Monday, June 15, 2009

Investors – Waiting and watching

Since late 2008 the number of loans to first-time buyers is substantially outweighed those to existing occupiers and investors as first home buyers rush to take advantage of the increased government grant.
There is no doubt that the incentive has driven a large number of First Home buyers into the market.
Normally an increase in lending to first-time buyers would also show similar increased lending to investors and existing homebuyers.
Part of the reason is that investors are not getting the first time grant and when you have to pony up your own money instead of the government’s you tend to think more carefully before deciding to take the plunge.
Michael Matusik, director to Matusik Property Insights, recently ran a website poll of just over 500 residential investors and found that unemployment concerns and fears about how the economy will evolve this year are key reasons why investors are not entering the market as much as one would expect.
One in five were still waiting for prices to fall. Half of those surveyed believe that next year will be a better time to invest.
Consumer sentiment figures released earlier in April by the Westpac – Melbourne Institute Survey tend to confirm the sentiments expressed in the Matusik poll.
The survey of 1200 people found pessimists still outnumbered optimists and with the prospect of more unemployment, that is unlikely to change soon.
Matusik however, says too many investors wait for the comfort of the masses before they buy. He says fixed rates are starting to increase, as are property prices at the bottom of the market.
The big headline of the past few weeks was the ABS statistics that showed over the year to March 2009 the price index for established houses for the weighted average of the six capital cities decreased by 6.7%.
These numbers come as no surprise to people working in the property market or selling during 2008. The settled sales for the June quarter of 2008 included some impact of increased interest rates but the cumulative affect on prices from the interest rate hikes that started during the last election and continued through the first half of 2008 really showed up in the statistics later in the year.
On the other hand during the first quarter of 2009 median prices of houses sold in Palm Beach and Elanora actually increased by $13,500 and $15,000 respectively.
If our experience over the past three months as we sold 73 properties for a total of $26,330,000 is any indication when our sales and those made by other agents settle and find their way into the statistics this upward trend will be more obvious.
Only time will tell whether the one in five investors to Matusik’s survey are correct and property buying will be better next year.

Next boom waiting in the wings?

There is broad awareness of the conventional wisdom suggesting sharemarket crashes are followed by an inevitable flight to property, the safe bet in uncertain times.
Following falls of 20% in the value of commercial property trusts in the last quarter of 2008 alone, statistics showed housing prices in major capital cities edged down only as much as 4% -- that was across the full 12 months. In Sydney where the market was already off and signs of recovery are first expected to be seen, falls were limited to less than 1%.
During sharemarket downturns, business is forced to tighten its belt and curtail expansion plans, directly affecting demand for the commercial sector i.e. office space, factories and industrial complexes. Therefore yields from, and values of commercial property trusts, weaken.
This is where history dictates the residential market usually behaves in the opposite fashion.
In the southern Gold Coast residential sales have been rising since December 2008. Whether current levels will be sustained if the First Home Owner Scheme is not extended past June 30 is hard to predict but currently sales are running at levels not seen since 2007.
With our economy edging towards recession, as announced by the Prime Minister and the RBA in the past few days, business turnover could soften and the sharemarket might fall further.
Business will naturally keep cutting costs by shedding employees and the RBA will, possibly, cut official interest rates again, to try and keep the economy moving - as predicted in the First National Property Outlook 2009.
For those who have job security, property becomes a viable investment option.
Real estate holding costs for investors are about a 10th of what they were a year ago and rents have been rising strongly. In some regional areas across Australia, positive gearing is a new reality and there has been a quiet return of investment by buy-to-rent players.
Missed by the general media because first-time buyers are the story of the day, investor numbers were up nearly 3% after bottoming out right at the end of last year.
The laws of supply and demand will always rule the day and Australia shows no sign of solving its unique housing shortage in the near future.
If you're interested in receiving a copy of the First National Property Outlook 2009 e-mail me at DavidH@palmbeachfn.com.au and I will send you a copy.

Monday, February 23, 2009

They dare not speak its name.

There is some marketing material circulating these days, particularly to people who are already selling that talks about an unnamed “plan that can get you a result soon and at the best price possible price”. The material talks about “getting your property marketed and sold in a positive and competitive environment as soon as is practical”.

What is this plan that dare not speak its name? In case you haven’t guessed, it is auction.

If you want to sell in a hurry in today’s market yes an auction will find a willing buyer. If you want your property sold in a competitive environment right now quite possibly it will not.

Like any other selling method an auction involves a search for market price, usually over 28 days. Leading up to the auction Buyers are encouraged to believe that they have a chance to acquire the property for a figure that represents outstanding value for them but only if they can sign cash unconditional contracts and settle in 30 days.

The rest of the Buyers are told they will have to wait until after the cashed up Buyers have had a go.

The Seller hears all about the expressions of interest and price comments from all the inspections but does not truly get to test the market until auction day although they are experiencing constant price re-evaluation.

If there is competitive bidding a good price can be achieved. However most of the time, in a market like this unless the property is exceptional, bids are low and properties are passed in or, if the Seller truly must sell, the Buyer gets what he or she is looking for, outstanding value.

We took a serious look at the Private Treaty sales results for First National Palm Beach, The Pines and Burleigh in 2008, a year of falling prices, and we found that although 60% of the properties that we sold required some price adjustment during the process 40% of the properties that we sold were sold without a price adjustment and those properties were sold within an average of 34 days on the market.

How well did we do using Private Treaty in achieving a good price outcome for our Sellers? We sold 34% within 2% of lasted list price and 78.9% of our sales were within 5% of the last list price.

There is complete transparency in our sale process; the Sellers know what the property is being marketed for and the Buyers know what the Sellers want for their property. We did not need to “feed the greed” with Buyers by encouraging them to believe they were going to get a “bargain” in order to close a sale

Sales people conducting an auction cannot be a gatekeeper. They have to just reflect the market and expressions of interest back to the Seller who then must decide whether a particular offer or bid represents fair market value to their property.

Monday, February 2, 2009

Shops open at Pavilions on 5th

THE renaissance of Palm Beach is gathering momentum with the opening of stores at Pavilions on 5th.
A 2500sqm Coles supermarket was the first outlet to open its doors at the project's retail precinct, which sits at the base of two seven-level buildings.
The $120 million mixed-use development, being undertaken by Australian Property Growth Fund, is taking shape on a 9820sqm site bordered by the Gold Coast Highway and Fourth and Fifth avenues.
The shops are the first stage of a major precinct planned for the site, which formerly housed the Palm Beach Plaza shopping centre and will eventually feature 5000sqm of retail space topped by 194 apartments.
Opening along with the Coles supermarket were a Liquorland outlet, a hair and beauty salon, pharmacy, newsagency, drycleaners, shoe repair shop, bakery and cafe.
Prima Hair and Beauty, operated by Wendy and Jerome Marron, has signed a five-year lease for a 83sqm shop in the retail precinct.
Guardian Pharmacy, which also opened this week, took a 125sqm space on a temporary lease at $425/sqm.
The pharmacy will move into a 250sqm shop once the second stage of the retail precinct is completed.
Development manager Mark Rundle, of APGF, said most former Palm Beach Plaza ret-ailers would take space in the new centre, which is expected to completed by the end of 2010.
"This is a clear indication they share our belief in the future growth of the Palm Beach market," said Mr Rundle.
The initial stage of the project's 180-vehicle basement parking area has opened, providing 94 spaces. It is accessed via Cypress Terrace.
The Coles store is double the size of the Bi-Lo which formerly occupied the site.
Source: GC Bulletin

Sunday, January 18, 2009

Getting the Right Price

By now it is pretty obvious to everybody that prices are down from their peak in November 2007 but unless you purchased in the second half of 2007 that's no reason to be concerned about whether or not you should put your property of the market.
It's not showing up in the public statistics yet but our opinion at First National is that prices have stabilised and absent some unforeseen development we think they will stick about the same level for a while.
The combination of reduced prices, lower inflation and falling interest rates have greatly restored affordability for real estate.
The pressure on weekly rents from continuing interstate immigration, the absence of investment buyers from the market and a few other factors means that along with these lower prices the yields on investment properties are also improving.
If you're thinking of selling in this market you don't really need to jump into an auction just because you want a quick result or because you want to find “more” buyers.
We recently completed a study of all of our sales since March last year that clearly indicates that, for our clients, private treaty works very well particularly in this market.
30.7% of our contract prices were within 2% of the last listed price;
17.3% were within between 2 and 3% of the last listed price;
17.3% were within between 3 and 4% of the last listed price; and,
13.4% were within 4 to 5% of the last listed price.
The means 78.7% of all our sales were made within 5% of the last listed price and about half were within 3% of the last listed price.
Most of those sales were also within 30 days from the last listed price.
An outcome like this works for the seller and the process is very transparent for both the seller and the buyer.
Achieving these results without under pricing property comes from a professional approach to the entire sale process, marketing, negotiation and closing the sale.
Marketing in this context is not advertising, anybody can do that, just part of it.
Marketing is about how we make a property stand out and good marketing acts like an insurance policy that will ensure a higher price at negotiation when we find the buyer.

Saturday, January 10, 2009

Property Investment - A ‘Super’ Idea

First National Real Estate has some super investment advice for those nervous about their superannuation in the current unstable share market conditions – purchase an investment property.
Changes to legislation in September 2007 freed up self-managed superannuation funds so they can invest in the property market.
Property has always represented a strong investment opportunity, but never more so than in tough economic conditions. It is increasingly being seen as a much more reliable safety net than shares.
In uncertain economic times, this is even more the case as investors realise that the returns from properties are above most other types of investment assets.
In Australia we enjoy a growing population, our families are getting smaller in size and our incomes are increasing. These factors all add up to ensure demand for dwellings will continue to outpace supply and prices will continue to rise, making property a very attractive investment alternative.
The gap between supply and demand is expected to support the market during the current economic downturn. Experts predict the shortage for 2009 to be in the vicinity of 200,000 homes nationally.
In future years, this gap is expected to widen as pent up demand grows and the population continues to expand.
It is not expected that the fall in Australian property prices will be sustained – once they have dropped, the next phase, with official interest rates falling, will be an upswing.
Rental yields are also increasing, making property investments an even more lucrative option for superannuation fund investors.
There are many other advantages of self-managed funds investing in the property market including:
Contributions to super are taxed at only 15%, leaving 85% to put towards your investment
Property can be leased back to a business being operated by the buyer
Has the potential to receive a tax deduction, through salary sacrificing, for loan repayments on the principal sum.
But the best advice I can give is to seek the services of a financial advisor to find the best investment option to suit individual circumstances.
The real trick in property investment is to be in it for the long haul – it is a long term investment where the dividends will far surpass that of the initial financial outlay.”
Based on historical trends in the property market and key economic indicators, the Australian property market is considered to be a sound investment opportunity.

Thursday, January 1, 2009

Debt landscape reveals opportunity

Despite ongoing negative economic news, Generation Y consumers show no intention of economising and there are signs that older consumers aren’t necessarily buying the negative media hype, even if their spending has been somewhat curtailed this Christmas.
The Westpac and Melbourne Institute sentiment survey recently showed that consumer sentiment rose 4.3% in November, compared to October figures, and it’s possible that the strongest link to this changed sentiment relates directly to petrol prices, which have fallen below $1 per litre. Three months ago the concern was that that petrol would reach $2 a litre by Christmas.
There are certainly many reasons for Generation Y (18-29 year olds) to be demonstrably optimistic.
For starters, many still live at home, do not have a mortgage, and most have not experienced recession in their working life. Governments, both Federal and State, are offering record levels of assistance to first home buyers and interest rates have fallen dramatically, with further reductions forecast.
Much of the pain of rising official interest rates has already impacted upon owners in compromised positions. Of those that found themselves over-extended, many have already sold to reduce their debt burden or been subject to repossession orders. That now leaves those that may be affected by any rise in unemployment in the next twelve months, and that remains a concern.
The current debt landscape in Australia reveals some of the reasons for the variance in consumer attitudes to the global economic downturn.
According to Roy Morgan Research the largest share of financial assets in Australia is currently held by 41.8 per cent of the population - those aged 45 – 59 years. The next largest group holds 32.5 per cent of assets – those aged 60 plus years of age. So, nearly three quarters of financial assets are in the hands of those that are reasonably well established, who have managed their way through a period of rising interest rates, and who are now benefiting from significantly lower rates as well as lower living costs.
This group, perhaps ironically, is the group that has most curtailed retail spending.
Interestingly though, since 1998 the share of wealth for 30 to 44 year olds has decreased from 28.8 per cent to just a little over 20 per cent today. The proportion of 18 to 29 year olds with home loans has fallen from 7.9 per cent to just 5.1 per cent over the same period. This group seems least concerned by the current economic climate.
Knowing that first home buyer enquiry has leapt by 30 per cent, and that the majority of first home buyers are aged 18 to 44, this market segment is awash with confidence and is likely to offer increased opportunity through until at least 30 June 2009 – when the Federal Government’s boost to the first home buyers grant scheme ends.
Merry Christmas