by Tracie Hocart
Residential Property Solutions
Affordability, Cost of Living, GFC, Resources Boom, skills shortages, budgets, cheap holidays, strong Aussie Dollar, infrastructure spending, under supply of housing – these are just some of the phrases appearing frequently in the media today. And, I’m sure it’s not just isolated to Australia. In fact, throughout the world, countries are going through a time where cost of living, affordability and the health of world economies are big news. This is no surprise given that we are all continuing to ride out the last waves of the Global Financial Crisis – some doing better than others.
Since the GFC, consumers in Australia have changed their habits. They have had to. Banks have tightened their lending policies for individuals, and more so, for businesses. Individuals and families have started to save. Prior to that consumer spending was at significantly high levels. Everyone wanted luxury and spent to get it.Retailers here have really felt the pinch, with less consumers opening their wallets. Competition in this sector is fierce. Not only are retailers forced to sell products at increasing discounts they are also experiencing the trend of many consumers shopping on line to purchase these goods. This is fantastic news for consumers. In fact, this has meant many consumers are not prepared to pay full price for anything. We are now armed with the knowledge on how to get a bargain and where to go to get that bargain.
In Australia, we are also experiencing a resources boom, the envy of many countries in the world. We are seeing the Chinese showing a lot of interest in investing here, and of course, in our resources. This is part of the reason that our economy has been so robust in the face of the GFC. Unlike many of the world’s economies, we were fortunate to ride out the GFC without slipping into a recession. Another reason behind this has been the government’s stimulus package that included accelerated spending on large infrastructure projects, and also consumer spending incentives.
Our housing sector has taken a bit of battering during the last two years. Prior to this, residential property was climbing in value, and outpacing other investments. Continuing increases of such dramatic proportions is unsustainable; therefore some geographical areas have been flat for some time. Many commentators are predicting that 2011 will see a continuation of this flat trend, with some slight growth in capital cities.
This is great news for homebuyers and investors. Property prices are low here, in comparison to previous years. During the GFC, some vendors have had to sell property at prices below replacement costs. At the same time migration levels (both interstate and overseas) have slowed slightly, but Brisbane and the Gold Coast continue to experience above average population growth. Demand is high. People are moving here and need housing. Prices are low and supply is plentiful, as first homebuyers and investors have been less active in the market. The supply issue is only going to worsen. Less new stock is coming onto the market, as construction is down, due to developers being pushed out of the market. Some vendors have also taken their properties off the market, as they do not want to sell below their expectations. Migration, although lower than in the past, is still continuing to be higher here. When the supply levels shorten, prices will move upward again.
In regard to everyday living expenses such as groceries and petrol – yes, some things have risen in price, whilst others have decreased. For example, here at the moment both Woolies and Coles are trying to attract customers through a pricing strategy involving staple goods such as milk and bread. The price of generic branded milk has gone backward and is now being priced at around $1 a litre. Catalogues of weekly specials come out for both grocery retailers and there are always good buys and significant savings. Consumers buying patterns are different to what they would have been 10 years ago. There has been so much information available in the media about how to save and be thrifty with money. We are getting all the more wiser and doing things like buying in bulk, buying multiple items when on sale, looking at the prices of competitors, and buying on line. If you take the time to look, significant savings can be made in the weekly grocery shop.
Petrol is priced here at the moment around $1.35 – $1.48 a litre, for unleaded fuel. It has also risen slightly. We do have our cycles with petrol prices. Last year we went through a stage where fuel was a lot more expensive, it seems to have settled a little bit now. However, we all know fuel prices are dependant upon the cost of oil per barrel.
In terms of electronic, white goods and computers, prices are coming down due to the fact that there are always new products being released into the market, competition is stiff and some products are made overseas where labour costs are lower. A perfect example of this is with televisions. We have a large flat screen TV that we purchased around 12 months ago. We bought this TV for $1500. We bought a similar TV (although not as large) 6 years ago for $3500. We are now getting more choice, more product and better features, for less outlay.
Eating out habits has also changed. A lot of people are so busy with work and family that they are choosing to stay home rather than to head out to a restaurant to eat. When we do head out now it is usually for a special occasion/celebration. There has also been an increase in the number of reality cooking shows on TV such as Master Chef, My Kitchen Rules along with Jamie Oliver and a host of other celebrity chefs shows. This has flowed through to the grocery retailers who are offering customers a wider experience with food, through celebrity chef created gourmet recipes. Recipes are using ingredients found in store. These things have meant restaurants are fighting a lot harder to bring in customers and as a result we are seeing discount vouchers, special offers and less expensive options on the menu. Once again, great news for the consumer!
The cost of renting a residential property in Brisbane and the Gold Coast is also growing, as we would expect. At the moment demand for rentals is extremely high for a number of reasons, including continued higher than average population growth, the recent floods in Brisbane, and also, that some people are choosing to rent as they are unable to get finance approved, or they are wanting to wait and see what happens with the property market. This has created great opportunities for the investor who is able to purchase in a low interest rate, low priced market, with high demand for rental properties.
The Australian economy is robust. We have a great lifestyle with beautiful beaches, magnificent rainforests, and a sunny climate. We are culturally diverse and have a low population density per square kilometre. We have a high standard of living, a low crime rate, excellent education system, fresh food and produce readily available, a good health system and a stable political and social environment. We still have low interest rates. It is very hard to determine ‘cost of living’ or to place a value on affordability. The cost of living is a very individual thing. It all depends on an individual, or families, goals and spending habits. For some, taking a holiday camping in a National Park can be far more enjoyable than spending a week in a luxury hotel. We all know that the cost to do these activities will be somewhat different. Some people will choose the latest BMW to get around in, whilst the next person may choose to drive a Holden Commodore. Both nice cars but cannot be compared price wise.
For those thinking of relocating it is important to take all things into consideration, not just the price of buying or renting housing, purchasing groceries or eating out. Think also about income levels, low interest rates, strength of the economy, as well as less tangible things like the climate, lifestyle factors, living conditions, and other things that matter to you and your family.
Tracie Hocart lives and works in South East QLD with her husband Damien (a Certified Practicing Valuer) and young family. Tracie and Damien own and operate Residential Property Solutions assisting home buyers and investors locate the right property, in the right location, at the right price.