More than rate cut needed

May 9, 2012 1 Comment

The 50 basis point cut made by the Reserve Bank (RBA) last week sent a positive signal and may improve consumer confidence, but don’t expect a sudden resurgence of demand says one of the nation’s foremost property forecasters, Michael Matusik.

Over the past decade, the connection between cheaper money and housing market improvements has been broken, he says, by artificial stimulus like government first-home buyer grants and building boosts. These have distorted the normal property cycle, inflated demand and prices, and have made the housing market more cyclical than it used to be.

Underlining Matusik’s point is the fact that despite falls of nearly 1.5% in mortgage interest rates in the past year, new housing starts have continued to decline, and, soft April home values show that despite a somewhat stable start to 2012, national home values have slipped 0.7% year to date.

Market ‘hole’ coming

With a raft of government incentives coming to an end, demand that has been brought forward may soon lead to a ‘hole’ that could last three to six months, or longer says Matusik.

Research reveals what’s ending, where and when…

What will it take to lift the market?

Residential property, especially new housing stock is over-taxed. If we’re to lift new housing starts, Matusik says we must:

  1. Increase the speed of population growth.
  2. Increase the supply of raw land across urban Australia
  3. Reduce approval times and unnecessary compliance red tape
  4. Allow the market to dictate demand
  5. Have new property valuations based on rental returns, not market comparisons
  6. Reduce taxation on property (HIA research shows this is up to 40% of a new home’s final price)
  7. Remove GST on new construction
  8. Remove stamp duty from off-the-plan sale.

However, the biggest problem affecting demand is the current oversupply of property for sale. Buyers are simply spoilt for choice and too many vendors are unrealistic in their expectations.

Healthy supply levels run at about 200,000 homes for sale at any given time. Australia currently has 400,000. Even a 1% or 2% drop in interest rates is unlikely to make an impact on their salebility, unless it is combined with sharp market pricing and aggressive marketing.

Make a decision

Matusik has some sharp advice for vendors who are overpriced, have been for sale far too long, and ‘who haven’t got a clue’.

He suggests that with rental vacancy rates running at just 1.7%, they should…

  1. Renegotiate mortgage finance
  2. Take their property off the market
  3. Lock into a low fixed-interest rate for a couple of years
  4. Rent the property out

And for those who really need to, or want to sell…

  1. Understand their dwelling’s value and accept the market – rip the bandage off and move on!
  2. Assign one good agent (multi-listing is sales death in a buyer’s market)
  3. Give your agent a short time frame to sell – 30 days
  4. Require offers on signed contracts – no verbal offers

Promote, promote, promote

You can’t sell a secret.

So, vendors who want to stand out from competitors must invest at least 1% of their home’s predicted sale price in marketing. Without some serious marketing push, there’s just no chance of standing out. Get professional photos taken and set an asking price – recent research shows 75% of buyers don’t even lift the phone to make an inquiry on properties without an asking price.

As with selling a car, presentation must be immaculate, every single time a buyer looks at the property. Clean the windows, light the fire (if you have one), trim the garden, plant or display fresh flowers and open all the curtains.

As Matusik correctly says, many may disagree with his views. However, for vendors who have a property that has languished on the market for more than six months, smaller or lesser actions are simply like re-arranging deck chairs on the Titanic.

Click For more information on regional locations eligible for government relocation grants:

Victoria

New South Wales

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Toddler drownings, the unfortunate truth

April 13, 2012 Leave a comment

Each year, toddlers continue to drown in backyard pools so safety must always be a First National property manager’s primary concern.

The unfortunate truth is that drowning can happen at any property if appropriate precautions aren’t taken. Royal Life Saving – the national body for water safety in Australia – campaigns hard to get all households to check their pools to ensure safety. They also send the message to local councils that pools need to be checked to ensure compliance with safety standards.

There’s no doubt, with the degree of public distress at each drowning, backyard checks and adherence to the Australian standards for pool safety will become a bigger issue over time.

Where a rental property has a pool, the managing agent holds some responsibility for the safety of the pool and the tenants. Obviously property managers cannot ensure toddler supervision, or that tenants don’t prop the pool gate open, so keeping pool safety top-of-mind is crucial.

However, agents do bear responsibility for ensuring the tenant is informed about pool safety and supervision, and that the pool surroundings and equipment meet minimum standards.

First National encourages Landlords to talk to its Property Managers, to make sure they understand the requirements and their legal responsibilities when they own and investment property with a swimming pool.

We also talk to our tenants, ensuring they understand their responsibilities with their pool. We provide clear documentation concerning what they are expected to do and what the safety requirements are.

Our property managers also regularly turn to pool professionals, such as PoolWerx, to ensure they’re fully aware of changing Australian safety standards. We recommend Poolwerx to all consumers as they can quickly let you know if your pool doesn’t meet the necessary safety criteria.

Taking action to ensure your pool is safe is vital to reducing the risk of a tragedy. By taking action today to ensure your pool is well maintained and safe, you are actively helping to reduce the incidence of drownings.

Visit www.homepoolsafety.com.au for further information and checklists or contact at First National property manager for advice.

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Renting With Pets, Think Again…

February 3, 2012 1 Comment

You own an investment property and you’re wondering whether you should consider applications from tenants with pets.

Conventional wisdom and maybe even your property manager’s advice suggests you might want to think twice about that. Obviously there’s the potential for damaged carpet as a result of small accidents, marked walls or garden damage. But is that really any different from the normal wear and tear of renting to people without pets?

New research suggests perhaps not.

Responsible pet owners typically work hard to ensure their pets don’t annoy neighbours and don’t do damage to their rental property. They know that one black mark against their name means it may be much more difficult to rent in future, or worse, they may have to surrender their pet to be euthanised, if they can’t find a suitable property.

The research also shows that tenants with pets pay and average $25 to $35 dollars more per week for their property.

Naturally, as with all rental applicants, good pet references are essential. Your property manager may also ask that your tenants sign an annexure to their lease, clearly spelling out expectations and requirements such as having carpets steam cleaned when the property is vacated.

As a landlord, the choice remains yours but allowing your property manager to consider applications from prospective tenants with good references expands your pool of potential customers. Anecdotal evidence also suggests tenants with pets rent for longer periods, reducing the wear and tear that occurs when people move in and out, and, lifting your annual net return.

First National Real Estate offers a ‘Pet Friendly Rental Search’ on its national and member websites. Prospective tenants simply tick the ‘Pet Friendly’ box when searching for property to instantly separate properties that are an option for them.

Even though vacancy rates are at very low levels and many landlords experience no difficulty finding good tenants for their properties, renting to a responsible tenant with a pet may see your investment leased for a longer period, at a higher rate, and that’s well worth thinking twice about!

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The Lucky Country?

January 18, 2012 Leave a comment

An example of Australia's vast, undeveloped interior...

Is it just luck that only 4.9% of Australian homes are worth less than their purchase price?

First National Real Estate would argue that luck has nothing to do with it.

The latest figures from RP Data emphasise the resilience of the Australian housing market, despite the ongoing concerns of international market commentators.

According to the organisation, strong growth in home values over the recent growth cycle is why most regions have seen significant levels of equity accumulation. In fact, over the five years to September 2011, capital city home values increased by around 28%.

Although there have been recent declines, as outlined in First National’s 2012 Property Market Outlook, approximately 43% of homes are worth more than twice their original purchase price.

Capital city home values are down 3.3% from their October 2010 peak to September 2011, but taking a longer term view, that’s hardly something for Australians to fret about, especially given the dire circumstances faced by our European and US home owning colleagues who are facing losses in equity well exceeding 40%.

Australia’s property market circumstances are almost entirely unique and largely misunderstood by foreign analysts.

Firstly, the great majority of Australians dwell on the coastline, leaving our vast interior mostly ‘undeveloped’. This makes demand for available land and housing on the coastline unusually strong. This combines with a population which grows at more than 300,000 per year, while we continue to build less than 150,000 homes per year – the opposite of what was occurring in Europe and the USA prior to the GFC. In the USA, a building boom created an oversupply, financed largely through non-recourse lending.

What’s non-recourse lending?

It’s a type of finance you couldn’t dream of acquiring in Australia. Here, before a bank will lend you the necessary finances to buy a property, you must prove you have the ability to pay it back. That starts with at least having a job, unlike some of the lending practices that were prevalent in the States, prior to the GFC, that didn’t require such fundamentals of a borrower. Non-recourse lending also allows the homeowner to walk away if their home becomes worth less than they paid for it, and it then becomes the bank’s problem. Walk away in Australia and the bank will reposess your home, sell it for the best price they can, then sue you for any shortfall. So, in other words, there’s no walking or running away and the investment remains your problem. This provides a strong incentive to ‘hold on’ in times when the market isn’t rising.

The flood of property for sale in the USA is largely the result of homeowners simply handing back the keys and walking off. The cascading oversupply combines with almost zero demand, apart from the occasional foreign bargain hunter looking to take advantage, to further suppress house prices.

So, with an entirely different approach to lending, record immigration, almost zero unemployment, an under-supplied housing market, and a culture that embraces home ownership rather than renting, there’s scant chance of any form of major correction in the Australian housing market despite its current, cyclical softness.

 

 

 

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Everything points to better times ahead

December 5, 2011 1 Comment

SOURCE: The Sydney Morning Herald

THE property market will be drawing a collective sigh of relief as the year comes to a close.

As we look back on how the market performed in 2011, we may well see an overall correction of up to 10 per cent – a significant drop for the property market but a fraction of the sharemarket correction of 2008.

As we gaze into the crystal ball and wonder what 2012 has in store for home owners and property investors, there are a few indicators that suggest we are entering calmer waters.

With Europe in crisis, the US economy anaemic and China cooling, interest rates are on the way down. Experts predict the Reserve Bank will cut rates on Tuesday by 25 basis points and there will be a further reduction of up to 100 basis points throughout 2012.

Falling interest rates instantly increase affordability and entice people back to the market. Buyers rushed back in 2001 and 2009 mainly due to falling interest rates. The main difference next year is that it is unlikely to come packaged with increased first home buyer incentives.

Property is a great Australian pastime and this continues to be the case.

Web statistics show that, although competition for property was soft in 2011, web browsing continues to be very high. Nielsen’s online analysis of real estate portals suggests more than 3 million Australians search for property each month. That means about 15 per cent of the population is actively looking at property at any onetime.

This activity flows on to the physical market, with many agents reporting high numbers at inspections for good quality homes. Despite the level of interest, many people believe that 2011 has not been the right time to buy.

This means first home buyers and investors have stayed out of the property market. The effect is increased demand for rental property and a lowering of supply. As a result, we are likely to see rental yields lift next year.

According to the Reserve Bank, household savings rates are at their highest levels since the mid-1980s. They have been moving up since the mid-2000s, reaching 10.5 per cent of disposable income in the June quarter.

Many borrowers have been making substantial excess principal repayments in recent years and this will increase their equity and cash flow positions.

For many people, myself included, money begins to burn a hole in our pockets. The people who have been saving and have job stability – which is 95 per cent of the population – will start to realise the sky is not falling and will begin to make a move.

All markets are cyclical and often the greatest period of growth comes directly after the biggest falls.

I think when we look back on 2012 in years to come these factors will likely result in a bounce in median values, and the market will be back to where it started before 2011 hit.

Mark Armstrong is an independent property analyst and creator of propertytycoon.com.au, Australia’s first online auction tipping competition.

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Still the lucky country

December 1, 2011 1 Comment

Chief Executive, Ray Ellis

As the property market moves toward its summer hiatus, First National would like to wish you happy and safe holidays as well as a Merry Christmas.

With the housing market correction having slowed in September and interest rates fallen, Australian confidence has risen to a six-month high.

Capital city dwelling values have fallen just 0.2%, the smallest decline since February, and economists are tipping rates could fall further yet. So what’s next for 2012?

We’re working on our 2012 Property Market Outlook right now, so ask your First National member for a copy in January and we’ll give you the views of a network of experts comprising 450 offices Australia-wide.

Although 2011 was a year in which Australians felt considerable gloom and uncertainty about the future, we really do have much to be grateful for.

While interest rate movements, property price statistics and auction clearance rates are reported in excruciating detail, then analysed in depth by the 24 hour media cycle, home owners have much to be satisfied with when it comes to their property holdings and their performance.

Credit Suisse’s Global Wealth Report recently ranked Australians as the wealthiest people in the world. The reason? Our average wealth now rests at $403,000 and our median at $225,000.

The median is indicative of how the middle class is placed, and, as we have comparatively high levels of home ownership on the world stage, our wealth distribution is relatively equitable. In the United States, by comparison, median wealth is $53,000. Coincidentally, the median wealth of an Australian rental household is pretty close to that of the US – $55,265.

Australians who own their home outright are worth an average $737,394 and there have never been more government incentives and bonuses to help you get your foot on the property ownership ladder.

So, it’s not hard to see why the ‘Great Australian Dream’ still includes buying and work towards ownership of your home.

Plus, with historically low interest rates and enviably low unemployment rates, we really are the land of opportunity. It puts all our worry about small movements in interest rates and slight reductions in house prices in perspective doesn’t it?

Swim between the flags!

 

Ray Ellis

Chief Executive

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November market wrap

November 17, 2011 Leave a comment

Consumer confidence has hit a six-month high as a result of the recent drop in interest rates.

The Westpac-Melbourne Institute consumer sentiment index jumped 6.3 per cent after last week’s Reserve Bank (RBA) decision. Since the RBA began to tone down its rate-hike rhetoric in September, the mood of households has lifted by 15 per cent.

Confidence in the economy’s prospects for the year ahead has also lifted nearly 19 per cent. Westpac’s Chief Economist suggests there will be another rate cut before Christmas, taking us down to 3.75 per cent. Most banks have passed on last week’s cut and with a beyond-expectation lift in housing finance activity of 2.2 per cent in September, the industry’s hopes of a lift in activity have been buoyed.

However…

Tis the season of lower prices

There’s been a large rise in property on the market and buyers remain reluctant to commit, unless they perceive a bargain (particularly at the top end). This is unlikely to be temporary; the market has undergone a structural shift. Even some of the most bullish commentators predict that gains of the past two decades are unlikely to be repeated for a long time.

Credit growth was the primary driver of phenomenal property price gains in that period. According to the RBA, there’s rarely been a time since the 1970s when housing credit wasn’t growing at well over 10 per cent per annum. This delivered an average 12 per cent a year return for 24 years – and that’s after tax and maintenance costs. On the strength of that data, the ANZ Bank review says its official – your home is the best investment you are likely to have made.

Paying back debt

Households continue to pay back debt at record rates. With housing credit growing by only 5.8 per cent in the 12 months to August, this is the lowest growth rate since 1976.

The International Monetary Fund (IMF) believes Australian house prices are overvalued by 10 to 15 per cent but this is based on overly simple price-to-income and price-to-rent metrics. Their opinion though, if correct, leaves little room for growth until wages catch up.

On the other hand, BIS Shrapnel – who arguably has the better appreciation of Australia’s market dynamics – expects house price growth of 20 per cent in Perth over the next 3 years, 19 per cent in Sydney and 16 per cent in Brisbane. Less so for Melbourne, where prices may only rise by 6 per cent (but are currently weakening).

Undersupplied and lower activity

Activity levels are mostly down, the exception being Victoria, where sales activity is booming but prices are falling. Queensland has fared better than most would think. Despite substantial drops in values, sales activity remains relatively high.

Returning to Victoria’s situation, the state government has done two things differently from other governments; it has released a substantial amount of land for new housing development but kept government charges per block of land to approximately $20,000 (try approximately $100,000 for every NSW block of land).

However, most capitals remain undersupplied, Melbourne being the exception – there’s been a 65 per cent increase in housing stock as a result of the record building levels of the past year. Sydney and Perth remain under pressure, the latter because of the mining boom.

For the majority of agents however, levels of activity are similar to those experienced during the depths of the Global Financial Crisis (GFC) and the market is characterized by modest falls in home values – 2.1 per cent over the financial year.

Lowest sales value in a decade

The value of all dwelling transactions fell by a nauseating 18.2 per cent nationally over the 2010/11 financial year – the largest annual fall in a decade.

It will come as no surprise to Queensland members that their state has suffered most, with the total value of dwelling transactions down by 27.5 per cent. South Australia, however, is the complete opposite. There, the total value of transactions increased by 1.3 per cent.

Rent reprieve over

If the pressure was off for tenants in the past three years, it’s time to pay the piper. Rents have turned sharply upward in Sydney and Perth, according to the Australian Bureau of Statistics. This vindicates our membership’s assertions (2011 Property Market Outlook) that 2011 would be the year of the investor.

With undersupply so acute, demand is now moving towards properties with better cash flow – those further from the inner city where prices are cheaper and tenants are easily found (good transport) and yields are higher. Properties where council zoning permits Granny Flats to be built are also back in vogue.

Top end trauma

Times are good for buyers at the top end. This is where prices have fallen further and faster than the wider market. However, owners with high price expectations need to take a cold shower.

Instead of traditional high exposure marketing campaigns, many properties are now listed on the quiet, their owners fearing a ‘no sale’ campaign might injure their chances of achieving the dream price.

In Melbourne’s leafy inner east, sellers lowering their prices are leading to relatively high volumes. Prestige rural areas such as New South Wales’ Southern Highlands are also offering exceptional price reductions – a 21-hectare estate listed for $8 million a year ago just sold for $6.5 million.

Turning to competitors for help

New data from a Real Estate Business straw-poll suggests more agents are turning to their competitors to get their listings sold. 46.5 per cent of agents said they ‘always allow other agents to sell their listings’ while 34.6 per cent said they ‘sometimes’ would permit conjunctions.

However, a startling 20 per cent of agents never agree to another agent introducing a buyer.

With lengthy days-on-market and low activity levels, this is surely a risky strategy that doesn’t put customers’ interests first. It does, however, assure 100 per cent of nothing if the property fails to sell.

Women list pricier homes

US website Trulia recently researched the total value of listings held by male and female agents in the United States. They found that, on average, men list more homes than women but the homes that women list have higher asking prices. The research included the listings of over 100,000 agents.

QR Codes… Que?

QR Codes, those snazzy little boxes filled with even littler squares, first appeared on a Toyota production line in 1994. Struggling to be embraced by consumers, they’ve recently enjoyed a moment of sunshine but are they as effective as you think?

The technology behind QR Codes was not invented for advertising and marketing, and it shows.

In an on-the-street survey conducted by iMedia Connection, 300 people were shown a QR Code and offered a free gift if they could say what it was for.

  • 11 per cent correctly answered QR Code or Quick Response Code
  • 29 per cent said ‘some barcode thingy’
  • 7 per cent guessed some variant of ‘those things you stare at that get 3D when you cross your eyes. What picture is it? I can’t seem to get it…’
  • 53 per cent tried everything from a secret military code to an aerial map of San Francisco

The survey was conducted in San Francisco, a tech mecca, so that’s not a very convincing outcome for something that professes to be quick. But the plot thickens…

Of those who knew it was some kind of barcode thingy, when asked how they would decipher it, only 35 per cent said ‘with their phone’. When they were asked to do so, only 45 per cent were able to – and that took an average of 47 seconds while they took out their phone and tried to find the correct application to read the code.

Not exactly quick or responsive…

_______________________________________________________

Stewart Bunn is First National Real Estate’s National Communications Manager.

 

 

 

 

 

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Will it be harder to sell this spring?

August 22, 2011 1 Comment

With spring a little over a week and a half away, agents could be forgiven for wondering just what kind of market we’re heading into. Traditionally the time for a resurgence of listings and sales, homeowners have been told not to bet on the Reserve Bank cutting interest rates, amid warnings of a property price crash by Christmas.

It seems the goal posts for the predicted property market crash keep moving.

Back in 2008 during the GFC, Australian property prices were supposed to crash by up to 40 per cent, just as they did in the USA and UK. Then, when prices rose, it was predicted there would be serious falls in 2009. Some said 10 per cent, others 20 per cent, and then Professor Stephen Keen chimed in with his now famous prediction of 40 per cent. The bidding war has continued, reaching predictions of a 60 per cent fall a few weeks ago.

None of this has happened yet the warnings from international economists continue to roll in.

For a moment it recently appeared as though the Reserve Bank might cut interest rates, but high inflation remains one of its primary concerns. The major banks have responded to the current crisis of confidence by sharpening their pencils but with international borrowing costs on the rise, this trend is unlikely to continue.

Despite the predictions of many analysts being patently wrong, major newspapers continue to add to their credibility by airing their views.

Three months ago, Fitch Ratings (US) reported mortgage arrears had shown a 30 per cent increase in the three months to March this year. This information was held up as evidence of trouble ahead and, let’s face it, a 30 per cent increase does sound like trouble. Many potential homebuyers would have interpreted that to mean distressed sales and distressed prices on the horizon.

However, it was not pointed out that the Fitch data referred only to the ‘low doc loan’ portion of Australia’s mortgages, only a tiny slice of the total mortgage market in this country, and that the actual arrears rate was 0.42 per cent, up from 0.29 per cent.

How is the average homeowner, investor or first home buyer supposed to work that out?

Only one third of Australians have a mortgage.

If there were a 30 per cent increase in arrears across all mortgages, nearly 2.4 million Australian households would be behind on their repayments. We wouldn’t need Fitch ratings to tell us about that; everybody would know somebody in arrears. Although that’s obviously not the case, it’s how it sounds.

So, while the analysts were looking for a property market collapse, the share market collapsed and the US has its credit rating downgraded instead. Where were those predictions? Where were the warnings about shares being so overvalued? In one week, $100 billion in value was lost from the Australian share market.

Perhaps a permissible observation is that while the Australian share market immediately followed the lead of overseas markets, the Australian property market continues not to follow overseas markets.

Looking at Australian Bureau of Statistics House Prices Indexes, while the share market has tanked, average house prices across Australian capital cities have fallen 0.1 per cent in the last quarter, which effectively means there’s been no change. Even Brisbane, taken in isolation, has fallen just 3.6 per cent in a year and everybody understands the January floods have a lot to do with that.

So, will the share market turmoil of the past two weeks and its impact on confidence make it harder to sell this spring?

According to a national survey by mortgage broker, Loan Market, 57 per cent of respondents say the proposed carbon tax affects their confidence in buying a property, chiefly due to concerns about an increased cost of living.

RP Data statistics show upper-end and prestige property prices are falling faster than more affordable market segments and many sales are taking place off the market, as agents sound out interest quietly.

Market activity will probably be slower than usual as people shelve plans to buy or sell, while they wait to see what happens.

However, high value sales are still being transacted and bullish prices paid in prime locations. On the Gold Coast, a five-bedroom waterfront recently achieved $1 million over the reserve price. But in Darwin, which recently had the strongest house price growth, prices have started to fall as 1300 houses languish on the market and investors wait for the next round of resources projects to begin.

Investor interest in residential property appears to have waned somewhat with June finance down 4.4 per cent. House building approvals also fell in June in all eastern states, most notably Victoria. Western Australia had a large increase of 11.3 per cent but this is unlikely to be sustained with private house approvals still trending down. There, buyers are cautious and need to be convinced the market has bottomed before committing.

Both the Queensland and New South Wales governments are attempting to stimulate investment and regional relocation with $7,000 grants apiece, the Queensland government printing trillions of dollars of fake money in a mail-out to promote its $140 million stimulus package to NSW and Victorian households.

This may have some effect, particularly as Generation Y is evidently prepared to shun the first homebuyers’ grant and buy an investment property instead. It seems if they can’t afford to buy the home they want, they’d prefer to be a landlord, but better landlords than the current crop the survey also suggested. Property Managers rejoice…

Without doubt, there will be buyers searching for opportunities throughout this spring, but homeowners would be well advised to work hard at presentation and to price their properties as keenly as possible. It’s that or risk stagnation in what is likely to be an unforgiving buyers’ market.

This spring, unless a home is special, really special, buyers are not likely to move on offerings they feel are above market value.

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Headworks cutting property off at the knees

August 2, 2011 Leave a comment

Media Release – 2 August 2011

First National Real Estate Chief Executive, Ray Ellis is calling on governments and local councils to reduce exorbitant headworks costs in an effort to address housing affordability and kick start sorely-needed development across Australia.

“The financial crisis has had a big impact on the real estate sector, both restricting development funding and amplifying the effect of infrastructure charges,” Mr Ellis said.

“Where once local councils’ headworks charges paid mostly for water and sewerage, they now include a host of other charges, including infrastructure costs for roads and in some cases recreational and community facilities, electricity charges, footpath networks and more.”

In Western Australia, it is estimated a simple two-lot subdivision could cost at least $25,000 to $30,000 depending on location and local council charges.

In Queensland, the industry is looking at setting building charges at $27,000 for houses and capping one-bedroom apartment charges at $13,500.  These charges do not include state government infrastructure charges such as roads, when these are added, the development costs start creeping into ‘unviable’ territory.

Commercial development fees on the Gold Coast are up to 10 times higher than other states, according to recent investigations.

In New South Wales, Victoria and Western Australia, headworks charges varied between $58,000 and $404,000 but on the Gold Coast a similar development was charged $2.5 million.

In Tasmania, a developer was recently charged $44,428 in “headworks” charges, equating to around 1 per cent of the cost of a $50 million development.

A 155-lot subdivision in Tasmania was recently put onto the back burner because of an $810,000 headworks charge.

And, in South Australia, the different infrastructure requirements plus internal infrastructure including roads, parks, common service trenches, stormwater basins, service connections and public lighting, could well see a rough cost per allotment in excess of $60,000, plus legal costs.

According to Mr Ellis, councils and governments, especially those in regional areas, need to change their attitude if they want their regions to prosper.

“Regional areas are in desperate need of growth and, if the bureaucrats and policy makers really want to attract people to these areas, these headworks costs defy logic as they stand in the way of development,” Mr Ellis said.

“There is an ideal opportunity to develop these regions as desirable locations for people to move to, but developers need to be given the right incentives to do this, such as reducing headwork charges to make the developments more commercially viable”.

As a fundamental economic driver of the Australian economy, more needs to be done to encourage property development, both residential and commercial and the best place to start is with governments and councils looking at what is a fair and reasonable charge, rather than just a money grab.

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Property Market Outlook Mid Year Update – The Year Of The Investor

July 1, 2011 Leave a comment

Media Release – 1 July 2011

Click Here To Read Our Mid Year Update

First National Real Estate has surveyed its 450+ offices throughout Australia and New Zealand to find that 2011 is set to become the year of the investor, with prime conditions for this segment to make their return to the market.

According to First National CEO, Ray Ellis, this is the picture building at the moment, based on expectations of interest rates, movements and local area member knowledge, underpinned by strong economic fundamentals as detailed in First National Real Estate’s  Property Market Outlook Mid Year Update released this week.

“The market is continuing to slow which is producing excellent opportunities for investors who should be taking advantage of low vacancy rates, strong returns, increased upgrader activity and easing bank lending criteria conditions”, Mr Ellis said.

“The biggest challenge facing us as an industry will be uncertainty.

“There is a lot of consumer nervousness which is basically due to uncertainty.  They are unsure of what is going to happen on a lot of fronts including what is happening to Australia’s economy and other global economies like Japan and Greece, will interest rates rise, will house prices fall, what’s happening on the job front and what changes will the government introduce in terms of policy, planning and taxes.

“As long as there is so much uncertainty and talk of policy changes, consumers will hold off making any major financial decisions.

“There is already evidence that they are holding onto their savings and either putting it back into their mortgages or other safe holdings until their confidence returns.”

First National Real Estate members across the country were overwhelmingly in agreement that house prices had steadied or fallen.

“Around 32 per cent of our members surveyed said house prices would trend downwards, while 50.9 said they would be flat,” Mr Ellis said.

“Across the board, any movements in house prices are expected to be within 10 per cent, but the majority of survey respondents anticipate them to be less than 5 per cent.”

Apartment/strata property prices in the coming six months are a mixed bag, with some states and areas expected them to trend upwards, some downwards and some for them to remain flat.

“Nationally, 45.5 per cent of our members surveyed expected this segment to remain relatively flat, but in New South Wales and Victoria the greater majority were expecting this,” Mr Ellis said.

“Whereas for Queensland, Tasmania and Western Australia, most of the members responding believed apartment/strata property prices would trend downwards.

Price movements for Apartment/strata property prices are expected, in the main, to be below 5 per cent.

According to the survey, most of First National’s members expect land prices to remain flat, with some predictions for prices to head upwards, and some downwards.   Victoria is the only state where the majority of members say land prices will trend upwards.

Any movements in land prices are expected to be mainly less than 5 per cent with some saying they may be as much as 10 per cent and a small minority predicting movements of between 10 per cent and 20 per cent.

For the rental market, members’ surveyed overwhelmingly expect weekly rents to increase while vacancy rates will lower or remain flat.

Members surveyed believe the strongest growth in their region will come from primarily investors, followed by upgraders, then first home buyers and lastly from retirees.

“Investor activity is expected to increase across the board, with all member survey respondents saying they anticipated growth in this segment,” Mr Ellis said.

“Investor growth is expected to be driven by mainly better rental yields and returns, increased second buyer activity and easing of bank lending criteria.

“As upgraders become more active, members expect opportunities will be created for first home buyers to dip their toes back into the market, as well.  However, any movement by investors and upgraders may be diminished if government continues to talk up some of their proposed policy changes they have recently raised.”

Mr Ellis said it was hoped the lack of inclusion of any of these proposals from the recently released budget is a sign that they have seen the error of their ways and dropped them.

Issued by: First National Real Estate. For further information or to receive a copy of the 2011 Property Market Outlook Mid Year Update, contact Stewart Bunn, National Communications Manager, First National Real Estate, on 02 9320 2535

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