Australia has been known to have the largest dwellings in the world and these houses are noted to be of high quality, with the average Australian house estimated at 214 square meters.

Now, the sizes of Australian houses have shrunk as potential home buyers are being offered new house and land packages that is a quarter the size than what was supposed to be before.

The shrinkage is blamed on the changing household preferences.

As Australian households are now apparently demanding lower maintenance homes, home builders, looking to meet the market, now offer more affordable house-and-land options, with lot sizes being squeezed into a less than 200sq m lot for the first time.

Likewise, backyards which have been reducing in size for decades and in recent times have been swallowed by a pool and deck may shortly disappear.

The downsizing trend in the homes for sale is said to have surged in the US since the global financial crisis and has sprung up in Western Australia, South Australia as well as in Victoria.

Australian house builders are now making certain that they are ready for the arrival of rear-loaded blocks or laneway, which are lots where a garage is built at the back, allowing car access via a laneway.

The era of the McMansions had ended as small lots are now in demand.

However, though changing household preferences could be one of the causes of this shrinkage, the main reason behind this shrinkage unfortunately is attributed to the government’s urban consolidation policies since the early-2000s which includes the implementation of urban growth boundaries around Australia’s cities as well as more restrictive zoning.

These policies have significantly driven up the prices of fringe land, which have both compelled the move to smaller block sizes in order to maintain some appearance of affordability as well as pushing-up the prices of new and pre-existing display homes.

Affordability as well as Livability

With this recent development, potential home buyers are likely to see house-and-land packages being offered at a price around $320,000, which is quite affordable.

Three-bedroom homes with an ensuite, double garage at the back, walk-in robes and a drying court are also likely to be offered.

Plans on introducing a range of affordable housing and smaller block sizes into its communities are also on the works.

Australian developers are aiming for affordability as well as livability in building these new houses. A more efficient block size situated near parks, public transport, places of employment and other amenities will more likely make people less reliant on their cars.

Though home builders admitted that yards would likely disappear and “terrace” block sizes would be as small as 7.5m by 25m (187sq m total), the loss of the yard  have only followed a trend where people are contented to have low-fuss outdoor areas and are happy to pursue social and sporting interests away from home.

The rise of the small block houses is said to be inevitable as smaller house and land packages would open up the market and would be a better use of resources.

Following the recent release of Australia’s State Budget last week, the next month and a half would be a crucial decision time for people who are planning to buy a house as first home designs buyers are being offered by the federal government with a $10,000 Building Boost for newly constructed properties valued up to $600,000.

The $10,000 Queensland building boost grant is intended for any person or corporation who is intending to buy or build a new home for the purpose of living in, or for renting it out for investment purposes, for homes valued less than $600,000.

The Building Boost Grant was aimed to rekindle Queensland’s struggling housing construction sector which was caused by a combination of declining property transfers and the economic impact brought about by the summer’s natural disasters.

The government wants to encourage people to buy or build new house plans in order to jumpstart the declining property market.

However, as the building boost grant is not intended to pay for a building contract, as well as to any owner home builders who is on the business of building homes and the home was built for sale in the course of that business, this would persuade home buyers to holdup signing an off-the-plan sale or building contract until August 1, as grant is only going to be available this coming August 1.

Meanwhile, existing home owners who want to upgrade or downsize to another property faces a stamp duty (transfer duty rate) increase of up to $7175.

Buying or Building?

With the recent development in the property market, many people would now be encouraged to buy or build new homes. With this, it is now necessary to learn the pros and cons of buying and building a house.

Buying Pros

Potential home buyers can:

• have a wide range of options or choices of ready-made houses to choose from
• have the opportunity to compare different features until they find exactly the right combination at the right price
• have seen the actual house design so they will instantly know what their house really looks like
• have a bargaining advantage as competitive is the property market nowadays, house hunters can now have the chance to drive a tough bargain and get the best deal possible, as there are many other options out in the market now

Buying Cons

Potential home buyers:

• may have to make concessions with regards to the house features you want
• may not find the perfect or the dream house that you want since you didn’t design it yourself.
• may need to spend money in order to make updates or repairs
• may need to make an offer that is more than the listing price if you get involved in a bidding war

Building Pros

Potential owner home builders:

• have control over all the features and options that they want in a dream house
• can customize their dream house according to their wants and needs
• can monitor the construction process so you will know if the house is built to your liking
• can have the opportunity to equip your house with the latest technologies and design
• house, fittings and appliances are all new

Building Cons

• Building a house is generally more expensive and may cost more than buying a house.
• Building a house often takes longer time and construction project gets delayed
• Building a house is more complicated for it will take considerable time and effort as well as it can be stressful for you have to deal will all the people who are part of the construction team.

According to data from the global survey by mortgage insurer Genworth that was in the news lately, Australian homeowners are among the most indebted in the world.

The survey’s respondents were home owners and aspiring first homebuyers in eight countries namely Australia, Canada, India, Ireland, Italy, Mexico, the United Kingdom and the United States.

Though the Australian homeowners are amongst the most indebted people in the world, however the data of the new research shows that most Australian homeowners had no trouble in meeting monthly repayments on their mortgage in the last year.

The survey shows that on average, 45 percent of homeowners’ after-tax income was used in paying off debts that is well above the average of 38 percent in the other countries surveyed.

The survey also shows that thirty-nine percent (39%) of Australians, that is one in five Australian homeowners, surveyed were using more than half of their after tax income to service debt.

According to a statement made by Ellie Comerford, chief executive of Genworth Australia, Australian homeowners are the most relaxed about being highly leveraged where survey data show that one in three Australian homeowners are comfortable borrowing more than 80 percent of their home’s value, which is the highest proportion of the eight countries surveyed.

Of the five Australian homeowners interviewed, four of them said that they had no difficulty in meeting their mortgage repayments in the last 12 months.

However, the surveys show that more than one-third of respondents said they were comfortable borrowing more than 80 per cent of the value of the property when buying a house, which is the highest rate in any country surveyed.

Next in the comfort rating for high debt were the Italians and Canadians.

Otherwise, 45 percent of Australian homeowners surveyed have overpaid on their repayments, which is well above the average of 26 percent in the other surveyed markets.

Australian homeowners have no trouble in meeting these mortgage payments because of their high level of confidence in their domestic economy, with the survey data showing the level of confidence in the domestic economy among Australian homeowners surveyed was higher than the total survey average, with 37 percent expressing confidence in Australia’s prospects, in comparison with the 30 percent in the remaining countries.

Otherwise, the average age of first home buyers in Australia was 28.6 as of March, and had risen at a faster rate than the average age in the other countries surveyed, according also to the research data.

With Australians being spared a rise in official interest rates since November, when rates were raised a quarter of a percentage point to 4.75 percent, Australian homeowners have no difficulty and are comfortable paying their mortgages.

With the recent development, home builders are also quite confident that the property market would soon stabilize as Australian homeowners become more confident with the economy.

With the weak economic data, including monthly employment figures, pushing out expectations for the next Reserve Bank interest rate increase, Australian homeowners as well as house builders are at ease with the recent standing of the property market.

AUSTRALIA’S construction industry has stalled, which shows a high vulnerability to a hike in interest rate.

Just recently in the news, it has been shown in a report that Australia’s construction industry has shrunk for the 12th consecutive month.

According to a survey, house-building activity has fallen for the twelfth consecutive month and now is vulnerable to further interest rate hikes.

House builders look to be threatened with a hike in interest rates as its house-building activity has stalled.

Figures from the Australian Industry Group/Housing Industry Association Performance of Construction Index shows that it increased by a seasonally adjusted 1.7 points in May to 39.6, which is below the 50 line that separates expansion from contraction for the twelfth consecutive month.

Home builders have stopped constructing new houses as a drop in building approvals was observed in April recently.

Though an expected contraction in March quarter growth in Australia’s construction industry occurred, it is still lower than what is anticipated.

According to the Australian Industry group director, Peter Burn, a clear withdrawal of the stimulus measures related with the response to the global financial crisis has been observed over the 12 consecutive months.

Data show that a contraction of all four sub-sectors has occurred in May, also showing a significant drop in apartment building, which was down by 5.8 points at 25.3.

A faster contraction in commercial construction was also shown in the May report data. This contraction reflects the rolling back of fiscal stimulus and the lack of force from private investment in projects including offices and retail premises.

Cause of Shrinkage

According to the report, most companies linked the ongoing shrinking in Australia’s construction industry to the passive market demand, which is said to be due to the shortage of new work that would have replaced the decreasing level of school building projects.

The reduction of Australia’s construction industry growth is also associated with the widespread flooding over the summer.

An economist also said that the small and medium-sized businesses which are considered the life blood of the housing industry are hassled by the burden of high costs and slower demand.

With the recent slump in home building approvals on top of the ongoing struggles of Australian households on impending higher interest rates, Australians nowadays appear to have put on hold their plans of building or renovating their homes.

The private sector demand is said to have not gained strength sufficiently which is said to be held back by higher interest rates and vigilance.

With these reasons, an ongoing weakness is being demonstrated in both house building and commercial construction, while a recorded 13 months in a row of negative figures was seen in the apartment sub-sector

As a whole, the construction sector seems to remain to be highly susceptible to any further interest rate hikes, though the Reserve Bank of Australia (RBA) 4.75 per cent cash rate is not expected to rise at the next board meeting on June even though an expected contraction in March quarter growth occurred.

The central bank has hinted recently that the cash rate may be on its way up, but is expected widely not to raise the rate in June

With the spiraling energy prices, new regulations and a coming price on carbon, Australia’s property owners, managers and listed property trusts are now forced to look seriously at their energy usage and levels of investment into energy efficiency solutions.

The increasing prices in energy and water have also forced potential home designs buyers to look into the benefits of buying green houses.

As defined by Wikipedia, “a Green home is a type of house that is designed to be environmentally friendly and sustainable, focusing on the efficient use of “energy, water, and building materials.””

Designed to conserve energy or water and improve indoor air quality, target recycled or used materials in order to produce less waste in the process, a green house or home might be the answer to the spiraling energy crisis.

According to Archicentre, the building inspection service of the Australian Institute of Architects, the ever increasing prices in energy and water will cause a heightened value of existing green homes and commercial premises.

As the running costs of the rising energy prices eating into every family budget and the bottom-line of every business, Australians have nowadays looked in the affordability of green houses.

The pressure of housing affordability as well as the initial building or purchase costs and the required services such as power, water and gas needed to run a home have become a massive concern for every Australians nowadays.

Prospective buyers of home plans are now concerned with the running costs of building a green house and the cost of maintaining them and are automatically factoring these costs into their balancing of their mortgages and other costs.

With these spiraling concerns, prices of green houses have been set to soar due to its demand.

Green houses are now in great demand. Though normal houses are not as pricey as green houses as well as these are not so difficult to maintain, green houses are still more environment-friendly and cost efficient with regards to energy.

However, the payback period for solar panels and other energy saving technology has shortened considerably with power costs in the past two years skyrocketing.

One of the biggest trends in new homes and renovations is the likelihood of the introduction of quality-based building inspections. The said inspection is said to be aimed to ensure that homes with a six or more green star design are actually built by home builders to the standard.

The government will also focus on the quality of construction of renovations and new homes in the future in relation to sustainability of green houses.

A survey data showed recently that Australian capital city dwellings’ values dropped by more than 1 per cent for the three months till April. This said to be due to the losses that occurred in the luxury property market.

With home values all across capital cities dropping by 1.2 per cent from the first quarter to April, Brisbane, Perth and luxury suburbs have continually pulled down the Australian housing market.

Latest survey data from RP Data-Rismark Hedonic Home Value Index shows that home designs in Brisbane fell by 3.1 percent while house designs in Perth fell by 3 percent for the quarter on a seasonally adjusted basis.

The combined capital city dwelling markets showed a drop by a seasonally adjusted 0.3 per cent in April, while values dived by 1.2 per cent in the three months to April.

Tim Lawless, RP Data’s research director, expounded that from the start of the year to April, a 5.4 percent loss was recorded over the homes is the most expensive capital city suburbs which helped drag down the overall property market.

Mr. Lawless explained that the luxury end of the housing market is showing its volatility, though all throughout the growth phase of the cycle, the highest capital gains were realized by the most expensive homes. However, as the market cools down, premium home values appear to be losing steam the fastest.

The slumping of the property market, specifically Brisbane and Perth’s housing market, is caused by the floods that occurred in January in the Brisbane area while the cooling down following Perth’s strong run between 2005 and 2007, respectively.

Since January, this is the first quarter that a string of natural disasters hit the country.

Likewise, the cheap suburb’s solid performance in the property market has competed against the popular claims that default rates are soaring up amid first time buyers, which the RBA recently rejected.

This development worried home builders as Australia houses for sale values for regional areas decreased by 0.6 percent for April on a seasonally adjusted basis and by 1.5 percent of the quarter.

Just this January, home values dropped by 1.4 per cent that caused capital city home values to also dropped 2.1 per cent for the three months to March.

The capital cities’ plummeting luxury property market values has caused a domino effect among the rest of the capital cities resulting to the continued pull down of the Australian housing market.

Losses in the luxury property market of the combined capital city dwelling markets of Brisbane, Perth and Melbourne caused by natural disasters, the cooling effect of the strong run of the property market between 2005 and 2007, and the faulty claims about default rates soaring up have overall caused great damage to the Australian housing market.

Losses in the luxury property market is said to be caused by premium home values rapidly losing steam as the luxury property market cooled down.

In the middle 60 per cent of suburbs, home values were down by 0.9 percent.

The slumping of luxury suburbs’ property market values has stunted the Australian housing market.

As Australia’s housing market remains locked in the doldrums, its new home sales are at its slowest pace this year in April.

A survey shows that Australia’s new home sales are flat and are showing signs of dropping to levels seen throughout the global financial crisis.

The number of new houses for sale in Australia sold edged up by a seasonally adjusted 0.2 per cent in April to just 11,000, according to the latest Housing Industry Association-JELD-WEN New Home Sales Report. The said sales is seen to be the weakest since sales shrank in the final two months of 2010 at less than the 4.3 per cent increase reported for March.

The national picture was a muddle with detached house sales just increasing by a measly 0.4 per cent or offsetting the fall of sales of multi-units by 2 per cent, which marked a third consecutive monthly decline.

With the risk of further interest rate hikes in 2011 which causes the household sector to be cautious and nervous, residential construction is seen to plummet in the depths endured during the global financial crisis.

With the predicted interest rate increase in 2011, people are now more wary in buying houses as their income is not enough to shoulder another burden.

This cautiousness of potential home owners causes the slow climb of new home sales in the housing market.

HIA’s chief economist, Harley Dale, said that the small and medium-sized businesses which are considered the life blood of the housing industry are harassed by the burden of high costs and slower demand.

Overall sales to date of new detached homes for sale, Australia sales are persisting at a volume 22 per cent lower than the long term average while the sale of multi-storey units dropped by over more than half by 2 per cent to their third monthly slide in a row.

With these developments, the industry’s outlook remains poor, as the profile shows a weak new home building conditions rampant in 2011 though there is an increasing construction activity and a growing housing shortage. However in all likelihood, the housing industry is seen to be declining over the foreseeable future as another rate hike is foreseen in the near future.

Dale agrees that the Reserve Bank must set interest rates for the whole of the economy but it would negatively affect the building industry if higher rates are created.

Australia houses for sale and home builders are in jeopardy by these recent developments.

With Australia’s housing market stalling at the start of 2011, it has experienced a drop in auction clearance rates at 60 per cent level as compared to the 80 per cent rate in the Melbourne and Sydney last year.

Auction clearance rates are used as a barometer of overall demand.

Slashing of the bank’s lending rates for some of their home loans are seen to be undertaken by banks as a bid to revive the market.

According to Dale, the housing industry needs a kick-start as well as a reinvigoration of the reform process as the new home building industry is fraught with the burden of excessive taxation and regulation, stalling housing supply reform process, and ambiguity over interest rates.

The problem in Australia houses for sale prices has been bugging the property market for a number of years. The softening of the property market has become a serious issue as many problems have cropped up that affect the property market.

Just recently, it has been in the news that according to a top government advisory body, regardless of a strong demand in key areas and a loss of affordable housing, a projected feature on the property market for this decade is a flat property prices.

However, Owen Donald, the newly reappointed chair of the National Housing Supply Council (NHSC), said that though the Australian residential property is still an attractive proposition, investors in the property industry need to get accustomed to receiving smaller capital gains and hundreds of different markets.

Shortages of homes for sale in some areas for some segment of the population has been observed as well as an oversupply of house for sale Australia, though probably only short term, in other markets.

Flatness in prices is said to be an expect feature of this decade but nevertheless, significant potential for investors as well as significant shortages could still be expected in this property market.

Speculations and facts on why house prices are going down have been on the news for a while.

According to Tim Lawless, RP Data’s research director, the falling home prices is chiefly a payback for the over-exuberant price growth that Australia experienced in the years preceding the global financial crisis.

Otherwise, Mr. Donald, in charge of delivering the 2011 annual state of supply report to the federal government, said that a house prices growth was doubtful to return in a hurry.

A lot of stock houses are being added to the marketplace, as home builder continues to construct more houses as the last month of the first quarter of 2011 has seen a rise in Australian residential building approvals resulting in lessening price pressure in the property market.

With Australian home builders busy in constructing house units in reaction to the increase in building approvals and a surge in the number of people looking to sell while buyers are being cautious in the face of higher interest rates and stricter home loan policies and, an across-the-board weakness in property prices is now occurring in Australia.

A problem in oversupply versus urgent demand is also happening in the property market.

A perceptible conflict involving the state of the market, regarding with oversupply in some areas and unmet demand among first home buyers in other areas, has been occurring in the property market.

With the oversupply of new apartments in areas such as south east Queensland, Melbourne’s Docklands and Canberra, banking and property analysts are giving Price correction warnings in some housing markets.

A shortage of more than 200,000 apartments and houses nationwide, more than 20,000 above the Commonwealth Bank’s estimate of a shortfall of 170,000 to 180,000 dwellings is happening across Australia.

The Australian property industry is worried that only half the number of new homes required is being built in Australia.

With these Mr. Donald said that it is imperative to address this problem for it may put more pressure on those people and on the building industry.

Caryn Kakas, executive director of Residential Development Council of Australia, said that though new homes were being built at half the rate of demand, we are still sitting around record lows.

Though the nation had an efficient building industry; however, because of poor forward, planning in housing and infrastructure the developers and investors had no long-term certainty.

After the the key interest rates hiked in May to 4.75% by the Reserve Bank of Australia (RBA), the housing market of Australia is said to be weakening. According to the Australian Bureau of Statistics (Austats), its Q4 2010 official data is expected to confirm the said softening of the houses for sale prices.

Property market blogs and forums as well as the newspapers have been full of stories of the softening of the property market of Australia. For instance, its lowering of sales and diminishing homebuyer confidence.

Though property market observers have predicted that Australia’s housing market would suffer one of the worst housing market crashes due to its perceived house price overvaluation, Australia’s housing market has still avoided the crash because of these reasons:

• Due to the rapidly growing Australian population, there is shortages in housing.
• Australia has experienced a strong overseas migration from 2004 to 2007
• Australian household sizes are said to be dwindling
• A stricter lending standards which is said to be stricter than in the US
• First-time homebuyers were given assistance by the government through its stimulus package

With the weakening Australian property market, i.e. falling house prices, and the lessening of confidence on Australia’s economic bet on China which seems to be unsafe, Australians are divided on whether it is a good time to invest in the property market.

According to the survey of 2000 homeowners done by Homeloans Ltd, a home loan provider, 48 per cent of first home buyers and investors believed that it is a good time to buy while the remaining half do not share this optimism in the market. Many of them believe that they must still be cautious even though economic conditions change due to growing confidence in the market.

With the falling residential property values across all capital cities in April, Australians are now more concerned on the high living costs than the rising interest rate. Unstable prices and equity markets have also left prospective buyers feeling cautious.

According to the founder of New York-based short selling firm Kynikos Associates, Mr. Chanos, bigger price drop is a possibility due to the trouble occurring in China’s property market where China’s house sales are slowing and house prices are declining.

Mr. Chanos said that China’s economic growth has now experienced cracks as real estate firms board up and sales offices close down.

In order to raise capital through junk bonds, Chinese developers are now beginning to work with Hong Kong as China’s banks wind back lending.

Since 60 per cent of China’s economy is motivated by the 12-year-old real estate construction and development market, a sharp hold up in the construction sector could quickly force China into a recession.

According to Mr. Chanos, if China will experience economic recession or a slowdown, this would cause strong secondary effects for commodity producers like Australia, Brazil and Canada as well as Australia’s housing market.

We all know that the boom in China’s property market has provided Australia’s government with higher tax receipts which have been resourced out into its local housing sector through lower interest rates. So a sharp China recession would bring about trade shock that would launch lowering of the local share prices and cutting the income per capital through the multiplier effect of a showing housing sector.

Given auctions in China’s property market, prices of houses for sale in Australia as well as its home builders would surely be affected as China’s trouble in its property market would surely have a domino effect on Australia’s property market as well.

It has been in the news recently that the banks in Australia are refusing to finance loans to people who are interested to buy flooded homes. Banks are snubbing and refusing to finance loans of shrewd would be buyers who are desperate to snap up a bargain in the post-flood Ipswich property market.

According to Brett McGrath, the Herron Todd White senior valuer, in spite of the recorded 3300 homes being written off and the 1700 house plans designs needing repair which were all affected by January’s disaster, there are still plenty of shrewd and desperate buyers who want to purchase these damaged and flooded houses.

Mr. McGrath said in his statement during a luncheon for more than 120 people at The Ipswich Club that there are still many buyers who are eager to purchase flooded homes. However the banks are refusing to finance these loans.

House land packages sold by home builders and purchased via cash by people who have a spare $150,000 in the bank are the only properties moving off the market.

However, those people who want to borrow in order to buy these flooded properties are not having any success at all in their loans approval for banks are refusing to them.

According to The Queensland Times May 5th edition, major banks in the country have been choking the region’s property market for they have refused loans to people who want to purchase Australia houses for sale across huge swathes of Ipswich and other flood-hit communities.

Lenders were accused by real estate agents of blacklisting entire suburbs that were affected by flood in January.

With these worsening development, would be house buyers of these flooded properties are facing difficulties with banks and lenders alike refusing to finance loans.

Peter Mendoza, the Ipswich chairman for the Real Estate Institute of Queensland, said that would be home buyers could only purchase home for sale by using cash which had led prospective home buyers to be furious.

According to Mr. McGrath, the property market has already reached its worst in almost 20 years before the floods hit.

Mr. McGrath expounded that the property market has been affected by more than just floods. In addition to the worsening market due to the floods, the brutal infrastructure costs and the end of the first home owner’s grant have also added to the property market crisis.

These three causes have lead to the worsening condition of the property market.

Mayor Paul Pisasale commented that during this worsening crisis banks and insurance companies are needed to show compassion.

Banks and insurance companies should show compassion instead of refusing to finance such loans applied by these would be buyers of flooded homes. The people need these banks and lenders to be more agreeable for a loan in order for the property market to thrive.

Mayor Paul Pisasale stated during the luncheon held this week that there would not be any more hidden clauses.

Mayor Pisasale further added that the floods have made them stronger with Ipswich challenging the problems of the GFC, with more than 240 new businesses starting up during that time, now they will do the same with the flood recovery, there will be no fence around their global city.