2012 is upon us – what does the year ahead promise for the Townsville property market ?
Another year gone – and prices continue to slip throughout the year in the Townsville real estate market.
Does this mean another year of the same – or are their green shoots so to speak of a property market revival ?
Well I am predicting normal market conditions – those which we have have seen in Townsville between 1994 – 2001 – and stabilising of prices now that we see buyers entering the market – and most importantly first home buyers out shopping for homes again.
Why did they leave – prices interest rates and bank policies – and with the Bank’s slowly easing policy (although certainly not to 2005 – 2007 policies where moony was easy to obtain), but common sense approaches where Bank’s again are lending 95% of the purchase price of home where borrowers have established a savings pattern, have clean credit history and stable employment.
The mortgage insurers are also loosening up according to brokers in line with a little more confidence from the lenders.
The buyers coming through houses savaging the market outlook are still their, but many in the last six months got left with egg on there face.
And off course the outlook for interest rates is stable to declining. The one economist who dared to come out and call the RBA drops, Westpac’s Bill Evan’s, got it mostly right although if you put it in context with the Business Spectator’s article published in the last few days, most economists still think the RBA will not be as aggressive as Evan’s predicited.
“Of course Westpac’s Bill Evans, who pulled off the forecasting coup of the year. On the July 15, Evans turned 180 degrees from projecting further RBA rate hikes to a total of four cuts, commencing in December. It is one indication of how difficult forecasting really is that while Evan’s switch is universally hailed as highly prescient, the timing and magnitude of the forecast itself were wide of the mark. (In the article Fighting a false forecasting war, published November 17, I explained the poorly understood differences between forecasting and investing.) Immediately after Evans’ radical change of tune, which was triggered by an overseas trip, the second quarter inflation numbers printed at a stonkingly high 0.9 per cent (after a similarly high first quarter result). Were it not for the US debt ceiling crisis, the RBA would have hiked rates in August. Instead, the RBA ended up lowering rates in November and December. The first cut was rationalised by the RBA’s willingness to shift monetary policy back to ‘neutral’ on the basis of the one (anomalously low) third-quarter CPI print. The December cut, which tipped policy into stimulatory territory, was justified not by a weak domestic economy, which the RBA repeatedly claimed was tracking ‘at trend’, but rather by the desire to give financial markets some insurance against a deterioration in the European situation”.
Europe is still not out of doll drums and although the US economy is showing some positive signs (finally) it’s like we will see a interest rate range in the broader 6% area for some time – fixed rates on home loans certainly confirm this.
High set three bedroom homes in Vincent and Heatley still represent great rental properties – they are selling as low as $240000 (I have seen one go for $220000 in Heatley) and return $320 per week – so not quite positive geared – but well under house and land value and certainly worth entertaining as part of a diversified investment portfolio.
Rental demand is still strong in the seasonal periods.
The Townsville economy still echoes some sector distress ( let’s see if the Labour government turn off the building boost).
All in all there are still challenges out there, but nothing like the perfect storm we had in 2008.
And this is how I remember it through 1994 – 2001 – steady as she goes, some ice bergs are out but we can manoeuvre around them – yes some excess stock (units) clearing – but at the same time savvy buyers out their mopping up – normal healthy market conditions returning with a an uplift around 2015.
My tip – Raise your glass 2012 – it will be a little better than 2011, confidence will grow, prices will stabilise in line with interest rates, and property will a solid long term investment as it always has been. Graham Lynham