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

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

An integrated real estate services business, McGrath today is one of the most successful real estate companies in Australia with an established and respected market presence in NSW, the ACT, Queensland, and more recently Victoria.

In October 2008, John was honoured by the Real Estate Institute of NSW with the Woodrow Weight OBE Award, a lifetime achievement award for his outstanding contribution to the real estate industry.  John was founding director of the REA Group and served on its board from 1999 to January 2018, serving as chairman from 2003-2007. 

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

Has Uber Eats shrunk the kitchen?

Tuesday, December 11, 2018

The kitchen is now the design centrepiece of our family homes, while Uber Eats shrinks the kitchens of apartment dwellers. 

We’re sharing cars, installing moveable walls, creating socialising spaces in residential buildings and swimming in demountable pools.

Feature walls are now feature ceilings and curves are replacing straight lines in the shapes of our best architectural abodes. 

The future of Australian home design is a dynamic space.

Adam Haddow, Director of Sydney architecture and urban design studio, SJB says today’s housing design buzzword is diversity.

“In the past, we had this fixed idea of what you got in a house – three bedrooms, backyard, maybe a pool,” says Haddow, who is a Churchill Fellowship recipient and thought leader on urban design and the modern evolution of city living environments in Australia.

“That hasn’t gone away but many people are realising they don’t need lawns to mow and four bedrooms. 

“You used to need a desk and possibly an office; now you need a kitchen bench the right height for your laptop, or a sunny courtyard with connectivity.

“These changes are dialling down in home design because we don’t need to create a space (for study/work); it is more about creating spaces where people want to live.”

In our recently released McGrath Report 2019, we revealed the hottest trends in urban residential design this year.

Repurposed living 

When Australia embraced open plan living at the start of the 21st century, there were inevitable casualties. Goodbye formal dining and lounge rooms.  Also over is the short-lived dalliance with the media room.

In came integrated study zones or home offices, with at least 3.5 million Australians now doing at least some work at home and nearly one million of us running home-based businesses. 

The future view is more flexible dwellings, reflecting the shrinking size of Australian homes with couple-only households due to outnumber couples with children by 2030. Greater use of moveable walls will allow room conversions and adaptable furniture will serve as room dividers.

Glamour kitchens in houses

Kitchens are still the heart of our homes but have evolved from utility rooms to social and entertaining spaces, Haddow says.

The open plan layout has brought the once segregated kitchen into the living and dining zones, typically with a sizeable island dining bench creating a gathering point for guests so they can chat with their host as the meal is prepared.

Prepping kitchens and butlers’ pantries are on-trend in new high end family home design.

As showcased in the luxury family-sized apartments of this year’s season of The Block, these separate private spaces enable home chefs to get messy, away from guests’ eyes and without detracting from their entertaining kitchen.

Smaller kitchens in apartments

Has Uber Eats shrunk the kitchen? The popularity of home delivered meals and our rising café and restaurant culture, particularly in big cities, has changed how Australians think about kitchens in the new millennium.

Food and drink delivery apps such as Deliveroo, Menulog and Uber Eats have exploded, with Australians spending $2.6 billion annually.

These trends are impacting how much of the modern floor plan is dedicated to food preparation, particularly in apartments which are more commonly occupied by time-poor couples and singles increasingly opting for Uber Eats over preparing food themselves. 

So, they don’t need a full kitchen anymore.

A rising trend in new development today is the glamorous communal kitchen and dining area that residents can hire to entertain guests, with more modest and functional kitchens in their own apartments.

Garaging parking

Our car-loving culture is rapidly changing, with 3.1 million active Uber users and 100,000 GoGet members nationally. 

These share services, along with expanding public transport, environmental awareness and dedicated bicycle lanes are reducing the need for parking on title.

Haddow says more small home designs will forego car parks. “What we are seeing is movement from majority to minority car ownership in the not too distant future. People are totally okay with using the one shared car on the street.”

City of Sydney figures show a 500% increase in the usage of its Kent Street Cycleway since 2008. Apartment blocks are increasingly supporting two-wheeling residents with shared bike rooms or racks. 

Blue sky thinking 

Textured housing exteriors made from recycled natural or industrial material like rammed earth, stone and bottle bricks are in vogue.

Architects are also departing from the traditional square shape, with curvy facades maximising the illusion of space and spherical structures emulating igloos offering bolstered thermal efficiency.

Fifth wall feature ceilings with stencil art and complex imagery have arty home makers talking. All the rage when Michelangelo was painting churches in the 16th century and Marie Antoinette was decorating ceilings with mirrors in the 18th century, housing costs eventually quashed the trend. 

Today, some owners and designers are resurrecting it, realising that ceilings are a blank canvas for injecting personality and texture into a home, Haddow says.

Keep a (goggled) eye out for the new wave of above ground pools. Able to be disassembled, the waist deep water features promise flexible all-seasons living in tight inner city spaces.

Green homes

Sustainability is becoming a major influence on home design, with record levels of solar use and rising interest in battery power resulting in the equivalent of 8.28 million households using renewable energy in 2017.

Savvy developers and home owners are fitting and retro-fitting properties to boost their appeal to an increasingly eco-conscious buyer pool.

Low cost improvements include draught sealing, insulation, low flow showerheads and taps, window shading and low wattage lighting.

Your personal touch 

Australians have embraced the concept of using their homes to reflect their lives and personalities. The ‘showroom look’ used in property marketing is often held up as the ideal, however that sort of styling is designed to appeal to the masses. Your own property, whilst you’re living there, only needs to suit you. So, make bold choices and I believe the real take-away is to create the ultimate home environment for your own enjoyment as it’s where you live.

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Regional is the new black

Thursday, December 06, 2018

With their impressive population growth, buzzing local economies, improved amenities and infrastructure, affordable housing and increasingly attractive lifestyle as our capital cities get busier and more expensive, regional bridesmaid cities are beginning to rival the real estate brides of Sydney, Melbourne and Brisbane

No longer sleepy, second-tier towns overshadowed by the glamorous capitals, many of Australia’s regional cities have come of age and are now thriving economic centres with hundreds of thousands of residents.

Housing has always been cheaper but regional areas now offer so much more, with burgeoning café scenes, major shopping centres, good transport and plentiful job opportunities without the traffic, pollution, noise and time poverty that comes with big city life.

As revealed in our recently released annual McGrath Report 2019, lifestyle markets and satellite cities within two hours’ commute of primary metropolitan areas are the biggest winners of the metro-regional switch.

While affordability remains a key reason to move, buyers are increasingly talking about escaping from city stress, traffic and cost of living pressures, too.

Population growth is no doubt contributing to the greater hustle and bustle of city life. Australia’s population hit 25 million in August 2018, 33 years earlier than forecasts published by the Australian Bureau of Statistics (ABS) in 1998.

Given almost 80% of Australia’s residents live in the four east coast capitals alone, it is not surprising that some of us are feeling a bit crammed in. 

With surprisingly comparable wages and a vast differential in house prices, the metro-regional trade-off is increasingly compelling.

Improved infrastructure has reduced the commute from many regional areas to capital cities, enabling switchers to enjoy a big city income with a relaxed small town lifestyle.

The NBN rollout has led to more city folk working remotely or establishing start-ups as part of their lifestyle change.

Jobs in the larger regional centres are increasingly plentiful, boosted by a deliberate strategy to decentralise government departments to regional locations.

Bendigo is set to benefit from a new GovHub office that will bring 1,000 new and relocated public sector jobs to the CBD. Construction will create 70 jobs, with completion due in late 2021. Two other GovHubs are also being developed in Ballarat and Latrobe Valley.

Massive infrastructure investment is also boosting employment in regional centres.

After Geelong in Victoria lost its Ford and Alcoa steel plants, the local jobs market rebounded following federal support for a $100 million rail duplication project and a $100 million pledge for an Advanced Manufacturing Fund for Victoria and South Australia in 2017.

In some cases, average wages in regional areas are higher than capital cities.

In Geelong, individuals aged 15 and over received a median $616 weekly income in 2016, $84 more than their Melbourne peers despite higher living costs in the capital, according to ABS statistics.

The data also shows that middle aged blue collar workers, in particular, are more likely to be paid similarly or better in regional centres of New South Wales and Victoria.

Large regional cities have been some of the east coast’s best performing property markets this year, largely due to the ripple effect following Sydney and Melbourne’s peak. 

Geelong, 70km south west of big sister Melbourne, recorded the largest increase in dwelling values across non-capital city Australia at 9.8% over the 12 months to April 2018, yet its median house price remained more than $200,000 cheaper than Melbourne.

Shoalhaven/Southern Highlands was the strongest performing regional market in New South Wales with 9.2% growth, driven by demand from sea changing and tree changing downsizers and families.

Fellow New South Wales bridesmaid, Newcastle posted a 7.1% surge. Australia’s largest coal port by volume and the Hunter Valley’s economic hub, it offers a world class university, vibrant coastal lifestyle and strong employment with 37% of residents in professional or managerial roles. 

Queensland’s top two regional performers were the Sunshine Coast (5.1%) and the Gold Coast (1.9%) due to rising demand from interstate home owners and investors. Increased tourism played its part, with 7.4 million interstate visitors holidaying there in 2017.

It is now more expensive to buy a house on the Sunshine Coast, where the median is $589,000; and the Gold Coast with a median of $650,000 compared to Brisbane at $536,000.

ABS data shows tens of thousands of big smoke property owners opted to cash in their assets or upgrade their homes more affordably with a metro-regional switch in FY17. 

The top two locations chosen by Sydney escapees were Newcastle/Lake Macquarie in the north (5,500 arrivals from Sydney) and Illawarra in the south (5,300 arrivals).

Melbourne switchers favoured Latrobe-Gippsland (7,300 arrivals from Melbourne) and Geelong (6,900 arrivals).

Up north, seven of the top 10 Australian regions to benefit from departing Brisbane residents were Queensland centres, with beach cities topping the list. The Gold Coast, 70km south, gained 8,800 former Brisbane residents and the Sunshine Coast 6,700.

City slickers’ exodus to tree change and sea change localities is evident in CoreLogic’s latest property sales analysis, which shows that dwelling values fell by -3.7% across the capital cities but rose by 1.2% across the combined regional markets in the 12 months to September.

If you’re contemplating a metro-regional switch, consider renting for the first six to 12 months to learn the local market and ensure you’re comfortable in your new lifestyle before investing in a new home.

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House prices in the nation’s capital

Thursday, November 29, 2018

The rate of growth in Canberra’s market slowed in FY18 but the city is expecting its fifth consecutive year of price rises in FY19, driven by above average population growth, limited supply of greenfield land for new housing, ongoing job security and the country’s highest wages.

 CoreLogic figures show the median house price rose by 3.3% to $674,000 in FY18, a deceleration on FY17 (9.7%) that is largely attributable to tighter lending restrictions, which are impacting every major market across Australia.

Economic forecaster BIS Oxford Economics says Canberra house prices will continue to rise at a slow and steady pace through to 2021, with 10% capital growth predicted – the second highest rate of forecasted growth in the country behind Brisbane at 13%. 

As discussed in our recently released annual McGrath Report, the most exciting thing happening in Canberra is the prospect of significant zoning changes that will reshape the city’s largely single level housing landscape to better meet the needs of residents in the future.

Strong population growth, limited greenfield sites for new homes and an impending wave of downsizing are prompting city planners to begin preparing for a ‘more compact city’ with higher density living.

The community’s desire for greater diversity of housing options was acknowledged in The Australian Capital Territory Government Housing Choices Discussion Paper, released in November 2017.

The territory’s residential stock is 81% separate dwellings, which has served the city well in the past but does not suit its rapidly changing community profile. Canberra has one of the fasting ageing populations in the country and single and couple-only households are becoming far more prevalent.

The apartment construction boom has met some of this demand but it has mostly been in town centres and along major transport routes, which does not serve the 50% of residents surveyed who would like to downsize in their existing suburban communities as they age but have little to no small home options.

This is a significant consideration for planners, given Canberra is expecting a 93% increase in over 65s by 2041.

There is a clear preference amongst residents for more terraces, townhouses and dual occupancies in established areas close to the city.

Infill development in the inner north and inner south has been a success, with valuations firm Herron Todd White noting particularly strong price growth in the inner north in 2018 due to the rising mix of housing, the intrinsic appeal of the leafy district and the buzz over the new light rail.

The challenge for the government is to meet the needs of its changing community whilst also maintaining Canberra’s character as a garden city. 

Canberra’s median apartment price decreased -0.8% to $438,000 in FY18, with demand still high enough to meet new levels of supply even with a drop-off in investor activity.

The city has seen significant development, with 6,700 new apartments still in the pipeline until the end of FY20, according to forecasts from Master Builders Australia.

For now, there is enough interest from local, interstate and foreign investors as well as younger generations to keep prices stable.

The vacancy rate remains extremely low, there is a strong tenant base of public servants and yields are very appealing at 5.7% – the highest amongst the East Coast capitals.

Premium developments are attracting the strongest enquiry. Local developer, Geocon sold 500 apartments pre-launch in its luxury High Society 27-storey twin tower project at Belconnen in July 2018. Earlier in the year, they sold 250 apartments in one night at the launch of Grand Central Towers in Woden.

A temporary oversupply might eventuate, given weakening investor demand and the cultural challenge of a city that is unaccustomed to apartment living.

First home buyer activity in Canberra peaked at 25% of new loans in early 2018 – the highest it has been since 2009 and well above its long-term average of 19%. From 1 July 2019, first home buyers with a household income under $160,000 will pay no stamp duty on new or established properties.

The long-term fundamentals underpinning Canberra’s property market remain strong. The territory’s population grew by 2.2% in CY17 – well above its long-term trend of 1.5%. It is forecast to grow by 1.75% in FY19 and FY20 before returning to 1.5% thereafter.

Employment is forecast to grow by 2% in FY19, before returning to trend growth of 1.5%.

Canberrans continue to enjoy high incomes averaging $1,016 per week. Jobs growth has attracted new residents, with Canberra amongst the top 10 destinations for all capital city migrants in FY17. It welcomed 12,000 people from the other capitals, including 5,200 from Sydney.

Canberra is quickly maturing into a major metropolitan city. One of the biggest transport projects in its history will launch next month, with the gleaming new light rail corridors snaking through Canberra’s north linking the fast-growing Gungahlin region to the city.

More international flights are opening tourism and trade opportunities, with Singapore Airlines and Qatar Airways flying daily from Canberra to Singapore and Doha. Tourism is up and international education has become the city’s largest services export, with 17,000 overseas students studying there.

The City Renewal Authority, established in 2017, is reviving London Circuit with new office space, a hotel, and retailers, as well as transforming the 19-hectare Haig Park into a more socially active recreational zone.

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Jewels in the crown

Tuesday, November 20, 2018

The big news in Melbourne of late was the buoyant auction results for this year’s hit renovation series ‘The Block’ in St Kilda.  

Our McGrath St Kilda office achieved the highest sale price in The Gatwick for Hayden and Sara’s apartment, selling for $3.020 million – $545,000 above reserve and delivering them $645,000 in prize money.

Every apartment sold well above reserve and whilst it is a blockbuster TV show, these are also real sales to real buyers.  I agree with McGrath Chief Auctioneer Scott Kennedy-Green, who did an excellent job on the night, that high quality properties will always have an edge, even in challenging markets.

As discussed in our newly released annual McGrath Report 2019, Melbourne has been cooling down over the past year, following 51% growth in home values over five years during the boom.

The market peaked in November 2017 – five months later than Sydney, with its cooling phase starting slowly but gathering pace in mid-2018.

Properties retained their value in FY18, with 1% growth, however, overall, buyer demand is clearly weaker, primarily amongst investors but increasingly also owner occupiers, as tightened lending criteria takes hold of the market.

In the 12 months to June 2018, the number of homes listed for sale remained roughly the same as the previous year, however sales fell by -16.8%.  At the end of FY18, Melbourne’s median house price was $821,000 and the median apartment price was $574,000.

As always in a slowdown, the citywide market has become patchy with prices in outer areas continuing to grow, while the inner and middle Melbourne markets broadly taper off.

Entry level suburbs with houses under $600,000 are drawing strong interest from first home buyers aided by stamp duty concessions and the new $50 million HomesVic co-purchasing program, whereby the government takes a 25% equity share to increase affordability for buyers and reduce the need for larger deposits.

Official figures show 250 buyers have provisional approval to buy via the pioneering program, which offers up to 400 properties in Melbourne suburbs including Dandenong, Ringwood and Sunshine, and regional hubs including Ballarat, Bendigo and Geelong.

Nine of Melbourne’s top 10 suburbs for median house price growth in the year to June 2018 were located in the middle to outer ring areas in the sub-$700,000 price range. The best performers were Coolaroo (37%), Melton South (32%), Melton (27%), Sanctuary Lakes (29%) and Sunbury (26%), according to CoreLogic figures.

Family buyers are also fuelling strong construction activity in the city’s outer east, north and west at the rate of 1,500 new family households per week, according to the Housing Industry Association.

A longstanding correlation between property prices and school zones means homes in sought-after districts should somewhat defy the slowdown, particularly given the premium that families are willing to pay.

Real Estate Institute of Victoria (REIV) sales figures for CY17 show houses in popular public school catchments were up to $400,000 more expensive than homes just outside the zone.

Examples include South Yarra Primary (median house price $410,000 higher than homes 1km outside the zone), Altona Primary ($325,000), Valkstone Primary ($250,000), Camberwell High ($289,000) and McKinnon Secondary College ($235,000).

“Parents of school-aged children are investing in the family home by buying into areas zoned for some of the city’s best public schools, rather than paying the equivalent in private school fees,” says Richard Simpson, REIV President.

Victoria continues to attract the lion’s share of international investment in Australian residential real estate. Victoria represented 41% of Australia’s 13,198 approved applications in FY17, more than any other state and 8% higher than New South Wales.

The total value of proposals was $10.33 billion of the nationwide $25.2 billion pie. 

Top flight education facilities continue to attract international students, with the University of Melbourne and Monash named in the World Higher Education Top 100 rankings again in 2018. 

Foreign buyers with deep pockets also remain active in Melbourne’s prestige market, reportedly setting a new house price record in February 2018 when Stonington Mansion in Malvern changed hands for $52.5 million.

Looking long term, Melbourne offers far more robust prospects for capital growth due to strong population and employment growth, major investment in infrastructure and cheaper housing than Sydney.  All of this should provide a comparatively softer market landing.

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Do you call that a cut?

Thursday, November 15, 2018

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Thursday, November 08, 2018

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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Sydney will sizzle in some suburbs

Thursday, November 01, 2018

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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My top 5 suburb picks

Friday, October 26, 2018

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

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

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

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

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

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

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

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

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

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

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

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

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

John McGrath’s top suburb Picks

My Sydney suburb picks

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

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

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

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

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

My Brisbane suburb picks

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

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

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

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

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

My Melbourne suburb picks

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

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

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

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

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

My Canberra suburb picks

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

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

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

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

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

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

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The first time ever I bought my home

Thursday, October 18, 2018

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

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

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

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

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

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

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

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

1. Stamp duty concessions 

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

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

2. First homeowner grants

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

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

3. Savings assistance 

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

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

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

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

4. HomesVic co-ownership scheme

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

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

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

Surge in first homebuyers

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

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

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

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

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

Thursday, October 11, 2018

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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