Posts Tagged ‘property values mornington peninsula’
Whether you buy a property as an investment or a home, certain basic rules apply to ensure good capital gain.
Predictions that house price growth won’t run as hot next year as it has in the past 12 months could provide breathing space for home and investment buyers but it may also mean they shouldn’t count on capital growth to bail them out if they buy badly.
”We’ve come through a strong cycle, particularly in Melbourne,” says the head of property research at Macquarie Bank, Rod Cornish. ”But growth over the next 12 months will be significantly slower than last year.”
The impact will be greatest in Melbourne, he predicts, because of the triple whammy of slowing immigration, lots of new housing and the hit to affordability from price rises so far.
”Melbourne, for the first time ever, is less affordable than Sydney,” he says, referring to how much income is required to meet the cost of housing in each city.
In Sydney, slowing immigration will also affect demand but prices haven’t run so far, for so long, and housing starts are only just above 30-year lows, he says.
Cornish says it is always important to make sure you pay a sensible price for property ”but in an environment where prices are not rising strongly, that’s more so”.
”A rise in the market isn’t going to correct for you if you do pay more than it’s worth,” he says.
However, a property investment adviser, Monique Wakelin, says property is a seven- to 10-year ownership proposition for most people and over that time frame you should come out in front, even if you pay a slight premium.
That said, buying well does allow investors to maximise return and it will put owner-occupiers in a home that suits both their budget and their needs.
”With an investor, it comes down to one question – how much capital growth can I buy for my money?” Wakelin says. This requires an unemotional, objective assessment of a property’s prospects.
For owner-occupiers, where and what depends on how much accommodation they need and their budget for that. Their decisions will be much more subjective.
The trick is when clients want to combine the two, she says – buying a home but with an eye to capital gain.
In this case, she asks them to assign a weight to each of those goals, with the caveat that the ratio can’t be 50:50.
If the client’s tilt is at least 60 per cent towards it being an investment (and therefore only 40 per cent on the scale as a home purchase), she’ll start showing them properties that may not appeal to their personal taste but which Wakelin Property Advisory ranks as being of ”investment grade”.
To pass, a property must have a history of consistently producing capital growth above the market average, Wakelin says.
Only about 5 per cent of the properties on the market at any one time pass muster.
For Wakelin, properties that sit two kilometres to 15 kilometres from the CBD in Melbourne, or up to 20 kilometres in Sydney, get a tick.
Single-frontage houses built between the 1880s and 1940s are good, particularly if they have shops, transport, schools and healthcare nearby. Access to major roads is also good; being on a main road is bad.
Major renovation required? No thanks. Apartments without parking are out, as are those less than 45 square metres to 50 square metres in size. High-rise is out.
Charming older units – with one or two bedrooms – are better than new ones because an even newer one will make your development look a bit shabby in just a few years’ time.
Cornish says people no longer want the most expensive or biggest house in the suburb.
”Developers are tuning in with that theme, starting to have more affordable product that’s not so large, with not quite the same level of fittings – perceiving that affordability is going to be a point that purchasers will look for,” he says.
Having found the right property, the next step in buying well is paying the right price.
Obtain the price history of your targeted property, or a similar one nearby, going back between 10 years and 15 years, Wakelin advises.
”As long as the trajectory and the history of growth in that property justifies it, as long as all the attributes of an investment-grade property are present, you can afford to pay a slight premium,” Wakelin says.
And you’ll know what a ”slight premium” is only after you’ve completed your research with a couple of months on the auction and sale trail, seeing what’s selling for how much and why.
Perhaps surprisingly, property author and consumer advocate Neil Jenman doesn’t see much wrong with owner-occupiers paying slightly over the odds for the right property, either.
Allow for expenses such as stamp duty and legal costs, set something aside for any unexpected repairs and think about worst-case scenarios such as time off work, he says. But then buy a property where you’ll be happy.
”Most people buy houses with their hearts and you should – if your wallet is OK,” Jenman says.
”If you love a house and you’re going to live in it a long time, it doesn’t matter if you pay a bit more – if you can afford it.”
Still, he says you can save money if you’re prepared to sacrifice ”prestige” or proximity and buy in a less-trendy suburb or travel a bit further to work to lower your repayments.
Key points
- Don’t assume every property will rise in price.
- Buy with a seven- to 10-year horizon.
- If you’re an owner-occupier, buy what you need, not what you want.
- If you’re an investor, buy without emotion.
- Research prices and desirable features before shopping.
MELBOURNE property prices have gone backwards after 17 months of strong gains that increased the typical price for a house from $404,636 to $500,000.
One of the nation’s most comprehensive property price-tracking indexes shows Melbourne property prices following a national downturn in June.
The latest RP Data-Rismark property index has dwelling prices slipping in all Australian capitals with Perth, Melbourne, Canberra and Brisbane dropping the most.
Sydney prices performed better than Melbourne but were largely stagnant and Adelaide prices continued to grow at a healthy 1.1 per cent.
”Australian dwelling values remained flat with effectively no growth,” the RP Data-Rismark report said. In terms of the June quarter, ”this represents a striking deceleration in the quarterly rate of increase in home values”.
The slowdown in property prices will be welcome news for first home buyers increasingly priced out of the market, but is also likely to favour buyers at the top end where prices declined most.
”Most of the pain is really at the top end of the market,” RP Data research director Tim Lawless said. ”It’s a little more severe in Melbourne than around the rest of the country.”
The RP Data-Rismark index is typically ahead of other indexes in picking up property trends as it compares ”like sales” with ”like sales” so as not to distort the market by changes in the composition of the stock sold.
New figures from the Reserve Bank show growth in housing credit slowed sharply to just 0.4 per cent in June – its slowest growth for any month since July 1984.
In a further sign that the economy is losing pace, the bank reports that credit growth among owner-occupiers slumped to a mere 0.3 per cent – the lowest of any month on record.
June quarter growth was just 1.4 per cent, also the lowest on record.
The growth now is mostly in loans to housing investors, which rose by 0.6 per cent in June and by 2 per cent in the quarter.
The total growth in lending in June was just 0.2 per cent, the weakest recorded this year. Business credit was flat, and the stock of personal loans shrank by 0.3 per cent.
Recent data has shown the economy faltering under the impact of six rate rises, renewed fears on global markets, and the winding down of federal government stimulus spending.
The downward spiral in prices was likely to delay the onset of another interest rate rise and appease the Reserve Bank, which has raised rates six times since October, Mr Lawless said.
”We had always argued that the May rate hike was a step too far,” CommSec chief economist Craig James said. ”But it will be important now for the Reserve Bank to stay on the interest rate sidelines to give shell-shocked consumers and home buyers a chance to catch their breath.”
The news will worry vendors as buyers are less likely to bid at auction if they feel prices are not likely to rise.
Saturday July 31st 2010
Demand improved at this weekends residential auctions with a clearance rate of 71 per cent recorded, an increase from last weeks 66 per cent.
This result will provide encouragement and confidence to vendors with homes listed for auction between now and the federal election. An interest rate increase next week would reduce that confidence.
There was a total of 541 auctions reported this weekend, of which a total of 382 sold and 159 were passed in, 103 of those on a vendors bid.
This weekend last year saw 374 auctions, well under this weekend and a clearance rate of 87 per cent.
Next weekend the REIV expects 520 auctions.
House Sales in Detail
TOP 5 HOUSES
1. 58 Washington Street, Toorak $3,350,000
2. 42 Bayles Street, Parkville $1,701,000
3. 114 Maltravers Road, Eaglemont $1,700,000
4. 14 Green Street, Windsor $1,652,000
5. 27 Boorool Road, Kew East $1,582,000
TOP 5 BARGAIN HOUSES
1. 4 Burke Road, Sunbury $190,000
2. 21 Fugosia Street, Doveton $300,000
3. 21 Talgarno Street, Broadmeadows $320,000
4. 96 Ashenden Square, Rosebud $321,000
5. 12 Radiata Court, Mill Park $325,000
Flat/Apartment Sales in Detail
TOP 5 APARTMENTS
11. 1/29 Lewisham Road, Windsor $1,265,000
2. 609/108 Bay Street, Port Melbourne $1,200,000
3. 10 Butler Street, Camberwell $1,072,000
4. 43 Myrtle Street, South Yarra $982,500
5. 35/85 Rouse Street, Port Melbourne $970,000
TOP 5 BARGAIN APARTMENTS
1. 1/88-94 Franklin Street, Melbourne $260,000
2. 1/160 Bayswater Road, Croydon South $290,000
3. 2/139 Melrose Drive, Tullamarine $292,500
4. 3/42 Middle Road, Maribyrnong $295,000
5. 6/4-6 Burnewang Street, Albion $298,000
THE completion of EastLink and the first home buyers’ grant has seen property prices boom in Melbourne’s eastern and south-eastern suburbs.
The Valuer-General Victoria, Robert Marsh, released his two-yearly general revaluation of 2.6 million Victorian properties, valuing the state’s residential, rural, commercial and industrial properties at a whopping $1.26 trillion, up 20 per cent in two years.
The Valuer-General uses land and market values to price properties and the results will be used by the state’s 79 councils to calculate rates from July 1 this year.
“It’s important to keep in mind, that an increase in values does not mean an increase in rates,” Mr Marsh said.
The total value of the 2.1 million residential properties assessed rose 20 per cent to $976 billion; the median house price jumped from $399,000 in June 2007 to $460,000 in June this year.
The Valuer-General’s spokesman, Greg Stevens, said properties in in the outer Melbourne suburbs neighbouring the Peninsula Freeway and EastLink had also jumped more than 20 per cent in value, and were singled out as the city’s prime moving real estate, particularly for first home buyers.
“They were the big movers in the revaluation this time around,” Mr Stevens said.
“There’s no doubt the property prices have clearly shown a direct relationship to the first home buyers’ scheme.
“It’s on the Peninsula Freeway arm, in areas such as Pakenham, Berwick, Narre Warren, Rye, Tookarook; they were low-value properties, and their values certainly increased at a faster rate than the average dwelling.”
Dandenong real estate agent Doriano Del Monaco, from Century 21, said it was no surprise that people were heading southeast, saying: “A lot of people are moving this way for a sea change. There’s quick access to the city, which they didn’t have before EastLink was completed in 2008.”
Real estate in the northern suburbs also saw impressive growth of more than 20 per cent. Inner-city Melbourne enjoyed a smaller surge of 5-10 per cent.
The median metropolitan house price has risen an impressive 121 per cent in the last decade; rural property prices had increased 131 per cent.
Bass Coast Shire had the largest growth in the state: 196 per cent since 2000.