Viewing by month: June 2009

So, why invest in property?

As someone who has spent much of their life in real estate, and as part of the CENTURY 21 network, it is difficult for me to argue against investing in property. The great Australian dream is to own your own home, and it’s been ingrained in the mass psyche of our country that owning property is something to strive for and be proud of. I don’t disagree.

  

Today, three out of four properties are purchased by owner-occupiers, which demonstrates this dream is alive and well, but then there are those people who seek to buy property purely to make money, and while this is fine, and can provide a healthy return, it’s a very different process to seeking out your family home.

  

Property can offer many good reasons for investment, such as capital growth, rental income, tax benefits, and a greater level of control with lower volatility than other investment options, but you need to be sure of what you’re hoping to achieve from investing in property before you start.



That may sound simple, and many people respond with a reason as simple as ‘I want to make money!’ but realistically you need to be more specific than that. Are you hoping to retire with more wealth, or retire earlier? Or are you seeking to invest as an alternative to your current job, or as a supplement to your current income? You really need to work out what your goal is, as it will dictate what type of property strategy you should consider – for example, if you should renovate, buy, develop or hold on to what you have.

 

 Achieving any property goal also requires you to purchase the right type of property in the right location. Markets grow differently, and you can’t assume that simply because you’re investing in a property that it’s guaranteed to make you money. Most people expect that the underlying value of a property will increase, and generally this is the case, but you need to be in the right location to maximise capital growth, and you also have to be prepared to dedicate the necessary time to make this happen.   

 

Like any investment, there are probably going to be ups and downs when it comes to your real estate investment, but property can often pay off and be less volatile than the share market. At the end of the day, everyone needs a place to live and for this reason property, especially well-located property, will always be in demand.

And always remember to talk to an expert when it comes to purchasing property! Your first stop should be your local Century 21 agent who can advise you in regards to the neighbourhood you are considering. 
0 comments | Posted by Charles Tarbey on 16/06/2009 at 8:52 AM | Categories:

Australia gets confident about property

There has been a lot of good news in the media lately regarding the return of consumer confidence when it comes to the real estate market. CENTURY 21 shares that confidence, and it’s great to see that after months of uncertainty and a slowing economy, the latest signs are pointing towards the country’s economic recovery. This is great news for the real estate industry and property market as there’s no denying that we’ve been affected by poor economic sentiment.

  

The good news extends beyond just real estate as there has been talk that so far we’ve managed to avoid a recession, interest rates are remaining low, and the Aussie dollar is stronger than it has been. This has culminated to result in the Westpac-Melbourne Institute index of consumer confidence increasing by a near-record 12.7% in June to 100.1 points. With 100 points as a middle ground, this recent figure shows that there are just slightly more optimists than pessimists for the first time since last year.

  

The real estate industry is also showing positive signs, as I have been saying we at CENTURY 21 have been experiencing this for a while. The first home buyer market has been active for a while, and other owner occupiers and investors are beginning to re-enter the market. Currently the number of new housing loans are at a 14-month high, an increase of 0.9% since April, and loans for new construction rose by 1.3% to reach a seven year high, according to CommSec.

 

An economist with CommSec has said that the most recent round of housing finance figures is reinforcing their view that the housing sector will be the growth driver over the next year, and that’s one that is shared by many in real estate.  
0 comments | Posted by Charles Tarbey on 15/06/2009 at 8:37 AM | Categories:

Are small houses the next big thing?

There are a couple of complaints that are regularly heard in real estate, particularly in regards to inner city housing – affordability, and size. Architects are rolling the two concepts together, and making smaller properties a positive in response to complaints about the cost of housing by recommending people turn to smaller abodes. At CENTURY 21, we see all kinds of properties on the market and going in and out of style, and although the new small trend is starting to be visible amongst home designers and builders, it will probably take a while for the general public to catch on.

  

Recently, competitors for the Australian Institute of Architecture Awards in the Small Project category included a beach house by Michael Dysart - a man who designed skyscrapers such as the Regent Hotel in Sydney during the 1980s. Michael decided he wanted an extra bedroom and living room adding to his waterfront fibro cottage on the Central Coast, but instead of using all of the block, he kept the whole thing within 100 square metres. Another entry boasted floor area of just 120 square metres.

  

Despite the increasing interest amongst architects for well designed small spaces, clients generally still think big is better. Most people in the market for a property, or who are building a home, want the right size for them at the right price, but that right size is often preordained and many won’t budge on size.

  

In December, a report by the Australian Bureau of Statistics found that the average cost to build a new house in NSW was $272,000 and the average floor area was 252 square metres. Twenty years earlier the cost was $67,000 and the average area was 181 square metres which implies people are demanding more space, not less.

There is of course a market that wishes to downsize, and often these people say their smaller homes feel bigger than the larger property they left. Often this can be attributed to a reduction in clutter, advice CENTURY 21 always gives our clients – an uncluttered home is a larger-looking one!   
1 comments | Posted by Charles Tarbey on 12/06/2009 at 9:17 AM | Categories:

The student becomes the teacher

In the current economic climate we are seeing reports on the number of advertised jobs beginning to decline, and as a result, the number of graduating high school students turning to further study rather than heading straight into the workplace is increasing. You may wonder what this has to do with the property market. Well, many students need somewhere to live while they study, and when you consider the number of international students and the fact their enrolments went up by 27% last year, it makes more sense. Whilst many in the real estate market end up renting their properties to students, dedicated student housing different again, and an investment option that should not necessarily be overlooked.

  

One of the reasons many investors are attracted to student housing is the ability to generate more income from the same space as if you were considering the likes of a professional tenant. If you get more tenants into the one space, your rental income can quite possibly increase, and regardless of the location, often the yields associated with student accommodation are higher than when compared to renting to non-students. And if you manage that well, your vacancy rate will often be low – often helped by the multiple persons in the property.

  

It’s not all guaranteed success however, just as any investment rarely is.  Increasing the number of tenants in a property may increase your income, but it can also increase the number of issues you have. As much as I hate to perpetuate a stereotype, students have been shown to be more likely to take less care of your property than other tenants, and students can often require furnished accommodation, down to towels and linen which can cause additional headaches and costs.

Student housing is much like any investment opportunity that you may be considering, and as such it should be considered carefully. If property is your favourite form of investment, then buying in university towns should probably make up part of a diversified property portfolio that isn’t solely geared towards students. If it’s something you’re considering, or even if you’re just looking for an investment property generally, have a chat to your local CENTURY 21 agent about the best property options in your area.


0 comments | Posted by Charles Tarbey on 11/06/2009 at 9:38 AM | Categories:

Why the property market will hold up

Lately I have speculated regularly about the state of the economy and the impact of this on the real estate market, but that’s not really surprising when it seems to be many people’s favourite topic of conversation. More to the point is the fact that when there is uncertainty, people seek out information to reassure themselves, or at least to remain informed. There is much being written on the state of the real estate market, and at CENTURY 21 we are committed to keeping our customers informed, particularly at a local level where it impacts our customers most.

  

When you look at the information at hand, it is difficult to deny that the Australian economy has suffered in recent times, and many economists have stated that the country has actually been in a recession since last year. That obviously impacted on the real estate market, however house prices have actually held up reasonably well, and when compared to the share markets, property has put on a much better performance. Further good news is that none of the gloomy predictions of a staggering 40% drop in property values have come to fruition.

  Although in a recession property prices do struggle to begin with, history shows that this makes way for bigger gains to follow. In the not so distant past, namely during the 1980s and late 1990s, we saw this happen. Property prices stagnated for a while, but then began to recover, and when that recovery did commence, it did so with an enormous force and resulted in double-digit growth.  What that means is if you are in a position to consider it, this is the best time to set yourself up for that impending growth. There are bargains to be found, and suburbs that have the potential to reap up to 50% growth in the next few years. Talk to your local CENTURY 21 agent about your property options so you can make the most of the current property situation.  
0 comments | Posted by Charles Tarbey on 10/06/2009 at 9:54 AM | Categories:

Scope for lower interest rates on the horizon

After speaking yesterday about the interest rate remaining stable this week, it was interesting to read information just released by the Reserve Bank in which the Governor, Glenn Stevens, says he sees scope to ease monetary policy further, but believes the domestic economy is well placed for expansion towards the end of this year. Just what I was saying!

  

The opinion that the economy will be back on an upward incline by the end of this year is indeed good news for the real estate industry. I have mentioned before that at CENTURY 21 we have been seeing positive movement in the market despite the economic downturn. This activity has been taking place due to measures such as the government’s boosted first home owner grants and the ongoing rate reductions, so this latest prediction that things are looking even better is great news for the property market. Already we have seen many first home buyers enter the market, we are seeing more and more investors coming back, and we have also seen many current home owners upgrading, or trading up, providing stock for those first home buyers seeking established property.

  

The down side to what Glenn Stevens says is the forecasted weaker consumer spending over the next few months as the government stimulus wanes and unemployment looks likely to grow. These points, although understandably impacting on real estate to a certain degree, and more relevant to general consumer spending, and as there are separate measures in place to help boost the housing sector, it is likely that we will continue to see positive movement in the real estate market.

Although this week’s decision to keep rates at the current 3.0 per cent was a disappointment to those hoping for a further reduction, the current cash rate is at a 49 year low, and has been slashed by 425 basis points in just seven months. This is great news for many, evidenced by an upturn in borrowing for housing in the last six months, and the number of buyers and sellers making their way back into the real estate market each week.  
0 comments | Posted by Charles Tarbey on 05/06/2009 at 8:36 AM | Categories:

Interest rate remains stable again

Again the Reserve Bank of Australia has denied the population another rate reduction, leaving the cash rate at 3 per cent. Most market analysts were expecting this outcome, however many people actually active  in the market were hoping for another cut. As the real estate market continues to stabilise slowly, incentives such as decreasing rates are still helping to stimulate activity, and for that reason a further reduced rate would have been welcomed by those of us in the industry.

  

Governor of the RBA, Glenn Stevens explained the decision by saying that the bank was assessing the effect on the economy of market and mortgages rates at historical lows and below average loan rates for businesses, and he claims that much of the effect of this is yet to be seen.

  

Many didn’t expect the RBA to make another move on rates until the August Board meeting, at which time some analysts are predicting that a cut of 50 basis points is completely possible. This is due to the Bank's growth forecasts for 2009 and 2010 depicting an economy which will experience its growth low point in the first three quarters of 2009, however the pace of recovery will be well below trend and weaker than is usually recorded as an economy comes out of recession. What that means is that the RBA would see few risks in over stimulating the market and further to that, the Bank would be mindful of downside risks given the tentative pace of recovery.

  

Whilst for the likes of us here at CENTURY 21, we view the rate cuts in terms of real estate and the property market, just as many homeowners do, there are of course other significant factors at play when it comes to the current cash rate. For example, if the national unemployment rate passes 8% it would be extraordinary for the RBA to sit by and not be seen to be doing something to boost confidence levels.

  If the deterioration of the Australian labour market continues, it will be apparent by August, which is why many analysts are predicting the next rate cut to occur then. But until then, those of us invested in property can still continue to benefit from extremely low rates, and breathe a little bit easier when it comes to mortgage repayments.    
0 comments | Posted by Charles Tarbey on 04/06/2009 at 9:07 AM | Categories:

Home values showing signs of recovery

Despite my recently discussing the downside to consumers becoming too confident when it comes to real estate, there is information out there that indicates we are right to be feeling less anxious than we have in the past. Recent information from the RP Data/Rismark Australian Home Value Index indicates that home values are continuing to recover, and have recorded a 2.8% increase over the first four months of this year.

 

This increase essentially wipes out the price falls seen in 2008 according to RP Data’s National Research Director Tim Lawless. This new information reveals that over the first four months to April this year, every mainland capital city apart from Perth has recorded an increase in home values. The most significant gains were seen in Darwin (+5.3 per cent), Melbourne (+4.4 per cent), and Sydney (+3.9 per cent). Home values in Australia’s mortgage belts, which are the prime first home buyer markets, were flat or falling between 2004 and 2007 while the inner city and affluent markets enjoyed consistent growth. In 2008-09 we have seen a reversal of this situation.

 

As a result, there is no denying that during these uncertain economic times, the first-time buyer activity has supported the market, but many people forget that 70-75% of home buyers are not first timers and this current return to capital growth comes as weekly rental rates start to level, making the market attractive to more than just first time buyers.

 Rental rates across Australia have surged over the last three years, providing the best gross rental yields investors have seen for a long time. But now we are seeing growth rates for weekly rents start to level due to decreasing rental affordability, and this is causing many renters to consider buying a home instead of renting. This is good news for those first home buyers still waiting to take a step into the market. It’s also great news for investors - gross rental yields are likely to peak over the coming months suggesting that now is probably the best time for this group to roll up their sleeves and become active.  
0 comments | Posted by Charles Tarbey on 03/06/2009 at 9:23 AM | Categories:

Is consumer confidence really a good thing?

Consumer confidence is on the increase, and it has been for a little while now. Sentiment is often quoted when you read about the economy and its recovery, and for many of us increasing sentiment equates to an improving economic situation.

  

However, recently I read an article that asked whether consumer confidence is actually a good thing. When you consider that the real estate market was booming just a couple of short years ago, and at that time consumer confidence was at an all time high, it didn’t turn out so well!

 

Maybe what we should be considering is consumer over-confidence. Of course, here in Australia we have not been as hard hit as other parts of the world, and I’ve made mention of that before. All of us at CENTURY 21 are realistic however, and the real estate market is of course a very different one to the one it was even twelve months ago. As a result, CENTURY 21 knows to go back to basics, and build on business fundamentals now so the hard times aren’t that hard, and the good times will be great.

  

What consumer confidence does show is that people are breathing a little easier and I think that’s a great thing. However old spending habits tend to die hard, and when confidence is up, there is the risk that the situations which caused the current market crash could return. Our current economy resulted from too much confidence and not enough rational thinking, and that’s a mindset that those in the real estate market can’t afford to return to.

Real estate decisions and purchases should always require rational thought, regardless of the state of the economy. The market right now is still offering some great buys for those who can afford to do so, and the market generally has also started to pick up, hence the increasing consumer confidence. And yes, we should be confident about that, and yes, it’s wonderful to see the industry on the up again, but we need to be careful we’re not too confident. The worst thing we could possibly do is return to overspending with little regard for where it could take us.  


1 comments | Posted by Charles Tarbey on 01/06/2009 at 9:54 AM | Categories: