Market Movement

Newcastle Herald

Saturday December 13, 2008

Frances Thompson

THE past year has brought difficult economic times but 2009, in some forecasters' minds, could herald a change of fortunes especially for those buying or selling a house in the lower price bracket.

Stirred by the Federal Government's stimulus package and its generous first home owners' grants of up to $24,000, combined with big falls in interest rates and fuel prices, Newcastle real estate is holding its own despite the challenging financial environment.

The prospect of rising unemployment could stem the optimism, however, and for this region, jobs in retail and mining appear most vulnerable.

First the good news.

Australian Bureau of Statistics figures show new home loans rose by a seasonally adjusted 1.3 per cent to 48,299 in October, ending eight months of consecutive falls.

Australian mortgage broker AFG said recently its Mortgage Index showed the volume of loans it arranged for first-home buyers increased by 120 per cent in three months from $474 million in home loans for first-time buyers in November, compared with $215 million in August.

Lower interest rates and falling petrol prices are putting hundreds of dollars a month back into household budgets.

New data released this week shows consumer confidence jumping 7.5 per cent in December on the back of Reserve Bank rate cuts of 300 basis points in the past four months.

With banks passing on about 2.7 per cent of the 3 per cent cut, households are responding. The survey found confidence among mortgage-holders surged 11 per cent in December compared to 1.6 per cent for tenants.

Newcastle agent and Real Estate Institute of NSW vice-president Wayne Stewart said he had seen a 200 per cent increase in sales activity in November on the previous three months.

Young buyers like Luke McLeod, 24, and Jonathon Dustow, 28, are the faces of the new confidence.

McLeod, recently found a unit in Lambton he could afford after looking to buy for about eight months and suggested his friend Dustow check out the one next door.

"I jumped at it," McLeod said.

So did Dustow and his wife Jessica, 24. The couple was living in a one-bedroom unit with his computer sharing the living room with her sewing machine.

"We were just so lucky," Dustow said.

But not just lucky. The couple has saved and "waited" for two years to buy their first home, they had a healthy deposit and he has a secure job.

"Newcastle is a good investment," Dustow said.

The investment is for the long term and the couple have aspirations of buying a second property by the end of 2009.

"It is not going to be our home. It will be a form of income down the track."

The Dustows have repayments of $240 a week, after paying $165,000 for the two-bedroom-unit.

"It is a comfortable fit," he said.

The block of four units in which McLeod and Dustow bought sold in 10 days, the agent said.

Wayne Stewart said the past year has been the worst he had seen in his 30-year career.

"People were frightened to buy," he said.

He predicted interest rates would continue to fall in 2009, with speculation the cash rate could drop to 3 per cent.

"Housing interest rates could fall to the fours (4 per cent). That's the lowest I can remember," Stewart said.

"Buying conditions could be some of the best I have ever seen."

Financial institutions have tightened lending. It is farewell to easy credit and borrowers need a secure job. Stewart said most people needed a deposit of about 20 per cent of the sale price.

Duponts Valuers chief executive Bob Dupont said the financial crisis had rattled people but the Hunter Region was a conservative market, not oversupplied and did not rely on what happened on Wall Street.

"It ticks along," he said.

Dupont described conditions as a buyers' market and even used the term recovery.

Dupont said sales declined by about 30 per cent from December 2007 to March 2008 but there had been steady increases in the residential sector since.

He quoted Westpac research as showing Newcastle values declining by between 2 and 3 per cent but warned the effects of contraction in mining and resources could not be properly assessed at the moment.

Experienced agent Andrew Walker does not share the confidence for the future of others in the industry and reported substantial falls between 10 and 20 per cent in Newcastle apartment prices.

Properties bought for say $1 million were now struggling to sell for $700,000 to $800,000 and those bought for $650,000 in the Linwood area were fetching $550,000 to $570,000, he said.

Walker said the stronger activity at the lower end of the market, from about $180,000 to $300,000, was not flowing up.

"The lowering of interest rates has taken pressure off the serviceability of the loans but the big problem is that it's not solving the core problem and that is the level of indebtedness.," Walker said. "That is the scary thing."

Walker said sellers didn't appear to be meeting price expectations and predicted an increase in mortgagee sales in 2009.

The boost to the first-home owners grant is due to run out in June 2009.

Fitch Ratings research this month showed home owners in Cessnock, Raymond Terrace and Nelson Bay topped the delinquent borrowers list for those with loans of between $225,000 and $413,000.

Residex head of property research John Lindeman said the median value of houses in the Hunter in the September quarter was $267,000, unchanged on the previous quarter.

Lindeman's theory is that the decline in sales has halted or stabilised.

"As long as you have job security, now is an excellent time to buy," Lindeman said.

Agent George Rafty blames the media for "hyping up" the crisis and describes a "frenzy" of activity in the first-home buyers' market.

He recently sold a Merewether unit for $290,000 on the day it hit the market.

"If we had another 20 properties between $200,000 and $290,000 they would be sold quickly," Rafty said.

Most properties under $350,000 were sold in four weeks but those above $500,000 took longer, Rafty said.

© 2008 Newcastle Herald

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