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The Experts

Charles Tarbey
+ About Charles Tarbey
Charles Tarbey is the owner of Century 21 Australia ( and Century 21 New Zealand (

Emerging trends in Australian real estate

Tuesday, February 20, 2018

Most people can no longer expect that a property will simply sell itself like it has in many markets in the past three years. Some may need to re-evaluate expectations for elements such as price, how quickly a property will sell, and how an agent will manage your transaction.

In January, CoreLogic reported that national dwelling values fell 0.3% over the month, taking dwelling values 0.7% lower since their recent peak in September last year. Across the capital cities, the softer month-on-month housing market conditions were led by Sydney (-0.9%), with declines also reported in Melbourne (-0.2%), Adelaide (-0.2%), Perth (-0.4%), Darwin (-0.2%) and Canberra (-0.1%) while values in Brisbane were unchanged.

According to CoreLogic, a preliminary auction clearance rate of 69.1%t was recorded across the combined capital cities over the week ending 18th February. Auctions clearance rates are lower across all capital cities (except Perth and Adelaide) when compared to the same period last year.

In light of these changing conditions, here are three trends to watch for over the coming year:

Opportunities that exist outside property hotspots

By the time a real estate hotspot is found and presented, often they are no longer hotspots. All the information communicated about the area may have occurred by the time the hotspot is publicised and all the buying activity has often taken place.

Sometimes markets that have attracted negative attention may hold good prospects for savvy investors.

For example, minutes of the Monetary Policy Meeting of the Reserve Bank of Australia have noted that in the eastern capital cities, a considerable additional supply of apartments is scheduled to come on stream over the next couple of years.

Oversupply can drive prices lower which in turn, may create enticing investment opportunities. Savvy investors may wish to build their cash reserves and be ready to act in falling markets that they believe still hold strong long-term prospects.   

However, in the short to medium terms, it will also be particularly important for investors to consider the prospect of higher vacancies and lower rents. Investors should not be put off by this but should ensure they are well prepared financially for lower rental income in the midst of a potential rental oversupply.

Equity markets impacting property

Recent volatility in the equity market may start to influence certain types of property. Discretionary spending areas tend to be the first affected by such volatility. If you are considering buying properties such as holiday homes, it will be as important as ever to define the reasons why you are making the investment and ensure that any investment works for your personal finances.  

An agent who drops their commission too quickly

When searching for a real estate agent to sell your property in the coming months, it will be important to pay close attention to their negotiation style.

Whilst negotiation has long been the basis of a successful real estate transaction, it will be a skill that is increasingly important in a softer growth phase as the negotiation process may take a little bit more time, and a little bit more back and forth between parties.

An agent’s negotiation skills will be on display during your initial consultations, and you may be able to assess their capabilities based on how they negotiate their commission. You should be wary if an agent offers to drop their commission with you too quickly. This could be a potential sign that they may do the same when negotiating your property’s sale price.

By meeting with a few different agents, you can assess who presents a strong, reasonable argument for a fair price for their services, and in turn, choose the agent who you feel is the right fit for your property.

By Charles Tarbey, Chairman and Owner of Century 21 Australasia

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What this year has in store for property

Tuesday, January 23, 2018

Across the country, property value growth is continuing to level out and although this may seem like a negative thing for homeowners, it may be a positive thing for the Australian market. A market experiencing moderate growth can often result in a healthier long-term market.

Looking back on 2017, national dwelling values were 4.2% higher over the calendar year according to CoreLogic – which is a slower pace of growth relative to 2016 when national dwelling values rose 5.8% and in 2015, when values nationally were 9.2% higher.

The CoreLogic December Hedonic Home Value Index results reported that national dwelling values slipped lower over the month, led by falls across Sydney, Darwin, Melbourne and Perth.

The most significant declines were seen in Sydney and Darwin where dwelling values were down 0.9% in both markets. 

International market conditions will likely continue to influence Australian market conditions, particularly the US and Asian markets. As the US property market is on the move, it may help support the Australian market and keep it balanced.

Vendors should ensure their expectations are realistic this year, and their property goals are in line with cooler conditions. Vendor discounting is a likely prospect for those selling property in Sydney and Melbourne markets, however, this may level out in the second half of the year. 

Engaging with an experienced real estate agent can help vendors set a realistic market price of their property as they can take advantage of an agent’s on-ground knowledge of the area and involvement in recent transactions. Not only this, a good agent may prove invaluable should the need for discounting arise, helping to navigate the negotiation process between buyer and seller which is often emotional and taxing.

Vendor discounting may help to improve housing affordability in some parts. Buyers may be placed in a better position to negotiate a favourable price compared to previous years. 

Apartment settlements may be placed under valuation pressure in markets across the country, with the Brisbane apartment market and outlying areas of Sydney and Melbourne especially affected.

The Brisbane apartment market may be a key market to watch for first home buyers. New supply combined with first home buyer’s incentives may see unique and affordable buying opportunities present. 

I believe Perth will also remain a market to keep an eye on this year. The market is showing signs that it has moved through its worst, as vacancy rates have fallen and there are lower levels of stock compared to previous years. 

At the end of last year, Perth saw its first rolling quarterly capital gain since late 2014 with CoreLogic reporting a 0.3% lift in dwelling values over the three months to November 2017. They also reported that settled sales are rising (+3.8% year on year) and homes are selling faster (59 days compared with 68 days a year ago).

There may be many good opportunities to purchase Perth property in the coming months and to benefit of any upside in prices.

Lastly, amidst some of the ‘doom and gloom’ talk surrounding a levelling market, I encourage Australians to consider the demonstrated value of property as a safe and profitable investment over the long term.

CoreLogic’s latest Pain & Gain Report showed the total gross value of properties resold at a profit over the September 2017 quarter was $17.7 billion, far outweighing resales losses which amounted to $453.8 million.

This also attests to the underlying demand for property that is still there in many markets and that will likely remain over the course of the year despite signs of moderating price growth.   

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Investor forecast for 2018

Tuesday, December 05, 2017

By Charles Tarbey

Property investors play a significant role in the Australian housing market, and over the past few years, they have been further enticed into the market by access to cheap finance and strong value growth in many markets. 

Over the past five years, the value of investor housing finance commitments has totalled $695.6 billion, and according to CoreLogic, at their peak in May 2015, investors accounted for 54.8% of new (excluding refinances) mortgage demand – which was an historic high.   

However, in recent times, property investors have been the target of Australian Prudential Regulation Authority (APRA). 

The impact of the levers put in place by regulatory bodies and financial institutions have certainly influenced the marketplace. Property investors may no longer be in a position to borrow what they like just because they have equity, as investor interest rates and loan value ratios are changing. 

We are seeing signs of the true impact of these actions, as the percentage of investor mortgage demand fell a further -6.2% in September 2017. CoreLogic reports that as mortgage demand from investors, particularly in New South Wales, has slowed, so too has the rate of value growth. 

Their data shows that investor mortgage demand in New South Wales has fallen from a peak of 63.6% in May 2015, to 50.3% in September 2017. Over the same month, Sydney capital city dwelling values were down 0.1%. This was the first month-on-month decline after 17 months of consistent capital gains.

I still believe there will be good opportunities to transact property in 2018, so here are some key considerations for investors for the coming year:

Changing investment opportunities 

Investor opportunities may become stronger, even though the capacity to borrow may be weaker. 

Over the coming year, there may be marketplaces across the country where investors are going to be needed to maintain value in property, particularly in areas where there are high levels of off the plan stock.  The Brisbane market is one where there has been talk of apartment oversupply in some parts. 

Some of these off the plan sales may struggle to reach completion in changing market conditions, and investors may be increasingly needed to act as secondary supporting buyers if the original buyers are not able to complete. 

Foreign investment slowing  

Australia has long been one of the most appealing destinations in the world for foreign property investment, however, these dynamics also appear to be changing due to tightened investment policy overseas. 

Some countries (such as China) are restricting the way money leaves their countries and in particular, are regulating the use of money for outbound investments, such as property.

Whilst it may be increasingly difficult for overseas buyers in Australia, investment opportunities may be presented to domestic investors by this slowdown. This may also be good news for first home buyers, as less foreign interest may lead to an oversupply of properties and increased vendor discounting. 

Factoring in the prospect of rate rises 

Many property investors have been embracing an extended period of record-low interest rates and cheap debt. The last cut made to the official cash rate was over a year ago in August 2016, however investors should remain wary of the potential for change in the year ahead. 

The RBA has been talking up the economy of late and this can indicate the potential that rates may start to come up. 

I believe property investors should be paying close to attention to ensuring their financial situation can cope with higher interest rates, and the effects that even a small shift upwards could have on repayments. 

It may be worthwhile considering a component of fixed and a component of variable interest rates, and to make debt reductions through the variable components of the loan. 

The coming year will likely continue to be a balancing act for the RBA. Whilst rate rises might slow some areas, it will be important to consider the impact upon other markets such as Perth and Darwin that are coming through the other side of the real estate cycle. 

Overall, it appears many seasoned investors may be sitting on the fence at this point in time, knowing there may be good opportunities arising in months to come. 

In preparation, investors may benefit from consulting professionals to solidify their New Year investment strategies. Working with expert financial and real estate practitioners will be invaluable to determine the best approach to any property transactions in light of personal circumstances 

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3 tips for selling before the end of the year

Tuesday, November 07, 2017

By Charles Tarbey
A lot can happen in 12 months and as we draw close to the end of the year, it appears we are in quite a different marketplace compared to where we were a year ago.

Even at the beginning of the year, the market remained relatively bullish in many areas however many pundits, including myself, forecasted that a change was on the horizon. I believe the changing market dynamics we are seeing indicates a market that is levelling, rather than one that is spiraling into downwards territory as some seem to think.

According to CoreLogic’s recent Quarterly Housing & Economic Review, values are continuing to rise, albeit at a slower rate. Over the third quarter of 2017, national dwelling values increased by 0.5%, which was their slowest quarterly rate of growth since the June 2016 quarter. Values saw an 8% increase nationally over the year, which is a very healthy result.

What remains consistent is that no two markets are really the same across Australia.

It is interesting to see that while the Sydney and Melbourne markets have often competed side by side, there is a growing disparity between the two. Sydney dwelling values increased at a slower rate of 0.2% over the September 2017 quarter, compared to a 2% increase in Melbourne dwelling values, according to CoreLogic.

Auction clearance rates are lower than this time last year, however the exception to this is in Perth and Brisbane where their performance has improved.

We are continuing to see conditions pick up in ‘opportunity markets’, which are areas that people often talk negatively about, however ones that I believe can hold strong prospects for investors. With more stock available, you may have a better chance to negotiate a good price for yourself in such places.

This is supported by CoreLogic data that reported typically smaller auction markets have experienced an uplift in clearance rates over the September quarter. Tasmania recorded the largest increase over the September quarter, up 13.2% to 65.6%, followed by Perth, up 6.3% to 43.4%, while Canberra increased by 2.8% to 71.1%.

Vacancy rates are at all-time lows in many places. Melbourne is sitting at 0.83%, and Sydney at 1.64%. We continue to see declines in Perth’s vacancy rates, down to 7.35% from over 10 which is a significant improvement in a market that has long been suffering.

We are seeing increases in listings leading into the end of the year. This could be for a variety of reasons, with people wanting to complete transactions before the holiday season or perhaps in part due to an influx of vendors who were holding out but now believe the best time to sell has passed, and are trying to get out of the market while they can.

In light of these changing conditions, I have three tips that people may wish to consider if planning to sell property before the end of the year.
1. Buy in the same market

Firstly, I believe those wishing to sell in this market should also look to be buying in this market. I believe this will be important as there is a risk that sellers could be priced out of the market if they sit on the sidelines for too long. This also may be an easier prospect than in recent times, with more options available.
2. Consider private treaty sales

I encourage vendors to consider private treaty over auction in areas where stock levels are rising. More property on the market takes the valuable competition aspects out of an auction sale and diminishes the benefits that would be attracted when bidders are enticed to keenly compete.
Whilst it may not suit all circumstances, weighing up the benefits of a private treaty for your situation may help to avoid some of the costs associated with auctions. In doing so, you may be able to take more time to consider offers and negotiate the best possible outcome for your property.
3. Choose your agent wisely  

With more stock on the market, some agents may appear to be very active as they have numerous property listings and ‘for sale’ signs dotted down the street. However, it is important to look at how many of these signs display ‘sold’ stickers, as this will indicate the agents who can drive a listing to a completed sale.

It may be worth considering successful agents with more limited listings, as this may mean you do not have to compete for their attention.

I also encourage prospective vendors to remember the value of picking up the phone and speaking to an agent, or heading into your local office for a chat and a coffee. It is easy in this day and age to hit reply on an email or rely on digital methods of communicating, but a face-to-face chat can make all the difference in building strong relationships. This may in turn help to clearly establish your property goals and ensure you have the right agent for your needs. 

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Why investors should look beyond property hotspots

Tuesday, October 24, 2017

By Charles Tarbey

Sydney has long been considered one of the jewels in the Australian real estate crown and has continued to attract attention for its rising property prices and bullish market conditions. However, according to CoreLogic’s September Home Value Index, it appears Sydney’s reign as a growth leader may be losing steam.

CoreLogic reports that the September quarter saw Sydney dwelling values edge 0.2% higher and values slip 0.1% lower over the month. This is the markets first month-on-month decline after 17 months of consistent capital gains.

Melbourne is another market that has attracted considerable attention yet is also beginning to show signs of slowing. Melbourne dwelling values increased 0.9% over September, and CoreLogic has noted issues related to off the plan unit sales in certain parts of the market.

I believe this shows it may now be time for investors to shift their focus away from the ‘hotspots’, and consider looking towards markets that may not have benefitted from the same capital growth experienced by markets such as Sydney and Melbourne.

Investors may consider markets that are less talked about, such as areas that have long been suffering or that have experienced very little growth at all.

For example, Perth is a market where some have been struggling to complete their transactions, however it is also a market that investors may benefit from taking a close look at. Parts of the WA market appear to have gotten close to, if not reached, rock bottom in the property cycle and in some cases, prices are lower than what they were pre-boom.

Brisbane has had relatively little growth in a decade, particularly when compared to Sydney and Melbourne. CoreLogic’s September Home Value Index shows a 2.9% increase in dwelling values over the year. Despite this, the market offers many appealing qualities such as lifestyle, accessibility and a well-established owner-occupier base compared to other coastal areas.

There are two key advantages that arise from markets that are not ‘hotspots’ and that may benefit first home buyers and investors alike.

Firstly, they may allow a less frenzied approach to be taken when contemplating a property transaction. Buyers may encounter opportunities without the pressure of a boom, and can weigh up a transaction with less pressure to rush in and purchase.

Secondly, they may be faced with more room for steadier capital growth prospects. A struggling real estate market may initially be approached with hesitation by some, but I remind Australians that real estate is best approached as a long-term investment. Investors may be able to enter the market and purchase property at a more achievable price compared to boom markets, and may achieve better growth prospects by holding the property and riding the real estate cycle.

Regional markets are also proving to hold good prospects beyond the capital city hotspots. CoreLogic recently reported that the Illawarra region of New South Wales was once again the top performing regional market for the June 2017 quarter. The region recorded the largest annual increase in home values, up 15.8% for houses and 14.4% for units.

Other areas such as the Sunshine Coast, regional Melbourne, Canberra and the south coast of Sydney are areas that were picked by Century 21 to hold good growth prospects over a year ago and have proven to be very dynamic markets. It is likely the halo effect may continue to propel growth in these areas so they may be worth keeping an eye on.

However, regardless of what people are talking about and whether a market is considered a property hotspot, what remains the same is the necessity for extensive research, due diligence and professional advice. This will help you better weigh up your property goals and ensure any decision to invest in real estate over the coming months suits your own personal circumstances.

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Myth busting the Australian real estate market

Tuesday, September 12, 2017

By Charles Tarbey

With so many different opinions and information on the property market available, it can be difficult to make sense of the truth behind what we read, see and hear.

Here are three myths about the real estate market that I believe should be dispelled to help Australians make the most of property transactions in the coming months.
1) That stabilising growth is a bad thing  

According to CoreLogic’s August home value index, national dwelling values remained flat over the month, with capital city values edging 0.1 per cent higher. Simultaneously, regional dwelling values slipped 0.2 per cent lower.

CoreLogic’s head of research, Tim Lawless, said this steady result provides further evidence that the national housing market has moved through its peak growth phase.

Whilst some may believe slower growth conditions are something to be alarmed about, I believe it also brings with it a number of positives.

It may enhance the opportunity for some to come off the sidelines and enter the market. Affordability issues may be lessened to some degree, as people’s wages and savings may be able to grow at a pace more in line with housing price growth.

People may also be faced with more time to weigh up a transaction in a marketplace that is not as hurried. Buyers may face less pressure to rush in and purchase the available stock, as we have seen occurring in more heated areas such as Sydney and Melbourne. This may also prove beneficial to investors who may have the chance to purchase an investment without getting caught at the top of the property cycle.

Vendors on the other hand may face less risk of selling and being priced out of the market when looking to buy again.

Moderate short-term growth can often lead to more sustainable growth over the long term so Century 21 is not overly concerned about cooling conditions.
2) That foreign buyers have put pressure on affordability

Australia is naturally an appealing market for international buyers - boasting a great lifestyle, climate and appealing property prospects.

Plenty of discussion has surrounded the influence of foreign investment on the real estate market, and whether this is preventing some Australians from getting on the property ladder. This appears to have resurfaced in recent times with increased taxes, changes to investor lending policies and new regulations in China.

I believe it is a myth that international buyers have caused a great deal of grief for our local market. Rather, they have helped our building industry to remain a strong and stable part of the national economy while likely increasing housing supply.

Not all properties built in Australia can easily be sold to the domestic market. For example, much of the stock that Asian buyers are purchasing here is not really in the first home buyer market, such as apartment stock.

It could be argued that our real estate and construction industries may suffer if foreign investors are increasingly pushed away, as they will look to invest into other parts of the world.
3) That agents don’t need to work that hard to make a sale

During market booms, the belief seems to circulate that properties virtually sell themselves. Some may see the agent’s role as a simple one that allows them to reap the rewards of high commissions.

It is important to dispel this perception as agents play a valuable role in facilitating successful transactions.

In a more stable market, the role of a good agent becomes critical. In these types of conditions it can be a little less easy to bring buyer and seller together, and to reach an acceptable meeting of minds. Agents may work for weeks, or even months, and put in significant effort without even earning a cent if a sale is not achieved.

Many also tend to forget that real estate can be quite an emotional game. Selling one’s home can be a stressful, confusing or intimidating process and this is where the experience of an agent will be invaluable to navigate the transaction and manage the emotions of all parties involved.  

Whilst cheaper options may suit the circumstances of some, choosing a skilled agent with refined negotiation abilities should be a key consideration for vendors in the coming months. It is worthwhile considering that a little extra investment in an agent who will tirelessly negotiate and market on your behalf could pay dividends in a sale price beyond your expectations.

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Bursting the property bubble talk

Wednesday, August 02, 2017

By Charles Tarbey

Australians are understandably very passionate about property considering it is one of their biggest and most valuable investments. 

Signs of a cooling market appear to have generated a slightly nervous sentiment of late, as speculation about a dramatic property market downturn is becoming more fervent. Some are concerned about what changing market conditions may mean for their property’s value and their financial position. 

However, I encourage Australians to take a step back and to evaluate the realities of the data behind the hype and the headlines, as things may not be as critical as many believe. 

Auction clearance rates

Over the June quarter, CoreLogic reports that clearance rates have eased slightly from 74.8 per cent over the first quarter to 71.7 per cent at the end of second quarter in 2017. A downturn of 3.1 per cent is arguably not a dramatic one, considering we are in the characteristically quieter winter season.

While we have been seeing less people at auctions, this does not mean the clearance rates are struggling in all markets. Clearance rates were 3.8 percentage points higher nationally in the June quarter of 2017 compared to 12 months ago, and all capital cities are performing better than they were this time last year according to CoreLogic.

Australians should remember that all it takes is one interested buyer for a successful auction, and it appears the underlying demand for property is still present in most areas.

It is also important to remember that while clearance rates are a reflection of market activity, they do not give the full picture of what is happening in a marketplace. For example, while auction clearance rates in Perth are struggling compared to others, it is a market that may be more conducive to positive results through refined negotiation in private transactions. 

Steadier growth

While some pundits were calling the top of the market after flat growth results earlier in the year, we are now seeing that many markets are back on track in terms of growth, albeit at a cooler pace. Across the combined capital cities, we find ourselves with property value growth of 1.5 per cent in July.

A steadier pace of growth is preferable in my opinion, as the past few years have seen growth in the market propelled at a faster rate than many expected, largely due to low interest rate climate.

It is interesting to see that Melbourne has now overtaken Sydney as the growth leader, with Melbourne recording a 13.7 per cent increase in dwelling values compared to a 12.2 per cent increase in Sydney over the last financial year.  

Ride the cycle

Recent CoreLogic data has reported that Sydney and Melbourne are seeing significantly higher numbers of new listings coming on to the market. Sydney, in particular, is seeing strong listing numbers of late. According to CoreLogic, total advertised stock levels across Sydney are now 13.3 per cent higher than the same time a year ago. 

This may be attributed in part to vendors deciding to exit the market in anticipation of a downturn, however I encourage vendors not to act too swiftly in making a decision to sell.

If homeowners do not have a pressing need or wish to sell, they may be wise to consider riding out this cycle until the next one invariably comes along. By doing so, they may be placing themselves in a better position to capitalise on their investment and maximise its potential. 

CoreLogic's Pain & Gain report showed that the majority of the selling public has experienced respectable gains selling property, with only 9.6 per cent of all dwellings sold selling for less than their previous purchase price over the first quarter of 2017.

While the marketplace is still very different from city to city, this data shows that most Australians are achieving positive results from property investments. However, Darwin might be the exception as it continues to be the capital city that has been most negatively affected by loss-making sales.

What lies ahead?

Spring is fast approaching which generally brings a more active period of real estate activity.

Speculation about market movements is inevitable, however, despite all the bubble predictions, I believe real estate has continuously proven to be, for the most part, one of the safer investments that a person can make if it is approached with a long-term outlook. 

I believe that the prospect of a dramatic fall in property prices is unlikely and the Australian property market remains healthy and vibrant.

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What will the new financial year bring for property?

Tuesday, July 18, 2017

By Charles Tarbey

The new financial year heralds a time for change and new things, and this may be particularly true for the Australian real estate market this year. 

Not only is the market demonstrating signs of shifting conditions and changing dynamics between buyer and seller, but recent legislative changes related to housing (which commenced on July 1) may further change the way Australians approach property transactions over the coming financial year.  

Return to seasonality

The latest CoreLogic Home Value Index has shown a slight recovery from the slower results recorded in May, where dwelling values fell 1.1%. In June, CoreLogic recorded a 1.8% increase in dwelling values over the month. 

CoreLogic suggests that despite the short-term recovery, signs are pointing to less steam in the market.

I am of the view that we may see the first ‘real’ real estate cycle kicking in over the coming months, and we may experience a more seasonal market. Strong market conditions, buyer demand and cheap finance mean we haven’t really seen distinct differences in seasonal activity over the past few years, however, a traditionally quiet winter market appears to be emerging.

We are seeing less people at auctions, and less energetic bidding conditions. Clearance rates are trending downwards. While this may be perceived as a negative by some, I believe buyers may be faced with better prospects for property purchases in some situations.

A quieter winter season can actually be a good time to buy, as many are turned off venturing out to open homes in the cold or wet, and there may be less competition when inspecting a property. Not only this, you may be able to see a property in a truer light, or even note how it holds up in less-than-favourable weather conditions. This scenario may help you accurately value a property and decide what you would pay for it.   

It is likely that spring this year will see the traditional increase in stock that is characteristic of the season in real estate, particularly with an influx of completed apartment complexes filling supply lines in some markets.

First home buyer legislation

Recently released data from the 2016 Census shows that home ownership rates have declined, from 68.6% in 1991 to 65.5% in 2016.

In a bid to improve prospects of home ownership, the Victorian and New South Wales state governments introduced new measures to assist first home buyers, including the removal of stamp duty concessions, and grants for builders and purchasers of new homes up to a specified thresholds. These came into force on 1 July 2017.

As such, there has been talk about first home buyers re-entering the market from July and becoming a bigger force to be reckoned with.

I encourage first home buyers to balance the short-term benefit of concessions with a smart, long-term investment decision. It is important not to rush in and buy any property for the sake of getting into the market or utilising concessions. They should carefully consider their financial positon now and if rates changed in the future, and ensure that the property they purchase sits within a predetermined budget that takes these factors into account – not just short-term concessions.

Shift to buyers’ market

It appears that the market is shifting in favour of buyers. While the outlook may be looking a little cooler, there is still a solid, underlying demand for property. Sellers may have to work a little harder to make their property stand out, and when the offers roll in, they may have to be more open to negotiation in reaching an acceptable outcome between parties.

It will also pay for buyers to remember that the financial year ahead may hold the potential for rate increases. While we cannot predict movements with certainty, rates can move quickly and I remind Australians to plan for such scenarios to ensure they don’t come under future financial pressure in a changing market.

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Australian property: More than a tale of two cities

Wednesday, June 07, 2017

By Charles Tarbey

When discussing what is happening in the Australian property market, many tend to focus on the capital city markets of Sydney and Melbourne. There is plenty of chatter about affordability concerns, competitive auctions and avocado brunches that are supposedly preventing young Australians from achieving home ownership in these cities.

While these markets will naturally attract attention due to their size and active buying and selling conditions, many tend to overlook the fact Australia is actually an incredibly broad real estate market that is changing rapidly.

Different markets, different points in the cycle

Markets across the country are at different points in their respective cycles. In Sydney and Melbourne, we hear stories about record prices achieved for properties. However, in other parts of the country, we are seeing properties that are struggling to sell and owners facing negative equity.

CoreLogic’s latest Hedonic Home Value Index showed a 1.1% drop in dwelling values for the month of May. I believe the data highlights the importance of investigating and understanding markets on a state-based, and even suburb-based, level.

This headline figure was largely influenced by a drop in dwelling values in Sydney and Melbourne, with Sydney values down 1.3% and Melbourne values down 1.7% for the month. It appears that the cities may be nearing the top of the market, with increased supply and fewer buyers likely leading to a new phase of softer growth conditions.  

If we look elsewhere, growth was still evident in some markets, albeit moderate growth. Adelaide experienced a 0.8% lift and Brisbane was up 0.3%, taking the markets 2% and 1.2% higher over the quarter respectively.

Perth saw a 0.4% decrease over the month, which may point to the fact the Perth market is nearing the bottom and may be starting to show signs of balance. 

It is important to note that CoreLogic finds May to be a seasonally weak month and Tim Lawless, CoreLogic Head of Research, said that values have fallen during May in four of the past five years.

I am of the view that moderating market conditions are not signalling a dramatic crash in property prices in the near future (as some may suggest). Moderating growth may be better for the property market over the longer term, as it arguably becomes more sustainable.

Markets such as Tasmania, Canberra and parts of Queensland are increasingly attracting investor attention, likely due to the affordability concerns and competitive market conditions faced in the Sydney and Melbourne markets. The ‘halo’ or ‘wave’ effect appears to be hitting these areas, where there are plenty of affordable property options available with appealing lifestyle benefits.

Investors may be able to sell their properties in more heated capital city markets and then utilise the equity to purchase property in a more affordable location, while keeping some money in the bank. This may be particularly true for downsizers seeking locations with lifestyle benefits, either by the beach, or in the country.

Other parts of the country have been heavily affected following the end of the mining boom, and the states have been attempting to find the bottom of the market again. It appears markets such as Perth and Darwin may begin to plateau over the coming months.

These markets also seem to be attracting investor attention as property can be secured at cheaper price points, however I encourage prospective investors to remain cautious. Too much investor interest has the potential to lead to rental oversupply, which can quickly damage an investor’s position. Recent CoreLogic data has shown a large number of Perth residents migrating interstate, therefore investors should carefully consider their potential to find and maintain good tenants in light of this. 

As signs point to softer growth conditions for Australian property over the coming months, professional advice and careful consideration will be as important as ever in navigating Australia’s varied market conditions. I encourage Australians not to rely on headline growth figures, but to investigate conditions within individual states and suburbs when weighing up their property options.

Talk to agents and financial experts to assess your position, and ensure your commitments are manageable should the year ahead hold any changes in interest rates. A level head and an informed position may enhance your prospects to make the most of investments in your respective markets.   

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Has the housing market reached its peak?

Tuesday, May 09, 2017

By Charles Tarbey

At the tail end of last year, I was of the view that more stable market conditions were likely on the cards for Australian real estate. In recent times, growth in the market has been propelled beyond what many expected, and there has been much discussion of late about whether the housing market has finally reached its peak.  

Weaker housing growth has been recorded in April, with CoreLogic data showing a 0.1% increase in dwelling values across the combined capitals over the month. CoreLogic reports this as the slowest month-on-month growth since December 2015. Interestingly, growth in Hobart surpassed the two heated capital city markets of Sydney and Melbourne, recording a 5.1% increase in dwelling values over the quarter compared to 4% and 3.9% respectively. 

Have we reached the top of the market? 

Opinions seem to be quite divided on this issue. Tim Lawless of CoreLogic advised caution in “calling a peak in the market after only one month of soft results.” On the other hand, UBS recently called the top of the Australian housing market, noting that whilst the common trigger of a rate hike is not present, banks are independently rising mortgage rates and sentiment appears to be low. 

My view on all the speculation is that we cannot really determine the top of the cycle due to the existence of so many marketplaces within one country. The Australian property market should not be viewed globally based on what is happening in Sydney and Melbourne. It appears that some may be focusing on these two major capital cities in speculating market peaks that aren’t necessarily reflective of conditions elsewhere. 

In some markets around the country, the top of the market has already come and gone. For example, the Perth property market was fuelled by mining activity and as this activity has slowed down significantly, we are seeing the aftermath with the market facing an oversupply of stock in some areas and property owners struggling with negative equity in some parts. 

The good news for Perth is that some areas appear to be experiencing increasing investor interest, as vacancy rates have decreased and property can be secured at an attractive price. Investors should still remain wary of increased rental competition and potential reductions in rental return due to this influx of interest. 

The Sydney and Melbourne markets likely still have more room for growth, and I don’t think they are quite at the top just yet. 

However, we are seeing demand changing and cooling slightly in some parts, with the number of people attending open for inspections appearing to be slowing down. The offers and bids are still there though, and I believe these markets will continue to offer plenty of reasonable opportunities for growth, as Sydney and Melbourne are expanding cities and supply is still less than demand in many parts. 

An unknown factor for the market will be how the influx of apartments will impact conditions over the next couple of years. There has been much talk about potential apartment oversupply, however no one can accurately predict what will happen when the new apartment stock hits the market for sale. 

A more cautious outlook  

Perceptions of property transactions appear to be changing, as many Australians are viewing potential transactions with increasing feelings of caution. I believe this can be attributed in part to tightened lending and increased regulation of housing finance. 

Regulators have been doing a good job of creating an environment of caution, and with the Reserve Bank of Australia leaving the official cash rate on hold, and lenders independently increasing investor rates, some are changing the way they view and secure finance. 

I believe it is a positive that many Australians are becoming more conscious of the fact that low interest rates may not necessarily stay this way for a long period of time. As a result, they may more carefully review and assess their financial position in relation to opportunities, rather than rushing in to buy. 

The changing role of agents 

Over the coming months, I believe the role of agents may become more prominent in changing market conditions. In busy markets, it may seem as though houses can virtually sell themselves, however I believe there will be increasing reliance placed on real estate practitioners to bring together buyers and sellers to negotiate a price that all parties are happy with. 

As always, I remind prospective vendors not to be deceived by an appearance of success when choosing an agent. Look for the most sold signs – these are the agents who should be attracting your attention. It is not the agent with the most listings posted on Facebook, or the agents with the flashiest marketing, but the agent with the most results in the field who will be your best ally in achieving positive results. 

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