The Great Recovery

The Great Recovery – Sharemarket trends

•    More than half a trillion dollars has been added to the capitalisation of the Australian sharemarket since March. Market cap currently stands at just over $1.4 trillion.

•    While the value of sharemarket has lifted almost 60 per cent since the March lows, it has also become more concentrated with almost half capitalisation held in banks and resources. And just over a third of sharemarket value is held in just six stocks – ANZ, CBA, NAB, Westpac, BHP Billiton and Rio Tinto.
The Great Recovery

•    We have had the Great Depression. And in some advanced countries the recent economic downturn has been termed the Great Recession. But more positively – and in the same vein – the strong, swift recovery of the sharemarket since March could aptly be described as the Great Recovery.

•    The value of shares on the Australian sharemarket currently stands at just over $1.4 trillion ($1404.7 billion). Since March 9, market capitalisation has lifted by over half a trillion dollars ($519.4 billion) or a gain of 58.7 per cent.

•    There is still some work to reach the highs set on November 1 2007 but it looks far more achievable than appeared the case just seven months ago. Sharemarket capitalisation needs to rise by almost 25 per cent to reach record levels.

•    Certainly the fall from grace for the Australian sharemarket was remarkable. Between November 2007 and March 2009 the value of shares on the Australian sharemarket almost halved, falling by just over $847 billion or 48.9 per cent. But since, just over $500 billion of the paper loss has been recovered with just over $300 billion to go.
With recovery comes concentration

•    The recovery of the sharemarket appears remarkable, but not if you consider the performance of the economy. If an economy grows, it will be reflected in sales, profitability and therefore in the size and value of Australian companies. The Australian economy avoided recession and is now accelerating out of a slowdown. The Reserve Bank certainly expects the economy to gain pace over the coming year as reflected by the recent decision to lift interest rates.

•    In essence the sharp decline in the value of the sharemarket was unwarranted as the Australian economy failed to follow other economies into recession.

•    The main problem is that the dollars flooding back into the sharemarket have tended to flow to the main banks and resource companies.

•    Currently three of the 19 sub-sectors account for almost half the capitalisation of the sharemarket. The S&P/ASX 200 sub-sectors – Banks, Materials & Energy – account for just over 48 per cent of sharemarket capitalisation, up from just over 39 per cent at the start of 2007.

•    In fact just six stocks account for over a third of the capitalisation of the entire sharemarket – ANZ, NAB, CBA, Westpac, BHP-Billiton and Rio Tinto. Capitalisation of these six stocks has soared by $228 billion from the lows recorded late last year.

•    If the shift of funds into the ‘Super Six’ companies just represents a shift into large, safe-haven companies at the start of the sharemarket recovery then there are few long-term implications. As the recovery matures and consolidates, investors should feel more comfortable to embrace small and medium-sized companies, leading to less concentration of sharemarket value in a small number of companies.

•    However if sharemarket value continues to be concentrated into the top stocks then key indices such as the ASX 200 and All Ordinaries will be far less representative. It is important that investors are aware of the power that the ‘Super Six’ companies exert.
Have investors become too exuberant?

•    The sharemarket has rebounded a long way in a short time period. As a result, this raises the question about whether investors have become too exuberant. And in this respect an interesting dichotomy has developed. The forward price-earnings ratio, measuring share prices against earnings forecasts stands at 17.82, well above the decade average of 16.09. However the lagged PE measure, comparing actual share prices against actual earnings, stands at 14.7, below the decade-average of 15.4.

•    Which measure is right? Analysts were pleasantly surprised by the resilience of earnings in the latest reporting season and many have sought to upgrade forecasts. But it is probably fair to say that analysts still harbour doubts. So the upgrade path still has further to go.

•    The lagged PE measure requires no adjustment of views, so in the current environment it is arguably the more accurate valuation measure. The bottom-line being that the market is neither super-cheap nor expensive. If companies continue to offer positive guidance about earnings, then the sharemarket will continue to track higher, however at a more modest pace than has been the case to date.

•    CommSec expects the sharemarket to end the year around 5,000 points and lift to 5,300 points by mid 2010.

Source Craig James, Chief Economist, CommSec

LANDLORDS LET’S PARTY!!!!!!!

Yep! Looks as though the planets are finally aligning for all you investors out there with rental returns looking mighty fine. C’mon it’s your turn to celebrate!

Our mates at AUSTRALIAN PROPERTY MONITORS recently reported that gross rental returns had either remained steady or slightly increased.

Now, normally one would have thought that our heavily reduced variable interest rates might have released the pressure on rents. Well, apparently not so.

As it turns out, rental vacancy rates are still extremely low. Particularly in Sydney. The September “Rental Vacancy Report” by the REAL ESTATE INSTITUTE OF NSW asserts that Sydney has a rental vacancy rate of just 1.3%. In fact, for the vast majority of NSW (including regional centres) the rate sits below 2%!!!

Here’s the good news – it seems that property investors will not need to drop rents to attract tenants in this environment.

Recently published population projections by the NSW GOVERNMENT show that NSW will grow by 372,600 people in 5 years. That is a touch over 1,433 people per week.

The NSW Govt. also estimates that 187,300 dwellings will need to be built during this period – 720 new dwellings every week! Compare this to the number of building commencements last financial year of 457 per week (Source: ABS) and you will no doubt see a problem looming. An estimated shortfall of 263 new dwellings every week (13,600 per annum).

Another reason for property investors to party will be the end of the first home buyers grant “Boost” on the 31st of December this year.

Whilst this boost enabled more people to get into their own home for the first time, it also scared off many investors. It seems many prospective investors will be waiting until the first home buyers’ have completed their feeding frenzy. That day approaches.

The good news for investors is that median rental yields have been building over the last five years. Every capital city in Australia now exceeds 4% p.a. and the housing shortage should support this position.

Go on investors…let your hair down, throw on your dancing shoes and strike a pose….it’s your turn now to have some fun!

Cities of dreams as value of homes begins to soar

Date: October 6, 2009

Clearly Sydney and Melbourne are leading the property market recovery and now represent two of the nation’s most popular markets.

RP Data’s national home value indices published last week reveal that for the first eight months of the year Sydney home values rose 8.6 per cent, to reach a new median value of $546,867.

Melbourne also put in a stellar performance and has found its feet again to record a stunning 11.6 per cent price increase, bringing the median value up to $467,280.

These buoyant conditions are in stark contrast to the same period last year, when values were falling, sales volumes were at rock bottom and only 45 per cent of auctions were clearing.

Now we are seeing house values rising, market activity increasing, and almost three-quarters of auctions are recording a successful result.

While the sceptics have touted this as a potential market bubble waiting to burst, the figures confirm that the residential market is protected from a downturn in values by a broad range of factors.

Interest rates are at historic lows and — although rates will be lifted over the coming months — we will need to see a rise of 150 basis points before mortgage rates reach their 10-year average of 7.3 per cent.

Importantly, housing is in undersupply and the nation’s population is growing at a faster rate than in any other country in the Western world.

Australian development is being underpinned by the fastest rate of population growth since the baby boomers.

Other factors such as the health of the financial sector and lower-than-expected unemployment figures are also likely to support the housing market.

Over the next six months capital growth is likely to moderate across the Australian market.

Interest rate rises, together with a winding back of the boost to the first-home owners’ grant, are likely to dampen demand.

Tim Lawless is the national research director of rpdata.com.

Source: The Sun-Herald

Thump Thump Thump

GOOD NEWS FULL OFFICIAL DATA CLICK HERE

Record August growth in home values despite first home buyer demand winding back.

Capital city dwelling values – first eight months of 2009
•Sydney values up 8.6% to $546,867
•Melbourne values up 11.6% to $467,280
•Brisbane values up 5.2% to $443,197
•Adelaide values up 3.1% to $ 407,227

National property values jumped by almost 2 per cent in August in the largest monthly movement since the
RP Data‐Rismark Home Value Indices began in January 2005

According to rpdata.com research director, Tim Lawless, the August results
surprised on the upside and are indicative of very high levels of buyer
confidence combined with low levels of listings.

“These buoyant conditions sit in striking contrast to the same time last year
when values were falling, less than half of the auctions held cleared.

GOOD NEWS FULL OFFICIAL DATA CLICK HERE

PROPERTY INVESTORS – YOU’RE IN THE MONEY!!!-on the Northern Beaches.

| Date:7 September 2009

It’s possibly the nation’s best kept secret. Just recently I’ve seen an ad or two on the tellie advising us about the governments stamp duty rebate for NSW Property Investors.

Here’s the drill – people buying newly constructed homes valued up to $600 000 will get a 50% stamp duty cut in a massive stimulus boost to the state’s housing sector. Yep! 50% off.

These changes came into effect 1 July 2009 and should run for at least 6 months with a review on December 31 2009!

There is certainly some movement out there with a baton change between first-home buyers and investors in Sydney’s residential market place certainly starting to take place, but not with the timeliness the State Government had budgeted for.

First-home buyers continue to dominate the market, with new figures showing just 221 investors took up a 50 per cent reduction in state stamp duty in the first six weeks of the scheme.

The figures do show an increase on the 167 investors who bought in the first five weeks of the rebate.

New houses and units worth $94 million have been purchased by investors at a cost of $1.6 million to state revenue.

The Government set aside $64 million to fund the six-month scheme.

First-home buyers seeking to take advantage of the handouts continue to purchase at a rate of about 1750 a week, compared with 36 investors a week.

Meriton, reports that investor inquiry has picked up considerably in recent months at its Victoria Square, Zetland, development.

This is due to the strong market fundamentals investors crave – low vacancy, rising rents, excellent yields and a lack of supply,’’ the sales and marketing manager, James Sialepis, said. “The percentage of investors purchasing our apartments has risen from 10 per cent earlier this year to 40 per cent in recent months.’’

Analysts say a return to the market by nervous investors will be crucial to supporting house prices as the current surge of interest from first-home buyers is expected to peter out.

Many property investors have been anticipating a fall in prices when the government support for first-home buyers is partially reduced next month.

’’The main reason that investors have been on the sideline was that they were concerned about the price side,’’ an economist at Westpac, Matthew Hassan, said. ’’Having a good yield is all very well, but to make the proposition stack up you’ve got to have capital gain.’’

But other signs of life in the property investment market are emerging.

A Westpac survey of consumer sentiment last month showed a big jump in house price expectations among people aged between 35 and 55 – the age of most property investors.

Our advice – getting cracking!

Take advantage of the government’s stamp duty rebate. There are some fabulous bargains out there!

Jump onto The Novak Agency website to see what brilliant investment properties we have available.

Want more info on the stamp duty rebate for property investors? Just click here.

DEE WHY HOME PRICES ON THE RISE!!!

THE NOVAK AGENCY TALKS ABOUT STAMP DUTY SURPRISE 4 SECOND HOME BUYERS!!!

| Date:22 June 2009

Seems it’s not only first home buyers that are getting to have their cake and eat it too!

If you’re a SECOND HOME BUYER or an investor, have we got some good news for you!

It seems in an effort to pump up the housing construction sector, the New South Wales government will be offering a massive discount to those people buying NEWLY CONSTRUCTED homes worth under $600,000, that 50% less stamp duty, a saving of up to $11,245!!! The deal will be axed on December 31.

This golden government giveaway, is fabulous news for those of us who are “experienced” home buyers and may already own or already purchased our first property. This deal is NOT available to first home buyers as they already pay no stamp duty on properties under $500,000.

NSW treasurer, Mr Eric Roozendaal described the measure as a “kickstart for the housing construction industry that will support employment in every part of the state”.

Now, if you’re looking for the ideal second home or investment under $600 000 and wish to take advantage of the 50% discount on stamp duty, you MUST visit The Novak Agency’s website. Just click on the link below.

Why not join the rest of the world and follow The Novak Agency on Twitter. Just click on the link below.

• www.thenovakagency.com
• www.twitter.com/thenovakagency

THE NOVAK AGENCY REPORTS – FIRST HOME BUYERS HAVE GONE WILD!!!

| Date:15 June 2009

It seems that the “in” place for 25-35 year olds to be seen these days is at open houses!

The first home buyers market has swelled to the highest level on record, data out today shows.

“There was a lull in the market for a short period of around 4 weeks and it’s gone absolutely crazy again”, reports Mark Novak of The Novak Agency in Dee Why.

First home buyers now make up 28 per cent of all dwellings financed, which is the largest proportion recorded since the Australian Bureau of Statistics began collecting the data in 1991.

The number of housing loan approvals rose by 0.9 per cent in April, the seventh monthly rise in a row. The figure was still below market expectations of a 1.5 per cent increase.

“Our stock levels are now nice and high again and we have found that certain properties have been sold prior to even hitting the market. Some properties we could have sold ten times over, there has been such enormous interest in them”, says Mark Novak.

Westpac senior economist Andrew Hanlan said the deadline was encouraging first home buyers to rush to the market.

“Where other investors have more time to make their decision, the nature of the (first home grant) deadline means they have to bring forward those decisions,” he said.

Mr Hanlan said there was a “dramatic improvement” in housing affordability, with variable mortgage rates still at their lowest since 1968.

Now here’s some juicy “goss”. If you are in the market for your first home and have not yet purchased one, you really need to get a move along.

Interest rates are somewhat unpredictable and there does not seem to be enough first home buyer properties to keep up with the demand.

Join the first home buyer party!!!

The Novak Agency, Dee Why has stacks of brilliant first home buyer properties in very affordable locations such as Collaroy, Dee Why, Manly and Freshwater.

Click here for a full list of  The Novak Agency properties for sale.

Click here to follow The Novak Agency on Twitter.

WHAT RECESSION? THE NOVAK AGENCY TALKS ABOUT WHERE THE RECESSION WENT…

Could it be that Australia is the wonder from downunder after having out-performed all other industrialised nations in the quarter by a hefty margin.

The Aussie economy expanded by 0.4 per cent in the March quarter after contracting by a revised 0.6 per cent in the December quarter.

While this may not spark dancing in the streets, it clearly is fabulous news that Australia has officially side stepped the recession.

Every other major developed economy went into reverse in a big way in the first three months of the year but Australia actually grew. Much of the credit for Australia’s resilience must be given to the swift actions of the Reserve Bank and the Government in stimulating our economy. And the weaker Aussie dollar played a key role in boosting the competitiveness of our exports.

If the near-death experience of the economy has taught us anything it is not to count your chickens before they hatch. Forecasts for economic growth and unemployment are just that – forecasts. Forecasts inevitably miss their mark and that’s why businesses and consumers should spend more time looking at their balance sheets than worrying about what may happen.

One thing is clear, Australia was very good at talking itself into a recession. Our economic conditions were nowhere near as bad as other parts of the globe, but somehow we all thought they were as bad. If Australians focus on the opportunities that lie ahead then the rebound should be much quicker and stronger.

Aussie, aussie, aussie….oi oi oi!!!

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ALLOW THE NOVAK AGENCY TO HELP YOU BUY YOUR CASTLE THIS QUEENS LONG WEEK-END!!!

So maybe you don’t have 320 million pounds tucked away in your bank account like Queen Elizabeth however that shouldn’t deter you from purchasing your Northern Beaches ’castle’.

With all fingers pointing upwards, it appears that the property market will be inflating in the not so distant future.

The lowest interest rates in almost 50 years, combined with an extension of the beefed-up First Home Owner Grant, have provided ripe conditions for young buyers.

But analysts say investors will flood the market after the grant is halved on September 30. Prices, already inflated at the bottom end of the market, will rise further.

Australian Property Monitors economist Matthew Bell said market conditions were ideal and there was no better time to buy.

“Now is a good time for first-home buyers,’’ he said.

“You’re not going to get interest rates this low for a long time and they will probably still be around for another year.”

The Novak Agency has a massive range of properties for sale in and around Dee Why, Manly, Collaroy and Freshwater,  many of which are ideal first home buyer properties. For a full list of properties for sale, click on the link below.

The Novak Agency are opened both Saturday & Sunday of the Queens Birthday long week-end.

Click here to view The Novak Agency’s open times or visit the website for open times or view the back page of The Manly Daily. Call 1300 4 NOVAK or 89786888 24/7 – we never sleep!

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