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The Experts

John McGrath
Property Expert
+ About John McGrath
About John McGrath - Founder & 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 most successful real estate companies in Australia with an established and respected market presence in NSW, the ACT, Queensland, and more recently 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 was founding director of the REA Group and served on its board from 1999 to January 2018, serving as chairman from 2003-2007. 

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.

Do you call that a cut?

Thursday, November 15, 2018

Last week we were given the news that NSW will begin indexing stamp duty brackets to inflation or CPI (the consumer price index) to make transactional costs “fairer” and combat bracket creep due to rising property prices.

Whilst indexing stamp duty makes sense, it’s also about 30 years too late.  Buyers today are paying about 10 times what the previous generation paid in relative dollars.

This is the first change to stamp duty arrangements since 1986, when the median house price in Sydney was just $100,000. Today, we’re close to $1 million.

This state government and several before them haven’t moved on this issue for one reason only – stamp duty is simply a big revenue raiser.

Indexing the brackets is really just a token gesture. The immediate effect is a $500 saving and while something is better than nothing, it’s impact on everyday Australians ability to buy a home or move will be negligible.

There are many people out there living in unsuitable accommodation because they simply don’t have the budget to cover the huge stamp duty impost.

If you want to buy a fairly modest home within 20km of Sydney’s CBD you’re looking at between $900,000 and $1,200,000. That’s around $40,000 in stamp duty that is ripped up for nothing.

This is the main reason the big cities of Australia have become unaffordable for many. It’s not overseas buyers, as was suggested during the boom. It’s the cost of transferring from one home to the next.

Today, someone wanting to upgrade from a house worth $1,000,000 to one worth $1,250,000 will have to pay around $80,000 in stamp duty, selling and legal fees.

This has prevented many Australians from doing what prior generations have done, which is gradually improving their homes so at some point in the future, the family home becomes an additional superannuation asset for downsizers at a certain time in their life.

The average length of time that Australians stay put in their homes is consistently rising and stamp duty is a big factor in this.  Many home owners reason that the cost of renovating and extending where they are now – if this is possible, is cheaper and more convenient than buying a new home.

Whilst I’m delighted to see some focus on the stamp duty issue, indexing the brackets to CPI is not going to shift the needle. It’s still way too high and needs to change.

If the Government is serious about making housing more affordable for everyone, it would abolish the tax and find a more affordable broad-based tax that would make it fairer for everyone.

The stamp duty brackets will change on 1 July 2019 and will be relevant to all purchases on or after that date.

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How hot are Brisbane, the Gold Coast and Sunshine Coast?

Thursday, November 08, 2018

South East Queensland will be the prime beneficiary of Sydney and Melbourne’s slowdown,  with the economy starting to turn a corner and the state re-claiming its place as Australia’s No 1 destination for internal migration, as more families and downsizers from the southern cities cash-in for a lifestyle in the sun.

Economic growth and jobs are closely tied to every property market’s performance and Queensland has suffered in the shadow of the mining downturn. 

But as discussed in our newly released annual McGrath Report 2019, things are changing, with boosted tourism, surging gas exports and the strongest annual growth in jobs in more than a decade combining for a comeback.

Economic growth is projected to accelerate from 2.5% in FY17 to 3% by FY19, supported by the biggest infrastructure spend since the 2011 flood recovery, announced in the FY19 Budget in June.

Looking ahead, economic forecaster BIS Oxford Economics says Brisbane will lead the capitals, with 13% property price growth predicted by 2021, although more of this growth will occur in 2021.

Brisbane is one of the world’s great cities.  Liveability, affordability, scale and future economic prospects all suggest that Brisbane is a market where you can confidently buy.

The value gap between the East Coast capitals is compelling – it is the largest it has ever been between Brisbane and Melbourne and the largest in 15 years with Sydney, according to CoreLogic.

A typical house in Brisbane is $437,000 cheaper than Sydney and $260,000 cheaper than Melbourne. This level of affordability, coupled with positive economic signs means Brisbane is primed for future growth.

Amongst the thousands of southern migrants relocating north, there is currently a clear preference for beachside living, with the Gold Coast and Sunshine Coast favoured over Brisbane.

These two regions have weathered the mining downturn particularly well, with significant local infrastructure spending, jobs growth and the 2018 Commonwealth Games on the Gold Coast offsetting the impact.

About 5,200 Sydneysiders and 2,500 Melburnians moved to the Gold Coast in FY17 and a further 1,500 migrated from Melbourne to the Sunshine Coast.

This has translated into better property price growth in the regions, with house prices rising 4.8% on the Gold Coast and 6.1% on the Sunshine Coast compared to 3.1% in Brisbane over the 12 months to June 2018.

The Gold Coast and Sunshine Coast are now more expensive than the state’s capital, with median house prices of $650,000 and $589,000 respectively compared to Brisbane at $536,000. The last time the Gold Coast had such a substantial premium to Brisbane was in July 2008.

This might be a sign of the future with a huge wave of downsizing due to unfold over the next two decades across Australia. 

Queensland’s best sea change locations, such as the Gold Coast and Noosa have long been favourite destinations amongst downsizers looking for a more relaxed life.

While affordability is part of Queensland’s attraction, massive growth in Sydney and Melbourne property prices over a prolonged period means southern migrants can afford to buy wherever they like.

Within Brisbane, southern migrants and local upgraders are favouring premium property in blue chip inner ring areas close to the CBD and/or river. 

This has led to above average growth in desirable neighbourhoods like Hamilton (median house price up 38.5% to $1.565 million), Paddington (up 15% to $1.15 million), Bulimba (up 11.3% to $1.307 million) and Auchenflower (up 9.5% to $1.095 million).

While a temporary oversupply of ordinary one and two bedroom apartments persists in Brisbane’s inner city, exacerbated by weakened investor activity, there is solid demand from downsizers for large luxury apartments in the $1 million-plus range in buzzy restaurant and entertainment precincts.

Australia’s favourite seachange destination is more appealing than ever before, with the Gold Coast amongst the top 10 destinations of all capital city migrants in FY17, attracting 19,400 people from the eight capitals, including 8,800 from Brisbane.

The opportunity to work remotely, set up a home business or take up one of thousands of new jobs is a big drawcard for the Gold Coast and Sunshine Coast, which both have airport access. 

The Sunshine Coast also has strong economic credentials, with the redevelopment of Maroochydore CBD and the Sunshine Coast Airport expansion underway. 

The Sunshine Coast Regional Council is planning light rail by 2025 and a Business and Technology Park adjacent to the new university.

Toowoomba, about 120km west of Brisbane, offers exceptional affordability and is benefiting from Australia’s first private airport, Wellcamp Airport, which began passenger services in 2014 and provides 80 direct flights per week.

Future growth is assured with major infrastructure projects such as the $1.6 billion Second Range Crossing and the $10 billion Brisbane to Melbourne Inland Rail Project set to advance the region. 

South East Queensland provides a golden triangle of opportunity today – from the Gold Coast to the Sunshine Coast, including Brisbane and west to Toowoomba. This region offers the best short-to-medium term opportunities for capital growth, as well as the most desirable lifestyle in Australia.

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Sydney will sizzle in some suburbs

Thursday, November 01, 2018

With Sydney’s market slowdown dominating the headlines and dinner time conversations, the focus has been on short-term price fluctuations, falling auction clearance rates and reduced buyer competition across the city. 

But Sydney has a much better story to tell, with once-in-a-generation change on its way in the biggest sub-market within our city – Western Sydney, where almost half of Sydney’s population currently lives and where a million more residents will settle by the early 2030s.

In our newly-released McGrath Report, we discuss what is actually the most important thing happening in Sydney today. 

The 24-hour, curfew-free Western Sydney Airport and its world class Aerotropolis business precinct will be one of Australia’s biggest infrastructure projects undertaken in decades.

Tens of thousands of new jobs and billions in new investment are about to permeate our most affordable property market, where prices have the most room to grow. It’s all about to start, with soil due to be turned at the 1,780 hectare Badgerys Creek site by Christmas 2018. 

The airport is one of several infrastructure projects in Sydney that will re-rate local home values while the rest of the market is cooling. 

The Northern Beaches Hospital will open in October 2018, the Sydney Metro Northwest rail will be running in the first half of 2019 and the CBD and South East Light Rail and the second stage of WestConnex will follow in 2020. There is much to be excited about! 

As we all know, median prices have slipped in Sydney over the past year and demand is certainly down, particularly among investors and upgraders due to finance restrictions. It’s therefore no surprise to see stronger activity amongst downsizers, who often buy without a loan; and first home buyers supported by the bank of mum and dad.

Stamp duty cuts have had a significant impact, with first home buyer activity in New South Wales peaking at 15% of the market early in 2018, the highest it has been since late 2012.

Young buyers are favouring Sydney’s West and South West, in particular Liverpool, Kingswood, Camden, Campbelltown and Riverstone, government figures show.

A wave of downsizing across Australia is coming as more baby boomers hit retirement age. Sydney downsizers have replenished superannuation lost in the GFC and the property boom has substantially lifted the value of their homes, putting them in a good position to buy as the market cools.

The Federal Government wants them on the move to free up desperately needed family homes for younger generations. From July 1, 2018, downsizers are being incentivised with people aged 65 or over able to make a one-off $300,000 contribution from the sale proceeds of their home into super ($600,000 for couples). 

Prestige property has had good price growth over the past few years, with some tapering off in 2018. Strong share market gains, business confidence and an improving economy have encouraged people to invest more of their wealth in the tax-free haven of a trophy home in iconic harbourside and beachside locations.

This time in the cycle requires Sydneysiders to do what most people unfortunately can’t – adopt a longer-term view. The market has cooled, with BIS Oxford Economics predicting Sydney’s median house price will remain lower than its peak through to 2021.

With interest rates so low and prices softening, now is the time to invest and/or pay down debt. The next upswing might be many years away but Sydney still has plenty of capacity for capital growth.

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My top 5 suburb picks

Friday, October 26, 2018

In our just released 2019 McGrath Report, we give a much needed simpler and clearer perspective on what’s happening in Sydney and Melbourne as both cities continue to cool.

The 5% to 10% drop we’ve seen so far followed a growth cycle that added 60% to 100% to property values overall. Many people owned property for the entire duration of this cycle and therefore have enjoyed the full benefit.

I believe we have seen the worst of Sydney and Melbourne’s correction and we’re in for a much softer landing than many pundits predicted.  My instincts tell me the market has corrected quickly and we are within a few percentage points of new price benchmarks.

In 2019, I see the strong possibility of a mini rebound as buyer demand grows at adjusted pricing levels.

It’s been about a year since both markets began to cool.  The theory of a 40% drop has resurfaced, like it did after the last boom and the boom before that; and retreated in the face of indisputable evidence that our market will be just fine.

Our two biggest cities have held the spotlight for many years, so in this year’s McGrath Report we ask the exciting question: which city will be next to step on stage?

History tells us Brisbane and South East Queensland tend to follow Sydney and Melbourne; and with the state economy up north in a turnaround phase, boosted by the biggest infrastructure spend since the 2011 flood recovery, we see great opportunities there now.  

Also in this year’s Report, we review some of the social trends impacting Australian real estate.

As our major cities become more crowded, congested and expensive, will more people trade off size for location?  Will people sacrifice a bedroom or garden to live closer to the CBD?

As Uber Eats feeds more Australians, will kitchens become less important or even vanish in some instances?

Will young families and empty nesters pull the rip cord on city life and escape to our vibrant, re-emerging regional centres that are readily available within a 90-minute radius of the capitals?

We’ll discuss all these questions in detail over the next few months here on Switzer. 

For now, let’s get started with my Top 5 Suburb Picks for greatest capital growth potential in each east coast capital city.

John McGrath’s top suburb Picks

My Sydney suburb picks

1. Putney: Once dominated by mainly public housing residences, this charming waterside pocket is one of Sydney’s least known riverfront addresses. When it goes the way of its sought-after neighbor, Hunters Hill, you’ll be regretting not owning a small piece of it.

2. Avalon Beach: The glorious Northern Beaches continues to offer value to Sydney buyers for a world-class coastal lifestyle. Avalon Beach and surrounds is my pick of the available addresses mainly because of the charming retail village which sets it apart. Enjoy the Palm Beach lifestyle without the hefty price tag.

3. Maroubra: Like Avalon in the north, Maroubra Beach offers relative value if you’re prepared to travel a few extra minutes to track into the CBD. The heartland of the South Sydney Rabbitohs, this beachside neighbourhood will catch up in time to its slightly more glamorous neighbouring beaches.

4. Earlwood: This is one of Sydney’s most diverse multicultural communities with Greek, Italian and Lebanese heritage delivering a wonderful vibe to this beautiful garden suburb. And with Marrickville shops up the road, you won’t go wanting for great eating options or a strong Turkish coffee or two. 

5. Stanmore: The Inner West continues to attract both upwardly mobile executives and families, as well as downsizing baby boomers looking to move closer to the action. Attached cottages, bungalows and now a selection of apartments delivers something for almost everyone within 15 minutes of the city.

My Brisbane suburb picks

1. Maroochydore (Sunshine Coast): The economic hub of the Sunshine Coast, the reinvention of Maroochydore is starting to take shape courtesy of its Priority Development Area designation. A 53-hectare greenfield site in the heart of Maroochydore is being transformed into a cutting-edge CBD, with a pledge to provide a 21st century epicentre that includes a high speed, high quality fibre optic network, free public Wi-Fi and an Australian first underground automated waste collection system of this size.

2. Pimpama (Gold Coast): Pimpama recorded Queensland’s fastest population growth at 31% in FY17, with buyers enthusiastically buying or building brand new homes. Pimpama is affordable with a median house price of $475,000 and is located within the rapidly developing northern Gold Coast region along the M1 corridor. The $100 million Pimpama City Shopping Centre is opening in September 2018 and the $56 million Northern Gold Coast Sports and Community Precinct is slated to open in 2020. A brand new $470 million Westfield will open in nearby Coomera in late 2018 and there is a proposed new train station to better connect it to Surfers Paradise. The northern Gold Coast population is projected to double from 75,000 residents to 167,000 in 20 years, accounting for one third of the city’s total growth.

3. Annerley (Brisbane): Only 4km from Brisbane CBD, this suburb has been under the radar until now. It neighbours the more prestigious Highgate Hill and Dutton Park, which is partly why the market is showing signs of growth and gentrification. While you need about $865,000 to buy a house in Dutton Park, next door in Annerley you can pick up a solid home for less than $710,000.

4. Grange (Brisbane): The leafy inner city suburb of Grange is fast becoming popular with young families with its easy access to the CBD, relative affordability, quality schools such as Wilston State School, and access to the airport and both the Sunshine and Gold Coast. The blocks are typically a little larger than the average and for a family friendly suburb, this is king.

5. Springfield Lakes (Brisbane surrounds): Located in the Ipswich region west of Brisbane, this popular master planned community continues to attract new residents with its population growing by 8.7% or 1,400 people in FY17. With a median house price of $440,000, two new releases have come to market over the past year – Springfield Rise and Creekwood. The region is set to benefit from a proposed passenger rail line extension between Ipswich and Springfield via Ripley, which is likely to be constructed after the Cross River Rail project is completed in 2024.

My Melbourne suburb picks

1. Bonbeach: If hunting beachside bargains, Bonbeach must top the 2019 shopping list. With a median house price of just $900,500, expect the ripple effect of pricier neighbours Edithvale and Aspendale to wash over this undervalued postcode. Cafes arrived in 2018; a sure sign of what’s ahead.

2. Thornbury: First home buyers are keen to stay as close to Brunswick’s action as money will allow, which will continue to underpin value growth. Interestingly, apartments listed with a median price of $500,000 are on the market for just 30 days. Strong investor interest and low 1% vacancy rates suggest a strong performer going forward, according to SQM Research.

3. Box Hill: Just 14km from the CBD with its own rail hub and hospital, Box Hill’s astonishing 118.9% growth since 2013 has pushed the median house price to $1.696 million. But its golden era is far from over. The Chinese community, which represents about 27% of residents, fights hard to buy in Box Hill Secondary College zone, one of the city’s top public schools. Houses on large blocks remain goldmines for small developers.

4. Wantirna: Wantirna South’s median entered the $1 million club in 2018, so its sister suburb, Wantirna is inevitably next in line. With a median house price of $960,600, it offers excellent transport links, schools and proximity to Westfield Knox Shopping Centre, which will undergo a long awaited major redevelopment from November 2019. 

5. Cheltenham: Straddling Nepean Highway, house prices on Cheltenham’s west side are still well beneath those of its salubrious neighbours Sandringham, Mentone and Black Rock. Its second metro commuter rail option, the recently opened Southland Station, cements this suburb’s profile as a business and commuter hub.

My Canberra suburb picks

1. Campbell: This inner north suburb is a 25 minute walk into the city and a short stroll to Lake Burley Griffin. Several substantial new apartment projects have opened in recent times. A decade-long transformation of Constitution Avenue on the border of Campbell has provided plenty of new eateries and shops for locals.

2. Greenway: A happy hunting ground for investors with impressive apartment median yields of around 6.4%. Greenway’s waterside living is enhanced by mountain views. It is enjoying an influx of people buying affordable new townhouses and drawn by jobs at two government departments including the Department of Social Services national headquarters, which opened in September 2017.

3. Kaleen: This suburb provides a good entry point into the inner north, with original older style homes remaining affordable. Kaleen Plaza, with its major supermarket and specialty shops, is complemented by smaller local shops. Proximity to the city and good transport links are a major plus. Demand pushed house prices up 12.8% in the year to June 2018 to a median $733,000. 

4. Mawson: The Mawson Southlands Shopping Centre is about to be redeveloped and upgraded. Young couples are overhauling the older housing stock and a bigger assortment of housing choices is on the way.

5. Harrison: Harrison has expanded rapidly in the past few years, embracing multiculturalism and an inner-city vibe where unit and semi-detached living is popular with young families and professionals. It is set for future growth with local shopping amenity and eateries, close proximity to the airport, and the added benefit of brand new light rail opening in December 2018 providing direct access to the CBD.

We hope the 2019 McGrath Report provides fresh insights and ideas for your benefit into the future. Please download your copy from

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The first time ever I bought my home

Thursday, October 18, 2018

Young buyers looking for their first home in Sydney and Melbourne haven’t had it this good in years. 

Interest rates remain at near record lows, with plenty of lenders (especially smaller ones) offering loan in the mid to late 3% range. That’s half the long term average of 7-7.5%. 

Stamp duty concessions are making first purchases cheaper in our most expensive markets. 

There are fewer investors to compete with due to tighter lending restrictions and there’s also fewer Chinese investors, who have been dissuaded by arbitrary fees in both states. 

Many first home buyers have the Bank of Mum and Dad to help them, so getting a loan approved is easier. Meantime, the rest of the market is struggling to get finance under tougher lending policies. 

On top of all this, prices are cooling in Sydney and Melbourne and a pipeline of new apartments (the typical product for first home buyers) is still working its way through.

This means more choice for young people and potentially a further softening in apartment prices as supply increases temporarily with every new build completed. 

Let’s go over the government help currently available to first home buyers in NSW and Victoria. 

1. Stamp duty concessions 

In Victoria, there is no stamp duty on new or existing properties worth $600,000 or less, with a sliding scale of concessions up to $750,000. 

In NSW, there is no stamp duty on new or existing properties worth up to $650,000, with a sliding scale of concessions up to $800,000. 

2. First homeowner grants

In Victoria, a $10,000 grant is available to all metro area buyers, either building or buying a new home valued up to $750,000. If you live in regional Victoria, the grant is $20,000. 

In NSW, buyers building their first home get $10,000 for properties worth up to $750,000. Buyers purchasing a new build or off-the-plan also get $10,000 for properties worth up to $600,000. 

3. Savings assistance 

The Federal Government’s First Home Super Saver Scheme allows young people to make voluntary contributions of up to $15,000 per year into their super ($30,000 total) to save for their first property. 

These contributions are taxed at the usual super rate of just 15%. That’s less than half the typical tax rate (32.5%) that someone earning $37,001 – $90,000 has to pay. 

These funds, along with earnings achieved while they’re in super (the best of the basic low cost industry funds typically return around 8% per year), can later be withdrawn for a first home purchase (minus a small withdrawal tax calculated by taking the buyer’s marginal rate of income tax less a 30% offset).

In Sydney and Melbourne, it won’t make the difference between being able to buy and not but it will help with your deposit, which is often the biggest hurdle young buyers face. This is a no-brainer – fill in a form and you’re likely to have several thousand in extra savings by the time you’re ready to buy.  

4. HomesVic co-ownership scheme

In Victoria, eligible first homebuyers can co-purchase a new or existing property with the Victorian Government in a pilot scheme called HomesVic. The Government has committed to purchasing up to 400 homes with an equity share of up to 25% in each. Buyers need a deposit of just 5%. 

Down the track when the property is sold, HomesVic receive its equity share back. 

The scheme commenced in February and already, 250 people have been given provisional approval to buy and 50 of those have exchanged contracts.

Surge in first homebuyers

The latest Housing Finance figures from the Australian Bureau of Statistics show a surge in first homebuyers over the past year. In the second half of 2017, following the introduction of stamp duty concessions in both states on July 1, first home buying soared. In 2018, the cooling market is clearly propelling the trend and keeping first home buyer activity at the same consistently high level.  

Month-to-month, the figures show a peak in first home purchases in November 2017 and May 2018 in both states. We haven’t seen this level of activity since 2011 in NSW and 2009 in Victoria.

Most people will tell you their first home became a cornerstone asset that allowed them to build equity, invest and grow their wealth later. With it comes peace of mind that you don’t have with rentals and the satisfaction of paying off your own loan, not someone else’s via your rent. 

So, take advantage of what’s in your corner this Spring…your first home maybe waiting for you, just make sure you don’t overleverage yourself and I always encourage you to buy for the medium term

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Paid a fortune for your property? What should you do?

Thursday, October 11, 2018

There’s a cohort of home and property investment owners in Sydney and Melbourne today who bought at the top of the market, which was around mid-year 2017 for Sydney and late 2017 for Melbourne. 

If you’re in this boat, I understand your disappointment in terms of timing but please don’t despair. No one can pick the top – and that includes me, and I’ve been around in real estate for 35 years! 

Unfortunately, in boom markets, there will always be people who happen to exchange at the peak but try to remember you are one of many – thousands of people did the same thing. What’s important now is for you not to panic and to look at the situation objectively.  

If you’re an owner-occupier, stop worrying.  You have a new home to enjoy for as long as you can afford your payments in what continues to be a low interest rate environment.

If the capital value of your home has come back a bit, it doesn’t matter because you’re going to be there long term and prices will eventually rise again. 

If you’re an investor, you’ve bought for different reasons but the time period should be the same – always long term. No investor likes to lose money or see the value of their asset go down. It’s not pretty to watch but you’ve got to hang in there. 

All that has changed is the amount of time your asset needs to bear fruit. We’re in the winter period now but the sun will come out again. Whether you invest in shares, managed funds, property or any other asset class, there are always going to be highs and lows. Smart investors ride out the lows. 

Don’t feel compelled to get out.  It won’t take long for Sydney and Melbourne to rebound.  These are two major international cities with many unique factors keeping property prices strong. You just have to be patient while the magic of capital growth takes effect. 

As I said in my column last week, I think the worst is already over. There have been 5%-10% declines in values this year and we might see another 5%-7% in some areas. After that, there will either be a steady period of market stability or even a small positive rebound by a few per cent.  

If you bought at the top and you’re negatively geared, there’s a few things you can do to keep your cash flow healthy: 

1. Watch your tax deductions like a hawk. Many property investors short change themselves by claiming less back from the taxman than they are entitled to. Pretty much every expense is tax deductible or depreciable so keep every single receipt!  So make sure you get good tax advice on this.

2. If your investment property is new, you’re entitled to depreciation benefits and these can be substantial, so get a quantity surveyor to compile a tax depreciation schedule. It will tell you how much money you can claim every year.

3. If you’re negatively geared, you don’t have to wait until the end of the year to claim your tax back. Say your property returns a loss of $10,000 pa; and your salary is $90,000. This makes your estimated taxable income $80,000. You can apply for a PAYG Withholding Variation to have your withholding rate recalculated based on this. You’ll have more money in your pay packet each period, which you can use immediately to pay the costs of owning the property.

Finally, whether you’re an owner/occupier or investor, it would be a good idea to put some spare money into your loan or an offset account while interest rates remain this low. 

Many people panic when they’re negatively geared, with no capital growth on the horizon and interest rates going up. This is a situation that could very well eventuate in the next few years, so get yourself mentally prepared now to wait it out.  Long term, you’ll be glad you hung in there.  

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House prices to drop 40%

Thursday, October 04, 2018

A recent TV programme presented a particularly grim view of Australian property, suggesting the market could shortly spiral out of control with up to a 40% fall in home values within the next 12 months. It’s going to be Bricks and Slaughter – get out while you can! 

This story was particularly misleading and unsurprisingly melodramatic. I say this having now experienced five property cycles in my 35-year real estate career and each time, often at around this stage of the cycle, the same old headlines re-appear. 

Steve Keen predicted a 40% drop in 2010, Johnathan Tepper predicted a 30% to 50% drop in 2016. Of course, both were ridiculously inaccurate. 

Generally speaking, the sponsors of such theories are seeking self-promotion. They are inevitably looking to promote a book or attract eyeballs to their websites. 

It’s interesting to note that respected commentators like Louis Christopher of SQM Research, who was featured on the programme, has since stated that his views were distorted and taken totally out of context.

Louis Christopher: “I was disappointed and unhappy…the segment was sensationalist to say the least.” 

If you saw this story, please don’t let it scare you. Our property market is one of the most stable in the world because there are so many fundamentals keeping its foundations strong at every point in the cycle from peaks to troughs.  

Let’s look at a few of them. 

Firstly, two out of three Australians own their own home or are living in a home with the owner and one in three are in a rented place. Of the 66% who own their home, half of these homes are fully paid off with no loan whatsoever. 

Next, let’s look at the generational change occurring, where many Baby Boomers (aged 60 to 75 approximately) are assisting their children secure a first home and of course as the life cycle turns, many will also be leaving their often considerable assets to their kids.  

In the main, most Australians are wealthier than ever before through their property, other assets or indeed, inheritance. Statistically, the average Australian is worth around $395,000, which is at record highs.

Next, let’s look at the underlying factors that we are experiencing today that may affect property, negatively or positively. 

We are enjoying a robust economy, low levels of unemployment, record low interest rates and significant overseas immigration and investment. None of these are likely to change significantly into the future. After all, we are the lucky country.

On top of this, our country has a unique population concentration with just under 70% of Australians living in one of only eight capital cities. This concentration, coupled with a chronic undersupply of housing, particularly in Sydney and Melbourne, keeps a rock-solid platform under home values. 

When you combine the strong levels of home ownership with the robust economic and social markers, it’s easy to see why the negative pundits have consistently got it wrong. The market will ebb and flow over the short term but the long-term macro view is strong and stable.

In terms of what’s next, I believe the property market has seen most of the value declines it is going to see this cycle. In many markets, there has been a 5% to 10% decline in values this year and I think we may see another 5% to 7% in some areas.

At the end of that, there will either be a steady period of market stability or even a small positive rebound back by a few per cent.  

Unless we see a total financial catastrophe engulf the entire world, a 40% drop in the Australian real estate market is never going to happen. Australian real estate is one of the best investments on the planet and that isn’t changing!

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

Thursday, September 27, 2018

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

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

So, let’s get over that hurdle now. 

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

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

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

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

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

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

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

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

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

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

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

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

Why can the small lenders offer cheaper interest rates? 

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

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

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

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

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

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

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

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

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Winners and losers in top suburbs

Thursday, September 20, 2018

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

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

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

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

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

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

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


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



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




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



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



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

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

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

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

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How to spruce up your property for an early sale

Tuesday, September 11, 2018

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

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

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

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

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

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

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

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

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

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

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

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

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

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