Legislation poses a threat to rental market in NSW

While the majority of agents are optimistic about rental demand in 2010, there is mounting concern that the proposed changes to NSW’s residential tenancy laws could scare off some investors.

According to the latest Real Estate Business monthly straw poll, 79.6 per cent of agents believe rental demand will increase this year.

Of the 734 respondents, only 20.4 per cent said they didn’t think the rental market would improve.

First National Real Estate property manager Naomi Spiteri told Real Estate Business that the rental market had been performing well in the North Sydney area on the back of tight vacancy rates.

“We had 30 people at each opening last weekend,” Ms Spiteri said.

In addition to high demand, rising median house prices has priced many prospective home buyers out of the market, delivering high rental yields to investors.

According to Rismark, Australia’s houses reported a December rent yield of 4.1 per cent while units performed well with a 4.9 per cent yield.

But Ms Spiteri said that the pending introduction of the Residential Tenancy Act 2009 (NSW) would threaten the performance of the rental market.

“My concern is that the new legislation may deter some people from investing in property, because it restricts landlords’ existing rights,” she said.

Under the proposed Act, landlords will be forced to procure a written residential tenancy agreement (not necessarily at the tenant’s expense) or lose the right to terminate the lease.

Furthemore, landlord’s rights will be restricted with regards to accepting holding fees, contesting tenant sub-letting, and contesting tenant repairs and maintenance.

via rebonline.com.au

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Rate freeze should help sales

The surprise Reserve Bank decision to leave the official cash rate on hold at 3.75 per cent will help stimulate further activity in what remains a fragile market recovery.

While economic conditions remain stronger than expected, Reserve bank Governor, Glenn Stevens said inflation measurements and higher lending rates prompted the Reserve Bank to pause on interest rate hikes, for now.

Last quarter, headline inflation slowed to just 0.5 per cent, helped by a fall in commodity prices at the end of 2008 as well as a noticeable slowing in private-sector labour costs during 2009 and a period of slower demand.

While the Reserve Bank’s preferred measure of underlying inflation hit almost 0.7 per cent to reach an annual rate of 3.4 per cent – well above the central bank’s target band of 2 to 3 per cent – Mr Stevens said inflation is expected to be consistent with the target in 2010 regardless of whether or not there is another rate hike.

Raine & Horne’s chief executive officer Angus Raine told Real Estate Business that the Reserve Bank’s decision to keep interest rates on hold would bode well for the property market.

“When interest rates are kept on hold, it encourages more people to put their property up for sale,” Mr Raine said.

“People are feeling more confident than they were this time last year. They are feeling secure in their jobs, which is helping buoy consumer confidence.

“We need people to feel confident, because the more confident they feel, the more likely they are to put their house on the market, which in turn satisfies the growing demand for property.”

Mr Raine said demand for property was currently outweighing supply.

RP Data’s senior research analyst Cameron Kusher agreed and said the market continues to see low levels of new dwelling commencements.

On the rate front, Mr Kusher said he expects the official cash rate to hit 4.75 per cent by the end of 2010.

“The higher cost of servicing home loan finance and the removal of the First Home Owner’s Grant Boost is anticipated to result in more subdued rates of property value growth during 2010 as fewer buyers are in a position to enter the market, in particular First Home Buyers,” Mr Kusher told Real Estate Business.

“We would anticipate first home buyer activity will return to a more normal level during 2010 thanks to increasing interest rates and a removal of the Boost.”

via rebonline.com.au

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Simon Baker buys local

Byron Bay hideaway for Simon Baker

‘The Mentalist’ actor and Australian man of the moment, Simon Baker, has purchased a $1.5million farm to live in with his actress wife Rebecca Rigg and three children Stella Breeze, 16, Claude Blue, 11, and Harry, 8 on their visits to Australia.

Located only 20 minutes drive from Byron Bay in Nashua, Baker reportedly bought the property due to its proximity to his mother, who lives in nearby Lennox Head.

The Federation-style house was built in 1917 and sits on a generous 6.8 hectares and features three bedrooms, two living rooms, a pool, tennis court, large shed, and studio.
 

via thehomefront.thehomepage.com.au

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Vendors to foot inspection bill in NSW

Vendors, rather than homebuyers, will soon be forced to pay for building and pest inspections.

In a bid to streamline property buying, the NSW premier Kristina Keneally has given the new vendor legislation her seal of approval.

Under the proposed legislation, which has been widely supported by various real estate groups, vendors would conduct the pest inspections on their properties, saving those that miss out at auction thousands of dollars in inspection costs.

“We are hoping to streamline property buying I would hope by early this year,” Labor MP Matt Brown told The Daily Telegraph.

“Purchasers need to know as much as they can about what they are buying.”

According to Mr Brown, there is increasing number of property auctions across Australia.

“More and more agents are encouraging people to go to auction and that creates a sense of urgency. People want to bid but have no time to get a building and pest inspection done. Once the hammer falls the buyers gets the property warts and all,” he said.

via rebonline.com.au

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Vacancy rates climb in 2010

The number of vacant residential properties in Melbourne, Sydney and Brisbane has risen close to long term averages, according to data from SQM Research.

Figures from SQM found there is almost 11,000 properties available in Sydney, or a vacancy rate of 2 per cent in December, compared with 1.7 per cent in November.

Melbourne’s vacancy rate has risen to 3.5 per cent from 3.1 per cent, while Brisbane’s vacancy rate climbed to 3.4 per cent, from 2.9 per cent.

“Year on year vacancy rates in capital cities have risen modestly, with the market remaining relatively tight in most areas, particularly for affordable real estate,” SQM Research managing director Louis Christopher told Real Estate Business.

Mr Christopher also said the rise in rental stock, although not an oversupply, was reaching the point of ‘equilibrium’, where there was little upward pressure on rents.

“There is no evidence to suggest we will see significant increases in rents. Increases of between 3 and 5 per cent in most areas are more likely,” he said.

“Nationally, we won’t see a huge jump in rents, but we should see a significant increase in the the more affordable areas.”

Mr Christopher’s comments are in stark contrast to recent statistics from APM which found rents in Melbourne could climb by as much as 7 per cent this year.

APM economist Matthew Bell said Perth would experience the biggest climb in rental prices, with a predicted 11 per cent growth in the city.

via rebonline.com.au

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The lowdown on the Christmas slowdown

 

 

 

 

 

 

 

 

 

 

The Christmas period is often considered to be one of the slowest times of the year for property sales, however a week by week analysis shows the weeks leading up to Christmas can be some of the busiest of the year.  

It has been widely reported how well the Australian property market has fared during 2009: based on the RP Data Rismark Monthly Home Value Index, most capital cities have seen property values rise well above their previous peaks. National property values are up 10 percent over the first ten months of the year.

From another perspective, looking at the number of property sales that have transacted from month to month, total property transactions have actually been relatively subdued. Over the year to October, the monthly number of properties sold has failed to break the ten year average mark of 61,400.

Even with transactions remaining low compared to the historical average, market activity has recorded a vast improvement from last year when the number of sales bottomed out at just over 43,000 sales in the month of August. Monthly volumes during 2009 have averaged 55,000 sales each month – a 27.5 percent improvement from the August ‘08 low.

The relatively low number of sales comes at a time when demand for property is growing, thanks to record population growth and improved confidence in the broader economy and property market… so the question must be asked, “why are sales volumes so low?”

The reason largely comes down to the tight level of stock in the market rather than any lack of demand for real estate. Despite the fact that new listings to the market have improved since June (up from about 44,000 new listings each month to about 50,000), the total stock levels have been consistently falling as actual demand outweighs supply.

On a slightly different note, the trend of sales volumes over the Christmas period will be interesting to watch. A finding that may come as a surprise to some is that many buyers remain active during the last weeks of December. As shown in the graph right, the 51st week (or second last week of the year) of the year typically sees a jump in the number of properties sold as buyers look to finalise contracts prior to the Christmas festivities. The same trend is evident in the weeks leading up to the end of the financial year.

January is a much more subdued month and is by far the quietest month in terms of the number of buyers and sellers actively involved in the market. Virtually no sales occur in the first week of the year and the second week of the year is not much better. By the second half of January we should start to see some life return to the property market.

The outlook for 2010 with regard to sales volumes is fairly upbeat. Even though interest rates are rising and much of the government stimulus will have been wound back, we expect investor and ‘upgrader’ numbers to continue improving which will provide some balance to the prospect of fewer first home buyers. Consumer confidence remains high and there is already speculation that unemployment is peaking, which will continue to support interest in the property market. Additionally, the medium to long term growth prospects remain very healthy, providing further encouragement to those considering buying: housing remains in undersupply and population growth is projected to remain very high creating an ongoing imbalance between demand and supply and rental yields are at reasonable levels with the likelihood of yield improvements as rents once again start to grow.

RP Data Property Pulse

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Google Real Estate – Should Agents Bank on It?

December 15, 2009 by Simon Baker 

The news just over a week ago that Google was “entering” the UK/European market has sent the share prices of Rightmove and Seloger into a tailspin. Seloger dropped by 9% while Rightmove has plummeted a whopping 17%. Seloger has since recovered to its pre-news price while Rightmove continues to be significantly down.

So let’s look at what happened, will the property portal landscape change and is this impact on the share prices is justified.

An article by the Financial Times (Dec 2 titled “Google set to enter UK property market”) seems to have set the cat amongst the pigeons. The article stated that Google is in talks with British estate agents and that “experts” say that an entry by them to the market could pose a serious threat to existing property websites. The article didn’t talk about what Google was going to do and Google didn’t comment. So there is really not much to go on. So the only guide we really have as to what Google may do in the UK and Europe is what they have done in Australia.

Google “entered” the Australian market 6 months ago (July 2009) when they made it possible for agents, brokers, franchise groups, and portal sites to place their listings on Google Maps. When a user does a search on Google Maps (not the main Google search) for real estate, Google plots the houses in its database on the maps and users can then click on the various dots to see if they like the houses and then are driven back to the advertiser’s site.

At that time, there was a similar uproar and many were predicting the death of realestate.com.au and domain.com.au and the REA Group share price dropped nearly 7% from $5.90 to $5.50. However in the 6 months since the announcement by Google, the REA Group share price has increased 60% to $8.84, the traffic to the site has increased from 4.5m UB’s in June 09 to 5.4m UB’s in October and analysts are predicting an additional 20% revenue growth for the REA Group in FY 2010.

Many hope that Google will be the saviour from the “big bad” commercial property portals and deliver free marketing to the agents. However this is a simplistic view and underestimates the challenges Google faces. The challenges include gaining enough listings, maintaining their quality, driving traffic to the maps area, and ensuring the interface is attractive to consumers.

Even if Google is successful in addressing the above, they will only be delivering clicks to the agent’s site not email leads. The agents will need to invest more in higher quality sites to convert the clicks to leads. This, of course, comes at a cost. The old adage holds true, there is no such thing as a free lunch.

It will be interesting times and if I was an agent, I would be putting my listings on Google. However, any clicks I get from Google should be supplemental to my existing online marketing strategy and not replacing my use of established portal sites.

via propertyadguru.com

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Westpac says low home loan rates ‘unfair’ to business

WESTPAC has justified its recent increase to home loan rates, saying that it would do no-one favours to offer rates that were unsustainable.

Australia’s second largest home loan lender also says it already absorbed some of the rising costs of funding.

“We absorbed some of the external cost increases, rather than pass them on to borrowers at the expense, of course, of shareholders,” chairman Ted Evans said at the bank’s annual general meeting.

“With interest rates now clearly on the rise again, both at home and abroad, there are limits to how long we could continue to absorb these costs without weakening our bank, the Australian financial system and, hence, the Australian economy.

“We would do no favours to anyone by offering mortgages at rates that we know to be unsustainable.”

Earlier this month, Westpac increased its variable home loan rate by 45 basis points, after the Reserve Bank of Australia raised the cash rate by 25 basis points to 3.75 per cent.

Mr Evans said it would not be fair for home loan borrowers to pay lower rates while business borrowers faced higher interest charges.

“Nor is it fair to other borrowers, such as small business owners, or even large project developers, to have their interest rates increased so that mortgage rates can be subsidised,” he said.

“Nor is it fair to those who save to have deposit rates held down so that mortgage borrowers can be subsidised.”

In a properly functioning financial system with strong banks, institutions must adjust rates in line with market pressures, and Westpac did that on December 1, Mr Evans said.

“Competition in the markets will ensure that power is not abused, and as has been demonstrated again in recent weeks, such competition is alive and well in Australia,” he said.

NAB increased its home loan rate by 25 basis points this month to end up with the lowest rate among the big four, and called on Westpac customers to consider switching banks.

 

 

 

via news.com.au

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Sydney’s rental vacancies at highest level in 2 years

Sydney’s rental vacancy rate has risen to its highest level in more than 2 years but it isn’t all good news,

according to the latest data released by the REINSW. The percentage of available properties in Sydney

now stands at 1.6%, an increase of just 0.3% compared to the previous month’s results.

The rental vacancy rate for Sydney is now at its highest level since August 2007. ”Even though these

are the best results in two years, they are nothing to write home about,” said REINSW President Wayne Stewart.

“To end the rental crisis that has gripped NSW, we need to see a vacancy rate of between 3% and 4%.

“Unfortunately a vacancy rate of 1.6% just doesn’t cut it, even if it is the highest result we have seen since

August 2007. “The fact remains that the state’s rental crisis is only set to deepen if proposed amendments to the Residential

Tenancy Act are passed. “The new Premier needs to demonstrate she is committed to tenants and landlords by scrapping these

initiatives which will see rents sky rocket and investors leave the state,” said Mr. Stewart. Sydney’s ‘middle’ suburbs, between 10 and 15

kilometres from the CBD, recorded the highest increase of 0.8% to 2.3%.

The percentage of available properties in “inner” suburbs between 0 and 10km from CDB rose 0.2% to 1.5%.

In ‘outer’ suburbs which are more than 25 kilometres from the CBD, the vacancy rate rose 0.1% to 1.1%.

The percentage of rental vacancies in Newcastle remained unchanged at 1.6% whilst in Wollongong, available

rental properties increased by 0.2 to 2%. 

November 2009	October 2009	September 2009	August 2009	July 2009	June 2009	May 2009
SYDNEY	1.6%	1.3%	1.3%	1.3%	1.5%	1.3%	1.3%
Inner (0-10km from CBD)	1.5	1.3	1.4	1.5	1.8	1.6	1.4
Middle (10-25km)	2.3	1.5	1.4	1.3	1.5	1.4	1.5
Outer (>25km)	1.1	1.0	1.0	1.9	1.1	0.9	1.0
HUNTER	1.7	1.6	1.5	1.6	1.9	1.8	1.7
Newcastle	1.6	1.6	1.6	1.8	1.4	1.6	1.5
Other	1.6	1.5	1.4	1.4	2.3	2.0	1.9
ILLAWARRA	1.5	1.8	1.7	1.3	1.9	1.8	1.6
Wollongong	2.0	1.8	1.6	1.3	1.9	1.6	1.2
Other	1.1	1.7	1.8	1.3	1.8	2.3	2.7
Central Coast		1.5	1.6	1.6	2.1	2.1	1.6
Albury		1.8	1.5	2.3	2.6	2.5	2.3
Central West		1.8	2.0	2.1	2.5	2.8	2.2
Coffs Harbour		2.7	1.9	4.1	4.6	3.9	3.3
Far West		0.4	0.6	-	-	-	-
Mid-North Coast		1.5	2.3	2.2	1.6	2.0	1.8
Murrumbidgee		2.9	3.6	-	-	-	-
New England		2.9	2.0	1.7	2.4	2.8	1.9
Northern Rivers		2.4	2.3	1.9	1.9	2.0	2.2
Orana		1.1	1.2	1.4	1.2	1.0	1.6
Riverina		4.1	1.5	1.3	1.6	2.1	2.0
South Coast		2.1	2.9	2.2	3.5	3.5	3.5
South Eastern		5.3	0.8	1.7	1.6	1.5	2.5

via REINSW

No Bull Real Estate

November 2009	October 2009	September 2009	August 2009	July 2009	June 2009	May 2009
SYDNEY	1.6%	1.3%	1.3%	1.3%	1.5%	1.3%	1.3%
Inner (0-10km from CBD)	1.5	1.3	1.4	1.5	1.8	1.6	1.4
Middle (10-25km)	2.3	1.5	1.4	1.3	1.5	1.4	1.5
Outer (>25km)	1.1	1.0	1.0	1.9	1.1	0.9	1.0
HUNTER	1.7	1.6	1.5	1.6	1.9	1.8	1.7
Newcastle	1.6	1.6	1.6	1.8	1.4	1.6	1.5
Other	1.6	1.5	1.4	1.4	2.3	2.0	1.9
ILLAWARRA	1.5	1.8	1.7	1.3	1.9	1.8	1.6
Wollongong	2.0	1.8	1.6	1.3	1.9	1.6	1.2
Other	1.1	1.7	1.8	1.3	1.8	2.3	2.7
Central Coast		1.5	1.6	1.6	2.1	2.1	1.6
Albury		1.8	1.5	2.3	2.6	2.5	2.3
Central West		1.8	2.0	2.1	2.5	2.8	2.2
Coffs Harbour		2.7	1.9	4.1	4.6	3.9	3.3
Far West		0.4	0.6	-	-	-	-
Mid-North Coast		1.5	2.3	2.2	1.6	2.0	1.8
Murrumbidgee		2.9	3.6	-	-	-	-
New England		2.9	2.0	1.7	2.4	2.8	1.9
Northern Rivers		2.4	2.3	1.9	1.9	2.0	2.2
Orana		1.1	1.2	1.4	1.2	1.0	1.6
Riverina		4.1	1.5	1.3	1.6	2.1	2.0
South Coast		2.1	2.9	2.2	3.5	3.5	3.5
South Eastern		5.3	0.8	1.7	1.6	1.5	2.5

	November 2009	October 2009	September 2009	August 2009	July 2009	June 2009	May 2009
SYDNEY	1.6%	1.3%	1.3%	1.3%	1.5%	1.3%	1.3%
Inner (0-10km from CBD)	1.5	1.3	1.4	1.5	1.8	1.6	1.4
Middle (10-25km)	2.3	1.5	1.4	1.3	1.5	1.4	1.5
Outer (>25km)	1.1	1.0	1.0	1.9	1.1	0.9	1.0
HUNTER	1.7	1.6	1.5	1.6	1.9	1.8	1.7
Newcastle	1.6	1.6	1.6	1.8	1.4	1.6	1.5
Other	1.6	1.5	1.4	1.4	2.3	2.0	1.9
ILLAWARRA	1.5	1.8	1.7	1.3	1.9	1.8	1.6
Wollongong	2.0	1.8	1.6	1.3	1.9	1.6	1.2
Other	1.1	1.7	1.8	1.3	1.8	2.3	2.7
Central Coast		1.5	1.6	1.6	2.1	2.1	1.6
Albury		1.8	1.5	2.3	2.6	2.5	2.3
Central West		1.8	2.0	2.1	2.5	2.8	2.2
Coffs Harbour		2.7	1.9	4.1	4.6	3.9	3.3
Far West		0.4	0.6	-	-	-	-
Mid-North Coast		1.5	2.3	2.2	1.6	2.0	1.8
Murrumbidgee		2.9	3.6	-	-	-	-
New England		2.9	2.0	1.7	2.4	2.8	1.9
Northern Rivers		2.4	2.3	1.9	1.9	2.0	2.2
Orana		1.1	1.2	1.4	1.2	1.0	1.6
Riverina		4.1	1.5	1.3	1.6	2.1	2.0
South Coast		2.1	2.9	2.2	3.5	3.5	3.5
South Eastern		5.3	0.8	1.7	1.6	1.5	2.5

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Cash rate won’t top 5% next year – broker

WHILE further interest rate rises can be expected next year, one mortgage broker believes it is unlikely that the official cash rate will top 5 per cent.

Loan Market Group chief operating officer Dean Rushton says he would be surprised to see the Reserve Bank raise the cash rate again in February after its unprecedented three interest rate increases in as many months.

The cash rate now sits at 3.75 per cent compared to its “emergency” low of 3.0 per cent earlier in the year.

“The first trifecta of interest rate rises in Australian history is expected to have some impact on consumers over Christmas and if there is subdued retail activity that would result in the RBA keeping its powder dry in February,” Mr Rushton said in a statement.

He expects the RBA will next move in March with a 25 basis points increase, followed by a couple of more increases during 2010.

“But I don’t think we will see the cash rate go back over 5.0 per cent during 2010,” he said.

He said the biggest fear for consumers was not the RBA’s decisions but the major banks breaking ranks and raising their lending rates by a bigger margin than the official move.

Westpac led the way by raising its standard variable mortgage rate by 45 basis points last week, nearly double the RBA’s move.

“Major banks no longer seem to be moving in line with the RBA, which is a development of great concern to mortgage holders,” Mr Rushton said.

Still, the cash rate is still below the level it was a year ago when it was 4.25 per cent, and as such, Mr Rushton said conditions for buying property remained ideal, even though the government’s more generous first home owners grant winds back at the end of the year.

via news.com.au

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