Will my property drop in value?

Will my property drop in value?

There is an Australian property crash coming. That’s what several economists and property experts would have you believe — but what would this really mean for your property portfolio?   Every few weeks another report is released about a property bubble in Australia and the inevitable market crash it will bring when it bursts. But are these predictions correct and should investors be worried about their portfolios? How do you handle a drop in property value — is it best to cut your losses and run or should you ride it out and hope your investment returns to form?      Will Australian property values fall?    Much like you can find a million stories on the next property hotspot, you can find a million stories on the Australian property bubble. The bubble, whether it exists and if it’s going to burst soon, is the topic of much contention between economists, property experts and investors. But is it as big, and as realistic, as the big doomsday predictions would have you believe? There can be no denying that some areas in Australian capital cities appear to be reaching oversaturation. Sky high prices and large developments nearing completion in Sydney and Melbourne have been the catalyst for these debates since 2016. But in terms of a crash which would send all Australian property prices plummeting, that’s harder to believe. Rather than a property bubble bursting, the result would more accurately be a correction of inflated prices which have grown at an unsustainable rate and would only affect those with property directly in these peak zones. But even outside a possible bubble pop,...
Why are property sales volumes declining?

Why are property sales volumes declining?

Property transaction volumes are reportedly declining in Sydney, and nationally. There are about 9.75 million residential dwellings in Australia, but despite a record construction boom stock turnover has fallen to well below 3 per cent, and way below the historical averages. Auction results are telling us this. There could be any number of reasons for this… Staying put! We know that the ridiculous cost of stamp duty (and selling fees) is a discouraging factor for people wanting to move house in Sydney. Stamp duty receipts in New South Wales have more than doubled since June 2013 to $8.63 billion. In June 2013 the buyer of a median priced house in Sydney paid about $27,000 in stamp duty, mortgage fees, and transfer duties. Today, they’ll pay nearly $45,000. That’s a lot of capital growth required to justify the costs of moving house, so we’ll arguably see a shift towards renovating and staying put (or buying cheap and renovating) just as we did at Sydney’s previous cyclical peak in early 2004. A buy & hold strategy A structural change over the medium term has been the “asset lock in” associated with property investors, with the prevailing tax legislation more or less compelling investors to use interest only loans and play a longer term capital growth strategy.  Since the latest round of monetary easing from 2012 investors have become a more substantial force in the larger capitals. There has been a 300 per cent increase in outstanding investor credit since 2003. Buy, hold, and compound the capital gains. Offshore investors In Australia non-residents are generally restricted to the purchase of new dwellings, thereby encouraging new construction,...
What should you believe about real estate prices?

What should you believe about real estate prices?

I keep a lot of real estate information, especially about real estate prices. This is a not so old article that tells a very common story. It is sad but true. At a recent seminar when Australia’s price data mess was talked about many in the audience were incredulous. Some had believed that if a national newspaper told them Sydney prices had risen 10 percent, based on figures from a well-known research entity, then that was a fact to be relied upon. If a research report portrayed a 10 percent decline in Darwin apartment prices that was information you could take to the bank. The reality is different. With scary regularity, figures about prices from one source are commonly contradicted by data from others. The problem is, no one in Australian media seems to have noticed. If journalists are aware, they’ve decided to ignore that reality because it makes life complicated. So this week media dined out on the latest price figures from Core Logic. Here’s a sampling of the headlines:- Sydney house prices cement return to double-digit growth (AFR) Sydney, Melbourne, Canberra house prices galloping ahead (New Daily) Strong early spring for Melbourne home prices as values rise again (Herald Sun) There were many other similar ones. Those headlines and the articles that followed showed a blind acceptance of the figures from that one source as absolute fact. But they’re nothing of the sort. They’re just one version of the truth, which can change dramatically depending on who you’re listening to. Sydney house prices were stated by CoreLogic to have risen 10.9 percent in the past year. But...
The majority of Aussies are still upbeat about house prices

The majority of Aussies are still upbeat about house prices

Record high house prices in Australia doesn’t seem to deter buyer sentiment, while sellers think 2017 is a good time to sell, says a new survey. Two in three (62 percent) Aussie home owners believe this year is a good time to buy, while a further 73 percent believe it is a good time to sell, according to the findings of the survey commissioned by free real estate agent search service, Local Agent Finder. The survey was conducted from a nationally representative, independent panel of 1001 Australian adults. How do we know? Local Agent Finder allows vendors to compare property sales agents in their local area, in conjunction with Pureprofile, a data and insights company. Local Agent Finder CEO Matt McCann said it was interesting to see two-thirds of Australians believe property is a good buy this year, given the double-digit percentage increases, talk of interest rates rises, and possible changes to property investment legislation. “Many of us are talking about Sydney and Melbourne’s strong property market, but that is not really being seen outside of the Eastern Seaboard. In fact, the value of property in Brisbane, Adelaide, Perth and Hobart were lower in 2016 than they were eight years ago,” he said. The Figures Sydney and Melbourne recorded the highest dwelling value increases from 2015 to 2016, at 15.5 percent and 13.7 percent respectively. Other cities had lower increases, with Canberra dwellings increasing by 9.3 percent, Brisbane by 3.6 percent and Adelaide by 4.2 percent, while Perth decreased by -4.3 percent. A majority of home owners surveyed in New South Wales, 81 percent, believe it is a good...
The Property Investment Myths!

The Property Investment Myths!

Want to learn the lowdown on property investment and the myths surrounding this tough market? Here are some quick-shot answers! WHY INVEST? Property investment is ideal for extra income, big ticket purchases, children’s education, wealth building and retirement income. UNDERSTANDING YOUR BUDGET IS CRITICAL Here’s how to find out where you stand financially, now and into the future: Calculate your average monthly income. Not only your wage/salary, but also any extra income from part-time work or other investments. Deduct your average* monthly outgoings. Not only essentials such as food, utilities (eg. electricity, gas and water), medical, car and home contents insurance, car or public transport expenses and phone, but also non-essentials like holidays, club memberships, restaurants, sporting events and entertainment. Consider what non essentials are important and if you can down grade any of the essentials. These changes can help you achieve your long term financial future a lot quicker. If you currently pay rent, then don’t include it – you won’t have to pay rent after you move into your home! However include council rates, fixed utility charges (e.g. electricity, gas and water supply), and an allowance for maintenance and repairs that your landlord normally pays. * apportion expenses that you pay quarterly or annually. Keep a ‘rainy day’ cash buffer so that you can continue making your loan repayments even if there’s a temporary downward blip in your income or upward blip in your expenses. PROPERTY INVESTING MYTHS Here are four popular myths about investing in property: MYTH #1: Buy your own home first Owning your home used to be ‘The Great Australian Dream’, but not today....
The big shift coming for the property market

The big shift coming for the property market

Demographics and population drivers can completely transform a property market — so what massive change is on the horizon that you need to prepare for? One of the most significant trends in the Australian property market is the ageing profile of property owners. This will have major implications for property investors and developers over the coming years as it will shape the type of properties most in demand from property buyers. In particular, the ageing profile of property owners has already led a big increase in the number of people seeking to downsize to apartments. The demand for apartment living in Australia will remain strong for the foreseeable future due to the ageing of our population. In the past decade, the number of people in Australia aged 60 and over jumped by 1.2 million people or 35 per cent to 4.8 million people. People aged 60 years and over currently account for around 20 per cent of our entire population or one in four people in Australia. This ageing of our population has seen a growing demand for apartment living in established areas of major capital cities as Baby Boomers want to live in unit developments that are close to their current residences. Property investors have been capitalising on this trend in greater numbers in recent years, especially in Sydney, Melbourne and Brisbane. The generous tax depreciation benefits associated with buying a new apartment has also been encouraging more investors to purchase apartments. While there are many issues concerning the depreciation entitlements on properties, in most cases, strata-style homes such as new apartments provide a higher rate of depreciation...