This month we have included an article on the affordability of rental properties and the comparison of the year so far, we have also included an article on how the market has increased and evolved over the last 10 years as well as an interesting study about how investment in Melbourne property has provided better returns than the stock market over the last two decades.

1: Rental affordability >>

2: Ten years ago >>

3: Better returns for property >>

Please be advised that in preparation for the Christmas period our office will close at 5:00pm on Friday 23rd December.

Please note that the last disbursement of rent during this period will happen on Wednesday 21st December.

We will commence normal trading hours and and the first disbursement of rent will be on Tuesday 3rd January 2012.

In case of an emergency during the Christmas and New Year Holidays, please phone our after-hours contact number on 0406 998 991.

Recent data about the availability of rental homes in Melbourne may provide an indication that the tight conditions of the past six years are beginning to ease.

The rental vacancy rate for Melbourne increased to 2.5 % from 2.2 % in June and is now well above the average for the past 12 months of 1.75%.

Looking past the vacancy rates, what emerged was a very clear trend of substantially reduced availability of affordable rental homes. The government deems that a rental home is affordable when no more than 30% of gross income is spent on rent. Lower income households are defined as those in receipt of Centrelink income.

In the March quarter this year a total of 17% of all rental homes in Victoria were deemed to be affordable. The actual numbers varied, of course, across the city. For instance, in Manningham only 2% were affordable, while in Dandenong it was 9%. There are very few areas in Melbourne where the rate of affordable rental homes is more than 10%.

A few years back, when housing was not in such short supply, the availability of affordable rental homes was much better.

Six years ago, 45 per cent of rental homes were affordable. In Manningham it was 16% and in Dandenong it was 79%.

The only solution to this problem is the construction of more affordable homes.

Source: REIV.com.au

A review of some market indicators shows that a lot has changed in the past decade.

In the June quarter this year the median Melbourne house price was $590,000, which is 103% higher than the $291,000 recorded in the June quarter 2001.

A decade ago the stamp duty payable was $13,120, which is 132% less than the $30,470 which was payable on the median house if purchased in the June quarter this year. Unlike a decade ago, first home buyers can now benefit from a 20% reduction on this bill for most homes.

However the First Home Owners Grant was valued at $7,000 in 2001 and is still valued at $7,000 today.

According to the Australian Bureau of Statistics, the average home loan to a non-first home buyer was $291,200 in June this year, 99% more than the $146,500 recorded in June 2001.

The median price of a house in Toorak was $2,175,000 in the June quarter this year, 105% higher than the $1,062,500 in the June quarter a decade ago.

In more affordable Broadmeadows the median was $370,500 in this year’s June quarter, a substantial 219% higher than the $116,000 in the June quarter 2001. This is indicative of a trend that has seen the more affordable suburbs increase in value more rapidly.

And finally, in the City of Ballarat the median house price has increased by 122 per cent from $130,000 a decade ago to $288,500 in the most recent June quarter.

Source: REIV.com.au

Study shows shares provide lower returns.

The recent falls in the stock market, both here and overseas, are a timely reminder about the benefits of diversified investment portfolio which includes property.

The last 20 years have shown that investment in Melbourne property has provided better returns than the stock market, a factor that will provide further comfort to property investors.

A recent study by Dr Ashton de Silva and Professor Gavin Wood published by RMIT University showed that, in addition to satisfying the basic need of accommodation, housing was also a very solid long-term investment.

Their study compared the typical rates of appreciation across 108 different segments and 500,000 sales between 1990 and 2010. This period of time includes the 1991 recession, Asian Financial Crisis, the 2001 recession and the recent Global Financial Crisis.

The outcome was compared to that gained from a balanced portfolio of Australian shares as measured by movements in the Australian All Ordinaries Index over the same time.

The study showed that that the quarter-on-quarter percentage increases for property was 1.6% compared to 1.3% for shares.

Not only were the returns greater but they were subjected to less volatility.

The study also found that in over 80 per cent of the market segments reviewed there was very little or no correlation between the share market and returns from the residential property market. This means that broadening an investment portfolio to include property is likely to provide not only stability to the outcomes but can also help to counter balance significant shifts in the stock market.

Source: REIV.com.au

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