A MATTER OF PRINCIPAL !

A MATTER OF PRINCIPAL !

Without a doubt one of the most alarming trends facing the real estate industry today is the movement of monies out of investment property into the principal place of residence, where home owners receive the greatest returns. A report by Wizard Home Loans found that investor demand (nationwide) fell by 7 per cent in the September quarter. Mosman house sales for 2007 have this week broken the billion dollar mark for the first time, with 411 sales totalling $1,000,333,000 (according to Home Price Guide). The average price for a home in Mosman is now $2,501,000 which also happens to be a new record and we believe it will climb higher in 2008. With the principal place of residence offering property owners tax – free capital gains, this is now the preferred wealth vehicle. Productivity Commission Chairman Gary Banks, announced this week that “one of the factors pushing up the cost of housing was the desire for even larger houses, with Australia now boasting the biggest homes in the world. The average Australian home is 3 square metres bigger than a US house, 30 square metres bigger than the New Zealand equivalent and 130 square metres bigger than a typical British home.”

In 2008 we expect rents to reach record highs given that today we see fewer and fewer investing in bricks and mortar. Yes – we are at a crisis point although respective governments at all levels prefer to ignore this issue. The answer is to entice investors and the cure will come only in tax relief initiatives. NSW is currently building around 150,000 a year and this really must be North of 200,000 to be competitive with increasing population growth.

South – West Sydney still remains Australia’s worst area for mortgage pain. Six of the worst 10 postcodes for late mortgage repayments are in that area.

Worst Ten
1. Guildford
2. Granville
3. Wetherill Park
4. Cessnock
5. Belmore
6. Greenacre
7. Punchbowl
8. Helensvale (QLD)
9. Coolaroo (VIC)
10. Bribie Island (QLD)

Source: Fitch Ratings

In July census data revealed that in Strathfield South and Bankstown, 49.4 per cent of families suffered mortgage stress, which occurs when more than 30 per cent of household income is paid to service a home loan. The Real Estate Institute of Australia is warning that we face further deterioration in housing affordability. Its September quarter report indicated that servicing the average home loan has never been more difficult, requiring 36.6 per cent of family income. This is the worst ever recorded result in its twenty two years of reporting data.

Just as interesting is that politicians maintain “if it is not broken don’t try to fix it”. Could this apply to broken promises too? Cheers ^__^

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