propertybuyer Market Update, April 2011
By Rich Harvey, Managing Director propertybuyer
Welcome to your April propertybuyer market update.
In this edition we will look at;
- Rich Market Wrap
- Rental Growth Outpaces Capital Growth
- Client Stories
- Creating a Cashflow Positive Property - Seminar 4th May
1. Rich Market Wrap
Confidence in the property market has been somewhat dented by negative economic news, wobbles in the global economy and natural disasters including the Japanese earthquake, the Brisbane floods, cyclone Yassi and the broader QLD, NSW and Vic floods which have damaged many regional towns. The floods are expected to shave around 0.5% to 1% off GDP economic growth this year growth. I expect the general flat-line market conditions to turn later in the year as confidence resurfaces.
During times of uncertainty people often sit on their hands and tend to save (or turn to thrift) rather than invest. But if you are a savvy investor, you would also be looking take advantage of changing market conditions and seek opportunities for buying properties with strong capital growth and positive cashflow potential.
My team of buyers’ agents are currently observing property values in some suburbs dipping a little while in other suburbs they are rising – it all comes back to supply and demand for individual areas and looking at the growth drivers in those areas. We are now using another tool in our search criteria called a DSR (Demand Supply Ratio) which provides a score out of 42 to indicate the potential for strong capital growth and rental yield.
Despite the many mixed messages coming through the media, I expect rents will rise significantly for the remainder of this year. Lack of housing approvals and strong employment coupled with the long term trend for workers to cut down on their commute will see rent rises nudging 7% to 8%pa this year.
BIS Shrapnel are also forecasting that property market will improve in the second half of the year. Building approvals have been at very low levels for quite some time and we are still not building enough dwellings nationwide to cater for overall demand.
While the first 4 months of 2011 has seen a relatively larger number of buyers relative to sellers in most markets, these types of conditions do not last forever and are quite short-lived. Trying to pick the exact moment for the bottom of the market is virtually impossible. It is better to be getting into the market at or near the bottom (while there is uncertainty) than getting in at the top of the market.
You need to be selective in what you buy – don’t follow the herd and get caught up in an emotional purchase. Talk to our multi-award winning team today and get a professional buyers agent on your side identifying the specific suburbs that will outperform the average and sourcing the right property at the right price for your long term financial security.
2. Rental Growth Outpaces Capital Growth in Recent Times
Over the last five years the debate about the affordability of purchasing a home has intensified. What is often missed is the fact that over this time capital city rental rates have increased at a greater average annual rate than capital city property values.
Over the five years to February 2011 capital city rental rates have risen at a faster average annual rate than capital city property values. Both rents and values have climbed much faster than inflation indicating that housing has become more expensive over the past five years, regardless of whether you choose to own or rent.
Over the last five years capital city house values have increased at an average annual rate of 6.2% and unit values at 6.7%. In comparison, rental rates have increased on average by 6.8% for houses and unit rents by 7.5% per annum. The result indicates that growth in house values and rents has been of a similar level however, rental growth for units has well and truly outpaced capital growth.
Over a similar period, December 2005 to December 2010, average end of year inflation has been recorded at 2.9%. The result indicates that housing costs have been increasing at a much faster pace than inflation.
Across the capital cities, capital growth performances have varied significantly during the last five years. Darwin has been the standout performer with property values pretty much consistently increasing until recent months. Over the past five years Darwin house values have increased at an average annual rate of 10.3% and unit values increased by 11.5% per annum. On the other hand, Sydney has been a laggard with house values increasing by 4.1% on average annually and unit values increasing by an average of 5.0% per annum.
As already mentioned, capital city rental growth has been stronger than capital growth over the past five years. Darwin was the best performing city for capital growth and has also recorded the strongest rental growth however, rental prices have failed to keep pace with capital gains. Over the last five years, house and unit rents have both increased at an average annual rate of 10.0%.
The cities and product types which have enjoyed the strongest capital growth have also tended to receive the greatest increases in rental rates. This is indicative of strong demand for housing in these regions over recent years with owners and renters preparing to pay a premium to secure accommodation.
On an annual average basis, rental growth over the past five years has been stronger in Sydney and Perth for both houses and units than the growth in property values. In all other cities average annual growth in property values has been stronger however, in most the differential is quite minor.
RP Data has stated for some time now that we expect that rental growth will accelerate during 2011 as property value growth continues to transition out of the market. As the first graph shows, rental growth has typically been strongest during the past five years during times when property value growth was limited.
Investors and first home buyers are largely remaining out of the market, housing affordability is stretched due to recent value growth, and above average interest rates and construction are likely to be quite weak during 2011. With this in mind, we anticipate that this will lead to increasing upwards pressure on rents through at least 2011. Also rental growth has been sluggish for quite some time and we expect there to be improvements due to owners requiring a superior rental return to that which they are currently receiving.
Article contributed by RP Data Limited
Here’s a sample of what our current clients are saying about their experience with propertybuyer:
“As soon as David was assigned to our case, our experience was very good. He didn't pressure us and his calm and confident demeanour put us at ease re our purchase and gave us confidence in his negotiation. He did very well to 'mentor' the selling agent into advising his client re our position, and got us in front of the other parties and kept us there. We were thrilled to have him work for us and think any other clients will be delighted with his service.”
Simon and Sarah
“I engaged propertybuyer as my Buyers' Agent to bid on a property auctioned whilst I was overseas and out of contact. Complete integrity and confidentiality was maintained throughout the process by propertybuyer and Anna Rorke. My adult son attended the auction and is convinced it was Anna’s expert bidding that unnerved rival bidders and secured the property for me well within my budget.”
4. Seminar - Creating a Positive Cashflow Property Portfolio
Have you ever wondered how some property investors manage to buy multiple properties and create a large portfolio?
How many properties do I need to retire?
Or is it more about the value of properties?
What is the right balance between cashflow positive and growth properties?
How do I secure finance for so many loans and how can I afford it?
How do I protect the equity I have created in my properties?
What size finance buffer is adequate?
Should I diversify across different states to reduce land tax?
Which property types provide the best overall return?
What structure should I use to minimise tax?
Real life portfolio building examples
If you have ever asked any of these questions then this seminar is for you! We will cover these meaty topics and more on the night. Bring your notepad, pen, calculator and an open mind to learn.
Date: Wednesday 4th May 2011
Time: 7pm-9pm (6.30pm for registration, drinks, nibbles and networking))
Venue: Castle Hill RSL, 77 Castle Street, Castle Hill.
Investment: Early bird discount $29 Single ticket, Double $39 (book before Friday 29th April)
(Standard ticket price: Single $39 and Double $49)
Book now at this link: http://www.stickytickets.com.au/5352
FREE ebook - As a thank you for coming to our next seminar all attendees will receive a complimentary ebook "How to Find Property Hot Spots - a powerful desktop research guide" by Jeremy Shepherd.