The combination of low interest rates, foreign buyers, upgrader enthusiasm and investor momentum saw 2013 emerge from its property holding pattern and the market become reinvigorated.
RP Data analyst Cameron Kusher said he believes momentum in property will continue into the new year, propelled by investors and upgraders.
He also believes values will climb further, though not as sharply in 2014. Another of his predictions is that gross rental yields in Sydney and Melbourne will continue the decline they commenced in latter 2013, leading investors to look at alternative growth zones. These are good tidings for the Far South Coast of NSW. The last few months of the year had seen keen interest in the area, with properties that were priced right being snapped up, some as soon as they came on the market.
However, Mr. Kusher issued a warning about other economic wild cards, like the unemployment rate, stating “If it reaches 6.25% it will be the nation’s highest unemployment rate since September 2002. If people start to become nervous about their job security it is likely to result in a lower level of demand for housing.”
Rates are at their lowest levels since the 1960s and inflation is currently at 2.2%. Keep in mind that the Australian interest rates don’t operate in a bubble – they respond to what’s happening in the global economy. The recent fall of the Australian dollar of 2.5 cents against the U.S. dollar as a result of the U.S. winding back its stimulus is a reminder that inflation could increase if the dollar keeps falling and the cost of imports increase. If inflation increases we could see a rise in interest rates. The all important question now is whether the RBA will increase or decrease rates, or leave them as is in the new year.
With keen interest from both local buyers and those from interstate in Merimbula, Bega, Tura Beach, Eden and Cooma and the current low interest rates together with confidence in the real estate market, vendors should not delay listing their properties for sale. Now is a prime time to sell.
There’s no doubt that yield is the golden word for investors. Other things may come into play, such as lifestyle or infrastructure potential, such as the Bega Hospital and Eden Wharf developments, but the income return on the property is usually the major concern for the purchaser. The Sydney market has been hot for investment properties to the extent that Investors are crowding each other out, resulting in a slight drop in yields. That gives regional towns on the South Coast and Monaro such as Bega, Merimbula, Tura Beach, Eden and Cooma the inside track for investors looking for positive returns.
Yield is generally calculated annually as a percentage. It is based on the asset price or market value of a property. The gross yield is the income (i.e. rent) derived from the investment before expenses are taken out. The net yield is the income less expenses. These expenses could include stamp duty, legal fees, pest and building inspections, repairs and maintenance, property management fees, insurance, rates, strata management fees.
The yield is stated as a percentage and is worked out as –
Gross yield = annual rental income / property value x 100
Net yield = annual rental income – annual expenses / property value x 100
The return or total return includes capital gains. It is quoted as a percentage and is retrospective, based on the gain or loss of the investment during a particular period.
Increasing housing demand drives property prices up and this can affect the yield of an investment. The more prices go up, the lower the percentage between rents (income) to property value. According to Australian Property Monitor’s figures for the September quarter, this is exactly what is happening in Sydney right now. With the current low interest rates many investors are considering purchasing property for negative gearing. Purchasers should ask the right questions of Real Estate Agents to ensure they know the likely net yield on a property before they purchase.
In May Representatives of the Real Estate Institute of NSW, President Christian Payne and CEO Tim McKibbin met with New South Wales Treasurer Mike Baird to discuss how the New South Wales Government can help stimulate the property market in NSW.
Amongst a range of issues discussed the Real Estate Institute of NSW put forward the argument that reducing stamp duty will stimulate real estate purchases and result in increased revenue to the NSW Government. On their website the REINSW states –
“REINSW believes that the best way to bolster the NSW economy is for the State Government to act now and cut the rate of transfer stamp duty in order to stimulate transactional activity in the property market and as a result potentially boost state revenue by hundreds of millions of dollars.“
They cite the outcome for Governments that have introduced stamp duty cuts. For example:
This is strong evidence that decreasing property transfer duty rates does indeed boost revenue. The REINSW also suggested at the meeting that the NSW Government should reinstate the first homebuyers’ incentives for purchasing existing properties. They felt that limiting the grant to cover purchase of new properties only had been a failure, causing a detrimental impact on the NSW property market. Their position is that the Government should take steps to improve housing affordability, which will consequently improve the New South Wales economy.
In Australia today, there are 8 million homes that use 13% of the total energy usage of the country and are responsible for emitting 10% of all greenhouse gas emissions. There has been a trend to build bigger houses, and therefore these figures will continue to rise. It has been predicted that private home energy use will grow by 55 percent in the 30 years from 1990 to 2020.
The Australian government has decided to introduce a price on carbon for the major polluting companies. Half of this amount will be given to homeowners through its Clean Energy Future Plan in the form of tax cuts and pension increases to help with the rising living costs. It is also working with home owners in an effort to lower their household pollution contribution by making savings in their energy usage. This is to be achieved through a mix of regulation, financial support, incentives, information and support. As a result there are planned changes to be made in the way new homes are built and older homes are renovated. A building’s energy performance is to be rated and changes are expected to be made in the way people generally use energy especially in the area of energy efficiency with regards to household appliances.
To meet the 2020 carbon reduction targets, the government is placing energy efficiency regulations on new homes being built. From 2012, all homes will be given an energy efficiency rating.
The reasoning behind adopting the energy efficiency star rating is that consumers will have a benchmark to enable them to make an informed decision on the energy requirement of the home they are thinking about buying or renting. If the home isn’t built to certain specifications it would be fair to assume that the home will have higher power costs and a lower market value, than one that is built to comply. All homeowners and future home builders on the Far South Coast need to be aware of this, and should read http://www.climatechange.gov.au/what-you-need-to-know/buildings/homes/nationwide-home-energy-rating-scheme.aspx
Whether you live in Cooma, Merimbula or Eden, to make the inside of a home constant and comfortable, in spite of the weather conditions, it can use a lot of energy. One of the most energy consuming aspects in any home is in heating and cooling. Australian homes consume, on average, 63 percent of their overall energy use on space heating and cooling, and heating domestic hot water. In today’s market, there are many heating systems available, some being more energy efficient than others. There is one that is growing in popularity in Australia- hydronic heating.
Hydronic heating involves heating water and then circulating it to every room that required heating. The heat is circulated through pipes set under the floor’s surface or through a series of radiators. In-slab hydronic heating is popular because of the penetrating and gentle warmth it offers. Discrete radiator units can be fitted to homes where under floor access is not feasible.
Dust and allergens are a big drawback with ducted heating systems, most radiators work on natural radiant heat where there is no forced air circulation. Meaning no dust and no allergies. All radiator panels are safe to touch with mild temperatures of water regulating at 65 Degrees Celsius. They are safe for children, the elderly and household pets. One characteristic of hydronic heating that is a clear advantage over many other forms of heating is the fact that it is silent. No noisy space heaters or wall heaters with the constant blowing of air, the radiant warmth heats your home in peace and quiet. It is effortless and reliable; simply set the thermostat upon installation and forget about it. Maintenance is seldom required; the only working parts are the hot water boiler and the pump kit.
When you’re preparing your house for sale, the garden can often be forgotten. Furniture is replaced, junk is sorted and disposed of, the paint is renewed, but outside may only get a basic touch-up. A minor garden makeover can ensure your property stands out, and can also generate extra dollars.
All it takes is filling plant gaps, washing the windows, removing cobwebs, laying new gravel and re-seeding brown patches on the lawn. First impressions are lasting, and gardens can sometimes be just as important as the architecture of the house. A property has to stand out on the internet, or when buyers are doing drive-bys.
So start replacing dead plants with new ones, move the old plants around, remove leaves, trim those hedges and add annuals in pots. That’s if your garden is well-established. If not, have a look at http://www.realestate.com.au/home-ideas/ for some ideas on how to spruce up your garden.
More handy tips:
• Focus on the front of the property.
• Make sure the front door is visible.
• Delineate it with standards or strappy, architectural plants, coloured pots or an obvious path.
• Get rid of clutter.
• Make spaces functional.
• External paving must be flat.
• Open up pathways to link spaces and make them obvious.
• Don’t over-prune or plants will look too woody.
• Soft new growth looks fresh and bright green.
A typical garden makeover includes:
• Clipping hedges
• Fixing loose pavers
• Pressure washing paving
• Renewing turf/adding instant lawn
• Adding colour pots
• Cleaning windows
With the impending carbon tax, people are trying to “go green” in an effort to save cash and conserve the environment. But there is still a general lack of understanding when it comes to sustainability. Within the real estate industry there is a lack of awareness about energy and water efficiency techniques, and the benefits these can offer home owners (both owner-occupier and tenants).
Generally, 10 percent (if not more) of household energy bills can be reduced by simple actions like avoiding standby power, awitching lights off and installing draght excluders under doors to keep roomers at a higher temperature. This can save home owners hundreds of dollars per year.
Solar PV power generation in residential buildings is another way that can help home owners future-proof their homes from rising electricity costs. These costs have risen by 47.5 per cent since April 2009 and are expected to increase by another 38 per cent in the coming years.
Rising energy costs are contributing to the cost of living, and are adding to the affordability crisis on the Far South Coast, and the rest of Australia. It would be ideal if real estate professionals could provide home buyers and tenants with information on simple and effective ways of ‘going green’. I believe that as industry professionals, we have a certain responsibility to promote and assist environmental sustainability around the home.
There are rumours the big Japanese banks are looking to muscle in on Australia’s mortgage market, which could spark a major discount home loan war.
In Japan you can get a variable mortgage rate of just two per cent. So could rates really drop that low here?
They have swamped us with TV’s and electronics, and now Japanese super company Sony is planning a raid on our mortgage market.
And it’s not just the Sony bank. There is actually a raft of Japanese banks ready to do battle in the Australian market.
The Japanese banks have a competitive advantage which could see them smash our local rates. The average deposit rate in Japan at the moment is 0.1 per cent.
That’s about 600 per cent less than Australian banks pay for their deposits. They get money more cheaply, so they can afford to give it to us cheaply, which our banks will hate, but home owners will love.
Banks have warned that home buyers could miss out completely on a pre-Christmas rate cut, amid a worsening economic situation in Europe and rising borrowing costs.
Senior government ministers are urging the big banks to pass on in full the 25 basis-point rate cut announced yesterday by the Reserve Bank, but the Australian Bankers’ Association said the banks were not obliged to do so. However rising borrowing costs and the medium-term economic outlook for the global economy could stay their hand.
At least two smaller banks have already passed on the cut, but banks are not required to match RBA rate moves in full and the RBA no longer determined the actual cost of money for banks in Australia.
There’s a strong expectation the banks will follow the Reserve Bank either on the way up or on the way down but there are times – and this is one of them – when the cost of money diverges from the Reserve Bank’s interest rates.
Treasurer Wayne Swan and Finance Minister Penny Wong today both urged the banks to consider consumers and pass on the pre-Christmas cut in full. They understand the banks are operating in a global environment and it’s a tough time. But the banks also have to understand the tough environment that their customers, families and small business face.
Tony Abbott believes the banks should be passing on rate cuts in full. That’s what happened under the former government, that’s what the current treasurer says should happen and the current treasurer should use his authority and try to ensure that it happens.
The Reserve Bank cut its cash rate by 25 basis points to 4.25 per cent yesterday, the second rate cut in as many months.
Property investors have rushed back to the housing market, with Australia’s biggest mortgage broker, Australian Finance Group, processing $2.9 billion worth of mortgages last month -up 18.4 per cent on October.
Investors accounted for two out of every five mortgages written in November, a record for AFG and no doubt helped by the interest rate cut last month.