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Wise words from one of the world’s most successful investors, Warren Buffett: “Be fearful when others are greedy. Be greedy when others are fearful.” Recent economic events have caused a heightened level of uncertainty. This will prove problematic for property at the higher end over the next quarter, however It is still believed most markets are at the beginning of a long term growth cycle. Property remains an excellent asset class for long term investment and definitely offers more stability than the volatile share market. Once confidence returns, Australia will be in good shape. Unemployment remains relatively low and rents are very strong. A key factor is interest rates. If the RBA moves to decrease rates further, this will supersede many macro economic issues for the average buyer. Buyers have been concerned about interest rates moving upwards and we really need to see a rate reduction that puts the steep rises of the past 18 months behind us. With three year fixed rates now below the variable, this indicates the banks’ belief that interest rates are on the way down. As Buffett also says, “If you wait for the robins, spring will be over.” In short, we are experiencing great buying opportunities. Take a long term view and purchase quality property in blue-ribbon areas or markets that show great prospects for capital growth. Market Observations- New RP Data figures for the June quarter show a -0.9% seasonally adjusted decline in capital city property values nationally. However, most transactions in investor and upgrader markets have been sub $750,000 with fewer transactions at the premium end.
- Currently the market appears to be taking a breather. A pause in any growth cycle should always be considered a positive. Markets don’t go up in straight lines, they always reflect growth punctuated by a pause or occasional corrections.
- Many consumers have de-leveraged by paying down their loans. Whilst not good for retail, they have more cash in the bank and their super funds. In some markets, people are deliberately downsizing to a more affordable home specifically to reduce the size of their mortgage. People are currently conscious of debt and are acting accordingly.
- Affordability is a key issue for buyers. With people less confident about taking on large amounts of debt, we are finding higher competition on the more affordable homes.
- Buyer demand, although weaker across the board, still outweighs the lessening supply. In the month ending July 30, RP Data reported 5,000 fewer new advertised listings nationally compared to July 2010. In NSW alone, there were 3,000 fewer listings. However, demand is solid, with Australia’s largest mortgage broker AFG, reporting an 8.6% increase in home loans in July 2011 vs July 2010..
- Upgraders and investors are still active. An increasing number of young people are choosing to buy an investment property ahead of their first home. People still want to enter the market and if they can’t afford it, they will stay at home longer, save for a bigger deposit, or buy with family or friends.
- Record high refinancing indicates buyers are taking advantage of better deals so they can upgrade or at least reduce the interest rates on existing properties. Three-year fixed interest rates are below the variable rate right now. As an example, ANZ is offering 6.44% for two and three years fixed vs 6.9% variable.
- The US debt downgrade by Standard & Poors will no doubt make people nervous, however property still presents as a stable investment. Strong rents are driving investor demand. Many more people are using self-managed super funds to buy property – latest Tax Office figures show a 13% increase in property investment via SMSFs over the past year.
- Vacancy rates are very tight with renters competing strongly in markets with little stock. Some renters are offering higher rents or advance payments. There were 9,000 less new advertised rentals in July 2011 vs July 2010 nationally, according to RP Data.
- In RP Data’s June results, Canberra was the best performing capital city with property values up 0.5%. Prices are now beginning to stabilise after 3-4 years of sustained growth. Great fundamentals for investment remain with apartments under $1M still in high demand and gross yields around 6.5%. The Australian National University has announced 6,000 new places which will add further demand for apartment rentals.
There have been ‘green shoots’ in terms of property demand in most regional areas. Some of the hardest hit markets such as Bowral, Ballina and the Gold Coast are receiving more new buyer enquiry than they have for several years – a good sign that smart buyers are picking the bottom.- Buyers continue to look for value, however they are now starting to purchase when they see it. The backlog of buyers is starting to create activity in markets such as Bowral where demand has increased noticeably over the last quarter, where our office reports significant new interest from Sydney investors seeking long term capital growth.
- Newcastle has become a popular regional market as it undergoes a fundamental change from its working class heritage to a fast growth business community. Several high profile companies have moved in including Macquarie Bank and PriceWaterhouseCoopers. Locals are upgrading closer to beaches and there is high investor demand with new apartment developments selling quickly. Studio and 1 bedroom apartments are proving most popular, often to out of area buyers who want to take advantage of the healthy yields up to 6%. Young Sydney families are realising the lifestyle and better value for money in Newcastle, as a very appealing sea change.
Key Points & Predictions:- Recent global economic events have caused a heightened level of uncertainty but most markets are at the beginning of a long term growth cycle.
- A reduction in interest rates will supersede many macro economic issues for the average buyer. Attractive deals on three year fixed rates will assist buyers with budgeting.
- People are very conscious about debt and are acting cautiously, demand is greatest for the most affordable properties sub -$750,000.
- Demand still outweighs supply and buyers are quick to act when they sense genuine value. Sydney and Melbourne clearance rates are in the low mid-50% and trending upwards.
- Rental demand still extremely strong, yields remain high and this is driving investor demand.
- Green shoots in terms of buyer demand in regional markets that have been soft for some time. Many buyers still sitting on the sidelines, great opportunities for upgraders and investors for long term capital growth.
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It’s pretty hard to ignore the speeding train that is technology these days. And I’m the first to acknowledge the opportunities for business that technology offers – over the years Richard O'Sullivan Real Estate has been able to utilise and embrace various innovations to achieve considerable success in the real estate market. Beyond the office though – what types of technology do people wish to incorporate into their homes? As a real estate agent we definitely focus a lot on beautifying, styling and readying a home for sale, and considering the value add potential of any cosmetic improvements that are made during a renovation or rebuilding process. But over recent years it is becoming apparent that people are increasingly placing value on the existence of technology in their homes. And I’m not just talking about an entertainment system that ensures your DVD player is connected to your television, I’m referring to an entirely interconnected network that pretty much allows you to wire your home to respond to your every whim. An article by Paul Best recently appeared on the Sydney Morning Herald website, entitled ‘Unlimited control of your life’, which considered the ways that average suburban homes around Australia are turning into ‘smart homes’. According to the article, processes of automation including controlling lighting, security, access to the house, communications and media distribution are usually what people first imagine when they think of technology in the home. Recent advances however, as explained by Michael Staindl of Smart Systems, means that these intelligent systems are integrated, and your property’s lighting, security, heating/cooling, entertainment and communications all work harmoniously. The article uses the example of a security system which lets your cleaners in at prescribed times each week, and sends you an SMS when they come and go. The article surmises that the advent of such technological innovation in homes has been driven by the iPhone and iPad. The apps available on these devices have given users a large amount of intuitive functionality and have started people thinking about what else is possible. The article leaves us with the message that smart homes are becoming increasingly standard, which gives home owners something to think about, even those who do not consider themselves to be all that technologically savvy. Incorporating technology into your home could be worth considering when renovating or building from scratch, as it seems to have the potential to not only make your life easier in the short term, but also could also add value to your property when it comes time to sell.
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It is not surprising that with the recent popularity of lifestyle and reality television cooking programs such as Master Chef, many Australians have been inspired to brush up on their culinary skills. It logically follows then that the gourmet centre of the home, the kitchen, has risen in significance as an important property feature, especially when it comes to selling. According to Archicentre, the building advisory service of the Australian Institute of Architects, thanks to Australians’ love of cooking and entertainment, the kitchen has become the show piece of the Australian dream home and is a major selling tool as well as a fashion statement. There is no doubt that a lot of money can be spent on creating a fantastic kitchen – on its design, fixtures and fittings, and appliances. When renovating a kitchen, it is therefore important for home owners to consider their purpose so as to ensure funds are spent wisely. Archicentre State Manager Queensland, Ian Agnew, notes the significant difference between redesigning a kitchen for your family’s purposes as opposed to when preparing for sale. “If you are renovating to sell the property it is often better to not over capitalise and leave the kitchen un-renovated allowing the new owner to renovate to their own style,” said Ian Agnew. According to Ian, Archicentre is seeing some of the following trends in kitchen design: • The use of drawers for the storage of crockery, cooking utensils and saucepans, as well as in the cupboard;
• Open-plan layouts;
• Clean, featureless appearances;
• Concealed appliances;
• Large island benches;
• Computer in the kitchen (used by approximately one in four renovators);
• Walk in pantries;
• The incorporation of natural light; and
• Ensuring the kitchen has a pleasant outlook through feature windows. Given that such large sums of money can be invested into renovating kitchens, it may be a worthwhile exercise to seek professional advice about how this capital can be best spent in achieving your kitchen goals. For information regarding any aspect of the sale of your home, including how a kitchen can be incorporated into your selling plans, please do not hesitate to drop into our office for a chat.
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Carrying out a pre-purchase property inspection is one of the most important tasks in the real estate buying process. These investigations have the potential to save you from needing to make significant further outlays by ensuring you are aware of major faults in properties of interest that could prove expensive to fix. It is therefore also important for buyers to be able to have complete confidence in the inspection company hired to investigate a property, which has become increasingly difficult in New South Wales since the Labor government ended regulatory oversight of inspectors in 2009. This is an issue that has recently been in the media, with an article in the Sun Herald (‘Calls for building inspectors to be licensed’ August 13, 2011) reporting that the new Liberal government has decided against the reintroduction of a licensing system, much to the chagrin of many real estate experts. Essentially without a regulated licensing system in place, there is an onus on buyers to ensure they employ a properly qualified and experienced professional to carry out pre-purchase inspections on properties of interest. When in doubt about who to hire, a good place to start can often be to ask your real estate agent to recommend a company they (or other clients) have previously worked with successfully. Buyers should also look for prior client references and adequate report pricing. As Howard Ryan, of H&K Ryan and Associates, who is quoted in the Sun Herald article, says – “If you’ve got a $2 million property over, say, three levels, you can’t do a proper inspection for $80”. For further advice about hiring a property inspector, or regarding any other aspect of the property buying/selling process, please don’t hesitate to call into our office for a chat.
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The great Australian dream of home ownership is constantly evolving. In previous posts on this blog we have explored the notions that both our houses and lot sizes are decreasing in size, with kitchens growing in importance and outdoor living becoming more prominent. We’ve also seen that many Australians are moving to downsize their property dreams with a large number choosing to purchase smaller dwellings such as apartments and townhouses to combat affordability issues. Despite these continuing changes, according to an article by Simon Johansen in The Age recently, ‘Australian homes still the world’s biggest’ (22 August), as the title suggests, dwellings in Australia remain the largest globally in terms of size. The article cites figures from the Australian Bureau of Statistics and other data compiled for Commonwealth Securities which show that the average new home built in Australia is around 10 per cent and nine per cent bigger than equivalent properties in the United States and New Zealand respectively, with the average floor size of a new freestanding house in Australia being approximately 243 square metres. The article notes that NSW has the biggest houses in the country, followed by the Northern Territory, Queensland and Victoria. I suppose these findings should not be altogether too surprising – it is no secret that as Australians we generally value our personal space, as well as having areas to congregate in both family and friendship groups. Having said this, the article notes that the increase in house sizes may have reached a peak, citing research from CommSec suggesting that various factors, such as an ageing population wishing to live in smaller properties and changing consumer behaviours, have contributed to Australian home sizes “going sideways” over the past five years. Population demographics will always be changing and this can have an impact on what buyers look for in homes. Ultimately in constructing a new property, owners will usually design in accordance with their own preferences. However it could definitely be a worthwhile exercise to keep general demographic trends in mind when building your new home. For real estate advice, including about what buyers are looking for when seeking out property purchase options, please don’t hesitate to talk to us at Richard O'Sullivan Real Estate on (02) 49281201
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I imagine the prospect of selling a home at the moment must be somewhat daunting. Never before have vendors had access to such vast amounts of information about market conditions, and while knowledge is definitely powerful, it can also be confusing. Add to this the continuing contradictory media speculation about the state of the market. Some weeks it looks as though interest rates are set to go up and there is an undersupply of properties, the next the commentators may be reporting that there are affordability and supply concerns. Buyers can definitely be excused for being perplexed! When hiring a real estate agent, vendors are essentially trusting the person that sells their home to provide them with the most accurate market information. This will enable them to make an educated decision about various aspects of the sale, including the price to accept, whether to take a property to auction, and how to best negotiate on price if the auction is not successful. In conditions where the market outlook is somewhat uncertain, good agents will be frank and honest with you as their client, both through the stages of securing your business and as your property is taken to the market. I have no doubt that when pitching for your business, less credible agents will give you positive information regarding price expectations and the like, that may not necessarily be reflective of the true state of affairs. However, it could very well be what you want to hear, and thus it is tempting to believe them. Good agents will refrain from over-exaggerating the positive state of the market to obtain your listing. While you may not like to hear it at the time, receiving an honest assessment about market conditions from the beginning should help to make your selling process a lot easier to handle. As a vendor you will also need to trust your agent to guide you through the price reduction process; that is, if your property has not yet sold, lowering its price to a level that meets buyers’ expectations. Believe me, this won’t be an easy conversation for your agent to have with you, however a good agent will approach you respectfully and should display an understanding of your situation. They know you don’t want to hear that your expected price may not be attainable, and will attempt to deliver the disappointing news in a truthful way. Working with an agent that you trust and whose professional opinion you believe, is incredibly important when selling a property. It is an agent’s job to educate you and prepare you to be able to make the best decision for your individual circumstances – try to appoint your business to an agent who is truthful and realistic with you from the outset of your sales process.
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Why is it so hard to value residential property and what can you do to get a realistic idea of what your property is worth? Ascertaining a property’s true value is a tricky business: it’s part science, part art, with a fair bit of guesswork thrown in for good measure!
This is largely because property is unlike other assets, such as shares, where any unit sold is identical to every other unit, explains John Lindeman, author of Mastering the Australian Housing Market.
“Estimating property values is difficult because no two house or units are the same,” he explains.
“Even two identical houses in the same street will have difference prices, and two adjoining units in the same block will sell for different amounts, because one has a better view than the other.”
Gaining an accurate estimate of your property’s value isn’t impossible, however. If you’re keen to figure out what your property is worth, Lindeman suggests the following:
Option 1: Look at comparable sales
“These are the recent sale prices of similar properties in the area,” Lindeman says. Make sure you compare apples with apples by seeking out the recent sale prices of homes with similar features, such as the same number of bedrooms and bathrooms. “While this is the best indicator to use, there are still significant problems if there have only been a handful of recent sales,” he adds.
Option 2: Real estate agent appraisals
Estate agents will generally provide potential vendors with a free market appraisal of what they believe the property will sell for in current market conditions. “This is not a valuation,” Lindeman cautions. “Keep in mind that the appraisal may be designed to win the listing.”
Option 3: Free property price reports
“There is a plethora of free property price estimate reports available online,” Lindeman says. “These usually provide basic demographic information and housing market history of the suburb or post code, and a list of recent sales in the area.” He suggests sticking with reputable sources such as RP Data, Australian Property Monitors and Residex.
Option 4: Licenced valuer
A professional valuation by a licenced, qualified valuer will give you the best indication of what your property is worth, but you’ll need to part out with a few hundred bucks. If you’re trying to decide whether to sell or refinance your property, this might be a worthwhile investment to help you make a fully informed decision. Also don’t forget that if the property is an investment, the cost of obtaining a valuation should be tax deductible
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Close to harbour and ferry
• 2 bath, 3 bdrm single story
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$550,000
- Large Family Home
Stockton, Newcastle
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Located in the heart of Stockton this property offers the potential to gain three separate rental incomes. Offering big rooms with open plan living upstairs while downstairs has a massive room overlooking the backyard. Towards the front of the property there is a double garage with second bathroom and laundry.
The property is currently rented to excellent tenants. Call to arrange an inspection.
Property information
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Immaculately finished
• 1 bath, 2 bdrm single story
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$650,000
- Harbour Views
Stockton, Newcastle
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LIVE WITH THE FORESHORE AT YOUR FEET
This immaculate home, which overlooks the ever changing Newcastle Harbour, has been tastefully renovated with quality fittings, with a conveniently placed living area looking out toward the water.
This home has been designed to take in the great vantage point and allow good natural light throughout the home. The private courtyard serves as a great retreat at the rear of this beautiful home.
The Chef's kitchen with adequate storage will be sure to excite the entertainer in you. The kitchen is conveniently located adjacent to the dining area and just off the entrance to the outdoor area.
Property information
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3 Separate incomes
• 2 bath, 5 bdrm single story
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$625,000
- Large Comm/Res Property
Stockton, Newcastle
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Located just 200 metres to Newcastle Harbour and Ferry service and in the centre of the commercial area with a corner site. The property offers two huge residences each with own entrances and private yards. One 3 bedroom and one 2 bedroom. Plus the property offers a prime office location. This property offers endless possibilities for the buyer with vision. Existing office tenant happy to rent back. Agent Interest. Take advantage of this rare opportunity.
Property information
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• 1 bath, 2 bdrm 2 story
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$429,000
- Charming and Convenient
Stockton, Newcastle
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This home is ideal for newly started or established families. The home is located within walking distance to Newcastle Harbour, Ferry, shops, Stockton Beach and sporting facilities. If considered for investment it is currently rented to great tenants and returning a good return.
Entering this home you have a large lounge room with a separate dining room leading into a renovated kitchen featuring a breakfast bar. Also offering two bedrooms, one up stairs one downstairs, bathroom and laundry.
The property has a very private front and back yards with the front offering off street parking via single garage. The yard has a paved area adjoining the shed to allow good BBQ and outdoor entertaining.
The property is located one street back from Newcastle Harbour. The location offers the potential to provide water views to the Harbour. You could be sitting back and relaxing on your own private balcony watching the ships go by.
Don't miss out on this property suitable for a good family lifestyle or rental return.
Property information
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180 Degree ocean views
• 505 sq. m., 1 bath, 2 bdrm single story
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$830,000
- Beachfront Property
Stockton, Newcastle
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Located on the Stockton Beach front. Offering spectacular views from Port Stephens to the north to Newcastle CBD/Fort Scratchley to the south.
The property has been renovated, offering a neat kitchen, modern bathroom, sunroom with amazing views and modern bathroom. there is a separate dining room & lounge room giving plenty of space for the family.
A large double garage has access from the very functional rear lane, thus leaving the level fenced yard clear.
The property is currently rented to great long term tenants.
This property provides potential plus with it great size block and location. The owners say it must be sold so call our office to arrange an inspection.
Property information
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Views to Newcastle Harbour
• 2 bath, 4 bdrm 2 story
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$550,000
- Convenient Location
Stockton, Newcastle
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Located close to Ferry and shop this property is positioned in a sought after area of Stockton. Offering great size rooms, open plan living, off street parking, very private yard, views to Newcastle Harbour from entertaining verandah off the main living area.
Large Open rooms
Great size living areas
Large Rumpus room downstairs
Good size yard
Property information
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Immaculate Condition
• 1 bath, 4 bdrm single story
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$310,000
- Lovely Home
Fern Bay, Newcastle
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This property is located within the grounds of Bayway Village. One of the best properties offered. Offering modern spacious living. The property is located on a corner block and is in immaculate condition with 4 bedrooms plus study, amazing kitchen, open plan living, modern bathroom. With lots of space including BBQ and entertaining area off the main living area.
Property information
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