Expert urges quick decisions from owners looking to cash in

Those looking to cash in on the recent strong capital growth seen in some real estate markets across Australia should do so sooner rather than later according to one property expert.

While capital growth in Australian real estate may not have been evenly distributed across the country in recent years, a recent survey by law firm Slater and Gordon revealed that 78% of Australians believe their home has increased in value in the past year.

The survey also revealed that 31% of Australians would consider selling their property to cash in on that growth, but Sam Saggers, chief executive officer of Positive Real Estate, said people should consider a different path to benefit from the growth.

“Right now, especially in places like Sydney and Melbourne, you’ve got a lot of people who are in a situation they’ve never been before,” Saggers said.

“They’ve bought a home and after what’s happened in the last few years they’re now in a situation where they’ve got all this equity built up in it and they’re thinking they should make the most of it,” he said.

While selling may seem like an easy way to benefit, Saggers said people shouldn’t be too hasty in placing their property on the market.

“A lot of the people who have benefitted probably thought they would never really be in that situation so they’ve never learned how to properly activate that equity in the right way.

“There’s a great opportunity for people to make the most of it right now and they should really consider creating a team to help them. Find people like a good finance broker who can help you and show you what’s possible.

While those looking to cash in should have a well thought out strategy, Saggers said people shouldn’t delay the process too much.

“My advice would be find out what’s possible for you and lock in that equity now.

“Firstly there’s no real use in having the equity if you’re not going to use it and the other thing is that conditions can change. In my opinion we could see prices drop by 3% or 4% in Sydney this year, so you could easily lose out if you put it off for too long.”
 

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Sydney still likely to see positive growth in 2016

While Sydney may have seen its median house price suffer a record fall recently, the head of a major real estate franchise believes homes in the harbour city will still be more expensive in 12 months’ time.

Angus Raine, executive chairman of Raine & Horne, said real estate in Sydney will continue to grow in 2016, albeit not at the same rate it has in recent years.

“The market might not achieve the double digit returns of the past three years; however, many Sydney real estate markets will achieve capital growth by the end of 2016,” Raine said.

“Many of the same fundamentals remain in play, such as Sydney’s continued population growth, as well as our strong economy, improved employment figures, and low interest rates. Around 50,000 people move to Sydney annually and they all need somewhere to live, while there is a good chance we’ll see more rates cuts in the middle of the year,” he said.

Rich Harvey, managing director of buyer’s agency Property Buyer, agrees with Raine’s outlook for 2016.

“It’s definitely not going to be the same as it was but we are going to see some growth this year,” Harvey said.

“It will probably be around the 5% mark, though it’s hard to put a single number on it because there are so many different markets across Sydney and some of them are vastly different,” he said.

Harvey said Sydney’s suburbs with mid-tier price ranges would likely be the best performing suburbs this year, helped by attention from buyers looking to upgrade their primary place of residence. 

While he also agreed that Sydney’s employment prospects and population growth will help the city’s market continue to improve, Harvey said there is another major positive in the Sydney market at present.

“There is a massive amount of money being spent on infrastructure, especially transport infrastructure, in Sydney at the moment and that’s a great thing for the market.

“The government has received a huge windfall from stamp duty in the last few years so they’ve got the money for projects like the light rails and metro systems and hopefully we see even more money directed to projects like those.”
 

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WA removes cap on valuation and conveyancing fees

The Western Australia state government believes buyers and sellers of property in the state won’t be worse off after announcing fees charged by settlement agents and land valuers will no longer be capped.

From 3 February, the government will no longer enforce a maximum limit on what can be charged by settlement agents and valuers, believing there is sufficient competition to ensure consumers are not faced with exorbitant fees.

“The fee caps for settlement agents and land valuers were imposed in pre-internet days when information on charges wasn’t easily accessible, and there was a risk that consumers could be charged excessive fees,” WA Commerce Minister Michael Mischin said.

“Industry data also reveals that, in practice, our competitive marketplace has resulted in the fees charged by settlement agents and land valuers being reasonable and well below the maximum amounts set by the Government,” Mischin said.  

While the government will no longer regulate what can be charged, it is requiring greater transparency by strengthening codes of conduct for those in the industry.

Valuers and settlement agents will be required to disclose their prices in writing before entering into an agreement with a client and they will be prohibited from charging clients a higher fee unless there is a significant change in the scope of the work.

“Removing the cap and deregulating fees will allow service providers greater flexibility to cater for the differing needs of their clients and the varying complexity of work involved,” Mischin said.

“The strengthening of the codes of conduct as well as stronger safeguards contained in the Australian Consumer Law means that WA consumers will be well protected when engaging the services of a settlement agent or land valuer after the fee caps are removed,” he said.

The move has been welcomed by the Real Estate Institute of Western Australia (REIWA), who believes similar deregulation in the past shows there will be no adverse impacts.

“REIWA supports the Government’s decision to deregulate the fees charged by settlement agents and land valuers,” Neville Pozzi, REIWA chief executive officer, said.

“We support any initiative that streamlines processes without threatening consumer protection. The Western Australian real estate fees were deregulated in November 1998 and there were no adverse impacts on agents or consumers,” Pozzi said.
 

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Broker claims regulators have gone too far

A Melbourne-based broker and former CEO of the Australian Institute of Professional Brokers has hit out at regulatory bodies, accusing them of overstepping their authority.

Reported by Your Investment Property Magazine’s sister publication, Australian Broker, Maria Rigoni, founder and owner of Universal Wealth Management, claimed in an open letter that recent actions taken by the Australian Prudential Regulation Authority (APRA) and the Australian Securities & Investment Commission (ASIC) have left borrowers worse off.

“It is fact that regulators, in recent times, have interfered where they have no right to,” Rigoni wrote.

“ASIC and APRA have caused loan repayments to be more expensive for borrowers and lender profits fatter,” she wrote.

Speaking to Australian Broker, Rigoni said recent moves by ASIC to curtail the growth of interest-only loans had been a major reason behind her open letter.

“Lenders have said ASIC has approached them and ASIC’s opinion is if people want interest-only loans to keep their repayments low then the lender should not accommodate them. The client’s requirements and objectives which make [an interest-only] loan a ‘not unsuitable’ loan have been ignored,” Rigoni told Australian Broker.

“ASIC are just open-slather going to lenders and saying this is what we believe and it is just nonsense,” she said.

Rigoni told Australian Broker that borrowers are being subject to “subjective judgement calls” from regulators about how they can use their own money and other assets and that current legislation strips borrowers of power and responsibility.

“The NCCP is nonsensical consumer protection. The consumer protection laws are not protecting the consumer and they are not protecting me either,” Rigoni told Ausrtralian Broker

“What I would like to see is a total overhaul of the NCCP. The whole focus of the NCCP does not give any power for a borrower to be a responsible borrower. It is all about the lender having the power and control.”
 

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Vacancies to decline as students look for accommodation

New South Wales’ tight rental market is set to contract even more in coming weeks according to a major real estate franchise.

As the start of the 2016 university year draws closer, real estate agents from Raine & Horne franchises are predicting competition for rental properties will soon start to heat up.

Grant Hill, co-principal of Raine & Horne Newtown, said Sydney’s inner west is already seeing  an increase in demand as tenants look for properties close to Sydney University and the University of Technology.

“We currently have six properties out of 1100 available for rent, with as many as 43 parties at inspections,” Hill said.

“We expect vacancy rates will be squeezed further as new and existing university students flood the rental market in February,” he said.

In particular, Hill said vacancies are likely to become scarce in suburbs such as Newtown, Darlington and Erskinville.

While the inner west maybe the first choice of many students looking for accommodation, Terry Brandtman, principal of Raine & Horne Randwick said landlords in Sydney’s eastern suburbs will find their properties are also attractive to students.

“Two-bedroom apartments in Clovelly, Coogee and Randwick rent for between $550 and $750 a week depending on the age of the stock, which compares very favourably to apartments in the newer developments in Waterloo, Alexandria and Mascot, where weekly prices can be closer to $850,” Brandtman said.

“Given Randwick’s proximity to the city, the University of NSW and the beaches, many rental properties are tightly-held, as existing tenants don’t want to leave for fear of paying more. However at this time of year there is usually some attrition with some people shifting outside the region and others looking to move to the area,” he said.

Competition for accommodation is also heating up in Newcastle, which is resulting in an increasing number of people turning to private accommodation.

“Anything in inner city Newcastle is being snapped up almost immediately,” Jason Maxwell, principal of Raine & Horne Newcastle said.

“We are seeing more students returning to the private rental market this year due to cheaper room costs and a desire for more privacy.”
 

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Vacancies to decline as students look for accomodation

New South Wales’ tight rental market is set to contract even more in coming weeks according to a major real estate franchise.

As the start of the 2016 university year draws closer, real estate agents from Raine & Horne franchises are predicting competition for rental properties will soon start to heat up.

Grant Hill, co-principal of Raine & Horne Newtown, said Sydney’s inner west is already seeing  an increase in demand as tenants look for properties close to Sydney University and the University of Technology.

“We currently have 6 properties out of 1100 available for rent, with as many as 43 parties at inspections,” Hill said.

“We expect vacancy rates will be squeezed further as new and existing university students flood the rental market in February,” he said.

In particular, Hill said vacancies are likely to become scarce in suburbs such as Newtown, Darlington and Erskinville.

While the inner west maybe the first choice of many students looking for accommodation, Terry Brandtman, principal of Raine & Horne Randwick said landlords in Sydney’s eastern suburbs will find their properties are also attractive to students.

“Two-bedroom apartments in Clovelly, Coogee and Randwick rent for between $550 and $750 a week depending on the age of the stock, which compares very favourably to apartments in the newer developments in Waterloo, Alexandria and Mascot, where weekly prices can be closer to $850,” Brandtman said.

“Given Randwick’s proximity to the city, the University of NSW and the beaches, many rental properties are tightly-held, as existing tenants don’t want to leave for fear of paying more. However at this time of year there is usually some attrition with some people shifting outside the region and others looking to move to the area,” he said.

Competition for accommodation is also heating up in Newcastle, which is resulting in an increasing number of people turning to private accommodation.

“Anything in inner city Newcastle is being snapped up almost immediately,” Jason Maxwell, principal of Raine & Horne Newcastle said.

“We are seeing more students returning to the private rental market this year due to cheaper room costs and a desire for more privacy.”
 

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Worldwide real estate worth more than US$200 trillion

Global real estate advisory firm Savills has released what it claims is world-first research into the total value of the world’s developed real estate assets.

According to Savills, world-wide developed real estate was worth US$217 trillion in 2015, 2.7 times the value of the world’s GDP.

Yolande Barnes, Savills’ head of world research, said the world’s real estate is currently worth more than 30 times the value of all gold that has been mined.

“To give this figure context, the total value of all the gold ever mined is approximately US$6 trillion, which pales in comparison to the total value of developed property by a factor of 36 to 1,” Barnes said.

According to Savills, worldwide developed residential real estate is worth $162 trillion, or 75% of the total value of global real estate.

The remaining 25% of the global value is split relatively even between commercial real estate ($29 trillion) and agricultural and forestry real estate ($26 trillion).

According to Savills, current low interest rates across world have helped global real estate reach a point where it accounts for 60% of mainstream global assets.

“In recent years, quantitative easing and resulting low interest rates have suppressed real estate yields and fuelled high levels of asset appreciation globally,” the Savills research said.

“Investment activity and capital growth has swept around the major real estate markets of the world and led to asset price inflation in many instances,” Savills said.

According to Barnes, the current value of global real estate shows how important the sector has become to economies across the globe.

“The value of global real estate exceeds – by almost a third – the total value of all globally traded equities and securitised debt instruments put together and this highlights the important role that real estate plays in economies worldwide,” she said

“Real estate is the pre-eminent asset class which will be most impacted by global monetary conditions and investment activity and which, in turn, has the power to most impact national and international economies.”
 

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Record price fall for Sydney

While the December 2015 quarter bought with it a record for Sydney’s median house price, property investment experts have said it was nothing more than a natural part of the cycle the city has been in.

According the latest Domain House Price Report, Sydney’s median house price now sits at $1,013,258 after falling 3.1% in the three months to December.

The decrease is the first decline for Sydney since June 2012 and the largest quarterly decrease on record for the city.

Domain Group senior economist Andrew Wilson said the movement over the quarter definitely signals the end of Sydney’s upswing.

“The remarkable Sydney boom we’ve seen over the last three years is now clearly over, with the market unlikely to record any notable house prices growth until at least spring,” Dr Wilson said.

“While the median house price still remains above $1 million, if current trends continue it will likely fall below this benchmark by mid-year,” he said.

While the boom may very well be over, Rich Harvey, managing director of buyer’s agency Property Buyer, said property owners in Sydney should cast their eyes over the city’s entire cycle before worrying too much.

“It’s the slowdown that had to happen really,” Harvey said.

“Over the past three years we’ve seen growth of around 50% in Sydney and when that happens you’re always going to get to a point where the growth curve flattens out and that’s what we’re seeing now,” he said.

Sam Saggers, chief executive officer of Positive Real Estate agreed with Harvey’s outlook and said the decrease shows Sydney likely pushed too far past the affordability barrier.

“It’s simply a correction from on high,” Saggers said.

“I think recently we’ve seen a weaker market sentiment recently, which probably shows that prices had got out of reach for a lot of people and now they’re just pulling back a bit which is normal,” he said.

While the decrease may be a natural part of the cycle, Sydney’s December quarter did it have some in common with two markets it has been worlds apart from in recent years.

Perth (-0.8%) and Darwin (-2%) were the only other two market to see a price decrease over the quarter.

The longer term figures do show the difference between Sydney and its resource driven counterparts however; in the past 12 months Sydney’s median house price rose 14.8%, while Perth and Darwin have seen prices fall 4.5% and 1% respectively.

For the quarter, Hobart was the strongest performer, recording a 7.9% increase in its median house price.

The median house price now sits at just under $360,000 in the Tasmanian capital, having increased by 8.7% in the 12 months to December and Dr Wilson said it’s a market with “further potential.”

Canberra was the next best performing housing market over the quarter, with its median house price increasing by 4.3% to $652,307.

The median house price in the nation’s capital is 9% higher than the corresponding period in 2014.

 Adelaide and Melbourne both saw 1.8% increases in their median house price over the quarter; however the yearly figures again paint a different picture, with Melbourne recording a year-on-year median increase of 14.5% to Adelaide’s 6.7%.

Brisbane’s median house price increased 1.5% over the quarter and posted a 4% year-on-year increase.


Source: Domain

Looking at the unit market, Sydney was again hit by a record quarterly decrease as the median price fell by 2.8% to $655,845.

While it’s the first quarterly decrease in two years for Sydney, the median unit price is still 8.7% higher than 12 months prior.

Over the quarter, Adelaide was home to the best performing unit market, with the median price up 3%, followed by Perth’s 1.5% increase.

The median unit price increased 1.3% in Melbourne and 0.8% in Canberra.

Hobart was hit by a 3.3% decrease over the quarter, while prices declined in Brisbane and Perth by 1.1% and 0.4% respectively.


Source: Domain
 

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Inflation figures good news for borrowers

The latest inflation figures from the Australian Bureau of Statistics are good news for borrowers across the country according to one real estate body.

The Consumer Price Index (CPI) for the December 2015 quarter was released yesterday and inflation measure within it indicate the current environment of low interest rates in Australia is likely to continue.

“In the December quarter, the CPI rose by 0.4% and an annual rate of 1.7%. These figures are well below the RBA’s target zone of 2-3% and should ease any pressure on the interest rate outlook,” Real Estate Institute of Australia president Neville Sanders said.

“This means that we can expect a sustained period of low interest rates which is good news for home owners,” Sanders said.

The inflation figures back up recent predictions by leading economists Bill Evans from Westpac and Shane Oliver from AMP Capital, who both believe the RBA will not increase the cash rate during 2016.

Dr Oliver said global economic conditions could force the RBA into lowering the cash rate to 1.75% this year, but Evans was remains strongly in camp that the official cash rate will remain unchanged at 2% through 2016.

“Despite markets confidently expecting that the Reserve bank would cut rates by February Westpac has remained firmly of the view that the Bank will remain on hold throughout the second half of 2015 and the whole of 2016,” Evans said.

While Sanders said the inflation figures, as well as other current market conditions are good news for buyer, investors may not see the same level of benefit.

“With inflation under control and a moderating housing market, home buyers can expect a stable outlook,” Sanders said.

“The impact of the past increased investor activity in the housing sector is flowing through to the lowest increases in rents in over two decades.”
 

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Commercial real estate in Canberra set to become offshore target

Australia’s national capital could be the next market to see an influx of offshore money into its commercial real estate market.

Global property consultancy group Knight Frank has improved economic conditions will help the commercial market in Canberra push into positive territory through 2016.

“Recent positive economic signs in Canberra are expected to help underlying market fundamentals,” Knight Frank associate director institutional sales – Canberra Nic Purdue said.

“This includes a far more stable vacancy rate, stable incentives and forecast rental growth – all signs that the Canberra commercial market has reached the lowest end of its cycle,” Purdue said.

The improvement in those market factors, along with the fact that the public service in Canberra provides attractive, long-term tenancy options will prove a drawcard for global capital, especially that which is flowing out of Asia.

“The current wave of Asian capital is looking to diversify away from Australia’s core markets and into higher-yielding regions, such as Canberra,” Purdue said.
“With some volatility in global markets, Canberra is increasingly being considered as a safe haven within the context of the wider Australian market place.

“Australia remains attractive for offshore investors who are drawn by the low Australian dollar, cost-effective borrowing and government stability. And should the global volatility continue there will be a case for the RBA to keep rates on hold, adding to the attractiveness of Canberra as a market.”

Earlier this month, CBRE revealed yields in some sectors of the commercial real estate market in Sydney and Melbourne fell drastically over the end of 2015.

While much has been made in recent years of Chinese money being directed to real estate in Australia, Purdue said interest in Canberra’s commercial sector is set to come from a number of countries.

“We are already receiving increased interest from Asian countries including Korea, Singapore and Malaysia.

“Canberra’s commercial sector hasn’t yet seen the levels of demand from Chinese investors that other capital cities have seen, but that could also change.”

Though improved economic and market factors have increased Asian interest in Canberra’s commercial market, especially for office blocks and hotels, Purdue said a new physical connection between Canberra and Singapore could soon see even more offshore money flow to the city.

“As reported in the media over the past week, if Singapore Airlines does create a direct flight route between Canberra and Asia, this will continue to build the case as an investment destination for Asian investors.”
 
 

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