A new report by BIS Shrapnel has alerted
Australia’s property investors to
the likelihood of a property boom within
the next two years. This forecast comes
amidst a climate of worsening housing
affordability due to rising interest rates
and soaring property prices.
BIS Shrapnel's senior economist, Richard
Robinson said that the Australian economy
is on the verge of a major cyclical upswing
and expects growth to pick up speed over
the next two years and build into a boom
later this decade.
Housing construction will be a key driver
of growth from 2010. Despite recent interest
rate rises, overall interest rates are
relatively low, and the bank rate should
settle around 5 per cent by the end of
the year. Property investors have the
opportunity to buy houses or units before
prices really take off, using the favourable
interest rates as a cushion that will,
along with rising rentals, help them hold
properties at or near a neutral gearing
position.
A positively geared investment is one
where rentals and tax concessions exceed
the monthly interest cost and outgoings.
Negatively geared means that there is
a shortfall in rentals and tax inputs
relative to costs, while ‘neutral’
means that the income and cost sides of
the equation are more or less in balance.
Consumer confidence has recovered strongly
now that the Reserve Bank Governor, Glenn
Stephens, has declared the GFC “officially
over”.
The stage seems set as seldom before,
with a chronic undersupply of housing
and ongoing record levels of immigration
fuelling demand, in addition to the increase
in the local population and the steady
reduction in the number of persons per
housing unit.
The property boom is expected to gather
momentum in 2010, through 2011 and into
2012, at which point prices will come
under pressure through interest rate increases
and for reasons of affordability relative
to incomes.
Whichever way you look at it, if the
experts are pointing to boom conditions
ahead, the opportunity is there to benefit
from the low interest rates and high rents
to support mortgage costs, and enjoy the
capital growth that will accompany strong
increases in property prices over the
next two to three years.
We at McCarthy Group have been consistently
optimistic about the prospects for property.
We picked it all the way through the GFC,
where prices rose by in excess of 10 per
cent in many markets, and we remain convinced
that conditions are right for a continuation
– and even increase – in this
exceptional rate of growth.
If you would like to learn more and discuss
how McCarthy Group can assist you in planning
for your retirement, click
here.
Source: www.yipmag.com.au
Brace for Australia's housing boom 23/02/2010
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