Renters feeling the pinch as weekly rents outpace home values

Rental rates across the combined capital cities in 2011 grew by 6.3% compared to a fall in home values of -3.6%. The superior growth performance of rents compared to values has been a consistent trend over the past five years.
Since the beginning of 2006, rental growth across the combined capital cities has outpaced the growth in home values. Over the period December 2005 to December 2011, capital city home values have increased by a total of 34.5% compared to rental rates having increased by a total of 46.8%. On an inflation adjusted basis, capital city home values have increased by 15.4% over the period and rental rates have increased by 27.7%.



Looking at the performance across individual years highlights the fact that you typically see either rents or values growing or in some instances both. Across each year highlighted one of either values or rents has grown by more than 5%. The results also highlight that if value or rental growth slow typically the other will increase; the markets tend to be counter cyclical.
The results are also indicative of a disconnect between housing demand and housing supply given that in any given year values or rents are growing at a rate which is in excess of the growth in inflation.



Across individual capital cities over the five years to December 2011, house values have grown by as little as an average annual rate of 0.1% in Perth and by as much as 7.9%pa in Darwin. Across the combined capital cities, house values have increased at an average annual rate of 4.4% over the last five years.
In comparison, house rents have recorded average annual growth of as little as 2.8%pa in Adelaide and as much as 9.9% annually in Darwin. Across the combined capital cities, rental rates for houses have increased at an average annual rate of 5.8%pa over the last five years, a full 1.4 percentage points higher than average annual value growth.
Focussing on units, they have enjoyed stronger value growth over the past five years than houses. Across the combined capital cities unit values have increased at an average annual rate of 5.5%pa over the period and have increased by as much as 12.5%pa in Darwin and by as little as 0.9%pa in Perth.
Rental growth for units has outpaced the growth in the value of units over the last five years. Unit rents have increased at an average annual rate of 6.2%pa over the past five years have increased by as much as 11.9%pa in Darwin and by as little 3.1%pa in Canberra.
The average annual rate of rental growth for houses has outpaced that of units over the past five years in each city except Melbourne, Adelaide and Canberra. Over the same timeframe, rental growth for units has outpaced value growth in Sydney, Brisbane and Perth.



Over 2012, RP Data expects that growth in rental rates will continue to outpace the growth in home values. The reason being that we are not anticipating any ‘real’ growth in home values. Additionally, tight rental market conditions accompanied by an insufficient supply of new housing is likely to result in superior levels of rental growth to that of home values.
As always, there is likely to be some disparity between rental growth across individual capital cities. Markets such as Sydney, Brisbane and Perth are anticipated to be the strongest performers for rental growth due to the large discrepancy between housing supply and demand and low rental vacancy rates. On the other hand, rental pressures are not expected to be anywhere near as strong in Melbourne and Adelaide due to higher rental vacancy rates and less of a disparity between housing demand and housing supply.

Information from RP Data

How to sell your home for more

How to sell your home for more
By Rebecca Mitchell

In most cases, once the decision has been made by a home owner that they want to sell, they usually want the sale completed quickly and with a minimum of fuss and bother. After all, keeping your home clean and tidy at all times and then having strangers traipse through at any time of the day or night can get a little tiring. So what can sellers do at their end to make the sale process happen quickly?

Research the marketplace
The first step is to educate yourself by researching the market and, more importantly, your competition. Attend open homes to check out other properties for sale in your local area in the same price bracket. What makes them appealing and what turns you off? Listen to comments from other people at the inspection. Don't just rely on the asking price though. It is paramount you research recent sales too. Sold prices are a true indication of realistic property values.

Pre-sale preparation
Having your home presented well is one of the main things any home owner can do to ensure their property sells quickly and for a good price. Depending on the budget, there are a range of things that can be done to spruce up a property and make it more appealing to buyers. With enough hands and the right advice you may even have the place sale-worthy in one weekend.
If your budget is limited then cleaning and de-cluttering are the first steps - all you need are some cleaning products, a little elbow grease and a ruthless eye. Where necessary, wash down walls and ceilings. If carpets are very dirty consider hiring a steam cleaning kit or employ a professional if the budget allows. Use floor rugs to hide bad stains. The next step is to de-clutter. The goal is to make rooms look bigger by removing unnecessary furniture and knick knacks that make a room feel overdone and messy. For inspiration check out furniture catalogues and design magazines. Consider adding inexpensive design accessories such as scatter cushions, lamps, picture frames and fresh flowers.

With any house sale it is paramount the kitchen and bathroom look clean, fresh and neat. Remove excess clutter from bench tops. Don't overlook inside the cupboards though. Any interested buyer will want to check cupboard space so it's no good having a clean exterior if inside your cupboards is dirty and messy.

If your budget stretches a little further then you might consider minor improvements that can be done quickly by a home handyperson. A fresh coat of paint can make the world of difference to tired walls and ceilings and will get rid of any lingering smells. Updating old and damaged blinds and light fittings will instantly lift a room that is looking a little dated.

A complete bathroom or kitchen renovation is not only costly but takes time. Sometimes replacing one or two items such as tap ware, bathroom vanity or shower screen, along with a fresh coat of paint, can instantly freshen these rooms. Don't overlook or neglect your outdoor areas. Hit your local nursery and stock up on pot plants - you can always take these with you when you move. Use flowering annuals to add splashes of colour and indoor plants to add life to dark shady areas of your garden. Your entry should invite buyers to inspect further so don't overlook your front door and entry hall.
If you have a larger budget but are short on time, employ the professionals. A pre-sale stylist can cast a professional eye over your home and provide impartial advice. They can assist with furniture hire and storage if some of your belongings need to be removed temporarily.

Your first open home
Once you have completed your pre-sale makeover and employed a real estate agent to take care of the sale, the next step is to prepare for the open homes. If you are selling in winter get rid of these stale, musty winter smells by opening doors and windows early in the morning. Once the home smells fresh, close them up and turn on heaters so the home is warm and inviting for visitors. Use fresh flowers to add colour and sweet, natural smells.
You should not be present during inspections (unless the agent expressly asks you to). It can put buyers off making them feel like they are imposing. If you have a dog, take them with you. Where possible, leave parking spaces free around the property for buyers. You are spending a lot of money on advertising and it's a shame if people are turned away because they can't find a park.

Finally, your goal is to ensure that your property presents at its best and is price comparable to others for sale. The rest is up to your real estate agent who, through a well devised marketing campaign, will attract buyers to inspect and work hard to negotiate a quick sale. Good luck and should you be considering selling please contact our office for obligation free advice and guidance.

Rebecca Mitchell is a property styling and presentation expert based in Sydney's Northern Beaches.

Financial matters to consider when buying your first home

Financial matters to consider when buying your first home

21-Mar-2011 Courtesy of the REIV
First home buyers have dropped recently as interest rates have risen, assistance has dropped and prices have also risen. This makes it even more important to be aware of the many costs associated with purchasing your own home when working out your budget – after all you want to have as much available for the actual property.
Financial assistance
In addition to the $7,000 first home owners grant those buying or building a new home can access thousands more before 1 July 2011. Check with the State Revenue Office to ensure you understand the eligibility requirements.
Borrowing costs
Before beginning the search for a new home, you should ascertain how much you can afford to borrow then obtain loan pre-approval from the bank. When combined with your savings the amount you borrow has to cover more than just the cost of the property, such as the loan establishment fee, mortgage insurance and stamp duty.
Fees will vary from lender to lender, so be prepared to shop around for the best loan to suit your needs.
Stamp duty
In Victoria, stamp duty on a property is currently can be as high as six per cent depending on the value of the property. In the middle of the year the Government has promised to cut it by 20 per cent for first home buyers.
Valuation report
It may be worthwhile obtaining an independent valuation report on a property to indicate its current market value. The valuation must be conducted by a Certified Practising Valuer.
Legal costs
Obtain assistance and advice from a Solicitor will help you navigate through the contractual process. Fees are negotiable, so shop around and compare rates.
Building and pest inspection reports
Undertaking such a report may save you thousands of dollars in the future and will highlight to you the need to undertake work on the property and possibly make allowances in your budget for it.

Interest rates on Hold

According to the Reserve Bank, "The global economy is continuing its expansion, led by very strong growth in the Asian region. Commodity prices have risen further over recent months, pushing up measures of consumer price inflation in many countries. A number of countries have been moving to tighten their monetary policy settings. Overall, though, financial conditions for the global economy remain accommodative."

"Australia's terms of trade are at their highest level since the early 1950s and national income is growing strongly. Private investment is picking up, mainly in the resources sector, in response to high levels of commodity prices. In the household sector thus far, in contrast, there continues to be caution in spending and borrowing, and a higher rate of saving out of current income. The effects of the natural disasters over the summer have reduced output, but production levels should recover over the months ahead, and there will be a mild boost to demand from the rebuilding efforts as they get under way."

"Asset values have generally been little changed over recent months and overall credit growth remains quite subdued, notwithstanding evidence of some greater willingness to lend. Business balance sheets generally are being strengthened, and the run-up in household leverage has abated."

"The labour market firmed in 2010, with unusually strong growth in employment and a decline in the rate of unemployment. Most leading indicators suggest further growth in employment, though most likely at a slower pace. Reports of skills shortages remain confined, at this point, to the resources and related sectors. After the significant decline in 2009, growth in wages has returned to rates seen prior to the downturn."

"Inflation is consistent with the medium-term objective of monetary policy, having declined significantly from its peak in 2008. These moderate outcomes are being assisted by the high level of the exchange rate, the earlier decline in wages growth and strong competition in some key markets, which have worked to offset large rises in utilities prices. Production losses due to weather are temporarily raising prices for some agricultural produce, but these should fall back later in the year. Overall, looking through these temporary effects, the Bank expects that inflation over the year ahead will continue to be consistent with the 2-3 per cent target."

REIV 01/03/2011

New government announces changes

New government announces changes

The Minister for Planning, Matthew Guy, has announced a number of changes to government policy.

The government has decided to retain the Growth Areas Authority, with broader powers. In addition, the government plans to overhaul the role of Vic Urban, including selling off a large amount of their $450 million land holding, moving the timing of GAIC so that 100 per cent of it is deferrable to statement of compliance, and maintaining a commitment to an 18 month PSP process.

UDIA has been actively pursuing similar policies.

Three months of little change for renters

29-Nov-2010

The metropolitan rental market continues to be in a state of imbalance, with vacancies more than outweighed by renters.

The rental vacancy rate for Melbourne in September was 1.4 per cent, a minor reduction compared to June when it was 1.5 per cent.

In the inner city the vacancy rate improved from 1.1 to 1.4 per cent; in the middle suburbs it reduced from two per cent to 1.8 per cent; and the outer suburbs retained the tightest rental market, with a 0.7 per cent rental vacancy rate compared to 0.8 per cent in June.

The lack of available rental homes continues to drive increases in rents. According to the Office of Housing, the rent for a three-bedroom home has, depending on the location, increased by between 3.9 and 11 per cent over the last year. The comparative figure for a two-bedroom unit or apartment is a rise of between 3.1 and 8.3 per cent.

There continues to be no improvement possible in the short- to medium-term.

Conditions in the regional Victoria rental market was very similar to the metropolitan one, with a rental vacancy rate of 0.7 per cent in September compared to one per cent in June.

The Bendigo region continues to have the lowest level of available rental homes, with a vacancy rate of 0.2 per cent compared to 0.4 in June. In the Geelong region it dropped from 1.3 per cent in June to 0.9 per cent in September and in the Ballarat region there was a small improvement from one to 1.2 per cent.

Weekly Market Comment, November 22nd 2010

November 22nd

According to the REIV we are at the start of the busiest 4 week period in Melbourne Residential auction history. Whilst there were over 1000 auctions gazetted for the weekend, as is becoming normal, many were not reported. 893 auctions were reported and we saw an average result of 59%. As an overall clearance rate for the week, this estimate will be close but probably revised down possibly 1 or 2 percentage points. Total sales were also fairly low at only 1047 reported for the week.

There are another three weeks of auctions meant to be in excess of 1000. Add this to the usual private sales for the week and we should see total sales of around 1400 per week. I would hazard a guess it may end up being closer to 1200 per week. It is definitely a buyers’ market at the moment.

However, good property still sells very well. The auction of a 3 level warehouse apartment located in Ascot Vale and was quoted at $550,000 - $595,000. Warehouse apartments have become hugely popular, and seem to sell well in all types of markets. This property in particular had a great floor plan and had some ‘wow’ factor about it. The auction was opened on a genuine bid of $500,000 and announce on the market at $605,000. There were five bidders in total, which for this market is strong competition. The comparable were showing that the property was worth low $600,000’s, the property sold at $656,000.

I notice the media are still talking about low quotes. One of the reporters even saying “if you want a fair idea of what the house you want to buy at auction is worth, add up to 15% on the advertised price and you might be somewhere near the final result”. That is absolutely ridiculous. You could end up paying 20% more than a property is worth. They still have not got it yet! The media and even government departments like Consumer Affairs still want to have a say in how a property is priced. For some reason they just don’t get it. The vendors’ agent is contractually obligated to assist only the vendor. No legislation will ever stand up to scrutiny that weakens the position of the party who is paying for assistance over the party that is not.

Furthermore the media are not really looking at one of the more important changes to legislation. Section 55 of the Estate Agents Act is being changed. The rules previously required a Real Estate agent, his relatives, or employees, to undergo a full independent assessment by the director of CAV with supporting documentation involving a written valuation by an independent Valuer if they wanted to purchase any piece of real estate their agency’s selling. The process is long winded and penalties for breach are serious.

Now the safeguards that were in place have been hand balled to the vendors solicitor or conveyancer. Most people in this profession would have absolutely no idea of what is a fair price or not. I wonder if these professions even have professional indemnity insurance to appraise the value of a home. It is bizarre that the Minister for Consumer Affairs is more worried about cutting down on paperwork than safeguarding vulnerable consumers.

Next weekend we have the State Election. Whilst the outcome may change a few things, the uncertainty may play heavily on the market. If we have anything close to a hung parliament like our Federal politicians are currently enduring then we are in for some interesting times between now and Christmas.



Article courtesy of JPP Buyers advocates www.jpp.com.au