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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.

Sep 7, 2023

Short Stay Rentals Australia

A recent visit to the Gold Coast on REIA business revealed one of the more vexing issues around rental affordability in Australia. In one of Australia’s favourite holiday destinations for both domestic and international travellers, the Gold Coast region has a high number of apartment homes traditionally used as a holiday flat or rented investment properties. A search of rental homes available across the Gold Coast region reveals about 1800 properties available for lease. By comparison there are some 5500 short-stay properties available. REIA’s analysis shows investors favouring the short stay market for a typical 2-bedroom apartment earn the same income in 156 days compared to a long-term rented property across a twelve month lease. a deep-dive study into short-stay accommodation Armed with this information, REIA undertook a deep-dive study into short-stay accommodation (SSA) across the nation which we released this week. The numbers reveal a remarkable level of growth for this sector with 133,968 (81.9 percent of which are entire dwellings) short-stay accommodation places across Australia, an increase of 22.8 percent for the period March 2022 to March 2023. Tasmania has witnessed the largest increase in SSA places, up an incredible 66.4 percent in twelve months to 4255 properties. Canberra came in second with a 49.6 percent increase in SSA places, followed by Victoria’s 32.4 percent, NSW’s 25.3 percent and Queensland’s 23.7 percent. Here in WA, there are 8,056 SSA places, an increase of 16.2 percent across the same twelve-month period; the lowest growth rate across the nation. Regional areas have the highest proportion of SSA places, making up 61.2 percent of all properties, with the highest differential between city and regional places found in Queensland (thanks to the Gold Coast and other coastal holiday destinations) at a ratio of 82:18 regional to capital city. In WA, 45.9 percent of SSA places are in the Perth metro area, the remaining 54.1 percent in the regions. Mature tourism destinations along with those more recently discovered thanks to the COVID-19 pandemic, welcome SSA opportunities for visitors with tourists contributing to local economies. Yet, the increase of SSA places has meant fewer properties available to traditional long-term renters with this shortening supply contributing to recent rent increases. SSA investments can be an appealing alternative to the long-term rental market. In Perth, an average two bedroom dwelling in the rental pool, earns $25,800 per year. The equivalent dwelling in the SSA market, based on average nightly rates, earns the same revenue in just 132 days. In regional WA, the gap in earnings from SSA and a long-term rental is even wider, taking just 107 days for a SSA property to earn the equivalent in the long term annual rental market. However, higher management costs (15-25 percent), no regulatory protections, risk of property damage and increased wear and tear are important considerations for SSA investments. The ‘gap’ in earning potential between short and long stay renting poses an immediate threat to further deterioration in rental affordability. Longer-term though, I predict the combination of cost of living pressures, slowing domestic tourism, potential excessive supply of SSA and risks associated with the SSA asset class will see long term rental investments regain favour.

Aug 10, 2023

Perth Property Leading National Capital Gain

By Hayden Groves Data house Core Logic’s latest housing price index figures reveal what many property commentators expected; that Perth property values now lead the nation in terms of capital gain over the past twelve months. Off the back of more moderate property value increases comparative to east coast cities during the property rush of early to mid-2020, Perth was better positioned to weather the storm of 12 successive interest rates rises in fifteen months and the resulting impact on property values. For the twelve months ending June 2023, Perth is the only capital city to record annual growth with dwelling values up 2.5 percent and moving 2.8 percent for the quarter. Somewhat remarkably, Sydney’s housing values increased an impressive 4.9 percent in the June quarter off a very high base, but have pulled back 8.0 percent from its peak prices in January 2022. Across the year Melbourne is off 5.7 percent, Brisbane backed off 8.2 percent and Hobart has declined the most by 12.7 percent. Overall, evidence is emerging that Australia’s property values are trending back towards a growth phase with almost every capital returning positive gains last month and quarter. Perth is well positioned for property price gains Property values are rising despite a high inflationary environment, higher interest rates and low business confidence off the back of increased immigration levels and low listing supply fuelling demand. Sales volumes have decreased across the year, down 20.3 percent nationally, with the three big east coast capitals’ transaction levels tracking below the national average. Perth’s property sales activity has only declined 3.2 percent last year, the lowest fall in the nation. The interplay between sales volumes, listing availability and property values provides useful insights into likely future market behaviour.  Listing stock continues to trend downwards, dropping 13.2 percent from last year and 28.7 percent lower than the five-year average. Lack of housing supply is the key driver of property values in today’s market. In Perth, total listings are down a massive 30.3 percent compared to last year and new listings coming to market are off 18.7 percent. With such short listing supply, population gains driving demand and relative affordability, Perth is well positioned for property price gains in the short to medium term. Meanwhile, national rents look like they’ve peaked growing by 9.7 percent year-to-date, down from the twelve-month peak of 10.2 percent for the 2022 calendar year. REIWA reported an uptick in vacancy rates to 0.9 percent last month, some welcome relief for tenants looking for a home. I see the biggest challenge for the housing market being the rate investors are selling their property assets, homes that provide rental housing. The decade average of investor property sales is 25 percent of all property sales. This has risen sharply since January to sit at 32.7 percent. Anti-landlord sentiment fuelled by the Greens and others for political purposes and higher interest rates is seriously damaging rental supply.

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 14, 2023

New listings are down a nation-leading 30.3 percent

By Hayden Groves This week, REIWA reported that there are 2,395 houses, 1,461 units and 1,364 vacant lots listed for sale on reiwa.com. This meagre total of 5,220 properties is about 40 percent lower than the same week last year. Meanwhile, sales volumes remain relatively high at 880 last week, unchanged from the corresponding week in 2022. Five years ago, reiwa.com listings numbered 12,417 and there were 29,000 property transactions. Last year, there were 58,000 sales across land, units and houses. Unsurprisingly, this shortage of supply matched with stronger sales volumes leads to one thing – higher prices. The same thing is happening in the rental market. Rental stock hit record highs in January 2018 with 12,000 homes available for lease, last week there 2,123. Rents are rising as a result of constrained supply. The problem of low housing supply for either sale or rent is not confined to the WA market. According to the latest Core Logic data, national listings for dwellings is down 13.2 percent on last year and 28.7 percent below the five-year average. In Perth, total new listings are down a nation-leading 30.3 percent from last year, way below the 18.9 percent average decline. Rental prices are rising at a rapid rate, up 13.4 percent in Perth since last year. Median house rents in Perth have moved from $370 per week in July 2020 to $575 per week today. A decade of relatively flat weekly rents, rapidly rising interest rates (which have risen 35 percent in a year), cost of living pressures and higher migration intake fuelling demand are the core reasons for the current rent price increases. new listings are down a nation-leading 30.3 percent Investors remain cautious about buying in the current fiscal environment and many, faced with spiralling mortgage costs are opting to sell. With 70 percent of all rental homes in Australia owned by persons holding a single property other than their primary home, selling the rental property is often a sensible option is your home mortgage repayments are rising. Chatter about rent freezes, high stamp and land taxes, a wobbly national economy, tenancy risk and yet-to-be tamed inflation disincentivise private investment. The structural nature of our rental housing sector has for generations relied on family investors to supply the market and in the absence of an alternative – such as governments supply more housing – we need thriving investment in housing from ordinary Australians to supply the homes tenants need. Yet, some politicians, advocates and the media have lashed these ordinary investors as being ‘greedy’ or even labelled them ‘dodgy’. Sure, there are some unscrupulous landlords out there – in the tiny minority. But this modern, anti-aspirational rhetoric threatens the fundamental underpinnings of our rental system. The government is unable to supply the $3 trillion worth of rental stock in Australia anytime soon, if that is the aspiration of those looking to undermine private investment in residential property.

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.