Real-estate investment scenario in Australia | Property Futures

Article: real-estate investment in Australia could be profitable.

Australia has grown its economy without interruption from 1992 onwards and avoided the recession seen in most developed countries as a result of the financial crisis. Currently, the demand for property exceeds the supply and, as a result, rental rates have been rising.

Canal Scene, Surfers Paradise

Growth is driven by its mining industry and strong demand for natural resources such as iron ore, coal and gas from Asia and China in particular.

In fact, the economy has grown by 3.7% year on year during the second quarter of 2012. Unemployment has remained steady between 4.3% and 5.6% according to the IMF and the increase in consumer prices has stayed within the target range of 2% to 3% set by the central bank.

You can expect good times for the real-estate market in Australia because of:

• Continuing growth in GDP
• Surplus in the budget
• Reduced number of unemployed

You should keep in mind that permanent residents in Australia can freely acquire property, but foreign nationals have to obtain the requisite permission from the Australian Government before making any investment.

Commercial real estate

Real-estate consultants Jones Lang LaSalle believe that commercial property will deliver excess returns over the next 5 years above the benchmark of 3.5%.

• In 2012, they noted 125 major office transactions of more than AUD$5 million with a total of AUD$9.38 billion, which represents the highest figure since 1987.

Offshore investors continue to participate vigorously in the Australian commercial property market and, in 2012, they accounted for a record 43% of total transactions.

There are currently large spreads such as the 2.3% between Sydney and New York and the 2.9% between Sydney and London.? There is a chance that, in some markets, vacancy rates could rise further because of:

• Slow recovery of the global economy
• Muted job creation in Australia

However, demand is expected to remain strong and you can expect to see modest price appreciation for the sector as a whole.

Residential real estate

The housing market in Australia continues to see falling prices despite the excellent condition of the economy.

• The house price index for 8 capital cities fell by 2.1% (3.2% adjusted for inflation) during 2012 up to the end of the second quarter, according to the Australian Bureau of Statistics.
• Housing construction has also fallen.

However, observers who expected a devastating housing price crash because of overvaluation have been surprised by the strength of the market.? The crash has been avoided because:

• A housing shortage because of the growing population
• Strong migration from overseas
• Shrinking size of Australian households
• Stringent lending standards
• Record low mortgage rates
• The government? program for the assistance to first-time home buyers.

The current rebound in the housing market is seen by ANZ to be the weakest cyclical recovery since the 1980s.? The reason for this is seen as:

• Expectations that prices will stay soft
• Affordability of deposits for first time home buyers
• Tighter credit
• Difficult approval process

The bottom line

It is possible to generate attractive returns on investment in the more expensive capital cities such as Sydney, Perth, Melbourne, Brisbane and Adelaide.? The majority of the Australian population live in the coastal areas and because of the relatively short supply of real estate, prices should keep appreciating.? There is also the possibility that because of this short supply, investments in outer city regions could well prove to be worthwhile.

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Source: http://propertyfutures.wordpress.com/2013/05/09/real-estate-investment-scenario-in-australia/

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