Viewing by month: October 2012

Housing construction lags behind national demand

 

The most recent building activity data from the Australian Bureau of Statistics (ABS) reveals that the total number of dwelling commencements across Australia fell by 11.4 per cent over the year to June 2012.

 

Consolidating these figures in its latest Weekly Property Pulse update, RP Data reported that the number of dwelling starts over the June quarter was 13 per cent below the decade average, while domestic population growth as of March 2012 was 49 per cent higher than the decade average – figures that reflect the increasing disparity between housing supply and demand.

 

According to RP Data’s National Research Director, Tim Lawless, “the results highlight just how weak the housing construction sector has been since building activity started to fall in early 2010.”

 

Across all housing construction types, detached houses proved to be the weakest performers, where the ABS recorded that construction began on just 20,786 houses over the June quarter of 2012 (seasonally adjusted), a level which Mr Lawless confirmed as being approximately 21 per cent lower than the decade average of 26,189 starts.

 

Unit commencements, in contrast, saw an upswing over the June quarter, tracking almost three per cent higher than the ten-year average despite a recent slowdown from a historic high.

 

 

RP Data noted that in Victoria, where new home building starts led the nation since 2008, there has been a considerable slowdown in construction: 


 

“Between the beginning of 2008 and the end of March 2012, Victoria accounted for one third of Australia’s housing starts; this is despite Victoria’s population growth (i.e. housing demand) comprising a lower 25 per cent of the nation’s overall population increase. The number of dwelling starts fell by 18.4 per cent between June 2011 and June 2012, however, housing construction in Victoria remains 6% higher than the decade average,” Mr Lawless said.

 

There is a chance – however, that housing starts could pick up in early 2013 as the full force of current demand begins to be felt within the construction sector.

 

According to the HIA- RP data Residential Land Report, there was a significant increase in land sales over the June 2012 quarter:

 

“The June 2012 quarter saw residential land sales rise by 23.3 per cent to be up by 29.7 per cent when compared to the same period in 2011,” said HIA Chief Economist, Harley Dale.

 

“Growth is from a low base and the result is exaggerated by a policy induced pull forward in land sales in New South Wales and Victoria. Nevertheless, land sales did rise in all six capitals and in a majority of regional areas and that is an encouraging result,” concluded Mr. Dale. 

 

For more information on market conditions in your area, please contact your local CENTURY 21 Real Estate Agents, for clear and expert advice.

 


0 comments | Posted by Charles Tarbey on 31/10/2012 at 12:00 AM | Categories:

Property investment options for ex-pats

In recent times, Australian real estate has become a very attractive investment prospect for both foreigners and ex-pats; with the nation’s projected housing shortage, there is a high likelihood that ongoing housing demand will support increasing rental yields and capital growth. Despite this, some Australian ex-pats may be deterred from investing in property back home due to the complex taxation and regulatory frameworks that apply to such. To provide clarity around some of these issues, I’ve decided to share the following article by EBM Insurance Brokers, which appeared in the October edition of CENTURY 21 Wentworth’s Property Investor.

 

Tax and the expat property investor

 

An estimated million Australian citizens live overseas - among them many successful property investors.

However, anyone considering a move needs to be aware of the different tax rules which apply.

 

As a non-resident of Australia for tax purposes, any rental income will face steeper tax - with no tax-free threshold and rates starting at 32.5 per cent for the first dollar.

 

General Manager, RentCover, Sharon Fox-Slater, said that expenses including landlord's insurance, interest and property management fees can still be deducted with tax only payable on the remaining income.

 

"The importance of having specialist landlord insurance like RentCover and a strong property management team is even greater if you're living overseas," she said.

 

"That's because you simply can't attend to incidents or inspections in person, and often aren't even in the same time zone. It's tax deductible peace of mind," Sharon said.

 

People who plan to live overseas for an extended period should wind up self-managed superannuation funds to avoid the risk of the funds being judged "non-compliant" and heavily taxed.

 

If an investment property makes a loss, it can be carried forward to offset against any future Australian income.

 

Special rules apply when an Australian moves overseas and rents out their former "principal place of residence" (PPOR).

 

As long as you move back into the PPOR within six years, you maintain your exemption from capital gains tax when the property is sold - however there is no such concession for land tax, which needs to be paid.

 

If you are already living overseas when you buy a home which you plan to move into later on, then capital gains tax will apply to the period the home was rented out for.

 

Sharon from RentCover said many expats had the chance to earn good money - providing a great opportunity to invest back home in Australia.

 

"Even if you're living overseas, it is possible to secure finance on Australian properties and some mortgage brokers specialise in the area," she said.

 

"The rules are complex so you do need to consult your tax professionals and financial planner - and make sure you're covered with landlord's insurance to ensure the process is both profitable and worry-free," she said.

 

While shopping for property from overseas is more complex than it is for those living locally, using the internet, potentially in conjunction with a reputable buyer's agent, makes it a live investment prospect.

 

For more information about RentCover landlord insurance, please visit http://www.rentcover.com.au/.


1 comments | Posted by Charles Tarbey on 26/10/2012 at 12:00 AM | Categories:

Positive signs for the Australian housing market

CENTURY 21 believes that a spike in housing approvals over August, falling interest rates and rising capital city dwelling values suggest a housing market recovery may be well underway.

 

“The Australian Bureau of Statistics recently reported that in August the number of residential properties approved nationwide rose by 6.4 per cent, in seasonally adjusted terms – a significant increase on the 21.2 per cent fall recorded in July,” said Chairman and Owner of CENTURY 21 Australasia, Charles Tarbey.

 

“When combined with recent interest rate cuts and dwelling value growth, CENTURY 21 expects a busy end to the year for the residential housing market in Australia.”

 

The overall increase in dwelling approvals was driven largely by non-house dwellings, such as apartments and townhouses, which rose by 23 per cent, seasonally adjusted, over August.  Approvals for detached houses declined by 0.5 per cent over the same period.   

 

The value of total building approvals rose by 9.4 per cent in August, in seasonally adjusted terms, after falling for two consecutive months.

 

Charles Tarbey continued: “When viewing these figures, it is important to recognise that building approvals remain historically weak and down on the year to August.

 

“Nevertheless, after a sustained period of turbulence in approval levels, this positive movement is pleasing to see and I am hopeful that this upward trend will continue.

 

“With building approvals up and RP Data-Rismark reporting that capital city dwelling values rose by 1.4 per cent over September – prior to the Reserve Bank’s latest rate cut –  there are certainly positive signs for the market’s short to medium term future,” concluded Charles Tarbey.

 

For more information on market conditions in your area, please contact your local CENTURY 21 Real Estate Agents, for clear expert advice.


0 comments | Posted by Charles Tarbey on 25/10/2012 at 12:00 AM | Categories:

Increasing population growth supports demand in the housing market

According to recently released data from the Australian Bureau of Statistics (ABS), Australia’s population growth rate has reached 1.49 per cent – the highest rate of population growth recorded since the last quarter of 2009. If population growth continues on this trajectory, it will likely be a factor that underpins national housing demand.

 

The ABS’ ‘Australian Demographic Statistics, Mar 2012’, reports that Australia’s population growth had two components in the year ended 31 March 2012: net overseas migration (57 per cent) and natural increase (43 per cent). The ABS indicated that all states and territories experienced positive population growth over this period.

 

The expansion in Australia’s population can be attributed partially to a turnaround in overseas net migration; 197,200 net overseas migrants arrived in Australia in the twelve months preceding March 31, 3012, which is 18.2 per cent higher than figures for the year prior.

 

According to the ABS, all Australian states saw an increase in overseas migration, with most migrants choosing to reside in either New South Wales or Victoria. Western Australia – however, saw the most significant increase, with the number of new migrants rising by 49.3 per cent.

 

RP Data’s Research Director, Tim Lawless, expects interstate and international net flows of migrants to support demand for residential property throughout Australia in both the short and long term:

 

“Stronger population growth is a significant factor for the housing market because it creates demand for housing,” Mr Lawless said.

 

“Looking forward, we can expect population growth to increase across Australia. If the Department of Immigration figures are anything to go by, we are likely to see higher levels of population growth over the coming years on the back of further overseas migration.”

 

For more information on property investment opportunities in your local area, please contact your local CENTURY 21 Real Estate Agents.


0 comments | Posted by Charles Tarbey on 19/10/2012 at 12:00 AM | Categories:

Auction advice for investors

Property investors often ask for advice regarding how to maximise outcomes when buying property at auction. To this end, I have decided to share a recent article by CENTURY 21 Australasia’s Chairman, Charles Tarbey, which appeared in the October edition of CENTURY 21 Wentworth’s Property Investor.

 

Insider auction tips for spring

 

As a means of purchasing a property, I think it is fair to say that the traditionally competitive environment of an auction is not usually the preferred option for many investors.  And after a prolonged period of somewhat subdued activity in the national residential property market - which has offered prime opportunities for privately negotiated sales - no doubt many active investors will have avoided the hammer entirely.

 

Nonetheless, savvy investors will know to keep their auction techniques well-honed, particularly as we start to see what appear to be improving auction clearance rates in some Australian locations.  And with interest rates continuing to remain at historically low levels, coupled with new incentives in various states to encourage buying activity, investors may find themselves faced with an increasingly competitive auction market.

 

Should this be the case, investors would do well to seriously consider their approach before auction day.  The following sets out how I personally would behave prior to, and at an auction, in order to fend off the competition and achieve the best possible result for my portfolio.

 

Bypass the auction process if possible

 

In the lead-up to an auction, consider your options - if you don't have to put yourself under the stress of an auction, then I would recommend that you didn't.  Even if a property is advertised as going to auction, this doesn't necessarily mean that the owner won't be open to a private offer prior to auction day.  In fact, as auctions can be quite taxing situations for vendors as well, many may actually welcome a fair and reasonable offer as a means of simplifying the process.

 

Take the time to talk to the selling agent to see what the vendor would be open to - a privately negotiated sale prior to auction may just be the most attractive option for both parties.

 

Consult the selling agents

 

Before auction day, and when attending the actual event, I always encourage buyers to consult the sales agents to obtain insights into both the property and its location.  This is a practice that you would do if you were acting on behalf of a buyer, so it makes sense that you do the same when considering your own investment.

 

Come auction day, try to approach as many people on the ground as possible - this includes everyone from the person writing your name down when you walk in the front door, to the agents positioned around the property, and the auctioneer.  Do not underestimate the importance of this field research - when people work together, they talk amongst themselves and hear opinions.  Thus, you might be surprised at how knowledgeable some agents can be and the depth of valuable information you can glean from them - even those employed in the most basic positions within a real estate organisation.

 

Stay firm on price

 

In order to achieve the best result at auction, it is crucial that investors have a clear understanding of both what they can afford and their price limit (based on research and feedback from agents), and then stick to that limit on the day.

 

When you get to an auction it can be very easy to get caught up in the excitement - a few skilful words of encouragement from the auctioneer and suddenly an extra $500 bid here and there results in an additional $10,000 on the price.  This is a real danger - I hear so many stories from both investors and home buyers who purchase property, but in doing so have paid more than what they had hoped or expected, and subsequently have had to rely on family or the bank to make up the shortfall.

 

If you have done your research, spoken to the right people, and have a clear understanding of what you can afford, then stay firm when it comes to bidding.  A successful investment is rarely made when purchasing above what a property is worth in the heat of the moment.

 

Be strong when bidding

 

When placing a bid at auction - be sure to make it a very firm one.  It is easy to be tempted to bid just a little bit above the offer of the previous bidder; try to avoid acting in such small increments as this will likely result in your competition simply continuing to bid.  Conversely, by making strong bids in a decisive fashion, you can make a statement that will prove your intent to others.

 

For instance, say I can afford to spend $500,000, and I am at the auction of a property that I feel, based on my research, is worth the same.  With bidding sitting at $477,000, I would be inclined to go to $490,000 to convey my seriousness, essentially shutting other bidders out.

 

When bidding for a property it is also very important to watch where you are bidding, making sure that you end up at an amount that is an even, not odd, number - for example, $490,000 as opposed to $489,000. Because you can rest assured that somebody will bid that extra one thousand, which could set off a flurry of smaller bids, potentially inviting further competition and unnecessarily prolonging the auction process.

 

Have somebody represent you

 

Auctions can be highly charged, competitive environments in which there is the potential for rational behaviour - essential for a successful investment - to fall by the wayside.  I have seen auctions where egos get in the way - for instance in situations where people know, or know of, each other, and then bid beyond their original intention, not because of the value of the opportunity but due to their drive to win.

 

Asking somebody to represent you, whether it be a trusted friend or a professional buyers' agent, is therefore often a very sensible way to approach an auction, particularly for those investors who are first-time buyers, or haven't had a great deal of experience in the auction environment.  Having somebody bid on your behalf also allows you to remove yourself from the immediate auction space, instead giving instructions from another location (or often even just from the back of an auction room) without having to resist the constant pressure from agents who may try to get you to change your thinking.

 

In the end, many investors will have to endure an auction at some point over the course of building their property portfolio.  By arming yourself with as much research as possible, acting with a clear head and staying firm, investors can position themselves to achieve the best possible outcome come auction day.

 

For more information about the residential property market in your areas of interest, please feel free to stop by your local CENTURY 21 Real Estate office for expert, clear advice.


1 comments | Posted by Charles Tarbey on 17/10/2012 at 12:00 AM | Categories:

Top 10 tips for becoming a successful negotiator

Although market conditions will almost invariably be the most significant factor in determining the selling price of a property, negotiation skills can sometimes be an equally important variable; whether you’re a vendor or purchaser, with strong negotiation skills, you can bargain for outcomes favourable to your interests.

 

With that being said, I’ve decided to share my top 10 tips for negotiating on selling price:

 

1.      Research, research, research: before making any offer on price, research and inspect as many houses on the market as possible. To this end, you should consider working with a real estate agent and utilising sources such as RP Data to inform yourself about median house prices, market trends and capital growth prospects within your area. Knowledge of such will empower you to be smarter and more confident during negotiations.

 

2.       Try to start your negotiations from a position of strength: at the beginning of any negotiation you should aim to extract more from the other party than what you expect to get; while you may not always achieve your aim, you will give yourself the best chance of negotiating towards your preferred price.


3.    Know when to stop talking and start listening; this will allow you to process crucial information, adapt your strategy if necessary, and identify prospective bargaining points as they arise.


4.       Be considerate of the other party’s needs and wants: try to stick to areas where compromise is possible in order to ensure that discussions remain constructive; as soon as negotiations become destructive, the chances of a favourable outcome for either party become considerably reduced.


5.       Make sure that you detail your position with clarity and precision: try to speak at an even pace and pause between sentences to ensure that the other party can properly understand and process what you are saying.


6.       Know when to step away from a negotiation; when differences become irreconcilable, recognise the fact and revisit discussions at a later point in time.


7.       Leave your emotions at the door: it is important to stay composed and rational throughout the negotiation process so that you remain in control proceedings and clearly evaluate offers and potential outcomes.


8.       Know your limits: the purchase or sale of a property can be a highly emotional experience, which can increase the potential for impulse decision making. As such, it is important to know your walk-away price from the start of the negotiation process and to stick to such.


9.       Set deadlines: If you make an offer it is important to create some pressure for acceptance. Give the other party a reasonable deadline to contemplate the offer and let them know that you will be speaking to other parties during that time period.


10.   Utilise the services of an experienced real estate agent: much like most people wouldn’t go into court without a lawyer, most parties shouldn’t enter into property negotiations without a real estate agent by their side; real estate agents can not only help clients make properly informed choices during their negotiations, but they can also be extremely helpful in developing negotiation strategies and providing emotional support.

 

For more information on investment opportunities in your area, please contact your local CENTURY 21 Real Estate Agents.


2 comments | Posted by Charles Tarbey on 12/10/2012 at 12:00 AM | Categories:

Capital city housing values update

Australian capital city housing values rose 1.4 per cent in September according to RP Data-Rismark’s Hedonic Home Values Index – the largest month-on month increase the Index has seen in more than two-and-a-half years.

 

Adelaide had the strongest growth result with a 2.4 per cent increase, followed by Perth (+1.6 per cent), Sydney (+1.5 per cent), Melbourne (+1.4 per cent) and Brisbane (+1.1 per cent).

 

The capital losses experienced over the first half of 2012 have now been completely reversed, with dwelling values up 0.8 per cent over the first nine months of the year.

 

On a quarterly basis, capital city house prices rose 2.0 per cent – the highest quarterly increase recorded since May 2010.  The only capital cities to see no price growth over the third quarter were Hobart and Perth, which saw -1.8 per cent and -0.2 per cent declines respectively.

 

According to RP Data Research Director, Tim Lawless, the financing opportunities afforded by lowered interest rates have played an important role in improving market conditions:

 

"It's no coincidence that housing market conditions bottomed out at the end of May, after the Reserve Bank cut the official cash rate by 50 basis points. A further cut of 25 basis points in June and the anticipation of further rate cuts in the pipeline appear to have instilled renewed confidence in the housing market which has driven the growth in home values," Mr Lawless said.

 

Rismark International’s CEO, Ben Skillbeck, indicated that the uplift in dwelling values could not be attributed solely to seasonal factors:

 

“The recovery in the housing market is broad based and not simply attributable to a seasonal spring uptick. Over the four months from end May to end September actual Australian capital city house values have increased by 3.4 per cent. If we adjust this to take into account seasonality, the increase is still a strong 2.9 per cent which represents an annualised pace of 9 per cent per annum,” he said.

 

Mr. Lawless concluded that high auction clearance rates, relatively low capital city listings and the confidence of vendors to persist with their initial asking prices were the main factors underpinning a housing markets recovery.

 

For more information on housing prices in your area, please contact your local CENTURY 21 Real Estate Agents.


0 comments | Posted by Charles Tarbey on 11/10/2012 at 12:00 AM | Categories:

Rate cut good news for borrowers

At its monthly meeting in Sydney, the Reserve Bank of Australia elected to reduce the official cash rate by twenty-five basis points to 3.25 per cent. This decision was welcomed by CENTURY 21 and we expect that it will help to further stimulate the national residential property market at a time when the national market is already showing signs of recovery. 

Following three consecutive rate holds, the Reserve Bank’s latest decision brings official interest rates to their lowest level in three years.

Charles Tarbey, Chairman of CENTURY 21 Australasia, said that the decision should provide relief for many home owners with mortgages and further encourage would-be purchasers to enter the housing market – should the banks pass on the savings.”

The Reserve Bank cited Australia’s softening labour market and high exchange rate, as well as weakening global economic growth and a sooner than expected end to the resource investment boom as key reasons behind the decision.

“The Board judged that, on the back of international developments, the growth outlook for next year looked a little weaker, while inflation was expected to be consistent with the target,” said RBA Governor Glenn Stevens in his official statement following the decision. 

“The Board therefore decided that it was appropriate for the stance of monetary policy to be a little more accommodative.”

The Reserve Bank’s decision comes off the back of recently released RP Data-Rismark figures showing that capital city dwelling values rose by 1.4 per cent over September – the largest month-on-month increase capital city property markets have recorded in more than two-and-a-half years.

The Reserve Bank will no doubt be keeping a close eye on how the major banks respond to its latest move. The big four banks – Westpac, Commonwealth Bank, ANZ Banking Group and  National Australia Bank – have yet to reduce their lending rates.

For more information about the residential property market in your areas of interest, please feel free to stop by your local CENTURY 21 Real Estate office for expert, clear advice. Additionally, if you would like to speak to a mortgage professional about the impact of this rate cut on your mortgage, or to find out more about suitable loan packages for your circumstances, please contact CENTURY 21 Home Loans. 

 


0 comments | Posted by Charles Tarbey on 05/10/2012 at 12:00 AM | Categories:

Property Investment and self managed super funds

Self managed superannuation funds (SMSFs) are becoming an increasingly popular option for individuals looking to increase their retirement funds and to branch out into new forms of investment. In light of recent changes to the laws surrounding SMSFs, I’ve decided to share the following article by EBM Insurance, which appeared in the September edition of CENTURY 21 Wentworth’s Property Investor. 

Property - potentially a "super" investment

The taxman has clarified previously-confusing rules on renovating and improving investment property within self-managed superannuation. 

Combined with share market volatility, the Australian Tax Office ruling SMSFR 2012/1 could potentially boost the numbers of people borrowing within self-managed super funds to buy residential investment property. 

According to the ruling: 

- Cosmetic renovation, such as retiling, can be done as a "repair" under super law, even though it can't under income tax rules - and can be done within super using borrowed money.

- Improvements to a property, such as moving internal walls, are allowed if the "fundamental character" of the asset does not change - but can only be done using non-borrowed money. 

- Improvements which fundamentally change the nature of the asset, such as turning a single dwelling into a duplex, are not allowed if there is still a loan on the property. 

General Manager of RentCover, Sharon Fox-Slater, said that the recent decision is just one of many that apply to self-managed super, the rules for which are complex - so it's crucial to obtain professional advice before signing any contract, let alone paying a deposit. 

She added that it is important to have landlord insurance regardless of whether the property is held within a self-managed fund or separately - and that regular landlord insurance is suitable for property held within super. 

Some of the chief advantages of buying property within self-managed super include: 

- Access to an investment type seldom held by retail super funds. 

- The ability to use leverage (borrowed money) to buy an asset. 

- The ability to use salary-sacrificed, pre-tax dollars to pay off the loan. 

- The SMSF pays a maximum of 15 per cent tax on the rental income. 

- Personal control via the ability to select your own asset. 

- Capital gains tax savings if the property is sold, and 

- "Non-recourse lending", which means that the bank can't seize other assets to repay the loan in the event of a default. 

Some of the disadvantages include: 

- The performance of a single asset potentially dominating your retirement future. 

- Administration and compliance headaches and costs. 

- All the risks that normally apply to any property investment such as the market falling or poor property selection. 

- Banks require a bigger deposit, typically only lending 75 per cent of purchase price. 

- Bigger bank fees, and 

- The risk members might need to kick in extra money if cash flow is insufficient. 

For more information about EMB’s range of insurance products please visit www.ebminsurance.com.au. 


0 comments | Posted by Charles Tarbey on 03/10/2012 at 12:00 AM | Categories: