Viewing by month: September 2012

What to consider before buying a holiday home

For many Australians, the option of purchasing a holiday house for dual use an investment property is an attractive one, as it provides investors with a viable prospect for ongoing rental returns and unique lifestyle benefits. Despite such, it is imperative that all investors – no matter how experienced – properly weigh up the pros and cons relating to this type of investment; not only can holiday houses have some great advantages, but they can also have inherent risks and drawbacks. 

With this being the case, I have decided to outline five important factors that should always be considered before purchasing a holiday house for investment property purposes:

1. Ensure that you account for different expenses that come with owning a holiday house. The holiday accommodation industry is competitive and, as such, you will need to factor in costs associated with advertising and marketing the property.  In addition, you will need to consider hidden costs including, but not limited to, agents fees, land and council rates, and general maintenance expenses.

2. As an investment, holiday houses are particularly susceptible to annual fluctuations; peak holiday seasons last for relatively short time-periods, which can potentially make finding regular tenants difficult. Although weekly rates for holiday rentals are generally quite high, these types of properties can sometimes lay unoccupied for weeks at a time, leaving owners to cover mortgage payments without any income support from the investment properties themselves.

3. There are a number of significant tax benefits that can potentially be leveraged via ownership of a holiday house. Ensure that you speak with a qualified accountant or tax adviser to understand the types of deductions that may apply. 

4. If you do decide to purchase a holiday house, try to cater to a wide variety of potential tenants. For example, you might want to consider purchasing a one-bedroom or two-bedroom unit as these property types may be appealing to both families and couples.. In addition, you should look to identify a location that is not only idyllic in setting but also close to amenities such as shopping centres, public transport and entertainment venues. 

5. Research and work with a real estate agent to list the risks involved before proceeding. While holiday houses can potentially deliver significant rewards, they can also carry large financial risks. As such, it can often pay to make a properly informed decision. 

For more information on investment opportunities in your area, please contact your local CENTURY 21 real estate agents.



0 comments | Posted by Charles Tarbey on 26/09/2012 at 12:00 AM | Categories:

Opportunities in the current residential property market

One of the most important processes that any investor should undertake before making a property purchase is to thoroughly research and analyse the current state of the real estate market. This will involve the taking into account of several different factors including, but not limited to, dwelling values, interest rates, domestic and international economic conditions, market forecasts and of course, the opinions of experts.

To this end, I’ve decided to share the following article by Empire CEO, Chris Gray, which appeared in the September edition of CENTURY 21 Wentworth’s Property Investor. 

Now might be a great time to enter the property market

The sentiment of doom and gloom out there might tempt many of us to hide under a rock until the economy takes a turn for the better. Very few of us realise, however, that a sluggish economy might actually present some hugely attractive opportunities for those with the capital to invest. 

The property outlook

Take a look at the current property market, which in recent months has endured: 

- Falling mortgage interest rates 

- Low vacancy rates in many areas 

- Rising rents; and 

- Buyer uncertainty 

Even though the Federal Government has boosted the first home owner's grant, many real estate agents have reported that buyers are continuing to resist until the market looks more certain. 

Profitable times for investors

If you're looking to invest, however, you couldn't have picked a better time to do it. While there is a great deal of negative sentiment and uncertainty in the marketplace, cashed-up investors with a long-term strategy may be able to secure some reasonably priced investments. 

The potential for strong profits is promising: mortgage rates are falling towards the six per cent level - and some banks are now fixing mortgage rates at under five per cent for three years. 

The gap between rents and mortgages could close to less than one per cent. For a property investor, this could translate to a net cost of less than $5000 per year on a $500,000 property - it rarely gets better than that. 

Previously, properties were costing investors up to $20,000. 

The time is right

At the same time, demand for median priced property is still strong in the inner-city rings of most capital cities. In addition, the fact that there isn't a great amount of available land to increase supply, could very well translate to rising prices.

There may also be some great opportunities for new home owners that can take advantage of the first home buyers' grants. As long as you can pay your mortgage, even if property values do drop slightly in the short-term, you can likely secure a more affordable property now than when there's more confidence in the market. 

My own strategy

I buy median-priced property within 5-15 kilometres of capital cities. These appeal to the majority of renters, ensuring consistent yields, and can easily be resold for a fair price in case of an emergency. While there are bargains to be had in many states, it's often worth paying a fair price for a blue-chip property rather than getting a discount for something that is not in demand now nor will be in the future.

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. For a FREE copy of his latest book, The Effortless Empire: The Time-Poor Professional's Guide to Building Wealth from Property, visit www.yourempire.com.au.

For more information on investment opportunities in your area, please contact your local CENTURY 21 real estate agents.


0 comments | Posted by Charles Tarbey on 25/09/2012 at 12:00 AM | Categories:

Interest rates update

At its monthly meeting, the Reserve Bank of Australia (RBA) chose to keep the official cash rate at 3.5 per cent. CENTURY 21 expects that this decision will encourage prospective buyers to think seriously about making a property purchase in the spring selling season, which has just commenced. 

Following the Reserve Bank’s decision, Chairman of CENTURY 21 Australasia, Charles Tarbey, said: “Century 21 is currently seeing a lot of stock coming through the pipeline as the spring selling season commences and the decision by the RBA may provide an added incentive for those in a position to buy property to be active during this usually busy period”.

The RBA released an official statement citing on-target inflation forecasts, on-trend GDP growth and a more subdued international outlook as some of the key determinates behind its decision. 

The decision follows the recent release of RP Data-Rismark’s Hedonic Home Value Index data, which showed that capital city home value growth remained flat over August, but had increased by 1.6 per cent in the three months preceding September. 

Charles Tarbey added that a combination of market factors have contributed to a favourable buying environment moving into spring:

 “Property prices have largely stabilised this year, there is adequate stock to choose from and with the ability to lock in relatively low interest rates- buyers would appear to have a number of conditions working in their favour.” 

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


0 comments | Posted by Charles Tarbey on 13/09/2012 at 12:00 AM | Categories:

Capital city housing values update

 

According to RP Data-Rismark’s Hedonic Home Value Index, capital city dwelling values in Australia rose by 1.6 per cent over the last three months – however, during the traditionally quieter month of August, value growth flat lined. 

Seven of Australia's eight capital cities registered capital gains over the last three months with the exception being Adelaide.

According to RP Data research director Tim Lawless, Sydney is proving to be one of the most consistent performing capitals this year: 

"Sydney dwelling values have increased over five of the past eight months providing a cumulative capital gain of 1.9 per cent over the year to date. Canberra (+1.4 per cent), Hobart (+3.9 per cent) and Darwin (+8.4 per cent) have also yielded owners capital gains over the first eight months of 2012." 

"In contrast, other capitals, like Adelaide (-1.3 per cent), Brisbane (-1.4 per cent), Perth (-2.5 per cent) and Melbourne (-2.6 per cent), have recorded tougher conditions this year." 

"In May 2012, Melbourne home values were down 5.1 per cent in just the first five months of the year. However, the bounce in the period since the RBA's May and June rate cuts has helped Melbourne values claw-back about half of these losses to be off a more palatable -2.6 per cent," Mr Lawless said. 

Highlighting the improved affordability over the past quarter, Mr Lawless points out that almost every capital city has recorded capital gains over the last three months:

"Improved affordability since June has helped dwelling values rise across every capital city over the three months ending August 2012, apart from Adelaide. The big question is, 'can this growth be sustained?' On the one hand, winter is seasonally slow, so these results have been encouraging."

For more information about the residential property market in your area of interest, please contact your local CENTURY 21 Real Estate office for expert, clear advice.

 


1 comments | Posted by Charles Tarbey on 12/09/2012 at 12:00 AM | Categories:

Property development and location

 

Many market analysts have spoken at length about the potential advantages associated with property development as opposed to property purchase. Some have argued that building after buying can cultivate increased long-term equity, while others have noted that manufacturing a property from scratch can implicate greater time, stress, cost and risk to the developer.

If you are an investor looking to build after buying, it is important that you identify a development site that can be positioned to deliver profitable investment outcomes. How can you do this?  Here are five quick tips: 

1. Take the some to research growth estimates and demographic breakdowns within potential investment areas; this may help you to determine areas and property types that will likely be in future demand;

2. Look to identify the presence of a diverse economy in any prospective investment area;  this can sometimes be a good indicator of the long-term economic growth potential of a region;

3. Try to equip yourself with a stellar understanding of the bureaucratic frameworks in which residential developments operate. This may entail researching zoning and development regulations, timelines for applications, minimum lot sizes, and speaking with the local town planner to gain a broader insight into the local development context;

4. Consider the development site’s accessibility to important amenities such as shopping centres, public transport, health and education facilities, major highways and parks;

5. Try to have a vision for the property prior to beginning your search; this will provide you with some sort of guiding criteria for looking at potential development sites;

6. Research and list the risks involved before proceeding. While property developments can potentially deliver rewards, they can also carry larger risks. 


 


2 comments | Posted by Charles Tarbey on 10/09/2012 at 12:00 AM | Categories:

A positive outlook for Australia’s residential property market

It is always good to get some expert insights into the residential property sector – particularly at present, with so many claims floating around about the current state and future of domestic and international economic conditions.  To this end, I’ve decided to share the following article which appeared in the August edition of Century 21 Wentworth’s Property Investor.

RBA: the purported Housing Bubble, Australia's economy and China

The Governor of the Reserve Bank of Australia, Glenn Stevens, recently delivered a speech at a charity luncheon in Sydney that provided some telling commentary for Australian property investors. 

A highly respected figure that is watched closely by markets due to his unique economic insights and influence over the economy and property market, the Governor provided his view on the controversial "housing market bubble" theory, the health of the Australian economy and the moderation in Chinese economic growth of late. 

The speech makes interesting reading for property owners and investors who are concerned about current dwelling value prices and the likelihood of an imminent drop, and those interested in the health and future prospects for the Australian economy. 

The Housing Market Bubble 

Many market commentators have been concerned about the perceived high dwelling values in Australia. Glenn Stevens explained that two key elements of this assertion are that prices relative to income are much higher than they were 15-20 years ago, and that Australia's dwelling values seem high compared to other countries. 

Without dismissing that prices can fall and have fallen in the past, Glenn Stevens questioned the first claim, stating that there is no particular basis to think that the price to income ratio 20 years ago was 'correct'.

The Governor went on to comment about Australia's apparent high dwelling prices compared to the rest of the world: "The point is simply that historical or international comparisons, to the extent they can be made, do not constitute definitive evidence of an imminent slump. At the very least, the complexity of making these comparisons suggests we ought to look at some other metrics in thinking about the housing market." 

Glenn Stevens continued by outlining how mortgage arrears remain low and have been falling over the past year, which is likely in response to debt servicing burdens declining. 

"As a result of lower house prices and therefore lower loan sizes, somewhat lower interest rates and a good deal of income growth, the repayment on a new loan on a median-priced house as a share of average income is now at its lowest for a decade (except for the 'emergency' interest rate period in 2009)." 

The Governor went on to conclude, "We should never say a crash couldn't happen here, and the Reserve Bank continues to monitor property markets and the performance of mortgages quite closely, as we have for many years. But it has to be said that the housing market bubble, if that's what it is, seems to be taking quite a long time to pop - if that's what it is going to do. The ingredients we would look for as signalling an imminent crash seem, if anything, less in evidence now than five years ago."

Australia and the China Story 

During his address, Glenn Stevens painted a fairly positive picture of the Australian economy and its recent resilience to international shocks. That being said, Australia's growth is heavily coupled with China and recent slowing in that economy has made many Australians concerned. 

Far from panicking about slowing Chinese GDP growth, the Reserve Bank Governor seemed to be thankful for the current period of moderate growth: 

"The data are quite consistent with Chinese growth in industrial output of something like 10 per cent, and GDP growth in the 7 to 8 per cent range," said Glenn Stevens.

"To be sure, that is a significant moderation from the growth in GDP of 10 per cent or more that we have often seen in China in the past five to seven years. But not even China can grow that fast indefinitely and there were clearly problems building from that earlier breakneck pace of growth. Inflation rose, there was overheating in property markets and no doubt a good deal of poor lending. It is far better, in fact, that the moderation occur, if that increases the sustainability of future expansion." 

The Governor then went on to suggest that the China Story is "roughly on course" and that it is likely fortunate that Australia is more exposed to China, than say Europe, which has a very low average growth rate. 

While clearly outlining some of the challenges that Australia is currently facing, the title of Glenn Stevens' speech seems to best summarise his views on Australia - "The Lucky Country". 

Governor Stevens' address was given to The Anika Foundation Luncheon in Sydney on July 24, 2012.

For more information regarding the residential property market in your area, please contact your local CENTURY 21 office.



2 comments | Posted by Charles Tarbey on 10/09/2012 at 12:00 AM | Categories: