Viewing by month: January 2014

Latest inflation figures signal steady interest rates

Inflation figures published by the Australian Bureau of Statistics for the December 2013 quarter show that overall inflationary pressures remain modest even though the price level rose by 0.8 per cent.

Underlying inflation (the RBA’s preferred measure of inflation) was also up by 0.9 per cent in the same quarter; however the annual rate remains almost exactly in the middle of the RBA’s target range.

This result confirms that interest rates are likely to remain at significantly low levels for the foreseeable future.

“Today’s figures add further fuel to the notion that interest rates will remain at all-time lows for a considerable amount of time to come,” said HIA Senior Economist Shane Garrett. “There is no justification to depart from current settings while inflation is under control and while economic growth continues to be below trend.

“Domestic manufacturers will be encouraged to see that import prices are coming under pressure,” remarked Shane Garrett,” he continued. “After several difficult years, they are finally starting to see their price competitiveness receive a boost.

“It is encouraging to see the rate of housing cost a little below its medium term trend rate.”


0 comments | Posted by Charles Tarbey on 30/01/2014 at 12:00 AM | Categories:

Red tape disadvantaging first home buyers

Century 21 believes the regulatory burden placed on developers attempting to create new housing stock is disadvantaging first home buyers trying to enter the property market.

“Red and green tape is stifling developments across many parts of Australia which is reducing supply and making it more difficult for first homebuyers to access affordable housing,” said Charles Tarbey, Chairman and Owner of Century 21 Australasia.

“While regulations are necessary, they must be reasonable and balance different interests.

“First home buyers will continue to be at a disadvantage if this regulatory burden is not examined and reduced by the relevant legislative bodies,” concluded Charles Tarbey.

The recently released RP Data-Rismark’s Hedonic Home Value Index saw home values finish the 2013 calendar year 9.8 per cent higher, the largest calendar year increase in values since 2009.

The Housing Industry Association’s (HIA) analysis of data from the Australian Bureau of Statistics reveals that to house Australia’s forecast population of 29 million people in 2030, a considerably higher average build rate will be required than the historical average of the past 20 years.

According to the HIA, there has been no commensurate boost to the supply of new housing in line with these demographic changes and it is time for policy makers to acknowledge the imminent policy challenge that this situation poses.


0 comments | Posted by Charles Tarbey on 29/01/2014 at 12:00 AM | Categories:

Consumer sentiment tumbles

The Westpac Melbourne Institute Index of Consumer Sentiment fell by 4.8% in December from 110.3 in November to 105.0 in December.

"This is the lowest level of the Index since July this year. It is 4.3% below the average print for the last 3 months which covered the post-election period and the time of most euphoria around house prices. It appears that the boost in confidence partly associated with the election result and booming house prices has faded in December,” said Westpac's Chief Economist, Bill Evans.

“The news around the housing market is mixed and is probably pointing to an affordability constraint impacting the market. The index tracking responses to the question on whether now is a good ‘time to buy a dwelling’ fell by 4.2% in December to be down by 10.5% from its September peak. At the same time, the Westpac Melbourne Institute House Price Expectations Index increased by 1.4% to be up by 14% over the last 5 months. The mix suggests an affordability issue and is most apparent in New South Wales where prices have increased the fastest – the index tracking NSW responses to ‘time to buy a dwelling’ plummeted 13% in December to be down 21.9% from its September peak, while the state measure of house price expectations is 6.1% higher than the national reading,” continued Bill Evans.

“Westpac has maintained a forecast for another rate cut of 25bps at that February [Reserve Bank of Australia] meeting for some time. It may be that the interaction of forces which we envisage takes longer to become apparent to the Board and the rate cut decision is delayed for some months. Of particular concern here is whether the housing data over the next few months is sufficiently reliable. For now, we retain our call for a cut in February while fully recognising that a delay to that move is also a realistic outcome,” concluded Bill Evans. 


0 comments | Posted by Charles Tarbey on 21/01/2014 at 12:00 AM | Categories:

Building approvals dip in November but recovery remains underway

Residential building approvals eased back during November 2013 but the recovery in activity remains strong, said the Housing Industry Association, the voice of Australia’s residential building industry.

“Total residential approvals dropped back by 1.5 per cent during November compared with the previous month,” said HIA Senior Economist Shane Garrett.

“Overall, the level of building approvals is high and the latest update indicates that activity in the market continues along a rising trend.

“During November, the number of detached house approvals increased by 5.7 per cent with multi-unit approvals falling by 8.8 per cent,” Shane Garrett noted. “Detached house approvals are at their highest level since during the stimulus in mid-2010. Total dwelling approvals totalled almost 174,000 over the past twelve months, a level of building which is much more consistent with Australia’s longer term housing needs,” continued Shane Garrett.

“The persistence of strong regional disparities means that the recovery cannot yet be seen as broad based,” cautioned Shane Garrett. “Despite strong increases in New South Wales, South Australia and Queensland, a sharp decline occurred in Victoria during November and the Tasmanian market continues to be plagued by declining activity.

“It is vital that strong levels of home building continue so as to ensure that housing needs are met across all regions. This is all the more important in the context of the chronic housing underbuild over the past decade.

“Policy reform in the areas of residential land availability and building regulation must continue as a matter of urgency. Strong levels of home building will be very supportive to wider economic growth, something particularly pertinent at this time,” concluded Shane Garrett.


0 comments | Posted by Charles Tarbey on 20/01/2014 at 12:00 AM | Categories:

Buying in a hot market

The property market in many parts of Australia has experienced substantial price growth over the past year and when the market starts heating up, it’s more important than ever that you are well-prepared with a strong strategy. In this article from the December edition of Property Investor, Chris Gray, CEO of Empire, a company that builds property portfolios for clients, shares his advice for buying in a hot market.

Secure finance pre-approval

It's imperative that you get pre-approved for finance, so you know exactly how much you can afford to pay for a property. Many buyers waste valuable time looking at properties they can't afford, and in a rising market a property they could have afforded earlier in the year may now be out of their reach.

Know what you want and be realistic

I recommend creating a checklist to ensure that you are able to recognise the right property when it comes around. This checklist should include a list of all of your essential must haves and what's optional, allowing you to quickly and effectively 'rate' a property. You need to build some flexibility in to these criteria, as none of us can afford the perfect house in the perfect location, as it nearly always comes at too high a price. If you get too picky you'll miss out on the property you wanted - I believe it pays to be realistic - you'll find that dream property before you know it.

Do your research

The most effective way to gain an accurate expectation about the price points of various properties is by viewing lots of open homes and keeping track of the price they sold for. At auctions, try to note whether it's a one off high price with two competitive bidders pushing the price up, or if there's ten or more people all bidding seriously, as that will give you a better idea of market demand and price expectations for that type of property.

Compare like with like

When you go to the inspections make sure you get the size of the property (internal and external), strata fees, likely rent and other important figures so you can ensure that you're comparing like with like. Seeing ten open homes a day can lead to confusion when you're looking back at them a few weeks later - try constructing a simple spreadsheet and then comparing what the agents were quoting, to what the property finally sold for.

Retail today = wholesale tomorrow

While we all want to bag a bargain, it's not always possible, especially in a rising market. Paying a fair price for a property today can be the same, or perhaps even cheaper compared to buying at a discount tomorrow. Firstly, tomorrow often never comes and secondly, if you do find a bargain, it may be in six months time when the property’s value has gone up $50,000 which far outweighs the $20,000 discount you received from the vendor.

Accept that the market moves quicker than you can save

It's tough saving for a deposit, especially when you're young and starting out. While saving is a good practice to get into, properties often rise in a boom faster than you can save. So even if you have to pay lenders mortgage insurance (LMI) today, it may be better to buy now with 10 per cent deposit than wait until next year when you have saved a 20 percent deposit.

Know what to do at auction

Before turning up to an auction, you need to be 100 per cent sure of what the property is worth to you and feel comfortable bidding against others. Go to as many auctions as you can before bidding on one and see how the professionals bid compared to the public. Consider getting a friend or hiring someone to bid on your behalf if you're unsure - it might cost a fee but it takes the emotion out of it.

Overall, you need to remember that action is essential in a moving market and you have to be prepared to re-set your expectations every few weeks as prices and opportunities change. The property market is never going to be 100% perfect when you purchase, so try to get as confident as you can and then make your move.

For more information visit www.chrisgray.com.au and follow Chris on Twitter: @ChrisGrayEmpire.


0 comments | Posted by Charles Tarbey on 14/01/2014 at 12:00 AM | Categories:

Home values finish 2013 calendar year 9.8 per cent higher

 

According the latest RP Data-Rismark Home Value Index results, capital city home values moved 1.4 per cent higher during December 2013.

Across the combined capital cities, home values increased by 9.8 per cent over the 2013 calendar year. According to RP Data’s Cameron Kusher, this was the fastest annual rate of value growth since August 2010, and the largest calendar year increase in values since 2009 when home values were up by 13.7 per cent.

Looking at the differences between houses and units, house value growth at 9.9 per cent slightly outpaced the overall increase in unit values at 9.0 per cent.

Breaking the year down into halves, the first six months of the year saw home values increase by 3.0 per cent compared to a 6.6 per cent increase over the second six months.

“Clearly value growth has gathered momentum throughout the second half of the year,” Mr Kusher said.

“Despite the strongest annual value growth since 2009, the rate of growth was not that startling given the low interest rate environment and the previous successive years in which home values fell.

“Although home values increased by 9.8 per cent in 2013 the growth follows a -3.8 per cent annual fall in values in 2011 and a further -0.4 per cent annual fall in 2012. Cumulatively, from peak to trough, capital city dwelling values were down 7.7% prior to this current growth cycle,” continued Mr Kusher.

Based on these latest results, RP Data believes it should be noted that between 1996 and 2013, there were seven instances where the calendar year rate of capital gain was greater than value growth over the past 12 months. According to Mr Kusher, this indicates that although value growth has been strong compared to recent years, the current growth cycle has been somewhat muted.

Each capital city housing market recorded positive home value growth in 2013, however, the cities driving the capital growth have been Sydney (14.5%), Perth (9.9%) and Melbourne (8.5%). Brisbane was the only other city to record value growth in excess of 5 per cent (5.1%) with each of the remaining capital cities recording annual value growth of 3.5 per cent or less.

An increase in dwelling values across each city over the past year has seen values move closer to their previous peaks where Sydney and Perth remain the only cities where home values are currently at record highs, up 10.9 per cent and 3.6 per cent over prior cycle peaks, respectively. Across the remaining capital cities values are all lower than their record highs; Melbourne (-0.7%), Canberra (-0.8%), Adelaide (-2.4%), Brisbane (-6.6%), Darwin (-7.7%) and Hobart (-12.0%).

Mr Kusher said that it is clear that as the market enters 2014 and as values rise across each capital city, the rate of growth will vary greatly. He said that the main challenges in 2014 are likely to be the impact of a forecasted higher unemployment rate, affordability constraints for the more price sensitive sectors of the market (particularly in Sydney, Melbourne and Perth) and whether any regulatory changes will be implemented by APRA and the RBA to cool the near-record high levels of investment activity.


0 comments | Posted by Charles Tarbey on 13/01/2014 at 12:00 AM | Categories:

Strong population growth necessitates more housing

Demographic statistics recently released by the Australian Bureau of Statistics (ABS) imply strong demographic demand for housing according to the Housing Industry Association (HIA).

“The figures show Australia’s population reached 23.13 million in mid-2013, having added over 407,000 people in the year to June 2013. This is equivalent to a growth rate of 1.8 per cent over the year which is well above the long term average,” said HIA Economist, Geordan Murray.

The natural increase in population (births minus deaths) recorded an additional 162,656 people in 2012/13. That represented an increase of 2.6 per cent over the previous year and contributed 0.7 percentage points to the overall annual population growth.

Net overseas migration increased by 8.6 per cent in 2012/13 to 244,371.This element of population growth contributed 1.1 percentage points to the overall annual population growth.

“With our population ageing and the baby-boomer generation progressively moving into retirement, Australia’s workforce must continually be replenished. Healthy levels of skilled migration, such as we are currently observing, will become increasingly important if we are to see the productivity improvements that will deliver sustainable advances in living standards,” continued Geordan Murray.

“The ABS population projections show net overseas migration is expected to make a stronger contribution to population growth in future years than it has in the past. The ABS’s mid-range population growth scenario anticipates net overseas migration of 240,000 people per year, which is consistent with the level we saw in 2012/13.

“The latest data shows Australia’s population has continued to grow at an above average pace and official projections show this is expected to continue. To date there has not been any commensurate boost to the supply of new housing. It is time for policy makers to acknowledge the imminent policy challenge that this situation poses,” concluded Geordan Murray.


0 comments | Posted by Charles Tarbey on 10/01/2014 at 12:00 AM | Categories:

Asbestos register now required by law - reduce the risks and costs of removal by acting early

In November 2013, Australia recognised the first national Asbestos Awareness Month and in the following article from the December edition of Property Investor, BMT Tax Depreciation shared some important information for property investors dealing with asbestos.

Any Australian property built prior to 1980 has an increased chance that some form of asbestos material has been used in its construction. This can be a major concern for any investment property owner, particularly when faced with the potential health risks and if necessary, the cost of asbestos removal.

If left undamaged, asbestos does not usually pose a health risk, however, when disturbed or damaged, the fibres within asbestos become a health concern to anyone exposed to them.

Due to the serious health risks associated with asbestos, it is now law in most Australian states and territories that every commercial building constructed prior to the 31st of December 2003 has an asbestos register and an asbestos management plan. It is the responsibility of the person with control or management of the property to ensure that the register and management plan are both current.

An asbestos register lists all identified and assumed asbestos within a building. The asbestos management plan outlines the presence of asbestos as well as the safe work procedures, control measures and emergency procedures for a building containing any identified asbestos. This management plan must be kept up-to-date and reviewed at least once every five years.

In a situation where asbestos becomes hazardous, it may need to be removed. For a property owner, the cost of its removal can be a large burden. However, under Section 40-755 (Environmental Protection Act) of the Income Tax Assessment Act, a property owner is able to claim a deduction for the removal of asbestos from their income producing property if the asbestos poses a health risk.

The Australian Taxation Office allows the property owner to deduct the expenditure incurred for the main purpose of carrying out environmental protection activities. The removal of damaged asbestos from a residential investment property or commercial building is classified as an environmental protection activity as its sole purpose is to prevent contamination or pollution of a property.

When completing any improvement to an income producing property, including asbestos removal, make sure you contact a specialist Quantity Surveyor so that the remaining depreciable value of items being removed is captured. A post-work depreciation schedule should also be completed as any replaced items and structural improvements are eligible to be claimed and this could mean a greater cash return from your investment property.


0 comments | Posted by Charles Tarbey on 09/01/2014 at 12:00 AM | Categories: