Grants Give Market Much-needed Boost

Grants Give Market Much-needed Boost

Sun Herald

Sunday January 18, 2009

CAMERON KUSHER Cameron Kusher is a senior research analyst at RP Data.

SLIGHT value falls were recorded across Sydney and NSW, during 2008. But the fact those falls occurred in Sydney is inconsequential, given that value growth has been virtually non-existent throughout the greater Sydney market during the past five years.

The good news is that Sydney is likely to be the first capital city market to recover.

After five years of virtually no value growth, value differentials between Sydney and all other capital cities have never been closer. The Federal Government's stimulus package, which has seen the doubling of the First Home Owners Grant from $7000 to $14000 and up to $21,000 for new stock, has created interest in this market.

By limiting availability of the increased grants until the end of the 2008-09 financial year, the Government has created a sense of urgency and much-needed stimulus. Essentially this means that 2009 is likely to be the year of the first and second home buyer and the market for more affordable properties (those under $500,000 to $600,000) will see the greatest activity.

When looking to purchase in this market, buyers must have a clear strategy and, in order to achieve best future capital growth outcomes, they need to target strategically located properties.

Buyers should look specifically at: proximity to a major working node; proximity to quality public transport amenity; proximity to retail amenities; and quality access via main roads.

They should also consider: demographics; proximity to schools; proximity to parks; and unique features of the property, among other factors.

Apart from the strength of the lower-end market, 2009 may finally see the return of investors. During 2008, rental yields continued to improve as rental rates increased and property values recorded relatively flat to slightly negative growth.

Some areas are showing positive cash flow. These are likely to increase as the cash rate continues to fall; it is forecast to fall below 3 per cent before April.

Inner-city units and outer, more affordable houses, in particular, are showing some of the best average gross rental yields and these yields are likely to improve further during 2009.