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 Australia’s housing market is showing signs of strong activity, spurred on mainly by bargain hunters and first-home buyers as sellers become desperate.

The number of properties to sell at auction is expected to spike this weekend as prices are slashed by up to 30 per cent and buyer interest is reignited by this week’s 100 basis point rate cut by the Reserve Bank.

The banks’ subsequent mortgage rate cut appears to be adding to the momentum generated by the increase in the first-home buyers grant from last October. The biggest spike was in Queensland.

On the Gold Coast yesterday, half the 12 properties sold at a Surfers Paradise auction were under $500,000, a sharp discount on their asking price.

One Surfers Paradise apartment sold for $195,000, $55,000 less than its original price tag.

Major residential developer Australand, which revealed an 83per cent drop in its annual net profit this week, and Lend Lease’s residential development arm said the number of first-home buyer inquiries had doubled in the three months to January. How many of these enquiries went to contract is the real question, and with bargains galore in the used housing market, people would be checking out these bargains before committing.

Most large residential developers want the Government to extend beyond June the current first-home buyers grant of $21,000 for a new property.

A recent pick-up in housing loan approvals and in reported display home traffic suggests these factors are now starting to add to housing demand

In Sydney’s west, the national market’s worst-hit region, more properties went on mortgagee sale and prices fell sharply to bargain hunters

A near-new three-bedroom home at St Helens in the city’s southwest was under contract for $290,000, $10,000 less than the owner paid six years ago. The property would rent for about $300 per week.

Some properties with four bedrooms and swimming pools were selling in Sydney’s mortgage belt for less than $300,000.

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As new home project builders trim back their operations, and developers go into bankruptcy, someother builders have their order books full because they have made a trend their friend.

Yes, we will always need new home developments, but many construction companies miss the point that new homes sales spending is being eclipsed by spending on renovating existing home stock, and that this accelerating trend grows stronger everytime a new home is built.

People move for many reasons, such as better, bigger home with the latest fitout. Many people don’t move because they are happy in their current location, and the land size is typically better. So the perfect solution for them is extending the home, and refitting the kitchen and bathrooms.

Typical land lot sizes are shrinking, and getting steeper, and more out of the way, so when you put on to this the softening of established home prices, remodelling your home might be a better option.

People with money and in sheltered industries immune from the effects of the downturn caused by the financial crisis are still spending and  renovations and extensions to these people is attractive for many reasons, stability, location, land size, land slope and government charges and stamp duties and the costs of buying and selling amongst them.

And with more builders looking for work, the cost of renovation may also fall. 

A lot of people are taking up renovations because they’re not paying the stamp duty and everything else that comes along with buying a new house

So far he hasn’t been too hard hit by the crisis. He said he had been “doing renovations for the last 12 years, and there’s always been work about”. 

“The new houses may slow down (in a recession) but the renovations keep going,” he said. 

Mr Horton tends to work for “people with money” and in his view, “there’s a lot of people around with money”. “The rich are still rich; it’s the young people that struggle,” he said. 

Louise Houston, a director of the roof conversions firm, was not not so sure things would remain rosy. She said the business had lost 20 per cent of its client base, many of whom had become victims of the downturn in the finance industry. 

Builders hope the Government’s stimulus package, with its plan to build 20,000 new public, community and Defence homes, will help kick things along again.

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