Switzer Sites & Services ▲
Why we started Switzer Daily

The Experts

Mcgrath_expert_normal
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.

Confidence lifts in prestige property market

Tuesday, September 27, 2016

By John McGrath

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

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

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

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

Gold Coast in focus

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

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

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

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

Other markets

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

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

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

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

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

| More

 

Property hotspots: Key regional markets

Tuesday, September 20, 2016

By John McGrath 

The ripple effect is being felt in key regional markets surrounding Sydney and Melbourne following a four year boom that has sent home values skyward by 64% and 44% respectively.  

After that sort of growth, it’s not surprising that some city dwellers are looking to nearby regional centres for better value. Some are buying for a lifestyle change as well as more affordable property prices, while others are using sizeable new equity in their city homes to purchase for investment or holiday purposes.

All of this is pretty predictable at the end of a boom, and the latest Regional Market Update from CoreLogic shows it’s occurring now.

What the research says

The research looks at a variety of key regional locations and reports a noticeable pattern of growth in centres located closest to Sydney and Melbourne.

The stand-out is the Illawarra region on the south coast of NSW, which recorded the biggest increase at 14.3% for houses and 13.9% for apartments over the 12 months ending June 2016.

In Newcastle and Lake Macquarie, sales activity is down, but prices have moved forward by 8.9% for houses and 5.9% for apartments. In the Richmond-Tweed, both house and apartment prices are up 8.4% and sales activity is almost 20% above its five- year average.

These aren’t boom time price rises, but definitely good solid price appreciation that is likely to continue as Sydney’s growth cycle slows down.

In Victoria’s Geelong, houses prices rose 5.6% and apartments 3.4%. The Latrobe-Gippsland region also experienced a price bump of 3.9% for houses and 0.6% for apartments.

Now, a word about Queensland.

The two major regional markets close to Brisbane are the Gold Coast and Sunshine Coast, and they were the strongest performing areas in the state over the year to June.

But they’re not feeding off lack of affordability in Brisbane, because the city hasn’t boomed yet. It’s had steady price growth for the past few years, but nothing near the scale of Sydney and Melbourne as yet.

Local drivers

So at the moment, price growth on the Sunshine Coast and Gold Coast is largely down to local factors.

On the Sunshine Coast, the effect of the new University Hospital on the property market cannot be overstated. That one major project has brought a lot of confidence to the area and a huge injection of professional jobs once it opens next year.

We’re also seeing local upgraders and seachangers from Sydney and Melbourne buying for a lifestyle change now, or holiday homes with a view to living there in retirement. There was 4% growth in house prices and 4.5% growth in apartment prices over the year.

On the Gold Coast, there’s lots of excitement in the lead-up to the 2018 Commonwealth Games, with plenty of infrastructure being built that will serve the city long after the event.

There are cranes in the sky along the waterfront as both local and Chinese developers continue to build. Price growth over the year to June was 7.4% to a median of $573,000.

Apartment values rose 5% to $377,000.

By comparison, over the same timeframe, Brisbane house prices rose 5.6% to a median of $505,000 and apartments rose 2.4% to $389,000.

| More

 

The world's most liveable cities

Tuesday, September 13, 2016

By John McGrath

Liveability or lifestyle is an absolute priority for today’s buyers. People are far more discerning about what they want in terms of their location and the type of home they live in. 

It’s largely a subjective thing, but the fun part is deciding what represents liveability best to you. 

Do you love the hustle and bustle of apartment living in the city? Or being close to the beach? Or does a slower pace of life on acreage sound better? It’s entirely your call. 

On a global scale, the Economist Intelligence Unit recently released its annual World’s Most Liveable Cities Index, which surveyed 140 cities based on 30 factors across five key areas – stability, education, infrastructure, health and environment. 

Right at the top – once again, is Melbourne. It took out the No 1 spot for the sixth year in a row. Two other Australian cities are in the Top 10 – Adelaide and Perth. 

Sydney dropped out of the Top 10 this year to No 11 over perceived fears of terrorism threats following the Lindt Café siege. It still received an impressive score of 94.9 out of 100. Brisbane also made the list at No 16. 

Here’s the Top 10. 

World’s Most Liveable Cities Index 

  1. Melbourne, Australia  
  2. Vienna, Austria
  3. Vancouver, Canada 
  4. Toronto, Canada
  5. Calgary, Canada
  6. Adelaide, Australia 
  7. Perth, Australia 
  8. Auckland, New Zealand 
  9. Helsinki, Finland 
  10. Hamburg, Germany 

Source: Economist Intelligence Unit 

The five key areas assessed in the study are pretty much universally valued by all buyers – stability, education, infrastructure, health and environment. The next layer is the street-level factors that make individual suburbs more liveable than others.  

Domain recently ranked 555 suburbs in Sydney based on 16 liveability indicators that included more localised elements such as proximity to employment hubs, traffic, views, cultural amenities like theatres, open space, tree cover, local cafes and restaurants, Wi-Fi coverage and access to the beach. 

Here’s the Top 10. 

Sydney’s Most Liveable Suburbs 

  1. Lavender Bay
  2. Milsons Point
  3. McMahons Point
  4. Kirribilli
  5. Waverton
  6. Wollstonecraft
  7. North Sydney
  8. Millers Point 
  9. Elizabeth Bay 
  10. Darling Point 

Source: Domain 

Another popular measure of liveability today is being walking distance to key amenities. 

As society gets more and more time-poor and congestion on our roads gets worse, buyers are placing a higher value on being able to walk to shops, transport, beaches and recreational facilities such as parks, cinemas and cafes. 

The Walk Score is a great tool for assessing walkability. You can search suburbs and cities all over the world at www.walkscore.com. Here are the Top 10 suburbs in our east coast capital cities. 

Top 10 Most Walkable Suburbs

Sydney 

  1. Haymarket
  2. The Rocks
  3. Sydney
  4. Ultimo
  5. Surry Hills
  6. Chippendale
  7. Millers Point
  8. Darlinghurst
  9. Newtown
  10. Rushcutters Bay

Melbourne

  1. Carlton
  2. Fitzroy
  3. Fitzroy North
  4. Melbourne
  5. St Kilda
  6. South Yarra
  7. East Melbourne
  8. South Melbourne
  9. Collingwood
  10. Windsor

Brisbane 

  1. Brisbane City
  2. Fortitude Valley
  3. Spring Hill
  4. South Brisbane
  5. Petrie Terrace
  6. New Farm
  7. Teneriffe
  8. West End
  9. Milton
  10. Woolloongabba

Source: walkscore.com 

When buying your next property, make sure you consider liveability. It might be a beautiful house, but if walking the kids to school and strolling to the shops are high priorities, make sure the property’s location enables you to do that. 

When buying real estate, you’ll always have to make compromises because no property is perfect. Just remember, you can change a property but you can’t change its location – and it’s location that has the biggest impact on liveability. 

So my advice is to be clear about your own priorities before making such an important decision.

| More

 

Property to Spring into action

Tuesday, September 06, 2016

By John McGrath

Welcome to the first week of the Spring market!

It’s the busiest time of the year for our industry and an exciting time for buyers and sellers, as more properties come onto the market and sales activity increases.

In Sydney, this Spring is going to be very important. The city has experienced a significant shortages of homes for sale all year, and hopefully, Spring will end the drought.

According to the latest stats from CoreLogic, new listings in Sydney are down 27% on last year. By comparison, new listings in Melbourne are down 16% and Brisbane listings are down 5%.  

Stock shortages make life very hard for buyers and sellers, because although sellers can usually sell at a premium, the trouble is buying back in. They don’t want to risk having to rent and move house twice, so many hold off.

That leaves buyers having to compete for a very small amount of stock. It’s very frustrating, and sometimes, they have to pay much more to secure their new home.  

Eventually, this market stand-off ends and Spring should provide the impetus this year. People love selling in Spring, they love the change of season and they’re generally aiming to buy again in time to enjoy Christmas and the end-of-year school holidays in their new home.

Clearance rates will be an important market indicator to watch this Spring.

Sydney’s weekend clearance rates have been high all year – I’m talking boom-level high – in the 70-80% bracket for most of 2016.

If there’s a substantial lift in stock, it will be interesting to see if the clearance rate holds firm, or starts to fall. A fall would indicate supply is starting to meet or exceed demand.

Over the past few years, the pattern we’ve seen is a rush of new stock in September, with even more homes coming onto the market in October/November, at which point we get a softening in prices. In the New Year, old stock gets absorbed and we go back to a state of demand exceeding supply by around March.

Some time soon, after four-and-a-half years of boom growth in 2012-2015 and steady growth in 2016, that’s going to change. I don’t know if 2017 will be the year in which we see a return to truly normal market conditions, but I can guarantee that change is coming soon. That’s the nature of cyclical markets like property.  

One interesting trend for Spring this year is the spike in the number of apartments for sale, mainly in Sydney, Melbourne and Brisbane.

This was entirely expected and it usually always happens after a boom.

When markets boom, developers begin building, but the long process means there’s usually a hangover of great new stock that hits the market after the boom ends. Not only that, there’s also the risk that some people, especially investors who purchased off-the-plan a year or so ago, won’t complete their purchase because they start worrying about the oversupply effect, not just on their asset’s value, but also its rentability. So they sell too, which adds more stock to the market.

New research from CoreLogic shows that across the combined capital cities, about 36% of homes for sale in July were apartments, compared to 26% five years ago.

In Sydney, about 45% of homes for sale were apartments, up from 40% last year and 35% in 2011. In Brisbane, 26% of homes for sale were apartments, up from 22% last year and 19% in 2011. In Melbourne, almost half or 49% of all properties for sale were apartments. A year ago it was 42%, and in 2011, it was 29%.

It might sound like our east coast cities are facing a massive oversupply, but it’s important to remember than the bulk of apartment development right now is centred around CBDs and inner-city suburbs. These are prime locations and highly desirable over the long term. I see great opportunity for apartment owner-occupiers over the next two years. You’ll be spoilt for choice and have negotiating power on your side.

My overall prediction for Spring 2016 is a strong season, with early Spring sellers benefitting most from the shortage of stock that will probably still be felt in September.

There will be a pause in the market over the school holidays in late September/early October, before the bulk of Spring’s new listings come onto the market.

I wish both buyers and sellers all the best for the Spring period.

| More

 

Why is off-market selling on the rise?

Tuesday, August 30, 2016

By John McGrath

You might have heard about off-market selling, where a property is sold without any public advertising. This only happens with a very small percentage of properties overall, but we’re definitely seeing it a bit more often in major metro markets these days. 

There are significant risks for vendors who choose to go this way, because without going on the open market, there’s no way to ensure every possible buyer has seen your property. And you need competition to flush out the maximum price that your home is worth. 

But for some vendors, this risk is worth it. There are some circumstances where the importance of getting a deal done quickly for a reasonable price outweighs the alternative of going to the open market and negotiating with buyers over several weeks for the best price. Such circumstances include relationship breakdown and financial stress. 

Other vendors like off-market selling because it enables privacy. This is often the main priority for prestige clients. They typically don’t need a quick deal and are happy to wait for a good offer while avoiding public advertising campaigns and the intrusion of opens. They will list with an agent who will then work their database to find suitable buyers. 

Some clients list off-market just to test the waters, in the hope their dream price will be offered. In the lower- to middle-market, some vendors go off-market because their property is tenanted and they can’t get access to style and prepare the property for a photo shoot.

Others do it purely to avoid the cost of a marketing campaign, but ultimately, I think sellers pay for this strategy with a reduced sale price due to reduced competition. 

So why is off-market selling on the rise? 

The primary reason is that agents have created the ability to sell without advertising through database marketing. 

The old way – placing ads in the paper and waiting for buyers to come to you, is over. The best agents are going after buyers themselves and dedicating more time to developing personal relationships with the purchasers they meet at opens and online. 

Another reason is the growth of the buyers’ agent industry. They were once only used by prestige buyers, but today, they are also very popular with time-poor families, couples, and executive singles purchasing in the lower to middle price brackets too. 

Smart selling agents love buyers’ agents because they’re a direct avenue to highly motivated purchasers ready to buy now. That’s helpful when your vendor needs to sell quickly, for example. 

Buyers’ agents are also being increasingly proactive in approaching home owners directly to see if they’re interested in selling – especially in markets that are undersupplied. This often occurs when a client wants to live on a particular street, or they have identified specific houses that they are interested in.

Owners are often open to selling in such circumstances if the buyer is willing to pay big. There’s also the ‘bonus’, as the seller might perceive it, of no selling agents’ fees. However, this scenario only works if they get a true premium price above market value. 

My general advice to sellers is to look carefully at the pros and cons if you’re considering selling off-market. In my opinion, there are more cons, as you’re highly likely not to get the best price for your property. 

There is no doubt that putting your home on the open market, with appropriate print and online marketing, is the best way to achieve the best price.  

If you do go off-market, select your agent carefully. Make sure you’re investing in someone who is going to put in the time and energy to match your property to suitable buyers and call them individually to discuss your home – not just send a group email with a brochure attached. 

Lastly, buyers can get access to off-market opportunities by engaging with selling agents and having their criteria registered on their databases; or by employing a buyers’ agent. 

| More

 

Suburbs with million-dollar medians

Tuesday, August 23, 2016

By John McGrath 

During my 30 years in real estate, I’ve seen a lot of changes in the marketplace.

As a young agent in Sydney back in the 1980s, if I was dealing with a millionaire client, I was dealing with someone from the upper echelon of society. Some type of high-profile businessperson, investor, or someone with family money.

Today, in most cases, one million dollars is the typical budget for a family home. And according to new statistics, it’s also the median price in 613 suburbs nationwide.

Independent analysts, CoreLogic, have just released their latest stats on suburbs with million-dollar medians.

They looked at the median sale price of every suburb across Australia and found that there were 613 suburbs with a median value of at least $1m – more than double the number of suburbs in 2013 and 29% more than last year.

Among the 613 suburbs, 570 had a median house price above $1m and 43 had a median apartment price above $1m. (By the way, to keep things accurate, CoreLogic only included suburbs that had recorded at least 100 sales.)

What happened? Well, a boom happened. A massive one. In fact, the latest numbers put the increase in property values over the past four years since this current growth cycle began at 61.3% for Sydney, and 42% for Melbourne.

Tasmania remains the only state with not a single suburb median above $1m. No wonder they’re getting more enquiries down there from Sydney and Melbourne downsizers who are keen to escape the expensive capital cities for gorgeous scenery and a cooler climate.

In terms of the states with the highest number of $1m suburbs, of course New South Wales leads with 418, followed by 102 in Victoria, 44 in Western Australia, 19 in Queensland, 15 in South Australia, 12 in the Australian Capital Territory and three in the Northern Territory.

Let’s take a look at the Top 25 suburbs with the highest median prices in Australia. Only two are outside Sydney – Toorak in Victoria and Peppermint Grove in Western Australia.

Top 25 most expensive suburbs

To round out the national picture:

  • The most expensive suburb in Queensland is Teneriffe (median $1.645m for houses)
  • The most expensive suburb in South Australia is Springfield (median $1.737m for houses)
  • The most expensive suburb in the Northern Territory is Larrakeyah (median $1.197m for houses)
  • The most expensive suburb in the Australian Capital Territory is Forrest (median $2.068m for houses)

CoreLogic also tells us that the number of homes selling for $2 million or more is on the rise.

When the growth cycle started in mid-2012, there had been 4,103 sales of $2 m or more across 884 suburbs in the preceding 12 months. By comparison, in the year to March 2016, there were 11,648 sales across 1,437 suburbs.

So what does all of this mean?

On the one side, there’s the affordability issue – yes, it’s getting worse in Sydney.

On the flipside, the rising number of million dollar suburbs means rising wealth for home owners. So in my mind, being a property owner certainly has its rewards.

| More

 

Property hot spots of tomorrow

Tuesday, August 16, 2016

by John McGrath

Savvy property investors are always on the lookout for the hot spots of tomorrow because that’s where the greatest potential for capital growth lies.

Some of the tell-tale signs of potential future growth are: beneficial new infrastructure such as new roads and transport, redevelopment of retail centres, and more lifestyle amenities such as new recreational centres, café villages and restaurants.

So buyers, let me tell you about Toowoomba. 

Toowoomba is located 125km west of Brisbane and in my opinion, is one of the most exciting emerging regional centres in Australia. It’s already our second largest inland city (after Canberra) but its growth is far from over.

Right now, Toowoomba has all the hallmarks for growth. We believe its strong focus and investment in infrastructure, retail and lifestyle precincts will have an impact on both interstate migration and employment opportunities in the short, medium and long term.

Several multi-million dollar projects are either underway or being planned, namely the $1.6 billion Second Range Crossing, the development of the 550 hectare Wellcamp Airport Business Park; the $500 million redevelopment of Grand Central shopping centre and the transformation of the railway precinct into an urban village and parklands.

To remind you – the key indicators of a hot spot are beneficial new infrastructure, redevelopment of retail centres and more lifestyle amenities … and Toowoomba has them all.

Guess what else is great about Toowoomba? The median house price is just $362,000 (CoreLogic). This affordable price point is not only attractive to the locals, it’s also attractive to tree changers, downsizers and investors. The median house rent is $305 per week (realestate.com.au) – a respectable yield of 4.4%.  

When do you buy in a hot spot? Ideally, it’s pretty soon after major projects have been approved or have commenced. The effects are not yet there, so they haven’t been felt by the property market – yet.

Our McGrath Toowoomba Principal, Toby Sandell says we’re at the best point in the cycle for buying for long-term capital growth now.

Our local market has been subdued for the past year since the banks tightened investment lending. As a result, we’ve seen very few investors in the marketplace, a decline in sales volumes of 33% (APM) and the region’s average days on market has increased to 67 days (REA),” Sandell says. 

“While there’s fewer investors, the flipside is we’ve seen more first home buyers and upgraders taking advantage of affordable buying and lower interest rates. There is good demand from locals for quality properties in the right areas.

“Interestingly, the median house price rose by 1% over the year despite these tougher conditions. The fact that the price is holding and even increasing slightly is a sign of Toowoomba’s resilience and strength. One reason for this is strong and stable employment with the state’s lowest unemployment figures.

“In the lead-up to Spring, we are just starting to see a few more positive signs with a bit more buyer enquiry and a few more investors from Sydney and Melbourne returning to look for well-priced homes.

“Stock is tight but we have been busy doing more appraisals for the past four-six weeks so we’re expecting that stock shortage to ease. We are currently marketing a number of high-end properties which have all attracted good numbers at opens.” 

Okay. Let’s talk specific projects.

Brisbane West Wellcamp Airport

The airport is having a positive effect on the accessibility of the region both domestically and into Asian markets. It is continuing to expand, with direct passenger flights to Melbourne and Cairns commencing in March. Several agri-based companies are setting up in the surrounding Business Park in order to take their produce directly to Asia. One of these is a baby milk formula factory – the first in Queensland, which will export directly to China.

Second Range Crossing

This new 41km road is important because it will take trucks off city streets, creating a better community amenity, while also enabling a faster trip for freight services. It will create 1,800 full-time jobs. Major construction is underway, with the peak phase expected around mid-2017, so as more workers move in during summer and into 2017, we expect to see weekly rents rise as well.

Grand Central redevelopment

Stage 1 of this massive new shopping centre should be open for Christmas retailing. The redevelopment will include a new dining precinct, department stores, supermarkets and almost 160 other stores.

Railway Parklands Precinct redevelopment

This 50 hectare site will incorporate a central park, shops, commercial and industrial facilities and residential options. The council estimates it will provide up to 3,300 jobs during construction and a further 1,800 jobs in retail and service industries. The developer is currently working with council to finalise the plans.

Now, a final word from Toby: 

“We see a very bright future for the town and the region. The airport’s expansion, the Second Range Crossing and the Grand Central extension will be pivotal to growth and employ thousands of workers once operational.

“The next big thing for us is the Melbourne to Brisbane Inland Rail line project, which would make Toowoomba a major logistical hub and bring more jobs and businesses to our region if it proceeds in its current proposed form.

“We feel that now is a fantastic time to buy and get in early before the next stage of growth starts to happen in the region.”

Super-Hot Spots within a Hot Spot

Every city has its super-hot spots. Right now, most of Toowoomba presents great buying, but we’ve highlighted a few suburbs that are the most popular right now and primed for capital growth.

South Toowoomba and Centenary Heights

  • Hot price bracket: $350k-$500k
  • Buyer demographic: Young families wanting value for money and close proximity to the CBD

East Toowoomba and Rangeville

  • Hot price bracket: $500k-$800k
  • Buyer demographic: Premium suburbs for upgrading families, although stock is very tight 
| More

 

What the rate cut means for the property market

Tuesday, August 09, 2016

By John McGrath

The Reserve Bank’s latest interest rate cut has taken the official cash rate to a new record low of 1.5%.

This is great news for people who already have loans because it makes their repayments cheaper. But the impact of this rate cut on the property market itself is probably going to be minimal. 

First of all, the big four banks are not passing on the rate cut in full.

Westpac is cutting rates on home loans with principal and interest repayments by 0.14% while customers with interest only loans (mostly investors), will receive a 0.10% cut.

The Commonwealth Bank is cutting its home loan rates by 0.13%. ANZ is cutting its rates by 0.12%. The National Australia Bank is only cutting rates by 0.10%.

Secondly, the banks’ tougher lending criteria continues to make it harder for people to buy more property. The rate cut won’t make borrowing easier, because in most cases, the banks calculate your existing repayment obligations at the long term average interest rate of about 7-7.5% to determine if you can afford another loan.

For the same reason, the rate cut won’t help first home buyers in Sydney where affordability is a major obstacle. First home buyers struggle most with raising their deposit, so a rate cut won’t help them find the 20% plus stamp duty they typically need to buy.

In addition, rate cuts at the end of a boom are less impactful than rate cuts at the beginning or during a boom when there is momentum in the marketplace and both buyers and sellers are highly motivated. Right now, momentum is easing.

According to CoreLogic’s latest report, Sydney homes are now taking an average of 40 days to sell which is two weeks longer than last year. In this environment, vendors typically begin reducing prices to get a sale. Price growth is continuing, but at a slower pace, and fewer new listings on the market means sellers are feeling less motivated (although buyer demand and clearance rates are still high). 

Sydney’s average annual rate of growth in the 12 months to July 2016 was 9.1% and Melbourne’s was 7.5%. This compares with Sydney’s peak of 18.4% in the 12 months to July 2015 and Melbourne’s peak of 14.2% in the 12 months to September 2015.

On the flipside, the rate cut does help people who already own property because it reduces their repayments.

The question is, what will you do with this extra money?

One option might be to change one or more of your loans to principal and interest, so you’re actually paying down your debt rather than just paying the interest.

Another option might be building up your savings for your next purchase, particularly if the banks are limiting the amount of money you can borrow. Put the money into an offset account so it reduces your repayments while also building your savings. 

If you take a long-term view with your properties (which you always should), these historically low interest rates are only going to last for a few years of what might be a two, three or four decade period of ownership.

There are many more years ahead and at some point, rates will return to the average of 7-7.5% or more. So it’s worth considering how you can best take advantage of these once-in-a-lifetime historically low interest rates while they’re still around.

| More

 

10 ways to give your home a facelift

Tuesday, August 02, 2016

By John McGrath

With so many great renovating and home decorating shows on TV these days, it’s no wonder people get inspired to make over their own homes. But ripping out entire rooms – which is what we usually see on TV – is not always required to achieve a great new look.  

There are plenty of cheap and easy ways to give your home a facelift without going to the expense of total replacement. You could literally save thousands of dollars if you just do a little research and have a good walk around your local hardware store.

Here is a list of cheap, quick and easy ways to smarten up your home:

1. Paint

Nothing lifts the look and feel of a home better than a fresh coat of paint. Painting a whole house professionally is expensive, so you can save a lot by doing it yourself.

I recommend neutral colours, which allows you plenty of flexibility with furniture colours.  Talk to an expert about gloss versus matte and colour selection. A quick way of doing things is to pick a neutral colour for the walls and then paint the doors, door frames, skirtings, architraves and ceilings in simple white.

Consider a mould-resistant paint for the bathroom and laundry. If you have children, look at wash and wear paints so you can wipe off marks more easily.

2. New window coverings

Replace old-style options, like venetian blinds and long curtains, with more modern options like plantation shutters or roman blinds in neutral colours.

3. Install a skylight

If your property is dark, skylights are your best friend. Bringing in more natural light will have an immediate and lasting effect on the ambience of your home.

4. Replace light fittings

If you’re on a budget, I’d go for one or two designer light fittings – such as pendant lights in the main living areas – and cheaper, simple and uniform fittings in the other rooms.

5. Replace wall light switch covers

This is a really cheap, but effective way of making every room look smarter. Many older style homes have plain white light switch covers. If they’re looking grubby or old fashioned, consider silver, stainless steel or a more modern white cover. You’ll pay about $6.50 for a typical single switch silver cover at Bunnings.

6. Steam clean carpets before considering replacing them

Some carpets are so worn out that nothing will save them – in which case, replace. However if your carpets are in good condition, but just a bit grubby with some stains and marks, try professional steam cleaning before you spend thousands of dollars replacing them.

7. Replace door, drawer and cupboard handles

This very low cost change will have a big impact. Try to find new handles that are similar in length and shape to your current ones, so you can place them over the holes from your previous handles – no filling required.

8. Upgrade the garden with simple tricks

Bark mulch is a simple, low-cost way of making your garden look stylish and neat. It will also reduce weeds and the garden will require less watering. In terms of plants, large gardens can look great with a big range of plant varieties, but small gardens tend to look better with just a few types of plants. Avoid deciduous plants (unless you enjoy raking leaves every weekend!) and instead target cheap evergreen varieties in similar shades of green.

9. Consider quick kitchen updates

Depending on what your kitchen cabinets are made of, you might be able to paint them if they’re still in good condition. Same goes for splashback tiles. Old laminate benchtops can be painted in another colour or even a stone-look laminate paint.

Alternatively, contact a kitchen company about refacing (brand new cabinet doors and drawer fronts with a matching veneer placed over existing cabinet boxes) or refinishing (painting/staining all existing cabinetry).

You’ll be looking at a few thousand dollars to refinish, several thousand to reface, and tens of thousands to replace (unless you go for a simple flat pack kitchen, which is a great replacement option for lower priced properties).

10. Consider quick bathroom updates

Resurfacing your tiles and bathtub is much cheaper than replacement. Even bathrooms in darker colours can be sprayed a brilliant white. Alternatively, you can paint the tiles yourself, but get advice first and make sure you use a primer.

If you want to replace the tiles, consider cheap ceramic tiles with a marble-like pattern or natural stone look. Also, replace your old shower frame with frameless glass – it’s far easier to keep clean and the extra expense of glass over a new aluminium frame is worth it!

When doing any kind of renovations, you need to consider what actually suits your home. I also recommend keeping re-sale in mind, even if you intend to stay put for the foreseeable future.

For example, if you own a modest home at the more affordable end of the price scale, don’t go tiling the bathroom with travertine stone because buyers in your price bracket will not pay more for that. Equally, if you’re renovating a larger home at the middle to higher end of the price scale, don’t use cheap ceramic tiles when your buyers will expect travertine.

If you need help making decisions, contact a local agent. Good agents will be more than willing to give you advice even if you have no plans to sell, so why not leverage their expertise to help you make the right call on your next round of home improvements?

 

| More

 

Buying apartment blocks with your SMSF

Tuesday, July 26, 2016

By John McGrath

Developers and high net worth individuals have always been the typical buyer demographic for blocks of apartments. But today, they are increasingly competing with a new type of buyer –  mum and dad investors purchasing through self-managed super funds (SMSFs).

Let me give you an example.

Not so long ago, one of our agents, Ben Collier at McGrath Edgecliff listed a fantastic art deco block of eight apartments in Barry Street, Clovelly that attracted many SMSF buyers.

The gross returns were $264,160 per year and there was scope to raise the rent and add value with extra parking too.

Ben expected a sale price around $7 million but strong competition at auction pushed the price to $7.52 million. While the property did end up selling to a developer, three of the under bidders above $7 million were mum-and-dad investors.

Now, $7.5 million is a big price tag and a budget that is simply out of reach for most people. However, when you’re buying with a SMSF, you typically have more money available to you for the deposit than you could have ever achieved through regular savings.

This is especially the case if you’re in your 40s or 50s and have been receiving mandatory super payments from your employers, plus your own contributions, since super was introduced in 1992. That’s 24 years of accruing at least 9% of your income (9.5% from FY15), with compounded interest and potentially other gains made from good investments over the years.

This means, depending on your income (and how hard your nest egg was hit by the GFC), you probably have more than adequate funds for the deposit on an investment property.

Recent statistics from the ATO shows that property investment via SMSFs is an increasing trend.

As of March 2016, there were 572,424 SMSFs belonging to 1,085,286 Australians.

Over the five years to March 2016, the amount of superannuation money invested in residential property has increased from $14.6 billion in June 2011 to $24.4 billion today – that’s a 67% increase.

Most SMSF buyers still need to borrow to buy a property through their fund, and getting finance for an apartment block purchase is more complicated than single homes.

I asked Alan Hemmings, General Manager of Oxygen Home Loans (the mortgage broking division of McGrath) to give us his advice.

  • Only a limited number of lenders will provide a residential loan for a block of up to six apartments, but they must all be held on one title (ie not strata titled).
  • In assessing serviceability, these lenders tend to be conservative and might only use a percentage of the actual rental income the block is returning to calculate whether you can service the loan.
  • Blocks with more than six apartments are considered commercial developments so you will have to use a commercial loan, which means a shorter loan term and a higher interest rate.
  • Banks typically apply an 80% LVR cap on all SMSF property purchases.

Buying a block of apartments presents many exciting opportunities for investors, but it’s hard to do in major cities because big money is usually required to secure the block in the first place and blocks don’t come onto the market too often. 

There are usually more options in regional markets, where purchase prices are lower and yields are typically higher than the cities.

A regional block won’t get the capital growth of a city block, but that might not be your aim. In retirement, many people just want to be debt-free with a few income assets to fund their lifestyle. So a regional block of apartments delivering a high rental return might be an excellent option, as long as the loan is small enough for you to pay it off before retiring.

For this strategy to work, you would need to buy in an area with a low vacancy rate over the long term, low unemployment, decent population growth and a diverse local economy.

Getting good advice is crucial when buying through a SMSF.

First, talk to your accountant as they’ll be able to advise you of the set-up and ongoing costs, including mandatory annual audits.

Then talk to a broker who really knows the ins and outs of SMSF investing to secure your loan.

Good luck!

| More

 

MORE ARTICLES

Election outcome to boost market activity

How to buy before the boom

New property trends: multi-gen living

EOFY checklist for property investors

Banks lend a hand to investors

Queensland's golden property triangle

Neighbours cash in on ‘megalot’ land deals

Sydney's auction clearance rates soldier on

Property sellers beat the winter blues

Property buyers want a sea change

A golden era for property buyers

Record numbers of property investors make a profit

Hot spots in the reno boom

How lenders differ on loan approvals

Our number 1 population growth city

Where to find the most affordable suburbs

Property oversupply an opportunity for buyers

The most desirable features of a home

Rental growth vs capital growth

Negative gearing changes a wealth killer for average Australians

Do prices double every 10 years?

Sydney’s next major hot spot

Million dollar suburbs

Property markets state of play

Million dollar suburbs

Property markets state of play

Apartment living on the rise - literally

Working in SoHo

Lessons for property investors in 2016

Is the Sydney property boom over?

The rise of the junior investor

A new wave of seachangers

What does $500,000 buy?

Sydney’s rising Manhattan effect

Infrastructure unlocks suburban pockets

Change is afoot in Canberra

Melbourne market shows ongoing strength

Sunshine State property market snapshot

The spectacular Sydney property boom

The best markets to buy property in

Where will be the next growth market for property?

Australia’s $1 million club

Don’t miss out on homes sold prior

What's a parking space worth?

Spring into hot auction action

Falling dollar makes property cheaper

What to do in a softening rental market

The right school zones add value to homes

Preparing to buy quickly

6 tips for buying at auction

How to improve your investment borrowing power

We’re staying put longer

Property market ends FY with a bang

How to manage escalating housing debt

House prices versus apartment prices

Regional property market hotspots

A light drop but no need to panic

Why Sydney property prices won't fall

Top 5 most affordable middle ring suburbs

Top 5 insider refinancing tips

Watch out for rental yield falls

Top 5 most affordable suburbs close to CBDs

How much is too much and does it matter?

The bank of mum and dad

Auction action and prestige market to pick up

The great ‘I’ll wait until prices go down’ mistake

The big picture for property investors

How can a buyers’ agent help you?

New apartment hot spots

Tips for bidding at an auction

Foreign buyer tax dangerous and short-sighted

A phenomenal time to sell property

How many investment properties do you need?

3 interest rate opportunities

2015 is the year of prestige property

Have you missed the property boat?

McGrath Report - location matters

Make the decision to sell in 2015

What's in store for property in 2015

Forget the bubble talk! What a year!

Deals to be done on mortgages

Ban on auction price guides ridiculous

It's still a seller's market

South-East Queensland property ripe for the picking

From a quarter acre block to 90 sqm

Spotlight on regional NSW

Regional & coastal QLD markets & suburb picks

2014 McGrath Report: ACT

Four themes driving the market (Part 2)

Four themes driving the market (Part 1)

2014 McGrath Report: Brisbane

2014 McGrath Report: Sydney

More price growth to come

Tips for buyers and sellers this spring

Fixed loans fall just in time for Spring

Follow the smart money

Choosing an investment location in 8 steps

Rental market in review

Foreign ownership debate

RBA debates rent versus buy

Pixel_admin_thumb_300x300 Pixel_admin_thumb_300x300 Pixel_admin_thumb_300x300 Pixel_admin_thumb_300x300 Pixel_admin_thumb_300x300