New home buyers, first time home buyers and Renters will feel the pain on South East Queensland's growth

South East Queensland's [SEQ] growing pains are set to pile even more pressure on both the residential and commercial property markets.

New home buyers and renters will continue to bear the pain as the influx of 1200 new residents a week puts immense strain on the construction sector.
"We are not building enough houses to house the growth in the population. We are getting pressure in the rental market, vacancy rates are very low and rents are going up at twice the rate of inflation," Housing Industry Association Queensland executive director Warwick Temby said.

"These are early signs that there's pressure in the market for either more price growth, or more construction, or a bit of both."

But price growth and interest rate hikes are making it harder for first homebuyers to get into the market, forcing them to continue renting at prices that are likely to keep climbing.

Real Estate Institute of Queensland chairman Peter McGrath said the affordability squeeze had become so bad that growing numbers of renters were forced to scour cheaper outer-lying suburbs – and even then there was very little stock to choose from.

He said the vacancy rate in Brisbane's outer suburbs was just 1.3 per cent.

"With more and more people trapped in the rental market due to the country's deteriorating housing affordability, the situation is not likely to improve soon," Mr McGrath said.

The most recent HIA/Commonwealth Bank Affordability Report found first homebuyers would have to commit 27.7 per cent of their income to mortgage repayments if they wanted to buy a property outside metropolitan southeast Queensland. They would have to shell out 30.1 per cent to live in Brisbane, a three-year affordability low and the second worst in the country after Sydney.

Similar stress is hitting commercial markets, where agency Knight Frank predicts that office rents in the Brisbane CBD will reach new highs.

Queensland managing director Grant Whittaker said the city's commercial vacancy rate was now less than 1 per cent.

Three new buildings are planned over 2007-08 but all the space has already been pre-committed. Another half dozen sites could house buildings each with 25,000sq m but they would not be completed before 2010, he said.

Mr Whittaker said the Government needed to consider making commercial land available in suburban areas.

Federal Government considers rent assistance and presuring States to release more land for home building for first time home buyers

The Federal Government is considering assistance for people struggling with the rising cost of renting homes, as potential first time home buyers get caught in the rent trap.
Prime Minister John Howard said today that he was "conscious that rents have got up in different parts of the country".
"I am aware of that, and I know there is some additional pressure because of the very strong economic conditions," Mr Howard said.
"Other people have put views to me about rental assistance ... we are considering those things."
Some observers have blamed changes to superannuation for turning investors away from property, causing a rental shortage.
But Mr Howard said the slow release of land around the country had contributed to the housing shortage that was pushing up rents.
"In some parts of the country, state governments have been far too slow at releasing land and that has contributed to the shortages.
"The other thing that governments generally around Australia have got to do is to make sure the level of land releases is adequate."
Mr Howard said rising rental prices underlined the "folly" of people who advocated the abolition of negative gearing for housing investors.

Source: AAP

First Home buyers caught in rent trap as rents jump and to rise for years

The Sydney rental crisis, and to a lesser extent around Australia is set to worsen and sharp rises in rents will continue for at least four years as the city's housing supply shrinks, a report warns.
Rents will jump due to a dramatic fall in the number of apartments built this financial year, the report by industry analysts BIS Shrapnel says.
BIS Shrapnel is predicting apartment rents will rise 42 per cent in the five years to June 2011 - equating to an average of 7.3 per cent every year.
Report author Angie Zigomanis said, since investors began to leave the property market two years ago, off-the-plan sales, which trigger building, had fallen.
"Most new apartment developments won't go ahead until they have sold enough off-the-plan to get enough money to get finance,'' he said.
"At the moment there are no investors in the market to do those pre-sales. The lag between off-the-plan apartment sales and completion means that, even if investors do return, it would take some years before their purchases are translated to new rental supply. The deficiency of rental dwellings will potentially be sustained through to 2011 and beyond.''
Weak growth in the cost of rent in recent years would lead to sharp rises as a shortage of rental stock emerged this year. Rents would rise 7.3 per cent each year, or 42 per cent over the next five years.
But investors would have to wait until mid-next year to see a better return in property prices.
He said two to three years of rental growth was necessary before yields improved to a level which would draw investors back to the apartment market.
"In many instances the value of investment apartments in Sydney has declined in the past two to three years,'' Mr Zigomanis said.
Prices would remain static or decline marginally over the next financial year.
Mr Zigomanis said a peak in vacancy rates in 2003 and lower rental returns had deterred investors.
"A peak in vacancy rates lead to static rents and low rental returns which caused investors to beat a retreat,'' Mr Zigomanis said.
"Since investors have left the market, pre-sales which trigger construction have fallen away and new apartment completions have been drying up.
"Consequently, we expect new apartment completions will show a dramatic decline over 2006/07.''
In June last year, Sydney rents were 6 per cent lower than the June 2000 peak, adjusted for inflation, after showing increases below long-term trends.
Sydney's rental vacancy rate was 1.6 per cent in January, according to Real Estate Institute of NSW figures.
"While attention was focused on rising interest rates last year, the situation for tenants was steadily worsening,'' REINSW president Cristine Castle said.
"The NSW Government needs to take immediate action to encourage investors to enter the property market, which would provide more accommodation for tenants,'' she said.

Source: Daily Telegraph and AAP

Housing rental rises to worry tenants and drive up accommodation costs

The rental housing accommodation shortages is now so bad that paying the landlord is causing more stress than paying off mortgages, new research shows.
A survey from finance group Australian Unity found the rental squeeze was hitting people at both the top and bottom ends of the market. Concerns about rental payments now have a greater impact on personal wellbeing than meeting mortgage repayments, according to the group's latest Wellbeing Index.
"The tight rental market means Australians are increasingly being forced into paying a higher proportion of their income on rent than they ideally should," Australian Unity group managing director Rohan Mead said.
"Housing affordability is at a record low, which in turn increases rental costs, and means saving for a home will get even harder for this group.
"Although some people choose to rent as part of a deliberate investment strategy, many Australians are renting because they simply can't afford to buy."
Index author Bob Cummins said renters were also often at greater risk because they were more likely to be single and therefore did not have a second income to fall back on.
"A higher proportion of renters are single and they don't have the assurance of additional financial and emotional resources often provided by a stable partner," he said.
"It's this compounding effect that makes stress about rent such a powerful influence on wellbeing."
Professor Cummins said the findings did not mean "getting a mortgage will make you happy" but renters were still more likely to feel worse off than those with a home loan, regardless of income.
The Index also confirmed what everyone who lives in an outer-suburban mortgage belt knows the benefits of cheaper housing is usually offset by the stress of commuting.
"When purchasing a home, commuting times are certainly something to consider," Professor Cummins said.
"The highest wellbeing was found to be in people travelling less than 10 minutes per day."
Meanwhile, borrowers should be able to rest easy this week with analysts tipping the central bank will leave rates on hold after three rate rises last year.
A recent survey found economists unanimously agreed that the official cash rate would remain unchanged at 6.25 per cent this month, with some even looking forward to a possible cut later this year.
The Wellbeing Index is updated twice a year and involves a survey of 2000 Australians.

Source: Courier Mail, Brisbane, Australia

First Time home buyers best news as mortgage interest rates tipped to fall

Prospects for an interest rate cut by the end of the year are firming, as economists predict the Reserve Bank will shed its strong tightening bias. This is great news for first time home buyers.
ANZ has tipped that the next move in official rates would be down instead of up.
ANZ believes the RBA's decisions this year will hinge on whether the effects of low inflation spread across the economy. The prediction has been backed by Access Economics, which has forecast the rise in output and slowing domestic demand will reduce the need for another rise.
In a publication out today, Acess says the drought will also feature in monetary policy deliberations.
ANZ chief economist Saul Eslake told a briefing of banking analysts yesterday that the interest rate cycle might have hit the top after three rises last year.
"There should be increased signs of higher rates impacting domestic spending over the next few months," he said.
"So, provided the Government avoids the pre-election splurge, this will likely represent the peak in rates for this cycle."
Access said price pressures should be flattened by the demand and output factors without affecting the economy.
"It may mean that the Reserve Bank is able to take its foot off the brake, perhaps by late 2007 or early 2008."
The RBA meets next week but is almost certain to keep rates on hold. Economists will analyse the RBA's next statement, due on February 12, for signs of a dovish tone.
ANZ has also reassessed the effect the drought could have on the Australian economy.
The long dry, judged the worst on record, has been estimated by the Australian Bureau of Agricultural and Resource Economics, to shave 0.75 per cent from GDP this financial year.
But ANZ said rain would turn the performance of the farm sector around.
A return to normal seasonal conditions would herald a 40 per cent swing to positive gross farm product. This result would reverse last year's contraction.
Similarly, if the drought broke, up to 0.7 per cent more could be contributed by agriculture to GDP growth.
The Access research said the drought would prove temporary and mining exports would remain the driver of the economy.
"Once we rebound from drought in the second half of 2007, most sectors should be looking solid," it said.
Mr Eslake said the fundamentals for the global economy remained strong, with growth around 4 per cent. ANZ has tipped this will edge up to 4.5 per cent and represent the longest sustained period of growth since 1968.
Source: The Australian