April 21, 2014

Budget threat to first home buyers


There is a lot of pressure on the Barnett government to cut costs and raise revenue in the state budget this May.

Those of us who work in the property sector are particularly concerned that property taxes might again be targeted. In last year’s budget the government increased land tax by 12.5 per cent.

This year it might be very tempting for the Treasurer to cast his net more widely by increasing stamp duty across the board for all buyers as well as scrapping the stamp duty exemption for first home buyers.

The Real Estate Institute of Western Australia has cautioned the State Treasurer against considering such moves. The property market in WA is only just stabilizing after several volatile years and current REIWA data indicates a market downturn for the second half of this year.

It’s critical that current policy settings remain in place and property taxes are not increased, distorting a fragile market.

Typical stamp duty on a median priced home in Perth is now $20,000. Bracket creep alone has pushed this up by $4,280 over the last five years.

The stamp duty exemption for first home buyers was raised to homes under $500,000 by the Labor Government in 2007 and along with the first home owners grant has been extraordinary successful at nurturing the market.

Cost of living and housing affordability is much tougher in WA than other states, but removing the stamp duty impost from first home buyers saves most of them around $14,000 and helps them into a home of their own.

In combination with low interest rates, first home buyers have flourished in WA but the signs are that they are now trending downwards and it would be devastating if they soon get hit with stamp duty.

Getting rid of first home buyer relief or increasing stamp duty across the board would also hit the housing construction sector through the increased cost of land.

The clear evidence from NSW, which recently scrapped its tax concessions for first home buyers, is that first home buyer activity collapsed and hasn’t recovered.

It has been a similar experience in Victoria where other concessions for first home buyers were removed or diminished.

First home buyers are critical to the overall health of the property market because they help nurture construction and facilitate the trade-up market.

Data from the Office of State Revenue show activity by first home buyers has been falling for several months, slipping from 1,974 applications in July last year to 1,540 in March.

For a sustainable, affordable housing market, it’s terribly important there is no rise in stamp duty for all buyers or that tax relief for first time buyers is abolished.

This article was originally published on reiwa.com.


Investors move before 30 June


If you’re thinking about buying an investment property before the end of this financial year then you have just three months to go.

While purchasing property should never be rushed, if you’re considering the purchase of an investment property before 30 June, you should be sorting out your finances and looking at suitable properties now. This is particularly the case for first time investors.

More seasoned investors might choose to leave it to the last minute and hurry their purchase before 30 June simply as a strategy to claim the allowable tax deductions associated with the investment during this tax period.

Most people, however, wouldn’t be inclined to do that because it could mean that as a buyer they have not had adequate time to properly research the market in terms of price, rental returns, availability of stock, etc.

Experienced investors tend to always keep an eye on the market and allow themselves plenty of time to select the best possible property for their needs, expectations and budget.

If you’re a first time investor and perhaps been thinking about buying for a while, then now is the time to be talking to professional financial advisers about your aspirations and opportunities.

You should also be considering the areas in which to invest and plan to inspect suitable properties.

Remember to factor State Government stamp duty into your purchase costs and to keep a clear record of this. When you sell the property in the future the stamp duty along with some other costs, such as agent’s and settlement fees, are tax deductible.

For full details on this read the information on rental properties at the Australian Tax Office website.

I am often asked by members of the public to give them a tip as to, “the best place to invest.”

There is no simple answer to this, it depends entirely on your budget and what you want your investment property to do for you.

Are you focused on rental returns, capital growth, land prices, development opportunities or tax deductions? Do you have cash or need finance? How long do you intend to hold this investment?

There is no such thing as, “the best place to invest”, what matters most is that you follow “the best ways to invest”.

That means getting competent financial advice from professionals to determine your budget and loan and then talk to some REIWA agents about opportunities in the areas that suit your portfolio plan.

If you are pressed for time but want to purchase before 30 June, or just lack confidence as a prospective investor, then you may want to consider engaging the services of a Buyer’s Agent to help you through the process with expert guidance and suggestions.

This article was originally published on reiwa.com.


Land value triumphs in the end


In the long term it’s the value of the land on which your dwelling is situated that will contribute most to the growth in the value of your purchase.

Of course you can still significantly affect the growth potential through the building decisions you make.

In the property sector, the phrase ‘highest and best use’ refers to the most effective way to build on a block of land to bring about either the largest growth in capital value or the highest rental income.

The highest and best use test more commonly applies in the commercial property market, but it also has applications in the housing sector.

For example, the owner of an older style home on a block that allows for a triplex development might be considering whether to sell the property and move, renovate or demolished and rebuild a new home.

It is likely that in this situation that the most profitable option would be to either redevelop the property into a triplex or sell the property to a developer who is looking to do that for themselves.

The other option, to renovate the existing home might be a sentimental option but it’s probably the case that this would restrict the resale value of the property.

Most of the likely buyers for such properties would be developers and the owner would be undercapitalising.

However, if an owner wanted to remain in the same location and to either renovate or rebuild, it’s probably best to consider strategies that would keep alive the redevelopment potential of the land.

For example, if the land is zoned for strata development the owner might subdivide the block, build on one lot and sell the other, or perhaps just keeping it vacant.

Homeowners considering this option should make sure they understand the tax implications of this strategy, in particular the likely capital gains and land taxes.

For the best guide to the most appropriate building for a location, have a chat to your local agent about their observations and recommendations.

The safest strategy is to keep to a similar pattern of housing that already exists in your precinct and concentrate on achieving the best quality construction for your budget.

Owners who correctly forecast a change in the style of housing in an area, particularly from rezoning options by local authorities, can find that they will be rewarded by stronger growth in property values if they proceed with a suitable project.

Metropolitan Perth is experiencing reasonable population growth and there is growing pressure for more affordable, strata titled dwellings closer to the city and communal infrastructure.

The challenge for local councils and developers is to meet this demand through increased density that complements the neighbourhood.

This article was originally published on reiwa.com.


Professional agents reduce the risk


Anyone selling a property wants the best price the market will deliver and buyers want the reassurance that the sale price is appropriate.

This is why most people use a licensed real estate agent when buying and selling. Agents are trained to arrive at a market sale price for a successful transaction.

Achieving the best market price is not easy without expert assistance. Private sellers, for example, tend to over-estimate selling prices and most private sales fail without significant price adjustments.

This can result in a final sale price that is actually less than the price which was achievable had the property been marketed correctly.

While sellers want to receive the highest price, buyers are keen to pay the least amount and this creates an understandable conflict between the two that an agent will negotiate to the point of agreement. It can be very hard for a private seller to play this role without an intermediary, keeping in mind that selling price is not the only area of conflict between sellers and buyers.

A real estate transaction can be a legal minefield and this is why state laws require licensed real estate agents to comply fully with the agent’s contractual obligations to the owner of the property.

Agents also have a legal obligation to represent a property correctly and fairly to a buyer.

This legal framework is important because real estate transactions are open to challenges unless proper process is followed.

Take for example the sale of strata title properties which account for a quarter of all property sales. Every time a strata property is sold the buyer must be provided with a package of general and specific information related to that and failure to comply with this risks heavy penalties and may invalidate a contract.

The process of buying and selling strata title properties, in particular, can be so complicated that REIWA has developed specific training courses with detailed checklists for its members.

Another area of potential buyer-seller conflict is information about services and rights of access on properties, including sewers, drains and reservations by public utilities.

If you are a buyer you should know about these matters. If you are the owner there is a responsibility to convey such information, but with private sales these matters are often overlooked and can result in legal dispute.

These and other influences on real estate transactions are covered in the standard legal documents accessible by agents.

If a problem occurs a seller or buyer can seek assistance from REIWA and the state government. However, if you are involved in a private sale and something goes wrong the best you can do is meet in court which can be expensive and time consuming.

This article was originally published on reiwa.com.


Dry summers influence buyers

Holiday homes can be purchased in many possible locations.

As we come to the end of one of the driest summers on record, it’s another reminder that those of us who live in this hot, Mediterranean climate need to be smarter and more efficient in our use of water.

Metropolitan dams are at just 30 per cent capacity and sprinkler restrictions look like they’re here to stay.

Irrespective of possible water restrictions, people need to be water-wise for the long term and we can see how this now impacts on the housing market and through consumer choices.

Smaller residential blocks of land are more common and properties with reticulated gardens more popular.

Busy lifestyles, smaller families and the increased cost of land are the primary reasons for shrinking block sizes with automated watering systems, but there is also a growing appreciation of the value of a water-wise home and of our greater environmental responsibilities

Each time the State Government brings in water restrictions, REIWA agents notice some increased interest in households converting to native gardens, reducing lawn areas, fitting rain water tanks or switching to reduced-flow shower heads.

This is understandable, but before you attempt a similar project aimed at being water conscious, keep in mind what such a change in your garden, in particular, might mean for your home’s resale value.

Most homebuyers are fairly conservative in their housing preferences. So, if you’re thinking of planning a more water-wise garden whilst being anxious to maintain the resale value of your property, keep in mind these few suggestions.

Think about keeping some lawn area in both your front and backyard. Australians love lawns and various types thrive in our warm conditions. Some are drought tolerant. A small lawn no bigger than a blanket will add some appeal and soften the harshness of brick walls and concrete driveways.

Large areas of uninterrupted paving can be counter-productive if you are trying to minimize on lawns and garden for the sake of water. During our hot summers, paving will heat significantly unless you have shade.

Designing a garden to make the best use of its position with the path of the sun is important if you have the opportunity. A well designed home and garden can ensure that there is at least one part of the outdoor living area shaded from our harsh afternoon summer sun. This will reduce evaporation in a section of your property and help keep the house cool.

As water restrictions become more common and as water costs increase, properties with water-wise gardens and shade features will become more desirable.

More homes are also making good use of rainwater tanks for garden use or to plumb into the laundry and toilets to bypass scheme water altogether.

This article was originally published on reiwa.com.

Image by Jörn Guy Süß via Flickr.


Understanding covenants and easements

Perth suburb

It’s always advisable to carefully check the title of a property you are thinking of buying to avoid any last minute surprises that may interfere with the sale.

In Western Australia, Landgate is the state government department which has responsibility for keeping the records of who owns each piece of land. The document on which ownership is recorded is called the Certificate of Title.

The Certificate of Title will record the present owner, note if the property is currently mortgaged and what rights other people and the wider community may have on the property and which might affect the buyers use and enjoyment of the land.

Before entering into a contract for the sale of land or strata title it’s wise to have a good look at the Certificate of Title.

The selling agent is required to conduct a search and should therefore be able to show you a copy.

Sometimes there are restrictions on the title that may affect its transfer when property is being sold. This might occur when another person or organisation has a financial claim or interest over the property in addition to the mortgage. Such a caveat effectively prevents the registration of any transfer of ownership until the caveat is formally withdrawn.

Restrictions on the land are called ‘covenants’ or ‘easements’ and can be placed to ensure that it is not used in certain ways or that buildings conform to certain requirements.

This is often done on land within a sub-division to try and ensure that the buildings are of a uniformly high standard.

Other covenants may prevent views from being blocked or natural light being impeded.

Generally, to remove a covenant an application must be made to the person who imposed it and this may be complicated. Anyone seeking to remove a covenant should therefore seek expert legal advice.

An easement is the legal term for a right, which someone other than the owner, has over the use of the land for a specific purpose.  For example, the neighbours may have a right-of-way to enable access to their property or the Water Corporation may have the power to obtain an easement to use part of the land for sewerage or water pipes.

Covenants and easements are reasonably common and in most cases will not affect the value or saleability of the property. However, before buying you should ask the selling agent if they exist, request copies and read and understand them before making a commitment to buy. You may also wish to seek further legal advice.

Generally, a bit of common sense should address your concerns and after taking the information into consideration you will be in a better position to make an informed decision on a purchase.

This article was originally posted on reiwa.com.


Strategic buying in a fast market


Currently in Perth there is strong demand for homes under $450,000. There is also an undersupply of stock across the board with about 3,000 properties fewer than normal. Consequently, there is quick turnover with well priced, well located property and the number of days on market can be as low as two or three weeks. In many areas homebuyers need to act quickly to secure a property but there is no need for panic.

The real estate market regularly swings between seller and buyer markets in response to  economic and population conditions. A more relaxed market will likely return in the near future, particularly given the number of apartments and townhouses currently under construction and due for release this year.

Curiously enough, a seller’s market can actually work in favour of buyers if they are organised and mentally ready to secure a quick deal. When properties are selling quickly many people who have held back from marketing their homes can be motivated into acting.

Even though the stock of properties available for sale is lower than usual there is greater turnover. This in turn presents opportunities for buyers who are fully prepared.

A seller’s market can also work to the advantage of a buyer who has an existing property to sell. Normally this situation is not very attractive to sellers as they’d rather not wait for you to sell your home before buying theirs. Yet in a fast market a seller can consider that scenario with greater confidence even if other unconditional offers are on the table.

Being fully prepared to buy a property is the key to succeeding in a seller’s market. This means organising your finances and, most importantly, knowing exactly what it is that you want to buy.

Timing is critical for a buyer in a seller’s market. Once you have determined your budget, type of property and preferred locations you should work to a plan. Confine your home-open inspections only to properties that meet your specific requirements.  It can also help to talk to some agents about properties that may not yet have come onto market but which might interest you.

You might also consider hiring a buyers’ agent to help you with your search, especially if you don’t have a lot of time for home-hunting or lack confidence in a competitive market.

When you do find the right property it’s important to convey to the seller that you are a committed buyer. A low offer is less likely to be considered, so be prepared to make a reasonable offer with a little ‘wiggle room.’

Finally, a bigger deposit will convey to the seller that you are genuine and have confidence in securing the finance to seal the deal.

This article was originally published on reiwa.com.


Perth market bounces in December


December quarter rebound in Perth property: Turnover and prices up – rents down.

Perth’s housing market experienced a rebound of activity at the end of last year with sales turnover during the December quarter moving back to the long term average for the metropolitan area.  The strong sales activity through the December quarter had not slowed and that enthusiastic ‘buyer momentum’ had carried into the New Year.
Sales normally calm down over the Christmas holiday period but that didn’t happen last year. The real-time reporting from our members currently indicates that January will also be a bumper month for turnover.
Earlier analysis by the Real Estate Institute of Western Australia showed the median house price lifting by 4 per cent on the previous quarter, suggesting 2013 would end up with
growth of at least 7 per cent across the year.
However, real-time sale data from REIWA agents indicate that the quarterly growth was closer to 6 per cent and pushing Perth’s median house price towards $545,000 through 9 per cent annual growth.
This has largely been driven by two key factors. The number of first home buyers has dropped 12 per cent since the June quarter with a  notable fall in sales under $400,000, while at the same time there was an increase in sales over $600,000. Together, this compositional change in sales acted to pull the median price upwards towards the end of the year.
I think the fall in turnover with sales under $400,000 has largely been a reaction to both low levels of housing stock and also affordability pressure on some first home buyers.
The number of houses and vacant lots on the market is below average by about 3,000 properties and this is increasing demand on the available stock.
Strong first home buyer activity had been a significant market driver over the past 18 months, although applications for established homes dropped away by 12 per cent in the December quarter.
Data from the Office of State Revenue show there were approximately 5,330 first home buyers in the December quarter paying a median purchase price across the state of around $433,000.
However, countering the drop in demand for established homes was a 9 per cent lift in applications for new buildings following the state government’s increase in grants for first homebuyer construction.
Entry-level activity had prompted an increase in trade-up sales as relinquishing owners sold to first time buyers.
The City of Fremantle dominated house price growth for the quarter with the western part of the City of Stirling also doing well.
Across the whole year price growth was strongest in the City of Belmont, while the cities of Fremantle, Gosnells, the western suburbs and the northern end of Joondalup were close behind with growth exceeding the metropolitan average of 7 per cent.
The sales of multi-residential properties, such as apartments and villas, dropped a little during the quarter but I feel this was probably a reflection of slowing first home buyers and weak investor interest.
Even so, multi-residential dwelling stock enjoyed good growth of almost 5 per cent for the quarter.
At the end of the year there were 8,700 properties on the Perth market, virtually unchanged from the September quarter as sales were quickly replaced with new listings.
It was a similar story with blocks of land, with the metropolitan area finishing the year with 1,115 lots on the market, much as it was in the previous quarter.
Days on market have stabilised around 50 days, well down on the 70-plus days at this time last year but it’s the rental market which is really experiencing a slowdown in activity.
REIWA data that during the December quarter the metropolitan vacancy rate grew further to around 3.2 per cent as more than 700 additional rentals came onto the market. That’s up 135 per cent since late 2012 with more than 4,800 rental properties currently available for lease through REIWA member agents
In response to the competition the Perth median rent came down by $10 to $460 per week and representing a drop of $15 per week since the middle of last year.
It seems that the downturn of jobs in the mining sector as well as many former tenants having now become first home owners, has caused the rental system to relax a little.
In the regions results were patchy depending on local economic conditions.
The Mandurah-Murray area finished up having a good year with sales turnover but price growth was modest. Rents also lifted by $10 to a median of $380 per week.
Turnover in Bunbury was up by almost 20 per cent across the year despite a dip in sales for the December quarter, however, prices didn’t move much from September.
In Kalgoorlie-Boulder sales activity has been trending downwards for two years resulting in volatility in the median price.
Geraldton-Greenough also had a weak year with its median price sliding on stagnant turnover. The Midwest city reporting 500 sales for the year, the same number as 2012.
In the Pilbara, the downturn in the mining sector is very apparent in the housing system.
Karratha sales actually picked up despite annual turnover being at its lowest point in 23 years. With the median house price having dropped across 2013, the improved affordability attracted buyers in the December quarter.
Nearby Port Hedland is also feeling the effects of the downturn with annual turnover being down by a significant 60 per cent, although rents remain very high at around $1,300 per week.
This article was originally published on reiwa.com.

The benefits of buyers agents

Buying a home can be confusing.

Around most of Western Australia the property market is stable with modest price growth, good turnover and low levels of listings.

Interest rates are low and most rental markets are turning in favour of tenants. Of course there are regional exceptions and all this can be a bit confusing to buyers and investors who might be trying to decide where and when is a good time and place to purchase?

In this situation you might like to turn to a buyer’s agent.

Just as you would expect a selling agent to represent your interests when selling, a buyer’s agent will act with the same level of professionalism in helping the buyer achieve their goals.

There are several characteristics that you should look for when selecting a buyers’ agent but the three key areas include communication, expertise and negotiation skills.

First up, a good buyers’ agent should be an excellent communicator. They should take the time to fully understand your needs and budget when selecting an investment or your next home and prepare a brief relative to these requirements.

This means that the buyers’ agent has a good working knowledge of your expectations and should be able to deliver. Conversely, if your expectations are unrealistic, a good buyers’ agent should be able to explain this effectively and politely to set you on the right path.

They should also possess the expertise and knowledge required to conduct specific research that may affect the purchase of the property and any other relevant items that are important to you the buyer. For example, development potential, re-zoning and major planning projects in the property’s locality that may impact on value over time.

If schools are important they should know which schools are available to your needs.

Demonstrated negotiation ability is extremely important. The buyers’ agent should be able to negotiate the deal on your behalf with the seller, including the contract and settlement terms, as well as ensuring you are paying a fair price for the purchase.

Buyers’ agents, as with any professional, will charge a fee for their service which may be fixed or a percentage of the purchase price of the property. In either case you should ensure this is discussed and agreed at the start of the process.

Remember, sales agents can offer great value and information when purchasing a property but of course they are engaged by the seller and are legally obliged to work in the sellers’ best interest.

Whereas a buyer’s agent is working for you, the buyer, and can save you lots of time while helping you get you the kind of property you really want. It’s a particularly handy service for busy people.

To find your nearest buyer’s agency please contact REIWA.

This article was originally published on reiwa.com.

Image by Edu Martínez Piracés via Flickr.


Check for unauthorised structures in your new home

Unauthorised structures should be disclosed to potential buyers.
When you are buying or selling a home it’s highly advisable to make sure that any additions or alterations to the dwelling have been properly authorized by the local shire or council.

You might be surprised how often this is not properly done and just how many homes have unauthorized structures as a part of the property.

Most often these are patios or verandahs but they can be more substantial matters such as the addition of a conservatory, workshop, garage or extra bedroom.

Local authorities have good reasons to design and apply the laws around building and construction and most often this is to do with safety.

Such laws and regulations are important for legal reasons as well as for personal injury and insurance reasons along with safety measures around fire, electricity and structural soundness.

If you are selling, the listing agent will ask you if you are aware of any unauthorized structures or additions to the property. It’s important that you answer truthfully to avoid potential legal problems down the track. The contract for sale might come unstuck if the buyer finds that the property is not in order.

As a seller, if you are aware of unapproved structures you can either remedy those before listing the property for sale or disclose them to potential buyers to avoid any misleading conduct. Remedies might include removing or making good the structures or seeking retrospective approval from the Council. This latter option is not always available so you will need to check with your local authority.

Alternatively, if the unauthorized structures are made known to potential buyers, dealing with these might form part of the negotiations in settling on an agreed price and sale conditions. For example, a buyer might make an offer subject to the unlawful patio being removed or the recent carport being retrospectively approved by Council.

As a buyer you have the right to ask about any unauthorised structures and the agent is obliged to answer truthfully based on the information they have been provided by the owner.

Perhaps more importantly, as a buyer you have the right to include a building inspection as a condition of your offer and acceptance. A building inspector can give a written report on the state of the dwelling you are considering buying including such things as structural soundness, rising damp, appropriate guttering and the quality of any additions or alterations. You can also check with the local council to ensure that additions or alterations have been properly approved.

While buyers may accept the sale with the unauthorised structure, it’s important that any modifications or additions to the dwelling are legally approved to ensure the safety of the occupants and to protect you from liability.

This article was originally posted on reiwa.com.

Image by Nicolas Boullosa via Flickr.