Hi Nikki,

Another high volume auction weekend with 978 auctions reported to the REIV achieving a clearance rate of 82%.  806 sold at auction, 172 passed in and there were an additional 159 private sales.

Over the weekend, the Victorian Treasurer Tim Pallas announced that stamp duty on property and land taxes will rise effective from the 1st of July as part of the this week’s state budget.

The new changes will include an increase in stamp duty for purchases over $2,000,000 which will include the normal $110,000 payable upto $2,000,000 and then changing to 6.5% over $2,000,000.  On a $3,000,000 purchase the stamp duty will now be $175,000 which is an increase of $10,000.  Whilst a lot of money, probably not enough of an increase to stop buyers from purchasing at the higher end.

Land tax is also proposed to be increased by 0.25% for taxable land holdings from $1,800,000 to $3,000,000 and 0.30% for taxable land holdings above $3,000,000.  If you have taxable land holdings (and this does not include your Principal Place of Residence) of $3,000,000, the current rate of land tax is $24,975 and the new proposed amount would be $27,975 which is an increase of $3,000 per year.

Whilst these increases are designed to target higher income earners, I don’t believe it will be enough to stop an owner occupier buying their ideal home but it may impact the amount of properties an investor purchases in Victoria.  That being said, the majority of property investors only hold one or two investment properties at any one time.

Developers and investors owning properties that are rezoned are also being targeted with a 50% tax if the gain is over $500,0000.

Despite the freezing conditions, the weekend’s auctions were active and open for inspections were busy.  Some even reporting lines up down the road, quite a feat considering the arctic blast Melbourne was experiencing.

1/3 Wilkins Avenue, Beaumaris – last sold for $552,500 in 2012 went under the hammer over the weekend with three bidders participating in the auction.  The property was announced on the market at $1,050,0000 and sold for $1,115,000.

17 Capulet Street, Moonee Ponds was popular with families producing 4 bidders at the auction.  The property was quoted $1,425,000 to $1,525,000 but sold well above this under the hammer for $1,705,000.

2/1163 Dandenong Road, Malvern East achieved a surprising result for a main road location.  Villa units in quality suburbs are in high demand and this three bedroom, one bathroom property was no exception, 6 bidders in total property achieving a result 25% above the top of the quoted range of $1,093,000.

Have a great week.

Kim Easterbrook

Hi,

There was a Super Saturday in Melbourne over the weekend with 1,019 auctions reported producing a clearance rate of 81%.  623 properties sold under the hammer, 192 sold before auction and 195 passed in.  There were an additional 204 private sales.

The Australia Bureau of Statistics released data showing new home loans surging to a record high in the month of March (an increase of 5.5% over the month).  The data showed that investors had the largest increase (which is consistent with the new enquiry we are receiving in our office) but worryingly that first home buyer approvals have dropped.

Interestingly, what this does demonstrate is that there are still a lot of buyers wanting to enter the property market and have only just started the process.  Price growth does seem likely for quite some time to come whilst interest rates remain low and confidence is high.  However, the rate of price growth is stabilising which is not unexpected as an increase of 8.8% in one quarter is not sustainable.  It seems the ‘fear of missing out’ is easing.

The auction of the property at 10 Hardinge Street, Beaumaris was competitive with seven bidders trying to secure this land site.  The demand for houses in Beaumaris has increased dramatically due to the new Beaumaris Secondary College school zone.  The deceased estate was quoted for $1,550,000 to $1,650,000 prior to auction with the knock down selling for $2,035,000.

1572 High Street, Glen Iris sold well above reserve with just the two bidders participating at the auction.  A strong opening bid knocked out some potential purchasers but was challenged with the property selling for $3,001,000 which was more than $400,000 above the reserve price.

Have a great day.

Kim Easterbrook

Hi,

There were 970 auctions held over the weekend resulting in a clearance rate of 81% according to the REIV.  609 sold at auction, 179 sold before auction and there were an additional 210 private sales.   The clearance rate for houses was 84% with a median price of $1,200,000 and apartments achieved a 76% clearance rate with a median price of $771,000.  Interestingly, this time last year there were only 96 auctions held.

Many experts are expecting property price growth to continue this year and further beyond.  This is all happening without population growth which is not expected to increase again for another two years.  Our employment growth has been better than expected, coupled with low interest rates, strong consumer confidence and many people have actually been able to save quite a bit of money over the past twelve months, this has all contributed to an increase in demand.

It seems APRA and the Reserve Bank are more interested in financial market stability, promoting growth in economic activity and lending regulations than property prices at present, so it doesn’t appear that any intervention is on the cards in the immediate future.

The weekend auctions we attended were once again competitive with multiple bidders and all auctions selling under the hammer.

The auction of 1/7 Crawford Road, Cheltenham produced a higher than expected result.  Entry level houses/units for good quality suburbs are currently in strong demand.  This three bedroom, two bathroom, one of two home attracted three bidders at auction.  The opening bid of $1,050,000 was quickly trumped by another bid of $1,200,000 where the property was announced on the market.  Two bidders then went head to head where the property sold for $1,325,000.

17 Leroux Street, Oakleigh had a lot of interest with land sites with development potential continuing to be in strong demand.  This property is on 702 sqm with a rentable, original house on it.  The property was quoted $1,050,000 to $1,150,000 prior to auction.  There was a large crowd in attendance and five bidders in total (with some not even having the opportunity to put their hand up).  The property sold for $1,387,000.

Have a great day.

Kim Easterbrook

Hi,

There were 922 auctions reported to the REIV weekend producing a strong clearance rate of 86%.  623 sold at auction, 169 sold before auction and in addition there were 207 private sales.

Active bidding, large crowds, reserves were smashed and whilst we thought a slow down in growth was in sight, the results from the weekend demonstrated this may not be the case.  There is high interest from buyers across the board from investors, first home buyers, upsizers, downsizers, renovators/developers with pressure on prices at all price points.

Land sites for buyers looking to build large family homes are in high demand, 13 Mangan St, Balwyn sold at auction on the weekend for $3,381,000 with five bidders trying to secure the land site. The price quoted was $2,800,000 to $3,000,000.  Another land site at 3 Bay Street, Parkdale sold for $2,575,500 on an agents price guide of $1,950,000 to $2,145,000.  Whilst some agents price guides are low, reserves generally speaking have not been too far from the top of the range.  It is the buyer competition that is pushing prices to these levels.

The REIV released their quarterly data last week which showed property prices increased by 8.8% in Melbourne, resulting in the Melbourne median house price surpassing the $1 million mark for the first time.  The house prices in regional Victoria increased by 4% which equates to 12% growth for the year and 19% for units.  The median unit prices across Melbourne increased by 5% for the quarter.

The amount of transactions for the quarter reached 35,000 which is the highest in six years.  We are still playing a lot of catch up from last year however no one could have predicted the level of interest property has received this year.

Have a great week.

Kim Easterbrook

There’s a secret to getting a house in one of Melbourne’s up-market suburbs.

Find our very own Kim Easterbrook commenting on ‘hidden gems’ in the Herald Sun here.

Melbourne’s auction market has received a warm welcome back for 2015. There were 458 auctions reported this weekend, with a clearance rate of 74 per cent. From those auctions 338 properties sold and 120 were passed in, 61 of those on a vendor bid. In addition to the auctions there were also 358 private sales reported.

Auction numbers are on the increase again, as is the clearance rate which saw a nine per cent jump since last weekend. But were those lower clearance rates recently recorded due to lower housing stock, or could it be a trend?

The ABS released figures last week describing residential price growth slowing, with Melbourne’s established house prices only growing by 1.1 per cent duing the December quarter.

The recent interest rate cut, and predictions of another rate cut being on the cards for the coming months may mean that property prices will be on the rise again. The lower interest rate environment mixed with the current volatility of the Australian share market means that returns on investments are at an all-time low. Investors are beginning to see property as a safe alternative, particularly for their SMSF.

The current stock levels available in Melbourne are tracking lower than the same time last year by 25 per cent. We believe this to mean there will be some heated competition for good quality properties. Some of our team attended very hotly contested auctions this weekend, and we are expecting more of this in the early parts of the year.

Auction Results

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1/8 Duff St, Sandringham. Sold for $715,000

This villa unit, in urgent need of renovation was highly contested. Originally quoted at $500,000 to $540,000, it was announced on the market at $570,000, which we felt was very realistic for a property like this. Part of a small unit development, the property boasted street frontage and its own driveway which would appeal to many buyers.

Six bidders fought to secure this property and to our surprise it sold well in excess of any comparable sales in the area. Three bidders were still in the race at $700,000 but all down to their final $1,000’s when the property sold for $715,000 to the disappointment of many buyers in the crowd.

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6 Kyarra Ave, Hampton. Sold for $1,640,000

Terrifically positioned close to Hampton Street and Sandringham shops, this lovely Californian Bungalow in walking distance to the beach was highly sought after, with a quoted price of $1.3M to $1.45M. The auctioneer, Sam Paynter did a great job of entertaining the crowd whilst attracting bidding from 6 parties. 
The opening bid was $1.25M from a very determined buyer who was bidding strongly for the entire 30 minute auction. Bids were coming in from all over the street until a gentleman jumped in when all thought it was over to snatch the property away from the original bidder, who no doubt thought the home would be his. The property sold for $1.64M, well in excess of the reserve price.

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18 Street St, Footscray. Sold for $712,000

A charming family Edwardian, stylishly renovated attracted a crowd of 100+ hipsters for the auction of this three bedroom house. A guide price of $540,000 plus brought out the buyers, and the auctioneer received an opening bid of $520,000 which was quickly crushed by a bid of $610,000. A third couple pushed the price to $635,000 to which the auctioneer announced the property on the market. Rapid-fire bidding began when a fourth party began outbidding another couple for approximately five minutes, and 16 bids. The final winning bid was delivered by the last party who secured it for $712,000.

Article by Kim Easterbrook

For the average buyer, it can be a very daunting task to purchase an investment property.  How can the average buyer, who has no knowledge of the property market know they are making the most profitable investment choice? How can they know what type of property is going to give them the biggest return on their investment with the least amount of risk?   There are many so called ‘experts’ in the market place advising to purchase off the plan, brand new and established properties.  It is very difficult for an investor to know who to believe and which way to turn.

There are pros and cons to both types of properties, so it is a matter of matching the right investment to your needs.

Let’s take a look at the off plan/brand new property scenario to begin:

 Advantages

Disadvantages

Established properties

 Advantages

Disadvantages

Generally speaking a property purchased off the plan and an established, will be worth roughly the same amount in ten year’s time.  We have many examples to support this.

So why, at the beginning, would you pay the premium price which includes rental guarantees, developers profit margins and builders profit margins?  Because of the depreciation benefits and stamp duty savings you say?   In actual fact, the premium price you pay now, far outweighs the tax benefits you will receive later.

A good example of this is a case study that we completed on two properties in South Yarra.  A two bedroom apartment in South Yarra, which was an older style established property, sold in 2001 for $273,000.  The same property sold again in 2009 for $575,000.  A similar type of property which was brand new, sold in 2001 for $410,000, and then sold again for $370,000 six months later (which demonstrates the loss in value which usually occurs once the property is second hand).    The same property sold again for $585,000 in 2009.  So in the initial purchase stage, an extra $137,000 was spent to get the same result 8 years later.  Some of this outlay is offset by depreciation and stamp duty savings; however, additional costs are also outlaid due to higher borrowing costs.  The end result was not enough savings to outweigh the $137,000 initial purchase outlay.

The stamp duty savings and tax depreciation benefits you receive when buying an off plan/new property do not compensate for the loss in capital growth you should achieve from an established property.  As buyers advocates, we are paid a fee to purchase properties that best suit our clients needs and help them achieve their long term goals, and for our investors, that means buying established properties.

 

 

Article by David Easterbrook

The answer to this question is easy to answer by applying a number of industry benchmarks widely accepted.  An investor in Melbourne will expect a rental yield of 3.5% – 4%…this is the rent a tenant will pay to the landlord.

For example

An investor buys an investment property for $550,000.  At a rental yield of say 3.75%, the rent per week would be roughly $400 per week. However, if the tenant decides to buy a property instead of rent, they would need to have a minimum of $55,000 in savings…  Based on this, their loan would be $522,000 plus lenders mortgage insurance would bring their total loan to $540,000.

Now we have established the numbers, all we need to do is work out the repayments on $540,000 at the interest rate of the day to see if renting is cheaper or more expensive than buying.

$540,000 @ 5% interest = $27,000 per annum (PA) or $519 per week (PW), interest only, or $669 PW principle and interest. Whilst renting, you are only paying $400 per week……a saving of approximately $150 to $300 per week! IN THE

SHORT TERM IT IS CHEAPER TO RENT THAN BUY

The above is the detailed way of saying this …5% interest versus 3.75% yield (rental payments) means it is cheaper to rent than buy….BUT, if you have purchased in a suburb with approximately 8% capital growth per annum ….in 10 years’ time the difference in the equation is substantially different.

Assuming that the property was purchased at $550,000 the should the value of the property grow at 8% per annum, the property will worth $1.2M.   That is an increase in value of $650,000 at an interest only cost of $120 per week, assuming interest rate stays the same.

IN THE LONG TERM, IF YOU BUY A PROPERTY WHICH WE WOULD DEEM TO BE AN EXCELLENT INVESTMENT PROPERTY AT THE SAME TIME, YOU MAY LOSE OUT ON HUNDREDS OF THOUSANDS OF DOLLARS BY RENTING AND NOT BUYING.

Article by Sonja Hagen

As a property manager, part of my job is to minimise any out of pocket expenses owners experience when their investment becomes vacant. There are several important things to consider during this time, the following of which are probably the most significant:

Presentation and appeal

Both are essential in minimising rent loss. Ensure the premises is well presented, clean, fresh and in good order throughout. First impressions, no matter what, always count. The past few years has not only seen a substantial amount of developments and brand new apartments along with a dramatic increase in weekly rents but this has also bought with it higher expectations from renters themselves. A modern apartment or updated unit will generate more interest than a property with worn carpets and an outdated kitchen or bathroom. Properties with air conditioning and dishwashers are looked upon favourably. Whilst these items, from an owner’s perspective, do not add capital value to the overall investment, they will appeal to potential tenants and present a more attractive option than a property without.

Competitive Asking Rent

Consider the competition. Be informed of what is available in the vacant property’s area in a similar condition with the same criteria. If the asking price is too high, many prospective tenants will be priced out of the market. On the flip side, advertise the property too low and it may attract the “wrong” kind of tenant and the out of pocket expenses may be more than anticipated to cover any shortfall in outgoings.

Quite simply, when an investment property is not generating an income, it can be a stressful time. It is important to weigh the options of reducing an asking rent (for example) by $10 per week and lease it promptly than leave a property at an inflated asking rent and have it sit vacant for a period of time. Ultimately, if the investment property is advertised at market value and is well maintained and appealing, it will present competitively to prospective tenants and reduce the length of vacancy.

Article by Fiona Evans

Available at open for inspections and online, the questions raised on the new Consumer Affairs Victoria Due diligence check list will be a starting point for many buyers to take more control of their purchasing and steer them to seek professional advice for some of the answers

Knowing what to further investigate will help property buyers make a better-informed purchasing decision particularly those who are inexperienced as this gives them a step-by-step guide to some of the issues.

The list highlights the need for an understanding of Owner’s Corporations and model rules, fire and flood implications for insurance and management, checking of titles, planning schemes and what to ask the local council, current zoning and building regulations, the need for building inspections and what to look for in the contract and section 32.

While most buyers will already have a common sense approach to some of these issues by undertaking  thorough due diligence or engaging the services of a professional, the due diligence checklist may help the buyer avoid the many pitfalls and costly mistakes involved in purchasing real estate so they can enjoy their property for many years to come.

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