26 November 2009
Property prices in Australia
We are frequently asked by investors about the property market. In our last Investment
News, we reported that dire predictions of the market's imminent collapse had been
shown to be wrong. As a result, one prophet of gloom, Steven Keen, now has to walk
from Canberra to Mt Kosciusko wearing a t-shirt proclaiming his error.
So what has been happening in property in 2009?
The overseas picture
With the onset of the Global Financial Crisis, some property markets have experienced
a significant downturn. The problems in the US are well documented and are likely
to be ongoing, as the entire nation enters a sustained period of enforced saving.
The UK has also had a difficult time, with house prices recently posting their first
quarterly increase since the third quarter of 2007. Closer to home, New Zealand
is still down on its peak in 2007, although there are signs of consolidation and
Property in Australia through 2009
The experience in Australia has been markedly different. In 2008, the market reduced
by 3% 'peak to trough' between February and December. However, by March 2009 it
was becoming clear that this softening was limited both in scope and duration. At
this time, Anthony Richards, the Head of the Economic Analysis Department of the
Reserve Bank of Australia, noted that:
Although we have obviously not yet completed the final quarter of 2009, it seems
clear that Richards' early assessment was accurate. According to RP Data-Rismark,
by the end of the third quarter Australian house prices had risen by approximately
the weakness in housing prices was mainly at the higher end of the market; and
preliminary data was already showing a significant pick-up in the market.
Of course, not all regions in Australia were equal. Darwin experienced 6.3% growth
in the third quarter alone and Melbourne and Sydney easily exceeded the national
average. However, other regions, such as Brisbane, Perth and Adelaide, have been
less buoyant, despite having provided the best overall results in recent years.
Property performance and investment
There is no doubt that many who have ridden the recent roller coaster on equities
markets would be looking enviously at the stability of the Australian property markets.
But investors should always recall that the property market does not rise and fall
uniformly. All investment, including property investment, involves risk.
The way to manage the risk (it can never be eliminated entirely, even by avoiding
investment) is to diversify your investment. Or, as the old adage puts it: "Don't
put all your eggs in one basket".
La Trobe's Pooled Mortgages Option offers diversification on a range of levels so
that it can provide a stable, reliable income for investors. Each investment is
available to be
invested in over 300 mortgages and in cash, rather than being reliant on the performance
of a single borrower. In addition, the mortgages are diversified geographically
and according to security type (e.g.: residential, vacant land etc).
La Trobe's dedicated management team constantly assesses and reviews allocations
and investments of the Pooled Mortgages Option. Allocation changes are constantly
adjusted to take account of changes in the general economy or in particular market
The La Trobe Group is one of Australia's leading mortgage managers and
has been managing mortgages for over 55 years.
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Head of Funds Management
t +61 3 8610 2811
Chris Andrews is the Head of Funds Management for the La Trobe Group and has responsibility for the La Trobe Australian Mortgage Fund.
Read full profile here.
La Trobe is one of Australia's leading independent specialist mortgage Financiers. Its business includes residential mortgages, commercial mortgages, and investment services operating one of Australia's largest Mortgage Funds under AFSL 222213. It employs over 115 staff and has raised over AUD$10Billion to assist over 100,000 customers since inception in 1952.
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