December 2011 - Rich's Market Insights
By Rich Harvey, Managing Director propertybuyer
Welcome to your December propertybuyer market update.
In this edition we will look at;
- Rich's Market Insights
- Suburb Spotlight: Crows Nest
- Hot Properties
- Rich's Trip to Indonesia with Bridge of Hope
1. Rich's Market Insights
The first week of December saw another interest rate cut of 0.25% taking the RBA cash rate to 4.25%. This will take a few months to filter though the economy but is not enough to see dramatic turnaround in demand. The two cuts in November and December will help restore some consumer confidence to a languishing property market. More cuts are needed to really build momentum in the market. Buyers are still being very cautious and scouring the market for potential bargains.
The rate cut that has now been passed on in full by the major banks will be a welcome incentive to buyers and sellers that have been sitting on the sidelines. While we might see some increase in number of transactions it is not likely to lead to a massive increase in prices yet. Home owners and investors have been paying down debt and this latest rate cut will help improve affordability..
Continued uncertainty in financial markets in Europe, restrained consumer behaviour and lower inflation may also lead to a further rate cut in February. Many borrowers have been re-financing their current loans as the competition between the banks has intensified. The latest figures from the ABS show there was a 17% increase in refinancing activity compared to the same time last year.
A few government subsidies will be removed next year with the stamp duty exemption for first home buyers in NSW to be abolished from 1 January 2012 and the $10,000 Queensland building bonus being removed from 31 January 2012. Stamp duty concessions for brand new property will still apply in NSW up to a value of $600k until July 2012.
December is still a great time to buy a property and potentially bag a bargain. There are still many listings on the market and vendors that are seeking closure before Christmas are more motivated to sell now. We have purchased many properties for our clients at this time of year as there is an incentive to get things finalised before the years end. It doesn’t mean, however, that you can take any short cuts with your due diligence – you still have to ensure you’ve done your research and comparable sales analysis.
Some reflections on the past year…..
- Cyclone Yassi and the Brisbane floods devastated parts of Queensland which stalled the market in this region and sent banana prices sky high,
- Harry Dent dropped in to spruik his doomsday predictions,
- The Aussie dollar went well over parity and dampened demand from expats and foreign investors
- The prestige market took a massive hit and significant price reductions abounded
- The bottom end of the market performed strongly with unit prices generally rising in most areas
- The middle part of market was resilient and showing room for growth
- Significant increase in interest in buying property via Self Managed Super Funds (SMSF) and ATO relaxed rules for doing renovations to property in SMSF
Andrew Wilson, Senior Economist from Australian Property Monitors (APM) has pointed out in a recent report that rising demand from aspirational buyers, low unemployment and rate cuts will see the national housing market recover in 2012. All capital cities have recorded house price falls during 2011. The table below summarises the current situation. According to APM Sydney, Perth, Brisbane and Darwin are predicted to have the strongest growth rates going forward from 2012.
Over the next 3 to 6 months as the impact of rate cuts take effect I predict we will see a pick up on both sales volumes and also prices.
In my January market update I will be bringing you my outlook for property prices in 2012 and what I believe will be the fundamental drivers of the market, along with my tips for what and where to buy. We will also be announcing some exciting new research tools that will revolutionise the way that investors can easily pinpoint hotspots and introducing some exciting new services to help investors buy properties at wholesale prices.
2. Suburb Spotlight: Crows Nest
Where is Crows Nest located?
Located 5km north of the Sydney CBD and well served by fast buses and by rail from St Leonards, Crows Nest is an undervalued suburb in comparison to its close neighbours. Travel north to the shopping hub of Chatswood, a 10 minute train into the city shops or a 5 minute drive to the harbour foreshore. Crows Nest is primarily occupied by professionals couples, executives but also young families. This diversity is reflected today in the blend of housing from modest apartments, semis, townhouses to large traditional homes.
What housing types are predominant?
Crows nest is predominantly made up of apartments, townhouses and terrace houses.
Demand to Supply Ratio in Crows Nest?
The demand to supply ratio (DSR) in Crows Nest is also excellent for both houses (27/ 48) and units 32/ 48) and the vacancy rate is almost negligible at 1.5%.
What attracts home buyers and investors to Crows Nest?
Crows Nest is an affluent residential and commercial suburb. At the core of Crows Nest is a blend of modernised retail developments from the 1920’s along the Pacific Highway and Willoughby Road, sitting side by side with modern office buildings. The residential buildings are a blend of older semi-detached houses and bungalows together with modern apartments and townhouses from the 1960’s through to now. And the shopping is excellent and diverse – from superb furnishings, homewares, fashion, gourmet food, bookshops, supermarkets and all the services.
Restaurants & Cafes
Willoughby Road is one of Sydney’s best known “eat streets”, with a little rousing support from the Pacific Highway restaurants. Start with coffee and a light snack at any of the side walk cafes, do your luxury food shopping at the Five Star gourmet, and then hit some of the brilliant Chinese restaurants for yum cha through to a banquet. At last count there were 175 different restaurants and cafes within a 1km radius.
Schools, Education & Institutions
Within walking distance or a short drive you’ll find some of Sydney’s finest schools including the well know North Sydney High and nearby private schools include Loreto and Monte Saint Angelo, Shore and SCEGGS.
Sports & Fitness
It’s a pleasant downhill jog to the gyms of North Sydney or to the Olympic Pool, or just take brisk walk around the numerous parks, and then head back for coffee and a vigorous browse around the shops.
What can my money buy in Crows Nest?
With a median house price of $1.187m it is still possible to purchase a semi or terrace below this level. Apartments have a strong rental demand due to the proximity to the city by bus or rail, two major hospitals, being the Mater and Royal North Shore. The median unit price is $547,000 and with good buying you can expect rental yields around 5%.
3. Hot Properties
Over the past month we have bought some great properties for our clients. It never ceases to amaze me that the more you research the market, the more opportunities you find. Below is a brief selection of some of the transactions my team has performed over the last month…
- Luxury home on Sydney’s Upper North Shore 5 bed for $2.3m
- A beautifully appointed brand new 4 bed terrace home in Sydney’s Inner West (Enmore) for $1.2m (previously listed at offers over $1.47m)
- Nicely positioned 2 bedroom terrace home in Newtown for $710k
- Solid investment opportunity for 1 bedroom unit in Marrickville for $310k purchase just prior to auction,
- Positive cashflow properties in thriving central Queensland areas – purchase price $445k, rent $950pw giving a sensational yield of 11.1% (note we have just a few more available),
- Positive cashflow properties in Sydney’s Western suburbs with granny flats – total purchase price (including rear flat) around $300-$320k and renting for $520+pw delivering yields in the 9% to 10% range.
- Solid capital growth properties in South West Sydney for $485k and renting for $620pw (6.5% yield).
- Development site (off market) for $2.1m for small to medium size developer.
We will be gaining exclusive access to a limited number of house and land packages in Gladstone. These will comprise 4 bed, 2 bath 2 car homes around the mid $500k mark (depending on design chosen) and will return an amazing $1000 to $1200 per week giving a yield of over 10%. Stay tuned for more details or register your interest today.
4. Rich's Trip to Indonesia with Bridge of Hope
At the end of November I travelled to Manado (North Sulawesi, East Indonesia) for 10 days with a group of people to support a Christian micro enterprise development organisation called Bridge of Hope.
Bridge of Hope provides small loans of between $100 to $200 to assist family businesses in growing their business and escape the poverty cycle. It was so hot and humid there you feel like you were operating at half speed. We presented some leadership training to the staff on time management, communication and effective listening skills and also ran a staff retreat which they thoroughly enjoyed.
We visited some of the villages where the family businesses reside. I was struck by how simple their lifestyle is, yet they have such a positive outlook on life. They are mostly simple food based and product based businesses with little diversification. Yet the small loan makes such a difference – they are able to triple or quadruple their production and therefore make more profit to expand their business capital. This in turn enables them to be more self reliant and provide more for their extended families.
One of the highlights of the trip was visiting an Orphanage near Lokon (an active volcano area). In the photo I’m the one in the red shirt at the back of the crowd. The orphanage is run by a delightful couple that look after 132 kids aged from 4 to 16. Many had tragic stories, but we had a ball with them playing games, singing and hanging out together. Some of them asked me if they could call me “Daddy.”
Another sad but insightful point of the trip was visiting the local rubbish dump at Somompo. We spent time with some of the kids that pick over the dump for recycled material. Bridge of Hope have built an small education centre to help educate some of the kids there that would otherwise not get to school because their parents insist they work the dump.
My wife and two boys really enjoyed the trip and it gave them a new perspective on just how privileged we are to live in Australia. On the funny side- my youngest son Sam was very popular as he was often mistaken for Justin Beiber as he had a similar hair cut and looks!