Property News

Property Price Increase great for Investors

The increase in property prices has been great for investors in the past year. There was a 20 percent increase in the price of property in 2009 including a 4.8 percent property price increase in the first quarter of 2009.

Australia is now the fourth fastest growing property market in the world. China is at the top of the hot list of property markets in the world with a yearly property price increase of 68 percent overtaking Hong Kong to take the top spot.

The list was compiled through a survey of 47 countries finding that the first four rankings are made up of nations in the Asia-Pacific region while the European countries take up the bottom half of the list.

Twenty-five countries recorded an increase in property prices while the rest of the countries on the list experienced a decline. Most of the European countries saw a decline in their property prices Britain though registered an 8.8 percent property price increase. Part of the reason for this increase, was the confidence of Asian investors in London properties this was due to a weak British pound and rising rental fees.

Property prices in the United States increased by 2.3 percent as well, though properties in Dubai experienced an eight-percent price drop. It is not yet clear whether the trend is due to growth or a result of the recession.

Property Market is Strong

The economy grew stronger than expected, though the Reserve Bank of Australia maintained the official cash rate at 4.5 percent and the property market is strong. Some economic experts believe that another rate hike will happen before the end of 2010.

Since the United States is in the midst of having another economic stimulus package and Europe is showing slow strides of growth, Australia is among the few countries with improving economic conditions and thus, rate hikes are very possible.

Many economic experts are searching for answers as to how Australia avoided the property market collapse while the United States is still feeling the effects of it. An answer to this puzzling fact can be found in the Australian and American mortgage and property market structures. Australian home loans have low rates and they do not carry the same non-recourse loan percentages that American home loans have.

This difference means that Australians do not have the option to turn over the loan to the lender if they cannot pay the mortgage. Also, recent data shows that Australians do not borrow much beyond what they need.

There are low delinquency rates in Australia, meaning that less than two percent of all the loans are unpaid 30 days past the payment due. Fact is that Australians even pay their home loans before scheduled repayments. Banks report that about 55 percent of home loans are paid in advanced and 40 percent of these payments are for more than a year in advance.

The rates of delinquency in Australia are way lower than the peak of 1.63 percent in January 2009. Thus, the Australian economy is unlikely to taste the same fate of the American economy even if property prices fall due to interest rate hikes and cautionary investing. It is very unlikely that Australians will experience mortgage defaults and negative equity.