The first quarter of the calendar year was one of the most difficult to comprehend due to the number of significant components driven by the results of the royal banking commission, the accelerating problem of drought, the concern and lack of housing stock and the stop-gap methods of trying to control the mortgage lending market.

In summary, the proximity of the federal election, the concern in the two major states as to the impact of state elections, the ongoing concerns of minor political parties are the very difficult components that must be addressed. The impact of drought and water conservation, the ongoing acceleration of power costs for families, the lack of any budgeting for wages during a period of accelerating employment growth being reflected in stock market moves and accelerating company profits.

In addition, the growth of royalty income in natural gas, coal and the general impact of the building industry and the acceleration of imported components for service industries and the questionable concern about employment in a far greater reduced financial services sector whose basis of operation will be driven by more regulation and investigation.

These components will be exacerbated by a change in dynamics i.e. mortgage rates for home buyers who are assessing the impact of negative gearing (which does not affect home buyers), capital gains tax for existing investors whose capacity to service greater loans in the future but being provided with borrowing opportunities which are taking into consideration a lower interest rate (which looks to be forthcoming) yet a greater impact of capital repayments on these loans.

In the market are vendors that are not prepared to sell at the lower levels that are being achieved against the owner occupiers who recognise the softening in prices and are yet to achieve a lending ratio that will reflect the price advantage that is out there.

There is evidence now that property investors that have had a reasonably successful five-year period are being pushed by the banks to either reduce their positions or turn their loans into principal and interest packages.

In the last three years the population of inner Melbourne and inner Sydney has risen in excess of 110,000 in each city per year. In addition, there has been a significant number of retirees who are not prepared to move into development blocks in their retirement but are putting pressure on the existing free standing market in the suburbs in which there are significant practical advantages in shopping, transport, proximity to where they wish to be, more likely suburbs out of which they have been pushed.

At the same time, we have seen a much greater move to regional areas such as Newcastle, Wollongong (in NSW) and Geelong, Bendigo and Ballarat (in Melbourne). The concept being that these parties are happy to stay in the closer inner areas as tenants, with the likelihood of achieving greater appreciation from a regional area where cost advantage is foreseeable and possible.


There is limited stock out there, inspections by potential buyers are increasing but the availability is limited and there is evidence now that prices must come back significantly (up to 15%) for there to be any reflection of an upward movement in stock.  The following schedule provides a scenario that incorporates the major components of rental, improvement replacement, a level of confidence in ongoing finance which will be affected by a long-term bond rate but encouraged by bankers whose revenue from the mortgage market has been seriously reduced. The above mentioned figures on population in both Sydney and Melbourne are in themselves dramatic and will underwrite people demand for at least ten years.

In summary, it would appear that we are about to witness another growth cycle which will be significant and profitable.