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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.

More kids in public schools raises property prices

Tuesday, August 15, 2017

By John McGrath 

More parents are choosing to educate their children in government schools, a complete reversal of the 40-year trend towards private education, according to the latest Schools Report from the Australian Bureau of Statistics. This change began in 2015 and has been increasing ever since.

The number of students staying through to Year 12 has also increased from 75% in 2006 to 84.3% in 2016, which means family home owners in prized school catchments are staying put for longer.

So what does this mean for real estate? In short, a lot!

The desirability of homes within the catchment zones of the best public schools has been growing across Australia.

A key factor was the introduction of the My School website launched in 2010, which provides directly comparable performance data for every public school based on NAPLAN results and other factors.

The ability to directly compare schools means family buyers can handpick a top public school for their kids and give them guaranteed entry by simply moving into the catchment zone.

Attending a top public school is also cheaper than a private school, so parents can save a lot of money going this route while also ensuring a good education for their kids.

On the ground, we are constantly meeting families who have a particular catchment zone in mind. Catchments are also a high priority for a rising number of Chinese buyers in Australia, with our high-quality education often a key reason for them migrating here in the first place.

The effect of high-quality schools on local property prices is highlighted in the latest Domain School Zones report, which show house price growth data by catchment zone rather than by suburb.

Let’s take a look at the top three primary and secondary school catchment zones in our East Coast capital cities for 2016. 

Sydney’s top school catchment zones by house price growth: 2016

Primary schools

1. Neutral Bay Public School – house prices up 31.4% to a median $2.575 million

2. Woodport Public School – house prices up 27.2% to $738,000

3. Vaucluse Public School – house prices up 26.8% to $4.12 million

Secondary schools

1. Hunters Hill High School – house prices up 20% to $3.18 million

2. Rose Bay Secondary College – house prices up 19.9% to $3.1 million

3. Lake Macquarie High School – house prices up 18.8% to $463,150

Melbourne’s Top School Catchment Zones

Primary schools

1. Glen Huntly Primary School – house prices up 41.3% to $1,180,000

2. Glenferrie Primary School – house prices up 35% to $2,025,625

3. Kerrimuir Primary School – house prices up 34.4% to $1,183,000

Secondary schools

1. Charles La Trobe Secondary College – house prices up 31.9% to $950,000

2. University High School – house prices up 23.7% to $1,113,500

3. Elwood College – house prices up 22.6% to $1,511,000

Brisbane’s Top School Catchment Zones

Primary schools

1. Logan Reserve State School – house prices up 40% to $597,500

2. Broadbeach State School – house prices up 23.8% to $1,015,000

3. Sunnybank State School – house prices up 22% to $657,500

Secondary schools

1. Sunshine Beach State High School – house prices up 19.1% to $840,000

2. Sunnybank State High School – house prices up 14% to $610,000

3. Merrimac State High School – house prices up 12.3% to $870,000 

Source: Domain’s School Zones Report

As you can see, the data clearly demonstrates the value of a school catchment, with house price growth in the top catchments well above the median growth for the corresponding capital city over the same time period.

Catchment zones are something all buyers should consider, as it appears that a premium is usually paid for houses in the best school areas.

Couples not intending to have kids, or downsizers whose kids have left home, might want to avoid top school catchments and instead look to suburbs just outside the catchment zone where houses can be tens of thousands of dollars cheaper.

The flipside is if you do buy in a top school zone, whether you make use of the school or not, you’ll probably enjoy a premium level of capital growth over time as well.

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More sellers are choosing auctions

Tuesday, August 08, 2017

By John McGrath

New figures show more sellers in Australia’s best performing markets are choosing the auction method of sale, with auction volumes up significantly in Sydney, Melbourne and Canberra this year compared to 2016. 

The best performing capital city markets right now are Sydney, Melbourne and Canberra, with home values up 12.2%, 13.7% and 9.6% respectively in the 2017 financial year. 

According to CoreLogic’s newly released Quarterly Auction Market Review for the June quarter, auction volumes are up in each of these cities.

In the June 2017 quarter, Sydney had 11,458 auctions compared to 8,888 in June 2016. Melbourne had 13,122 this year compared to 11,741 last year. Canberra had 932 compared to 851.

As a percentage of total sales, CoreLogic figures show there are significantly more homes being sold by auction in Sydney and Canberra. In Melbourne, the Real Estate Institute of Victoria says there has never been more homes taken to auction.

So why is auction such a popular choice right now?

It could be argued (for many reasons) that in most cases, auction is the best method of sale. However, in strong markets it is definitely the most effective way of maximising your sale price. When you have multiple buyers interested at around the same price level, an auction is the best way to determine who has the deepest pockets.

The top 3 benefits of auction (for buyers and sellers)

1. The price is benchmarked with other buyers in public – this is the market talking

2. You get an immediate result

3. If you’re the winning bidder, you sign a contract right away to make it official

The statistics tell us auctions are working particularly well in our strongest markets.

Clearance rates are solid at 73.3% in Sydney, 75.8% in Melbourne and 68.3% in Canberra. These rates are all up compared to June 2016, but down compared to the March 2017 quarter as demand cools a little.

In other capital cities, clearance rates are weaker. One reason is that these markets are less used to auctions than Sydney and Melbourne, as you can see from the volume in each city, but the bigger reason is market conditions – they’re basically normal or soft right now.

Auction clearance rates and volumes (June quarter)

  • Melbourne 75.8 % (13,122 auctions)
  • Sydney 73.3 % (11,458 auctions)
  • Canberra 68.3 % (932 auctions)
  • Adelaide 64.6 % (1,322 auctions)
  • Tasmania 52.4 % (107 auctions)
  • Brisbane 48.8 % (1,760 auctions)
  • Perth 37.1 % (530 auctions)

Auction hot spots

The auction hot spots around the country are as follows. These are the capital city suburbs that had the highest number of auctions in the June 2017 quarter.

  • Melbourne: Reservoir (184 auctions)
  • Sydney: Mosman (165)
  • Brisbane: Sunnybank Hills (37)
  • Canberra: Ngunnawal (27)
  • Adelaide: Norwood (33)
  • Perth: East Perth (17)

The following suburbs recorded the highest clearance rates.

  • Sydney: Double Bay (100%)
  • Melbourne: Tullamarine (96.2%)
  • Brisbane: Camp Hill (75.9%)
  • Canberra: Kaleen (80.0%)
  • Adelaide: Norwood (51.7%)

I asked McGrath’s Chief Auctioneer, Scott Kennedy-Green, what he’s been seeing on the ground and he confirms auctions are very popular right now.

“The number of properties going to auction within the McGrath network has increased year-on-year,” Scott said. This reinforces our view that the auction process is still the preferred method of sale.

“Buyer demand remains robust and vendors are keen to take advantage of the competitive bidding often evident at auctions and capitalise on this demand whilst buyer sentiment remains consistent.”

With clearance rates around the early- to mid-70% mark in Sydney and Melbourne (and just under 70% in Canberra), we expect auctions to remain popular. A clearance rate of 60% indicates a normal market, so conditions for auction sellers today are clearly still strong.

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Why more Sydney and Melbourne home owners are selling now

Tuesday, August 01, 2017

By John McGrath

Sydney and Melbourne buyers might have noticed more properties on the market this Winter, with newly advertised listings up significantly on this time last year.

According to new figures from CoreLogic, new listings are up almost 17% in Sydney compared to July 2016 and total advertised stock (which includes re-listings) is 13.3% higher. New listings are also up in Melbourne by 10.8% and total advertised stock is virtually the same – up 0.1%.

So why are more people selling now?  

First of all, we need to keep in mind that stock was very low all year in 2016 and this was a big factor in keeping boom time growth going. So, in effect, the extra stock we’re seeing this year is simply re-balancing the market. We’re nowhere near oversupply, with clearance rates remaining in the 70% range, which is a very healthy rate of sale.

Winter is traditionally more of a low volume sales season because a lot of people think it’s a bad time to sell (the reverse is usually true but that’s a topic for another time). So, it’s encouraging to see more new listings now compared to the same time last year. There’s plenty of motivated buyers still in the market in both cities, so this extra stock is giving them more choice and a better chance of securing their next property sooner.

But what’s led to the spike in new listings? Well, the re-balancing element I mentioned earlier is a factor. CoreLogic also raises the possibility that this could indicate that some home owners are concerned that the market is moving through its peak (or has already done so).

I also think this is likely.

Here’s a classic end-of-boom scenario. A Sydney home owner’s property was worth $1 million in 2012 when the growth phase began. It’s increased in value by about 75% to $1.75 million today. They’ve been watching the market and similar properties are now selling between $1.7 million and $1.9 million. They start thinking, ‘If I sell now, maybe I could get $1.9 million. But if I wait and the market continues to soften, I might only get $1.7 million or $1.75 million.’

This might be plausible. But unless you actually have a lifestyle reason to sell right now – such as the need to upgrade or downsize, or you want to retire and leave town for a seachange – then I think selling simply because the market is probably at its peak is not a great idea.

When you sell at the peak, you have to buy back in at the peak too – unless you’re leaving the city and moving to a cheaper market. The home owner with the $1.75 million house needs to realise that this is not the only time they will ever be able to get $1.9 million for that asset. We’re not at the end of the growth cycle, we’re at the end of the boom. Sydney and Melbourne property prices will continue to grow over the next five years, it just won’t be at the same pace.

So, if you don’t have a lifestyle reason to sell, why let go of your most important asset just because the market is peaking? Remember, buying and selling can be an expensive exercise, so it’s best to wait until you have a genuine need to sell so the trading costs are worth it!  

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Investors depart, first home buyers return

Tuesday, July 25, 2017

By John McGrath

First home buyers in Sydney and Melbourne have had it tough over the past few years. The key hurdle has been saving the 20% deposit at a time when property prices have kept rising at a rapid pace, so the goal posts are always changing. 

Those who managed to get their deposit together (often with mum and dad’s help) then had to compete against a large number of investors going for the same sort of smaller properties, such as apartments, townhouses and semis. Those investors, armed with new equity from their homes or other investments, usually had more buying power so young buyers often lost out. 

These challenges have contributed to a record low in first home buying activity in NSW, where just 8% of new loans are going to young buyers today, compared to the long-term average of 17%, according to the Australian Bureau of Statistics. In VIC, 14% of loans are going to first home buyers compared to the average of 21%, according to new statistics for May 2017. 

But the pendulum is finally swinging back in favour of first home buyers for the first time in many years, with investors departing just as government incentives kick in to help young buyers. 

Firstly, let’s look at why investment is declining. 

The most important factor is APRA restrictions are starting to have an impact. APRA introduced a limit on credit growth among the big banks on investment lending to 10% in December 2014. Then earlier this year, they restricted interest only loans (the most popular option among investors). 

In addition, since August 2015 the banks have been charging higher interest rates on investment loans, so not only is it harder to get finance approved, it’s also become more expensive to service. At the end of May 2017, standard variable mortgage rates were 5.3% for owner occupiers and 5.8% for investors, according to CoreLogic. 

On top of this, investment is a little less attractive right now in our boom cities. We’ve had five years of very strong growth and the rate of annual capital gains is inevitably going to slow very soon. Plus, rental yields are pretty low – just 2.8% for houses and 3.7% for apartments in Sydney and 2.6% for houses and 4.2% for apartments in Melbourne.  

So, it’s not surprising that on the ground we’re seeing a slightly less investor demand in the market. 

According to the Australian Bureau of Statistics, investor activity during the boom (2012-today) peaked at 53% of the market in NSW in April 2015 and 46% of the market in VIC in May 2015. Today, investor activity is 46% of the NSW market and 36% in VIC. That’s still a big proportion but significantly less than the peak. 

Meantime, first home buyers are back. We don’t have data yet, but it’s clear at our open houses that stamp duty cuts in both states are bringing young buyers back. 

In NSW, stamp duty has been abolished on new and established first property purchases up to $650,000, with a sliding scale of concessions on properties up to $800,000. 

In Victoria, stamp duty has been abolished on new and established first property purchases up to $600,000, with a sliding scale of concessions on properties up to $750,000. 

So, first home buyers now have three big advantages. Not only can they save tens of thousands in stamp duty, they also don’t have to compete with as many investors and can take advantage of more favourable mortgage rates for owner occupiers. 

It’s still not easy to buy your first home but young buyers finally have a few things going their way. So, it’s a fantastic time for young people to consider buying their first home. 

Meantime, I do encourage investors to remain open to opportunities in real estate. Property is a long-term play and even for the most astute investors it’s difficult to buy at the ‘right time’ in the market. The ‘right time’ is simply when you can afford it and you find a suitable property to suit your investment criteria.

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Census insights into property

Tuesday, July 18, 2017

By John McGrath

Key findings of the 2016 Census have been released and include some fascinating insights into the changing ways we live and what this means for future home values.

So let’s take a look at the main trends and what they mean for real estate.

Population growth

There’s 23.4 million of us now living in this great country – up 8.8% since the 2011 Census. Given the ongoing housing undersupply in the areas where most people want to live – our capital cities – rising population will almost certainly impact house prices.

Migration is a big part of our population growth, with almost a million more overseas-born residents registered between 2011 and 2016. We remain one of the most attractive destinations in the world for migrants, with 26% of our residents born overseas compared to 13% in the UK, 14% in the US, 22% in Canada and 23% in New Zealand.

The top five places of birth are Australia (66.7%, down from 69.8% in 2011), England (3.9%, down from 4.2%), New Zealand (steady at 2.2%) China (2.2%, up from 1.5%) and India (1.9%, up from 1.4%).

China and India are especially important here. These are two large, expanding economies and with rising incomes comes a greater desire for a better lifestyle and Australia offers exactly that. I expect an ever-increasing flow of new residents from these two countries over the long term.  

Where we live

More than two thirds of Australians live in a capital city, which is one of the reasons capital growth is usually strongest here compared to regional areas over the long term. The East Coast dominates, with eight out of 10 people living in NSW, VIC, QLD and the ACT. 

NSW has the biggest population at 7.5 million, with 8.1% growth since 2011, but it’s the ACT, VIC and WA that are experiencing the fastest growth at around 11% each.

Sydney remains Australia’s biggest city with 4.8 million residents – up 9.8% on 2011. But Melbourne is catching up fast, with 4.4 million residents and 12.1% growth on 2011.

In real estate terms, Melbourne will continue to be a big growth story in the short to medium term. There’s plenty of great opportunity for investment and it offers more affordability than Sydney.

The way we live

Nationally, most of us are still living the traditional dream of a house and backyard, with 72.9% of homes being houses in 2016 – down from 75.6% in 2011.

However, there has been an increase in people living in smaller homes such as apartments, semis, townhouses and terraces. This has risen from 23.5% in 2011 to 25.8%. There are a few reasons for this.

1. In big city markets like Sydney and Melbourne, affordability is certainly a factor in more people living in smaller dwellings, particularly apartments. In Sydney alone, 28.1% live in apartments today, up from 25.8% in 2011. 

2. There’s a growing number of couples without kids. They represent 38% of families – up from 32% in 1991. Couples without kids don’t need the quarter acre block, so apartments, semis and terraces are ideal. These couples include empty-nesters and young couples either delaying children, or choosing not to have kids at all.  

3. One in four households are lone-person households, up from one in five in 1991. This reflects a few trends, one of them being our aging population. One in six of us are aged over 65, compared to one in seven in 2011. Apartments provide a lower-maintenance lifestyle suitable for singles.

Another change in the way we live is the rise of multi-family households. While it’s still a small percentage of household types overall, the number has almost tripled from 0.7% in 1991 to 1.9% in 2016. This reflects two trends:

1. More typical families are living with their in-laws due to housing affordability and the need for help with the kids, thus reducing child care costs; and

2. We have a rising number of overseas-born residents and it’s tradition in many cultures for several generations to live together.

Home ownership

The Census shows 31% of Australians own their homes outright, down from 32.1% in 2011; and 34.5% own with a mortgage, down from 34.9%.

Renting is increasing – largely due to affordability – with 30.9% of homes currently rented, up from 29.6% in 2011 and 27.2% in 2006.

Renting has increased more dramatically in expensive cities like Sydney, where renters comprise 34.1% of dwellings – up from 31.6% in 2011. 

Now that the Census is out, it’s a great time to do some new research. The Census provides a great snapshot for property investors considering new locations. Use QuickStats to research individual suburbs and look for markers such as population growth, changes in housing stock, income growth and the top professions to get a feel for who lives there and what the market is like. 

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EOFY property round-up

Tuesday, July 11, 2017

The end of the financial year gives us a chance to assess how the property market is changing across the country and especially what’s happening in the boom cities of Sydney and Melbourne.

Latest quarterly statistics from CoreLogic indicate that Sydney and Melbourne might be slowing down.  Recent auction clearance rates have also softened, so when you put these two indicators together, we either have a seasonal glitch or perhaps the first definitive sign that the boom is over in these two cities.

Price growth continued in Sydney in FY17 at a rate of 13% for houses and 8.6% for apartments. Melbourne price growth was 15% for houses and 1.5% for apartments.

What is more notable though is the change between the March and June quarter results for both cities. Overall dwelling values in Sydney went from 5% growth in March to 0.8% growth in June. Melbourne dwelling values went from 4.2% in March to 1.5% in June.

The media is always quick to declare booms over the moment statistics turn but in reality, property markets don’t change that quickly. There isn’t a single point in time when the market turns. What usually happens is a bit of ‘up and down’ price movement before a prolonged period of softer market conditions. So, I wouldn’t be surprised if quarterly price growth stays subdued in Winter but fires up again in Spring. Time will tell.

The biggest elements that will end the boom is affordability and lending restrictions to investors.

Affordability is always a factor at the end of booms – prices get too high and people exit the market, with many giving up and deciding to stay put and renovate instead of trading up.

The other big influence is investor activity. Investors tend to start and end booms. They get in when they see opportunity and they get out when that opportunity has eroded.

Investors are after two things – capital gains and rental yields. Both Sydney and Melbourne are likely to have several years ahead with far more moderate gains. Yields are also low, which makes it harder for investors to cover their mortgage. Average yields for Sydney houses are 2.8% and apartments 3.7%. In Melbourne, it’s 2.6% and 4.2% respectively.

On top of this, lenders are making it harder to borrow money. So even if there were still many investors out there keen to buy, a significant proportion will find it too difficult due to stricter serviceability, a crackdown on interest-only lending and higher mortgage rates on investment loans.

Looking at the national picture, here’s what happened across the capital cities in FY17. 

House prices

  • Sydney – house prices up 13% to a median $1.050 million
  • Melbourne – house prices up 15% to a median $755,000
  • Brisbane/Gold Coast – house prices up 3.3% to a median $555,000
  • Canberra – house prices up 9.7% to a median $693,000
  • Adelaide – house prices up 2.7% to a median $465,000
  • Perth – house prices down -1.9% to a median $500,000
  • Hobart – house prices up 7.4% to a median $375,000
  • Darwin – house prices down -6.2% to a median $500,000

Apartment prices

  • Sydney – apartment prices up 8.6% to a median $750,000
  • Melbourne – apartment prices up 1.5% to a median $542,800
  • Brisbane/Gold Coast – apartment prices up 1.2% to a median $400,000
  • Canberra – apartment prices up 7.6% to a median $439,500
  • Adelaide – apartment prices down -1.3% to a median $380,000
  • Perth – apartment prices up 0.5% to a median $400,000
  • Hobart – apartment prices up 1.5% to a median $313,800
  • Darwin – apartment prices down -10.5% to a median $440,000

Source: CoreLogic Home Value Index June 2017, median prices based on settled sales over June quarter

So, what’s in store for FY18?

Right now, I do think the Sydney and Melbourne markets are at or near their peak for this growth cycle, so a slowdown is expected in FY18.  Whether this has already begun is something we don’t know yet – the peak only becomes clear months after it has happened.

In FY18, I do think we’ll see a consistent moderation in the rate of price growth over several quarters.  We should see more first home buyers in the NSW and VIC markets due to stamp duty cuts, which might go some way in off-setting an expected reduction in investor activity.  

South East Queensland remains the most appealing market in the country for both investors and young families. As the price gap widens between the region and Sydney and Melbourne, South East Queensland is well positioned to take up re-directed demand. I expect this region to be Australia’s strongest performing market over the next three years.

 

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Sydneysiders moving out

Tuesday, July 04, 2017

By John McGrath

Sydneysiders are leaving in growing numbers and relocating to major regional centres within commuting distance or cutting ties with the big city altogether and moving to coastal seachange areas or regional treechange areas for a complete lifestyle make-over.

Others are swapping Sydney for another city such as Melbourne, Brisbane or the Gold Coast, as indicated in the latest internal migration statistics for the 2016 financial year (FY16) released by the Australian Bureau of Statistics and analysed by independent property researchers, CoreLogic.

Sydney’s high property prices are no doubt contributing to this trend, with the city’s net internal migration numbers at their lowest since FY12. Conversely, migration to Regional NSW, Melbourne, Regional VIC and Brisbane is at its highest in at least 10 years. 

The biggest net gains were in Regional NSW with 11,827 new residents, Brisbane 10,149, Regional VIC 8,429 and Melbourne 8,270. The biggest net loss was in Sydney with -23,176 people departing.

Now don’t get me wrong, we’re not seeing a mass exodus of people from Sydney. However, this data does indicate that the property boom has influenced some people to leave the big city.

The ABS figures look at the number of people moving within a state and across state lines. Of the top 25 regions for population gains, 13 were located outside capital cities; generally in seachange/treechange regions close by. Of the bottom 25 regions where population was lost, 17 were located within a capital city; generally close to the city centre where home values are highest.

Drilling down to the individual regions with the greatest population gains, the Gold Coast and the Sunshine Coast were at the top of the list nationally and this is no surprise to me.

The Gold Coast gained 6,428 new residents over the year. This is very significant as it is the highest internal migration ever recorded by the ABS since they began this data series in FY2007. It’s the first time the Gold Coast has topped the list and compared to FY15, internal migration is up a massive 39%.

Next is the Sunshine Coast, which also recorded very high migration with 6,200 new residents.

Coupled with the highest internal migration to Brisbane in at least a decade, it’s clear that South East Queensland is Australia’s hot spot for internal migration right now.

I think the South East Queensland property market will be the country’s strongest performer over the next three years with many investors, seachangers and treechangers taking advantage of the vast price gap between Sydney, Melbourne and the Sunshine State. 

South East Queensland offers a fantastic lifestyle, great weather and comparatively very affordable housing. The latest stats from CoreLogic show the median house price in the Brisbane-Gold Coast region is $555,000 compared to $755,000 in Melbourne and $1.050 million in Sydney. The median apartment price is $400,000 compared to $542,800 in Melbourne and $750,000 in Sydney.

In NSW, I think regional areas close to Sydney such as Wollongong, the Central Coast and Newcastle are well positioned for strong growth in property prices. It’s typical to see many Sydneysiders moving to these areas at the end of a boom. They keep their Sydney-based jobs but enjoy much greater affordability.

But I also think we’ll see more Sydneysiders making a complete seachange/treechange in the future due to the following trends.

  1. More retiree buyers. Post-GFC, many would-be retirees remained in work to re-build their nest eggs. This delayed their seachange/treechange and created a backlog of demand. We should see more retiree buyers in lifestyle markets in the short to medium term, not only due to the backlog but also given thousands of baby boomers are reaching retirement age every year.
  2. Decentralisation due to technology. Technology and more flexible working arrangements are allowing more people to work from home permanently or part time, where they go to the office just a couple of days per week. This is the way of the future and will likely lead to somewhat of a decentralisation of part of the workforce to better lifestyle locations.
  3. Affordability. This has become a bigger issue in Sydney than ever before. In years gone by, baby boomers and Gen Xers tended to stay in Sydney and battle the big mortgage. The desire was to buy a house and work hard to pay it off. But I think the more nimble Gen Y will be less accepting of this financial lifestyle. I think we’ll see more young singles, couples and families relocating to Melbourne in particular, where there’s plenty of jobs, a similar big city lifestyle but more affordable housing. We’re already seeing statistics to this effect.  

Here are the top 25 and bottom 25 regions for internal migration nationally in FY16.

 

 

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What the NSW Budget means for home owners

Tuesday, June 27, 2017

By John McGrath

A strong economy and big infrastructure investment were the highlights of the NSW Budget for home owners, with plenty of local markets to benefit from new or upgraded roads, schools, public transport and hospitals. 

New infrastructure can have a significant impact on property values. Most new services and facilities improve the lifestyle of local residents and make the area more appealing for future buyers. 

A road upgrade might cut the commute to work, meaning families have more time together. A new school can mean a better educational experience and new learning opportunities for kids. A new hospital provides better medical services and brings lots of new jobs to the area. All of this adds up to more demand for local property.

Overall, the NSW Government announced a higher-than-expected surplus of $4.5 billion this year and $2.7 billion in 2017-18. The strong state economy is an important fundamental for NSW property prices. Nothing weakens home values faster than job losses and this is unlikely in a strong economy.

As we’re in surplus, money is available for good-quality investment, with the NSW Government detailing a near-record $72.7 billion infrastructure package over four years. 

To find out if your area benefits from this year’s NSW Budget, take a look at this detailed list. Note: Some of these projects are already underway but more money has been allocated in the budget.

Roads

More funding for major transport projects, including the third stage of WestConnex (M4-M5 link), Sydney Metro City and South West and Sydney Metro Northwest 

Completing the second stage of the Schofields Road upgrade 

Continuing road upgrades surrounding the new Northern Beaches Hospital at Frenchs Forest

Road upgrades to support Badgerys Creek Airport, including completing stage one of both The Northern Road and Bringelly Road upgrades

Major road upgrades in the Sydney Airport precinct

Continuing the Pacific Highway upgrade including completing all projects between Port Macquarie and Glenugie near Grafton, continued construction between Glenugie and Ballina and planning for the future bypass of Coffs Harbour

Widening the M1 Pacific Motorway and completing intersection upgrades on Wyong Road

Princes Highway upgrades including completing the Berry bypass and commencing the Berry to Bomaderry upgrade

New England Highway upgrades including commencing construction of the Scone bypass

Hospitals 

Expanding services at Campbelltown, Nepean and Concord Hospitals  

A new state-of-the-art hospital in the Tweed region plus expanded services at the existing Tweed Hospital 

Redeveloping Randwick Hospital, continuing redevelopment of Gosford, St George, Hornsby and Westmead Hospitals and continuing expansion of Blacktown and Mount Druitt Hospitals 

Redeveloping regional hospitals at Albury, Armidale, Bowral, Coffs Harbour, Cooma, Goulburn, Inverell, Lismore, Muswellbrook, Shellharbour, Wagga Wagga and Wyong

Building new hospitals at Macksville, Maitland and Mudgee 

Planning for Rouse Hill, Liverpool and Tumut Hospitals and a staged development at Griffith Hospital 

Full implementation of the Helicopter Retrieval Network Service, with doctors on every flight and bases operating 24/7 at Newcastle, Tamworth, Orange, Wollongong, Canberra, Lismore and Bankstown

Schools

New or upgraded high schools at Picton, Sydney Olympic Park and Canley Vale

New or upgraded primary schools including Kent Rd, Eastwood; Schofields, Riverbank, The Ponds, Carlingford, Greystanes; and Marsden Rd, Liverpool

Continuing upgrades at Wamberal Public, Rutherford Public and Belmont High Schools 

Public transport 

More public transport services in places like Penrith, Campbelltown, North Rothbury and Nelson Bay

24 brand new air-conditioned suburban trains and extra services across Sydney’s train network 

Planning and early work for the Parramatta Light Rail and new Parramatta to Sydney CBD ferries

More funding for Newcastle Light Rail

The NSW Budget also included an affordability package targeting young buyers, with details announced a couple of weeks ago. The headline measures of the package include the abolition of stamp duty for first home purchases up to $650,000 and stamp duty concessions on properties up to $800,000 from July 1.

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Changing nature of apartment developments

Tuesday, June 20, 2017

By John McGrath 

For the first time ever on record (since 1984), we’ve seen more new apartments completed than houses in Australia. The latest Building Activity report from the Australian Bureau of Statistics shows 28,102 new houses and 28,527 new apartments and townhouses were completed in the December 2016 quarter.  

We’ve had a major construction boom on the East Coast of Australia in recent years. Construction activity is still very strong in NSW, where new starts and the number of apartments under construction continues to trend higher. However in Victoria and Queensland it is starting to decline, according to CoreLogic.

The construction boom was brought on largely by strong market conditions in Sydney and Melbourne, a national undersupply of housing, population growth and the rising popularity of apartment living, among other factors. 

The rise of apartment living has been one of the most important trends I have seen over my 30+ years in real estate. While in many cases their simple affordability compared to houses is a factor, many people today would tell you they’d rather live in an apartment for the security and low-maintenance lifestyle.  

One of the interesting things about apartment development these days is the changing nature of projects.

The apartment blocks of old were concrete towers with either no residents’ facilities or perhaps a small gym room and a kidney-shaped fibreglass pool out the back. Things have changed.

Apartments are no longer the cheaper stepping stone to houses. They’re long-term homes for many buyers who expect great design, comfort and amenities. As modern life gets busier, buyers also want convenience and recreation where they live and apartments often fit the bill.

In recognition of this, developers are being far more imaginative in creating products that sell a lifestyle, not just a place to live.

Take the increasing number of master-planned communities, for example. These are large estates usually with several apartment buildings and a mixture of communal facilities including gardens, barbecue areas, cafes, gymnasiums and aquatic centres. Everything you need is on site, meaning great convenience but also a real sense of community, with residents able to socialise together in communal spaces.

Another strong trend is the development of apartments directly above shopping centres. This is a very New York-style of residential living. Apartments above centres usually have great views and a two-minute trip down the elevator delivers you to an array of shops, restaurants and transport.

Cushman & Wakefield, one of the world’s biggest commercial real estate services firms, discusses the rise of residential/retail development in its Australian Retail Property Outlook 2017 report. It describes mixed-use retail as “emerging as a major category in Australia’s retail landscape”.

The popularity of apartment living is providing a win-win opportunity for developers, retailers and buyers. Many time-poor city dwellers love having supermarkets, shops, cafes and cinemas at their doorstep and retailers love the sizeable guaranteed patronage that ‘shop top’ housing provides.

Here are some examples of the main trends in the mixed retail/residential space. 

1. Developers increasingly incorporating retail precincts into new developments 

Meriton’s largest retail development to date is Mascot Central in Sydney, which combines 17 eateries, shops and a major Woolworths beneath four towers of around 800 residential apartments. They’ve also recently launched the Sundale development on the Gold Coast, which is Southport’s tallest residential tower at 55 levels with 13 new shops beneath, including a Woolworths.

2. Re-development of existing shopping centres to include new residential apartments above

A great example is Top Ryde City Shopping Centre in Sydney’s northern districts. Top Ryde was once a modest two-level suburban shopping centre. It was demolished in 2007 and a new centre was built with hundreds of shops and 653 apartments on top, many with views to the city or Blue Mountains.

Completed by Crown in 2014, the Top Ryde City Living development is now home to more than 600 residents. Not only do they have access to fantastic common facilities including a music room, library, theatre, 25m infinity pool and a children’s playground, they also have direct access to a huge shopping centre with hundreds of retailers, an Event cinema and plenty of eateries just downstairs.

3. Shopping centre owners selling air space above existing shops to developers

Just recently, the owners of The Glen shopping centre in Melbourne’s Glen Waverley announced they had sold the residential air rights above the centre to a developer who will build 539 apartments as part of the centre’s redevelopment. The new centre will have 240 shops and eateries.

4. Shopping centre owners developing apartments on top of existing shops

In Sydney’s Winston Hills, the owners of Winston Hills Mall are developing 86 apartments above their existing mall. Called The Langdon, it is the first apartment complex ever for the suburb. Residents will have about 70 shops on their doorstep including Aldi, Big W, Coles and Woolworths.

I think we’ll see more mixed retail/residential development in the future. We’ve got more people wanting to live in apartments, a greater desire for convenience and lifestyle, a lack of land and potentially, a growing interest among retail centre owners in diversifying into residential property.

With the shopfront retail industry battling online competition, it wouldn’t be surprising to see more centre owners converting commercial assets into mixed use developments. Alternatively, they can sell the air space to developers who are desperate for opportunities given lack of land supply. 

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NSW affordability package: Stamp duty savings

Tuesday, June 13, 2017

By John McGrath

The third instalment of Government measures to address the affordability struggle in Sydney and Melbourne has been delivered, with the NSW Government announcing a package of reforms commencing July 1. 

This follows announcements by the Federal and Victorian Governments in recent months. 

The primary goal of these measures is to help first home buyers. All three governments are using a variety of avenues to achieve this, including reducing stamp duty, helping young buyers save their deposit and raising housing supply across the board. I’m all for addressing the affordability issue but I’m concerned by how they’re funding this good initiative – largely by disincentivising investor activity and foreign ownership. 

Here’s a rundown of the NSW Government’s affordability package:

  • Stamp duty abolished on first home purchases up to $650,000 (new and existing property);
  • Stamp duty concessions on first home purchases up to $800,000 (new and existing property);
  • Stamp duty on lenders’ mortgage insurance abolished for all buyers. This is usually 9% of the premium, so it’s a pretty hefty impost. This will benefit young buyers because LMI is only charged when a client’s deposit is smaller than usual;
  • First home buyers who are building their first home will receive a $10,000 grant for properties worth up to $750,000;
  • First home buyers purchasing a new property, such as an apartment off the plan or newly completed, will also receive a $10,000 grant for properties worth up to $600,000;
  • The 12-month deferral of stamp duty for residential off-the-plan purchases by investors will be scrapped. The $5,000 New Home Grant Scheme will cease;
  • The stamp duty surcharge paid by foreigners will double from 4% to 8%. Land tax charges to foreigners will increase from 0.75% to 2%. Foreign developers will be exempt;
  • Housing supply will be increased through a variety of measures, including making development approvals simpler and council re-zonings faster. Plus, $3 billion will be spent on new roads, schools and other facilities surrounding new developments; and
  • The Government will focus on raising supply in key urban hubs, including Belmore/Lakemba, Burwood/Strathfield/Homebush, Campsie/Canterbury, Cherrybrook, Frenchs Forest, Glenfield, Leppington town centre, Anzac Parade corridor, Riverwood, Schofields town centre, Seven Hills/Wentworthville, St Leonards/Crows Nest, Telopea, Turrella/Bardwell Park and Westmead.

The stamp duty savings are big news for young buyers. Putting the transfer duty and LMI duty savings together, on a $650,000 purchase with a $50,000 deposit, a young first home buyer stands to save $26,857. On a $700,000 purchase, the saving is $18,786. And so on.

Getting the deposit together is often the hardest step, rather than affording the repayments. So removing (or reducing) stamp duty from that equation is a big boost. CoreLogic’s recent Perceptions of Housing Affordability report found 48% of NSW respondents felt stamp duty was the most significant obstacle to affordability and 74% felt removing or reducing it would help. 

It could be argued that stamp duty cuts and grants for young buyers will ultimately raise property prices due to higher competition. However, with Sydney and Melbourne now at their peak, I think softening market conditions might balance out any price effect from greater first home buying activity, especially if there are fewer investors in the market due to tighter lending restrictions.   

First home buying has been low in Sydney for many years. CoreLogic quotes recent ABS statistics showing that first home buyer activity in NSW hit a record low of 7.5% of new owner occupier mortgages last September and has increased only marginally since then to 8% in March this year. The long term average is 17%, so we’re a long way off that. But things should change now. 

CoreLogic reports that 20% of houses and 33.5% of apartments sold in Sydney over the past 12 months were priced at $650,000 or less. Across regional NSW, these figures jump to 73.3% of houses and 74% of apartments. 

About 34% of houses and 51% of apartments in Sydney sold for $800,000 or less. Regionally, 82.5% of houses and 78.4% of apartments sold for up to that amount.

So that’s a lot of sales that now qualify for stamp duty discounts. The great thing for regional first home buyers is that they’re benefitting from affordability measures aimed at city buyers contending with much higher home values. 

There’s no end date for the stamp duty changes, but don’t be complacent. Jumping in quickly is the best way to take advantage of them and beat any rush. There’s often a lag period between the introduction of such measures and peak take-up, so get organised to buy after July 1 now! 

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