MARKET REVIEW

There is no question that the residential real estate market is doing it tough. On the eve of Australia Day, the ABS released key Consumer Price Index (CPI) figures showing inflation remained ‘unchanged’ in the December quarter 2011 which is the first time there has been no quarterly inflation recorded in Australia since December 2008. The ABS also recorded in the December quarter 2011, a 1% increase in rents and a small increase in new dwelling purchases by owner occupiers. The two consecutive interest rate decreases at the end of last year and the RBA’s decision to leave rates on hold in the 1^st week of February 2012 may give property enthusiasts greater confidence to enter the market leading up to quarter 1 2012. Buyers are also ensuring that they do their research prior to committing to a decision.

Property transactions continue their downward trend in 2011 with transaction volumes 13% lower than 2010, 26% lower than 2009 and 33% lower than recent highs recorded in 2007, which is applying significant pressure on margins and agent commissions, especially in lucrative markets around the country. As a result, we can expect to see a softening of national property markets throughout quarter 1 2012.

Mosman, Sydney achieved the No.1 ranking again for the 5^th year  in a row based on receive rpdata statistics with more than half the properties in  rpdata’s ‘Top 100 suburbs’ list showing a median house value higher than $1million.

2011 was generally speaking a weak year for the residential property market sector. Across the combined capital cities home values fell by -3.5% over the 12 months to November 2011. Consumer sentiment has also been at fairly low levels over 2011 by default in terms of what’s been happening in global markets. We are still seeing this resinate in the open stages of 2012 where consumers are focusing on firming up debt and family finances and with the future prospect of a further interest rate cut in quarter 1 2012, it may not be enough to sway consumers to start spending again, especially in the residential property market. We expect housing markets in Australia to improve over the course of 2012 as a result of the two previous interest rate cuts and possible further cuts to come, however growth will be minimal at best and property investors will need to be more targeted and selective in their approach to identifying and purchasing assets. We may also see a slow down in the take up rate of first home buyers entering the property market as a result of the FHOGS being scaled back.

Property market conditions for the first half of 2012 will be subdued as investors and owner occupiers/home buyers will be increasingly weary of world economic conditions that may result in unemployment slowly rising in white collar sectors affecting top end property prices.

Houses

Sydney housing has been the nation’s best performer with dwelling values up 0.4% in December 2011 and by 0.7% over quarter 4 2011 and recorded the largest volume of recorded sales in December 2011 than any other state. Over the December quarter, Australia’s capital city home values declined by -0.5% and represented the year’s smallest quarterly decline in housing values. Regional house values fared a little better towards the back end of 2011.

Gross weekly rental returns across the capital cities were up 1% over the December quarter and are now 6.3% higher than the same time last year. The higher rental rates in conjunction with property values falling have improved property investors ’overall yields.

National auction clearance rates in Australia for December 2011 were 47%, with both Sydney & Melbourne representing 49%, Brisbane 25% and Adelaide 37% respectively.

Sydney

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Melbourne

If you ask most real estate agents how was 2011, they will tell you it was an average year for business as sales volumes were down approximately 20% – 30% across Melbourne. This is an indication that vendors in the most liveable city of the world felt, that selling in 2011 – would mean selling at a discount by comparison to 2010 levels. Surprisingly the reduction in sale volumes had a mild stimulating effect on one pocket of the market being, quality property – as few high quality properties hit the market pace demand was high for this market segment and price marginally rose. For the rest of the housing stock however there was a slight reduction in prices and property took on average nearly twice as long to sell.

People talk about the clearance rates as being the number one indicator of the market place – but it’s easy to forget that auctions are only being conducted on a sub section of the market place.  The average days on market is the most comprehensive way to gauge the state of the market. Towards the end of 2011 property was sitting on the market on average 50 days and towards the end of 2012 property was sitting on the market on average 90 days. This effectively means there were fewer buyers in the market place, and those buyers were taking a lot longer to see eye to eye with vendors.

The REIV has vacancy rates at 2%. where as, SQM research has vacancy rates at 4.4% – the reality is properties are getting harder to rent – this is largely due to the slight over supply of property that is beginning to haunt Melbourne property investors and owner occupiers who over extended themselves in 2010 – we feel that rents will flat line this year and with yields already low, it appears prices might have to fall in the short term to lure investors back into the market.

So what can we expect for the year ahead – well, in my opinion a very similar year to 2011 – I think it will take the average property 2 months to sell, I feel that there will be very similar transaction volumes – and if there are no rate reductions this year or god forbid a rate rise: then there is the real possibility of further slight falls within the market place.

As indicated in my December 2012 on the ground, Melbourne is going through a correctional phase at the moment. This is a normal pattern in any real estate cycle and the market will recover as we have solid long term growth fundamentals. If you are going to invest in Melbourne, stock selection and a sound strategy is critical. It is vital that you align yourself with a buyer’s agent that can not only offer you the best of Melbourne (in difficult times) but superior opportunities in other parts of Australia where your investment may have a better opportunity for short term growth.

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Brisbane

2012 will likely be a mixed bag for residential property in QLD. Brisbane, having received the ignoble title for the worst performing capital city of 2011, is believed to be showing signs of recovery. This is a welcome sign for both prospective buyers as well as owners in a state that was ravaged by natural disasters and bad sentiment for much of 2011. So far 2012 has given a small glimpse into the upside that is possible coming off a low base.

Many buyers have come to the realisation that they will have to meet the market if a sale is to be achieved and there are indeed some great opportunities to buy in selective areas.

The gold Cost and Tweed area is still on the nose and is best avoided until signs of recovery  are within coo-ee. Regional hot spots such as Gladstone have received their fair share of press and despite high yields there is a premium attached to entering these type of markets.

As usual Capital 360 is well placed to service the QLD market and with eyes firmly on Brisbane we anticipate it to be an exciting year ahead!

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Perth

Many have billed 2012 as a big year for property in the West. The strength of the resource industry is maintaining continual positive net migration (with strong wages) and this invariably has a positive correlation with rising rents and property prices.

With the unemployment rate steady at 4.3% (over a full per cent more than the national average!) the strong economy will be firmly behind the rejuvenation to be expected in the residential property space.

While still too early to tell when and where any recovery will occur, history states that with the falling rate in developer activity it is most likely to occur in established metropolitan regions away from the urban fringe.

There are ample opportunities in the property market provided you get the right advice on where to invest so speak with a Property Strategist from Capital 360 today.

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Adelaide

Soft and sombre is the mood for 2012 in Adelaide. Transaction numbers will be low and prices are tipped to decline. For those souls brave enough to consider buying in Adelaide focus on areas where infrastructure spending is anticipated although this is no guarantee to safeguard against shrinking capital. For investment opportunities we recommend looking toward other states where at least property is on much firmer ground.

There are ample opportunities in the property market provided you get the right advice on where to invest so speak with a Property Strategist from Capital 360 today.

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Company Title home units are found in buildings owned by companies registered under the Corporations Act. The majority of these were set up in the 1920’s and 1930’s, and were the first chance for people to own a home without buying a house. Company Titles largely disappeared when Strata Title was introduced in the 1960’s. However there are still about 100 Company Title buildings in Sydney. In the East, you will find them mostly in Kings Cross, Potts Point, Darlinghurst and Elizabeth Bay. On the North Shore, they are likely to be in older areas: Kirribilli, Lane Cove and Neutral Bay with some further North in Turramurra and Killara.

A person who buys a company title property receives shares in the company that owns the building and a share certificate. The ownership of the shares gives them the right to occupy in the unit. However, the owner of the shares does not receive certificate of title to the property. Only in Strata or Torrens title do you receive a certificate of title to the property.

Many people in the market for a home unit are attracted to older buildings because of their obvious attractions: handsome foyers, attractive locations, and living spaces with such things as sunrooms and separate pantries. If you see a building like this, it is worth asking the agent whether it has a Company Title. (Some older buildings began with Company Titles but have since been converted to Strata Title.) The agent will know and usually has copies of the contract at ‘open for inspections’. Company title outgoings also generally include water with the levies so this will often be an initial hint.

Buying a certain number of shares entitles the shareholder to exclusive possession of a particular unit and perhaps a space for a car. Shareholders vote to decide company rules and regulations on such things as the right to lease. Unrestricted company title buildings allow owners to rent their apartment to a tenant and thereby retain the apartment as a normal investment property. Restricted company title buildings mean that shareholders must use the apartment for their own occupation. Sometimes they can have family or a friend live in the apartment, subject to the guidelines of the company.

On the front page of a Strata Title contract there will be reference to the Law Society’s standard form of contract, currently the 2006 edition. On the front page of a Company Title contract there is no reference like this. The contract for a Company Title home unit is usually headed ‘contract for the sale of shares’.

Company Management 

The Constitution:

The constitution of a Company Title building was referred to in the past as the Memorandum and Articles of Association. This document lists the official procedures by which the company conducts the operation of the building.

The Constitution allows for the Company to appoint a Board of Directors who take care of management tasks, but shareholders should bear in mind that they have rights and responsibilities as well.

The Board:

Each company has a Board of Directors responsible for ensuring that the company is managed for the benefit of the shareholders.

Most Boards appoint an external Company Secretary responsible for the collection of levies and the day-to-day maintenance and operation of the building. However, there is no obligation on the Board of Directors to appoint an outside manager, and some boards manage their own affairs.

The Board of Directors is responsible for approving new shareholders and if leasing is allowed under the articles, approving tenants who occupy any of the units.
Other information for shareholders:

All shareholders in a company title building are entitled to vote at the Annual General Meeting.

Shareholders elect the Board of Directors. There is usually a minimum number of directors elected at one time, as specified in the constitution. Even if there is an external manager, the directors are responsible for the day-to-day management of the building, so the personnel on the Board directly affects the owners.

Company Title buildings also have a set of rules and regulations. Owners who reside in the building as well as tenants and invitees, are bound by those rules.

Some Company Title buildings place restrictions on long-term tenants. Some buildings will allow tenancies for short periods of time (up to one year) while other buildings may not allow tenancies at all. It is necessary to look carefully at the constitution of the company to find out whether leasing is allowed. This may not be an issue at the time when you buy a unit, but it may be a problem later.

Another area that may be of importance later is what happens when there are disputes between a shareholder and the Board or between shareholders. Always check to see what the situation is in the building you intend to buy into.

Each company title publishes an annual set of accounts. All holders of shares are given a copy of those accounts.
Finance

One obstacle to buying Company Title units in the past has been the buyers’ belief that they will be hard to finance. Some lenders do restrict the maximum LVR that they are willing to lend on Company Title properties. However a number of banks and building societies will finance company title home units in the same way as financing a strata title home unit. It is suggested that you speak to your bank or finance company to ascertain what their requirements are.

Constraints on Owners

There are three other areas prospective owners should consider before deciding to buy. They relate to what you are permitted to do as a resident, and which you may find restrictive.

They are:

• The rules and regulations governing the building
• What you are allowed to do by way of refurbishment of your living space; and
• What happens in case of a dispute with the Board or the neighbours in the building.

Rules and Regulations:

The rules and regulations may cover such things as making noise, parking motor vehicles (sometimes a problem in older buildings), disposal of refuse, gardening and landscaping, keeping pets, and the use of services and facilities.

Refurbishment:

All company title home unit buildings have rules and regulations relating to refurbishment of the unit. These rules and regulations will be set by the company and prior to carrying out any refurbishments (other than of a minor nature such as painting and minor decorating matters) a plan/outline should be submitted to the companying detailing exactly what is required.

You should check with the company secretary to ascertain what the company’s requirements are concerning the refurbishment of units.

On occasions if a major structural change is planned, you may need to obtain development consent from the local council. The company will need to give consent to lodging that development application (DA) and may need to affix the company seal to the DA. This may vary from council to council.

Disputes:

Most disputes are resolved by means of negotiation between the company and the owner of the shares or the occupier of the unit.

If a dispute cannot be resolved by the Board, there is no other forum for resolution other than the Supreme Court. This is expensive, and not satisfactory, as the court will quite often refuse to get involved in the day-to-day operational matters of the company.

Letting or Leasing a Company Title Home Unit:

A buyer who intends to let out a Company Title home unit should check with their solicitor or conveyancer whether the particular company allows letting. The company can refuse to allow letting at its own discretion. Most companies have rules and regulations relating to letting.

If the company allows letting, each prospective tenant is required to produce at least two references and must usually attend an interview. , Company Title Boards can refuse to allow a tenant to occupy a unit if they are not satisfied that the tenant is a fit and proper person to live in the place, or if the tenant intends to allow other people to live in the unit without company approval.

If a company refuses a tenant, it is up to the owner to resolve the issue. The company will not become involved with discussing the matter with the tenant.

Buying a ‘Restricted’ Company Title Property

If the title is ‘Restricted’ the purchaser would be an owner occupier and not be concerned that the property may never be able to be rented out at any stage. Restricted buildings then tend to have only owner occupiers living in the building, and the buildings tend to be very well kept.

Also, generally the purchaser needs to be approved by the other owners in the company, which means the same if you become an owner. This helps to keep ‘undesirable’ people buying into the building.

Buying an ‘Un-restricted’ Company Title Property

If the title is ‘Un-restricted’ the purchaser may still need to be approved by the other owners in the company, but there may not be as many restrictions around leasing, pets etc. This depends on the Constitution of each company.

Selling a Company Title Property

Selling a Company Title home unit is not unlike selling a Strata unit. Both kinds of dwellings are part of a building where other people live, and not separate structures. However, remember that when you sell a Company Title unit, you are selling shares and not property.

Some companies have particular requirements relating to the transfer of shares and will not process the transfer application until a ‘vendor’s pack’ has been purchased from the company secretary.

If the title is ‘Restricted’, it may be more difficult to sell the property, as it cuts out investors and buyers may be scared off with the restrictions the company may have.

Price 

Company title properties are generally priced lower than similar strata titled properties, particularly in lower price ranges. However this is not always the case as Company Title allows for exclusivity which can be a desired trait for many owner occupiers and may mean that the price can actually be higher.

If you would like to know more about Capital 360’s Property services or would like to arrange an obligation FREE Initial Consultation with one of Capital 360’s investment experts, please contact us online or call us on 1300 227 360.

The latter half of 2011 saw a soft national property market with many purchase prices struggling to meet the expectations of vendors. Nationally each capital city has experienced a reduction in median values of between -7.0% (Brisbane) and -0.5% (Sydney) for the year ending 2011. We anticipate that this subdued market will improve throughout the year, but this current period of global / EU uncertainty creates exceptional conditions to be adding high quality assets to a long-term property portfolio.

Some good news for housing on the home front comes from the resource sector with activity increasing and resource costs upheld from strong international demand. The Melbourne Cup Day interest rate cut and the following December reduction were welcome news for buyers and sellers alike and future interest rate movements will continue to influence the market strongly. Further forecast reductions in interest rates will help limit any further falls in softer markets and speed up recovery in the Nation’s more resilient markets.

The National market is likely to experience several new trends whereby apartment growth will match and in some cases outperform house price growth. Obviously exceptions will apply, however it will continue to reflect the demographic shift towards apartment living, particularly with affordability constraints in established metropolitan areas (as well as the stronger rental yields obtained by apartments for investor owners). While prices will improve through the year, growth performance will vary dramatically by state, suburb and price brackets / property types in each micro-markets.

“In the 2012 property market, fortune will favour the brave…and those armed with the best research and investment advice.”

Capital 360 believes the Australian property investment market has forever changed, in that you can no longer just throw a dart at the housing dartboard and just expect that you will make money.  Quality research and advice will be King.  The good news in this is that because it is not so obvious to the general market where the best opportunities lie, that those in the know will have less competition for these higher-performing assets.

Our research and buying teams in each major Capital City are tirelessly helping uncover great buying opportunities for our clients that not only represent excellent value currently but will outperform over the longer term.  5-10-20 years from now all that will matter is the equity you have created and the passive income you are generating.  The results of your portfolio will be greatly impacted by the strategy you employ with your existing assets and your next purchase… If you don’t have a property strategy (or a current strategy) or simply want more confidence that your property portfolio will deliver the results you need to retire comfortably with a strong equity base and passive income…then we strongly suggest you contact us today and arrange a FREE consultation with one of our property wealth strategists to review and implement a property strategy that will deliver results.

Here are Capital 360’s ‘Top 2 Suburbs by State’, hand picked by our Research Team.

New South Wales:

Without doubt New South Wales and the Sydney market in particular are demonstrating their ongoing desirability for investors and homeowners alike, with values remaining steady and marginally rising in many areas. While many continue to question affordability constraints of Sydney pockets of Newcastle have been tipped to perform well, particularly those close to the CBD having benefitted from recent gentrification and development. However, owing to overwhelming demand and limited supply in Sydney’s middle and inner ring suburbs Capital 360 has picked two standout Sydney metro suburbs as our top picks.

Alexandria: Formerly a suburb dominated by industrial activity the investment potential offered in Alexandria has been a poorly kept secret. The suburb has several desirable pockets with the most notable being the ‘Golden Triangle’ in the suburb’s north; a very tranquil area that is very close to it all, including the now redeveloped Australian Technology Park which now also houses Channel 7’s new headquarters. The traditional workers cottages and Victorian terraces offer excellent renovation potential for savvy buyers and with the development of the former industrial Ashmore precinct into apartment dwellings good quality houses will be sought after by working professionals wishing to be close to the CBD and lifestyle attractions.

Dulwich Hill: Being sandwiched between two strong performing suburbs of late (Summer Hill and Marrickville) Dulwich Hill is very well placed to enjoy strong capital growth for both houses and units. Both younger apartment buyers and families looking for houses are attracted to the area. With an established train station as well as the forthcoming light rail infrastructure there is excellent appeal to professional renters and buyers. With median prices for houses and units at $814,000 and $460,000 there is increased affordability (compared to other areas in the inner west) and with block sizes and units slightly larger there is also more bang for your buck.

A.C.T

Canberra currently has the nation’s second most expensive capital city median price (behind Sydney). The vacancy rate in Canberra has traditionally been extremely low and this has helped achieve very high average yields (units) of approximately 7.7%p.a. The two suburbs put forward offer a sound relationship between yield and growth prospects and we anticipate that the A.C.T and Canberra will continue to track the performance of the combined capital cities.

Bruce: Underpinned by the tight rental market Bruce derives its popularity from two large tenant bases, namely the University of Canberra and the numerous government offices in the immediate area. In four years the population has increased 47% and the vacancy rate is as low as 0.5%. In the last twelve months house prices have jumped 11.0%. With a median house price of $660,000 it is routinely possible to achieve 5.0%+ yields.  For those seeking affordable units with high rental yields 4km from the CBD an alternative may be the suburb of Braddon.

Kambah: Kambah offers an investment alternative well suited to lower price points and investment strategies. Located in south-west Canberra the median house price of $480,000 it is well priced to make the most out of Canberra’s strong demand for housing. An alternative area offering the same strategy in the Territories North is Charnwood with median house price of $390,000.

Queensland:

Queensland (with Brisbane in particular) has recorded some less than flattering statistics in the past twelve months. Largely owing to the ‘F’ word (floods) Brisbane has recorded a fall of 6.3% in median house values in under a year. With much hub-bub and volatility in resource based markets in regional QLD we believe Brisbane offers a low risk alternative, well-suited to a medium-term investment outlook. While the national property market has surged since the GFC Brisbane has undoubtedly underperformed when compared to other capital cities. With long-term rental growth sitting at 5.6% and 6.5% per annum for houses and units respectively Capital 360 believes that the Brisbane market will begin to change for the better.

New Farm: While investment grade housing in New Farm has a higher entrance price ($750,000+) correctly positioned units in smaller complexes are well-placed to enjoy growth through their proximity to lifestyle attractions and the CBD. The long-term growth rate of 8.98%p.a. (units) is strong and the suburb has low vacancy rates (1.9%) helping to offer a sound ‘set and forget’ investment option.

Paddington: In contrast to New Farm the Paddington housing market is an attractive proposition for would-be investors. With good housing stock available from between $650,000 to $720,000 there is still scope to build capital value and rental income through renovation works. The relative value on offer (just 3km from the CBD) is a bonus and with half of the population renting and a vacancy rate of just 0.8% finding a good quality tenant should be no problem. Likewise, the apartment market is comparably affordable (with good two bedroom units available to purchase from $400,000) and is well placed to enjoy gains as the Brisbane market gains momentum.

Victoria:

Like the rest of the Australian real estate market Victoria is made up of countless smaller markets and in spite of a broad market decline in Victoria (compared to this time last year) there are numerous pockets where value and good growth prospects may be found.

Geelong: With a diverse local economy and ongoing gentrification Geelong’s profile remains firmly on the ascent. Increased government spending on infrastructure such as road and rail upgrades (over $4b worth) is likely to boost the already strong population growth (higher than the national average) putting an upward pressure on both house and unit values.  The area remains relatively affordable with median pricing of $440,000 for houses and $329,000 for units, making it a worthwhile area to consider.

Balaclava: Balaclava abides by the investment notion of ‘low price, high location’ inferring that units at lower purchase price, in a premium location offer good resilience and growth prospects driven by affordability. Balaclava is normally over-shadowed by its higher profile neighbour, St Kilda East, though with 50% of residents renters, a vacancy rate of 1.6% and advertised rental yields increasing by 24% in the year to date it is well worth further consideration for prospective investors keen to purchase a quality unit.

Western Australia:

While Western Australia has recorded falls in values recently, Capital 360 believes Perth is approaching the bottom of the property cycle and likely to approach a growth phase in the short-term.

Subiaco: Being one of Perth’s more sought after suburbs Subiaco invariably has a strong level of interest from affluent buyers. While the suburb is far from cheap (with a median house price of $902,000 and $638,000 for units) there exists strong potential to negotiate favourable prices in a desirable and well serviced area while taking advantage of negative gearing benefits with the anticipation of growth returning the a competitive inner-Perth market.  Harder hit than its more affordable neighbours by recent price declines, watch this space for a ‘bounce’ as the cycle turns.

Carlisle: Carlisle is a pretty suburb 6km south-east of the CBD. It is well serviced by train, shops, and educational facilities and with easy access to the airport. With unit prices relatively affordable (a median of $412,000) the average rental yields are quite high at 5.2%. With the dominant demographic being young professionals (singles and couples) and student rental demand is high. Even in a slow market the suburb has recorded (albeit a modest 2%) growth, making this a area to observe when heat returns to the West Australian market.

South Australia:

South Australia and Adelaide in particular are very affordable on a national scale.  In fact, with a median house price of $400,000 it is the most affordable of any mainland capital city.

Semaphore: At 15km from Adelaide’s centre Semaphore is an older beachside suburb that still demonstrates good affordability, especially compared to more expensive suburbs nearby such as Henley Beach. As the development of the port nearby continues and the introduction of cafes and restaurants continues we hold reserved hopes for the area.

Torrensville: Capital 360 appreciates that the beginning of gentrification is a good indication of investment potential with Torrensville being an excellent example. Located just 4km west of the CBD the identity of the suburb is changing and with good proximity to the city, beach and transport it is likely to experience good growth in both rental values and capital value.

Tasmania:

In a similar fashion to South Australia, Tasmania is tipped to be a solid performer based on the affordability of the area. Hobart remains Capital 360’s pick with two suburbs standing out.

Moonah:  Less than 10 minutes to the CBD and with access to good schools and shopping centres Moondah has numerous attractions for would-be investors. Cheaper than neighbouring New Town it is possible to enter the housing market with as little as $350,000 and experience strong rental demand from a large pool of prospective tenants.

New Town: 3km from the City Centre Moondah has a strong popularity with young professionals and families. Houses have a median of $438,000 and have grown 14% in the past 12 months. With good yields of 4.51% the suburb is likely to continue as a favoured spot for investment.

Northern Territory:

The last decade has seen a phenomenal level of growth with an annual compound rate of approximately 12.8% for Darwin. More recently this has reversed with the 12 months to June 2011 recording a fall in values of 2.2%. For this reason Capital 360 advises investors to focus on more central suburbs within close proximity to the Darwin CBD, which are more likely to be more resilient and offer strong rental yields.

Parap: With a gross rental yield of 5.5%p.a. for units Parap offers good investment potential. In the last twelve months the median unit price has fallen to $397,000 (down 16.2%) so there are some good buying opportunities.

Stuart Park: Similarly to Parap, Stuart Park offers excellent rental yields (which are of paramount importance in a slow market as the NT’s at present). With units returning 5.75%p.a. GAR and a median of $416,250 (cheaper than surrounding areas) the suburb should be buoyed should short-term market volatility continue.

While a long term buy and hold strategy is an ideal way to achieve maximum capital growth from your investment property, there will come a time when it will benefit your wealth creation position to sell.

When that time arrives, your first priority as an investor should be to achieve the best sale possible. So here’s a concise explanation of the sale process to put you on the right track.

Preparation

Before you rush into the sale process, it is important that you have a firm idea of your end goals and have evidence that the sale is going to be worth your while.

Use your most recent valuation of the property – a fresh one is ideal, but up to six months old is acceptable – to gauge the market value of your property and the possible outcome of the sale. Then, meet with your accountant to crunch the numbers. This should also help you determine your asking price.

It can be almost impossible to successfully predict the most advantageous time to sell your property, however you can hire an independent property advisor to help improve your chances. They will also be able to review the asset you’re looking to sell, consult you again on the possible sale price and help you plan an appropriate timeline for the sale.

Methods of selling

There are two main ways to sell a property. The most popular is to recruit a professional, although there are many property owners who choose to sell their property themselves.

Using a professional

Hiring a professional to manage your property transaction is the best way to reduce the time, emotion and stress that is often consumed during the sale process.

Consider hiring either a selling agent (real estate agent) or the increasingly popular vendor’s advocate. Both professionals will ensure the important things are taken care of, such as advertising, open inspections and negotiation (of the final sale price).

However, a vendor’s advocate offers a more holistic service in the sense that they oversee the entire sale including;

• Selection of the right selling agent (and negotiation of their fees)
• Overseeing the marketing process
• Property presentation tips

The combined use of both advisors will set you back between 1%-3.5% (plus GST) of the final sale price. However, if you have chosen the right professionals, the improvement in your final sale price will outweigh the cost of their services by far.

As part of your selection process for the right professionals, ensure they are licensed in their field and registered with the Real Estate Institute in their state. Also, ensure they;

• Are willing to reveal their fee and commission structure
• Are experienced selling in the area
• Are good communicators and personable
• Quote an asking price similar to your independent valuation results
• Are willing to provide you with a defined period for sale (usually within three months)

Your vendor’s agent should ensure that you stay in close contact with the real estate agent and the buyer during the process of the sale. Feel free to contact them as often as possible to stay in the loop and to express any concerns or requests you might have.

Selling DIY

A successful DIY property sale requires a generous combination of four elements – time, organisation, research and personality. Even with all four, it can be a difficult task to ace.

However, it is achievable with the right preparation and guidance on what to expect. And so, in order to provide the best possible chance of a top sale, we suggest you read and heed advice from the following steps.

1. Follow the ‘preparation’ steps explained (here-link) in the beginning of the article
2. Research the net for recent sales (for properties similar to yours) located within a 3-6km area and compare the results from your valuation against actual sales
3. Attend multiple open inspections to get the snoop on your target market’s needs and wants
4. Consider advertising options (newspapers, real estate magazines, internet, ‘For Sale’ signs). Which would best reach your target market of buyers (while staying on budget)?
5. Talk to your valuer or current rental property manager about how to improve on any negatives in relation to your property (but don’t over capitalise getting things fixed!)
6. Focus on your property’s positives to create your marketing material for advertisements. Read other ads for style and structure ideas, and always highlight factors that reveal the property’s uniqueness, aspect, land size, as well as local area reputation, services, amenities and proximity to transport
7. Conduct research into auction clearance rates in your property’s area. If they are high (above 70%), your property is unique and there is a seller’s market, then an auction might be for you. If an auction makes you nervous, or you’d prefer not to pay the $300 for an auctioneer, consider selling via private treaty
8. Prepare for open inspections by cleaning and styling the property, and compiling an information pack to hand out to potential buyers (including photos, and the property’s address, positive features, a map, a floor plan and your contact details)
9. Make it easy for potential buyers to find the property on inspection day by using signs out the front. Have windows open, something fragrant cooking on the stove or some refreshments for potential buyers. Remain emotionally unattached and be ready to answer some tricky questions (rehearse with friends)
10. Respond to any offers within 24 hours and never drop your price more than 1-2% (of your original asking price) at a time. Ideally, you want the buyer chasing you to secure the sale, not the other way around!
11. Remember that the buyer has the right to inspect the property before settlement to ensure everything is as it was when they first viewed the property.

Legal representation

The typical approach is to hire a licensed conveyancer or licensed solicitor (usually at a cost of between $1,200-$2,500 respectively, per sale or purchase transaction). Each professional will organise the legal agreement by which the vendor (you) will sell the property and the buyer will purchase it. They also have your interests at heart when negotiating the final contract terms and conditions with the other party. On top of that, they will also both organise the legal transfer of ownership between you and the purchaser.

For more information on the Sales Advisory Process or if would like to arrange an obligation FREE Initial Consultation with one of Capital 360’s investment experts, please contact us online or call us on 1300 227 360.

Interesting times in the Sydney market, indeed. Despite the expected agent hype around the “super Saturday” – traditionally one of the most active weekends for buyers and vendors in the Sydney resi market – the Sydney market did little to inspire. Clearance rates were at a relatively flat 52% (across 641 scheduled auctions). Capital 360’s observations point to a lingering disparity between vendors’ expectation and buyers’ keen desire to press on price and snag a bargain.

As expected, market activity has been buoyed by a late rush by first home buyers – keen to beat the forthcoming cessation of stamp duty concessions.

Despite this, in the lead up to the recent rate cuts, market sentiment appears to have been flagging and in a fairly fragile state. Andrew Wilson, Chief Economist at Australian Property Monitors, points to the prospect of a European credit crisis as being a contributing factor to the downward pressure on local house prices and market activity.

The latest RP Data-Rismark Home Value Index indicates that capital city values slid 0.5% in seasonally-adjusted terms over October, while the 10 months prior saw dwelling vales decline 4%. Sydney and Canberra were the most resilient markets, showing flat to positive growth over October (0% and 1.6%, respectively).

RP Data research director Tim Lawless notes that the lower, more affordable segment of the resi market has endured current market conditions comparatively better than their premium-priced counterparts. Certainly, with a combination of falling interest rates and some more attractively priced properties in the lower-mid range segment, we’re observing that the lower priced market segment appears to be responding to improvement in affordability faster than the upper end.

“The combination of lower interest rates, cheaper homes, and rising incomes is generating a welcome boost to housing affordability, particularly in those markets where value falls have been more significant,” Lawless said

ON the rental front, the recent Labor Party proposal to cap rents in Australia has thrown the cat amongst the pigeons with a prompt response from the REIA, saying it would be disastrous for rental affordability and the property market. The proposal has two aims in both monitoring rising rents in the private rental market whilst identifying mechanisms through which affordability can be maintained through rent capping legislation.

Meanwhile, vacancy rates across key Sydney inner-ring suburbs are still hovering at a super tight 1%, which is tough news for tenants. Investors, on the other hand, should take this as welcome news. On a wider scale, vacancy rates remain relatively higher, ranging up to 8%+. Again, Capital 360’s caveat for investors is to do your homework and avoid the mistake of adding sluggish investment assets to your portfolios.

The Capital 360 buying team are always on the lookout for good buying opportunities – both pre and post-Christmas – as vendors are keen to lock in sales and create some certainty for their next steps into 2012. As a prospective investor having your finance approved and deposit in hand will put you in good stead for some great buying opportunities into 2012.

Why spend too much time worrying about tomorrow when you’ll miss the opportunities you have today?

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Is the Melbourne market in an undersupply like some experts are still predicting? The answer is there are pockets of Melbourne that are in oversupply and more pockets are likely to appear as we move further into 2012. This is evidenced by the amount of stock which is currently for sale according to Louis Christopher of SQM research there are approximately 52,000 properties for sale – which is double the long term average. Furthermore, the low clearance is compounding this issue and stock just keeps building.

According to Charter Keck Cramer we have moved from a general undersupply of property in 2008 to an oversupply which is not set to reach its peak until mid 2013. The reason why developers and governments have let this happen is the record population growth of 2008 and 2009 has not been sustained and now there are too many properties and not enough buyers.

The increasing stock levels is also having an affect on vacancy rates with the REIV indicating that they have moved to 3.1% – this is the first time they have been above 3% since 2006.

Vacancy rates above 3% give renters the upper hand in the market place and means rents will not rise in the short term and in the oversupplied areas rents are likely to come back slightly.

This is not good short term news for investor – but this will start to open up some opportunities by way of distressed property by mid next year. The interest rate cut today is positive news for the market however unless stock is reduced and/or rents start rising, there is little hope of any positive market movement in the short term.

Melbourne is going through a correctional phase at the moment and this is likely to continue well into 2012, if not beyond. This is a normal pattern in any real estate cycle and the market will recover as we have solid long term growth fundamentals. If you are going to invest in Melbourne, stock selection and a sound strategy is critical. It is vital that you align yourself with a buyer’s agent that can not only offer you the best of Melbourne (in difficult times) but superior opportunities in other parts of Australia where your investment may have a better opportunity for short term growth.

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Similar to the Perth market, the bottom is near… Brisbane has experienced the largest median house price decline of any capital city down 8% to $402,000 according to RP Data, continuing the decline which began almost 18months ago in June 2010. We are also experiencing the same downward trend in the median unit price as well.

Capital 360 believes that the Brisbane property market is still impacted by a continuous oversupply of properties versus buyers (stop levels are increasing where buyers are decreasing). Combined with low expectations for capital growth and tighter financial constraints, the situation in Brisbane is improving, however, and consumer confidence is beginning to return to the property market.

Auction clearance rates have been steadily declining in recent months with the latest weekly result sitting at 25% with 24 properties scheduled and only 6 sales recorded with 6 withdrawn. This represents a total value of just over $2m in property value.

Rental incomes from houses and units have remained relatively stable and are almost on par with each other representing an average $390 per week and $380 per week, respectively.  Rental yields should remain at a modest 4.5%-5.5% over the short tem with minimal impact on property values. With limited government reinvest predicted in 2012, Capital 360s view of Brisbane remains optimistic in spit of little stimulus activity to promote capital growth in the long term. Opportunities will continue to come from distressed sales and off market transactions.

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The Perth market has been steadily declining for a number of years, however, recent indicators are predicting that this could change in the coming quarters as Perth approaches the ‘bottom of the market’ and is now preparing itself for growth in 2012. Perth’s median house price continues to fall at $443,000 down 5% since September 2011 according to RP Data.

Unemployment has increased slightly, but not by any alarming margin and migration to the state is very strong in comparison to other states and territories, which is the best indicator for real population growth.

Property sales and listing numbers are increasing and first home buyers are becoming active in the market. Investors are still holding back somewhat, but that is expected to change as more evidence points to growth early in the new year.

However, Capital 360 believes all the signs and indicators are there for future opportunities – rental rates have been climbing slightly since June 2011 (experience flat growth leading up to), sitting at $380 per week for 3 bedroom house rents (up total 5.5% year to date) and $360 per week for 2 bedroom units (also up 5.8% year to date). Vacancy rates have fallen slightly by 0.9%, down from 1.2% in the June quarter and yields for houses are around 4.5% while units yield returns are 5.1%, respectively. We are also experiencing a surge in first home buyer purchases accounting for 17.4% of all investor purchases up more than 4% in June 2011. With the recent interest rate cut in early November, Capital 360 expects this buying trend to continue in the first quarter of 2012, especially in light of another rate cut of 0.25% recorded on Tuesday 6 December 2011.

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The Adelaide rental market has remained sluggish in the lead up to summer indicating that the Adelaide property market is still patchy with the statewide vacancy rate recorded at 3.21%. A general trend emerging in the Adelaide market is that we are currently experiencing a rental market that is more closely aligned to the sales market. When sales trend downwards, rentals are up and vice-versa, but currently, we are experiencing a slower economy, so vendors are holding tight and waiting to see what happens over the first quarter of 2012. Vacancy rates are up to 7% in the Riverland region and 3.4% in North Adelaide, according to REISA.

In terms of these high level results, Adelaide’s median house price according to RP Data/Rismark continues to drop in value to more than 5.5% during the past year to $387,000. The fall in values is in line with results throughout Australia, where median house prices across the country’s capital cities were down 4.7% over the past year.

However on a more positive not, Adelaide continues to experience consistency in terms of auction clearance rates with another 37% recorded in the last week of November 2011. Auction clearance rates for the last week of November were significantly stronger helping the November month close out on a high with 130 auctions scheduled (up from 89 recorded auctions in the previous week), 26 reported sold and 46 passed in recording a total value of $5.9m, respectively. These figures don’t take into account activity following November’s interest rate cut, which Capital 360 believe will generate better results in the first quarter of 2012.

According to REISA, higher yields in the vicinity of 4%-4.5% can still be found in Adelaide’s metropolitan areas where purchases can be as little as $250,000 and in these areas, rental yields have remained relatively stable. The average rental for houses is now $310, up from $300 in the September quarter. We believe there is real opportunity out there now, especially as property prices have softened in recent months, so now is the time to start thinking about investing.

According to RP Data, Adelaide suburbs represent 28% of the total number of national suburbs where the median house price is below $300,000. Capital 360 believes this represents significant opportunities for property investors in other states looking for lower entry points into residential real estate investing.

With both fixed and variable interest rates on the decline, Capital 360 expect to see an improve in housing affordability, which will also have a flow on affect in terms of quality property listings and housing valuations in the new year, especially in Adelaide.

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MARKET REVIEW

Unfortunately for most property investors the impact of overseas economies and the ongoing lack of buyer confidence have translated into a softening of real estate prices.

The Australian Housing Market remains relatively soft even with the recent duel cuts to interest rates in November and December 2011. Its performance and stability in 2011 have been resilient as opposed to the extreme volatility of the Australian Sharemarket.

Capital city home values declined by -0.2% in October 2011 prior to the RBA’s decision to cut interest rates. The decline in capital city home values in 2011 stands at 4.0% on a seasonally adjusted basis, according to RP Data. If we add in gross rental income, total housing returns are up 0.9% 2011 YTD, which is a reasonable result considering 2011 has been plagued by many global economic uncertainties (e.g. debt crisis in Italy, euro currency stability, rising unemployment in the US, $AUS fluctuation impacting import/export markets).

With fixed and variable home loan rates falling in recent months, freeing up more disposable household income, Australian investors are benefiting from a very welcome boost in overall housing affordability.

Houses

In October 2011, Sydney and Canberra have been more resilient compared to other capital cities, where houses produced relatively flat capital growth in October 2011 (0% and 1.6%). The other capital cities did not come off so favourable with Brisbane reporting a negative capital growth rate of -1.6% during the same period, along with a decline in its median house price which is now at $402,000 (down 10% from $420,000 in July 2011).

Melbourne experienced it’s peak performance in the midst of 2009-2010 with capital growth between 25-30%, however, the Melbourne property market has corrected itself in 2011 to return -5.8% with a median house price of $458,500 (down 10% from $475,000 in July 2011).

While housing values have dropped, rental markets still remain relatively strong across the board in all capital cities, with very little movement up or down being identified.

We are still experiencing deterioration in housing values at the premium end of the market with large falls in house values, obvious over the past 10months. Rental yield results still remain strong for houses at 4.3% with no movement since July 2011, with the stand out performer in October 2011 being Darwin at 5.3%.

The level of demand for new dwellings remains high in the Sydney market, with more than 124,000 dwellings required (namely in the South West) over the five years to 2016 according to BTS Properties.

Although values across the residential property market have fallen by -2.0% over the past year the performance across all capital cities has varied significantly.

Market Review

Houses

Throughout the capital city markets value growth has varied from a modest 0.5% increase in values in Sydney to a -6.3% fall in Brisbane. Different sectors of the market are showing very varied performances with the most affordable suburbs actually recording the smallest declines in values while more premium areas have been amongst the hardest hit, with some dramatic reductions in values recorded.

Melbourne’s median house price is recorded at $520,000 and while the sales volume of homes on the market is -29.0% below the five year average properties are selling at a much slower rate than this time last year. This is largely due to the overwhelming negative sentiment in the market place and the belief that house prices will soften further.

The average discount rate for Perth, of -6.8%, indicates that market conditions remain soft, with the market having dropped off since the climax of 2007. This time last year the rate of discounting was lower, -5.9%, indicating that the market has softened further with vendors more willing to negotiate on price in order to achieve a sale.

Hobart and Adelaide remain amongst Australia’s most affordable suburbs with median house prices of $336,250 and $400,000 respectively. While value remains present in the marketplace house prices have performed well under national averages and so investment potential in these two cities may be restricted in the short-term.

In real terms (once inflation has been taken into account) all capital cities have experienced improved affordability and with rental accommodation becoming increasingly tight it is anticipated the decline in house prices will level out rather than continue to decline or crash.

 

Units

Last month Darwin was lauded for being the best performing unit location nationwide however the upward pricing trend is beginning to reverse with even some of the more desirable suburbs (i.e. Parap) recording price drops of -16.2%.

Although Melbourne has been a solid performer buyers ought to beware of overpaying on speculative stock and stick to apartments in proven areas with higher rental yields than the cities average gross yield of 4.3%pa.

Brisbane units have outperformed Sydney units on a 5-year view returning 5.6% versus 5.3%. Whereas the growth profile for Sydney units has been fairly consistent over time (with annualised returns of 6.6% over 5-years and 4.4% over one-year), Brisbane unit prices have only delivered moderate 3-year growth and have fallen 3.5% in value in the aftermath of the January floods.

While the rental growth for units in Perth has been strong (7.5%pa for the last five years) the capital growth experienced has been less than spectacular with the twelve months to date recording a fall in median values of -1.1%. Similarly market weakness is evident in the high rate of discounting, currently sitting at -8.0%.

Possibly as a result Sydney’s more consistent performance, Sydney has overtaken Hobart unit market performance (5.3% for Sydney compared to 5.2% for Hobart) the latter of whose longer term growth profile has been impacted by more recent downside volatility.

 

Opportunities

While at present distinct opportunities remain elusive it is envisaged that vendors coming onto the market in late 2011 or 2012 will do so with an awareness of the prevailing softer conditions. This will inevitably result in vendors having more realistic expectations. At present we are finding vendors are not adjusting their expectations to the current market and this is hampering the potential to secure a well-priced property.

Sydney’s lower price points are likely to be influenced early in the year with a predicted drop off in first home buyer activity. With first home buyers forced to cough up an extra $8,000 in stamp duty on a $400,000 purchase there will be a short vacuum in this price point that may present opportunities for prospective investors. This may be more likely for more premium areas where rental yields are higher than average. The drought of first homebuyers may also have a domino effect upon the ‘upgrader’ market that have been reliant on first time buyers propping up interest and prices in their more affordable properties, allowing them to upgrade. In both cases expect a mild level of negotiation potential in both price brackets.

The lackadaisical market conditions in Melbourne mean that buying opportunities are still some way off. Fear in the market about further falls in median pricing (over a range of price points) indicate that for those considering purchasing to focus heavily on securing a property underpinned by strong rental returns in premium locations. Solutions may be offered in apartment stock in lifestyle locations close to Melbourne’s centre.

Brisbane is heavily rumoured to be at the bottom of the property cycle and in the process of experiencing some growth in the more sought after areas close to the City’s centre. Keep an eye on prices and the level of interest amongst buyers in areas such as Paddington and New Farm as suburbs like these will be indicative of confidence returning to the market place.

In a similar fashion to Brisbane, Perth is anticipated to begin showing signs of recovery. While some suburbs will remain in the doldrums for the short-term other suburbs have recorded their first reported results of positive growth for some time. Watch areas such as Carlisle and surrounds (for the ripple effect) and see how they track.

]]> http://www.capital360.com.au/2011/11/australian-property-market-overview-november-2011/feed/ 0 http://www.capital360.com.au/2011/11/geelong-a-city-on-the-rise/ http://www.capital360.com.au/2011/11/geelong-a-city-on-the-rise/#comments Tue, 15 Nov 2011 04:00:28 +0000 admin http://staging.capital360.com.au/?p=4726 Continue reading →]]> Geelong has long been a gateway to regional Victoria, however now with commitments to drive economic growth to the region, Geelong is proving itself to be a prosperous yet still largely affordable option for investors and home buyers.

The Geelong Waterfront development

Staking its claim as the second largest city in Victoria and located only 75km south west of Melbourne, Geelong is now benefiting from key development projects from both Federal and State Governments in a push to ensure sustainably and ease pressures on housing supply for the ever-expanding Victorian population. Supported by strong compounding growth rates, the Geelong property market is setting the scene for strong investment opportunities.

Flagged as a key component of the Melbourne @ 5 million plan, Greater Geelong along with Ballarat and Greater Bendigo have been tipped to accommodate around 40% of this additional population. As it stands currently Geelong has an average population growth rate of 1.3% per annum which equates to around 3,300 new residents and was Victoria’s fastest growing region between 1996- 2005.

With this in mind, the Armstrong Creek project (a 2,580 hectare urban growth development) is to be rolled out over the next 10-15 years making it Australia’s largest urban growth area. When complete this community will be home to approximately 50,000 residents and will include over 22,000 homes, 22,000 permanent jobs across two employment precincts along with several shopping districts and schools in the vision of a sustainable and technologically forward community.  This development project is further supported by the completion of the Geelong Bypass, extended rail links and plans to convert Avalon Airport into Victoria’s second international airport. This large injection of infrastructure and spending will further enhance Geelong’s already strong diversification of industry. Furthermore, the Port of Geelong is set to increase its current productivity with an estimated doubling of its bulk handling facilities by 2020.

The recent rejuvenation of Central Geelong and the Waterfront, including Westfield Geelong undergoing a $150 million redevelopment, the city now has a “cosmopolitan feel” which again further enhances its appeal. With character filled period homes within close proximity to established amenities, connectivity to Melbourne improving dramatically and strong yields prevalent, this not-so-quiet town is proving it can offer more than just a successful football team.

As with all investment options careful selection and due diligence is required, if you would like to further information on Geelong and its investment opportunities or would like to arrange an obligation FREE Initial Consultation with one of Capital 360’s investment experts, please contact us online or call us on 1300 227 360.

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