+ About John McGrath
John McGrath is considered one of the most influential figures in the Australian property industry. As Chief Executive of McGrath Estate Agents, he took the company from a lounge room start-up in 1988 to one of Australia's most successful residential real estate groups, selling $10.1 billion in residential property in FY14.
A total solution company, McGrath Estate Agents currently has offices located throughout Sydney, North Coast, Central Coast, Southern Highlands, South Coast, the ACT and Queensland, as part of its growing franchise network.
In October 2008, he 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.
Monday, May 23, 2016
by John McGrath
Next week marks the beginning of winter, a season where most real estate markets run a bit slower because fewer homes are listed for sale. And herein lies one of the greatest myths in real estate – that winter is a bad time to sell. Actually, the opposite is usually true.
Buyers have no reason to stop shopping during the colder months. For example, growing families and upgraders who need more space do not suddenly stop needing more space. Their motivation to buy doesn’t go away just because it’s a bit colder or raining on Saturday mornings. You also need to remember that most people with approved finance are only given six months to buy before they have to re-apply. So they don’t have time to take three months off over winter.
Thus, demand doesn’t change much. What does change is supply, which means more competition for the homes that do go to market over June, July and August. I think winter 2016 presents a particularly good opportunity for sellers in Sydney.
After three years of boom conditions, prices are still rising this year, just not as much as they were before. CoreLogic RP Data figures show Sydney property values up 4.5% between January 1 and April 30 this year compared to 6.9% over the corresponding period in 2015.
Despite this slowdown, one of the factors currently keeping prices strong in Sydney is a lack of stock, which is creating a favourable supply/demand dynamic for sellers. Add the ‘winter effect’ and it’s reasonable to assume competition could be stronger over the next few months.
This presents the best opportunity Sydney home owners have had to fully cash in on the capital growth they’ve achieved during the boom.
It’s important to remember that true market booms happen only every now and then. If you hold a property for 20-30 years, you’ll probably only go through two or three real booms over that timeframe.
If you’ve been waiting for this most recent cycle to end so you can sell your home for the maximum price possible, I’d strongly encourage you to consider selling this winter. If you don’t, you’re probably going to kick yourself in Spring when a flood of new listings come on to the market.
In 2014 and again in 2015, we saw a significant change in the strength of prices achieved during the final few months of the year, directly due to a higher volume of stock. Across the board, prices didn’t fall per se, but the number of people competing for the same homes declined and this meant fewer properties were commanding those big above reserve results.
Another great benefit of selling in winter is you get to buy in Spring. Ideally, you always want to sell when there are fewer homes on the market and buy when there are lots of homes on the market. A winter sale and Spring purchase fits this ideal scenario.
Some properties present better in winter, some in Spring/Summer. Talk to your preferred agent and weigh the pros and cons of putting your home on the market this winter. As experts in their local area, agents know how each change of season affects their marketplace. The more experienced agents, particularly those who have worked through previous booms, can also advise you how your local market tends to change in the immediate couple of years after a boom.
All of this will help you decide if a winter sale this year is the best option for you.
Tuesday, May 17, 2016
By John McGrath
One of the new trends in Australian real estate today is young families leaving cities – particularly Sydney, in favour of seachange and treechange lifestyle locations.
The boom of 2012-2015 resulted in a significant surge in property prices and our feeling was that more so than ever before, this particular boom would result in many young families considering alternatives to Sydney, especially when it comes time to upgrade to a bigger house.
New internal migration statistics (excluding overseas migration) released by the Bureau of Statistics and analysed by CoreLogic RP Data last month indicate that this trend is indeed occurring.
The statistics look at the top 25 regions nationally for internal migration, as calculated by comparing population changes between the 2008-09 financial year and 2014-15.
Many of the top 25 regions are on the outskirts of cities, which is a typical destination for families in the inner or middle ring who need more space. However, more than half the regions are coastal or lifestyle areas, which suggests an increase in sea and treechanging. In many of these areas, the populations of the 0-14 and 25-64 age brackets are the fastest growing, which points to families driving the trend.
This is significant because traditionally, it’s been the downsizers or empty-nesters leaving our cities for the hills or the coast in retirement. That’s still happening, but not at the rate of young families. These days, more empty-nesters are trading family homes in the suburbs for lifestyle apartments in or near their CBD.
There’s a few reasons for this – among them is the impact of the GFC. Seachanging and treechanging was a strong trend before the financial crisis but this has now changed, with many downsizers delaying their retirement to replenish their superannuation nest eggs. Downsizing closer to the city enables them to be closer to work as well as all the recreational amenities they desire.
Family Sea & Treechange Hot Spots
Here are the 15 seachange and treechange areas that made the top 25 list for internal migration 2008-09 to 2014-15.
1. Sunshine Coast, QLD – 4,732 migrants predominantly aged 45-64 & 0-14
2. Gold Coast, QLD – 4,610 migrants predominantly aged 0-14 & 45-64
3. Geelong, VIC – 2,828 migrants predominantly aged 45-64 & 0-14
4. Richmond-Tweed, NSW – 2,198 migrants predominantly aged 25-44 & 0-14
5. Mornington Peninsula, VIC – 2,141 migrants predominantly aged 45-64 & 25-44
6. Mid-North Coast, NSW – 2,057 migrants predominantly aged 45-64 & 25-44
7. Central Coast, NSW – 2,009 migrants predominantly aged 45-64 & 0-14
8. Hunter Valley (exc Newcastle), NSW – 1,814 migrants predominantly aged 25-44 & 45-64
9. Southern Highlands & Shoalhaven, NSW – 1,746 migrants predominantly aged 45-64 & 25-44
10. Bunbury, WA – 1,632 migrants predominantly aged 0-14 & 25-44
11. Mandurah, WA – 1,554 migrants predominantly aged 45-64 & 25-44
12. Sydney-Outer West & Blue Mountains, NSW – 1,434 migrants predominantly aged 25-44 & 0-14
13. Illawarra, NSW – 1,262 migrants predominantly aged 25-44 & 0-14
14. Wide Bay, QLD – 1,148 migrants predominantly aged 45-64 & 0-14
15. Latrobe-Gippsland, VIC – 1,054 migrants predominantly aged 45-64 & 25-44
Source: Australian Bureau of Statistics and CoreLogic RP Data
Some sea and treechanging families are making a permanent change and cutting ties with Sydney altogether, including finding a new job. Others are moving to lifestyle locations with public transport access back to the city so they can remain in the same job but enjoy a better lifestyle, including buying a far more affordable property to live in.
Fly-in fly-out work opportunities, as well as more flexible workplaces that allow people to work from home at least part-time, are also enabling families to change their base from cities to lifestyle locations.
We expect this trend to continue for at least another couple of years. Although the Sydney boom is over (but prices are still growing), many families have hit their limit with housing affordability. Gen Y couples and families in particular are far more nimble than generations past, with the idea of starting a new life in a new, more affordable location a serious option for them.
Tuesday, May 10, 2016
By John McGrath
The market in Sydney is doing exactly what it’s supposed to at this point in the cycle.
After three-and-a-half years of boom-time growth, the pace of price growth is slowing down, but it’s still going up. This period of moderate growth will go on for a while and that’s healthy. After boom conditions, you want to see some moderation in prices without major falls.
The latest report from CoreLogic RP Data shows Sydney house prices have risen by 4.5% over the first four months of the year, with apartments not far behind at 4.2%. That’s great.
Melbourne house prices have lifted 3.7%, also very good for this time period, while the apartment median has dropped – 0.4% – reflective of some inner city oversupply right now.
Here’s the rundown for every capital city.
Price movements January 1 to April 30, 2016
Source: CoreLogic RP Data
Looking at the numbers on a year-on-year basis, there are only two capital cities that have experienced a decline in house prices, but it’s pretty small. Perth house prices are down -2.2% and Darwin house prices are down -5.2%. Remember though, these cities are at a different point in the cycle to Sydney and Melbourne.
Last week’s announcement of a further 0.25% cut in official interest rates presents further opportunity for both investors and owner-occupiers in the property arena.
It doesn’t mean you can borrow more, as banks will usually assess your borrowing power at the long-term average of about 7-7.5%. However, it does mean historically low-cost repayments and a phenomenal opportunity to buy or get ahead on your current loans by making extra payments.
But there’s a word of warning. The official cash rate is now 1.75%. That is incredibly low. Official rate cuts mean the Reserve Bank is concerned about the economy. So, you need to think carefully before committing to a mortgage.
Compared to other economies around the world, we are very stable, however we have a challenge right now in transitioning from the mining boom. The most important consideration is your employment. As long as you’re employed, you can make your repayments. If you’re working in a volatile industry where job losses might occur, you’ll need decent back-up savings to help you through any period of unemployment.
That said, if your job is secure and you’re doing well, then this is an absolute ‘golden era’ for financing your next property purchase. Interest rates are probably going to stay low for some time, with the banks still offering five-year fixed deals well below 5%. That means they still expect to make money out of new borrowers, even on that very low rate, all the way through to 2021. This should give you confidence that interest rates are going to stay low for a while.
Two things worth highlighting
1. The most expensive period of your loan is the first five years. That’s when your repayments will be mostly interest and very little principal. Over time, your repayments will comprise more principal and less interest as you continue to pay down the debt. So the opportunity to take out a loan with a record low interest rate for the first five years is amazing.
2. Interest rates have been low for a while and many people are used to this by now. Especially young first home buyers, who have just started thinking about buying. But this is not the norm. Interest rates will go up and it’s important for every buyer to realise this because home loans are a long term venture. Over a 30-year mortgage, you’re inevitably going to have periods of high interest rates. So you need to understand the opportunity before you right now. We shouldn’t focus on first home owner grants and the like, interest rates as low as they are today are the best leg-up a first home buyer could ever ask for. Australia’s largest mortgage broker – AFG – reports the national average for new loans is $474,360. On a 4.5% principle and interest loan for 30 years, the repayments are $2,404 per month. On a 7.5% principle and interest loan for 30 years, they are $3,317 per month. See what I mean? Right now, the average Australian loan is $900 cheaper per month compared to the average.
This is a really exciting time to be buying real estate. A lot of lament occurs in property – people often talk of missed opportunities five, 10, or 20 years ago. If you’re looking to create wealth, you need to look long term and take advantage of every opportunity that makes it easier. Now is one of those times.
Tuesday, May 03, 2016
By John McGrath
I never get tired of hearing success stories in real estate. There is so much wealth to be created through property and I love hearing about investors and owner-occupiers making great money out of bricks and mortar.
Individual stories are always best but big statistics can also paint a nice picture of what is achievable, so I was interested to see the latest stats from the Australian Tax Office which show a record number of property investors made a profit in the 2013-14 tax year.
The ATO finds out this information from our tax returns. So basically, after taking into account all the expenses that investors declared such as strata levies, repairs, renovations, depreciation and the like, a record number of them ended up in positive territory with extra money in their pockets.
Sure, they would have paid a bit more in tax because of this, but you only pay tax when you’re making money and that’s what we all want from our investments!
CoreLogic RP Data analysed the stats to give us the breakdown.
There were about 775,000 investors who had a net rental profit in 2013-14, an increase of 6.1% on 2012-13 and setting a new record. The total profit was $7.25 billion, which was also an historical high and up 5.3% on the year before. The average profit in these investor’s pockets was $9,330.
Among the 1.257 million who claimed a net rental loss, the average loss was -$8,720 – the lowest recorded since 2005-06.
Obviously, lower mortgage rates are the main reason that so many people recorded a neutral outcome or profit with their rental returns in this particular year. Expect the stats to be even better for the 2014-15 tax year because mortgage rates were even lower.
CoreLogic RP Data also looked at the most common income bracket of investors with a net rental profit and it’s clear that older Australians are by far the largest contingent who are positively geared. That’s definitely where you want to be as you approach retirement, you want those investment assets that you’ve been paying off for years to eventually deliver an income you can live off for life.
While these latest tax stats are pleasing, they only look at rental returns – not capital gains. For tax purposes, the ATO is only interested in capital gains figures when you sell. But every year, over the long term, property owners who hold their assets are making money in new equity all the time.
I think people often forget about this. They don’t acknowledge in their heads the serious money they make as their assets grow in value. It’s not money immediately available in their pockets like wages and rental income, but it’s real money and often a lot of money which can be drawn down for renovations, further investment and other opportunities whenever you like.
In some cases, you might make more money through capital gains in a year than you do by working, especially during boom periods like we’ve just had in Sydney and Melbourne.
Talking straight averages and accepting that quality properties double in value every 10 years, if you own an $800,000 house now (the Sydney median), then on average you’ll make about 10% or $80,000 per year over a 10-year period. Sure it won’t happen uniformly but that’s the average you can expect over 10 years. You know what $80,000 is? It’s the average Australian income, according to the ABS.
Show me another asset class as easy to understand as residential property that can earn you the equivalent of a year’s income while you do nothing but hold it and make your repayments. That’s the advantage of owning real estate.
Tuesday, April 26, 2016
By John McGrath
Sydney and Melbourne are proving to be Australia’s renovation (reno) hot spots right now, with the amount of money spent on renos in both cities far surpassing other capitals.
New figures from the Bureau of Statistics and modelled by Domain’s Chief Economist
Dr Andrew Wilson show $1.882 billion was spent on renos in Melbourne last year and $1.684 billion was spent in Sydney.
The two big cities eclipsed the next in line – Brisbane, with just $766 million spent in comparison. Here’s the state by state run-down.
1. Melbourne $1.882 billion
2. Sydney $1.684 billion
3. Brisbane $766 million
4. Perth $500 million
5. Adelaide $299 million
6. Canberra $111 million
7. Darwin $57 million
8. Hobart $57 million
Source: ABS, Domain Group
So why the massive difference between Sydney and Melbourne and the rest?
Well, putting aside obvious factors such as larger populations and higher incomes, one of the reasons is that these two cities are at the end of a three-and-a-half year boom, so more people are finding it tough to buy and many are choosing to renovate instead.
The Housing Industry Association’s latest Renovations Roundup report shows renovation activity nationwide has increased for two consecutive years. Almost 1 in 4 renovation jobs have a budget of $12,000 to $40,000 and 13% are in the $200,000 to $400,000 range – which is the type of major renovation the HIA expects to see more of over the next few years.
Another contributor to rising reno activity is low interest rates. Many people fund home improvements by topping up their home loans and given interest rates remain at historical lows, it’s a fantastic time to borrow because you’ll be able to pay it off that much faster.
Another reason for a spike in renovation spending in the late and post stages of a boom is that buyers’ budgets no longer stretch as far, so they begin targeting lower priced fixer uppers with potential for extensions in their favoured locations.
A great way to spend less with the assurance you can renovate right away is to target homes with DA approved plans already in place. Make sure you read advertisements thoroughly as some agents don’t include this information very high up in their ad copy.
A two bedroom property with DA approved plans for say, a third bedroom and second bathroom is worth more than a two bedder without approval, but not as much as a finished three bedder. So this is a good way of getting the three bedroom home you need for less.
Renovating done well should increase the value of your property over and above the amount you spent but there’s broader community benefits too. Every renovated home adds value to the neighbourhood and in the case of sleeper suburbs, it can completely change them from rundown lower socio-economic areas to prime blue ribbon neighbourhoods.
But renovating doesn’t just happen in up-and-coming suburbs.
Last year, the suburb with the largest renovations spend nationally was Mosman on Sydney’s Lower North Shore, where local home owners spent a whopping $92 million to improve their homes.
Mosman is one of those aspirational suburbs where people move in and stay put – they don’t want to leave. So once they’re in, they’ll spend the money required to make their home perfect for the very long term.
If you’re thinking of renovating, the most important thing is to plan it well. Work out a budget, source well-qualified people and consider whether you can live through it or need to move out (usually a decision based on the scope of the job – as well as your patience!).
Tuesday, April 19, 2016
By John McGrath
There is plenty of talk in the market at the moment about interest rates. Lenders are offering large discounts for new business and rebates for new borrowers refinancing with them.
Alan Hemmings, General Manager of McGrath’s mortgage broking division, Oxygen Home Loans provides the following examples.
New business discounts (owner occupied loans with LVR below 80%)
- St George offered a 1.35% discount on new business valued above $500k and 1.45% above $1m
- Commonwealth Bank of Australia offered a 1.4% discount on new business above $750k
- Suncorp offered a 1.55% discount on new business above $150k
Refinancing rebates (T & C apply)
- St George is offering a $1,500 rebate for all new refinances valued above $250k
- Commonwealth Bank of Australia is offering a $1,500 rebate for all new refinances valued above $250k
These offers sound great but what the banks don’t talk about is the way they assess your loan application. This is far more important than any discount or rebate because it has a significant impact on firstly, your ability to borrow; and secondly, how much you can borrow.
I asked Alan to provide some detailed information on this to help you best manage your next finance application. Over to you, Alan.
Every bank has a different process for assessing your application and this is known as your credit score – not to be confused with your credit file:
- Your credit score is a form of ranking applied to you as a person by a lender. It is based on a range of factors unique to the lender and based on the performance of their loan book. They look at all the attributes of clients who have loans that perform to determine the types of clients they will lend to; and
- Your credit file is a long-term record of your financial behaviour, which banks can access to help them calculate your credit score. Have you ever defaulted on a home loan repayment or electricity bill? Bought new furniture on interest-free terms? Applied for a home loan or any other finance? All of this will be on your credit file
How your credit score is assessed could mean the difference between application approval and decline; and it will also impact how much money you can borrow, sometimes by tens or even hundreds of thousands of dollars.
Factors lenders consider to determine your credit score.
- Your age
- Drivers’ licence – lenders see this as an indication of financial stability
- Home phone number – another indication of stability
- Number of credit enquiries on your credit file (such as home loan applications that were rejected or approved but not used; as well as purchases on interest-free terms, such as new furniture)
- Defaults on your credit file (gas, electricity, council rates, home loan repayments)
- Employment – lenders will look at your type of employment (part-time, casual, self-employed, contract or full-time); the industry you work in; and how long you’ve worked for your current employer. If you are full-time in a relatively stable industry and you don’t change jobs every two years, you will score higher than someone who is part-time or has changed jobs frequently
- Savings history – lenders will consider how much you’ve saved and over what timeframe. Your ability to save indicates your ability to repay a loan
- Other assets – includes cars, furnishings, shares etc. A strong asset base, like a strong savings history, shows you’re not wasting your income and you’re motivated to build wealth
- Loan to valuation ratio (LVR) – the lower your LVR, the better your credit score. This ties in to your savings history – the larger your deposit the better
- Residential history – lenders want to know whether you’re still living at home, boarding, renting, living in your own property etc. How long you’ve lived there is also an important indicator of stability
So these are the typical things lenders look at. But there’s also many crucial differences between lenders in how they calculate your credit score. Part of your credit score relates to ‘serviceability’ – that is, your ability make your repayments. This, in addition to your equity in other assets, will determine how much you can borrow.
- Examples of differences in how lenders assess your income (or ‘serviceability’)
- Rental income – lenders will use 60%-80% of your rental income. Some lenders will use rental income as determined by a valuation, others will use actual rent receipts
- Other mortgage debts – most lenders now apply the benchmark rate to other existing debts, so a rate of 7.5% is applied to existing mortgages rather than the 4-5% you’re actually paying now
- Credit card debt – lenders will use 2.5%-3% of your credit limit (not the outstanding balance) to calculate a monthly repayment
- Other expenses – any regular ongoing expenses will factor into your serviceability
- Bonus Income – lenders will use 80%-100% of any bonus income
- Commission income – lenders will use 80%-100% of any commission income
- Industry allowances – some lenders won’t include allowances at all, others will use 80-100% of shift allowances or tool allowances when calculating income
- Overtime – lenders will generally use 80% of overtime income
So, you can imagine what a difference it would make if your chosen lender bases their calculations on 80% of your rental income, 100% of bonus income and 100% of your allowances compared to say, 60%.
In order to ensure your loan application is approved for the highest possible borrowings; and to avoid loan rejections which will stay on your credit file for 7 years, you need to choose the lender that will assess you the most favourably when making your next application.
This is why it is so important to work with a broker to determine the best lender for you based on your personal circumstances. This is especially important if you’re borrowing for investment, as the criteria for investor loans is now tighter and interest rates on these loans are higher.
Tuesday, April 12, 2016
By John McGrath
Last year, Melbourne was once again named the world’s most liveable city for the fifth consecutive year in The Economist magazine’s 2015 Global Liveability Rankings.
It was ahead of other revered cities including Vienna in Austria; Vancouver and Toronto in Canada; and Adelaide which tied for fifth spot with Calgary in Canada.
And it seems more and more people are recognising Melbourne’s excellent lifestyle and relatively affordable property compared to Sydney, with new population statistics from the ABS showing Melbourne was Australia’s fastest and largest growing city for 2014-15.
Population growth is reported by the ABS in two ways. Fastest growth relates to growth in percentage terms for a particular area; whereas largest growth relates to the actual number of people who moved into the area. Melbourne was No 1 by both measures in 2014-15.
Why does Melbourne have the top level of population growth? There are two main factors:
1. Historically high interstate migration
2. Rising overseas migration and investment
Although Sydney and Melbourne are both cooling right now following the boom, we expect steady ongoing price growth, particularly for houses over the next few years. But Melbourne has a bit more scope for growth because its median house price is substantially lower.
This is proving attractive to an increasing number of Sydney families struggling to afford the next level of home as their families grow. They’re looking to Melbourne where jobs are plentiful and there are lots of good schools and facilities. Over the 2014-15 year, 1,760 people per week moved to Melbourne compared to 1,600 moving to Sydney.
Melbourne also remains the number 1 city of choice for foreigners (mainly Chinese) entering Australia via the Significant Investor Visa. International developers also love the city, with a Singapore company currently building what will become Australia’s tallest building – a 108-storey high rise apartment complex called Australia 108, in the city’s Southbank precinct.
Overall, Melbourne recorded a 2.1% boost to its population in 2014-15. Seven out of Australia’s Top 10 growth areas were in Greater Melbourne and these were concentrated in the outer suburbs and inner city, which was a trend seen in many other capital cities as well.
Australia’s largest growth area was Cranbourne East in Melbourne’s outer south-east (up by 4,600 people). Next in line was South Morang (4,200) and Epping (3,300) in the outer north; and Point Cook in the outer west (3,200). Impressive growth was also recorded in inner city Melbourne (up 2,600 people).
Looking beyond Melbourne, the new data also showed that outside the capital cities, the fastest growing regional population was in Queensland. Classified as ‘Rest of State’, the Queensland regions grew by a collective 1% in 2014-15 compared to 0.8% for regional NSW and 0.6% for regional Victoria.
Significantly, 5 of Queensland’s Top 10 largest growing areas were outside Brisbane, including:
1. Upper Coomera-Willow Vale on the Gold Coast (up by 1,500 people – the largest growth of any area outside Australia’s capital cities)
2. Deeragun (1,300) in northern QLD
3. Pimpama (1,000) on the Gold Coast (also the fastest growing area outside any capital city, up 20%)
Population growth is one of the biggest influencers of property prices in Australia. Ongoing population growth especially in undersupplied environments like Sydney and Melbourne means greater demand for housing and higher prices due to stronger competition.
Here’s a rundown of population growth across the capital cities, listed in order of percentage growth. Also included are the 3 fastest and largest growing areas in each state.
- Melbourne up 2.1%
- Fastest growth: Cranbourne East 32%, Truganina 15%, Beaconsfield-Officer 14%
- Largest growth: Cranbourne East (4,600 people), South Morang (4,200), Epping (3,300)
2. Northern Territory
- Darwin up 1.9%
- Fastest growth: Palmerston-South 22%; Howard Springs 17%, Darwin City 9.5%
- Largest growth: Howard Springs (810 people), Darwin City (530), Weddell (250)
3. New South Wales
- Sydney up 1.7%
- Fastest growth: Cobbitty-Leppington 26%, Homebush Bay-Silverwater 15%, Waterloo-Beaconsfield 11%
- Largest growth: Waterloo-Beaconsfield (3,100 people), Cobbitty-Leppington (2,600), Homebush Bay-Silverwater (2,400)
4. Western Australia
- Perth up 1.6%
- Fastest growth: North Coogee 23%, Forrestdale-Harrisdale-Piara Waters 20%, Yanchep 14%
- Largest growth: Baldivis (2,800 people), Forrestdale-Harrisdale-Piara Waters (2,600), Ellenbrook (2,400)
- Brisbane up 1.6%
- Fastest growth: Pimpama 20%, North Lakes-Mango Hill 10%, Rochedale-Burbank 7%
- Largest growth: North Lakes-Mango Hill (2,500 people), Upper Coomera-Willow Vale (1,500), Deeragun (1,300)
6. Australian Capital Territory
- Canberra up 1.4%
- Fastest growth: ACT-South West, which includes the new suburbs of Wright and Coombs, 127% (also fastest rate of growth in Australia), Crace 28%, Harrison 23%
- Largest growth: ACT-South West (2,000 people), Harrison (1,600), Crace (810)
7. South Australia
- Adelaide up 0.9%
- Fastest growth: Munno Para West-Angle Vale 6%, Walkerville 4%, Seaford 3.5%
- Largest growth: Seaford (760 people), Northgate-Oakden-Gilles Plains (640), Munno Para West-Angle Vale (560)
- Hobart up 0.8%
- Fastest growth: Rokeby 2.8%, Old Beach-Otago 2.5%, Kingston Beach-Blackmans Bay 2.1%
- Largest growth: Kingston Beach-Blackmans Bay (220 people), Rokeby (160), Howrah-Tranmere (140)
Source: Australian Bureau of Statistics
Tuesday, April 05, 2016
By John McGrath
Affordability has been a hot topic of late so a new report from CoreLogic RP Data is quite timely. It presents the most affordable suburbs in every capital city – which is interesting reading but let’s be honest, they might not be suburbs on the top of your wishlist particularly as many of them are on the outskirts.
In fact, in the case of NSW, 4 out of the top 5 cheapest suburbs are actually on the Central Coast, which is increasingly being seen as an extension of metro Sydney and becoming a popular choice for first home buyers willing to commute.
However, these lists do remind us that there are affordable locations in or very close to every capital city, so check them out further below.
Here’s another angle on the whole affordability debate. Prices aren’t going to change (at least not much) but there are things you can do yourself to improve your own ‘affordability’.
The best possible thing you can do is take advantage of historically low interest rates. The interest on your home mortgage will always be your greatest expense as a first home owner, so low interest rates can make a huge difference. For further security and sleep-at-night comfort, lock in those rates with a fixed loan for 3-5 years
Perhaps consider a second job. Think outside the square about what else you could do – maybe from home, to pick up some extra cash to contribute to your deposit. Alternatively, if you feel you deserve a pay rise at work, ask for one!
Just be prepared to explain why you deserve it
Compromise on property type
- Consider an apartment, townhouse or villa over a house; and
- If you really want a house, consider buying an original home that you can renovate over time
Talk to a broker who can shop around for you, as lenders have vastly different criteria for assessing borrowing power – in some cases, the amount lenders are willing to give to the same candidate can vary by tens of thousands of dollars
Compromise on your desired location
- Look at areas immediately surrounding your target suburb – you might be surprised how much less you’ll pay just next door; and
- Consider cheaper suburbs in the same city that offer a similar lifestyle. For example, if you enjoy living close to the beach, do some research on other beach areas. For example, compare these median prices for one bedroom apartments in these popular Sydney beach suburbs:
- Bondi $740,000
- Manly $656,500
- Dee Why $550,000
- Cronulla $480,000
What is probably most notable here is the $100,000-plus difference between Manly and Dee Why. These are both Northern Beaches suburbs with their own beaches and established shopping and dining precincts and they’re only 10-15 minutes apart by car.
Cheapest capital city suburbs (Houses)
New South Wales
Spencer (Gosford area) $342,372
San Remo (Wyong area) $371,669
Mannering Park (Wyong area) $390,821
Melton (Melton area) $265,335
Melton South (Melton area) $280,966
Millgrove (Yarra Ranges) $294,664
Russell Island (Redland area) $225,655
Dinmore (Ipswich area) $227,512
Leichhardt (Ipswich area) $227,658
Davoren Park (Playford area) $179,954
Elizabeth North (Playford area) $180,191
Smithfield Plains (Playford area) $192,237
Medina (Kwinana area) $276,935
Calista (Kwinana area) $308,061
Parmelia (Kwinana area) $309,380
Herdsmans Cove (Brighton area) $137,724
Gagebrook (Brighton area) $140,650
Clarendon Vale (Clarence area) $154,642
Moulden (Palmerston area) $465,257
Gray (Palmerston area) $492,119
Woodroffe (Palmerston area) $511,911
Charnwood (ACT) $400,119
Ngunnawal (ACT) $435,859
Holt (ACT) $442,124
*Source: CoreLogic RP Data – only suburbs with at least 10 sales over the 12 months to January 2016 are included
Tuesday, March 29, 2016
By John McGrath
As reported in the media recently, forecaster BIS Shrapnel is holding firm to a view they’ve had for a while – by 2017, every city excluding Sydney will have a significant oversupply of apartments; and it will probably be worst in inner Melbourne and inner Brisbane.
Oversupplies happen after a boom. Time and time again, they happen. Let me explain.
During a boom when the market is hot, developers race to acquire land, lodge building applications, prepare sites and build apartments – and increasingly, high rise apartments. But construction takes time so inevitably, when a boom ends, there is an overhang of new supply yet to hit the market when demand is beginning to wane.
In an oversupplied market, values tend to fall a bit. There’s not enough demand to meet the extra supply. What this means for buyers is they finally get the upper hand and it’s my advice to use it!
There is a very specific group of buyers who can benefit from oversupplied markets. Those buying for owner-occupation with a view to holding the home for the long term; and to a lesser extent investors, as long as they are in a position to cope with high vacancy rates for a while. This might include couples who want to downsize to a luxury apartment in the city at a future date.
For these two groups, as long as you’re buying in a good location with a history of strong demand, and you’re also looking to hold your property for the long-term, you can do really well purchasing in an oversupplied market.
Oversupplied markets give buyers lots of choice and flexibility with negotiating. The trick is, once you’ve bought well, you need to be able to ride out the oversupply and wait for the market to re-balance through population growth. You need to be prepared for gloomy media reports of potential price falls. You might, in fact, experience a decline in your home’s value but this is likely to be short term for good quality properties in desirable areas.
While owner-occupiers can use oversupplied markets to their advantage, investors do need to be more cautious. It might be difficult to rent your property out when there are many other options for renters. The best thing you can do is buy a property with some special features that separate it from the pack – such as a larger floor plan, great fixtures and fittings, double parking, a north facing aspect and so on, to ensure you get consistency of tenancy during the oversupply.
Also, if you’re looking to buy and access equity in the near future to purchase again, then buying in an oversupplied market might not be a good idea because price growth is going to take a while. If you’re just looking to buy a home, live there and not do much else in property, then buying in an oversupplied market could be a phenomenal opportunity.
Latest estimates published in April 2015 by Infrastructure Australia show expectations of strong population growth concentrated in our capital cities. Nationally, we’re predicted to grow from 22.3 million in 2011 to 30.5 million in 2031. The four largest cities – Sydney, Melbourne, Brisbane and Perth are projected to grow by 5.8 million (or around 45%) from 12.8 million in 2011 to 18.6 million in 2031.
The BIS report predicts new dwelling commencements to peak this quarter at around 221,000 but when you take into account impending population growth over the next 15 years, it’s a green light for buyers looking to take advantage of oversupply prices next year.
Tuesday, March 22, 2016
By John McGrath
A recent survey of the top 10 most desirable features in a property – according to buyers, shows that many Australians are not taking a broad enough view when it comes to choosing a potential new home.
Finder.com.au surveyed 1,043 Australians to find out what they cared about most in a potential new home.
Here’s the top 10 most desirable features, according to buyers:
• Air conditioning: 65%
• Carport/Garage: 60%
• Garden/Backyard: 52%
• Solar panels: 33%
• Deck/Pergola: 24%
• Dishwasher: 17%
• Swimming pool: 17%
• Built-in barbecue: 4%
• Water feature: 2%
• Garden gnomes: 2%
Now, without knowing exactly how this survey was done (for example, whether respondents listed 10 things off the top of their head or selected from a list of options provided by finder.com.au), the most alarming implication of this survey is that some buyers are making purchasing decisions based on optional features over fundamental features.
• An optional feature is something that can easily be added or taken away from a property
• A fundamental feature is something that cannot be changed and has a direct effect on a property’s value
Eight of the top 10 features in the survey are optional features. The only two fundamentals are off-street parking and a garden/backyard.
The No 1 most desired feature is air conditioning. But it really doesn’t matter whether air conditioning is installed at the time of purchase – that’s an optional feature that can be easily added later, it shouldn’t be a determining factor in your purchasing decision.
Air conditioning might be a determining factor for renters who can’t change a property’s features during their tenancy, but I believe owner occupiers should be focusing on far more important things.
The most important features that should influence your purchasing decision are the fundamental features you can never change. Examples:
1. Location (proximity to transport, shops, cafes, school zones)
2. Aspect/natural light (north facing is best)
3. Block size (houses) or internal size (apartments)
4. Noisy vs quiet
6. Number of bedrooms, bathrooms and off-street parking
Once you’ve got the really important features covered, it’s time to consider other features that you’d really like to have. These features might not be as fundamental, however they are features that would cost a lot of time, money and effort for you to add or create later, so it’s best to buy a home that already has them. Examples:
1. Structural integrity (always do a pest and building report! A home with structural problems can be fixed however it might cost a lot of time and money)
2. The floor plan configuration you like best (it might cost many thousands to move walls around to create, for example, a more open plan style)
3. The style of property you like best – modern vs period style
4. The condition of the home – don’t buy a fixer upper if you don’t have the time, energy or enthusiasm to renovate or re-build!
Once you’ve got the 10 points above covered, then you might want to consider the optional features that a potential home has to offer.
The survey also broke down some of its results by generation and not surprisingly, Gen Y ranked features that saved them time (dishwashers) and enhanced their lifestyle (pools) more highly than their Gen X and baby boomer counterparts.
It’s also interesting to see solar panels ranked so highly. This represents heightened awareness around environmental issues in our society today. People are generally keen to protect the environment and if there’s a cost-of-living benefit, even better. Solar panels can reduce electricity bills as well as our carbon footprint, so they have a place on the wish list of green-minded buyers – just remember they’re an optional feature, not a fundamental one.