Hi forumites,
Spotted this article on the internet. What are your opinions?
Houses flat, rents to jump
By Nicki Bourlioufas
September 18, 2006 01:21pm
Article from: NEWS.com.auFont size: + –
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HOUSE prices will remain flat over the coming year but rents are set to jump due to a shortage of housing, according to a leading investment bank.
Analysts from Citigroup forecast interest rates may stay on hold for the rest of the year as the economy takes a hit from rate rises in August and May – but house prices will remain subdued.“Over the medium term (property) prices will be flat or grow sluggishly and rents will rise well above the rate of consumer price inflation,” forecast economists at Citigroup, Shane Lee and Paul Brennan.
However, sharp falls in house prices are not expected as the housing downturn finishes its course. “It looks like the (housing) downturn has run its course provided there are no more interest rate rises,” they wrote in a weekly research note.
Rents are set to rise sharply as growth in the demand for rental accomodation outstrips supply. Already in Melbourne, Brisbane and Perth, vacancy rates are below 2 per cent and not much higher in Sydney.
“Since 2003 interest rates have never been low enough to encourage new supply to enter the market at a fast enough pace to meet underlying (rental) requirements,” write the economists.
The analysts forecast interest rates may stay on hold for the rest of the year as higher interest rates eat into household spending and economic activity.
“Domestic data indicate the August rate rise has cooled business momentum somewhat, potentially keeping the Reserve Bank of Australia (RBA) on hold through the end of the year,” say Mr Brennan and Mr Lee.
“The apparent easing in credit demand and business conditions could provide the RBA breathing space over the few months.”
The central bank in August lifted the official cash rate by 25 basis points to 6.0 per cent, a five-year high, following a rate rise in May. The rate rise took variable lending rates to 7.8 per cent, well above lending rates of recent years.
However, the bias is still towards rising interest rates due to the commodity boom, which is pushing up inflation and wages in some sectors of the economy, the economists say.
“The risks from a combination of strong global demand and a capacity constrained economy suggest that a more restrictive stance on monetary policy (higher interest rates) may ultimately be needed if the commodity price cycle remains elevated into next year as we expect.”
Dom [biggrin]
It is a state by state deal, even areas within cities vary.
With property diving out west of Sydney cannot see how rents there can rise.
Also saw last week on the ABC 7.30 report that mentioned in apartments and units the vacancy rate due to drop as construction started years ago comes to conclusion.
We have been fed figures interpretted by people with vested interests for so long, I will sit and watch first before getting excited.
Originally posted by gmh454:We have been fed figures interpreted by people with vested interests for so long, I will sit and watch first before getting excited.
Yes, funny how we’ve had many media stories detailing the shortage of rental stock in Sydney, tenants prepared to pay higher than asking rent just to secure a lease quickly.
Then the ABS figures come out showing a 0.5% rise in rents for the most recent quarter in Sydney. 0.6% in the previous quarter, 0.4% before that and just under 0.5% before that. Annualised that is a rate of around 2%. Something doesn’t add up. I’d suggest that ‘vacancy rate’ statistics may come from a dubious source, and could perhaps be easily massaged in a direction that would add to investor confidence…
With yields still hovering around 3% in much of Sydney, it would take 48 years of static prices for rents to catch up!Food for thought. Mmmm, food.
F.[cowboy2]
Originally posted by gmh454:It is a state by state deal, even areas within cities vary.
With property diving out west of Sydney cannot see how rents there can rise.
Also saw last week on the ABC 7.30 report that mentioned in apartments and units the vacancy rate due to drop as construction started years ago comes to conclusion.
We have been fed figures interpretted by people with vested interests for so long, I will sit and watch first before getting excited.
Sorry the ABC report mentioned that they expected vacancies to rise due to the upcoming unit /apartment /townhouse releases.
Small error, big difference.
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