Property Investment Guide Australia

Annual Changes (June quarter 2006 to June quarter 2007) “Over the twelve months to June quarter 2007, preliminary estimates show that established house prices rose 9.2%. Annually, house prices rose in Brisbane (+15.7%), Perth (+15.3%), Adelaide (+11.7%), Melbourne (+11.5%), Hobart (+9.7%), Canberra (+9.0%), Darwin (+7.4%), and Sydney (+3.0%). The movement in the established house price index between March quarters 2006 and 2007 has been revised from the first estimate, an increase of 8.6%, to an increase of 9.9%.”

In line with many other mature property markets the Australian residential sector has been booming produced significant returns over the past ten years, however, interest rate rises are now having an affect.

According to the REIA (Real Estates Institute of Australia, price rises have been varying greatly across the country with increases in 2006 ranging from only +0.6% in Sydney to +38.7% in Perth, which is bucking the trend. Like Europe and the USA interest rates are also been rising; during 2006, the Reserve Bank raised interest rates three times to an average standard variable rate of 7.85%.

Issues with regard to the affordability of housing are now very marked.
Due to the prices of houses averaging €252,000 nationally and increasing costs of finance, first-time-buyers now make up only 17% of the market, whereas historical levels range between 20% and 25%.

Conversely these issues have led to increased demand for rental accommodation, which is extremely high in the major metropolitan areas. According to a report of Mortgage Choice/REIA Real Estate Market Facts, vacancy levels are extremely low at 1.7% of the market. However, sharp price rises have pushed down yields which now rang between 2%-4% (gross) on average; except for locations such as Sydney where high rents have meant yields over 5% are achievable.

Finding information on property in Australia is relatively easy; the legal system is very transparent and property rights in Australia are also very well protected.  According to the Jones Lang LaSalle Real Estate Transparency Index 2006 Australia is the most transparent country in the world to do business in. There is some red tape required for foreign property purchasers who want to buy urban property; prospective buyers need to be have their acquisition approved by the Foreign Investment Review Board.

Purchasing costs range between 7%-10% and 80% LTV mortgages are available to foreign buyers. Interest rates depend on the type of mortgage, with cross currency mortgages common: current rates of 7.00% variable can be obtained in Australian dollars, 6.25% variable in pounds sterling, or 4.12% in US dollars. Fixed rate deals are also possibly available ie fixed for 1 year at 6.69% in Australian dollars. Buyers should take advice on the type of mortgages to obtain and think very carefully before undertaking a cross currency mortgages because of the risks involved.

With winter temperatures in much of Australia higher than Ireland’s summer temperatures it is easy to see the attractiveness of country for overseas immigration. Combined with low unemployment levels Australia has been dubbed as a location where demand should continue to be strong for accommodation.