To our valued customers here is a our snapshot of the Australian economy and Melbourne property market for August.

*The Board of the Reserve Bank of Australia at its meeting in August have left the cash rate unchanged at 4.75%. The bank noted, "The global economy is continuing its expansion, but the pace of growth slowed in the June quarter"

*According to Robert Larocca from the REIV, "Buyers have clearly worked out that they are advantaged by not bidding at auction and waiting and trying to negotiate afterwards". During 2010, only 31.0% off properties were sold by auction.

*Residential land sales have fallen by over 40% across Australia.

*Changes to Victoria's planning rules will mean that; planning permits will no longer be required to a developer a single residential dwelling on lots of less than 300 square metres.

*Housing building approvals in Victoria fell 8.1% in the month of June.

*Sales of new homes in Victoria fell by 7.8% in July.

*According to RP Data house values in Melbourne fell 3.1% in the 3 months to July, the worst quarterly fall since 1991. The number of properties now passing in on a vendor bids, has reached 30.0%.

*Harry Dent and American economic forecaster, predicts the world will experience a second, deeper downturn during 2012, house prices are likely to fall dramatically during this period of uncertainty.

*The National Australia Bank quarterly residential property survey, shows respondents expect house prices to decline over the next 12 months.

Our View:

*Well July might have been a month for non-stop discussions about interest rates.

*By contrast August has been a month of uncertainty. Volatility in international stock markets, negative discussion about the introduction of the carbon tax and pressure on the Julia Gillard to step down as Prime Minister have driven media reporting.

*What this negativity does is to undermine economic activity and diminish consumer confidence.

*This uncertainty translates into a prolonged and depressed property market.

*Anecdotally, market conditions markedly changed in August, while economic conditions most certainly had been slowing in the first half of the year, sales results virtually stopped in August with real uncertainty in market values covering the market.

*Our view is that the economy has not fundamentally changed in the last 12 months, however consumer sentiment and confidence is now at an all time low.

*With the prospect of increased volumes of property available For Sale during Spring we are of the opinion that sales volumes will remain subdued and Auction clearance rates will remain below the 60.0% mark for the remainder of the year.

*We believe that market confidence is now unlikely to change until into 2012.

Property Facts:

*The average new Australian dwelling came in at 214 square metres, 10.0% larger than US homes and 9.0% larger than NZ homes.

*Property owners are staying longer a new report shows, RP Data research shows the hold period is now 8.6 years compared with 6.8 years, 10 years ago.

*The year to date Auction clearance rate is 58.0%.

*Auction volumes in Melbourne are now 29.0% lower than for the same period in 2010.

Property Investment News:

*At tax time Self Managed Super Funds with real estate assets require an up to date valuation for reporting purposes.

*The Housing Industry Association predicts that Victoria is facing a deficit of 104,200 homes by the year 2020. The HIA is urging governments to provide reform to meet the expected demand.

*It is a buyer's market at present, the volume of properties on the market for sale is at market high, recent sale prices confirm that median house values have fallen by 6.2% since the start of the year.

*According to the REIV, rental vacancy rates eased to 2.5% in the month of July, out from the longer term average of 1.75% recorded over the last 12 months.

*The Council of Australian Governments is asking for community views on mandatory energy certificates for residential property.

*A recent study by RMIT has concluded that investment in residential property was a solid long term investment class returning on average a quarterly increase of 1.6% compared with returns from shares at 1.3%.

*The 1996 book "The Millionaire Next Door", by American academics William Danko and Thomas Stanley, shows the average American millionaire has become wealthy through saving.


Independent Advice, can you really afford not to have it ?

Market News - July 2011

To our valued customers here is a our snapshot of the Australian economy and
Melbourne property market for July:

*The Board of the Reserve Bank of Australia at its meeting in July have left the cash rate unchanged at 4.75%.

*Financial commentators now are split between those who consider a rate rise in August and those who suggest that the RBA will observe the market perhaps until the end of 2011.

*Overall employment growth in the Australian economy slowed to 2% in June and the jobless rate was 4.9%

*According to the ABS, last financial year the state that recorded the strongest jobs growth was Victoria.

*Residential building approvals fell by 7.9% in May, almost 14% lower than for the same period one year ago.

*Building activity is expected to soften over the next 6 months as builders contend with fewer buyers, rising interest rates and tougher lending conditions. The Master Builders Australia - June national survey suggest that builders are quite gloomy about their prospects as the governments stimulus programs come to completion.

*One in four mortgage broking firms closed shop in the 12 months to March, driven out of business by a slowing housing market, new government regulations and lower commissions from banks.

*Corporate collapses rose by 4.4% in the 11 months ended May 31 as small businesses were hit by the tail end of the global financial crisis.

*Demand for home loans is likely to fall over the next 2 years, putting pressure on Australian banks to cut costs in order to keep bank profits growing.

*Population growth has slowed to its weakest pace in almost five years. An additional 325,000 people were born or arrived in the country in 2010, almost 100,000 fewer than in 2009.

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Our View:

*Interest rates, interest rates, interest rates. Frankly I am sick of hearing about interest rates, surely there must be more to life than the Reserve Bank and the will they or won't they saga.

*Clearly the two speeds of the economy makes for a challenging economic environment for regulators, however despite the hype around the mining industry, the rest of the economy is in a period of limited growth and that is a cause for concern.

*Our view is that really the Australian economy is driven by two major things population growth and the building industry, more particularly the new home sector of the market. Clearly with population growth slowing and with the government stimulus packages ending, it must surely dawn on many of the politicians that more should be spent on large government infrastructure projects in order to underwrite the economy.

*With most of the economic information filtering through this month being negative and perpetuating a somewhat of a gloomy outlook, it is good to see that not everyone is negative. Peter Verwer of the Property Council suggests that; "International financial instability, and a string of natural disasters have drowned out an economic engine which is revving up for a period of prolonged growth, the will drive property fundamentals", it's good to actually hear someone talking positively for a change.

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Property Facts:

*According to a 2005 ASIC survey, 70% of Australian Homes are underinsured.

*Homeowners in Melbourne's outer western suburbs are more likely to sell every 2 years as opposed to those living in the inner north east and south east areas where the average home ownership is 15 years.

*The auction clearance rate in Melbourne continues to hover around the mid 50% range. Overall numbers of properties coming to the market is also down around 25% from last year.

*House prices in the US have dropped a third from the peak in 2006 and the market is still grappling with excess supply.

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Property Investment News:

*With falling dwelling approvals and an acute shortage of rental accommodation, residential rents are tipped to increase by between 5% and 7% over the next two years.

*Melbourne prime office vacancy rate has fallen to around 4%, the short term supply of new accommodation is limited. Effective rents are increasing.

*According to Australian Unity Investments head of property Martin Hession indicated that Melbourne was the best performing office market and that values may improve by around 30% over the next two years.

*Rental yields for Melbourne units/apartments are around 4.1%, whereas they are around 3.6% for detached houses.

*Residential units/apartments in Melbourne on average have increase in value by 9% per annum over the last 5 years, whereas detached houses have increased by 9.2%.

*The cost of a median house and land package in growth areas reached $460,000 in the first three months 2010, an increase of 14%.

Independent Advice, can you really afford not to have it ?

To our valued customers here is our snapshot of the Australian economy and Melbourne property market today-:

**Board of the Reserve Bank of Australia, decided to leave the cash rate unchanged in June 2011

**Consumer confidence is mildly negative at present, while retail sales improved slightly in April, overall retail spending is lower and we are seeing retailers enter into an earlier than usual end of year sale campaign in attempt to combat a sluggish economy and increased competition from the online sector .

**Consumer savings are at an all time high.

**The residential market has now seen a sustained clearance rate in the high 50% range, which is the lowest level of confidence recorded since the GFC.

**Property values have softened in a number of market sectors and the number of properties sold in Melbourne has hit a five year low.

**Sales of new homes in April 2011 was 10% lower than for the same month in 2010.

**The ANZ Bank has indicated that there is now a glut of student accommodation and that the strong Australian dollar is likely to see apartment values undergoing a correction.

**The ANZ bank has also predicted no house price growth gains for at least a year, with the drivers of growth possibly gone forever .

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Our View

**The last 3 months have represented a great time to be in the newspaper business, there is no doubt in my mind that bad news sells more newspaper than good news.

**What is of interest is not so much the rhetoric being employed, but more the way that language is manipulated or slanted for a more sensationalist view.

**I think we can be sure, the media is extremely negative towards the economy at present and that is really projecting a level of fear.

**CMA believes that the property market is in a state of transition at present, clearly the uncertainty surrounding economic conditions in Europe and the US have compounded what is typically a seasonal slowing in the real estate market due to the colder winter months.

**The mining states of WA and QLD are driving the Australian economy at present, the remainder of the economy is sluggish and is without the direct benefit of government spending in the construction sector.

**Is the market likely to crash, unlikely to our way of thinking, China still requires our raw materials, unemployment remains at an all time low. These fundamentals are unlikely to change significantly anytime soon.

**We feel that activity is likely to remain sluggish until the warmer weather arrives in the spring.

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Property Facts:

**According to a 2005 ASIC survey, 70% of Australian Homes are underinsured.

**The ANZ's property team has indicated its concern about a potential over-supply of apartments in inner-city Melbourne, with 2013 as a most vulnerable period.

**Declining home ownership rates means one in four Australians won't own a home by the time they retire, research from an industry super fund suggests.

**The number of first home buyers taking out home loans has plunged to the lowest level in 17 years.

**Since the beginning of 2007, Melbourne dwellings have increased almost 50 per cent compared with growth of 27.8 per cent across the combined capital cities.

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Property Investment News:

**NRAS properties rent at a 20% discount to market rent and in return investors receive an annual tax free incentive of $9,140 indexed for 10 years.

**15.4% is the average allocation to direct property for DIY super funds.

**Wealthy clients who trade investments more than their peers tend to generate lower returns according to a survey by Barclays.

**Kew recorded an increase in median house prices of 366% for the 10 years to June 2011.

**Changes to the law have made it possible for DIY super funds to borrow to invest, however the average fund has a relatively small proportion of its assets in property.