propertybuyer Market Update, September 2011
By Rich Harvey, Managing Director propertybuyer
Welcome to your October propertybuyer market update.
In this edition we will look at;
- Market Sentiment Shifting in Spring
- Hot Deals
- Client Stories
- Rich Keynote Speaker at Melbourne Property Show
1. Market Sentiment Shifting in Spring
The warmer weather, talk of interest rate declines and the wobbly sharemarket are seeing the property slowly market emerge from its winter hibernation. It’s not time to say the market has turned a corner yet, but we are seeing some indicators that the mood of the market is changing.
The spring season is bringing a host of new listings to the market and we are seeing buyers come out in larger numbers to scour the market. We have had increased enquiry from expats and investors that are looking to enter the market before the end of the year. We’ve also had strong enquiry from many prestige buyers seeking to capitalise on the sluggish top end market. Similarly we are regularly approached by vendors seeking to sell their property privately to our clients (and save sales commission in the process). First home buyers also have a short window of opportunity to enter the market with NSW stamp duty concessions on established property due to expire at the end of the year.
Consumer sentiment data was released this week by Westpac and the Melbourne Institute which showed an 8.1% improvement in the consumer mindset over September. The lift in consumer spirits is welcome news and may mark a turning point for confidence levels amongst Australian’s, which, previous to the September reading, was at a 26 month low. There is a strong correlation between the trend in consumer confidence and transaction volumes across the housing market, so any improvement in the Index will be welcomed by the property sector. A sub-set of the Consumer Sentiment Index, the ‘Time to Buy a Dwelling Index’ showed a 14.3% improvement over the month as more Australian’s take comfort in the renewed level of interest rate stability.
While consumer sentiment saw an improvement in September, the August results for business confidence were released this week by the National Australia Bank which showed a further slump in business confidence and conditions. The index is now at a 28 month low for August, however we may see an improvement in the Index over September in line with the improved consumer sentiment data. The weakest sectors, according to the NAB survey were manufacturing and retail. The only state to show an improvement in business conditions was Western Australia.
Dwelling commencements data was out from the Australian Bureau of Statistics which showed national dwelling starts fell by 4.7% over the June quarter (detached homes down 2.1% and apartments down 7.1%) after recording a 3.3% improvement over the March quarter. Over the year, dwelling commencements were almost equivalent with the decade average of 156,294 starts.
Newly advertised properties added to the market have remained reasonably low; we are yet to see a dramatic uplift in listing volumes as the market heads into Spring. Compared with last year every capital city apart from Melbourne and Sydney have shown a fall in new listing volumes compared with the same time last year. New listings are up 7% in Sydney and 24% in Melbourne compared with last year. The total number of homes being advertised for sale has continued to increase. We are currently tracking 285,243 houses and units available for sale across Australia. 49% of the listings are within the capital cities. The total number of homes available for sale is now 34% higher than at the same time last year. Across the capital cities, the year on year change in total stock levels is lowest in Perth (up 14%) and Brisbane (up 16%) and highest in Melbourne (up 61%) and Hobart (up 39%).
Auction clearance rates have started to track upwards at the start of the spring season. 1,359 auctions were held last week, the highest number of auctions held since the last week of June earlier this year. The weighted average clearance rate across the capital cities was 49.4% which is right on the average for the year to date. The clearance rate across Melbourne’s 650 auctions was 52% and the Sydney market (446 auctions) saw 55% of auctions cleared over the week.
The other big news last week was that the ATO has issued a draft ruling that will permit Self Managed Super Funds (SMSF) the ability to renovate properties. The rules around “improvements” have been relaxed such that SMSF that invest in property may now (for example) add a new kitchen, a new garage, add a second story addition or a swimming pool provided the funds come from within the superfund. Previously the ATO had ruled that any improvements (as opposed to repairs) were not allowed. Now selected improvements will be allowed as long as it does not changed the fundamental nature of the asset.
This great news for property investors as it provides another avenue for building wealth via renovation strategies.
2. Client Stories
Here is a selection of feedback from some of our happy clients last month:
Buyer type: Investor
Buyer's brief: 2-3 bed unit in Sydney's Lower North Shore
Asking Price: Offers over $1.1m
Appraised Value: $1,125,000
Buyers' Agent Comment
Liz and Mark were looking for a second property for their self-managed super fund. They wanted a nice 2-3 bedder with 2 bathrooms and parking in a solid, blue-chip area of Sydney. I located and secured a lovely character apartment in a small block of 4, in Neutral Bay, just a couple of hundred meters to the ferry into the CBD. It was in excellent condition and would rent for around $1,000 per week. The highly motivated vendor had accepted a higher offer of just over $1.1m, but the purchaser was not in a position to act quickly, so we moved to secure it within the day at the lower price of $1.075m.
What our clients say
“We are thrilled with our second super fund property purchase in Aubin Street. So a big thank you for your commitment to securing this one for us. You certainly earned your fee on this one – negotiating a price we were comfortable with and dealing with the vagaries of the selling agent!” Liz and Mark
3. Hot Deals
We are sourcing some excellent property deals for our clients in the current “buyers market”. Many of these are off-market opportunities that will never be found on the internet or the local paper. Contact us on 1300 655 615 to find out more.
1. Positive cashflow properties
Would you like to own a positive cashflow property and achieve 10%+ yields and enjoy capital growth with the property located in Sydney?
We specialise in sourcing specific sites which allows for the construction of a 1 or 2 bedroom flat behind existing homes. We project manage a licensed builder and have negotiated a discounted volume rate for our clients starting from just $66,000. Call us today to find out more.
2. Mixed residential/ commercial deal
Incredible opportunity to purchase a mostly residential investment with positive cash flow. Ideal for home buyers looking for extra income, investors or SMSF investors.
Buyer type: Investor
Property Type: Renovated house with mixed commercial, 5 bed, 2 bath, 2 car home on 1100m2,
Asking Price: Offers over $1,550,000
Purchase price: Possible deal at $1,200,000 (Owners now motivated)
Appraised value: $1.6m (earlier bank valuation was $1.85m in Dec 2009)
Rental: House $1000pw ($50k pa), Commercial part: $1250pw ($65k pa) Total $117k pa. (10 year lease on commercial part with 5year option)
Yield: 9% on reduced price
3. High growth properties
Brand new 4 bed, 2 bath 2 car brick and tile homes for $390k to $420k in high growth areas. Rental returns between 5.0% to 7.0% with zero vacany rates.
Clients also enjoy the benefit of ZERO stamp duty on brand new properties.
(1) Brand new house and land packages starting from $520,000 and yielding $620pw rent. take advantage of the $10,000 QLD government Building Boost.
(2) Townhouse $385,000; Off-market 2 bed, 2 bath 1 car townhouse in the centre of town yielding 7% net!
Opportunity to capitalise on both high growth and high yield. One street back from the main street – Excellent location in a boutique complex of just 16 townhouses (with on-site manager). Views over district and water. Only 2 years old and fully furnished – excellent depreciation benefits (price includes all fittings and furniture).
Brand new golf course fronted 3 bed, 2 bath, 1 car townhouses $20,000 below bank valuation.
Bank valuation recently came in at $425,000 but likely market value is $450k. Rental appraisal at over $430pw+ and the internal finishes are of a high standard.
4. Melbourne Home Buyer & Investor Show - 7-9 October
If you would like free tickets to the Melbourne Home Buyer and Property Investor Show at the Melbourne Exhibition Centre then click on the link below and enter the promo code PROPERTYBUYER to claim your tickets. We have around 25 tickets to give away: http://www.homebuyershow.com.au/special-offers/propertybuyer-offer-2/
I will be a keynote speaker each of the three days at the Melbourne show. We’d love to see you there. Drop into our stall at Stand 28for the chance to win an Ipad2 (worth $750) or a free portfolio review (valued at up to $2000).
Location: Property Investor Stage
Date: Friday 7th, Saturday 8th & Sunday 9th August
Time: 4:00 to 4:30pm
Topic: “Property Investment - The keys to picking property winners”
Too many investors get emotionally involved in the decision to buy investment property, rather than looking at the facts and figures. Understand the top 20 criteria you need to successfully pick property winners and discover how to make the due diligence process simple.
There’s no secret to buying property, it’s about doing massive research, understanding the market, appraising values, negotiating well and applying well defined decision making. Learn the 10 key questions you need to ask to identify hot spots and avoid buying in the wrong areas. Discover the seven steps you need to take to develop a sound investment strategy.