THE COST OF LAND VS THE COST OF A HOUSE
Source; RP Data
Over the 10 years to December 2011, the rate/m2 on residential land has increased at a significant rate across each capital city. The compound growth rate over the past 10 years is detailed below for each city:
• Sydney – 5.4%pa
• Melbourne – 11.7%pa
• Brisbane – 12.9%pa
• Adelaide – 14.4%pa
• Perth – 13.7%pa
• Hobart – 16.5%pa
Interestingly, if you compare the compound growth rate for land prices over the period to growth in overall house values it appears that the land component is becoming much more expensive while the value of the house is becoming comparatively more affordable. Listed below are the ten year compound growth rates for capital city houses:
• Sydney – 3.9%pa
• Melbourne – 7.3%pa
• Brisbane – 8.3%pa
• Adelaide – 7.9%pa
• Perth – 9.9%pa
• Hobart – 9.7%pa
Ross Cutten
Owner/Licensee
Director
Wednesday, May 23, 2012
Tuesday, May 15, 2012
MARKET UPDATE 20.04.2012
Market update
20.04.12
At Wednesday’s meeting of the group we belong to called Prominent Agents Network one of my members quoted back something I had said about the market some months ago as he believes it is a good description of his current experience.
At the time I described our market as being like a car with a faulty carburettor. In other words it will accelerate for a while and then just when you think it is a new trend that has started it will switch off.
Compared to 12 months ago there seems to be much more optimism from the buying public and numbers are up at home opens, plus buyers are placing written offers.
However they are still shopping hard when it comes to price so there is no sign of rising values yet but it is more stable.
R.E.I.W.A. has just under 14,000 properties for sale (long term average is 12,000, 1 month after the GFC all time high 18,400, May 2011 18,200).
Sales are running at about 2/3rds of the long term average, so we need a drop in listing coupled with a pickup in demand to change values.
The current signs are still positive but it isn’t a trend yet.
Ross Cutten
Owner / Director
Noble Real Estate
Sunday, May 13, 2012
BEWARE THE FORECASTERS
BEWARE THE FORECASTERS
Here is a reprint of an article I wrote in October 2008, the month of the GFC.
Have a read and see if there is any relationship to our experience over the past 31/2 years and keep it in mind when the prophets of doom next start predicting the end of the world.
Have a read and see if there is any relationship to our experience over the past 31/2 years and keep it in mind when the prophets of doom next start predicting the end of the world.
A LITTLE CLARITY IN A WORLD GONE CRAZY
Lots of people are expressing their fears in response to the turmoil on the stock exchange and some of the talk has moved to the future of real estate in W.A.
First and foremost is the concern about the “R”word (recession).
While am not an economist I cannot see how this state can go into recession
given the many pluses which exist here.
(Just yesterday I received an email from the Chamber of Commerce and Industry expressing the same sentiment)
Australia has a rapidly increasing population (260,000 in the past year) and W.A. is picking up more than it’s share.
They have to live somewhere and the building of new homes is not keeping pace.
Remember the key to all things financial is supply and demand.
It is also about what people believe and unfortunately many do not read beyond the headlines.
What about the talk about real estate values dropping by 20%, 40%, or similar amounts?
The way I see it every time a new subdivision of land is being produced, each metre of road is more expensive than the last subdivision.
That is due to rising costs of fuel, wages, and producing kerbing, etc.
The same can be said of constructing a house.
Each brick, metre of timber, wages, etc. will be more expensive than one built last year.
So that brings in to play the replacement cost of homes.
If you look at many of the homes for sale today in Rockingham, you will find they are below replacement.
The other factors which help to make Rockingham stronger than other areas is the fact that 70% of Australia’s navy families are based here and they spend there money right here every week.
Add to that the number of families for whom Kwinana industrial strip supplies employment and we have more factors which underpin our local economy.
The events in the U.S.A. bear little direct comparison to Rockingham or even Australia.
In the USA they can unilaterally opt out of their mortgages with no further liability just by returning the keys to the lender.
Here you will remain indebted to the lender if you were to abandon the property.
That is why there are so many homes for sale there.
Traditionally investors have returned to the property market when rents have approached 5% Gross return.
The easy way to work that out is to say that if a property is rented at $260 per then investors have in the past been interested when the price of the property has approached $260,000.
We are getting to that stage with some homes now.
The only way to turn a paper loss into a real loss is to sell.
So if you have the option at the moment it is better to stay out of almost any market place if you are a seller.
If you are a buyer look at buying as soon as you can.
Do not make the mistake of waiting, thinking you can pick the bottom of the market.
Did you pick the top or the bottom last time—odds are the answer is no.
The best definition of an economist I have found is “An economist is someone who has predicted 28 out of the last 3 recessions.
And please keep in mind that the job of a newspaper is to sell newspapers not necessarily to report accurately.
First and foremost is the concern about the “R”word (recession).
While am not an economist I cannot see how this state can go into recession
given the many pluses which exist here.
(Just yesterday I received an email from the Chamber of Commerce and Industry expressing the same sentiment)
Australia has a rapidly increasing population (260,000 in the past year) and W.A. is picking up more than it’s share.
They have to live somewhere and the building of new homes is not keeping pace.
Remember the key to all things financial is supply and demand.
It is also about what people believe and unfortunately many do not read beyond the headlines.
What about the talk about real estate values dropping by 20%, 40%, or similar amounts?
The way I see it every time a new subdivision of land is being produced, each metre of road is more expensive than the last subdivision.
That is due to rising costs of fuel, wages, and producing kerbing, etc.
The same can be said of constructing a house.
Each brick, metre of timber, wages, etc. will be more expensive than one built last year.
So that brings in to play the replacement cost of homes.
If you look at many of the homes for sale today in Rockingham, you will find they are below replacement.
The other factors which help to make Rockingham stronger than other areas is the fact that 70% of Australia’s navy families are based here and they spend there money right here every week.
Add to that the number of families for whom Kwinana industrial strip supplies employment and we have more factors which underpin our local economy.
The events in the U.S.A. bear little direct comparison to Rockingham or even Australia.
In the USA they can unilaterally opt out of their mortgages with no further liability just by returning the keys to the lender.
Here you will remain indebted to the lender if you were to abandon the property.
That is why there are so many homes for sale there.
Traditionally investors have returned to the property market when rents have approached 5% Gross return.
The easy way to work that out is to say that if a property is rented at $260 per then investors have in the past been interested when the price of the property has approached $260,000.
We are getting to that stage with some homes now.
The only way to turn a paper loss into a real loss is to sell.
So if you have the option at the moment it is better to stay out of almost any market place if you are a seller.
If you are a buyer look at buying as soon as you can.
Do not make the mistake of waiting, thinking you can pick the bottom of the market.
Did you pick the top or the bottom last time—odds are the answer is no.
The best definition of an economist I have found is “An economist is someone who has predicted 28 out of the last 3 recessions.
And please keep in mind that the job of a newspaper is to sell newspapers not necessarily to report accurately.
Ross Cutten
Owner / Director
Noble Real Estate
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