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.


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