Australia Property News – How Bad is Bad?

To be honest I think Australia is going to come out of the current crises better than most. Lets face it if you have no money and no home – Australia’s beaches are some of the world’s best to bum on!

Although Australian society is not perfect – and its particularly bad in the Aboriginal towns and communities – otherwise its pretty OK and I don’t see the Dystopians of the US getting any real traction here.  Australia never has had the level of urban decay which appears common in large cities in the US’s mid-west. Australia’s three-tier system of government of federal/state/local (shire in the country) is far from perfect but does see most towns and cities having reliable basic services.

High rise low-rent/pubic housing tower blocks which blight US and UK cities never happened in Australia – instead public housing is predominantly standalone homes. Although the some areas have been characterized as urban waste lands, they don’t generally have the level of violence, drugs and crime which are a feature of tower block estates overseas.

Storm Clouds, Beach South of Eyre Bird Observatory, WA

Australian culture is generally a lot more cohesive too – although the Cronulla race riots were a wake-up call for Sydney and the country and have not been repeated. The social servies benefit system means that those that end up homeless generally have serious drug, alchohol or mental issues.  The health system is far from perfect – but it will not bankrupt you because your child needs medical attention or if you are badly injuried in a car accident.  Violence occurs, and there is definitly a culture still of drinking until you can’t stand and then abusing the guy next to you. The big difference from the US is that the use of a gun still brings headlines. Most Australians wouldn’t have seen a gun except on TV, or if they live in the bush.

So no I don’t think Australian society is going to change dramatically. In fact I suspect immigration will hold out quite well if thing do get very dire in the next year or so for other parts of the world. After 9/11 both Australia and New Zealand benefited greatly from skilled migrants moving to their safe haven.

If the Federal government manages to get its fiscal stimulus through the Senate then it could have a marked effect on the property market in Australia over the next few months. Payments will be made to people’s bank accounts from April. The key elements of the package which will effect property are:

Grant to Insulate Houses

Homeowners will get a one-off payment of $1600 to insulate previously uninsulated homes. Landlords will get $1000. Most homes can be insulated for under $2000 so that’s a pretty good subsidy. Approximately 2.2million home owners are in line to benefit. Although all new homes have been required to have insulation for quite some time, there are approximately 2.7 million existing homes which have no insulation.

Cash in Buyer’s Pockets

The government grants to ordinary workers and students are significant. A family with 3 school age children with one partner working part-time will get around $5000 from this round of pay-outs. This could be the difference between having the deposit for a first home or not. Again this will see first home buying pick up – but will do nothing much for the middle/top end of the property market which is going to be in a slump for a while.

Mortgage Rates Plummet

The official interest rate of a full 1% on Tuesday has pretty much passed on in full by the bank’s – the Prime Minister did remind them that he had recently bailed out their commercial lending – one wonders how much longer the bargains at the low end of the market will last? The aggressive investor may want to look at buying , tarting up and flipping appropriate properties to first home buyers.  The drop of official interest rates to 3.25% means a saving of $275 /month on a $450,000 mortgage.

Commercial Vacancies on the Rise

Figures from the Property Council of Australia show the sharpest 6-month rise in vacancies for 17 years. That said the national vacancy rate has only reached 6% in January 2009, compared with 4.3% six months ago. Remembering that back in the 90’s Sydney’s vacancy rate got to 25%.  I’d expect to see a sharp rise in Perth and Brisbane as mining and resource sector companies downsize their staff.

Most commercial buildings currently under construction have leases already signed – but up to 50 new commercial projects have been cancelled as developers see that the vacancy rates will get a lot worse before they improve.

Photo Credit: Australia News