Tenancy agreements should make better use of technology

Legislation covering residential tenancy agreements in New South Wales should be updated to make better use of changing technologies according to one of the state’s peak real estate bodies.

The NSW government announced last October that it will undertake a review of the Residential Tenancies Act 2010, with NSW Fair Trading commissioner Rod Stowe saying it was important the state’s laws are correctly serving all parties.

“Whether you’re a renter or a landlord everyone needs residential tenancy laws that are balanced, modern and flexible,” Stowe said at the time.
 
“Over 800,000 NSW households live in rental properties and it is important that the state’s tenancy laws are working as intended,” he said.

In a submission to the review, the Real Estate Institute of New South Wales (REINSW) has called for the act to be overhauled so that those in the property industry as well as tenants can make better use of technology, especially in the area of communication.

“We just think the legislation has fallen behind the advancements we’ve had in technology in the past few years,” REINSW chief executive officer Tim McKibbin said.

“It’s not really much a much of surprise that’s happened given the speed that technology moves at and that the legislation is only reviewed every five years. We think now is the right time for that to be addressed.”

In particular, the REINSW is calling for the act to be updated to allow for tenants, landlords property managers and others to be able to make use of more contemporary method of communication.

“A lot of the language in the legislation talks about people communicating and sending documents by post or fax. As a medium these days I think to a certain extent post and fax have been made redundant,” McKibbin said.

“I don’t think social media is as yet a way people can serve documents like a lease, but I think there’s definitely a place for email, and to a certain extent SMS messaging, to be better incorporated into real estate transactions.”

McKibbin said an update of the legislation would bring more certainty to situations currently encountered in the real estate industry.

“We’re at the point now where landlords, tenants and agents are receiving or sending emails to do with residential agreements. We need some consistency so people know how to act when that occurs.

“If there’s a dispute about some aspect of an agreement then and somebody sends an email then it would be benefit everybody if they knew that was something they need to act on and make record of.”

Opening more official channels of communication would also likely help in minimising some of the headaches that can come with rental properties.

“The best way to stop a lot of disputes is to have a pro-active agent or landlord who takes the time to ensure you find a good tenant that will respect the property,” McKibbin said.

“There’s still a chance that there will be issues and disagreements, but if you have open and accessible methods of communication, then you’re going to go a long way to minimising the impact of those.”
 

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Rate rises, slow wage growth causes decline in housing affordability

The out-of-cycle interest rate hikes levied by Australian lenders during November led to deterioration of housing affordability across a number of real estate markets according to one lobby group.

According to the Housing Industry Association’s (HIA) Housing Affordability Report for the December 2015 quarter, the interest rate rises levied as result of stricter capital requirements for lenders saw housing affordability in Australia fall 6.4% over the three month period.

“The unilateral increase in the major banks’ variable mortgage rates which came despite the absence of any change in the official cash rate has delivered a significant blow to housing affordability,” HIA chief economist Shane Garrett said.  

“Combined with double-digit dwelling price growth in cities like Sydney and Melbourne, the shock jump in interest rates has pushed home affordability to its least favourable position in over three years,” Garrett said.  

Canberra’s real estate market was the worst hit by the rate rise, with affordability declining 11.4% during the quarter.

Affordability worsened 10.5% in Melbourne and 3.3% in Sydney.

Darwin was the only market to see an increase in affordability over the quarter.

Garrett said the impact on affordability the November rate rises had was worsened due to current levels of wage growth in Australia.

“The affordability challenge has been compounded by the slow pace of earnings growth which means that the buying power of households has not kept pace with dwelling prices,” he said.

“The increase in mortgage interest rates during November was an unpleasant surprise for homeowners, and housing affordability will be damaged even further if this tactic is repeated.”


Source: HIA

Garrett also renewed calls for policy makers to address affordability issues by making changes to stamp duty arrangements.

“HIA research has shown how the typical stamp duty bill of around $20,000 eventually costs homebuyers about $50,000 over the course of the mortgage due to higher LMI premiums and mortgage interest costs. It’s time for this inefficient tax to be addressed.”
 

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Infographic: 10 Tips to be a Successful Property Investor


property investing tipsProperty investment can be complex, so here are ten quick tips to help you be a more successful property investor.

This list is not exhaustive, so please add any of your own in the comments below, we would love to hear your views.

Thanks for reading and good luck with your property investment.

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RBA makes February cash rate decision

In a move that is likely to surprise few people, the Reserve Bank of Australia’s first board meeting for 2016 has ended with no change to the official cash rate.
 
The decision means the cash rate remains at 2%, where it has sat since the RBA announced a 0.25% reduction after its May 2015 board meeting.
 
Tim Lawless, research head at CoreLogic RP Data said the RBA’s decision was likely influenced by employment figures and consumer confidence levels.
 
“Factors adding to the hold argument were likely to have been around labour markets which have been showing a healthy trend based on the Bureau of Statistics data and retail sales showing a better appetite for households to spend,” Lawless said.
 
Nicki Hutley, director at consultancy firm Urbis, agreed that current economic conditions likely gave the RBA little reason to move the cash rate.
 
“The economy is growing a moderate pace. Indicators for employment and inflation suggest current rate stance is appropriate,” Hutley said.
 
While today’s decision from the RBA was widely predicted, Lawless said the board of the central bank likely had plenty to weigh up during the decision making process.
 
“There are plenty of reasons why the RBA may have contemplated cutting the cash rate today,” Lawless said.
 
“Australia’s terms of trade are approaching 10-year lows due mostly to lower export prices, inflation is tracking at the bottom of the RBA’s target range and the Aussie dollar has once again seen some upwards pressure; however the housing market is playing out exactly as the RBA probably would have hoped:  losing steam without a collapse in values,” he said.
 
Many commentators have said that recent conditions in Australia’s residential real estate market have likely played a major role in the RBA keeping rates on hold; however Lawless said that is likely to become less of reason as the year progresses.
 
“With heat in the housing market no longer likely to be a major concern for the RBA, a major obstacle has been removed from preventing rate cuts and we may see the cash rate move lower later in the year,” he said.
 
“The last three months have seen capital city dwelling values drift 0.6% lower and capital city home values are up by only 0.7% over the past six months. 
 
“The RBA probably doesn’t need to worry too much about over stimulating the housing market via another rate cut; mortgage rates are already higher than a year ago due to the higher capital requirements implemented by APRA and the pace of investment growth has fallen below APRA’s 10% speed limit imposed in December 2014.”
 

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Infographic: Residential vs Commercial Property Investment

commercial vs residential property investingProperty investment comes in many different forms; commercial investing covers shops, factories, offices and warehouses, while residential investing includes holiday lets, short stay, long-term rentals and student accommodation.

Both are feasible options depending on your financial situation and level of experience.

This infographic lists some general pros and cons that you can consider when it comes to commercial and residential property investing to help weigh up which is the better option for you.


 

residential vs commercial property investing

 

 

Moody’s predicts a rise in Australian mortgage delinquencies

Changing economic conditions at home and abroad will result in an increase in the number of Australian mortgage delinquencies in the coming year according to one credit rating firm.

According to the latest monthly review of the performance of Australian prime residential mortgages by ratings firm Moody’s, delinquencies in excess of 30 days rose to 1.20% in November 2015 from 1.14% in October 2015.

Moody’s puts that monthly decrease down to seasonal factors such as household overspending in the run up to Christmas, but still believes 2016 will see a higher number of delinquencies than 2015.

“The housing market has shown signs of cooling over recent months,” Moody’s assistant vice president – analyst Alana Chen said.

“Strong housing market activity in both Sydney and Melbourne helped foster relatively strong economic performance in the respective states of New South Wales and Victoria in 2015,” Chen said.

“But a slower pace of house price growth will mean a slowdown in economic activity and will contribute to a deterioration in mortgage performance in 2016 from current exceptionally healthy levels,” she said.

Moody’s predicts the slower price of house growth will continue as the Australian economy faces some challenges through 2016.

“Slowing growth in China, Australia’s biggest export market, and declining commodity prices, which are at or near multi-year lows, will also put pressure on the Australian economy and contribute to below-trend growth and a soft labour market in 2016,” Chen said.

But while Moody’s predicts a growing number of borrowers are at risk of becoming delinquent, not all are convinced that will be the case.

“With all respect to Moody’s, who have a number of economists working on this sort of thing, I find it difficult to believe we’re going to see a real rise in the number of delinquencies,” Jane Slack-Smith, director of Investors Choice Mortgages, said.

“I’ve been a broker for 10 years and a property investor for a long time too and that’s given me a lot of experience in  reading the market and I can’t really see anything at the moment that’s going to cause a rise (in delinquencies),” Slack-Smith said.

Slack-Smith believes the period of low interest rates have allowed a large proportion of Australian borrowers to get in position where they a comfortable with their financial commitments, while others have been prevented from getting in over their heads.

“With the lower interest rates we’ve had I think a lot of people have taken advantage of that. A lot of people have built up their redraw or offset account so they’re in a position where they’re pretty comfortable with everything.

“The other thing is that the APRA and ASIC changes have quelled a lot of irresponsible lending that might have happened.

“It was a pretty heavy handed approach, but the fact that people were assessed on a 7.5% interest rate and the servicing criteria was made tougher means there’s already been a buffer built in so that people can manage if we do see interest rates start to move up.”
 

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Melbourne moves ahead as capital growth leader

The start of 2016 has been a positive one for Melbourne’s real estate, with figures from CoreLogic RP Data showing the Victorian capital is pulling ahead as Australia’s strongest market.

According to CoreLogic RP Data’s latest Hedonic Home Value Index, the 12 months to the end of January saw Melbourne become the nation’s leader in terms of capital growth.

Released yesterday, the index shows the past 12 months has seen the median dwelling price in Melbourne increase by 11% to $595,000.

While Sydney’s median dwelling value remains significantly higher at $776,000, values have only risen by 10.5% in Sydney over the last 12 months.

“While still a high rate of annual growth, Sydney’s annual rate of capital gain is now at a 29 month low and has been progressively softening since peaking at 18.4% in July last year,” CoreLogic RP Data research head Tim Lawless said.

“Melbourne’s housing market has been more resilient to slowing growth conditions which has propelled the annual growth rate to the highest of any capital city, with dwelling values 11.0% higher over the past twelve months. The latest data reveals Sydney’s housing market is now playing second fiddle to Melbourne’s, at least in annual growth terms,” Lawless said.

Over the three months to the end of January, Sydney’s median house price declined by 2.1%, while Melbourne saw a quarterly fall of just 0.1%.

For Miriam Sandkuhler, buyer’s agent and the director of Melbourne based Property Mavens, the resilience in Melbourne’s market can be put down to the affordability it offers in comparison to Sydney.

“At the moment we’re dealing with a lot of interstate buyers who are seeing better value in Melbourne as well as a lot of local buyers who still see the market has something to offer,” Sandkuhler.

“Competition for anything priced up to the $600,000 mark is really strong, with real interest from owner-occupiers, investors and self-managed super investors as well. Even for the $600,000 to $800,000 price range in the middle and inner rings there is a lot of interest,” she said.

“In that market there’s a lot of interest for people looking to invest through their SMSF and from downsizers who already own their primary residence but are looking for somewhere to live in 10 or 15 years.”
Sandkuhler also said Melbourne’s relative affordability had helped it weather the storm brought on by changes to investment lending.

“The APRA changes haven’t seemed to knock everyone out the market,” she said.

“Those that have the equity or a slightly bigger deposit are still looking around and they’re seeing there’s more bang for their buck in Melbourne right now.”

Outside of Sydney and Melbourne, there is somewhat of a drop of to the next best capital growth performers.

Over the past 12 months, Canberra has had the third highest rate of capital growth, with the median dwelling value up by 6% to $587,500, followed by Brisbane’s 2.8% increase to $478,200.

The median dwelling value in Hobart increased 2.3% to $332,500, while Adelaide saw a 1.1% increase to $420,200.

Perth was the worst performer over the past 12 months, with the median dwelling value declining 4.1% to $515,000.

Darwin also saw its median dwelling value deteriorate, with it falling 2.5% to $520,000 over the past 12 months.


Source: CoreLogic RP Data 

While the past 12 months have brought positives for owners in the majority of markets thanks to positive capital growth, landlords haven’t enjoyed similar growth conditions for their rental returns, with no combined capital city rental growth recorded in the 12 months to January.

“There hasn’t previously been a twelve month period when rents didn’t rise across our combined capitals index,” Lawless said.

“With dwelling values rising substantially more than rents in Sydney and Melbourne, this ongoing effect has created a compression in gross rental yields to the extent that gross yields in these cities are now only marginally higher than record lows.”

The flat rate of rental growth was caused by the tough conditions in Darwin and Perth currently, where rents have fallen by 13.4% and 8.6% respectively in the last 12 months.

Rents have also fallen in Brisbane (-0.7%) and Adelaide (-0.4%).

 Source: CoreLogic RP Data 
 

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RBA closing in on cash rate move

It’s unlikely to come today, but the Reserve Bank of Australia is getting closer to moving Australia’s official cash interest rate.

The first monthly Finder Reserve Bank survey for 2016 has 29 experts in agreement that the RBA won’t touch the cash rate during this afternoon’s board meeting; however there is growing sentiment that change is on its way.

More than a third of the experts surveyed believe the RBA will announce a rate rise sometime in 2016, while 52% of respondents predicted a rise in 2017.

Having sat unchanged at 2% since May 2015, it appears the cash rate may have hit the low point of its current run; with only 24% of respondents believe there will be any further rate reductions this year.

While he doesn’t believe the RBA will move the cash rate this afternoon, Shane Oliver, chief economist at AMP Capital, believes economic conditions may force the central bank to make a downward move in the near future.

“I think that given the emerging softening in the housing cycle, the ongoing mining downturn and renewed global market turmoil that the risks to growth are on the downside and given very low inflation the RBA should ease again. But I don’t think it’s convinced just yet,” Dr Oliver said.

But prominent economist Saul Eslake said there has been no real change since the RBA’s latest meeting that would warrant any movement.

“Nothing has happened since the last meeting to warrant a change in monetary policy settings,” Mr Eslake said.

“The fall in the exchange rate since early December is a sufficient response to the deterioration in global financial market sentiment,” he said.

The experts such as Eslake may not be the only ones who don’t believe another rate cut will come anytime soon, with Finder consumer advocate Bessie Hassan claiming borrowers are becoming more cautious.

“Over the past year the cash rate has fallen twice – in February and May 2015 – and finding better home loan rates has become a priority for many Australians,” Hassan said

“Interest rates in Australia are at historically low levels and the feeling is they are not going to get much lower. Borrowers are likely worried the pendulum will suddenly swing back and interest rates will start to rise,” she said.
 
 

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RBA cash rate moves closer

It’s unlikely to come today, but the Reserve Bank of Australia is getting closer to moving Australia’s official cash interest rate.

The first monthly Finder Reserve Bank survey for 2016 has 29 experts in agreement that the RBA won’t touch the cash rate during this afternoon’s board meeting; however there is growing sentiment that change is on its way.

More than a third of the experts surveyed believe the RBA will announce a rate rise sometime in 2016, while 52% of respondents predicted a rise in 2017.

Having sat unchanged at 2% since May 2015, it appears the cash rate may have hit the low point of its current run; with only 24% of respondents believe there will be any further rate reductions this year.

While he doesn’t believe the RBA will move the cash rate this afternoon, Shane Oliver, chief economist at AMP Capital, believes economic conditions may force the central bank to make a downward move in the near future.

“I think that given the emerging softening in the housing cycle, the ongoing mining downturn and renewed global market turmoil that the risks to growth are on the downside and given very low inflation the RBA should ease again. But I don’t think it’s convinced just yet,” Dr Oliver said.

But prominent economist Saul Eslake said there has been no real change since the RBA’s latest meeting that would warrant any movement.

“Nothing has happened since the last meeting to warrant a change in monetary policy settings,” Mr Eslake said.

“The fall in the exchange rate since early December is a sufficient response to the deterioration in global financial market sentiment,” he said.

The experts such as Eslake may not be the only ones who don’t believe another rate cut will come anytime soon, with Finder consumer advocate Bessie Hassan claiming borrowers are becoming more cautious.

“Over the past year the cash rate has fallen twice – in February and May 2015 – and finding better home loan rates has become a priority for many Australians,” Hassan said

“Interest rates in Australia are at historically low levels and the feeling is they are not going to get much lower. Borrowers are likely worried the pendulum will suddenly swing back and interest rates will start to rise,” she said.
 
 

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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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