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Dec 7, 2023
What’s in Store for 2024?
With Perth’s property market growth leading the nation as at the end of last year, some property commentators are predicting a slow-down in capital gains as the year progresses. Returning a 13.7 percent growth rate in property values to date 2023, Core Logic data showed Perth ahead of the rest of the nation in growth with Brisbane the next strongest market performer with 10.7 percent value gains. Perth is at its market peak reaching a median dwelling value of around $650,000 at the end of last month. Yet, despite Perth’s strong market performance, our local market remains the most affordable major capital city aside from Darwin in terms of median prices comparative to average family incomes. It is this relative affordability, strong economy, full employment, an uplift in migration intakes and limited housing supply that will continue to drive our market forward. Whilst it is always difficult to accurately predict property markets, in the absence of significant and unexpected market shocks, WA residential property is likely to put in another strong showing in 2024 with 8 to 12 percent gains predicted. Turning to the rental market, with vacancy rates below 1 percent for most of 2023 caused by a lack of housing supply, it will take some time to deliver enough homes to the market sufficient to bring the rental market back into balance. Rents have risen sharply since mid 2020 after a decade of falling and stable rents, rising a further 13 percent last year. Strong demand from incoming residents and low supply remains the core cause with little relief in sight for tenants struggling to secure suitable accommodation. With less than 2000 properties listed for rent on reiwa.com, supply constraint due to a lack of investor buying activity over the past decade has seen house rents move from $350 per week in 2017 to $600 per week today. Investors have come storming back to the Perth market as they exit the overheated east coast city markets and look to capitalise on the prospect of price growth and nation-leading yields. As more supply comes to market, rents could moderate this year but further rent rises of at least 5 to 10 percent is likely thanks to the slow construction cycle and lacklustre dwelling approval numbers. Overall, WA is the place to watch in 2024 as its property market continues to expand from a base of relative affordability.
Oct 5, 2023
How to Buy in Perth's Tough Property Market
The current real estate market in Perth is presenting unique challenges for buyers. According to REIWA, there are only 4,895 properties listed on reiwa.com, the lowest number in a decade. This limited supply, combined with increasing demand, is driving up prices and making it tough for buyers to find their ideal family home among the 2,289 available homes. Perth’s current market for available property Comparing REIWA’s report to 5,131 four weeks ago and 8,117 this time last year highlight’s the challenge of purchasing a property due to availability. With further analysis of the 4,895 listings, 1,196 of them are blocks of land and 1,410 are units, making it particularly tough to find an appropriate family home from just 2,289 homes across Perth. Property prices inevitably increasing With supply so constrained whilst demand continues to rise, prices inevitably increase impacting affordability and making buyer conditions especially difficult. No doubt, it is a sellers’ market with these conditions likely to prevail until we can get more supply into the market. Real Estate agents’ buyer databases are bursting at the seams but because we act for the seller, agents will encourage their clients to expose their property to the widest possible market to achieve the highest price possible through competition. A Seller's Market That means a marketing campaign designed to attract as many buyers as possible, leading to dozens of groups through the home and multiple offers made. If buying by private treaty, most agents won’t declare an asking price for fear of adding a ceiling price to the process that could prove below market sentiment – a definite ‘no-no’ when discharging your fiduciary responsibility. This adds to the buyer challenge when competing, fearful of paying too much but not wanting to pay significantly more than the next best offer. Buying in a competitive market Buyers need to be well prepared. Have your finance; if needed, pre-approved and up-to-date, be clear on your preferred settlement date and research your preferred buying areas to gauge likely market values for homes suited to your budget and needs. There is no point thinking you can snag a bargain in this market so if the likely market price is say $1M, don’t think you can buy it for $950,000. Sign up for email alerts on the major portals and when finding something that looks promising, call the agent don’t just email them. Build rapport with the agent; if they like you, they’ll be more inclined to want to help. Ensure you arrive at the first home open early or if you can, try and get an inspection prior. Don’t be disheartened if attending a very busy home open thinking ‘I won’t get this one’ because there will be others thinking the same thing. It is not uncommon to have dozens of buyers through a property, plenty of interest, yet no offers. This ‘groupthink’ mentality can work to your advantage if you’re aware of it. When making your offer, put forward your best offer early in the negotiation, remove unnecessary conditions and propose a generous deposit. In this market, buyers will get very little chance to negotiate hard if competing with others. Tips for Buyers: So, what can buyers do to try and get an advantage in such a competitive environment? Be Well-Prepared: Ensure your financing is pre-approved and up-to-date, determine your preferred settlement date, and research market values in your desired areas. Utilize Email Alerts: Sign up for email alerts on major real estate portals to stay updated on new listings. When you find a promising property, don't hesitate to call the agent, as building rapport can be advantageous. Early Attendance: Arrive early to the first home open and consider requesting an inspection before the open house. Stay Optimistic: Don't be discouraged by crowded open houses. Many potential buyers may attend, but it doesn't guarantee immediate offers. Understanding the “groupthink” mentality can work in your favour. Strong Offer: When making an offer, present your best offer early in the negotiation, minimize unnecessary conditions, and propose a generous deposit. In a competitive market, buyers have limited room for negotiation.
Sep 20, 2023
2023 Australasian Auctioneering Championships
This week I attended the Australasian Auctioneering Championships, hosted in Auckland. The best auctioneers from across Australia and New Zealand fought it out ‘theatre-style’. An amazing event with the very best auctioneers moving through extraordinarily difficult bidding sequences that, thankfully, auctioneers don’t normally encounter. Christchurch based Ned Allison taking home the 2023 major prize with a stunning call of a very complex bidding sequence. I’m an advocate for the auction process as a method of sale for several reasons. It remains the most transparent selling process with all buyers able to see competing buyers, with the auctioneer bound by an ethical REIWA code of conduct, bringing fairness to the process. Buyers also usually have the time (unless the seller accepts an offer prior to the auction) to view the property several times, undertake all necessary due diligence, and be ready to buy on auction day. The benefits to sellers include cash, an unconditional contract, a settlement period that suits their needs, a healthy deposit, and the delivery of a price that is the definition of fair market value. The “no price” marketing strategy in the lead-up to the auction day is also beneficial as it captures all possible buyers, including those who may not otherwise consider the property if it were on the market at a fixed price by private treaty. the auction process ‘shakes the buyer tree’ In short, the auction process ‘shakes the buyer tree’ and reveals all possible buyers. If the property is being sold under an executorship arrangement, or the market price is difficult to determine, then auction may be the most appropriate method. And of course, let’s not overlook the X-factor an auction brings which, through fierce competition, sometimes delivers an amazing result well above expectations, one that can be hard to replicate with other methods of sale. Auctions may not be for everyone of course, it’s important that Sellers understand the process and feel comfortable with the strategy. Some sellers can sometimes feel under pressure to ‘meet the market’ on the day of auction if the highest bid is below their original reserve price. The lead-up to the auction day can be stressful too with multiple home opens and inspections during the weeks prior. Some buyers remain deterred by the auction process too; either too nervous to bid or unprepared to buy without certain conditions being met, such as finance approval for example. However, more and more these days, many buyers appear to be welcoming the transparency of the auction process over the blind, confidential negotiation of a Private Treaty sale. Be sure to ask your agent about all the options when coming to market, as there are benefits with all methods of sale. It’s a matter of choosing one that suits your needs and circumstances, and agents should offer you that choice and confidently explain your options.
Sep 13, 2023
Pricing Your Property Right
Fremantle’s property market continues its positive trajectory with short supply and solid demand. This current imbalance is keeping up property values as buyers continue to compete for the limited homes available in the area. Although interest rates have stabilised and inflationary pressures have tempered some of the FOMO enthusiasm, the limited buying opportunities have buyers competing for homes. The short supply means agents are desperate for listing stock and, unfortunately, one response to this market is for agents to offer ‘happy prices’ to would-be sellers, the aim being to secure the listing and hope the market catches up during their period of authority. Additionally, emotional attachment often leads homeowners to believe their property is worth more than a market consensus of a fair price. Opinion of market value for a property is largely a subjective exercise; various agents will have differing views of market price, and friends, lovers, and others have their own opinions as does the property owner. take in professional advice from a local REIWA agent Sellers who have committed to another property at a higher-than-hoped price will also be pressured to sell their own home for more than the market will bear. The result can be price expectations that well exceed market reality. In truth, the value of a property is not determined until a buyer is found, negotiations finalised and the contract for sale is completed. The combination of market information, comparative property sales analysis, demand and supply levels, buyer activity, and property presentation provide an insight into what fair market price might eventuate for a property, but what does the anticipated or listing price have to do with the final market price? In short, plenty. Statistics show that sellers who over-price their property lose money in the end. Sellers that allow their property to languish on the market due to unrealistic price expectations (either derived from themselves or an over-zealous agent) end up fighting against the buyer sentiment of a stale listing; a property that has been on the market for above average periods of time. Such properties are often simply over-priced and buyers will discount them because they think “there must be something wrong with it if no one has bought it.” Sellers that have to discount listing prices to sell will almost always end up selling for less than if they had a realistic market price expectation from the beginning. Sellers are well advised to take in professional advice from a local REIWA agent and form a considered, unemotional opinion of value based on facts, evidence and reputable market data.
Aug 3, 2023
Use a REIWA Property Manager
By Hayden Groves Property management is more about managing the tenancy than it is about managing the property. The property manager’s primary role is managing the tenancy agreement as expressed by the terms of a lease and regulated by the Residential Tenancies Act. The property manager can only inspect the property on four occasions per year on behalf of the owner, so it is important that the tenant understands that it is them as the occupant, that effectively manages the property itself. For tenancies longer than three months, the Residential Tenancies Act (the ‘Act’) applies automatically (whether there is a formal lease or not) and it is foolhardy not to utilise the services of a competent property manager for a property asset, particularly during times of short supply and high demand. There is great value in having a property manager act at ‘arm’s length’ Management fees are not exorbitant and are tax deductible. And for the sake of saving a relatively small portion of the rental income in management fees, the risks of self-management are significant. A sound working knowledge of ever evolving legislation is essential, as is the capacity to properly reference check a prospective tenant. But, perhaps most importantly, much of the risk and responsibility attached to the management process is borne by the managing agent, giving property owners someone to rely on if the tenancy goes wrong. Even thoroughly assessed tenancies go off the rails on occasion due to a change in circumstances of the occupants; job loss, relationship failure and health issues are common reasons. A professional, well trained local agent is equipped to deal with this challenging issues when they arise. Finding the right tenant can be tricky too. Prospective tenants almost exclusively rely on the internet to find themselves a property, so owners without access to the favoured websites will find it difficult to attract the right tenant in the first place. There is great value in having a property manager act at ‘arm’s length’. Many a self-managing landlord has fallen into the trap of sympathising with their defaulting tenant and allowing rent arrears to build up over time hoping that they’ll “make good”. Acting at arm’s length affords the property manager a compassionate ‘just business’ approach to rent payments and the lease agreement more broadly. This is particularly important in these times of rising rents and inflationary pressures. Self-management often works well and for extended periods, but when a tenancy goes wrong, it is costly and stressful and it has been my experience that with all things considered, it is not worth the risk.
Jul 24, 2023
3 Reasons Why You Don’t Sell or Lease
By Hayden Groves The current market is tight on supply and high on demand with rising property prices the result. The rental market is equally experiencing supply constraint and with limited availability, rents are rising too. In such conditions, almost any property that comes to market to buy or lease is fair game, snapped up by buyers and tenants at a record pace. In markets such as these, it is unusual to see a property languish on the market for a substantial length of time. According to reiwa.com, median selling days are at 11, compared to 23 days a decade ago and 58 days as little as four years ago. So, if your property since listing on reiwa.com remains unsold after 11 days, you might begin to question why. In itself, not selling in under a fortnight is not necessarily a problem. Your property is still relatively fresh to the market and if, for example, a major sporting event, inclement weather or long weekend coincide early in your campaign, your buyer simply may not have found your property yet. Such a strategy will always deliver a poorer result However, after you’ve been on the market for more than 60 days, there are generally three major reasons why you’ve not achieved a sale. Firstly, you may have chosen the wrong agent to represent you. Choosing an agent based on the cheapest fee, choosing an ‘out of town’ agent or one that’s carrying too much stock are common reasons why your agent isn’t able to expediently attract a buyer. Choose an agent that carries a strong reputation, deliberately takes on a manageable number of listings and is an expert in their local market. Secondly, your marketing campaign may have missed the mark. In this market, buyers are plentiful and some sellers are tempted to try and sell ‘off-market’, without a well considered and implemented marketing campaign to attract every possible buyer, opting instead to rely on an agent’s data base of buyers. This can often deliver a good selling outcome, but leave you feeling like you may have missed the chance of a better outcome had all the buyers had an opportunity to compete. Choose an agent that can deliver both, qualified buyers known to them as well as a brilliant marketing campaign that gives the best chance of a premium result. Thirdly, and the most common reason, is sellers and owners have a desired price outcome that is out of step with the market. Holding out for a price or rent that is well above the reasonable market price will deter buyers and tenants from engaging with the property, simply moving onto the next one that has a more realistic price tag. Use caution in choosing an agent that gives you a ‘happy price’, one that they know if above the market with a strategy to ‘work you down’ after being on the market for a prolonged period. Such a strategy will always deliver a poorer result than one that gives buyers the chance to compete for your property in an open market where price expectation is reasonably aligned with market sentiment. Right now, deploying the right strategy and choosing the right agent should have you sold or rented in a little over a week.
Jul 11, 2023
Western Australia remains astonishingly affordable
By Hayden Groves The Real Estate Institute of Australia’s (REIA’s) latest Housing Affordability Report was released last week revealing housing affordability worsened across Australia. As expected, NSW and Victoria remain the least affordable places to buy property with an astonishing 55 percent of a family’s income devoted to meeting the average loan repayment in NSW. In Victoria, 46.5 percent of their hard-earned goes to meeting mortgage commitments. The national average is now 44.9 percent, well above mortgage-stress territory. We are fast approaching record levels of housing un-affordability. Happily, Western Australia remains astonishingly affordable with 34.5 percent of our average weekly family income of $2,471 covering the average loan of $478,236. In contrast, mortgage holders in NSW hold average loans of $731,410 with an average family income of $2,373. As expected, housing affordability has deteriorated over time declining 14.2 percent over twenty years with much of that decline (11.6 percent) occurring in the past five years. Tasmania’s decline in affordability tops the chart with a 21.7 percent fall in affordability over twenty years. Once more, WA’s affordability performance remains appealing to home buyers and investors with a modest 7.4 percent deterioration in affordability in twenty years. Rental affordability is a hot-button topic both politically and in the media. With the average tenant across Australia paying 23 percent of their income on rent, leasing remains significantly more affordable than property ownership. Over the past twenty years, home ownership affordability has deteriorated at a rate almost 18 times faster than rental affordability. Whilst property ownership affordability has rapidly declined over the past five years, national rental affordability has been remarkably stable, worsening by a mere 0.8 percent in twenty years. Rental affordability has, in fact, improved over the past five years by 0.7 percent. Ten years ago, it was less affordable to rent a home in Australia than it is today. In WA, rental affordability has deteriorated by 3.9 percent in five years, but barely changed across the fifteen years prior to 2018. Whilst rental affordability is stable, median rents continue to climb with lack of housing supply the main contributor to the increases. A potent combination of low investor activity, rising interest rates, stamp duties, land taxes, insufficient social housing, tenant-friendly tenancy laws, increasing population, construction industry blockages and short-stay accommodation continue to conspire against maintaining a reasonable supply of rental homes. REIA’s figures show that rental affordability across Australia has barely changed over the past twenty years, proving that markets are cyclical. Whilst we know things are tough for tenants right now, once we get more supply into the market, balance will return.
Jul 3, 2023
Data Gurus: Less Pain, More Gain
By Hayden Groves Data gurus Core Logic produce a quarterly report aptly named the Pain and Gain, providing insight into the profitability of property sales across Australia. The report assess each property sale from its previous selling price in order to determine if the property was sold on a positive or negative margin. It doesn’t take into account the holding (interest payable, land taxes, rates, etc.) or purchasing costs such as stamp duty. The losses or ‘pains’ could therefore be worse than reported. Looking at the figures, it’s unsurprising that when assessed over a ten year period, Perth’s property market has had its fair share of pain during that time. Since the market peak of 2014, the proportion of properties sold for profit steadily declined from 95 percent to near 50 percent by late 2019. Usefully, Core Logic splits the data into detached houses and units with Perth houses performing significantly better than units since 2013. For houses, the portion of profit-making sales on a rolling quarter basis back in 2013 through to early 2016 held steady at 95 percent. It steadily fell thereafter to reach 60 percent April 2019. The market must have been dire for 40 percent of all houses sold in mid 2019 selling for less than their previous sale price. The numbers are even bleaker for units for a period in mid-2020 where only 40 percent of units sold realised a profit. During this ‘peak-COVID’ period we had rental moratoriums, a great deal of uncertainty and a decade of zero growth. Investors fled the market in large numbers, with – as it turns out – 60 percent of them willing to take a loss on the investment in the process. Roll forward to now and unit sales still lag behind houses in terms of profit-making. Perth’s market is still in recovery across the unit sector with only 64 percent of sales profit-making, well below the national average. Comparatively, profit-making house sales represented 94 percent of all houses sold last quarter. The discrepancy here can be attributed to the natural inclination of larger households to sell less frequently coupled with units being more favoured by investors, making them a more liquid asset. For Fremantle, 17 percent of all sales in the March quarter sold for a median value loss of $51,500. Inversely, 83 percent of Fremantle sellers made a median gain of $171,500 across a hold period of 8.9 years when they sold in the March quarter. In Cockburn, the median loss was less at 13 percent at $40,000 with 87 percent of sellers making a tidy $130,000 median profit if holding the property for about 9 years. Overall, the trend for Perth property being sold at profit is upwards as property values continue to grow. Values are up 1.9 percent across April and May this year with the likelihood of further gains adding to the recovery in profit-making sales as the year progresses.