Viewing by month: November 2012

RBA predicts future increases in dwelling investment

The Reserve Bank of Australia’s head of economic analysis, Jonathan Kearns, recently gave a speech entitled ‘The Outlook for Dwelling Investment’ that provided some interesting insights into the future of Australia’s residential property market. In particular, he forecasted that ongoing demand for new housing will drive increasing dwelling investment over the coming years.

 

According to Mr Kearns, low vacancy rates in Australia’s rental markets are a telling indicator of the significant demand that already exists for new dwellings:

 

“Tightness in the rental market will generally be indicative of tightness in the overall property market. While the typical owner-occupier property will differ in many ways, there is significant interconnection between the markets for owner-occupier and rental properties,” he said.

 

Commenting on why these market factors have not been reflected in construction rates, Mr Kearns said that ”while the number of dwellings constructed each year hasn’t grown, the size, quality and relative cost of each dwelling has.”

 

Furthermore, Mr Kearns noted that developers’ exposure to risk has increased in recent times, off the back of increasing regulation and greater involvement with community infrastructure provision – an area that had traditionally resided with various levels of government

 

Mr Kearns concluded that dwelling investment would likely increase at a relatively moderate rate in the medium-term, supported by demands for new housing:

 

“So what is the outlook for dwelling investment? While the long-run decline in the average number of people per household seems to have tapered off at least partly for demographic reasons, the strong population growth in recent years and the relatively low rate of dwelling construction suggest that there is sufficient demand for housing in the economy that an increase in supply could easily be absorbed.

 

“Overall, it looks likely that dwelling investment will pick up at a relatively moderate rate in the medium term. How quickly and how strongly of course remain important questions for understanding the impact on the overall economy.”

 

For more information about property investment options in your area, please contact your local CENTURY 21 office.


0 comments | Posted by Charles Tarbey on 30/11/2012 at 12:00 AM | Categories:

Low-value pooling – a tax depreciation concept that any property investor should know

 

Moving towards Christmas and the new year, many property investors will be looking for ways to maximise their tax benefits and increase their cash flow. To this end, I have decided to share the following article by BMT Tax Depreciation, which appeared in the November edition of CENTURY 21 Wentworth’s Property Investor.

 

Understand low-value pooling

 

By Bradley Beer, Managing Director of BMT Tax Depreciation

 

Low-value pooling is a method of depreciating fixtures, fittings, plant and equipment within a property at a higher rate to maximise deductions, which will increase an owner's annual cash flow. The following categories of assets can be allocated into a low-value pool:

 

Low-cost assets: a low-cost asset is a depreciable asset that has an opening value of less than $1,000 in the year of acquisition. This can include cooktops, rangehoods, exhaust fans and blinds.

 

Low-value assets: a low-value asset is a depreciable asset that has a written down value of less than $1,000. That is, the value of the asset is greater than $1,000 in the year of acquisition. However, the remaining value after previous years' depreciation is less than $1,000. Assets meeting this classification are placed in an itemised, low-value pool. An example could include a hot water system valued at $1,100. In the second financial year after installation, the asset would have depreciated to a written down value less than $1,000, which would make it eligible to be placed in the low-value pool.

 

Property investors who place assets in the low-value pool are able to claim them at a rate of 18.75 per cent in the year of purchase, regardless of how long the property has been owned and rented. From the second year onwards the remaining balance of the item can be claimed at a rate of 37.5 per cent. This rule allows for an increased depreciation deduction on qualifying assets.

 

Assets which form part of a group with a total cost exceeding $1,000 can cause confusion. For example, if a house has a set of six blinds costing around $3,000, it would seem that the set does not qualify for the extra depreciation available in the low-value pool. However, these blinds can be depreciated at the higher rate as they qualify for the low-value pool as individual items.

 

A specialist quantity surveyor will always use legislation available to maximise depreciation deductions.

 

A BMT Tax Depreciation report will always apply low-value pooling to increase the rate of depreciation, boosting the cash return earlier for the property owner.

 

 

For more information on BMT Tax Depreciation’s Australia-wide service, please call 1300 728 726 or visit www.bmtqs.com.au.

 


0 comments | Posted by Charles Tarbey on 29/11/2012 at 12:00 AM | Categories:

Dwelling finance commitments lift for second consecutive month.

According to recently released figures by the Australian Bureau of Statistics (ABS), the total number of owner occupied housing commitments increased by 0.9 per cent (seasonally adjusted) in September, following an upwardly revised 2.1 per cent rise over August.

 

CENTURY 21 believes that the increase in dwelling finance commitments over September could indicate further strengthening in the residential property market.

 

“A lift in housing finance approvals over the past two months is pleasing to see, and there is a strong possibility that there will be further improvements over the remainder of the year as the impact of the Reserve Bank’s rate cut in October becomes evident,” said Chairman and Owner of CENTURY 21 Australasia, Charles Tarbey.

 

The ABS data showed a rise in finance acquired by first home buyers, with the number of first home buyer commitments as a proportion of total owner occupied housing finance commitments increasing to 19.3 per cent in September from 18.6 per cent in August.  

 

“Moving forward, we may see further lifts in first-home buyer activity as relatively low interest rates and recently introduced first-home owner benefits continue to encourage purchasers to enter the market – particularly with the preference of many to conclude their property transactions prior to Christmas,” continued Charles Tarbey.

 

“The residential property market continues to present attractive purchase opportunities for buyers across the board, with a good deal of high-quality properties spanning a number of price brackets.

 

“For those that are financially positioned to act and have done the required research, now might be a prime time for them to approach their local real estate agent and mortgage broker to discuss appropriate purchase opportunities and financing options,” concluded Charles Tarbey.

 

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 and clear advice. Additionally, if you would like to speak to a mortgage professional about suitable loan packages, please contact CENTURY 21 Home Loans.


0 comments | Posted by Charles Tarbey on 23/11/2012 at 12:00 AM | Categories:

How to climb the property ladder

For a large number of Australians, property investment is an attractive yet somewhat daunting prospect; while most people recognise the financial and lifestyle benefits that a strong property portfolio can bring, many potential investors will likely stay on the sidelines due to a lack of understanding about how to execute a successful investment strategy. To provide some guidance surrounding this issue, I’ve decided to share the following piece by Empire CEO, Chris Gray, which appeared in the November 2012 issue of CENTURY 21 Wentworth’s Property Investor.

 

Chris Gray's tips for climbing the property ladder

 

Property and renovations can be for anyone, it all comes down to your goals and dreams and how much you want them. When you're starting out and have limited financials it can be tough, but the sooner you get on the ladder, the sooner your equity grows and you can start duplicating. Caution - the quicker you try and double your money, the sooner you're likely to fall over; slow and steady is the key to winning the race.

 

1. "Don't fear the gear" is one of my mantras. Most people are afraid of debt and leverage, as they perceive it as dangerous. However, debt can increase your return and shorten the time it takes to get the return. Debt does increase your risk during a downturn, so every investor needs to do know how much debt they are comfortable carrying.

 

2. Go against the grain. 95 per cent of the population retires poor. If your goal is to retire wealthy then you need to do the opposite of what everyone else is doing. Good investors buy when everyone else sells and sell when everyone else is buying. Yes, it can be difficult to maintain your confidence when everyone tells you that you're doing the wrong thing at the wrong time, so you need to develop your mind to block negative comments which can come from friends, relatives and the media.

 

3. Stick to your strategy. Every investor should have their own strategy that reflects their circumstances and adversity to risk. Figure out what works for you and, once you've found your strategy, stick with it.  Be aware of other opportunities and get other advice, but often these can be distractions. A good strategy doesn't have to be complicated - it's often the simple things that work.

 

4. Time in the market. The real secret to wealth is compounding your investments. You need to change your mindset from trying to be a millionaire overnight to aiming for consistency. This can be very frustrating when you first start out as your wealth won't increase much. But over time you will see your portfolio increase in value.

 

5. Timing the market. Many people wait until the market is at a low before buying. If you buy good stock and hold onto it for ten years or more, you should see some great capital gains, regardless of market ups and downs.

 

6. Buy blue chip. It's worth paying market value for a good property in a top suburb rather than a property that is low priced because nobody really wants it. Blue chip properties tend to steadily grow in value over the years, so if you buy and hold on to the property, you can then build up equity, borrow against the property and build up your portfolio. Blue chip properties typically grow between 6 - 10 per cent in the long-term.

 

7. If possible, never sell. Most people think that you need to sell to realise a gain, but that's not the case. Property is a long-term investment. My strategy is to hold onto properties and refinance in order to benefit from the equity increase. The goal is to get your properties working for you to create passive wealth.

 

8. Create a two sided buffer:

Side 1: Refinance your property to create a buffer. Refinancing when your property grows in value will create an emergency 'buffer' zone. This will ensure that you can continue to make mortgage repayments even if you lose your job.

 

Side 2: Keep part of the equity aside as a buffer. This is like an emergency fund for when things go wrong or for when interest rates rise. When everyone else panics as rates rise, some people will choose to sell, and if you're cashed up, there's an opportunity to get a great property at a reasonable price.

 

9. Choose the right property. Focus on purchasing "cosmetically tired" rather than "structurally tired" properties. Structural work is often where problems occur and budgets blow out.  Some of the most efficient and simple ways to renovate a cosmetically tired home include painting, carpeting, polishing floorboards, converting a garage into bedroom, styling, replacing kitchen doors, re-enamelling tiles and baths, and replacing fittings.

 

10. Renovate wisely. You need to understand who is likely to buy your property and what they want. You also need to know what other homes are on the market, what condition they're in and what features they offer compared to yours. If you're selling a property, much of the sale price will come down to the cosmetics such as painting, carpeting and styling. I've seen some of the worst properties styled well and sell for a premium compared to better properties that haven't been styled and sell at a lower price.

 

11. Make sure it’s lettable. To ensure that it is tenable, you should buy a property that the majority of working professionals could afford to rent, in an area where they want to live: that is, within 5-15 kilometres of the city. Based on median prices and current rental yields, I would buy a unit in high density cities like Sydney or Melbourne, whereas in a lower density city such as Brisbane or Perth, I would buy a house. This should get you the best yields and growth over the long-term.

 

12. Invest in professional expertise: You need professional help with your first investment (and, I believe, every investment thereafter) because you are spending large amounts of money. You've got to treat this outlay like you would any other business and pay for expert assistance. Every investor needs a good accountant, mortgage broker, financial advisor, valuer, building inspector and buyers' agent.

 

13. Don't retire on property rents. Most people think you've got to pay property off as quickly as possible and then retire on rents. But often it's the capital growth that makes the real money. Change your mindset and be less emotional about it - look at the numbers and make your decisions based on that.

 

If you are ready to enter the investment market, go for it now. It's a great time to take the leap into the world of property investing.

 

About Chris Gray

 

Chris Gray is CEO of property portfolio company Empire. He is a leading property expert who provides opinion and commentary regularly on Sky Business News, A Current Affair and other news media. He is a regular columnist for Real Estate Journal (REINSW), Queensland Property & Lifestyle (REIQ), Your Investment Property and other property media. Through Empire, Chris today builds property portfolios for time-poor investors - searching, negotiating and renovating on their behalf.

 

To learn more about Empire, please visit http://www.yourempire.com.au/. Additionally, for more information about the residential property market in your areas of interest, please stop by your local CENTURY 21 Real Estate office for clear and expert advice.


0 comments | Posted by Charles Tarbey on 23/11/2012 at 12:00 AM | Categories:

Tips for selling an investment property

Selling an investment property is very rarely an easy process; not only do you have to form appropriate price expectations based on current market conditions and various other complex factors, but you also have to align yourself with an agent and a strategy that is going to enable you to achieve your expectations. To this end, I’ve decided to share the following piece by CENTURY 21 Australasia’s Chairman and Owner, Charles Tarbey, which appeared in the November edition of CENTURY 21 Wentworth’s Property Investor.

 

Time to say ‘goodbye’ – ensuring the successful sale of your investment property

 

Whether selling an asset to make the most of changing market conditions, finance a new opportunity, or to ensure greater liquidity, by approaching the sale process in a strategic way, investors can give themselves the best chance of achieving a favourable selling price.

 

Selecting an agent

 

When you are thinking about selling, securing the best agent is an important consideration; agent choice is often the difference between a successful or mediocre result. To find an agent, the route many vendors will take is to call in three or four recommended agents and have them present their sales approach.  While these pitches can certainly be impressive, I would be careful in making a decision based on this step alone; I have seen better agents not awarded work because their presentations were not as slick as those of their competitors.  Thus, other selection methods must also come into play.

 

If you have a selling agent in mind, one of the tactics that I always recommend is to scour your local area and record any properties that they have listed. More importantly, if any of these properties have a sold sticker on them, I would knock on the front door, and if owner-occupied, make a few enquiries about how the process went. To me, this exercise is going to give you the best answer to go on.

 

Sellers should note that ultimately, the best way to select an agent is to look at results. Keep in mind that even if an agent has dozens of 'For Sale' signs up in an area, these really only indicate that the agent is active - which isn't necessarily the type of agent that you want to be looking for. Activity versus performance is a key consideration and you will usually find that activity-based agents are nowhere near as powerful as those who are performance-based.

 

To this end, when looking around your area, it is important to note that while an agent may have a large number of 'For Sale' signs, they may not necessarily be selling anything. In fact, I always say that a 'For Sale' sign is a sign of success, but after four weeks it becomes a sign of an agent's failure to get the job done. Yet these signs may give potential vendors the wrong impression about an agent's ability to get results, and before you know it - you're just another property with a sign out the front.

 

In addition, for those investors who employ a property manager, these professionals can provide a wealth of information when it comes to selling your property and choosing the best agent. Not only will your property manager be well positioned to recommend a sales agent operating in your area, they will also be aware of any necessary procedural or legal requirements, with regards to tenants, that could be relevant in the sale of your property.

 

Base pricing expectations on a number of different sources

 

When setting an appropriate price for your property, it is essential to listen to the feedback of your agent, which is based on their experience and knowledge of current market conditions. However, in order to be in the best position to arrive at an appropriate price guideline, this feedback must also be coupled with your own research.

 

Such an investigation can be easily conducted both online, through sources such as Residex and RP Data, and in the streets around your investment property by driving around, looking at properties that have sold signs on them, and ringing up the agents to find out how much they sold for.

 

When you lock these two forms of research together, have an open mind to selling and take the feedback that has been given to you, you are in a much better position to make the right decision regarding price.

 

Use ongoing feedback to determine if auction is the best course of action

 

While an auction may seem like the most appropriate way to sell your property at the beginning of the selling campaign, only time will tell whether it is in fact the best way to go. A good agent will give you continuous feedback regarding the number of enquiries received and responses given from prospective buyers, which should be the basis of your decision. For example, your agent may let you know that there haven't been any buyers through the property and that perhaps auction may not be the best option - and you will make your decision based on that.

 

Handling yourself at auction

 

As a vendor, if you really want an auction to work for you, it's important that you do not discuss price expectations with your agent and auctioneer; I would recommend that you try to refrain from disclosing what you would like to receive for the property for as long as possible. By giving the agent and/or auctioneer an amount, even just an idea, you are essentially setting them a target, which once met, could indicate a successful auction and see them less likely to push for further bids.

 

While many auctioneers and agents will want to talk to you about price, the best option is often to just let the auction run, and discuss what you're thinking based on events as they unfold.

 

In addition, over the course of the auction, take care not to be too quick to let the bidders know that the property is on the market once you have hit your target price.  When you get close to that price, and if your agent is aware of this fact, they will likely suggest that you 'put it on the market'. However, if you call it, as opposed to simply continuing to take bids, then people will know it's for sale. You may in fact be able to achieve a higher price if bidders are simply allowed to keep bidding blindly.

Also note that if you do decide to call it on the market, it is usually best not to act until you are fairly close to the reserve price that your research indicates the property can reasonably expect to achieve. By holding out and fighting on, you should be able to improve your chances of reaching and exceeding such a reserve.

 

It is important for investors to understand that the successful divestment of a property can be just as crucial to an investment portfolio as an opportune acquisition. To this end, the decisions made by a vendor throughout the process of selling a property can have a significant impact on the result eventually achieved.  By selecting your agent carefully, thoroughly conducting your own research and handling an auction to your advantage, investors should be able to position themselves to obtain the best results for their property portfolio.

 

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 and clear advice.


5 comments | Posted by Charles Tarbey on 16/11/2012 at 12:00 AM | Categories:

Housing finance figures up in September

Recently released figures by the Australian Bureau of Statistics (ABS) reveal that the number of home loans granted across Australia rose over the month of September.

 

According to the ABS, 46,395 owner-occupied loans were approved in September, up from the 45,983 home loans granted in August – a seasonally adjusted rise of 0.9 per cent. Meanwhile, the value of loans for investment properties increased 8.6 per cent.

 

The total worth of housing finance rose by 3.8 per cent, seasonally adjusted, to $21.303 billion.

 

The results suggest that more buyers looked to take advantage of improved financing conditions, brought about by Reserve Bank interest rate cuts in May and June.

 

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 and clear advice. Additionally, if you would like to speak to a mortgage professional about how to finance your next residential property purchase, please contact your local Century 21 Home Loans office.


1 comments | Posted by Charles Tarbey on 16/11/2012 at 12:00 AM | Categories:

Capital city dwelling values ease in October

The RP Data-Rismark Home Value Index results for October recorded a -1.0 per cent decline. The fall was broad-based, with declines being experienced across each of the capital cities, except Perth and Darwin.

The fall in October follows dwelling value increases of 1.4 per cent in September, no change in August, a 0.6 per cent gain in July and a 1.0 per cent rise in June.

 

Both Sydney and Brisbane markets recorded a -0.9 per cent fall in values over the month, while Melbourne values experienced a larger -1.1 per cent drop. Of the mainland capitals, the largest monthly decline was recorded in Adelaide where dwelling values dipped -2.4 per cent in October.

 

On a quarterly basis, most capital cities recorded a rise in dwelling values, with the largest capital gains being found in Darwin (+1.5 per cent), Adelaide (+1.3 per cent) and Perth and Sydney (both +0.7 per cent). The only cities where values were down over the three months ending October were Canberra (-0.8 per cent) and Hobart (-5.7 per cent).

 

On an annual basis, only Sydney (+0.6 per cent), Perth (+3.5 per cent) and Darwin (+8.6 per cent) have shown a rise. The largest fall over the past twelve months to the end of October was recorded in Hobart, where dwelling values are down -4.6 per cent.

 

According to RP Data’s research director Tim Lawless, the weak October result highlights how delicately balanced the Australian housing market is:

 

"Whether the October decline is a blip on the path to a recovering market, or a sign of further weakness is yet to be seen. Other indicators are suggesting the market has gathered some strength, with auction clearance rates holding firm around the 60% mark across the two major auction markets and owner occupier housing finance numbers showing steady improvements since February 2012, albeit from a very low base."

 

"Until we see optimists outnumber pessimists in consumer confidence surveys, a recovery in the housing market is likely to remain precarious," Mr Lawless said.

 

While unit markets showed a more resilient performance across the combined eight cities aggregate index, with values down -0.6 per cent in October, compared with a -1.0 per cent decline across the detached housing market, the cities of Melbourne and Adelaide both recorded a larger -3.2 per cent fall in unit values over the month. In particular, Melbourne unit values have shown a greater decline in values than any other mainland capital city over the past twelve months, recording a 6.0 per cent drop.

 

Rismark International's CEO, Ben Skilbeck, commented, "We are starting to see a reversal of the relatively poor performance of the top 20 per cent of the market as compared to mid-market segment. Over the last quarter the top 20 per cent of suburbs by price have outperformed both the mid-market and the bottom 20 per cent."

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 and clear advice. Additionally, if you would like to speak to a mortgage professional about the impact of this rate hold 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 09/11/2012 at 12:00 AM | Categories:

CENTURY 21: Rate hold to help provide stability in housing market

At its monthly meeting in Sydney this week, the Reserve Bank of Australia (RBA) elected to hold the official cash rate at 3.25 per cent. This decision was welcomed by CENTURY 21 and we expect that it will provide some stability for the property market and added confidence for many prospective purchasers in the lead-up to Christmas. 

 

Speaking on the rate hold, Chairman and Owner of CENTURY 21 Australasia, Charles Tarbey, said: ““I believe the decision by the RBA is the correct one in light of economic conditions. What borrowers can take from this decision is that the RBA is reasonably comfortable with the state of the economy, and still has the scope to reduce rates in December should conditions soften.”

 

“This situation should help to give many current homeowners and prospective buyers a degree of confidence as we move towards 2013.”

 

The Reserve Bank’s decision follows the recent release of the Australian Bureau of Statistics’ (ABS) Buildings Approval data for September 2012, which showed that national building approvals increased by 7.8 per cent over the month. The ABS reported that building approvals were up 12.4 per cent in the year to September.

 

In its statement following the meeting, the Reserve Bank cited slightly higher-than-expected inflation results and somewhat more positive information on the world economy as some of the key determinates behind the decision.

 

“In combination with stock levels, rising building approvals and firmer auction clearance rates, this latest rate hold should be an encouraging signal to the residential market,” concluded Charles Tarbey.

 

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 and clear advice. Additionally, if you would like to speak to a mortgage professional about the impact of this rate hold 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 08/11/2012 at 12:00 AM | Categories:

Spring selling season delivers improved auction clearance rates

According to the most recent statistics from RP Data, a total of 2,321 properties were put up for auction across all capital cities last week, resulting in a healthy combined auction clearance rate of 54.6 per cent.


When compared to previous results, these clearance rates provide further evidence of the modest recovery taking place in Australia’s residential property market; at the same point last year, fewer than 1,600 auctions were held throughout Australia’s capital cities and the combined auction clearance rate was 44.9 per cent.

 

In Australia’s two largest capital cities, auction clearance rates were significantly higher than in the preceding week, despite a large increase in the number of properties on the market.

 

In Sydney, the auction clearance rate was 54.6 per cent, up from 51.4 per cent the week prior, while Melbourne saw a 61.5 per cent auction clearance rate, compared to 53.6 per cent the week before.

 

According to RP Data’s Research Director, Tim Lawless, the positive auction clearance rates indicate that demand for residential property is growing across Australia - giving vendors the necessary confidence to maintain their initial asking price:

 

“Vendor discounting (the percentage difference between the original listing price and the ultimate selling price) has been consistently improving since July last year.

 

“This can be attributed to both vendors setting more realistic asking prices for their properties, and buyers losing some leverage in their negotiation position as market conditions show signs of recovery”, said Mr. Lawless.

 

In a separate statement, Enzio Raimondo, CEO of the Real Estate Institute of Victoria commented that clearance rate results were extremely promising, given the high number of auctions:

 

“A further sign of the improving sentiment is the increase in residential transaction volumes this spring, with around 9 per cent more auctions being held than at the same time last year,” Mr Raimondo said.

 

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 02/11/2012 at 12:00 AM | Categories: