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AUSTRALIANS appear to be somewhat confused about the direction of house prices, with mixed economic data jumbling expectations on whether they will rise or fall in 2007.

“People are fairly confused as to where this market is heading,” Westpac senior economist Matthew Hassan said.

“It is an open question going into 2007.”

A survey of 1894 Australians by News.com.au found that 68 per cent of respondents said that higher interest rates would force home sellers to cut prices, while 42 per cent expected house prices to fall in the next quarter.

One third said the value of their home had fallen in the last 12 months, while 32 per cent said their mortgage was now worth more than their home.

News.com.au business editor Nicki Bourlioufas said the survey showed that past rate increases had hurt property values and put off investors.

She said recent strong jobs growth figures heightened the chances that the Reserve Bank of Australia (RBA) would raise interest rates next month.

The RBA will announce its next rate decision on February 7, with economists split on whether rates will rise or stay at 6.25 per cent.

But even if rates were to rise, a contrasting survey of 958 people by the Mortgage Industry Association of Australia (MIAA) and BankWest showed that Australians were becoming increasingly optimistic that house prices would increase in the next year.

The study showed that 42.9 per cent of respondents expected residential property prices to be higher in the next quarter, despite higher rates, compared with 24.1 per cent in June 2006.

Only 10.8 per cent of respondents said prices had fallen, compared with 37.5 per cent in the previous survey.

Meanwhile, a housing report by financial services provider Credit Suisse found that house prices would rise about seven per cent in 2007.

House prices rose right across the country in 2006, ranging from 0.6 per cent in Sydney to 38.7 per cent in Perth, Real Estate Institute of Australia (REIA) figures showed.

The national weighted average median house price was $412,023 in the September quarter, up 6.7 per cent from a year earlier, REIA said.

Mr Hassan said he was not surprised Australians had differing opinions about the market with such varied conditions across the states.

He said strong house price growth in Perth over the last year and a half was in stark contrast to the eastern states of New South Wales and Victoria, which had been either flat or in some sort of a decline.

Also impacting prices is a lack of supply in the market, but the key influence remains affordability.

“That’s really what’s weighing on the housing market,” he said.

And it is expected to take several years of good income growth to bring affordability back into line with the current price of housing.

But with so many factors affecting the direction of house prices, Mr Hassan said 2007 would likely be a bumpy year.

“We’ll have periods of prices slowing and perhaps picking up again as sentiment improves,” he said.

“I think it is very much a watch and wait situation.”

TAX advantages under the Government’s new superannuation laws are encouraging some property investors to sell-up and boost their super.

But this strategy is only likely to benefit a small section of the market.

Housing Industry Association (HIA) chief economist Simon Tennent said he believes the super changes, which come into effect on July 1, have triggered an exit from the property market, particularly for disappointed investors or those nearing retirement.

Under the Federal Government’s new super regulations, money received from a taxed super fund will be tax-free for people over the age of 60, making it the most tax-effective investment for retirement.

At present, money is taxed when put into the fund, while within the fund, and generally when withdrawn.

Once the new laws are in place, an individual will be limited to investments totalling $150,000 a year or a maximum $450,000 within a three-year period.

However, at present the Government is allowing deposits of up to $1 million to be put into super before the June 30, 2007, cut-off date.

This transitional phase has opened a window of opportunity for some investors to boost their retirement savings by selling other investments, such as property.

Mr Tennent said some investors had become disheartened with the property market due to recent low house price growth, which he did not see picking up for at least 12 to 18 months.

“I don’t think prices will keep accelerating because we’ve hit an affordability threshold,'’ he said.

“And as this coincides with changes to superannuation, our view is that there will be a flow of funds out of property.'’

However, ANZ financial planner Ron Holmes said there were a lot of issues to consider before deciding to move property investments into super.

“It is a complex area; There’s so many possible ‘maybes’ and ‘what-ifs’, and everybody’s circumstances are so different,'’ he said.

Mr Holmes said the investor’s age, if they were retired or when they were planning to retire, and whether they were married, all played a role in determining if this strategy would be beneficial.
Other important considerations were house price appreciation, how much capital gains tax investors would pay when selling their property, and how much they were saving in investment property tax deductions, he said.

Mr Holmes said this strategy would probably only benefit a very narrow part of the market, including those who were nearing retirement and were planning to sell properties valued at about $1 million if they were single or $2 million if they were married.

He said many of those approaching retirement, but with a lower value investment property, could sell their property at anytime after the June 30 cut-off date and still invest the money in super.

“If they’re a married couple, and they’ve got a $900,000 property and they sell it, they can still put $450,000 each into their super after June 30,'’ he said.

Mr Holmes said waiting until retirement to sell investment property could also have benefits, with retirees paying less capital gains tax on their properties due to their lower income, Mr Holmes said.

He said younger investors needed to be wary that moving property investments into super would restrict their access to that money, while they would also lose their tax offsets.

“I can’t see it as being a very attractive strategy if currently it’s providing you with tax offsets and the property is growing,'’ he said.

However, he said that before making any decisions, investors should closely examine their individual situation.

“Go along and talk to your licensed tax adviser and your licensed financial planner before you do a thing,'’ he said.

Although Vietnam’s new law allowing foreigners to invest in residential developments took effect in January, direct ownership of properties continues to be outlawed. But there are options.

IndoChina Capital, which is developing parts of the popular China Beach area, is offering investors a stake in a foreign company that, in turn, owns a Vietnamese one.

“Essentially all the owners own all the villas but agree through our offshore agreement to allocate one villa per owner, sharing income and expenses according to usage,” said Rick Mayo-Smith, the company’s managing director.

“The structure is similar to a New York co-op in the sense of sharing expenses and allocating usage of condo or villa through contractual rights,” said Dao Nguyen, a Saigon-based partner in the law firm of Johnson Stokes & Master, which devised the structure.

The first property to use the sales method is the all-villa resort attached to the Nam Hai Hotel, which opened in December. When villas are not occupied by their owners, General Hotel Management, the British-based company supervising hotel operations, will rent them as part of the hotel’s regular room pool.

There are only 1,000 hotel rooms along China Beach, but with tourist numbers growing about 15 percent a year, the authorities have allocated land for as many as 10 more developments within the next four or five years. The beach is just 15 kilometers, or 9 miles, from Da Nang International Airport, which has direct flights from Singapore, Bangkok and Taipei and is expected to get direct flights from Hong Kong soon.

About 30 of Nam Hai’s 40 private villas have been sold to international investors, mainly to people in the financial services industry. Prices for the remaining villas range from $1 million for a large one-bedroom villa to $2 million for a three- bedroom, bringing the average price per square foot to $280.

While these prices compare favorably with those of similar luxury properties in other sought-after destinations like Bali and Phuket, Thailand, investors may need some patience if they decide to resell the 50-year leasehold properties.

“I think it’s a very opportunistic investment for people wanting to capitalize on the tourism story,” said Nicholas Heaney, a banker who

is considering the Hai Nam project. “But even if the property price doubled in a few years, as is expected, you will need to find a buyer that can pay cash, as you can’t get a mortgage on those properties. That might be a bit more difficult if you’re in a hurry, because that’s a lot of cash.”

HONG KONG: An address on The Peak is a sure statement of success in Hong Kong. But even more prestigious are stand-alone residences there, with views dominated by green forests and blue seas, yet only a 15-minute drive from Central.

Gough Hill Residences, a collection of five houses ranging from 5,657 square feet to 7,857 square feet each, was built by HKRT Peak Properties, a subsidiary of Wharf Estates Development. Completed in November, they are being marketed at a minimum price of 30,000 Hong Kong dollars, or $3,850, per square foot.

HKRT’s other properties include 1 Plantation Road and Chelsea Court, both luxury low-rise developments on The Peak.

LWK & Partners, an architectural firm based in Hong Kong, was responsible for the contemporary sand- colored granite buildings, while Steve Leung Interior Designers worked on the layouts and interior specifications.

Because the site is roughly pentagonal and is on a steep slope, each house has a distinctive floor plan, although all five were built to face south, toward Aberdeen and the South China Sea beyond. The site is only 50,000 square feet but the staggered locations and landscaping, which includes camellias, Buddhist pines and white orchids, give each residence as much privacy as possible.

Each of the houses has a secured underground garage that can accommodate as many as 10 vehicles, another rarity in a city where parking space can rent for as much as an apartment.

The two larger houses have five bedrooms each and rooms with ceilings 22.5 feet high; the three smaller ones have three bedrooms and 12.5- foot ceilings.

All five have rooftop terraces, heated lap pools, Jacuzzis and decks finished in imported limestone.

Last summer a Hong Kong businessman bought one of the two larger houses, at 3 Gough Hill Path, before construction was completed. He paid 220 million Hong Kong dollars for the 7,800-square-foot house, which he intends to make his primary residence.

Vivian Wong is an account manager with Centaline Property Agency, the firm responsible for the sale of 3 Gough Hill Path. “This type of freestanding property on The Peak is very limited,” Wong said. “Since they are so rarely available and have the appeal of a ‘brand name’ address, we are seeing aggressive market movement in high-end luxury developments such as Gough Hill.”

Eva Ho, senior manager of project marketing for Wheelock Properties, said, “Those interested in Gough Hill have been mostly Hong Kong clients with businesses in China. They see the house as their primary residence.” Wheelock is another subsidiary of Wharf Estates.

AUSTRALIANS appear to be somewhat confused about the direction of house prices, with mixed economic data jumbling expectations on whether they will rise or fall in 2007.

“People are fairly confused as to where this market is heading,” Westpac senior economist Matthew Hassan said.

“It is an open question going into 2007.”

A survey of 1894 Australians by News.com.au found that 68 per cent of respondents said that higher interest rates would force home sellers to cut prices, while 42 per cent expected house prices to fall in the next quarter.

One third said the value of their home had fallen in the last 12 months, while 32 per cent said their mortgage was now worth more than their home.

News.com.au business editor Nicki Bourlioufas said the survey showed that past rate increases had hurt property values and put off investors.

She said recent strong jobs growth figures heightened the chances that the Reserve Bank of Australia (RBA) would raise interest rates next month.

The RBA will announce its next rate decision on February 7, with economists split on whether rates will rise or stay at 6.25 per cent.

But even if rates were to rise, a contrasting survey of 958 people by the Mortgage Industry Association of Australia (MIAA) and BankWest showed that Australians were becoming increasingly optimistic that house prices would increase in the next year.

The study showed that 42.9 per cent of respondents expected residential property prices to be higher in the next quarter, despite higher rates, compared with 24.1 per cent in June 2006.

Only 10.8 per cent of respondents said prices had fallen, compared with 37.5 per cent in the previous survey.

Meanwhile, a housing report by financial services provider Credit Suisse found that house prices would rise about seven per cent in 2007.

House prices rose right across the country in 2006, ranging from 0.6 per cent in Sydney to 38.7 per cent in Perth, Real Estate Institute of Australia (REIA) figures showed.

The national weighted average median house price was $412,023 in the September quarter, up 6.7 per cent from a year earlier, REIA said.

Mr Hassan said he was not surprised Australians had differing opinions about the market with such varied conditions across the states.

He said strong house price growth in Perth over the last year and a half was in stark contrast to the eastern states of New South Wales and Victoria, which had been either flat or in some sort of a decline.

Also impacting prices is a lack of supply in the market, but the key influence remains affordability.

“That’s really what’s weighing on the housing market,” he said.

And it is expected to take several years of good income growth to bring affordability back into line with the current price of housing.

But with so many factors affecting the direction of house prices, Mr Hassan said 2007 would likely be a bumpy year.

“We’ll have periods of prices slowing and perhaps picking up again as sentiment improves,” he said.

“I think it is very much a watch and wait situation.”