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August 31, 2010

Buying on main roads – what’s the big deal?


We all know the old real estate adage ‘location, location, location’ and the careful consideration needed to ensure capital growth. However equally important is the position of a property within that location – an unwise choice can have significant consequences if you need to sell in a soft market.

By CATHERINE CASHMORE

Homebuyers are often tempted to inspect properties on main roads, especially during periods where the market is rising and there’s reduced stock. It’s not hard to be tempted when priced out of a desired suburb and ‘lo and behold’ a seemingly attractive and affordable option arises. Read more →

August 30, 2010

Don’t be a victim of underquoting


Underquoting is continuing to be an issue for many buyers. This is where a selling agent quotes a property price of, say, “offers over $600,000” but the actual value and realistic selling price is more likely to be $710,000. So what is the solution?

By RICH HARVEY

My team has seen countless examples of underquoting over the past seven months. It’s partly a reflection of the undersupplied market, but sometimes it’s a reflection of poor agent practice.

The catch phrase for this outdated tactic is “quote them low and watch them go!” Like bees to a honey pot the buyers swarm around the perception of a bargain, only to be disappointed again. Read more →

August 27, 2010

Units outperform houses


Historically houses have enjoyed more capital growth than units but things are changing – maybe permanently.

By MICHAEL YARDNEY

The latest RP Data-Rismark’s Home Value Index shows that units outperformed houses with higher capital growth over the past 12 months. And with shrinking household sizes, affordability issues and a rapidly growing population all impacting on Australia’s housing markets, the result is probably not surprising.

The report suggests the reason houses have traditionally shown stronger long-term growth includes our cultural preference for big homes and backyards, a decrease in developable land and generally better designs available with housing stock. Read more →

August 26, 2010

How to use your investment property for your retirement


Dreaming about retirement? Short of winning the lottery, a common

approach is to use an investment property to benefit you in retirement. Let’s look at a few issues that can help you decide whether this will work for you.

By DAMIAN SMITH

Share the load
If your investment property is generating a good rental income then you may be better off hanging onto it as opposed to selling now. But you may need to weigh up the effect of owning an asset like an investment property on your eligibility for a pension – make sure you talk to your accountant about this. One option that some retirees explore is to sell a portion of the property to your children as you may be able to release some of the equity in order to generate income elsewhere. It may also reduce your capital gains tax (CGT) exposure in the long run and enable you to diversify any other investments.

Increase your super
Another way that could possibly lessen the impact of CGT is by depositing some of the proceeds of the sale of your investment property to top up your super. Make sure you’re aware of the limits that apply to deposits by age, as there are some potentially big tax consequences here. Check out the Australian Taxation Office (ATO) website, and ask your accountant for more information.

Sell the property
If your investment property isn’t producing a high enough income, or if you’re concerned of its impact on your eligibility for the pension, you can always consider selling the property. You can then either use the proceeds to purchase other income-producing retirement investments. However, be aware that you could incur CGT upon selling the investment property. Again, there are CGT calculation tools at the ATO website.

Damian Smith is CEO at financial comparison website RateCity (www.ratecity.com.au). He’s one of Australia’s most experienced internet and technology executives, with leadership roles in Australia, the US, Japan and the UK for over 13 years. Damian holds a Masters Degree in Public Policy from Harvard University.

August 25, 2010

Rural focus could influence housing policy


If Australia emerges from its election limbo with Independents holding the balance of power, as expected, Federal Government policy is likely to take on a distinctly rural flavour.

By ELIZABETH ALLEN

The rural and regional focus of three key Independents combines with Australia’s inevitable population growth to create a very different scenario for our federal policy makers.

And it’s one that could have implications for the property market – as CommSec chief economist Craig James noted this week.

“We do need more migrants and where these people end up settling may be a matter for the Independents,” James said. Read more →

August 24, 2010

Our two-tier market – those who can and those who can’t


‘Affordability’ has been the proverb of the month. It’s a timely election ‘hot word’. One mention of affordability and everyone puts their hand up because no matter what our earning capacity we all hold debt and crave the unaffordable. But how many of us have stopped to think about the factors behind today’s housing affordability problems and two-tier property market?

By CATHERIN CASHMORE

The one difference between our lives now compared to 30 years ago is our attitude toward money. It was highlighted in the book ‘Rich Dad Poor Dad’. Delve back into the history of finance and you’ll see at the turn of the 20th century it was all but impossible for the average person to get a loan – the surge in leading which we’ve witnessed since the 1980s is the result of a gradual transformation in the socialisation of credit and our inclination towards living on debt. Read more →

August 23, 2010

How to get a yes from your lender


Anyone looking to invest in the residential housing market for the first or subsequent time should go back to basics before applying for a home loan. Making the leap is an effort no matter how much experience you have, so below are some tips on how to make sure you’re well prepared and doing everything possible to achieve the best possible outcome.

By KRISTY SHEPPARD

I’m sure you’ve heard a lot of talk about the lending criteria screws being noticeably tighter since the global financial crisis, to the point where a significant percentage of Australians who would have been approved for a home loan previously are now being turned away.

In fact, I was talking to a real estate agent the other day who had been with his lender for 12 years while expanding his property portfolio. He’d never had issues, late payments or defaults, yet has just been knocked back for extra finance that he was sure would be approved. Read more →

August 20, 2010

Rents have been flat and yields declining, but that may now change


Australian Property Monitors’ (APM) June rental report indicates a fairly stagnant rental market for the end of the financial year, with house rents up nationally by only 0.7 per cent for the June quarter and annual growth at only 3.1 per cent. Units fared better, with national growth at 3.5 per cent for the same period and annual growth at 4.2 per cent. But APM economist Matthew Bell says there could be good news ahead for property investors because as leases begin to expire, a strong labour market will mean rental prices will begin to increase towards the end of the year.

By MICHAEL YARDNEY

The APM report showed that Sydney and Canberra were the only two major capitals to show any growth in median house rents, with a 4.3 per cent increase for Sydney in the June quarter and 2.3 per cent for Canberra.

All other cities saw no growth or a decline in weekly asking rents, with Darwin taking the biggest hit at -5.5 per cent. Melbourne and Brisbane house rents dropped by 1.4 per cent for the quarter, while Perth and Hobart remained unchanged.

In the unit market, the median weekly asking rent increased in Darwin by a whopping 12.5 per cent over the past year, even though the June quarter figure was down by 6.3 per cent. Sydney, Australia’s largest rental capital, outperformed for the June quarter with a 4.8 per cent rise in the weekly asking rent for units. Melbourne showed an increase of 2.9 per cent, Adelaide and Canberra of 1.9 per cent, while Perth and Hobart once again flat-lined with nil growth.

Bell suggests that even though vacancy rates remained low and unemployment continued to fall, landlords may have opted to keep a lid on rents due to poor consumer sentiment for the June quarter.

According to APM data, gross weekly rental yields for houses were down across all cities for the year to June, with Melbourne taking the hardest hit at minus seven per cent, followed by Brisbane (-5.3 per cent), Perth (-5.1 per cent), Darwin (minus five per cent) and Adelaide (-2.4 per cent).

Gross unit rental yields fared slightly better in most instances apart from Darwin, recording a decrease for the year of 9.4 per cent and Melbourne with a drop of 6.7 per cent. Hobart and Adelaide both enjoyed an increase in gross rental yields for units of 2.3 per cent and 1.2 per cent respectively.

Of course this just indicates that property values grew significantly more than rents did over the year.

Bell adds, “The exodus from the rental market to the ownership market that occurred in 2009 is still having an effect on asking rents in most capitals. However, the alternative option for renters of moving into ownership has become less attractive as property prices have risen significantly in most cities in the last year and interest rates have risen a long way off their lows, with increases on the way.

As leases expire and are renewed however, it is expected that a robust employment market, rising incomes and low vacancy rates in most capitals will start seeing asking rents increasing again.”

So as property price growth slows down it’s likely for rentals to start growing again – but that’s the way the property cycle has always worked.

Michael Yardney is the director of Metropole Property Investment Strategists, a best-selling author and one of Australia’s leading experts in wealth creation through property. Subscribe to his e-magazine at www.propertyupdate.com.au. For more information about Michael visit www.metropole.com.au.

Blog readers – how have your investment properties performed?

August 19, 2010

Is now the time to fix?


Property investors and homeowners were given a much needed reprieve as the Reserve Bank of Australia (RBA) decided to leave the official cash rate of 4.5 per cent unchanged for the third consecutive month at its August 3 meeting. So is now a good time to lock in your interest rate with your lender?

By ED NIXON

The RBA’s decision came as the June quarter consumer price index (CPI) rate of inflation was lower than expected: 3.1 per cent, just outside the central bank’s target band of two to three per cent.

In a statement regarding the decision, RBA Governor Glenn Stevens said, “With (economic) growth likely to be close to trend, inflation close to target and the global outlook remaining somewhat uncertain, the board judged this setting of monetary policy to be appropriate.” Read more →

August 18, 2010

Property goes missing during federal campaign


The Federal Election campaign has been “full of sound and fury signifying nothing”, to borrow a line from Shakespeare.

By ELIZABETH ALLEN

At least, that’s the view of many political commentators  – and property industry experts seem to agree.

Their view is that property has played no direct role in the campaign.
In fact, issues such as housing affordability and interest rates have been conspicuously absent.

But most analysts warn that the hot campaign topic of future immigration policy has the potential to affect property investment down the track. Read more →

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