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

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

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

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

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

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

Canberra’s remarkable price growth turnaround

Tuesday, November 29, 2016

By John McGrath 

The market has improved significantly in Canberra this year, with house prices rising by almost 10% over the first 10 months of 2016 alone*. This time last year, Canberra was a market still in decline, so the turnaround this year has been quite remarkable.

Underpinning this growth is an undersupply of houses for sale, greater stability in Federal Government following many years of unrest, and a very low unemployment rate of just 3.6%^, boosted by the lifting of a two-year hiring freeze in the public service in mid-2015.

The Federal Election

In our recently released 2017 McGrath Report, we revealed a distinct new confidence in Canberra’s marketplace following the Federal Election.

Canberra is always directly affected by elections because one in three workers are employed in the public service. Unlike the last Federal Election, there was no threat of mass job cuts on either side of politics, so the market maintained its momentum during the long campaign.

The Coalition’s return meant continuing stability for government employees, no changes to negative gearing or capital gains, and a tax cut that would benefit a large proportion of residents who are among the highest paid workers in the country.

Other factors

Opens have been well-attended all year and auction clearance rates for houses remained just shy of 70% for the 12 months to June 2016, according to Domain research#.

Interest rate cuts are no longer having a stimulatory effect, with buyers now used to record lows. However, young couples and families are leveraging rates to stretch their budgets further and buy in premium locations close to the best schools.

Mr Fluffy buyback

The $1 billion ‘Mr Fluffy’ buyback and demolition of 1,022 homes across 56 suburbs by 2018 continues, and is having a big impact on the market. Approximately 260 homes have been demolished, with 176 scheduled for demolition between July and December 2016 **.

The scheme has displaced hundreds of families who all need to buy or rent. They have been paid well for their homes and the stamp duty concession on their next purchase is giving them extra buying power and the ability to buy quickly and compete strongly at auction.

Some are staying in their area, others are upgrading elsewhere. For example, many ‘Mr Fluffy’ sellers in Belconnen are heading to nearby Gungahlin where they can purchase bigger, newer homes.

Meanwhile, the incredibly rare opportunity to buy vacant land in premium established suburbs following the demolition of ‘Mr Fluffy’ homes is exciting buyers.

The first 10 blocks were taken to auction in April. Among the sales was a block in Pearce for $605,000 and one in Chapman for $610,000 – both close to the city’s median house price. This signalled to other home owners just how valuable their land has become due to limited release of new supply in recent years.

Original housing stock in Canberra’s prized inner north and south is more than 60 years old and due for an overhaul. Owners are realising the best way to capitalise on their land value is to re-build and families are out in force looking for knockdown opportunities in prime locations.

Downsizers are among these buyers, with many not ready for apartment living. Townhouses are hard to find, so many downsizers are looking to build dual occupancies instead – sometimes in joint venture deals with friends.

The Over 60s Home Bonus Scheme provides downsizers with a market advantage due to a substantial discount on stamp duty. On a $660,000 purchase, just $20 is payable. We are finding that many people are still unaware of this opportunity but once informed they feel incentivised to sell.

Apartment oversupply

Canberra’s apartment oversupply continues, comprising 51.2% of all homes for sale, according to CoreLogic^^. However, property values and rental yields are holding up well.

The median apartment price has risen 4.4% in calendar year 2016 and rental yields are among the highest in the country at 5.1%*.

The rental market is being supported by extra demand from ‘Mr Fluffy’ sellers as well as usual strong demand from young workers, students at two universities and public service contractors who do not want to settle in Canberra permanently.

* Hedonic Home Value Index, CoreLogic, published November 1, 2016

^ Labour Force Australia, August 2016, Australian Bureau of Statistics, published September 15, 2016

# Property Research Report for ACT, Domain, 12 months to June 2016

** Houses to be demolished by district and year, Asbestos Response Taskforce, published July 29, 2016

^^ Units are increasingly making up a higher proportion of overall stock available for sale, largely driven by the nation’s two largest capital cities, CoreLogic, published August 2, 2016

## CoreLogic; 12 months to June 30, 2016; suburbs with a minimum of 40 sales in the year

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Brisbane market affordable and resilient

Tuesday, November 22, 2016

By John McGrath

South-East Queensland continues to offer outstanding opportunity for growth. However, a sluggish economy, political upheaval, low population growth and an impending apartment oversupply is delaying the significant price growth that’s overdue in Brisbane today.

In our recently released 2017 McGrath Report, we discussed how the end of the mining boom has hit Queensland and its capital city hard. Brisbane is no longer experiencing the strong flow of money that came from regional areas where mining workers earning big salaries were investing in Brisbane real estate, or buying family homes in Brisbane for a fly-in fly-out lifestyle.

Latest statistics from the ABS and CoreLogic show Brisbane’s population growth is at its lowest point since 2001*. Continuously strong economic conditions in New South Wales and Victoria and uninspired state management following the Liberal National Party’s removal after one term (and now a minority Labor Government) provides no incentive for big business to set up and expand into Brisbane.

Brisbane shows resilience

But through all this, the property market is showing resilience. According to CoreLogic, median property values (for houses and apartments) along the Brisbane to Gold Coast corridor rose by 5.7% to $482,000 in FY2016^, compared to 3.5% growth in FY2015 and 6.7% in FY2014.

Despite all the big picture challenges, the market is currently seen as affordable, safe, steady, reliable and doing well in tough economic conditions.

The standouts

As always, some suburbs have exhibited exceptional results. Those with more than 15% house price growth in FY2016 include Robertson (25.6%), Darra (23.9%), Wilston (20.3%), Chelmer (19%), Banyo (17.2%), New Farm (16.8%), Sandgate (16.8%) and Carina Heights (16.2%)#.

Apartment oversupply

In the apartment market, Brisbane is facing an oversupply with a two-year pipeline of 44,511 dwellings to be completed, according to CoreLogic**. This is significant when, ordinarily, about 30,000 apartments would be sold in this timeframe and that includes a combination of old and new.

The oversupply will be primarily around the city and inner ring areas. Investors are increasingly wary of this and some developers have delayed their projects. However, it does present an opportunity for owner-occupiers with a long term view. The newly boosted First Home Owners’ Grant, up from $15,000 to $20,000 until June 30, 2017 should help young buyers in this market.

On the Gold Coast, plenty is happening and it’s all positive. Locals who bought highly discounted properties in prime areas post-GFC have now renovated or re-built and are selling with a view to buying again in a better location. They are making money and moving up the ladder through a buy, renovate, sell and repeat strategy.

In the more affordable suburbs, a huge range of buyers including local upgraders, downsizers, renovators, first home buyers and some Sydney and Melbourne lifestyle buyers are targeting up-and-coming areas, particularly on the southern Gold Coast.

Buyers are especially drawn to areas such as Miami, Palm Beach and Tugun where good quality houses that are walking distance to the beach are selling for well below $1 million. 

These suburbs offer exceptional value and opportunities for growth. A Palm Beach home worth $600,000 is worth $1 million just 9km up the road in Mermaid Beach. On the beachfront, Palm Beach buyers are paying $2.5-$3 million, compared to $5-5.5 million in Mermaid Beach.

Prestige sales

In the prestige market, there have been very few sales above $10 million since 2009, but this year, six were recorded over the first three quarters alone, reflecting rising confidence particularly among locals.

The biggest deal was the $25 million sale of a Mermaid Beach mansion in September. There was also the $15.5 million sale of a riverfront Isle of Capri residence to Chinese buyers and two other sales in Mermaid Beach for $13.25 million and $11.45 million. There was also an $11 million sale on Cronin Island and a $10.9 million sale at Sanctuary Cove.

We remain very optimistic about the Gold Coast. In the lead-up to the 2018 Commonwealth Games, billions will be spent on infrastructure, and the economy is becoming more diversified with health and education jobs supplementing the more volatile retail, tourism and construction industries.

On the Sunshine Coast, there’s a lot of demand at the upper end in Noosa and Sunshine Beach. Local upgraders and lifestyle buyers from Queensland, Sydney and Melbourne are spending up to $5 million for properties to either occupy now, or use as holiday homes ahead of retirement. A new record for beachfront homes on the coast was set in September with a $9.3 million sale at Sunshine Beach.

* Melbourne leads population growth, CoreLogic, published April 11, 2016 and Regional Population Growth, Australia 2014-15, Australian Bureau of Statistics, published March 30, 2016

^ Hedonic Home Value Index, CoreLogic, published July 1, 2016

# CoreLogic; 12 months to June 30, 2016; suburbs with a minimum of 40 sales in the year

** Record high unit construction increases settlement risk, CoreLogic, published May 16, 2016

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Melbourne more appealing than ever

Tuesday, November 15, 2016

By John McGrath 

Melbourne and Sydney have long been the engine rooms of Australia’s property market, with Sydney traditionally leading the way. But the southern capital is looking more appealing than ever before due to its superior value for money and glowing reputation as the world’s most liveable city for the past six years*.

In our recently released 2017 McGrath Report, we discussed Melbourne’s emergence as the No. 1 hot spot for both overseas immigration and Australians moving between states. Of particular importance is the growing number of Sydneysiders relocating and/or investing in Melbourne where property is cheaper, with good employment opportunities and an appealing lifestyle.

Melbourne’s relative affordability is contributing to record high net interstate migration, as well as strong net overseas migration, making it Australia’s fastest growing capital city with an average of 1,760 people moving in per week in FY2015, according to the ABS^.

Although Sydney outshone its southern cousin in the boom, with 64% growth in home values compared to 44% since 2012#, Melbourne arguably offers greater prospects for growth in the future.

Its median house price is $287,000 cheaper##, and a projected population surge from 4.61 million in 2016 to 7.91 million in 2053 will see it overtake Sydney as the most populous city in Australia^^.

Melbourne’s median house price rose by a modest 8.6% in FY2016 to $608,000, with the median apartment price up 2.5% to $485,000##.

However, some areas experienced much stronger price growth due to a lack of supply in 2016. According to CoreLogic, Melbourne’s top 10 suburbs for house price growth in FY2016 all experienced more than 25% gains in value##.

The dominant buyers in Melbourne today are upsizing families, most of whom are targeting the catchment zones of top performing public schools to avoid private school fees. This trend is so strong that new REIV research** shows there is now a significant price difference between homes located within top catchments and those that border them.

In Parkville, homes within the catchment for University High have a median house price of $1,395,000, compared to $799,000 for homes that are 1km outside the zone. Similarly, homes in the catchment for McKinnon Secondary College have a $305,000 premium over those outside the zone**.

With interest rates continuing at record lows, young buyers are stretching their budgets to get into premium areas. They’re targeting small inner-ring cottages with a bit of character, and paying well over the reserve to secure a piece of prime land while they can.

Some vendors are leveraging strong selling conditions to upgrade to larger homes in more affordable areas with change to spare. For example, vendors in Doncaster, Mitcham, Blackburn and Box Hill are selling in the early $1 millions and buying in Croydon for $800,000-$900,000.

Given Melbourne’s tight supply and rising prices, we are seeing the ripple effect in many areas. For example, buyers priced out of the highly desirable Bayside area are purchasing next door in Bentleigh and McKinnon, leading to several sales above $2 million this year – a price level not thought possible just a few years ago.

APRA restrictions have impacted investor demand, but we are still receiving enquiries from Sydney, Perth, Brisbane and ex-Melbourne locals living overseas. Many investors have now put Sydney into the ‘too-hard box’ due to affordability, and have switched their focus to Melbourne.

The southern capital has long been the favoured destination of offshore Chinese buyers, but demand has softened this year following changes to lending criteria for foreigners and forced sales of properties purchased in breach of Foreign Investment Review Board regulations.

Despite this, Melbourne’s prestige market remains strong, with a new house price record for the city set in Toorak at $24.1 million and Victoria’s highest residential sale ever occurring in South Yarra, with the exchange of three homes in one line for $33 million. Both occurred this year.

Sales above $25 million are expected for penthouses in South Yarra’s glamorous Capitol Grand development, which would break the national apartment record.

Melbourne is facing an oversupply of apartments, which currently represent 49% of stock for sale compared to 42% a year ago and 29% in 2011^^^. CoreLogic figures show a pipeline of 80,500 new apartments due for completion over the next two years, when only 61,500 apartments (old and new) are usually sold over this timeframe###.

This presents a great opportunity for owner-occupiers with a long term view, but they need to choose wisely.

* Global Liveability Ranking 2016, The Economist Intelligence Unit, published August 18, 2016

^ Regional Population Growth, Australia 2014-15, Australian Bureau of Statistics, published March 30, 2016

# Hedonic Home Value Index, CoreLogic, published September 1, 2016

** Top of the class: School zones boost prices in 2016, Real Estate Institute of Victoria, published June 27, 2016

^^ Population Projections, Australia 2012 to 2101, Australian Bureau of Statistics, published November 26, 2013

## CoreLogic; 12 months to June 30, 2016; suburbs with a minimum of 40 sales in the year

^^^ Units are increasingly making up a higher proportion of overall stock available for sale, largely driven by the nation’s two largest capital cities, CoreLogic, published August 2, 2016

### Record high unit construction increases settlement risk, CoreLogic, published May 16, 2016 

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McGrath Report 2017: Sydney prices still to rise

Tuesday, November 08, 2016

In our just released 2017 McGrath Report, we take a look at all the major east coast capital city markets and discuss the dominant trends going on in each of them.

The stand-out market – as always, is Sydney. It remains Australia’s strongest and most enduring market powered by long-standing fundamentals of undersupply and population growth; and providing every type of lifestyle possible including beachside, harbourside, CBD living and suburban neighbourhoods for almost 5 million residents.

Sydney real estate is like gold and in my opinion, despite the phenomenal boom of 2012-2016, Sydney property prices will continue to rise.

Figures from CoreLogic RP Data* tell us that Sydney property prices have risen 64% in four years. This is spectacular growth and well ahead of the second best result in Melbourne at 44%.

For many Sydney property owners, the boom has delivered extraordinary gains for those in the market. But how do you best capitalise on this newfound wealth?

Meantime, the market is showing signs of plateauing but price growth has continued due to a significant undersupply of stock and strong demand buoyed by further falls in interest rates.

According to CoreLogic RP Data*, the pace of price growth in Sydney has halved this year but median property values are still up 12.8% to $880,000 for houses and 7.5% to $665,500 for apartments over the first eight months of 2016. Pretty impressive for a slowing market.

Record low listing numbers have contributed to very strong auction clearance rates between 70% to above 80% all year.

Local upgraders have been the greatest buying force, aiming to use new equity to upgrade their homes and potentially refinance while interest rates are so low. However, fear of selling and not being able to buy back in is resulting in a determination to buy first, so stock remains low.

Many would-be upgraders are staying put and renovating instead, with Sydney and Melbourne owners spending more than twice the money of owners in other capital cities, according to the ABS and Domain research.

While investors are still out there, we have definitely noticed a drop-off due to tighter lending criteria. The APRA-led changes introduced in early 2015 aimed to limit growth in the banks’ property investment lending to less than 10% per year and this has now been achieved.

The top end of the market is improving this year. The lower dollar has encouraged expats and foreign buyers; and locals who purchased wisely post-GFC are now looking to cash in and upgrade.

In Sydney, Eastern Suburbs owners who bought in the $2 million-$4 million bracket are now selling for $7 million and upgrading to $10 million. In the Lower North Shore harbour suburbs, young families are selling for $4 million -$5 million and upgrading to $8 million - $10 million.

Affordability remains an issue across Sydney. The traditional migration west for cheaper housing continues, with the greatest population growth over the next 20 years expected in Camden, Parramatta, The Hills and Liverpool regions, according to new figures from the NSW Department of Planning#.

However, limited greenfield development space on Sydney’s western fringe means we need to get creative in housing a predicted 1.7 million new residents over the next two decades.#

Among the options is subdivision of traditional blocks in established suburbs to enable more terraces, townhouses and dual occupancies; and more high rise apartment living around suburban CBDs.

Meantime, a growing cohort of young families are leaving Sydney altogether in favour of affordable lifestyle locations, with ABS figures showing the most popular spots are the Richmond-Tweed region, Mid-North Coast, Central Coast and Hunter Valley**.

Chinese buyers remain a force in Sydney, however new fees levied by both federal and state governments on top of tighter lending criteria for foreigners has resulted in reduced demand and settlement risk on new apartments.

There’s a two-year pipeline of 82,000 new apartments to be completed in Sydney, according to CoreLogic RP Data^^. To put that in perspective, 43,500 apartments are sold in Sydney per year but that includes established apartments, which represent a bigger share of the pie.

This wave of new supply will be concentrated around the inner city and suburban employment and shopping hubs such as Strathfield, Parramatta and Ryde. This is where young people want to live and over the next few years, they will be spoilt for choice and finally have some negotiating power on their side.

We see a bright future for the Sydney property market. There is plenty of long-term price growth ahead even as we approach a major affordability hurdle for younger buyers today.

We believe the burgeoning global audience for Sydney real estate will be a key contributor to future price growth; and the long term stability of the market and opportunity to create significant personal wealth will sustain the aspirations of Sydneysiders to own their own homes for generations to come.

*Hedonic Home Value Index, CoreLogic RP Data, published September 1, 2016

#NSW Population Projections 2016 Update, NSW Department of Planning and Environment, published September 12, 2016

**Is family-led sea and tree change back in vogue? CoreLogic RP Data, published April 18, 2016 and Migration, Australia 2014-15, Australian Bureau of Statistics, published March 30, 2016

^^Record high unit construction increases settlement risk, CoreLogic RP Data, published May 16, 2016

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Top 5 suburb picks: East Coast capitals

Tuesday, November 01, 2016

By John McGrath

Another compelling year in Australian real estate is behind us, so what do we take out of it?

In our just released 2017 McGrath Report, we look at the movements in the market and pinpoint the trends that seem to be having the greatest impact on us both now and into the future. The last few years have been a fascinating time for Australian residential property, with a number of trends emerging and driving different markets in different ways. 

Over the next couple of months, I will discuss these trends in greater depth, including why we’re staying in our homes longer, the rise in off-market prestige sales and how technology will continue to change the way we transact real estate.

Today, I provide a general market overview and my top 5 suburb picks for each east coast capital city. These are the areas we feel have the greatest potential for price growth moving forward. 

So, taking a macro view of Australia first of all, it’s clear that Sydney and Melbourne have decoupled from the rest of the country. But this is a phenomenon this neither concerns nor surprises me. 

If you follow the trends of most countries around the globe, the largest city or cities often become separated from the rest of the market by the weight of demand. And within these cities, we continue to see an increasing ‘Manhattan Effect’, where lifestyle and locating as close as possible to the proverbial action has become a sub-trend. 

As commuting becomes increasingly challenging, the desire to be close to the business and arts districts is a direction that’s here to stay. As a result of this, people ask me if I think Sydney and Melbourne are overvalued off the recent cycle uplift. My honest view is that Sydney and Melbourne are the “New York’s of Australia” and will be in huge demand as far into the distance as I can possibly see. 

In fact, with several billion people on the doorstep of this lucky country – many with a huge appetite to enjoy the lifestyle we have – it would be far easier to mount a sensible argument that both of the big cities will look incredibly cheap as we look back in a decade or so. That is assuming we manage our growth well and find a way to sensibly welcome immigrants and overseas investors into the country. 

Which brings me to what I believe is one of the most short-sighted initiatives I’ve seen in my 35 years in real estate – the decision by three east coast state governments to impose hefty taxes on overseas buyers.

This tax could only have been imposed for one of several flawed reasons. Was it to allow local buyers to get into the market? Or was it simply to raise more revenue?

Let me emphasise that the overall percentage of property in Australia sold to foreign buyers is minimal. The reason Sydney and Melbourne prices have risen has little, if anything, to do with overseas buyers. It’s a supply issue. And let’s not forget that we all came from somewhere else. Our multi-cultural society is one of our greatest assets. Why send a message to the world that they’re not welcome to invest alongside us in this great country?

Drilling down to street level market trends in the east coast’s major cities, there are several suburbs in each city that I believe offer greater promise for capital growth than their peers. Here are my top 5 suburb picks based on current opportunity and long-term prospects for price growth. 

SYDNEY 

Canterbury 

Once an average suburban precinct best known for its equine interests, Canterbury is fast becoming an Inner West bolthole attracting young families and professionals alike. Buy, sit and watch your asset grow in value. 

Hunters Hill 

We still can’t work out why property values here are materially below similar suburbs in the East and North. This attractive garden enclave is private and discreet with beautiful homes and perfumed gardens. If you want to see some of the best homes in the country, check out Hunters Hill.  

Rouse Hill 

Follow the money. At the minute, it’s all heading to the North West ahead of the soon-to-be-completed new rail line. The surrounding areas are equally as attractive for both lifestyle and capital growth but the Rouse Hill Town Centre is worth seeing for that address alone. 

Sans Souci/Dolls Point 

Surrounded by water and with all the appeal and benefits of Sydney’s southern suburbs yet only minutes to the Bay, Airport and CBD, this area will continue to be one of the most desirable in Sydney. 

Forestville 

This has been a favourite suburb for several years now. If you crossed the leafy North Shore with the vibrant Northern Beaches, Forestville would be the outcome. Relatively easy access to the CBD, just seven minutes to the surf and surrounded by trees, it is ideal for homemakers. 

MELBOURNE 

Windsor 

A hidden gem neighbouring Prahran, Windsor was once considered the grungy end of Chapel Street but now the hipster crowd is moving in. We see great potential for this trendy pocket, which has easy access to trains and shops and is conveniently close to the CBD. 

Oakleigh South 

Change is on its way with a noticeable uplift in buyer demand over the past 12-18 months. This suburb is full of mid-century homes on big blocks with plenty of potential for knockdown/re-builds and development. Downsizers are capitalising on a 10-15% jump in land values over the past few years and selling to young families and developers. 

Northcote 

Just 6km north of the CBD, Northcote has undergone major change and is now a destination suburb for young professionals and families. High Street village offers many restaurants and the tram runs straight through to the city with a train station also close by. Local schools including Northcote High and Santa Maria College are increasingly popular. 

Wheelers Hill 

Wheelers Hill has a median house price that is $250,000 less than its neighbours of Glen Waverley and Mount Waverley, yet it is only 5-10 minutes away. Buyers are increasingly looking for better value here and we anticipate solid price growth as a result. 

Abbotsford 

This inner city precinct less than 3km from Melbourne’s CBD has been through significant gentrification over the past decade. With an abundance of leisure and lifestyle amenities, it also has cycling and running routes along the Yarra River. Young professionals and families enjoy its walkability and accessibility, while cashed up downsizers are now discovering this gem. 

BRISBANE & SURROUNDS 

Gordon Park 

Brisbane’s smallest suburb, Gordon Park offers fantastic value and great infrastructure. Access to the CBD has become much easier with the Clem7 and Inner City Bypass. New cafes are popping up and a ripple effect is occurring from the more established and pricier neighbouring suburbs of Grange and Wilston. 

Taringa 

Situated next to St Lucia and Indooroopilly, Taringa has access to all the same amenities as its blue chip neighbours but offers better value for buyers. According to CoreLogic, Taringa house prices rose 10.2% in FY2016 but we think there is more growth to come. 

Mermaid Waters 

This suburb offers very good value and a mix of waterfront and non-waterfront homes. We are seeing at least 4-5 registered bidders across all auctions in this suburb. This is an ideal location for second home buyers who don’t have the budget for Mermaid Beach. A lot of buyers are renovating so the suburb is undergoing a facelift. 

Sunrise Beach 

With a median house price of $675,000, it offers better value than neighbouring Sunshine Beach (median $1,015,000) but probably not for long! Just a few minutes outside Noosa, Sunrise Beach has had a noticeable kick in activity and 12.5% house price growth in FY2016. 

Maroochydore 

This is a town on the move with its CBD undergoing a complete makeover. Just 2km from the ocean, there is already a fresh, exciting new vibe on the main street with lots of new roads, retail, commercial spaces and community facilities on the way. 

CANBERRA 

Kambah 

Underrated and primed for growth, Canberra’s largest suburb with 6,140 homes offers better value than Woden and Weston Creek and a diverse range of properties. Centrally located, it is the most northern suburb of Tuggeranong with good access to arterial roads for the CBD commute. 

Curtin 

Big money is being spent in Curtin, which has undergone a changing of the guard over the past few years. Ex-Government housing has been sold off, knocked down and re-built and family buyers priced out of Deakin, Hughes and Garran have bought and renovated. 

O’Connor 

Adjoining Turner where houses are in very short supply, O’Connor offers great value. However strong buyer demand has made it Canberra’s No 1 suburb for growth in FY2016, with house prices rising 21.5% to a median of $960,000 and apartment/townhouse values up 15.3% to $490,000. 

Franklin/Harrison 

Sitting on opposite sides of Flemington Road, the main arterial road leading out of Gungahlin to the city, these two suburbs will directly benefit from the new light rail. Both are family-oriented neighbourhoods with good schools and close proximity to the CBD. 

Cook/Aranda 

These two suburbs are well positioned to benefit from Belconnen’s gentrification. A lot of new townhouses and apartments are being built in the area, creating residential precincts with great amenities including shops, restaurants and cinemas.

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Sydney buyers head to South Coast

Tuesday, October 25, 2016

By John McGrath

The latest Regional Market Update from CoreLogic shows Wollongong and Shellharbour have recorded impressive price growth of late, largely driven by Sydneysiders relocating to the south coast as the post-boom ripple effect gets underway.

It’s very common in the immediate period after a capital city’s boom to see buyers flocking to nearby regional centres within commuting distance back to the city. In the case of Sydney, it is typically the Blue Mountains, Wollongong, the Central Coast and Newcastle that benefit most from the ripple effect. This week, let’s drill down on the south coast.

Sydney buyers are looking south for affordability, lifestyle and investment opportunities. Among the owner-occupier buyers, some are commuting back to Sydney for work while others are seeking a permanent seachange with the hope of local employment to escape the city hustle and bustle altogether.

We’re also seeing more Sydney retirees heading to both Wollongong and Shellharbour. Now that Sydney’s four-year boom is over, they are selling their family homes for impressive prices and finding great value and lifestyle on the south coast, while still being close enough to drive back to Sydney regularly to see the grandkids. 

Here are the stats.

In the Wollongong council area, which includes Port Kembla, Bulli, Thirroul and Helensburgh at the very southern tip of Sydney, median house prices grew by 15.1% to $630,386 and apartment prices grew by 14.4% to $471,037 over the 12 months ending June 2016.

In the Shellharbour council area, which includes Shell Cove, Warilla, Oak Flats, Flinders, Blackbutt and Albion Park, median house prices grew by 13.1% to $532,463 and apartment prices grew up 12.7% to $411,958, according to CoreLogic.

I had a chat this week with one of McGrath’s Principals, Jordan Andonovski, who co-owns three of our south coast offices at Wollongong, Thirroul and a brand new one in Shellharbour. According to Jordan, all three are seeing an influx of Sydney buyers. 

Jordan says: Sydney commuter buyers are primarily coming from the western and southern suburbs and are targeting the northern areas of Wollongong including Thirroul, Bulli, Woonona and Towradgi.

“Those in Sydney’s west, who are already commuting to the CBD, are realising they can buy a home for less in Wollongong and although the commute is a bit longer, they can come home every day to a beachy lifestyle and a good-sized home on a decent block of land.

“Buyers from the Sutherland Shire have always liked Wollongong because it’s not so much of a stretch to go that bit further south for more value. They can buy a house here for the same price as a townhouse in the Shire. So after a long period of price growth in Sydney, they’re seeing an opportunity now to sell high in Sydney and upgrade here while interest rates are still extremely low. 

One of the most interesting trends our south coast offices are seeing is more people from Sydney moving to the coast because their work life has changed, with their employers allowing them to work part-time from home. This means they only have to commute a few days per week, which makes a coastal lifestyle outside the city much more appealing and manageable. 

We’ve been seeing this with semi-retired senior executives in many regional areas close to Sydney for several years, but it’s now becoming more common among young families too. Technology is enabling somewhat of a decentralisation of the workforce and regional areas close to major cities are really primed to benefit from this trend.

The $600,000 to $700,000 price range appears to be the most popular in Wollongong, according to PriceFinder data cited in the October market report of independent property valuation firm, Herron Todd White. This bracket had the highest volume of house sales in the 2016 financial year at 420 sales, according to the report.

Jordan concurs with this, with his personal team selling about 40 homes over the past three months at an average sale price of $650,000.

This sort of budget buys good quality apartments in the Wollongong CBD and older houses in areas like Figtree, which is about 4km south-west of the Wollongong CBD. Figtree has been a hot spot this year as it provides better value for buyers on tighter budgets, has some of the best schools in the Illawarra and is easily accessible to the M1 for the Sydney commute.  

Our Wollongong office is also selling a lot of apartments to investors who are finding Sydney too expensive to buy in now, with yields too low following the boom.

Jordan says: “Most apartments will deliver investors a strong rental yield, that in most cases, makes the investment very close to neutrally geared. This is very appealing to Sydney investors, who are primarily targeting older-style apartments in the late $400,000s to early $500,000s.

“We’re also seeing a lot of Sydney parents buying apartments in suburbs close to Wollongong University such as North Wollongong, Gwynneville and Keiraville. They’re buying with the intention of giving their kids somewhere to live while studying, with a view to holding the apartment as a long-term investment after their child moves on.”

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Big opportunities for first home buyers

Tuesday, October 18, 2016

By John McGrath 

With first home buying across Australia at its lowest level in more than a decade, I want to encourage young people to re-think their position and look into the grants and stamp duty concessions available to them today. 

Every single state and territory in Australia is currently offering assistance to first home buyers – and not just on new property purchases either.

Every now and then the rules change and young people need to keep abreast of these changes so they can best take advantage of them.

For example, did you know the Queensland Government has introduced a $5,000 boost to their First Home Owners’ Grant for this financial year only? This is a one-off, one-year boost to the grant from $15,000 to $20,000 that will end on June 30, 2017.

While it’s true that all grants are limited to newly-built, off-the-plan or substantially renovated properties, some stamp duty concessions apply to both new and established homes.

It’s really worth taking the time to check out exactly what assistance is available to you, especially with interest rates at such record lows and likely to stay this way indefinitely. If you put these two factors together, motivated first home buyers can do very well right now.

Although affordability is a big hurdle in cities like Sydney, I see a major opportunity ahead for young buyers in prime east coast markets.

That opportunity is the impending oversupply of new apartment stock in Melbourne, Brisbane and to a slightly lesser extent, Sydney. Where a market is oversupplied, prices fall.

It’s that simple and that means opportunities for buyers.

The impending apartment oversupply means first home buyers will be able to:

  • Buy for a better price
  • Have more negotiating power 
  • Have more choice of property available to them
  • Have more time on their side to choose their next home
  • Get tens of thousands of dollars in grants and duty concessions to assist them

Now, a few words of caution when buying in an oversupplied market.

  1. You have to be careful in your choice of location. Pick a desirable area close to amenities with easy access to major employment hubs. Once the oversupply has been absorbed (which might take a few years), prices will begin rising again in good quality suburbs.
  2. Be careful in your choice of product. Focus on good quality developments and choose an apartment that has some unique features, such as a particularly large floor plan, generous balconies or courtyards, great privacy, views or a north aspect. Avoid small uninspiring apartments in developments where every property is the same.
  3. Shop around for finance. Some lenders are avoiding certain postcodes (primarily central CBD areas) not because they’re bad areas to buy in, but because the oversupply creates too much short-term risk for the banks. So you’ll need to talk to a broker to find out which lenders are appropriate for you if you want to buy in these areas.
  4. Buy for the long term. I can’t stress this enough. The oversupply will take some time to run its course. Don’t put yourself in a situation where you need to sell during the oversupply period. Oversupplies are only advantageous to buyers. 

Here is a brief overview of the grants and stamp duty concessions available in each state and territory. For more comprehensive information, go to www.firsthome.gov.au. 

New South Wales

Grants

Name: First Home Owner Grant (New Homes) scheme

Eligible price point: $750,000 or less

Eligible properties: New homes

Amount: $10,000

Stamp duty concessions

Name: First Home – New Home scheme

Eligible price point: Full exemption up to $550,000, concessional rates for new homes valued between $550,000 and $650,000

Eligible properties: New homes 

Victoria

Grants

Name: First Home Owner Grant

Eligible price point: $750,000 or less

Eligible properties: New homes

Amount: $10,000

Stamp duty concessions

Name: First home buyer duty reduction 

Eligible price point: $600,000 or less

Eligible properties: All properties

Amount: Up to 50% discount on stamp duty

Note: A second scheme called the Off-the-Plan Concession provides a further discount specifically for off-the-plan purchases

Queensland

Grants

Name: First Home Owners’ Grant

Eligible price point: $750,000 or less

Eligible properties: New homes

Amount: $20,000 until June 30, 2017

Stamp duty concessions

Name: First Home Concession

Eligible price point: $550,000 or less

Eligible properties: All properties

Amount: Stamp duty exempt to $500,000, sliding scale from $500,000 - $549,000  

Note: A second scheme called the Home Concession provides stamp duty concessions on all properties at any price point purchased for owner-occupation. If your first home is above $550,000, you can apply for a concession through this scheme

Australian Capital Territory

Grants

Name: First Home Owner Grant

Eligible price point: $750,000 or less

Eligible properties: New homes

Amount: $10,000

Stamp duty concessions

Name: Home Buyer Concession Scheme

Eligible price point: Full concession up to $455,000; sliding scale to $585,000

Eligible properties: New homes 

Other criteria: Gross income thresholds apply. For example, the threshold for applicants without children is $160,000. You do not need to be a first home buyer but you cannot have owned property for the past two years

Amount: Stamp duty reduced to just $20 on properties worth $455,000 or less

Western Australia

Grants

Name: First Home Owner Grant

Eligible price point: $750,000 cap on properties south of the 26th parallel (i.e. Perth metropolitan areas) and $1 million cap on homes north of the 26th parallel

Eligible properties: New homes

Amount: $10,000

 

Stamp duty concessions

Name: First Home Owner Rate of Duty

Eligible price point: $530,000 or less

Eligible properties: All properties

Amount: Stamp duty exempt on homes worth $430,000 or less. Sliding scale of concessions on homes valued $431,000 - $530,000

 

South Australia 

Grants

Name: First Home Owner Grant

Eligible price point: $575,000 or less

Eligible properties: New homes

Amount: $15,000

Stamp duty concessions

Name: Off-the-Plan Apartment Concession

Eligible price point: No threshold

Eligible properties: Off-the-plan apartments

Amount: Partial concessions available until June 30, 2017. Amount depends on the stage of construction at the time of purchase

Northern Territory

Grants

Name: First Home Owner Grant 

Eligible price point: No threshold

Eligible properties: New homes

Amount: $26,000 plus a further grant of up to $2,000 under the Household Goods Grant Scheme

Stamp duty concessions

Name: First Home Owner Discount

Eligible price point: $650,000 or less

Eligible properties: Established properties

Amount: Stamp duty exempt up to $500,000; sliding scale to $650,000. Flat $10,000 duty discount for homes worth more than $650,000

Tasmania 

Grants

Name: First Home Owner Grant

Eligible price point: No threshold

Eligible properties: New homes

Amount: $20,000 until June 30, 2017 and $10,000 from July 1, 2017

Stamp duty concessions

None available 

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Strata law overhaul to improve apartment living in NSW

Tuesday, October 11, 2016

By John McGrath

The biggest overhaul of NSW strata laws in four decades is about to make apartment and townhouse living that much easier for more than a quarter of the state’s population who own, rent or manage strata properties. 

More than 90 individual changes to strata legislation have been approved by the NSW Government following five years of public consultation. During that time, they received 3,000 submissions, indicating a lot of interest in the community and a genuine need for change.

Most of the changes are effective from November 30. Not only are there changes for owners, but tenants are included too, which is an important step given the rising number of people renting their homes these days. 

One of the most important changes relates to renovations, making the process easier for owners and removing unnecessary red tape. Owners will no longer need permission for things like installing handrails or picture hooks. They will only need 50% support for minor renovations such as installing timber floorboards or renovating a kitchen, and structural renovations will still require 75%.

Owners can set a broader range of community rules, such as allowing or restricting pet ownership, classifying smoking as a nuisance (thus enabling more action to be taken against residents whose smoke drifts into neighbouring abodes), and paying the local council to issue parking fines for unauthorised use of common property, such as visitors’ parking spaces. 

There are some common sense changes in relation to how a strata property is run, such as allowing owners to use technology to communicate on issues, participate in meetings and cast their vote. This includes the use of social media, video and teleconferencing, electronic voting and distributing papers via email. 

‘Proxy farming’ will end with owners restricted to only one proxy vote for strata schemes of fewer than 20 lots, or 5% of the scheme for larger lots.

Tenants will have the right to attend owners’ corporation meetings, but won’t be able to speak or vote unless they hold a proxy on behalf of an owner. The owners’ corporation can vote to allow a tenant to speak on a particular matter and if more than 50% of the building is tenanted, a tenant representative can be nominated as a non-voting member of the ‘strata committee’ (previously called the ‘executive committee’). 

A controversial change is the ability for 75% of the owners’ corporation to decide to sell or redevelop their building instead of the previous requirement of unanimous consent.

This could facilitate a major rejuvenation of housing stock in desirable, established areas where 1960s and 1970s apartment stock is common. The opportunity to develop in prime locations will no doubt be more appealing to developers than greenfield opportunities in Sydney’s city fringes.

Owners might be able to sell collectively for a much higher price than they could achieve individually, particularly in the case of blocks on very large lots where the land has not been well utilised. For example, a block of 50 might be able to be replaced with a new block of 150 if the site allows for it, and this sort of scenario would likely result in premium offers from developers.

At an academic level, this sort of change reflects the challenges we face in accommodating a growing population, particularly in Sydney. We do need to think differently and creatively in order to house an expected 1.7 million new residents over the next two decades. But you can’t ignore the plight of owners who don’t want to sell in this circumstance. The new law says they pretty much have to live with the majority decision, or take their argument to court, and this won’t sit well with many people. 

Any plan to sell or renew a building will have to be approved by the Land and Environment Court and owners must receive at least the market value of their lot plus extra money to cover moving costs and other expenses but still, it’s a harsh reality for dissenting owners. To this end, the Fair Trading Department will set up an advocacy program for vulnerable and elderly residents to provide free advice and referrals to support services.

In the lead-up to November 30, the Fair Trading Department is running a series of community seminars to help people understand the changes. For more information on the changes and the dates of future community seminars, go to fairtrading.nsw.gov.au.

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More gain than pain in real estate

Tuesday, October 04, 2016

By John McGrath

New research from CoreLogic shows property continues to provide excellent wealth creation for owner-occupiers and investors alike – as long as you make smart decisions both at the time of purchase and also when selling.  

The Pain and Gain Report, released late last month, shows the average capital gain earned by capital city vendors who sold their house for a profit during the June quarter was $363,442. For capital city apartment sellers, the average gain was $229,596.

In regional markets, the average capital gain on houses sold for a profit was $154,773 and $107,680 on apartments. 

Now that’s the ‘gain’ side of the equation. The report also gives us the ‘pain’ side, that being the re-sale losses where homes were sold for less than their purchase price. 

Overall, 5.9% of houses and 9.5% of apartments sold in capital city markets in June were sold at a loss. The average loss on houses was $94,936 and it was $67,456 for apartments. The capital cities where the most re-sale losses occurred were Perth and Darwin. 

In regional markets, 12.2% of houses and 19.9% of apartments sold below their purchase price. The average loss on houses was $64,423 and it was $61,944 for apartments. The area that experienced the most re-sale losses was, by far, regional Western Australia.

As you can see, there’s generally more gain than pain in property, but statistics like this do remind us that it’s possible to lose money if you make the wrong choices. Thankfully, they’re pretty easy to avoid. 

The biggest contributing factors to re-sale losses in real estate are as follows: 

1. Selling too soon after purchasing

For the ordinary buyer, real estate should always be a long-term play. Buy it, sit on it, maybe make some improvements along the way and don’t sell for at least 7-10 years. I say this because on average over the past century, Australian property values have pretty much doubled during this sort of timeframe. Given the costs of buying in, you don’t want to get out until you’ve made some really good money, so a good rule of thumb is a minimum 7-10 years because this is usually enough time for a full-growth cycle to occur. 

If you get really lucky and buy just before a boom, you might be able to sell in a shorter timeframe and still make great money, but even so, I still recommend holding for as long as you can to truly maximise your overall gain. 

2. Buying in second-tier locations

This can be avoided through rigorous research.

Don’t buy in towns with declining populations or areas that rely on just one or two major industries, particularly volatile industries such as mining and tourism. When it comes to choosing areas within a suburb, or particular streets, talk to agents and become an expert on your target neighbourhood to ensure you make the right purchasing decision.

3. Stretching your budget too far

When buying, don’t stretch your budget beyond what is reasonable for your circumstances. Look ahead 7-10 years. Can you afford the loan repayments at 7-8% interest (the long-term average)? Can you keep up the repayments if you lose your job or take time off to have a baby, for example? Do you have enough savings for other unexpected costs? You need a ‘yes’ answer to all these questions before you buy. If not, the likelihood is you’ll end up selling simply to liquidate funds and that will usually involve a loss.

Real estate is an expensive asset class, but it’s also one of the safest and most reliable vehicles to wealth creation in Australia. If you keep it simple – buy good quality property in good quality locations and hold for the long term, you have every reason to expect a very positive outcome. 

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Confidence lifts in prestige property market

Tuesday, September 27, 2016

By John McGrath

The big news in Sydney real estate right now is the listing of John Symond’s renowned Point Piper estate, which is expected to sell for a new national record price. 

I remember when John bought this property in 1999 for over $10 million and soon after commenced one of the biggest and most elaborate builds the Sydney market has ever seen.

It took five years to create the magnificent estate, which sits on about 2,675 sqm of land with one of the largest waterfrontages along Point Piper’s western edge. This is the most desired position because it faces the city, Opera House and Harbour Bridge.

The mega listing is symbolic of rising confidence and excitement in the prestige market today. There have been some big deals this year, not to mention a few record sales, in many markets across the country.

Gold Coast in focus

The stand-out is the Gold Coast, where there have been very few sales above $10 million since 2009 but all of a sudden this year, we’ve had six above $10 million, a seventh which is under contract, and several more sales in the $5 million to $10 million range.

The GFC hit this market harder than any other in Australia, but prestige buyers are most definitely back in 2016. So far this year, the biggest sale has been a $25 million deal at Mermaid Beach this month. There have been five other sales above $10 million across the central and northern sections of the coast, and most of them have been to local buyers.

I can’t emphasise enough the importance of this. Chinese buyers are still active but it’s the locals who are dominating on the Gold Coast and this signals a change in confidence and that prestige buyers obviously see value and opportunity at the moment. 

The prestige sector is overdue for growth and it’s great to see more sales and new benchmarks being set this year.

Other markets

In Melbourne, a new record was set in June, with a $24.1 million sale in prestigious Toorak. There was also a $33 million multi-purchase deal of three lots in South Yarra in March.

In Brisbane, the highest sale is $10.5 million for a house in New Farm in September.

In Sydney, the highest sale so far this year is $21 million in Point Piper in May, closely followed by a $20.3 million exchange in February for a house in Vaucluse. (There was also a $33 million settlement in Rose Bay in February on a property bought a few years ago).

The benchmark sale of the year is the $80 million multi-purchase of four lots in Vaucluse in April.  

When people are spending multi-millions in prestige real estate, it gives confidence to the rest of the market. And as Australia’s international reputation continues to grow, and given the value on offer compared to London, New York, Los Angeles, San Francisco, Hong Kong and Singapore, I think we’ll also see more international buyers investing here in the future.

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