Ray White Bunbury Blog

Rents Firm at Present but Upward Trend in Sight

In a new national and regional centre rental review by rpdata, it was found that national rental rates remained flat over the June quarter.

Although this comes after recording a 2.9 per cent increase over the past 12 months, it was found that rents have shown little growth over the recent quarter, with the median weekly advertised rents for houses recording no change and median rents for units only increasing by 1.4 per cent.

According to rpdata.com research analyst Cameron Kusher, the slowdown in the rate of rental growth is commensurate with the Reserve Bank of Australia’s aggressive cuts to official interest rates as the Global Financial Crisis hit and the introduction of the First Home Owner’s Grant Boost.

“Both initiatives, coupled with softening property values during 2008 and consistent growth in rental rates during recent years, resulted in a significant boost to affordability for first time buyers.  As a result during 2009, first home buyer activity was at its highest level on record, with first time buyers generally coming from the rental market so it’s no surprise to see that the rate of rental growth has slowed so markedly.”

Moving forward, Kusher believes that this trend won’t continue and the news is not so positive for renters but looking better for property investors.

With vacancy rates remaining below 2 per cent across most capital cities and the likelihood of an increase in demand over the next 12 months due to higher interest rates and home values, which will force many prospective buyers to remain or return to the rental market, there are likely to be rental increases across the board.

“Landlords are likely to be reviewing rental rates to make up for an erosion of profits caused by higher interest rates. Low vacancy rates and ongoing high rental demand means that landlords should have a reasonable amount of leverage to raise weekly rents upon a lease expiry.”

This should in turn, says Kusher, lead to an improvement in rental yields and a greater incentive for investors buying into the residential property market.

Other major highlights of the report included:
• Units outperforming houses for rental growth
• Only cities to record rental increase over June quarter were – Sydney & Canberra
• Nationally to June 2010, both house and unit median rents at $350 per week
• Darwin remains most expensive rental market for houses at $520 per week
• Cheapest rents for houses found in Adelaide at $320 per week
• Most expensive unit rents found in Darwin and Sydney at $420 per week
• Most affordable units are in Hobart at $275 per week
• Greatest quarterly growth for houses – 2.3 per cent in Sydney
• Greatest quarterly growth for units – 3.8 per cent in Canberra

Read the full report

DIY: Home Carpet Dyeing

Sometimes your property’s carpet needs a fresh look, especially if you plan to impress potential buyers. After years of use, carpet colours can start to fade and disrupt the overall look and feel of your home.

Replacing your carpet is an expensive process so it might be worth considering dyeing your old carpet. It can often be an easy and cheap way to allure the eyes of homebuyers.

Before starting, make sure your carpet is in good enough condition for a fresh dye job. It’s all very well dyeing a faded carpet but if your carpet’s condition is worse than a little colour loss, such as torn or scuffed, then you might need to completely replace the carpet.

A good tip also is that carpets made of nylon or woollen fibre can be dyed, while polyester or acrylic carpets can’t.

To decide on the colour, take note of your carpet’s current colour, if it is a light colour such as cream, then you can choose pretty much any new colour. If your current carpet is a darker shade then be sure to only use a dye that is darker.

To start, clear furniture and tape the walls so as to avoid staining. Make sure your carpet is clean. Now, prepare the dye.

Add an amount of your chosen dye into about 150ml of hot water within a jar (something with a lid), enough to produce your desired colour. Be sure to stir well. Then add warm water, according to your chosen dye’s manufacturer’s instructions. Shake well and pour into a spray bottle.

Spray a small section of your carpet as test run. If the colour does not appear as desired then add more water or more dye accordingly. Once you’ve got your colour right, spray the entire carpet.

It is best to also use a brush to apply the dye evenly – use soft circular, overlapping brush strokes.

Once your carpet is covered, allow it to completely dry before standing on it or returning furniture.

With luck, your potential buyers are sure to appreciate the floor beneath their feet.

Buying Off the Plans

Over the past few years with the onset of the credit crunch, sales of ‘off the plan’ projects have taken a bit of a hit.

Not only are there less apartments being built, wary investors and owner-occupiers are now a bit more discerning before parting with their cash.

Previously, it was definitely the hunting ground for potential purchases who were more than happy to sign on the dotted line and buy an apartment without having stepped inside.

However, recently times have changed. Investors and owner-occupiers are a bit more wary of the potential capital gain from off-the-plan purchases and many have shied away fearing that they could actually incur a loss on their investment or that the project will never get off the ground.

These types of investments, however, can bolster your portfolio and in some recent cases investor and owner-occupiers have made a decent capital gain in only a few months.

You just need to know what to look for. Here are some tips to get you started.

• Do your homework. Do thorough checks of the development company – its current and past projects.
• Get a valuation on the unit or apartment so you can compare this to the purchase price.
• Check that consent has been granted for the project.
• Check any titles against the company’s name.
• Read the fine print for cancellation and force majeure clauses that the developer can use to cancel the contract.
• Check to see if you can modify the plans to better suit your needs?
• Do all the other due diligence checks you would when purchasing an existing unit, apartment or house.

Foreigners Still Buying Despite Restrictions

In recent headlines, The Australian reported that foreigners will buy almost 9 per cent of all homes for sale over the next year.

Even after the Rudd government reinstated foreign investment laws which restrict foreign investors to new-home purchases and only allow temporary residents to buy existing housing for their own use while living in Australia, a new survey has shown that this isn’t curbing offshore buyers. The law change has been blamed for contributing to a major drop in auction clearance rates, especially in the top-end housing markets of Melbourne and Sydney, but according to a National Australia Bank residential property survey, 250 respondents believed 9 per cent of all house purchases over the next year will be by offshore buyers. The survey canvassed property professionals, property developers, asset fund managers, owners and investors.

The bank is surprised at the result, which indicated overseas buyers would buy about 47,000 of the 520,000 properties likely to be traded across Australia in the next year.   

The Rudd government had to reintroduce the restrictions to slow an overheated market.

The Real Estate Institute of Australia, which backed the return of restrictions, accused the Foreign Investment Review Board of not effectively policing the relaxed buying rules.

The report also found that respondents predicted a fall in price expectations for the next 12 months across all capital city markets, owner-occupiers would continue to dominate the market, accounting for almost 47 per cent of purchases, and investors would buy more than 29 per cent of stock.

What do you think? Should these restrictions be in place and monitored more closely or is it a good time to have foreign investment boost our economy?

Top Tips on Avoiding Landlord Insurance Pitfalls

Tip Three- Don’t Delay Serving Legal Notices- if you are managing the tenancy yourself, never delay in serving your legal notices on time when a tenant falls behind in rental payments. If you have submitted a claim for rent default and it is found that the process has been delayed or compromised, this will affect your claim and possibly result in it being denied!

Top Tips on Avoiding Landlord Insurance Pitfalls

Tip Two- Beware Bank Landlord Insurance- when you take out your loan with the bank, no doubt they will also offer you building and landlord insurance cover. Be aware that policies sourced through financial institutions can contain large rent default excesses not found in landlord insurance policies sourced through property management agencies. Restrictive clauses can also result in your claim denied, which may have been otherwise covered by landlord insurance sourced with your property manager.

Ongoing Demand for Housing

The continued decline in land sales could fuel the ongoing demand for established houses.

A recent report highlights that for the second consecutive quarter in March 2010, the volume of residential land sales fell and the median land values flattened out. The latest residential land report from HIA and rpdata.com identified the risk of a renewed decline in new home building starts next year.

The HIA-rpdata.com Residential Land Report shows the volume of land sales fell in the March 2010 quarter to 40 per cent lower than in the same quarter last year.

Meanwhile, the weighted median land value held steady in the first quarter of 2010 (-0.1 per cent), for annual growth of 6.9 per cent.

HIA chief economist Harley Dale said the renewed decline in the volume of land sales is consistent with concern of the recovery in new residential construction. 

“The prospect of new home starts heading down again next year reinforces the need to keep interest rates on hold throughout the remainder of 2010.”

Sydney remains the most expensive residential land market, with a median value of $305,000. Outside the capital cities, the Sunshine Coast in Queensland remains the most expensive land market with a median value of $260,000.

There are 12 markets across Australia where median land value sit at or below the $100,000 mark.

The most affordable market is the Mallee region of Victoria ($72,000), followed by Murray Lands ($77,000) and the South East ($80,000) in South Australia, East Gippsland in Victoria ($80,000), and the Murrumbidgee region in New South Wales ($83,000). 

Top Tips on Avoiding Landlord Insurance Pitfalls

Tip One- Building Insurance is not Landlord Insurance!

Some investors believe that building insurance also includes landlord insurance. Standard building insurance will cover you for fire and storm damage etc, however will not cover you for losses relating to a tenancy like rent default and malicious damage caused by the tenant. Comprehensive landlord insurance must be implemented separately to ensure you are covered for tenancy related risks.

Landlord Tips1

Top Tips on Avoiding Landlord Insurance Pitfalls Introduction- Landlord insurance is vital for every property investor. Just like building insurance covers you for the unexpected, landlord insurance also covers you against unexpected loss like rent default and malicious damage. However not every landlord insurance policy available performs the same way and in fact there can be several pitfalls you need to be aware of. In the next few weeks we will reveal to you what pitfalls you can avoid

Growth in the Residential Market

In a recent report released by economic forecaster BIS Shrapnel, it is expected that there will be price growth for residential properties over the next three years.

However, this growth is not expected to be at levels we have seen in the past few years.

According to the company’s Residential Property Prospects, 2010 to 2013 report, lending activity is already easing and first-home buyer demand is down but, despite this, the company doesn’t expect house prices to fall.

BIS Shrapnel says this is mainly due to investors returning to the market and picking up some of the reduction in owner-occupier demand – loans to investors were up by an annual 26 per cent in the March quarter of this year.

So what does BIS Shrapnel predict in the main centres?

Sydney
It is forecasting total price growth in Sydney over the three years to June 2013 to be 20 per cent, representing average growth of around six per cent per annum.

Newcastle and Wollongong
Total growth in the median house price in Newcastle over the three years to June 2013 is forecast to reach 18 per cent, while the total rise for Wollongong is forecast to be 17 per cent.

Melbourne
The forecast is for Melbourne’s median house price to rise by a total of 11 per cent over the three-year period to June 2013, or a modest 3.5 per cent per annum.

Brisbane
The overall price growth to 2012/13 is expected to be only moderate, totalling 12 per cent in the three years, or just under four per cent per annum.

Gold Coast and Sunshine Coast
BIS Shrapnel forecasts prices will increase by 11 per cent over the three years to June 2013, with a rise of 13 per cent anticipated for the Sunshine Coast. Price growth on the Gold Coast is expected to be marginally lower than Brisbane given its higher median house price, while on the Sunshine Coast it will be slightly stronger.

Townsville and Cairns
Cumulative price growth over the three years to 2013 is expected to be 17 per cent for Townsville and 16 per cent for Cairns.

Adelaide
It is forecasted that Adelaide’s median house price will rise by 20 per cent over the three years to June 2013, an increase averaging three per cent per annum.

Perth
BIS Shrapnel forecasts Perth house prices to rise by 22 per cent over the three years to June 2013, representing an annual average rise of seven per cent per annum.

Hobart
Hobart’s median house price is forecast to rise by 12 per cent over the 2009 to 2012 period, reflecting an average increase of four per cent per annum.

Canberra
In Canberra, prices are forecast to increase by a total of 14 per cent over the three years to June 2013, which reflects a rise of 4.5 per cent per annum.

Darwin
Total price growth of 12 per cent is forecast over the three years to June 2013, or an average of four per cent per annum.

For more details and highlights of the Residential Property Prospects, 2010 – 2013, click here.