2013 – The Year Of Confidence and Growth

2013 Northern Beaches Property Growth

2013 is set to defy the unlucky 13 myth, with 2013 instead being marked as the year for new confidence and solid growth. On the Northern Beaches of Sydney this is certainly the case. As we enter the second month of the year, we are seeing buyer enquiry on the rise and sales prices becoming strong in comparison to previous years. Two of Australia’s sharpest forecasters and most influential figures in the financial world, John McGrath (CEO of McGrath Estate Agents) and Charlie Aitken (Managing Director at Bell Potter) have both been excited in sharing their knowledge and predictions for 2013. Some of the key points I’ve outlined below:

Charlie Aitken’s Insights

The smart money is starting to move into residential property ahead of the change of Federal Government later this year. The general feedback is the final “glass ceiling on household confidence” is the removal of the failed experiment known as a minority Labor/Greens/Independents later this year.

Think about this combination: generational low mortgage rates, generational low term deposit rates, an equity market above 5000pts, the AUD under parity, a recovering China, a recovering global economy and a new Federal Government elected with a “landslide” majority mandate. I believe that combination is coming in 2013 and WE ARE ALL UNDERESTIMATING THE POSITIVE WEALTH EFFECT ON CONFIDENCE THIS YEAR.

Confidence, in a world of instant information, is like a virus. It spreads incredibly quickly. You can already see this year the press are struggling to find a negative headline. That is extremely important for household confidence in Australian where 30% of households are now making their own investment decisions via controlling self-managed super funds.

My job, in hopefully writing accurate investment strategy, is more about forecasting mass psychology than anything else. It is all about behavioural economics and forecasting mass investor behaviour. Anything we have got right lately has been based on forecasting mass investor behaviour, whether or not we agree with that behaviour isn’t the point; it’s whether it happens or not.

In Australia, the great rotation from cash (TD’s) to risk assets will accelerate. The beneficiaries will continue to be high sustainable yield equities, corporate debt and residential property. While house prices are the true driver of the wealth effect, that house price recovery is led by the equity and corporate debt markets. The biggest headline grabber from this point will be the residential property market as the auction season gets underway from February.

Auctions are back! With confidence back in the air, just watch the masses come through and compete at auctions. In a moving market, Auctions are a great way to get above market prices so be sure to take advantage of this. (Note: Not all properties are suitable for Auction campaigns. Speak with us direct for the best recommendation for your property and specific situation).

In my opinion median Australian house prices will rise by +5% to 10% in 2013. Auction clearance rates will head to 75%+. I believe the high end will rise up to +15% as the “market linked” earners in the community get more confidence and snap up trophy properties that may have been for sale for over 12 months. I also believe that “lifestyle” property such as beach houses and hobby farms within 2hrs of major cities will bounce hard. A falling the AUD will also bring in foreign investors into the Australian residential property market.

You watch, all those high end houses, beach houses, boats and hobby farms that have been for sale for years will suddenly start selling. That inventory will be cleared out and there will be a lack of supply and growing demand. Prices will move up to a new price point. The press will report rising prices and it will become self-fulfilling.

All those Palm Beach weekenders that have been hanging around for 4 years at half price will be snapped up as the Aussie share market gathers momentum & when they’re all gone then price growth will be next…

2013 Northern Beaches Property Growth

Insights from John McGrath

When you know the market is on the rise, everyone will be quick to pick up on it. I guarantee that by the end of the year this market will be between 5%-10% up from here. I predict the First Home Buyers will be up by between 3%-5%, the middle end between 5%-8% and the luxury end up at least 10% also.

For rentals, Sydney has hit a new all-time high of $520 per week after a 4% jump in the September quarter alone. That’s a big increase – if we had 4% growth every quarter rents would be up 16% by the end of the year, so you see what I mean about 4% being a rapid pace of growth.

If you’re thinking of investing in property, I say get out there now. We’re in one of the best environments for property investment that we’ve seen in several years. Property prices are showing signs of improvement, home loan interest rates are falling and rents are rising strongly.

With investors able to borrow at 5.39% or thereabouts on a fixed deal, the potential to purchase a positive or neutral cash flow property is far greater than usual.

I’ve been doing this for 30 years and I can tell you that investors are typically very active before a market turns. While owner-occupiers are always in the market, investors only jump back in when conditions are right. They’ll often sit still in softening conditions and come back when things are improving and that’s what’s happening now. When we see strong investor competition on top of owner-occupier demand, we eventually reach a tipping point where prices begin a new northward march. We’re on track for this now.

Now back to rents. While rising rents are great news for landlords, the flipside is the impact on tenants. When rents get too high, we start to see a jump in first home buyer activity. Many experts will argue that Sydney isn’t affordable for first home buyers but I disagree. Sure, you might not be able to afford the ideal property in your favoured suburb, but Sydney renters can afford to buy here if they’re willing to compromise a bit.

Google ‘reverse rent calculator’ and punch your numbers in to reveal what you can afford to buy. I used the realestate.com.au calculator, which says if you can pay $520 per week in rent, you can afford a mortgage of just over $400,000 on a 30 year loan at 5.39% (a fixed rate that is available through St George for three years.) Run your numbers and you might be surprised to discover that buying might actually be a better option than renting.

Remember, these are the halycon days & this is a lucky country…so let’s get moving!

So What Can You Do With This News?

Start getting EXCITED about the property market ahead as we are set to sail into flourishing times, with stronger sales results across the board for all property by year end. If you are not feeling ecstatic by this news you should be! For the past 4 years we have not seen such positivity. If you are planning on purchasing investments or upsizing your home – act now! Nobody ever wants to call it but with such statements from the best and most accurate forecasters in the industry – I believe the call has been made!!!

2013 Northern Beaches Property Growth

Kick start the new year and purchase your dream home on the Northern Beaches or get your property SOLD above market value!  Call:

Tim Cullen on    0424 006 855

Bernadette Cullen on    0414 618 908

About Tim Cullen

Since joining McGrath Estate Agents 15 years ago, Tim Cullen has defined himself as a first class industry leader with an outstanding track record and rapidly growing and loyal client base. He ranked 1st on the Northern Beaches in this year’s Real Estate Business’ Top 100 Agents List and ranked 21st nationwide.