Finding property winners in a flat market


  • Email Alerts for:

Transcription of Finance News Network Interview with RP Data's Head of Research, Tim Lawless.
Lelde Smits: Hello, I’m Lelde Smits for the Finance News Network and joining me fromAustralian property data provider RP Data to discuss the outlook for Australian property in 2013 is Head of Research, Tim Lawless. Tim, welcome back to FNN and Happy New Year.
Tim Lawless: Thanks Lelde, happy to be here.
Lelde Smits: Australia has some of the most expensive property in the world: Do you see prices rising, falling or remaining flat in 2013?
Tim Lawless: I think this year will be a relatively stable year for housing prices, continuing on the trend we saw over the second half of last year where we did see properly values bottom out in May 2012 and the next six months we saw values increase by around about 2 per cent. 2013 is really going to be a year of stabilisation and starting to claw back some of those losses we saw in the marketplace in 2010 and 2011.
Lelde Smits: Which regions do you think could defy the trend and rise this year?
Tim Lawless: Some of those markets that underperformed over the correction phase, areas like Perth and Brisbane, are now starting to show some fairly solid fundamentals. Probably throw Sydney in that basket as well. Markets were generally the long term cycle has been relatively strong, but now we are starting to see more rents rising quite rapidly in those three cities, vacancy rates remain fairly low. And, we are starting to see some very subtle levels of growth return to the market places, at least in the last part of 2012.
So, I think those three cities are probably the best placed in terms of capital cities. But, also look around some of the different sectors of the market place - Units are now out-performing houses, probably mostly due to their affordable price points and generally the fact that they tend to be often strategically located, close to the cities and close to major transport routes.  
Lelde Smits: The RBA [Reserve Bank of Australia] lowered the key cash rate to a GFC [Global Financial Crises] low of 3 per cent at the end of 2012. Do you think rates will go up or down in 2013 and how will this impact the property market?

Tim Lawless: I think if anything we will see rates fall further. We’re already seeing economists calling a 100 basis point cut during 2013. I’m not sure if they’ll fall by another 100 basis points, but I think we can expect at least another 1-2 rate cuts, meaning probably down 25-50 basis points. Of course, lower rates are always going to be a positive for the housing market. The balance of course is that rates are moving lower for a reason.

Lelde Smits: Many commentators claim Australian property prices are in a bubble and the Reserve Bank of Australia cutting rates just prolongs the situation. What’s your opinion Tim?
Tim Lawless:I think there are some areas in Australia that have been in a bubble, and we’ve seen those bubble burst – look at the Gold Coast, or Cairns or a lot of the lifestyle markets around Australia. We have seen fairly dramatic falls in property values. Even some of the premium segments around the capital city markets. Look at the North Shore of Sydney or the Northern Beaches of Sydney as a pretty good example.
But broadly speaking, from a macro perspective, I don’t think the housing market here is in a bubble. But, what we have seen is a very, I suppose, modest correction. We’ve seen values correct by a little bit more than 7 per cent across the Australian housing market. But we’re already beginning to see signs of the market stabilising, which I think is what the following year does hold.
Lelde Smits: Are there any other areas or segments of the market you think are at risk of these steep falls in the coming?
Tim Lawless:I think what we’re now seeing as the market now transitions out of a resources dominated economy, we are starting to see some of that pain move into those mining sectors. Look at areas like the Pilbara or the Byron Basin in Queensland which is coal dominated, we’re already seeing rents falling and values falling in some of those areas. That is of course of the back of absolutely meteoritic prices rises over the past couple of years on the back of the resource boom. So, I think mining towns probably are one area that’s going to be an underperformer in 2013.
Lelde Smits: Finally Tim, looking ahead which cities will see the biggest increases in residential property prices in the year ahead?
Tim Lawless: I don’t think there’s going to be major increases across any capital cities or any markets around the country. But, I think the over-performers will probably be Brisbane, Perth and Sydney and potentially in that order as well. I think these are the markets that have the best fundamentals, prices are still relatively affordable – particularly in Brisbane and Perth – perhaps not so in Sydney. But, Sydney is being buoyed by different drivers. The fact that there has been virtually a very small amount of new dwelling commencements, so a very small amount of new housing supply coming onto the market. Rents are going up very high and vacancy rates are very low. So, I think many investors will be looking for firstly a rental yield, and really maximising their yield and secondly trying to position for long term capital gains.
Lelde Smits: Tim Lawless, thank you so much for your outlook on the year ahead.
Tim Lawless: Always a pleasure, thank you.