Property Forecast

Residential prices in Melbourne are set to continue increasing, according to the BIS Shrapnel three-year forecast. BIS Shrapnel is an independent economic forecaster and property analyst company. They are often looked to for their insights into the future conditions of the real estate, nationwide

The estimated amount for the growth was 19% percent, which included inflation. Sydney and Adelaide were also predicted to have a similar growth as Melbourne. BIS Shrapnel came to this conclusion due to the rush of first home buyers scrambling to use their first home owners grant while they still could.

Mr Zigomanis of BIS Shrapnel said, "We're expecting that increased first home buyers activity to lead through to stronger upgrading demand for people upgrading to their next property." He also added that once the first home owners grant expires and first home buyers drop back out of the market there will be enough activity in the market for it to become self-sustaining.

Further findings for Melbourne's property market from BIS Shrapnel stated that the median home price in June 2009 was around $425,000. This figure would be expected to increase. A lot of market activity was predicted to be amongst those who were looking to upgrade their property.

"The weak economic environment will continue to be a dampening factor on price growth in the Melbourne market during 2009/10," says Zigomanis. "A rising deficiency of dwellings will maintain upward pressure on rents, while the reductions in interest rates have boosted affordability in Melbourne to its best level since 1999.

"This is likely to encourage demand as economic growth begins to strengthen through 2010. Over the 2009 to 2012 period, we are forecasting Melbourne's median house price will rise by a total of 19 percent, which is nine percent growth in real terms."

However, others are sceptical of such a rise occurring due to the rising level of unemployment. Many predict that the market will remain stagnant from the hesitation of citizens to jump into the market when there was so much uncertainty regarding stable employment. According to Mr Zigormanis' outlook, unemployment, affecting Australia, will peak between 7 and 8% mid next year. The government, however, seems to think that this will not be the case until mid 2011. This will, in effect, leave approximately one million Australians without work.

Regarding employment affecting growth, Mr Zigormanis added the impact on house prices would be "more so from a confidence perspective."

He elaborated by saying, "Those people who have the means to buy property, and still have a job to buy property, they may be concerned about their employment outlook."

From the findings, it can be concluded that the housing situation in Melbourne is good for buyers. It has the largest and most affordable new home market compared to the other major cities throughout the nation. Real estate in Melbourne is more affordable than those located in other major cities nationwide.

Melbourne 2030

Melbourne 2030 is a strategic plan by the Victorian government covering the period from 2001 to 2030. The policy involves the framework for sustainable growth and development in the Melbourne metropolitan area. During this time, the population of Melbourne is expected to increase by up to one million people and 620,000 extra households.

Two of the designated growth areas are Melton and Wyndham. A committee was appointed by the state government to create and overview growth plans for the next 30 years.

The plans were co-ordinated by a government-appointed committee for Smart Growth. It was created in order to keep track of the urban growth development in 5 regions of the area, which includes: Casey-Cardinia, Hume, Whittlesea, Wyndham and Melton-Caroline Springs. The committee reviews and oversees the implementation of past, current include and future strategic framework.

Wyndham is expected to double in population by the year 2030 so it was only appropriate for a Smart Growth Committee to be appointed in this area. The committee of both areas is made up of representatives from the City Council, community and also industry representatives. The committee reviews and oversees the implementation of the past, current and future strategic framework.

The proposed action plans need to be refined, scheduled and prioritised to develop an achievable program, but the Council looks forward to working with the Government on refining and adapting Melbourne 2030 to their city.

The Shire of Melton is expected to accommodate additional 33,000-37,000 households over the next 25 years.

The four main areas of the Urban Growth Boundary (UGB) for Melton Shire include:

•· Melton Township North (93 hectares) - along either side of Coburns Road to approximately Minns Road.

•· Melton Township South - (455 hectares)- along either side of Exford Road between the Melton Reservoir and Toolern Creek.

•· Melton Township South-East (1,431 hectares) - south of the Toolern Employment Node and the railway line, and east to Paynes Road.

•· Taylors Hill East (218 hectares) - north of Taylors Road and east of the high voltage electricity line easement.

Interest Rates Update

During the December Reserve Bank of Australia (RBA) meeting, it was revealed that the official interest rates were raised by 3.75%. This third time rise is an unprecedented event. Such a rise was similarly observed in October and November. The meeting took place on December 2^nd with the cash rate being lifted by 25 basis points.

The minutes of the December RBA meeting stated that: "Members agreed that the level of the cash rate set when the outlook appeared to be much weaker would be too low for an economy that had resumed expanding, with a smaller amount of spare capacity than had earlier been expected."

"That adjustment would not be intended to slow demand compared with the current forecast path, but aimed simply at keeping the stance of policy appropriate for improving economic conditions.''

''In Australia, the downturn was relatively mild, and measures of confidence and business conditions suggest that the economy is in a gradual recovery,'' RBA Governor Glenn Stevens said in a statement accompanying the rates verdict. The central bank's ''gradual'' increases in rates will ''work to increase the sustainability of growth in economic activity,'' he said

The minutes showed that there was heavy discussion as to whether it would be appropriate for the rates to remain level or if there would be increased benefit from another rise. Both sides of the argument were "finely balanced" and many factors were taken into consideration. However, board members came to the decision that, "the stance of monetary policy would best reflect the circumstances facing the economy over the period ahead if there were an increase in the cash rate of 25 basis points at this meeting."

Westpac was the first commercial bank to act upon the rate rise by increasing its key variable home loan lending rate by a surprising 45 basis points.

Interest Rates are predicted to rise again in the New Year, according to many analysts. The findings were found when a poll was taken by Reuters amongst 18 economists with the majority foreseeing that the Reserve Bank of Australia would increase by 25 basis points.

JP Morgan's Chief Economist Stephen Walters commented that it may be witnessed that the RBA make history again by applying four rate rises in a row: "With inflation likely to creep up, and the worst in the economy having passed, there is no need to keep rates at very expansionary levels.''

"We think they will again lift rates in February,'' Mr Walters said. ''The RBA does not meet in January, but I think they will hike when they return after the break. The word 'gradual' is still there in the RBA statement and I think they will start going slow in lifting after February."

As a result of the rate rise, the dollar dropped but later recovered to around 91.5 US cents.

The increase has been met with disapproval from the Australia Retailers Association. Russel Zimmerman, the executive director of ARA, commented that "Instead of letting retail recovery gain some much needed momentum over the Christmas and Post-Christmas trading period, the RBA is taking cash away from consumers at the worst possible time.''

The past interest hikes haven't significantly affected the current economy, with businesses and consumer spending still strong. It's simply a matter of wait and see when it comes to finding out if the economy will fare similarly during the Christmas period.