The Experts

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John McGrath
Property Expert
+ About John McGrath
About John McGrath - Founder and Executive Director, McGrath Limited

John McGrath is considered one of the most influential figures in the Australian property industry. As Founder and Executive Director of McGrath Limited, , he took McGrath Estate Agents from a lounge room start-up in 1988 to one of Australia's most successful residential real estate groups, listing McGrath Limited on the Australian Stock Exchange in November 2015.

An integrated real estate services business, McGrath today is one of the fastest growing real estate companies in Australia with a strong market presence in NSW, the ACT & Queensland, and a growing presence in Victoria.

In October 2008, John was honoured by the Real Estate Institute of NSW with the Woodrow Weight OBE Award, a lifetime achievement award for his outstanding contribution to the real estate industry.

John himself has become a spokesperson for the industry both in Australia and internationally. John has five books that have reached bestseller status including “You Don’t Have To Be Born Brilliant” and “You Inc.”. In “The Ultimate Guide to Real Estate”, John shares with the reader his invaluable knowledge on the Australian property market.

John is a Director of REA Group and also the South Sydney “Rabbitohs,” which is one of his great passions.

Is it safe to get a loan from a small lender?

Tuesday, September 25, 2018

Borrowers have more home loan lenders to choose from than ever before, so why do the Big Four banks dominate the market, especially when the smaller lenders offer cheaper interest rates? 

Alan Hemmings, General Manager of McGrath’s mortgage broking division, Oxygen Home Loans, says many borrowers simply don’t know how much choice they have; and they might also be worried that the small no-frills brands are not as safe as the big guys.  

So, let’s get over that hurdle now. 

The most important thing for you to know is that APRA supervises all of Australia’s small banks, which include credit unions and building societies, in exactly the same way as the Big Four. They’re all playing by the same rules and APRA is there to make sure every one of them is operating soundly.  

This alone should give you confidence to consider the small banks and there’s heaps to choose from, with APRA monitoring 143 in total at the moment. 

On top of this, you also have a bunch of high quality non-bank lenders to choose from. They’re not regulated by APRA but they all have a credit licence from ASIC and get this – many are actually backed by the big banks. 

“UBank is the online lender for NAB, Tic:Toc is backed by Bendigo and Adelaide Bank and Edge is underwritten by NAB,”  says Alan. 

So, is it safe to borrow with a small lender?  

Alan says: “Generally speaking, it is safe to borrow from the small banks. They have the same responsibilities as the large banks and capital requirements that help protect their customers. The non-bank sector is also safe – as we saw during the GFC, clients did not lose their homes through banks ‘calling in’ mortgages.” 

Some examples of small banks include Heritage Bank, Bank Australia, Bank of Sydney, IMB Bank, Greater Bank, Beyond Bank, Bank of Queensland and Newcastle Permanent Building Society. You can view a full list here. Examples of non-bank lenders include Pepper and Liberty. 

Alan says: “We use these lenders as they might have a niche that the big banks do not provide.  For example, some of them offer a bit more flexibility when it comes to assessing clients’ affordability.” 

This has never been more important given today’s credit squeeze where even good quality applicants are being rejected by the Big Four on technical grounds. Alan says this is prompting mortgage brokers to recommend small banks and non-banks more often to their clients.  

“The biggest driver for our business at the moment are clients who have been knocked back by their existing bank, which is generally a big bank,” says Alan. 

“More often than not the recommendation is a smaller bank or non-bank lender. This doesn’t mean smaller lenders are taking on riskier loans, they just look at customers differently.

“Five years ago, our business settled over 80% of loans with the Big Four and their subsidiaries. Last financial year, that number was below 60%.”

Why can the small lenders offer cheaper interest rates? 

They’re cheaper to run – it’s that simple. 

Alan says: “The big banks have large networks of branches, call centres and expensive operational areas and they need to factor this in when pricing their home loans. They also have to provide a return for their shareholders, whereas small lenders can be profitable on smaller margins.” 

Let’s do a test run to see how much you could save. 

Using comparison site, RateCity, I requested a quote on a $640,000 loan to fund an $800,000 purchase (LVR 80%). The best rate available was 3.54% with offset and redraw facilities with a non-bank lender. The best offer amongst the Big Four was 3.99% with redraw but no offset. 

That’s a saving of almost $2,000 over the first year of a 30-year loan, without considering any offset benefit. 

Alan and I aren’t advocating one type of institution over another. There are pros and cons to each. The biggest pros with small lenders are cheaper rates and slightly more flexible lending policies. The cons are very small or no branch networks, no ‘professional packages’ and fewer loan features such as offset, redraw and interest only options.  

The best lender for you comes down to your individual circumstances and that’s where a mortgage broker is so valuable. A broker will sit with you, discuss your needs and goals and figure out which lender is best and most likely to approve you. 

It will save you a lot of time and stress to reach out for this free, professional service next time you need to refinance or get a new loan.   I’m a big fan of mortgage brokers, just make sure you find a good one!

 

Winners and losers in top suburbs

Thursday, September 20, 2018

Sydney and Melbourne might be cooling overall but not all suburbs are following the trend. 

As with all major market cycle swings, some suburbs are standing up to the change extremely well, with properties either growing or holding their capital value and sellers still in command. Other suburbs are following the trend, with prices softening and buyers enjoying new opportunities.  

According to CoreLogic analysis, Sydney peaked in July 2017 and Melbourne in November 2017. Since then, both city markets have recorded patchy results at the suburban level and this is entirely expected. The difference comes down to local market factors and which buyers are most active. 

Generally speaking, we’re still seeing strong demand for high quality homes in desirable, tightly-held suburbs; as well as the more affordable, outlying areas where first home buyer activity has spiked. 

Suburbs where prices are weakening are a mixed bag. Some of them are highly desirable areas that experienced a lot of price growth during the boom, so prices are only dipping now because buyers simply can’t afford (or can’t get the finance) to compete anymore.  

Prices are also weakening in suburbs that are now oversupplied with new apartments, or have been heavily impacted by the departure of investors.  

Below are some tables showing the suburbs with the best price growth and the greatest price dips in the year to 30 June 2018. You need to know what’s going on locally to interpret these figures and that’s where an experienced, qualified local agent can help. 

SYDNEY 

These suburbs had the best growth in Sydney over the year to 30 June 2018. 

Houses:

Units:

These suburbs experienced the most price softening in Sydney over the year to 30 June 2018.

Houses:

Units:

MELBOURNE

These suburbs had the best growth in Melbourne over the year to 30 June 2018.

Houses:

Units:

These suburbs experienced the most price softening in Melbourne over the year to 30 June 2018.

Houses:

Units:

Source: Market Trends, 12 months to June 30, 2018, suburbs with minimum 40 sales pa, house and apartment data excludes suburbs with less than 30% of the relevant stock type, CoreLogic, published 10 September 2018

These statistics remind us that local market factors matter and they will make a difference to sale prices this Spring. 

When citywide markets are in a state of flux, you really need to choose your agent wisely and listen to their advice. 

Anyone can sell a property in boom conditions but only the most experienced, hardworking and knowledgeable agents will continue to achieve great prices when the market is cooling down. 

 

How to spruce up your property for an early sale

Tuesday, September 11, 2018

Going early carries one significant advantage for sellers – time. This year, I think it’s best to maximise it instead of listing later when the Christmas deadline can cause a bit of stress. 

I say this because credit restrictions are having a material impact on buyer competition and this, combined with cooler conditions and less urgency in the marketplace overall, might end up impacting the timeframe of your sale this year. 

It’s not uncommon to see auctions postponed a week or two these days, especially when the best buyers on a property can’t get their finance in time. This is a strategic decision that you may or may not face but it’s good to have extra time up your sleeve by going on the market early this Spring. 

The other advantage of listing sooner rather than later is it gives you more time to buy back in. Most family buyers want the moving process over by Christmas, so they can enrol their kids in new schools for new year and move into their new homes before or during the holiday period. 

In terms of the time is takes to sell property, a three to four-week campaign is not all there is.  If you want to maximise your sale price, you need to approach the sales process methodically and this means at least a couple of weeks planning and preparing ahead of your campaign launch.  

After signing with your agent, there is likely to be a series of small repairs you’ll need to do and maybe even some cosmetic renovations to freshen up the presentation, such as painting, a house wash, some gardening and so on. 

If you want to professionally style your home, that also requires time for the stylist to attend your property, put together a plan and arrange for the hiring and delivering of furniture. 

Presentation is a critical part of the selling process as it directly contributes to how buyers feel about your home. You don’t have to invest a huge amount of money but what you don’t invest financially to get someone else to do it faster and better will cost you time to do it yourself. 

Getting the presentation right can result in a $5,000 to $50,000 upside in most instances I’ve seen, so you can’t skip this process and that means budgeting a decent amount of time to get it done. 

Then your property needs to be photographed and ads have to be booked and mocked up. Don’t forget that you need to factor in school holidays (September 29 – October 14), which are best avoided in family suburbs because buyers go away. Your agent can advise you on whether this is a consideration in your area. 

For the 2018 Spring season, it is also crucial to invest in a good quality marketing campaign. You need to attract the maximum number of buyers possible because the odds are, some of them won’t be able to compete due to finance issues. So, the bigger your buyer pool, the better chance you have of selling for a good price, in a concise timeframe, which allows you plenty of time to buy back in. 

Lastly, I want to encourage Spring sellers to listen to their agents on price and keep their expectations realistic. This can be hard in the first Spring season following a boom but in my experience, 80% of failed sales come back to price so it’s crucial to get this right from day one.

Whether buying or selling this Spring, I wish you the best of luck!

 

SOLD! By auction or private treaty?

Thursday, September 06, 2018

CoreLogic figures show there was a 20% reduction in the number of homes taken to auction nationwide over this year’s winter period compared to 2017, with Sydney and Melbourne the main contributors to this decline.

Property prices and clearance rates in Australia’s two most auction-centric markets have continued to progressively moderate in 2018 and it’s spooked many would-be sellers.  

In the June quarter, median house prices dipped -1.2% in Sydney to $1,012,368 and -1.7% in Melbourne to $821,463.

At the same time, CoreLogic’s Quarterly Auction Market Review, released in late July, showed

auction clearance rates over the June quarter softened a further -7.6% in Sydney and -7.3% in Melbourne. Generally speaking, both cities are recording clearances in the 50-60% range now.  

A 60%-ish clearance is what we expect to see in normal market conditions, however, many sellers are struggling to adjust. The market has cooled rapidly, exacerbated by tighter lending restrictions; and for many sellers it still feels like only yesterday that both cities were clearing 70-80% at auction.

But there’s really no reason to panic and there’s certainly no reason to rule out selling by auction.

There’s actually plenty of buyers out there who want to make purchases and are willing to compete on properties that are priced correctly. When you have good competition, auction is always the best way to go.

Using the auction method also puts a timeline on buyers and this is becoming important in both Sydney and Melbourne, where buyers have more stock to choose from and softening prices means they can take their time.

An auction motivates people who have fallen in love with your home to get organised.

In order to make them fall in love, you must present your home well, invest in good quality marketing and most of all, hire a great agent who has proven success in the auction arena and ideally someone who has worked in cooling markets before. That’s a recipe for a good auction in today’s market.

Lending restrictions are interrupting the auction process a bit, with some buyers unable to compete either on the day or during pre-auction negotiations. Agents need to make room for this and conduct negotiations in a way that includes as many potential buyers as possible.

Equally, the auction method also provides scope to sell prior. Once again, you simply need an experienced agent with expert negotiating skills whom you can rely on to draw the best price out of the market prior to auction.

For those of you interested in stats, CoreLogic’s Quarterly Auction Market Review tells us the following:

Top 3 Auction Capital Cities

·         Melbourne 12,330

·         Sydney 9,312

·         Brisbane 1,574

Top Auction Suburbs (by volume) per city

·         Reservoir in Melbourne

·         Randwick in Sydney

·         Sunnybank in Brisbane

Top Auction Suburbs (by clearance rate) per city

·         Sydenham 86.7% in Melbourne

·         Northbridge 85% in Sydney

·         Kambah 78.3% in Canberra

So, where to from here?

Well, it’s the first week of September and we’re now gearing up for the typically busy Spring season. The number of homes for sale via auction is already increasing in line with this seasonal trend.

If you’re considering selling, I suggest attending a bunch of auctions in your area to see which agents are still successfully taking homes to auction and which auctioneers are doing the best job.

Some auctioneers are employed exclusively for individual companies while others are freelancers and can work with any agent.

At McGrath, we have prided ourselves on expert auctioneering services for more than 25 years, as we truly believe the best auctioneers can make a real difference to your sale price on the day.

Good luck this Spring! 

 

What are the top growth suburbs across Australia?

Thursday, August 30, 2018

With the Sydney and Melbourne booms dominating national headlines over the past few years, you’d think every other market in the country is in the doldrums. But that’s not true.

As the following data from CoreLogic shows, there are plenty of suburbs across Australia where home owners and investors are making great money through property, even when they are located in a capital city that has experienced little overall growth in recent times.

These figures also show that despite both Sydney and Melbourne slowing down, premium suburbs with more demand than supply are still experiencing price growth.

So, let’s take a look at those suburban areas that have performed best in each state over the 12 months to May 2018.

Top growth suburbs by state

1. Canberra

In the Australian Capital Territory, the first six suburbs of our top 10 are all in the desirable inner north or the fast-growing outer Gungahlin region.  This part of Canberra is set to benefit from the brand-new light rail, which will commence operations in December. The light rail provides direct access to the CBD for Gungahlin residents via the inner north.

2. Victoria

 

Most of our top performers are in Melbourne, however, the Geelong area of Newcomb makes the list at No 8. Geelong is about 70km from Melbourne and is Australia’s leading regional city for house price growth. You can buy a house in Geelong for about a quarter of a million dollars less than Melbourne and enjoy spectacular beaches, buzzing café and shopping precincts and a rising number of jobs in service industries.

 

3. New South Wales

Regional areas dominate the top 10 performing suburbs, which is no surprise, given the ripple effect from Sydney is well underway.

4. Queensland

The top 10 suburbs were a mixed bag representing areas in Brisbane and its outer regions, the Gold Coast, the Sunshine Coast and Townsville. Only one suburb – Hamilton, is in Brisbane city, which reflects the stronger demand seen in the state’s regional areas of late.

5. Western Australia

The top 10 comprised eight suburbs in Perth and two in the Pilbara region. Claremont and Applecross are listed twice due to strong capital growth amongst both houses and apartments.

 

6. South Australia

Adelaide suburbs dominated the top 10, with Norwood breaching the million dollar median mark over the past year.

7. Tasmania

The top 10 suburbs were all in Greater Hobart bar Bridport, in the Dorset council area in the state’s north east. Hobart has had two years of very solid capital growth and has led the capitals over the past year. Some of these suburbs have extremely short days on market – as little as seven in Bellerive (apartments) and Claremont (houses) and only 13 for the top growth suburb of Blackmans Bay.

8. Northern Territory

 

Growth was only mild – less than 5% across the board for the top 10 performing suburbs, with some even in negative territory.

Source: CoreLogic, 12 months to May 31, 2018, All properties, Suburbs with 40 sales minimum over 12 months

One of the great things about property is there are always opportunities if you’re willing to put in the work to find out which suburbs have the best prospects for future growth and why.

There is certainly a world outside ‘the big two’ capital city markets, with plenty of property success stories to tell in areas where median prices are well below Sydney and Melbourne.

You will find a few commonalities among top performing suburbs, such as new or planned infrastructure, high performing schools and lifestyle amenities such as beaches, cafes and proximity to work centres.

Making money in real estate begins and ends with good quality research. To help you, this type of data above and much more is easily available from suppliers such as CoreLogic and realestate.com.au. 

 

West side story

Tuesday, August 21, 2018

When I started in real estate 35 years ago, Western Sydney didn’t have the relevance it does now. It’s taken just three decades for this quiet, outlying region to transform into the country’s third largest economy and home to almost half of Sydney’s residents today.

In the 1980s, housing affordability wasn’t a major issue in Sydney. People could generally buy a long-term home close to the city where most of them worked. There was nothing really pushing people to move ‘out west’ unless they particularly liked the area, wanted more land or wanted to be close to manufacturing jobs.

However, since then Sydney’s economy and population has exploded, necessitating massive urban sprawl of housing to our west. As the region’s population grew, so did services.  Major shopping centres, schools, hospitals, transport and recreational amenities were developed and this attracted more families again.

While all this development was going on, the sheer size of Western Sydney and its distance from the CBD kept property affordable. It was an ideal starting point for young families buying their first home and unskilled immigrants looking to start a new life amongst fellow countrymen in the west’s rising immigrant communities.

In the early 2000s, we saw more of Sydney’s middle income bracket move west seeking more land to build their dream homes (remember the McMansions of the early 2000s)? Sydney’s property boom during this period made housing close to the city more expensive and encouraged more people to ‘go west’ for value.

Ongoing population growth boosted by surging immigration has forced governments to invest in further infrastructure to service this burgeoning region.

House prices have gone up a lot – in fact, CoreLogic figures* show that among the 22 Sydney suburbs with a 20-year annual compound growth rate in median house prices of 10% or more, 91% of them were in Western Sydney.

Parramatta has cemented itself as Sydney’s second CBD and evolved from a suburb ‘on the outskirts’ in the 1980s to the geographic heart of our rapidly expanding city today. Parramatta is a thriving economic hub with more than $10 billion to be invested in transport, education, health, sport and cultural projects between 2016-2021. 

This includes Stage One of WestConnex, the Parramatta Light Rail, the redevelopment of Westmead health precinct, a new cultural centre including the Museum of Applied Arts and Sciences on the Parramatta River; and a new 30,000-seat Western Sydney Stadium to replace the old Pirtek Park and swimming centre.

A dramatic 18% increase in Parramatta’s population is expected between 2016-2021.

Western Sydney has several other significant economic hubs, including Liverpool, Blacktown, Penrith and Rouse Hill.

Rouse Hill was among the 22 suburbs with the best house price growth, averaging 10.9% per annum since 1998. This suburb is still developing but it has already become a crucial suburban centre for the North West.

Rouse Hill is part of the NSW Government’s North West Growth Corridor, in which more than 33,000 new homes will be built by 2026. A new hospital is being planned and the 10-year-old Rouse Hill Town Centre is undergoing a $300M expansion that will include 80 new retailers and hundreds of new apartments.

Developers are proactively acquiring large parcels of land for residential development, particularly around the Metro Northwest’s Tallawong railway station, not far from Rouse Hill Town Centre.

The broader Western Sydney is still growing today. It’s the one part of Sydney that still has so much promise and the space needed to capitalise on it. A million more people are expected to live there by the early 2030s and by 2050, it will house more people than Brisbane and Perth combined.

Despite all this promising growth, there are two things holding the region back.  Not enough employment to enable residents to work locally, which necessitates a long commute on traffic-clogged roads to the city.  This commute is getting longer and there’s a generation of young people who would rather rent for life near the CBD than travel from a home they own out west.

But everything is about to change and it means big things for the Western Sydney property market.

The first big change is with regard to public transport that will reduce the commute to the city.  

Next year, the North West will have its first heavy train line with the 52km Metro Northwest connecting Cherrybrook, Castle Hill, Bella Vista, Kellyville and Rouse Hill directly to the CBD.

The 33km WestConnex is on its way, which will transform the city-west connection and take 25 minutes off the Parramatta to CBD trip. The Metro West fast train service from Parramatta to the CBD will also transform the commute, with travel reduced from 32 minutes to potentially as little as 15 minutes.

Parramatta Light Rail will connect several western precincts for the first time, enabling easier access to local jobs and entertainment options.

The second big change for the region is the Western Sydney Airport. This brand new 24/7 curfew-free international airport is going to re-shape the region from top to bottom. It’s the game changer of a lifetime.

Initially, the most important thing it will do is generate jobs. During the construction phase, 11,000 jobs will be created with 30% going to locals. A further 27,000 jobs will follow in the five years after the airport opens in 2026, with 50% targeted to locals.

The surrounding ‘Aerotropolis’ will become one of Sydney’s biggest economic zones, with endless opportunities for investment. This 10,000 hectare greenfield site will enable major local and international companies to set up shop with direct exporting and importing made easy.

There will be many major associated infrastructure projects, including a brand new train line likely to run from Macarthur to Schofields with a connection to the Metro Northwest at Tallawong station in Rouse Hill.  

Western Sydney is now a key focus of government infrastructure planning. The Greater Sydney Plan divides Sydney into three cities including the Central River City around Parramatta and the Western Parkland City around the airport. The aim is for all Sydneysiders to live within 30 minutes of their jobs and everything else they need for a great life.

If we look at Western Parkland City alone, the population of this region which incorporates Liverpool, Penrith, Campbelltown-Macarthur and the airport precinct is estimated at 1,070,000 today. By 2036, it will be more than 1,500,000, with 185,000 new houses and 200,000 new jobs compared to 2016.

That’s just one example of the incredible growth ahead for Western Sydney, making it one of the most exciting property markets in Australia today.

*CoreLogic figures supplied to McGrath, 12 months to April 2018, 20-year annual compound growth rate in median house prices among suburbs with more than 100 houses total and 40 or more sales in 2018

 

Why are luxury apartments booming in Brisbane?

Thursday, August 16, 2018

Prestige apartments in Brisbane’s inner-city are hot property, with a growing number of local and interstate downsizers looking for large, well finished lifestyle apartments at prices that represent far greater value compared to Sydney and Melbourne. 

The recent construction boom might have created a temporary oversupply in Brisbane, but the best of the best apartments are in high demand. The value gap between the southern capitals and Brisbane remains significant and as a result we’ve experienced an influx of out-of-area downsizers.

One of the reasons for increased downsizer activity is that more buildings are nearing or at completion, which allows owner occupiers their preference to actually see properties before purchasing.  When they were in pre-sale stage, the bulk of buyers were a mix of local or foreign investors.

Downsizers are being driven by the volume of high quality new stock available and an increasing desire for low maintenance living.

Brisbane’s inner city has changed with many vibrant dining and entertainment precincts that come alive at night.  Middle aged buyers are increasingly wanting to ditch the maintenance of a house for a riverside apartment with eateries at their doorstep.

Fewer new projects are being launched in Brisbane this year and buyers are realising that absorption of excess stock is underway. 

New market confidence

Drew Davies of McGrath New Farm says an uptick in high end apartment sales over the past year has instilled new assurance in the market.

He just sold a luxury one bedroom riverfront apartment for $2.625M. This was an exceptional price and a good demonstration of how highly sought-after the highest quality properties are and the premium buyers are willing to pay to secure them now. In fact, this property was snapped up before the marketing even commenced. 

Drew said: “When comparing Brisbane’s inner-city market to Sydney and Melbourne, it’s a much cheaper price point and represents incredible value when you look at the growth and infrastructure upgrades happening throughout South-East Queensland.”

In my view, Brisbane is one of the world’s great cities and there is a lot more growth to come over the next few years.

Topping the charts

Just recently, Brisbane appeared for the first time on the internationally recognized Knight Frank Prime Global Cities Index, which measures the top 5% of a city’s housing market by value and is considered a means of gauging where luxury prices are headed at a time.

According to the Index, demand for high-end property in Brisbane led to 3.6% growth over the past year. Researchers attributed Brisbane's new ranking to the growing demand from downsizers.

The latest CoreLogic Hedonic Home Value Index also reveals a healthy prestige market in Brisbane, with 1.05% growth in the top quartile over the past 12 months. Whereas Sydney (-8.0%) and Melbourne (-4.1%) both reported falls across the most expensive quarter of the market.

Individual suburbs have done even better. CoreLogic figures for the 12 months to April 2018 show South Brisbane had 280 sales at a median price of $587,500, representing 20.6% growth.

Even suburbs reputed to be in oversupply, such as Newstead, recorded growth. Newstead had 262 sales over the year at a median price of $639,500 and annual growth of 7.2%.

Brisbane downsizers have a particularly good opportunity in front of them today. They can put a big chunk of money from the sale of their homes into super, they can take their time looking around with more newly-built stock to choose from and they have less competition due to tougher credit policy. 

In terms of the wider apartment market, the oversupply will dissipate – as it always does, over time.

Looking ahead, Drew said: “A wave of major infrastructure and development over the next five years will dramatically alter the Brisbane CBD and inner suburbs, and if the banks regain their appetite for lending it could be the perfect storm Brisbane has been expecting for years.”

In my view, Brisbane and South-East Queensland present the best opportunities for value and growth thanks to their liveability, affordability, scale and future economic prospects.

 

Why buy property this Spring

Tuesday, August 07, 2018

We’re a few weeks out from the traditionally busy Spring season when more property will come onto the market, giving buyers more choice.

The question is, will Sydney and Melbourne buyers take advantage of this Spring or will some people continue to hold off purchasing in the hope that prices might fall further?  

In both markets, it is clear that buyers are being more cautious. They have the opportunity to take their time as competition is lower, stock is higher and vendors are (or should be) open to negotiation.

It’s tempting to wait because after a five-year sellers’ market, buyers finally have some control back and they want to make the most of it. But realistically, I don’t think we have much more to go in terms of price correction.

New CoreLogic figures released last week show Sydney property values overall (houses and apartments combined) have come back 5.4% over the past 12 months. Melbourne prices have pulled back -0.5%.

History tells us that we shouldn’t expect a correction of more than 8-10%.

CoreLogic analysed every period of decline in Sydney since 1980 and found the biggest price loss was -11.6% over 28 months in the correction of 1988-91.

In Melbourne, the biggest price loss was -9.4% over 12 months in the correction of 2008-09.

If you’re looking to buy a first home, upgrade your family residence or purchase a new investment, you should have at least a 10-year horizon in mind and by that time, whatever you pay today will look cheap.

The best time to buy has nothing to do with the market – it’s when you can comfortably afford it and want to do it.

There will be a couple of distinct advantages for buyers this Spring:

·      There will be more homes for sale, as is always the case in Spring but it will come on top of already elevated levels of stock.  CoreLogic figures for Sydney show stock for sale in July was 21.7% higher than the same time last year and the greatest volume for sale since 2012. In Melbourne, stock in July was 10.5% higher than last year and the greatest volume since 2014

·       You’ll likely face less competition, not just because some buyers have left the market but also because so many buyers are struggling to get finance these days. This is having a material impact on sale prices because it is reducing competition at auction 

Also bear in mind that today’s low interest rates are a major benefit for buyers but they won’t last forever.

Your loan is at its most expensive in the first five years when the bulk of your repayments go towards interest.

Spring buyers should use today’s low rates to make extra repayments and get a serious jumpstart on paying down debt.

Your loan is a long-term liability – usually 25 or 30 years; and during that time rates will return to their long term average of 7-7.5%, which could make tens of thousands of dollars difference to your loan repayments.

Maximising the number of years on cheap rates within the 25-30 year lifespan of your loan is as worthy a goal as not paying too much for your next property.  I encourage you to keep it in mind!

 

Big city income, small town lifestyle

Tuesday, July 31, 2018

We’re hearing a lot about young families departing big cities for regional towns, largely in NSW and VIC which is typical at the end of market booms. House prices grow too much and families decide to quit the city and go elsewhere for a seachange and a more affordable mortgage.

However, it seems that the ‘city escape’ is becoming much more to do with lifestyle than house prices. This is interesting because Australians have always loved living in capital cities – in fact, just under 70% of our entire population lives in these eight locations alone.

However, families moving to regional markets are talking a lot more about wanting an easier life. In regional areas, they can have more time with their kids because work, school and home are 10 minutes apart. They want to go to the shops, park outside the door and not have to line up in queues. Cheaper housing is also a benefit but it’s no longer the main reason to move, it seems. 

Population growth is no doubt contributing to the greater hustle and bustle of city life. You might have heard recently that Australia’s population is due to hit the 25 million mark next month – about 30 years too early based on projections published by the Bureau of Statistics in 1998.

Given most of us live in capital cities, that’s where we’re feeling this population growth most. It’s understandable that some people are feeling too crammed in and need a change of pace.

Many people would say that ‘moving to the country’ sounds nice but isn’t very realistic, mainly because it’s harder to get a job with a decent salary. But is that perception or reality?

New data just released on personal employee incomes indicates that blue collar workers and their families are the best positioned to leave Sydney or Melbourne without taking too much of a pay cut, as long as they don’t venture too far afield.

Here’s the big picture, using NSW and VIC as our examples…

NSW – city versus regional income averages

Average income Greater Sydney: $66,172

Average income Rest of NSW: $52,872

VIC – city versus regional income averages

Average income Greater Melbourne: $59,573

Average income Rest of VIC: $49,379

So, generally speaking, people living outside Sydney and Melbourne earn quite a bit less – about $13,000 in the case of regional NSW and $10,000 in the case of regional VIC.

Drill down further though and you’ll discover that the larger regional areas with closer proximity to the capitals offer very competitive incomes in exchange for a better lifestyle.

Take Sydney for example, where the average salary is $66,000. About 90 minutes south is the Illawarra, where the average salary is $59,000 – a bit below Sydney but well above the ‘rest of state’ average. About two hours north is Newcastle/Lake Macquarie, where the average salary is $58,000.

You can see in the statistics below that the further you move away from a capital, the greater the income disparity. This is because regional areas closer to capitals tend to be thriving cities in their own right, with strong and growing local economies and a broader range of employment options.

NSW – Top 6 areas outside Sydney for income

1.     Illawarra $59,182

2.     Hunter Valley (excluding Newcastle) $59,015

3.     Newcastle/Lake Macquarie $58,064

4.     Capital Region (Goulburn, Far South Coast) $54,726

5.     Central Coast $54,428

6.     Central West (Lithgow, Orange, Parkes) $53,330

VIC – Top 6 areas outside Melbourne for income

1.     Mornington Peninsula $54,055

2.     Geelong $53,849

3.     Latrobe-Gippsland $51,633

4.     Bendigo $50,352

5.     Ballarat $50,008

6.     Hume (Wodonga, Wangaratta, Seymour) $47,998 

Now, here are the stats that will really surprise you. 

We went through occupational data for people aged 35-54, which is the typical age of families; and found that some blue collar jobs paid just as much and even more in regional areas compared to cities in both NSW and VIC.

For example, labourers aged 35-44 in Sydney earn an average $47,031. In regional NSW, they earn $46,744. Technicians aged 45-54 in Sydney earn $71,476 compared to $71,991 in regional NSW.

Machinery operators and drivers in regional areas can earn more than their city counterparts. An employee aged 35-44 in Sydney earns $62,120 per year. In regional NSW, they earn $81,136.

There were bigger gaps between pay with white collar jobs.

Managers aged 45-54 in Sydney earn an average $142,265. In regional NSW, they earn $89,752. Professionals aged 35-44 in Sydney earn $103,632, while their regional equivalents earn $81,423.

Salary figures for Melbourne and regional VIC mirrored NSW trends.

This data shows that big city incomes and small town lifestyles are possible if you do your research first. In most cases, employees will have to take a pay cut but blue collar workers are more likely to earn similar money.

It’s up to you what price you put on a better lifestyle! 

*Estimates of Personal Income for Small Areas, Employee Income, 2011-16, ABS, published June 19, 2018

 

Where are the buyers?

Monday, July 23, 2018

If you’re selling in Sydney and Melbourne today, odds are you’ve noticed fewer people turning up at opens and few bidders competing at auction. There’s a few reasons why buyer numbers are down, so here’s what’s happening and what you can do about it.

1.     Investors have lost interest

After five years of exceptional price growth, rental yields in Sydney and Melbourne are pretty low (3.2% and 3% respectively) in comparison to other capital cities (4.4% in Brisbane, 4.6% in Canberra) and the prospects for further capital growth in the short to medium term have diminished.

At this point in the cycle, investors leave to pursue other markets, which is something we are seeing in Brisbane now as more southern city investors look north for opportunity. First home buyers are somewhat filling the void left by investors but only in the lower price brackets.

If your property offers particularly strong investment credentials, such as separate accommodation that improves the overall yield; or a large land size with potential for re-development or sub-division, include these specifics in your marketing to capture investors’ attention.

2.     Owner occupiers have made other choices

There comes a point during booms when a sizeable proportion of owner-occupiers give up and depart the market. They decide prices are just too high, it’s simply too hard to compete and they’re better off staying put and renovating or doing a seachange out of the city altogether. 

Having said that, there are still plenty of buyers out there today – your agent just has to work harder to find them and negotiate with them. 

In this market climate, owner-occupiers are not willing to buy anything just to get into the market anymore, which means the better quality properties are attracting the greatest attention.

You and your agent need to do all you can to help buyers fall in love with your home. You can’t change the location but you can change the presentation of your property. You can also reach more buyers with a comprehensive marketing campaign.

3.     The credit crunch

Buyers’ borrowing capacity has changed and it’s taking longer to get approval following further credit tightening this year. This is a big issue in the market today. We’re hearing many stories of buyers pulling out the night before auction because their loan hasn’t come through in time.

Agents need to educate their buyers and ensure their pre-approvals are recent. If not, it’s wise to suggest they double check with their bank. The rules are changing day by day as each individual lender determines their new assessment criteria.

Agents should proactively refer buyers to high quality mortgage brokers that they personally know and trust. It’s part of an agent’s role right now to ensure every buyer interested in your home has their finance. With few buyers around, you don’t want to lose further competition because one or two of your best prospects have loan troubles.

If you’re selling via auction, you can always postpone if one or more of your serious buyers aren’t ready due to financing delays. This is a strategic decision though – talk to your agent.

4.     Fewer foreign buyers in our market

Australian property is less appealing to foreign buyers following the introduction of arbitrary application fees in 2015 and rising stamp duty surcharges and other taxes in several states.

The latest annual report from the Foreign Investment Review Board show approvals for residential property were down from 40,149 in FY2016 to 13,198 in FY2017. This is partly explained by the effect of the application fees, with investors now only applying when a purchase is highly likely. 

Other factors include China limiting capital outflows and Chinese investors looking to cheaper and closer South East Asian markets like Thailand and Vietnam, which are also associated with the Belt and Road policy that aims to link China more directly with Eurasia via massive new infrastructure.

A drop in overseas investment, particularly from China, is being felt mainly by developers and investors selling newly-built homes, as non-resident foreigners can typically only buy new.  

In conclusion…  

It is normal for homes to take longer to sell in a post-boom market. The most important things you can do to ensure as many buyers as possible engage with your home is choose a good agent, price your home correctly and invest wisely in its presentation and a comprehensive marketing program.

 

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