Archive for Frequently Asked Question

What economists predict for Australian house prices in 2019

In the middle of last year, several top economists were predicting house prices to in fact increase in 2018 – one forecasting as much as nine per cent, but since then house prices have experienced their largest and longest peak to trough decline in recent history spurred on by increased housing affordability constraints, a banking royal commission with a microscope on lending standards, and APRA’s restrictions on new investor loans.

Now that the price falls are well and truly in motion, all five economists recently surveyed by The Australian Financial Review forecast national house values would continue to drop in 2019, with Sydney, the epicentre of the downturn, dragging down the national average.

Stephen Koukoulas, of Market Economics, was most downbeat about the state of the property market, with expectations prices would fall in Sydney between 7.5 per cent and 10 per cent in 2019 after a drop of 7.5 per cent in 2018.

Nationally, he predicted house prices would fall by between five per cent and 7.5 per cent.

“From the 3rd quarter in 2019, I am forecasting some stability in prices as supply and demand forces underpin new activity,” Mr Koukoulas said.

By then he expected cashed-up first-home buyers would be lining up to take advantage of increased levels of affordability.

A key consideration for Geordan Murray, HIA acting principal economist, is that while population growth is slowing, it remains strong and will ensure ongoing demand for housing throughout the cycle.

“The labour market has been improving and is projected to continue to do so. This should contribute to further modest improvements in wage growth,” Mr Murray said.

“There are risks around borrowing costs.”

A key issue mentioned by the economists was that at some point in 2019 is whether the RBA may be forced to consider another interest rate cut if the slump in home prices starts to impact consumer spending and the outlook for inflation.

While each economist offered a variation on how much prices would fall in 2019, each attributed the tightening of credit, rising mortgage rates, and a surge in new supply to the further softening of the market.

To see each economist’s predictions, read the full article on the Australian Financial Review. Please note you will need to be an AFR subscriber to read the full article.

New Foreigner Owner Duty Surcharge a disappointing blow for WA property market.

REIWA is disappointed the members of WA Parliament have ignored the concerns of the property industry by voting to pass the Foreign Owner Duty Surcharge tax.
REIWA President Damian Collins said the new tax would likely have significant consequences for the WA property market, which was just starting to show signs of a recovery.

“The WA property market has endured a challenging few years. We are just starting to see the green shoots of a recovery on the horizon. A new tax will only serve to further dampen our already weak market and deter much needed foreign investment from the state.

“WA has the lowest level of foreign investment of any state, second only to the Northern Territory. This ill-timed tax will place an additional barrier for people wanting to move to WA and set up a home.

“Although foreign buyers only make up a small proportion of the WA market, it’s a proportion we can’t afford to lose. Especially at a time when the market is showing signs of stabilising,” Mr Collins said.

Foreign buyers of residential properties in Western Australia will pay a seven per cent surcharge from 1 January 2019.

This month the RBA announced that it would leave the official cash rate at 1.5%*

How Much Can I Borrow?

Before you can set a realistic budget for buying your dream home, you’ll first need to find out how much you can borrow.

Your borrowing power depends on your income, assets and current living expenses, as well as the size of your deposit and credit history.

Here are three things to consider in order to potentially improve your borrowing power.

1. How much can you save for a home loan?

Living expenses have a way of eating into your cash flow, so keep a record of what you’re spending. You might be surprised to see where your money is going – and how much you can save.

Cutting back on large and unnecessary expenses might help boost your borrowing capacity, but you don’t have to be too strict with your budget – make sure there is a little wiggle room for things like holidays or brunches with friends.

2. How much deposit do you need for a home loan?

As a general rule, the more money you can put down upfront the better. Sometimes this isn’t an option, therefore a Low Deposit Loan might suit you – often referred to as a No deposit home loan- although this shouldn’t be your first preference.

Not only does a bigger deposit mean you won’t have to borrow as much, it may also help you avoid paying LMI ( Lenders Mortgage Insurance) protects the lender if you default on your repayments.

You are typically required to pay LMI if you need to borrow over 80% of the purchase price, but even a 20% deposit may not cover stamp duty and other fees and charges associated with buying a property.

If you need to add these costs onto your home loan, you may end up over the 80% threshold and liable for LMI, so aim to save at least 25% of the purchase price to create a bit of a buffer.

3. How is your credit rating?

Potential home loans lenders will access your credit history to see if you can afford the loan you are applying for, and whether or not you are likely to repay it.

Having a bad credit history may reduce your borrowing power and can potentially increase your interest rate, so make sure you review your credit history every 12 months to correct any mistakes.

It’s also a good idea to try to avoid extending the limit on a credit card or taking out a loan for a new car in the months before applying for a home loan, as the number of times lenders request your report can impact your credit score.

Understanding your financial position is the first step to boosting your borrowing power. Budgeting carefully, setting a savings goal and building a strong credit history can all help take the stress out of applying for a home loan.

 

 

 

Perth rental market improves in August

The Perth rental market continues to show promising signs of improvement, with the vacancy rate falling to 4.5 per cent in August – the lowest it’s been since April 2015.
REIWA President Hayden Groves said the Perth rental market had shown encouraging signs across all key indicators.

“What we are seeing is a steady yet healthy improvement in tenant activity,” Mr Groves said.

“Steady rents, easing supply as listings for rent continue to fall and stronger demand with more leasing activity all point to the rental market leading Perth’s property market recovery.”

Leasing activity was up 17 per cent in August, with 4,805 dwellings leased during the month.

Mr Groves said reiwa.com data had revealed the suburbs of Leederville, Glendalough and Secret Harbour experienced the most significant growth in leasing activity during August.

“Leederville had more than double the amount of properties leased from July to August, with the volumes increasing by an impressive 183 per cent,” Mr Groves said.

“Typically, as we move into these warmer spring months, the property market should see an overall uplift in activity, and historically the sales market follows the rental market during a recovery.”

Perth’s median rent continues to hold for the 17th month straight at $350 per week, with no changes recorded since April 2017.

Mr Groves said it was pleasing to see stability return to the rental market, giving both tenants and property investors’ greater certainty and confidence in the leasing sector.

Back stronger than before: The 12 Perth suburbs now recording strong price growth after experiencing declines last year

North Fremantle, Bicton and Nedlands are among the 12 Perth suburbs to have experienced house price growth this year after suffering declines last year.

REIWA President Hayden Groves said 12 suburbs across the metro area had defied the declining trends experienced in the 12 months to June 2017, to record strong house price growth in the 12 months to June 2018.

“It’s really pleasing house prices in these suburbs have recovered so well in just 12 months. All of the suburbs on the list have higher median house price values now than they did in 2016 just prior to the decline, which is positive news for sellers in these areas.

“North Fremantle had the strongest rebound in price, with its median increasing 28.1 per cent to $1.23 million in 2018, after declining 0.8 per cent to $960,000 in 2017.

“Bicton came in second, with a 17.6 per cent median house price increase this year after declining 6.5 per cent last year, while Nedlands, Kallaroo and West Leederville saw house prices lift by 15.5 per cent, 14.6 per cent and 13.4 per cent respectively in the 12 months to June 2018,” Mr Groves said.

Helena Valley, City Beach, Claremont, Mosman Park, Winthrop, White Gum Valley and Leeming rounded out the 12.

reiwa.com analysis shows all suburbs on the list had a median house price above the Perth Metro median of $515,000 and seven of those suburbs had median house prices above $1 million.

“Perth’s aspirational suburbs are really leading the way in the property market’s recovery. Last quarter there were more houses sales recorded in the $800,000 and above price range, which is a trend that also occurred during the December 2017 quarter. In addition, recent reiwa.com data also shows 11 per cent of houses sales in Perth now sell above $1 million, which is the highest proportion of million dollar sales Perth has seen,” Mr Groves said.

“Another interesting observation is that nine of the 12 suburbs had faster average selling days than the Perth Metro region average of 66 days, with Nedlands (28 days), Claremont (40 days) and West Leederville (47 days) the standouts.

“There is genuine competition amongst buyers in the luxury end of the Perth market, forcing buyers to act fast in these areas and pay a premium to secure the property. Home owners in these suburbs who are thinking of selling would be wise to take advantage of these favourable market conditions.”

     Suburb Median price (June 2017) Annual change vs June 2016 Median price (June 2018) Annual change vs June 2017
1. North Fremantle $960,000 ↓ 0.8% $1.23 million ↑ 28.1%
2. Bicton $892,500 ↓ 6.5% $1.05 million ↑ 17.6%
3. Nedlands $1.45 million ↓ 3.7% $1.675 million ↑ 15.5%
4. Kallaroo $700,000 ↓ 9.4% $802,500 ↑ 14.6%
5. West Leederville $1.1 million ↓ 1.6% $1.247 million ↑ 13.4%
6. Helena Valley $530,000 ↓ 9.6% $600,000 ↑ 13.2%
7. City Beach $1.627 million ↓ 4.9% $1.835 million ↑ 12.8%
8. Claremont $1.3 million ↓ 3.7% $1.455 million ↑ 11.9%
9. Mosman Park $1.285 million ↓ 1.2% $1.38 million ↑ 7.4%
10. Winthrop $840,000 ↓ 1.2% $899,000 ↑ 7.0%
11. White Gum Valley $682,500 ↓ 3.2% $730,000 ↑ 7.0%
12. Leeming $660,000 ↓ 5.7% $705,000 ↑ 6.8%
Perth Metro  $520,000  ↓ 2.8%  $515,000  ↓ 1.0% 

Median house price data is for the 12 months to June 2018 versus the 12 months to June 2017.
Filtered for suburbs with more than 28 sales.

Over 10 per cent of house sales in Perth now sell above $1 million

Sales above $1 million now account for 11 per cent of all house sales in the Perth Metro region.

REIWA President Hayden Groves said there had been a steady increase in the proportion of sales above $1 million in Perth since 2012.

“It’s interesting that the proportion of sales occurring above $1 million has increased during a time when the Perth property market and the WA economy have experienced a difficult few years.

“In the year to June 2012, only seven per cent of house sales in the Perth Metro region were above $1 million, six years later this figure has grown to 11 per cent – the highest it’s ever been,” Mr Groves said.

The five suburbs to record the most house sales above $1 million dollars in the year to June 2018 were Nedlands (95 sales), Cottesloe (93 sales), Floreat (89 sales), Claremont (77 sales) and Mosman Park (75 sales).

“Buyers clearly recognise there is excellent opportunity in these aspirational suburbs to purchase high quality family homes at prices we are not likely to see again as the market recovers,” Mr Groves said.

Data also shows the number of Perth suburbs with a median house price equal to or above $1 million has increased.

“There are 37 suburbs across the metro area with a median house price at or exceeding $1 million, a notable increase on the 31 suburbs recorded at the same time last year,” Mr Groves said.

“Demand in these suburbs has clearly strengthened. reiwa.com analysis shows 25 of those 37 suburbs are selling faster than the overall Perth Metro region figure, which indicates buyers need to act quickly in these areas to ensure they don’t miss out.”

Mixed results for Perth rental market in June quarter

Perth’s rental market produced mixed results in the June 2018 quarter, with stable dwelling rents, subdued leasing activity, declining listings and faster leasing times.
REIWA President Hayden Groves said the June quarter’s mixed results were not unusual given Perth’s rental market was in a transitional phase.

“Although the worst of the downturn appears to be behind us, it’s not uncommon to see results fluctuate as the market transitions into a recovery.

“The change in seasons has also contributed to this quarter’s results, with the cooler weather impacting activity levels. We tend to see activity slow during the winter months before picking up again in spring,” Mr Groves said.

Median rent prices

Perth’s overall median rent price remained stable in the June quarter, holding at $350 per week for a fifth consecutive quarter.

“Rent prices have been stable since the June 2017 quarter, which is pleasing. After experiencing prolonged periods of freefalling rent prices, the stability we’ve observed over the last 12 months is a welcome change and should provide landlords with confidence,” Mr Groves said.

Although Perth’s overall rent was stable, reiwa.com analysis shows 102 suburbs across the metro area did experience median rent price growth.

“The five best performing suburbs for rent price growth in the June quarter were Attadale (up 75.8 per cent to $580 per week), Jolimont (up 50.9 per cent to $423 per week), Burswood (up 33.3 per cent to $480 per week), Booragoon (up 28.4 per cent to $475 per week) and Hamersley (up 28.4 per cent to $430 per week),” Mr Groves said.

“Other top performing suburbs were Karawara, North Fremantle, Mount Nasura, Mount Claremont and Hillarys.”

Leasing activity

There were 12,633 properties leased during the June 2018 quarter.

Mr Groves said leasing activity had declined 10.4 per cent over the June quarter and was down 4.1 per cent compared to the June 2017 quarter.

“The latest population figures for WA shows migration into the state has declined by five per cent, which has likely influenced leasing activity levels in Perth. The rental market feels the impact of changes in population first, with new migrants to the state relying on rental accommodation to set themselves up.

“Tenants are also not moving as much as they were when prices were declining and there were good deals to be had. After 12 months of stable rent prices, lower activity levels suggest tenants are feeling confident rental prices have found a floor and therefore more inclined to stay put,” Mr Groves said.

Despite the overall reduction in leasing activity, reiwa.com data shows there were 71 suburbs across the metro area which saw leasing activity improve.

“The five suburbs which saw the biggest improvement in activity were Brookdale (up 88.9 per cent), Ocean Reef (up 75 per cent), Kallaroo (up 63.6 per cent), Parmelia (up 48.3 per cent) and Hamersley (up 46.2 per cent).”

Rental listings

There were 8,293 properties for rent in Perth at the end of the June 2018 quarter.

Mr Groves said this figure was 2.5 per cent lower than the March 2018 quarter figure and 22.9 per cent lower than the June 2017 quarter.

“Rental listings in the metro area have declined significantly over the last 12 months, with far fewer properties available for rent this year compared to last.

“A key driver for this improvement is the slowdown of new dwelling commencements. With less new properties coming onto the market, existing rental stock is being soaked up faster, putting downward pressure on listing volumes,” Mr Groves said.

Average leasing time

It took 46 days on average to find a tenant in the June quarter, which is two days faster than the March quarter.

“It is also six days faster to lease a property than it was during last year’s June quarter, which is a notable improvement,” Mr Groves said.

“Although leasing activity softened during the June quarter, activity levels remain above long term averages. This, combined with rapidly decreasing listings means tenants are needing to act fa

House sales down in June, but 31 Perth suburbs buck trend

reiwa.com data shows Perth house sales were down in June, but 31 suburbs across the metro area defied this trend to record more sales in June than they did in May.

REIWA President Hayden Groves said a further eight suburbs also saw sales volumes stabilise over the month.

“While house sales activity in Perth decreased in June this is not unexpected with the onset of winter, but our analysis also shows a substantial number of suburbs saw sales volumes improve during the month.

“Duncraig, Mosman Park, Waikiki, Dayton and Palmyra were the five best performing suburbs, with each recording significant improvements in the number of houses sold between May and June.

“Other suburbs to perform well were Butler, Kelmscott, Tapping, Baldivis and Joondalup, which rounded out the top 10 in terms of sales volume,” Mr Groves said.

reiwa.com data shows eight of the 10 best performing suburbs in June had median house prices below $550,000, which were traditionally areas with a lot of first home buyer activity.

“Mosman Park was the only million dollar suburb to make the top 10 in June, with sales volumes in the suburb lifting back to normal levels in June after declining in May,” Mr Groves said.

“Perth continues to present good opportunities for buyers, especially in the more affordable end of the market.

“The latest reiwa.com data suggests suburbs in the $550,000 and below price bracket are seeing healthy activity levels, with first home buyers taking advantage of the conditions to secure their first property before prices inevitably rise again.

“In terms of the overall market, REIWA expects house sales activity to remain moderate in Perth throughout winter, with improvements expected during spring.”
info@reiwa.com.au

Seven common mistakes investors makeI

uWhen it comes to winning big in real estate, many turn to property investment. But achieving success takes time and patience, with only a handful making it past their first investment.
To ensure you don’t fall into the property trap talk to an expert and do research.

1. Don’t buy in an overheated market

Momentum Wealth Research Advisor Shaun Strickland said many investors see reports of unprecedented growth in one area and assume this must be the next ‘boom’ suburb.

“If you are reading about a boom in the media, chances are it is already too late to be buying in the suburb. Instead, investors need to be identifying areas that are likely to outperform in the long-term, which is where the advice of a professional buyer’s agent could prove invaluable,” Mr Strickland said.

2. Not doing enough homework

The property market is always changing, and you will never know EVERYTHING there is to know about real estate. But, doing your homework nonetheless is essential and studying the suburb you wish to buy in will make it worth your while.

Mr Strickland believes research is the cornerstone to a successful property investment.

“Identifying high-performing properties requires analysis of demand and supply, knowledge of the local demographic, consistent market monitoring and awareness of other key growth factors,” he said.

“Once investors have narrowed their search to a specific suburb, they will then need to assess the potential of individual streets and properties.”

Another common mistake investors make is that they tend to only research properties within five kilometres of their current location.

Mr Strickland also said “whilst it’s a natural reaction for investors to look in areas they are most familiar with, this could result in them missing out on key investment opportunities elsewhere.”

3. No backup cash

According to Momentum Wealth Finance Team Leader Caylum Merrick, many investors fall into the trap of not saving up a sufficient cash buffer once they’ve actually acquired a property, which could leave them in a disadvantaged position should unexpected scenarios arise such as property repairs, rises in interest rates or tenants leaving a property.

Mr Merrick advises investors to set aside a cash buffer to cover unexpected costs for each property in their portfolio.

“We also advise investors to work with an experienced property manager to understand any of the potential costs that could occur for their particular property,” he said.

Find a property manager

4. Cross-collateralisation

This is when more than one property is used as security for a loan or multiple loans.

“Cross-collateralisation can significantly reduce an investor’s ability to borrow in the future, so it is especially important to seek the help of a mortgage specialist who fully understands their financial needs and long-term investment goals.

“Choosing the right loan strategy from the start can significantly maximise an investor’s borrowing capacity and give them more flexibility moving forward,” Mr Merrick said.

5. No plan, no gain

All property investors have one goal – to build a lucrative property portfolio. However getting there without a plan or goal will backfire. As the old saying goes, if you fail to plan you plan to fail.

You need to have an end vision of where you want to end up and then follow a strategic plan to get there.

6. Thinking with your heart not your head

With the Perth property market starting to show signs of recovery and stabilisation, interest will grow from property investors, meaning buyers need to act fast to secure their ideal property.

An investment should be look at as a business decision. Making an ’emotional purchase’ is to be avoided at all costs. A decision driven by your heart can lead you to over-capitalise rather than prioritise the best outcome for your investment goals.

Base your decision on facts, statistics and research.

7. Choosing to self-manage

Seeking the advice of a professional can help you avoid making simple mistakes, and they can also play a vital role in helping investors identify opportunities to maximise rental returns.

“Property investment experts can assist investors in identifying properties with the highest growth prospects that a single investor may not be able to discover or analyse on his or her own,” Mr Strickland said.

It can be very daunting trying to handle all aspects of property investment on your own, especially if you have a portfolio of more than one or two properties.

Momentum Wealth Asset Management Advisor Clare Christiansen said property managers play an important role not only in the day-to-day running of properties, but also in supporting an investor’s overall investment strategy and protecting their long-term wealth.

“Property investment doesn’t stop at the acquisition of a property,” she said.

“Savvy investors will also realise that smart asset management is key to their long-term wealth strategy.”

Read more about why property managers are vital to a successful investment.

What condition should the property be in at settlement?

One of the most widely misunderstood elements of real estate is what condition a property should be in at settlement or possession.

What does ‘buying as inspected’ really mean?

In short, a property is sold “as inspected”. If there was dust on a ceiling fan when you first inspected before contracting to buy then the fan can be dusty at settlement. The same goes for a dirty oven, a blown light globe or a squeaky laundry door. If it was dirty, blown or squeaky at inspection before purchase then so it should be at settlement.

Buyers will typically expect that the property is handed over to them spick n’ span and thankfully most house-proud sellers leave their homes in an appropriate condition when moving out, however legally there is no obligation for them to do so.

What should you expect at settlement?

If you’re buying a home, it’s smart to have a realistic expectation of what to expect at settlement.

Unless otherwise specified in the contract, the seller is under no obligation to have the property professionally cleaned for settlement and it is surprising how few buyers ask that such a condition be included.

The seller’s only obligation under the contract (Clause 6.1(b) 2 of the General Conditions) is to “…remove from the Property, before possession, all vehicles, rubbish and chattels, other than the Property Chattels.”

Many modern contracts to purchase include provision for essential plumbing, gas and electrical components to be working at settlement. Hence, if at settlement the toilet cistern leaks then the seller ought to make good because the contract says so.

It is trickier when, for example, a telephone jack doesn’t work at settlement. It is not strictly electrical but it is probably reasonable for a buyer to assume that it was functioning at inspection. This is partly because, caveat emptor (buyer beware) has all but disappeared according to some legal practitioners. The onus is probably on the seller to disclose (in this case) that the telephone jack didn’t work.

How to ensure you’re happy with the property at settlement

My view is that buyers need to take reasonable steps to ensure the property they have bought will be presented to them in a condition they are satisfied with.

This can be achieved by either contracting with the seller to guarantee it and/or being more thorough when inspecting the property in the first instance. Ask the agent if it’s ok to turn on taps, flush loos, flick switches, open and close doors, open the oven, turn on the dishwasher and so on before making an offer to purchase.

Buyers ought to have a realistic expectation of what to expect at settlement when buying an established home and acknowledge that opinions of presentation are subjective.

If you’re unsure about what to expect, it’s a good idea to speak with the agent selling the property about your concerns.

info@reiwa.com.au

New GST legislation passes for purchasers of new residential

 

  • New GST

NEW

The Federal Government has passed legislation that will require purchasers of new residential property sales to remit the GST directly to the Australian Taxation Office (ATO) as part of settlement.

Announced as part of last year’s Federal Budget, this reform is designed to improve the integrity of GST on property transactions. According to the ATO website, some developers were failing to remit the GST to the ATO despite having claimed GST credits on their construction costs.

The legislation specifies;

  • purchasers of new residential property transactions will be required to withhold 1/11th of the purchase price and pay this to the ATO,
  • the developer will receive a credit for this GST through the normal GST business activity statement lodgement,
  • a reduced withholding tax rate of seven per cent can be used where the margin scheme has been applied,
  • developers will now be required to provide purchasers with information that assists them with determining whether the withholding applies,
  • special transitional provisions are included for project delivery agreements.

This change will take effect on 1 July 2018, however the Government have announced it will introduce a transitional arrangement to this budget measure, which will exclude contracts signed before 1 July 2018, as long as the transaction settles before 1 July 2020.

For more information about this new legislation, visit ato.gov.au.