2011: The Year The Property Markets Slumped

2011: The Year The Property Markets Slumped

December 22, 2011, 1:29 pm Michael Yardney Yahoo!7

At this time of year it's customary to look at the year that has just passed and make some forecasts for the year ahead.
1 Comment

*
* tweet0
* Email
* Print


Well... 2011 will be remembered as the year the property market slumped. It didn't crash like many property pessimists predicted, but it stalled in some areas, dropped a little in others and prices fell significantly in a few spots.

Ongoing economic uncertainty, the worry of rising interest rates for much of the year, decreasing affordability and political uncertainty were a volatile mix that stalled the property markets.

To see what really happened over the last year here are the latest figures from RP Data:

The markets are fragmented

What these figures don't show is how fragmented the markets really are.

Did you know that the median home price in 80% of Sydney suburbs has actually had capital gain of around 1% over 2011? It is only the most expensive suburbs in Sydney, the more affluent areas, which have been the hardest hit and have suffered price declines. In these suburbs prices fell around 3.2% over the year.

And the markets are similar right across Australia. The most expensive homes across the country experienced the biggest capital losses and the lowest priced homes have dropped in value much less.

By the way… there is nothing unusual about this - the lower end of the market has always been less volatile.

What I call "investment grade properties" - good properties in the middle price range (say $450,000 - $950,000), in prime locations and with an element of scarcity are still selling well and holding their values, even though there is clearly less interest from both owner occupiers and investors than there was before.

On the other hand "B" & "C" class properties are not selling well. Some have dropped in value by 10% or more and some can't be given away. Well…it's not really as bad as that, but you'd have to give a very steep discount for someone to buy them in areas like the Gold Coast. (More from Michael Yardney: Oversupplied Property Markets To Remain Flat In 2012)

And all the key indicators suggest the slow down will continue well into the first half of 2012. The number of properties on the market is high, properties are remaining on the market for sale longer and many buyers are still nervous about making a decision.

2012 - the year ahead

I'll cover myself with my first prediction being that most predictions will be wrong.

Just look at what happened in 2011...

For much of the year we thought interest rates were going to rise and they've fallen. We thought Europe would sort out its financial problems and things got worse. And many people predicted Australia's property market would crash - and it didn't!

Looking forward I think 2012 will be a better year for property - but not by much. 2012 will be another year of crises. But if you think about it, every year has its crises.

The European Debt Crisis will still dominate over the first few months of 2012. The US economic recovery is likely to slowly continue, but many of its property markets will fall further. China's booming economy will slow a little and the Australian economy should chug along nicely as strong business investment spending will counter the lower growth in consumer spending and housing activity.

Interest rates have come down twice over the last two months and it looks like they'll drop further in 2012. This will increase housing affordability and slowly entice buyers back into the market.

When the government tried to stimulate our property markets in previous downturns, it combined rate cuts with First Home Owners Grants (2001 and 2009) and this caused people to rush into the markets. I can't see a First Home Owners boost being brought back in 2012. (More from Michael Yardney: Five Property Lessons For 2012)

My observation is that the recent rate cuts have increased confidence in buyers, but many are still sitting on the sidelines waiting for something else.
Some are waiting to see how the problems in Europe play out, others are interested to see what happens in our local political scene and yet others want confirmation that property prices won't fall any further. They don't want to buy in a falling market.

In the meantime many savvy investors are back picking the eyes out of the market. I was interested to read John Gandel, one of Australia's biggest property investors, is on the look out to buy again. There must be a lesson in that somewhere.

It is likely that the average homebuyer won't need to see a lot of price growth to regain confidence; they just want to know that home values won't fall further. Meanwhile they are stashing their cash waiting for someone to ring the bell that the market has bottomed.

Of course no one will do that, so I like to remind buyers that they are not buying "the market" but an individual property in the market.

If they buy well and purchase a good property below it's intrinsic value, they will be covered even if the market drops a little further. And when they look back in a few years time they'll be pleased they took action while others waited for the "bell to ring."

Michael Yardney is a director of Metropole Property Strategists who create wealth for their clients through independent, unbiased property advice and advocacy. He is best-selling author, one of Australia's leading experts in wealth creation through property and writes the Property Update blog. Subscribe today and you'll receive a free video training - The Golden Rules of Property Investment.
More from Yahoo!7 Finance:Homes On Top Of The World
Australia's Most Expensive Suburbs
Energy Savings Myths
Five horrific things that can haunt your finances
Year In Review 2011
Yahoo!7 Finance Calculators:
image

*
Stamp Duty Calculator
*
Loan Repayment Calculator
*
Borrowing Power Calculator
*
Income Tax Calculator
*
Budget Planner
*
More Calculators

This information was brought to you by
Sponsored Links
Are you getting 7.8%pa?

www.firstmac.com.au

Your fixed income investment could be returning 7.8%pa.
The Leader in E-commerce

www.Volusion.com

More Stores Trust Volusion®. Award-Winning. Get Free Trial Now!
Gold Could hit $2,000

www.xForex.com/Gold-Trading

You can buy almost $10,000 worth of Gold with a $500 investment only
What's Your House Worth?

WhatPriceMyHouse.com.au

Find House Prices For Every Suburb in Australia - Free Reports!
Savings Account Finder

* How much do you want to save?$10,096
01,000,000
*
Account type
Access to funds at any timeFixed term depositTerm
* Find

SPECIAL PROMOTION
Looking for new meal ideas?

Try a Glazed Roast Ham with help from Continental Stock Pot - a premium stock that tastes just like home made
Click here for more information

Show:
Oldest First

Newest First
Top Rated
Most Replies

1 Comment
Post your comment

1.
0Thumbs UpThumbs Down0
X2 hours, 38 minutes agoReport Abuse

I thought it wasn't possible for Australian property prices to fall (only kidding). Some property spruikers have been telling porkies.
Reply

Post a comment
Do you have a Yahoo! ID? Sign in | Sign up
ADVERTISEMENT
Stock Quotes

* Get the latest quotes from Yahoo!7 Finance
*
* Get Quotes!

e.g. BHP, CBA
Latest Finance News

* 7:55 pm Aboriginal group battles with Fortescue Metals
* 6:32 pm UPDATE 2-Brent oil set to end yr up 14 pct, record high average
* 6:30 pm Spot gold rebounds 1 pct tracking US gold gains
* 5:47 pm Aust stocks fall Friday, lose 15% in 2011
* 5:23 pm A$ up, 10-year bonds at record levels
* 5:18 pm Passengers compensated over mid-air drama
* 5:04 pm Stuart Highway repair work flagged to cause delays
* 4:43 pm Shares flatline after rollercoaster year
* 3:56 pm Rate cuts boost home values
* 3:48 pm UPDATE 1-Brent oil set to end yr up 14 pct, record high average

ASK OUR EXPERTS

*
ASK OUR EXPERTS

Do you have a question for our experts? Get the latest money tips as well as super and investing advice from our trusted professionals.Click to submit »

COMPARE & SAVE
Saving Accounts

* USaver (Base Rate...max rate 6.11%
* ANZ Online Saver...max rate 6.00%
* Citibank Online...max rate 5.80%
* ANZ Progress Savermax rate 5.76%

COMPARE MORE
Credit Cards

* bankmecu Low Rate...low rate 10.74%
* Citibank Clear...low rate 11.99%
* St.George Vertigo...low rate 13.24%
* Westpac Low Ratelow rate 13.49%
* NAB Low Rate Visa...low rate 13.49%
* BOQ Low Rate Visa...low rate 13.49%
* HSBC Credit Card -...low rate 17.99%
* Virgin No Annual...low rate 18.99%
* Westpac 55 Daylow rate 19.59%
* Virgin Flyer Credit...low rate 20.99%

COMPARE MORE
Home Loans

COMPARE MORE
Home Broadband Internet Plans

* TPGADSL2+ 100GB (Bundle)$19.99/mthmin cost $499.84
* ExetelOT-100 Plan (Bundle)$29.50/mthmin cost $634.00
* TPGADSL2+ 500GB (Bundle)$29.99/mthmin cost $1,279.72
* ExetelOT-200 Plan (Bundle)$39.50/mthmin cost $754.00
* TPGADSL2+ 150GB$39.99/mthmin cost $779.77
* iiNetADSL2+ Home-2 (Bundle)$49.95/mthmin cost $1,997.55
* InternodeEasy Broadband 200 (Bundle)$49.95/mthmin cost $2,260.60
* WestnetASDL1 Home-2 (Bundle)$49.95/mthmin cost $2,012.55
* WestnetASDL1 Home-1 Plus (Bundle)$49.95/mthmin cost $2,012.55
* MyNetFoneADSL2+ Economy 200GB$49.95/mthmin cost $1,198.80
* iiNetADSL1 Home-2 (Bundle)$49.95/mthmin cost $1,997.55
* WestnetASDL2+ Home-2 (Bundle)$49.95/mthmin cost $2,012.55
* MyNetFoneADSL2+ Economy Naked 200GB$49.95/mthmin cost $798.40
* OptusUp to 120GB Cable Broadband & Home Phone Plan$49.99/mthmin cost $1,657.51
* TPGADSL2+ 500GB$49.99/mthmin cost $659.83
* OptusUp to 120GB Naked ADSL2+ (Bundle)$49.99/mthmin cost $1,824.71
* TPGADSL2+ 130GB with VoIP$49.99/mthmin cost $979.77
* OptusUp to 120GB Cable Month to Month (Bundle)$49.99/mth
* OptusUp to 120GB ADSL2+ Month to Month (Bundle)$49.99/mth
* OptusUp to 120GB ADSL2+ Broadband & Home Phone Plan$49.99/mthmin cost $1,657.51

COMPARE MORE
Apple iPhone 4S Plans

* OptusiPhone 4S 16GB$19 Optus Cap for iPhone $70 incl. value 100 MB incl. data$41.00/mthmin cost $984.00
* Virgin MobileiPhone 4S 16GBFair Go Cap 19 $50 incl. value 50 MB incl. data$42.00/mthmin cost $1,008.00
* VodafoneiPhone 4S 16GB$29 Cap Contract $180 incl. value 200 MB incl. data$44.00/mthmin cost $1,056.00
* Virgin MobileiPhone 4S 16GBFair Go Cap 29 $190 incl. value 250 MB incl. data$46.00/mthmin cost $1,104.00
* OptusiPhone 4S 16GB$29 Optus Cap for iPhone $180 incl. value 200 MB incl. data$47.00/mthmin cost $1,128.00
* Virgin MobileiPhone 4S 16GBBig Plan 29 $450 incl. value 250 MB incl. data$48.00/mthmin cost $1,152.00
* Virgin MobileiPhone 4S 16GBFair Go Cap 39 $300 incl. value 500 MB incl. data$52.00/mthmin cost $1,248.00
* VodafoneiPhone 4S 16GB$49 Cap Contract $550 incl. value 1536 MB incl. data$54.00/mthmin cost $1,296.00
* Virgin MobileiPhone 4S 16GBBig Plan 39 $650 incl. value 500 MB incl. data$54.00/mthmin cost $1,296.00
* Virgin MobileiPhone 4S 16GBFair Go Cap 49 $400 incl. value 2048 MB incl. data$54.00/mthmin cost $1,296.00
* VodafoneiPhone 4S 16GB$59 Cap Contract $750 incl. value 2048 MB incl. data$59.00/mthmin cost $1,416.00
* OptusiPhone 4S 16GB$49 Optus Cap $550 incl. value 1536 MB incl. data$59.00/mthmin cost $1,416.00
* OptusiPhone 4S 16GB$59 Optus Cap $750 incl. value 2048 MB incl. data$59.00/mthmin cost $1,416.00
* Virgin MobileiPhone 4S 16GBFair Go Cap 59 $700 incl. value 3072 MB incl. data$59.00/mthmin cost $1,416.00
* TelstraiPhone 4S 16GB$59 Freedom Connect Plan $550 incl. value 1536 MB incl. data$63.00/mthmin cost $1,512.00
* VodafoneiPhone 4S 16GB$50 Infinite Plan Unlimited 500 MB incl. data$67.00/mthmin cost $1,608.00
* Vodafone BusinessiPhone 4S 16GB$50 Infinite Business Plan Unlimited 500 MB incl. data$67.00/mthmin cost $1,608.00
* VodafoneiPhone 4S 16GB$65 Infinite Plan Unlimited 2048 MB incl. data$72.00/mthmin cost $1,728.00
* Vodafone BusinessiPhone 4S 16GB$65 Infinite Business Plan Unlimited 2048 MB incl. data$72.00/mthmin cost $1,728.00
* VodafoneiPhone 4S 16GB$79 Cap Contract $900 incl. value 3072 MB incl. data$79.00/mthmin cost $1,896.00
* TelstraiPhone 4S 16GB$79 Freedom Connect Plan $800 incl. value 2048 MB incl. data$79.00/mthmin cost $1,896.00
* OptusiPhone 4S 16GB$79 Optus Cap $900 incl. value 3072 MB incl. data$79.00/mthmin cost $1,896.00
* VodafoneiPhone 4S 16GB$49 Cap Contract $550 incl. value 1536 MB incl. data$81.00/mthmin cost $972.00
* VodafoneiPhone 4S 16GB$85 Infinite Plan Unlimited 3072 MB incl. data$85.00/mthmin cost $2,040.00
* Vodafone BusinessiPhone 4S 16GB$85 Infinite Business Plan Unlimited 3072 MB incl. data$85.00/mthmin cost $2,040.00
* VodafoneiPhone 4S 16GB$59 Cap Contract $750 incl. value 2048 MB incl. data$86.00/mthmin cost $1,032.00
* VodafoneiPhone 4S 16GB$50 Infinite Plan Unlimited 500 MB incl. data$87.00/mthmin cost $1,044.00
* Vodafone BusinessiPhone 4S 16GB$50 Infinite Business Plan Unlimited 500 MB incl. data$87.00/mthmin cost $1,044.00
* Virgin MobileiPhone 4S 16GB89 Topless Unlimited 4096 MB incl. data$89.00/mthmin cost $2,136.00
* VodafoneiPhone 4S 16GB$65 Infinite Plan Unlimited 2048 MB incl. data$97.00/mthmin cost $1,164.00
* Vodafone BusinessiPhone 4S 16GB$65 Infinite Business Plan Unlimited 2048 MB incl. data$97.00/mthmin cost $1,164.00
* OptusiPhone 4S 16GB$99 Timeless Extreme Unlimited 5120 MB incl. data$99.00/mthmin cost $2,376.00
* VodafoneiPhone 4S 16GB$100 Infinite Plan Unlimited 4096 MB incl. data$100.00/mthmin cost $2,400.00
* Vodafone BusinessiPhone 4S 16GB$100 Infinite Business Plan Unlimited 4096 MB incl. data$100.00/mthmin cost $2,400.00
* VodafoneiPhone 4S 16GB$79 Cap Contract $900 incl. value 3072 MB incl. data$101.00/mthmin cost $1,212.00
* VodafoneiPhone 4S 16GB$85 Infinite Plan Unlimited 3072 MB incl. data$107.00/mthmin cost $1,284.00
* Vodafone BusinessiPhone 4S 16GB$85 Infinite Business Plan Unlimited 3072 MB incl. data$107.00/mthmin cost $1,284.00
* VodafoneiPhone 4S 16GB$100 Infinite Plan Unlimited 4096 MB incl. data$118.00/mthmin cost $1,416.00
* Vodafone BusinessiPhone 4S 16GB$100 Infinite Business Plan Unlimited 4096 MB incl. data$118.00/mthmin cost $1,416.00
* OptusiPhone 4S 16GB$129 Timeless Extreme Unlimited 6144 MB incl. data$129.00/mthmin cost $3,096.00

COMPARE MORE
LATEST PHOTOS

1.

Check Out These Absurdly Expensive New Year's Parties
2.

Divorced Couples Who Worked Together
3.

Celebrity Real Estate Woes 2011
4.

Countries With the Best Holiday Entitlements

ADVERTISEMENT
Sponsored Links
AU Investment Property

investmentpropertypartner.com.au

Download Free Report! Stay Updated On Investment Property in Australia
Australian Stock Report

www.AustralianStockReport.com.au

Free Trial - Our Team will show you which Shares to Buy & Sell Everyday
Invest in Land in Brazil

www.landcorpnews.com

Double your investment in a short period, with a low risk investment
2011 Jaguar XJ

www.Jaguar.com

XJ: The Icon Re-Imagined. View the Latest XJ Model Online
SPECIAL PROMOTION
Search for Singles Search for Singles

With thousands of singles all across Australia, your perfect partner could be right here on Match.com.

Find people who are looking for someone with your qualities, based on information in your profile.
Search now
YAHOO!7 PERSONAL FINANCE

* Money Manager
* Ask the Expert
* Calculators
* Small Business
* Compare & Save

* Fame & Fortune
* Investing
* Photos
* Real Estate

ALSO ON YAHOO!7

Connect

* Check your mail
* Find singles in your area
* Find a new job
* Share photos online

Fun Stuff

* TV guide
* Live sports scores
* Movie session times
* Outdoor rec sports

Serious Stuff

* New car reviews
* Currency converter
* Enter free competitions
* Horoscopes

Copyright © 2011 Yahoo!7

All rights reserved.

* Advertise with Us
* Privacy Policy
* Terms of Service
* Help