Property: Early thoughts for 2010

Without doubt, 2009 will be remembered as the “Year of the First Home Buyer”, courtesy of the Federal Government stimulus package.

This initiative certainly provided the Central Coast with a much needed boost in real estate sales in the sub $400,000 price bracket. The success was due to the fact that many parts of the Central Coast market falls into this bracket.

At the beginning of the year, cautious optimism was expressed for the success of the stimulus package, but by mid year the results filtering through was clear – sales in sub $400,000 market proved even stronger than expected.

Slight increases in values in some areas had been noted, but upon further analysis, it was clear that these increases were directly proportionate to the level of the first home buyers bonus.

Interestingly, it seems that Umina Beach took the prize for the largest turnover of real estate.

We thought the second and subsequent home buyer market would lift on the back of the strong first home buyer market.

Well eventually this did occur, but activity in these segments remained subdued for much of the year until November when more activity was seen.

With few notable exceptions, beachfronts, waterfronts and executive dwellings were anticipated to suffer during 2009 and this has been the case.

Comparatively speaking, we saw some very good buys occur and there was surely some hurt felt in these markets. But the general lack of activity in these segments was mostly due to owners (in a position to do so) opting to delay the sale of their homes until the market improves, rather than take a hit. But from November onwards, good interest in these markets had been reported.

In the early stages of the new year, confidence in the residential market seems to have improved. This is evidenced by the owners’ own estimates of their property values being seen by property valuers. But such confidence is yet to be realised as the hard evidence emerging so far indicates that there is little increase.

Much attention has been given to the property development sector and the lack of activity that is occurring. This is and should be a real concern for all levels and segments of the market. Developers and investors are reporting the inability to secure funds, with the banks seeming to have adopted a “drip feed” position to the sector and on terms that many borrowers are unable to meet.

Amongst other things, the role of property valuers in the development sector is to advise lenders of the likely value outcomes of new developments. This of course, happens in the preconstruction phase when project funding is being raised and at times, during the development of the property.

Many valuers report that for some time now, the need for this type of advice has been greatly reduced and as a barometer of the level of activity that can be expected in the short to medium term, the supply of new development will be minimal. This of course, affects the local economy on many levels.

No one can argue that the banks have endured a particularly difficult phase through the GFC, but in the absence of funds being available at a local level, developers and investors are looking elsewhere with overseas funds being sourced.

Overall, we envisage 2010 being a very interesting year for property on the Central Coast. If the late ‘09/early ‘10 activity results are an indication of what lies in store, the popular segments will be in the $500,000 to $1 million and perhaps the $1m to $2m ranges.

But if the property cycle remains true, 2010 should shape as a year of cautious optimism and consolidating one’s position in the market in preparation of the years ahead.

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