Don’t lose out to party season, landlords urged

Landlords have been reminded to take the necessary precautions to prevent them starting the new year with a property headache.

With the holiday season approaching, occasions such as New Year’s Eve parties are on the horizon and insurance agency Terri Scheer, which specialises in landlord insurance, have urged people to ensure their properties aren’t left in a state of disrepair.

While New Year’s Eve maybe only days away, Terri Scheer Insurance executive manager Carolyn Parrella said preventing party damage starts well ahead of time.

“Prevention is often better than the cure. Tenants are entitled to enjoy their time at the property however it must be done with respect and consideration for the landlord,” Parella said.

“Including lifestyle questions on the lease application can help to identify and minimise future issues. Does the applicant have regular visitors or guests? What type of activities will be undertaken at the rental property? Landlords can use such questions to help filter potentially troublesome tenants,” she said.

The start of a rental period is also a good time for landlords to clearly define what is and isn’t acceptable through the rental agreement.

 “A rental agreement may allow landlords to enforce noise restrictions, such as no loud music after 10pm, and a maximum number of guests at the property at any one time,” Parella said.

It’s a common oversight by landlords not to use the formal rental contract as a way to outline a tenant’s responsibilities.”

Parella also recommend rental inspections be scheduled before and after the holiday season.

“Regular inspections can provide early indications of a tenant that may fail to fulfil their rental agreement obligations if accidental or malicious damage is identified. Likewise, post-New Year’s Eve inspections can help identify any accidental damage incurred during the holiday season.

“This also shows the tenant that the landlord has an active interest in the care taken with their property and helps reinforce the conditions under which the tenant has leased the property.”

Perhaps most importantly, landlords have been reminded to have their insurance in order to make sure they’re not left out of pocket if the worst case scenario occurs.

“Too often property investors overlook risk management until after a tenant has moved in or when something has gone wrong.

“Maintaining a specialised landlord insurance policy can protect investors from the many risks associated with owning a rental property and provide peace of mind if the unforeseen should occur, such as malicious and accidental damage, loss of rental income and potential legal liability if someone is injured at the property.”

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Victorian couple to stand trial on property fraud charges

 A Victorian couple have been committed to stand trial on charges of fraud relating to property deals in Australia and the United States.

Maureen Gael Johnston and Mr Douglas Gordon Johnston of Carrum Downs were charged with more than 70 offences, including fraud, obtaining a financial advantage or property by deception, and attempting to pervert the course of justice in November 2014 after an ASIC investigation into property deals worth $1.5 million.

A three day committal hearing in the Melbourne Magistrates Court last week found there were grounds for Mr and Mrs Johnston to stand trial.

ASIC investigated Investman Nominees (USA) Pty Ltd and Small Business Management Pty Ltd and allege Mr and Mrs Johnston misled people into investing approximately $1.5 million into various property developments in the United States and Australia.

ASIC alleges the money raised was not used to develop any properties, but instead used by Mr and Mrs Johnston for their own benefit.

It’s alleged through their close association with the Collingwood Football Club the Johnstons allegedly misled club supporters into investing.

ASIC alleges the funds raised by the Johnstons were not used to develop any properties, but were instead used in part for gambling at the Melbourne Crown Casino, paying personal credit card debts and to make interest payments to investors in a Ponzi style operation. 

Mr and Mrs Johnston have both pleaded not guilty to the charges and were granted bail.

The matter is listed for a Directions Hearing on 18 January 2016 at the Victorian County Court. 

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Auction volumes fall away after record year

The lead up to Christmas has seen auction volumes take a tumble after five straight weeks of more than 3,000 being scheduled.

Figures from CoreLogic RP Data show Australia’s capital cities are expected to hold 1,727 auctions this week compared to the 3,028 scheduled last week.

The strong run in the past few weeks has helped push Australia’s capital city yearly auction total into record territory, with 108,500 having been held in 2015.

Compared to previous years, there were 104,444 capital city auctions held in 2014, 81,473 in 2013 and just 62,713 in 2012.

Last week’s national clearance rate finalised at 54.2%.

This week, volumes are down in all capital cities except Perth and Brisbane, with the most notable falls in Melbourne and Sydney.

After holding 1,572 auctions last week, the Victorian capital is predicted to only see 872 homes go under the hammer this week.

Last week saw Melbourne’s clearance rate take a slight increase, rising to 64.9% from the previous week’s 63.3%.

Volumes have nearly halved in Sydney this week as well, with the harbour city scheduled for 470 auctions this week compared to last week’s 891.

Sydney also saw a small week-on-week clearance rate increase last week, up to 54.7% from 52.9%.

The busiest individual suburbs for auctions across Australia this week are all located in Melbourne, with 19 auctions scheduled in Craigieburn, 17 in Reservoir and 16 in Mill Park.

In Brisbane, 186 auctions are scheduled compared to last week’s 180, for which the Queensland capital returned a clearance rate of 41.9%

In Adelaide, 118 auctions are scheduled for this week after it held 154 last week, while Canberra will hold 99 this week after the 115 held the previous week.

Their clearance rates of 49.3% and 48.6% respectively last week were Adelaide and Canberra’s weakest of the year.

In Perth, 66 auctions are scheduled compared to last week’s 60, from which the city returned a clearance rate of 36.2%.

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NSW almost debt free thanks to stamp duty

The strength of the property market in New South Wales has helped the state government become almost debt free, as it benefits from increased stamp duty revenue.

According to a budget update released yesterday, NSW’s net debt level has shrunk to $1.8 billion, the lowest it has been in two decades.

The reduced debt levels are thanks in part to an additional $863 million which has been collected in stamp duty charges since June budget estimates.

According to the government, around $430 million of that came from stamp duty associated with the sale of electricity provider TransGrid, but a large proportion of the remainder came from property transfers.

“The windfall transfer duty we are expecting to receive in 2015-16 is primarily made up of stamp duty from the TransGrid transaction and commercial and industrial property transfers,” NSW Treasurer Gladys Berejiklian said.

The government’s increased revenue announcement has again prompted the Property Council of Australia (PCA) to go on the attack as it renews calls for the tax to be abolished.

“Stamp duty is our most damaging tax and hurts homebuyers, businesses and the economy,” PCA NSW executive director Glenn Byres said.

“NSW continues to haul in record levels of stamp duty – which has doubled in the past four years from around $4 billion to well above $8 billion,” Byres said.

While Berejiklian said earlier this week that stamp duty revenue is expected to moderate as Sydney’s property market cools in the coming year, Byers said the damage has already been done.

“The affordability woes facing homebuyers are exaggerated by stamp duty, which forces the average homebuyer in Sydney to find an extra $35,000 when they purchase a house,” he said.

“Stamp duty hurts people trying to crack the housing market, families needing to buy up as they grow, and people wanting to downsize later in life.

“And signals about a slowdown need to be treated with caution – as stamp duty is still poised to rise by approximately 15% this year and stay above $8 billion for the next few years.”

But Byers and the PCA may be protesting in vain, with one tax expert believing stamp duty is likely to be around for the foreseeable future.

“Our view is that stamp duty is likely to be here until will see substantial changes to areas like payroll tax and the GST,” David Shaw, director at accountancy firm WSC Group, said.

“It’s an inefficient tax, but it’s one that people are going to have to keep factoring in,” Shaw said.

While there was speculation earlier this year that an increased or expanded GST could be implemented to replace stamp duty, Shaw said that’s highly unlikely.

“We’re not going to see an increase in the GST until the states can agree to it and that’s not going to happen anytime soon.

“They all want to protect their self-interests and there will need to a whole discussion about how the GST revenue is distributed among the states.”

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Sydney’s vacancy rate up in the air

Disagreement surrounds Sydney’s residential vacancy rate, with two organisations releasing differing figures on how many dwellings are looking for tenants.

According to SQM Research, Sydney’s vacancy rate saw a small increase over November, from 1.6% to 1.7%, with total vacancies rising from 9,692 to 10,045.

Head of SQM research Louis Christopher said the increase his firm had documented was in line with seasonal trends.

“Vacancies appear to be following the common seasonal trends expected at this time of year, where rental accommodation tends to become more available for a variety of factors,” Christopher said.

“The most predominant of these factors is the departure of University students from their regular rental accommodation over the long four month summer break,” he said.

But the Real Estate Institute of New South Wales (REINSW) believes Sydney’s rental market tightened over the month.

The November REINSW Vacancy Rate Survey claimed Sydney’s vacancy rate decreased 0.2% to 1.7% over November

According to the REINSW, vacancies in inner Sydney fell 0.3% to 1.8%, middle Sydney slipped 0.2% to 1.7% and outer Sydney rose 0.1% to 1.7%.

“The popularity of inner Sydney was recognised during the month of November and the flood of new apartments reaching completion declined to see vacancy rates hit their lowest level since May,” REINSW President John Cunningham said.  

Elsewhere, the Hunter region slipped 0.2% to 2.5% accrodring to the REINSW, with Newcastle down 0.1% at 2.1%.

In the Illawarra the overall vacancy rate fell 0.9% to 1.0% with Wollongong slipping from 2.6% to 1.1%.

In the regional areas Albury fell 0.4% at 2.4%, Orana fell 0.2 % to 2.1%, while Central Coast rose 0.3% to 2.2% and Northern Rivers was up 0.3% at 1.5%.

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Fed moves unlikely to impact Aussie interest rates

The first interest rate movement in seven years by the United States’ central bank, the Federal Reserve, is unlikely to impact the immediate future of interest rates in Australia.

The Fed yesterday opted to raise its Federal Funds target interest rate from a range of 0-0.25% to 0.25-0.5%.

While it is the first movement in the better part of decade, AMP Capital chief economist Shane Oliver said the decision was not one that came out of the blue.

“The move is hardly a surprise. The Fed has been talking about a rate hike ever since ending quantitative easing over a year ago,” Dr Oliver said.

“After being delayed in June and September, due to a combination of soft US data and financial market turmoil, the Fed has given ample warning recently of a December hike provided there were no unanticipated shocks,” he said.

Dr Oliver said the increase should be seen as positive, indicating the US economy is on its way to recovering to pre-GFC levels.  

“The reasons for the hike are simple. The extraordinary monetary easing since the GFC (zero interest rates and three rounds of quantitative easing) have done their job in seeing off the risk of a depression and returning US growth to reasonable levels. Jobs are now well up on pre-GFC levels, unemployment is down to 5%, confidence is up, the housing sector has recovered and business is investing,” he said.

“At its core the Fed’s move is positive as it signals that the US economy is strong enough to be further taken off the life support that has been in place since the global financial crisis.”

According to Dr Oliver, the fact that the US economy is showing positive signs is why the Reserve Bank of Australia won’t be following in the Fed’s footsteps.

“Australian rates often follow the big swings in US rates, but in recent times they have diverged. With the Australian economy on a weaker trajectory relative to its potential than the US economy, the RBA will not be following the Fed into a rate hike.

“In fact, the odds remain that the RBA will have to cut again as the mining boom continues to unwind, the contribution to growth from housing starts to peak next year and inflation remains low.”

The Fed’s increase does mean that the Australian dollar is likely to keep falling against the greenback.

“With the Fed undertaking a dovish rate hike there is a risk that a further fall in the $A will be further delayed.

“But as the Fed undertakes more, albeit gradual, rate hikes next year, the RBA retains an easing bias and commodity prices remain weak the trend in the $A is likely to remain down with it heading to around $US0.60 sometime in the next 12 months.”

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10,000 new homes for Waterloo as part of Metro project

The inner south Sydney suburb of Waterloo is set to benefit from an injection of government spending, after the suburb was chosen as the preferred location for a Sydney Metro station.

The decision ends speculation about where the 31st Metro station would be located after plans for the City & Southwest line, released last month, showed the government was still deciding whether it would be located in Waterloo or at the University of Sydney.

NSW Premier Mike Baird said Waterloo was chosen as the preferred site as it provides the government an opportunity to revitalise the suburb.

“The metro station creates the opportunity to transform Waterloo and make it a better place to live for future and existing residents, many of whom are amongst the most vulnerable people in NSW,” Baird said.

As part of the revitalisation the ageing Waterloo social housing estate will be progressively renewed, with the government saying there will be no loss of social housing from the current 2,000 dwellings.

The government claims the redevelopment will help it deliver thousands of new homes to the area.

“Waterloo metro station will be the catalyst for the delivery of an additional 10,000 homes and thousands of new jobs in the precinct for families who live in the area,” NSW Minister for Planning Rob Stokes said.

Speaking to Your Investment Property Magazine when the initial plans for the City & Southwest line were released, Rich Harvey, managing director of Property Buyer, said areas around the Metro project will benefit from it.

“A project like this is absolutely a good thing for the market,” Harvey said.
“With infrastructure projects like this there are two periods where it can have a dramatic effect on prices. The first is when the announcement is made and the second is just after the project is completed,” he said.

But while Harvey said the project will help prices in the area, development lobby group Urban Taskforce has raised concerns that the government could artificially inflate places through development levies.

In a statement announcing the station’s location the government said it “investigate a Special Infrastructure Contribution around Waterloo station to be reserved for the Sydney Metro project,” which Urban Taskforce claims could add up to $20,000 to price of a new apartment in the suburb.

“The price of new housing will go through the roof if it has to fund rail infrastructure and social housing. While the new apartment market has been booming in the last year there are signs that this is tapering off,” Urban Taskforce CEO Chris Johnson said.

“The Urban Taskforce is very supportive of the renewal of social housing estates by building significant numbers of private housing units to help subsidise the new social housing units. Our concern at Waterloo is that the potential addition of a value capture tax similar to that proposed for the Parramatta Light Rail could add $20,000 to the cost of each new private dwelling,” he said.

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Commonwealth Bank raises oversupply concerns for Brisbane and Melbourne

Oversupply fears for the Brisbane and Melbourne apartment markets have again reared their head, with a major bank claiming it could be years before the flood of supply is absorbed.

According to an article in Fairfax media yesterday, the Commonwealth Bank’s Commbank Property Insights Summer Edition estimates Australia’s major capital cities have 80,000 apartments under construction, with another 117,000 approved or being marketed in off the plan deals.

Like the Reserve Bank of Australia claimed earlier this year, the report claims inner city Brisbane and Melbourne are likely to be the two markets most affected by the increase in stock.

“These two locations will be subject to rising vacancy and reduced rents, leading to drops in property values and greater settlement risk,” Kevin Stanley, CBA’s corporate financial services head of property strategy and research, said in the report.

“It’s likely to be a number of years after the 2017 peak of completions before population growth can absorb these new apartments, so vacancies can return acceptable levels and allow positive growth in prices and values,” Stanley said.

The report predicts Melbourne could see up to 120,000 new apartments over 734 projects completed in the next two years, while Brisbane could see 34,000 apartments across 192 projects.

Sydney could see 88,000 new apartments across 538 projects in the next two years, but the report claims there is a more even distribution in the harbour city with only 7% located in the CBD.

While Sydney is not identified by Stanley as being as at risk of the impact of oversupply, concerns have been raised about its apartment market too.

Last week Sydney real estate agent Douglas Driscoll said he wouldn’t be surprised if investors began to walk away from deposits on unbuilt apartments.

“Towards the end of 2016 we might start to see some investors potentially walk away from their deposits because they perceive that they paid too much for it in 2015 and see that it’s no longer worth the risk,” Driscoll said.

According to Stanley, if all of the apartment projects currently in Australia’s construction pipeline are completed, the country would have enough supply for the best part of a decade.

“Based on the current population growth, this pipeline is sufficient to see construction continue apace for the next seven years,” he said.

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Brisbane hits median house price record

A new record high for Brisbane’s Local Government Area (LGA) median house price shows the growing level of confidence in south east Queensland’s real estate market.

According to figures from the Real Estate Institute of Queensland (REIQ), Brisbane’s median house price grew by 0.8% to $615,000 over the September quarter, passing the previous price record of $610,000 it set in the three months to June.

The median unit price in Brisbane LGA grew 1.2% to $430,000 over the quarter.

“It’s been difficult for areas of the state that were heavily reliant on mining to find their feet, but we’re starting to see indicators that suggest we are heading towards firmer ground,” REIQ chief executive officer Antonia Mercorella said.

“Confidence in the residential house market is growing with sales activity up over the quarter across almost all southeast Queensland regions,” Mercorella said.

According to REIQ, sales activity for houses in the Brisbane LGA increased 5% over the September quarter to the highest level seen since 2012, while unit sales increased 13%.

Across individual areas of the greater Brisbane region, Ipswich was the best performer for houses, with the median price increasing 1.6% to $320,000.

For units, Redland was the top performer, with the median price increasing 6.1% to $390,000.

In terms of sales, Ipswich saw the highest increase for houses and units, with sale levels increasing 12% and 15% respectively.

Outside of Brisbane’s reaches, but still in the state’s south east, the Gold Coast also saw some steady improvements over the quarter.

Sale activity for houses rose 6%, with the median house price increasing 3.8% to $545,000.

Units in Noosa performed strongly, with the median price increasing 3.2% to $434,000, with sales activity up 23%.

With many considering south east Queensland the next investment hotspot, the REIQ figures would seem to support that, but one property expert believes people shouldn’t let the hype carry them away.

“People need to be considering if it’s the right financial time for them to invest and work out what will best suit them,” Paul Wilson, founder of Gold Coast based buyers’ agency We Find Houses, said.

“I don’t put a lot of attention on the micro-analysis. That’s the sort of thing that can mislead people, it might make for a good headline, but you need to be looking at the macro side of things to ensure you’re buying in the areas that have sound fundamentals and will serve you in the long term,” he said.

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RBA keeps cash rate cut door ajar

Despite remaining unchanged since May, the Reserve Bank of Australia has not ruled out further cuts to the official cash interest rate.

Released this week, the minutes from the central bank’s December meeting show its board is still open to the idea of reducing the cash rate below 2% thanks to a current weak global inflation outlook.

“Members judged that the outlook for inflation may afford some scope for a further easing of monetary policy should that be appropriate to lend support to demand,” the minutes read.

“The Board would continue to assess the outlook, and hence whether the current stance of policy would most effectively foster sustainable growth and inflation consistent with the target.”

Within Australia, the RBA expressed some concern about wages, with growth remaining weaker than the bank would prefer.

“Wage inflation had remained subdued in the September quarter, consistent with spare capacity in the labour market and the forecast for a prolonged period of weak wage growth,” the minutes read

“The latest data suggested that wage growth had been little changed in the household services sector, where employment growth had been strongest.”

Outside of Australia’s shores, the board noted current economic conditions in Asia had been subdued.

“Members commenced their discussion of the global economy with the observation that growth in Australia’s major trading partners had picked up in the September quarter, driven by an increase in growth in some Asian economies following weakness in the previous quarter.

Overall, however, conditions across the Asian region, including in China and Japan, had been weaker than expected this year.”

While the board noted there had been some improvements in China and Japan, economies across Asia could struggle for some time.

“In the rest of east Asia, GDP growth picked up in the September quarter after a soft June quarter outcome. Members noted that this stronger growth could reflect temporary factors and that weak external demand was likely to have negative effects on many economies in the region for some time.”

The Reserve Bank also noted sluggish growth in the US and European economies.

“Growth in the United States and the recovery in the euro area had continued. Core inflation had generally edged higher in both the advanced and emerging economies, but remained below most central banks’ targets,” the minutes stated.

While the RBA may not have ruled out the chance of a rate cut, others believe the cash rate is likely to remain unchanged.

“I don’t think there’s any real sign at the moment that we’re likely to see a downward movement in the rate,” Joe Sirianni, head of mortgage broking firm Smartline, told Your Investment Property Magazine earlier this week.

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