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May 19, 2023
Waiting on Spring to Sell?
By Hayden Groves During the winter months, when market conditions can flatten out, vendors often choose to hold off on their selling plans until spring when both gardens and moods improve. In a balanced market, this can be a reasonable strategy; an attractive garden can add genuine value to a property and there is a more positive atmosphere once winter ends. Locally, the residential rental market normally slows during winter with notably fewer tenant enquiries for vacant properties during the cooler months of the year. REIWA’s statistics consistently reveal vacancy rates often move with the seasons, even during high rental demand periods. From September through to March the vacancy rate normally drops, rising again during winter. it is wise to sell and re-buy contemporaneously Property owners also tend to be less enthusiastic to move during the winter months. Often for reasons similar to those displayed by tenants, although broader market conditions have far more impact on selling outcomes than the seasons alone. However, with current market conditions of short housing supply and high demand, seasonable variables matter far less. The current market conditions indicate that sellers and tenants could comfortably transact property now on the proviso they stay in the market. For tenants, finding a rental is hard enough and with rents likely to continue to rise, securing a twelve-month lease at a fixed rent now makes sense. For sellers, in current market conditions, it is wise to sell and re-buy contemporaneously. Buying in winter is a reasonable idea, as some buyers (like tenants) are more inclined to stay put during the cooler months, giving those that are looking to buy an environment with fewer competing buyers about. However, with property listings down to 6,157 (of which 1,629 are blocks of land) compared to 8,294 a year ago, buyer activity remains elevated. Rental listings have plunged to 2,047, 400 fewer than last year. With such low stock levels, buyers and tenants are having to complete for properties which counters any typical winter seasonal decline in demand. Many local homes are also lovely and cosy in winter and present themselves well to would-be buyers. Those homes with effective solar passive design, northern orientation shine and a crackling fire in the corner can do wonders for buyer sentiments. If selling in winter, make sure your winter weeds are pulled, any moss and mildew on paths, walls and bathrooms removed, and try and hold inspections when the weather forecast is fine, and the sun is high in the sky.
May 12, 2023
Presenting your home for sale
By Hayden Groves Not unlike a first date, first impressions count. Just as you would dress to impress, smell lovely and chew with your mouth closed, your home ought to be preened with the same level of care when presenting it for sale. It is a good idea to get around to completing those jobs around the house you had been intending to do for years. Build that garden bed, paint the front fence, fix the side gate, remove the old couch etc – all typical examples of small jobs that fit into the “I must get to that one day” category. Small things do make a difference When preparing your home for sale, these “little” jobs are important in achieving an expedient sale at the highest possible selling price. This is because buyers typically notice the little jobs too; a rusty downpipe is easily and cheaply replaced yet can loom large in the buyer’s mind as a more major problem and hints that other areas of the property may be neglected. Of course, you need to be cautious about “over-capitalising” when preparing to sell. Replacing a bathroom and renovating a kitchen are expensive and depending on the property and its location, may prove to be counterproductive in the effort to achieve the best price. Conversely, an original cottage in Fremantle is more likely to benefit from renovations when preparing to sell due to the higher demand for “all finished” properties in our more popular streets. Obviously, each property and circumstance engenders a variety of options for sellers when preparing to sell and opinions from real estate agents on the matter are, as always, subjective. In general terms however, presenting a neat, clean, and tidy home is always going to help your cause in selling at the best price. “Present it like you don’t live in it,” a client suggested recently and is probably a fair description. Paint out bright colours on internal walls, de-clutter by storing away trinkets and excess family photos, clear the fridge of magnets and kids’ school art and place items neatly in storage cupboards. For vacant properties, the hire of some stylish furniture makes a huge difference and almost always speeds up the sale. Small things do make a difference. With paint and gardens another two areas of focus that can make a disproportionate difference to the selling price relative to their cost and the effort involved. It is also worth considering seeking advice from a qualified home stylist who, whilst a measured investment, can mean the difference between a higher than expected selling price and no sale at all.
Apr 14, 2023
Ethics and Real Estate
By Hayden Groves As a junior sales agent many years ago, I lost a listing to a competitor. The seller’s rationale surprised, telling me, “We really like you, Hayden, and the other guy makes my skin crawl, but we reckon he can get us the best price.” The idea there was a disconnect between being a good person and achieving the best market price was difficult to comprehend then as it is today. Thankfully, the two are not mutually exclusive. The Governance Institute of Australia undertakes an annual survey of Australian society’s perceptions of ethics across the major occupational sectors. Unsurprisingly, nurses, veterinarians, doctors, teachers, ambulance and fire services all rank in the top ten of ethical occupations. The bottom ten are made up of lawyers, politicians, senior executives and fund managers. Real estate agents rank third last with 46 percent of those surveyed suggesting we were ‘somewhat unethical or very unethical’. Real estate agents rank third last Remarkably, the militant Construction Forestry Maritime Mining Energy Union ranked higher in ethical behaviour than real estate professional associations. Clearly, the community judge us and those that represent our interests (as President of the REIA that includes me) harshly. With such a poor ethical reputation, it is surprising that many real estate agencies survive as long-standing small businesses. It’s hard to imagine a local restaurant, retail shop or other cottage business that suffered such a poorreputation surviving very long. As a local real estate practitioner and employer, your reputation is everything. Damage your reputation through misconduct in the market and word quickly spreads that you’re untrustworthy. Most local agents enjoy a solid reputation, attract repeat business and have serviced theircommunities for years. For example, a quick Google search of Fremantle’s top three real estate agencies boast 418 reviews at an average of 4.6 stars. And ask random folk about real estate agents and the reply is often, “they’re terrible, but mine’s great!”. So, why the disconnect between community perception and most users of real estate services? Part of the answer lies in the history of real estate agents’ behaviour prior to their regulation in the 1970’s. Stories of real estate agents preying on “little old ladies”, underselling their homes to relatives and on-selling for profit, can develop into urban myths that remain stuck to an industry for generations. Mostly though, it is our fiduciary responsibility to work in our client’s best interest that impacts community perceptions of an agents’ ethical conduct. Being duty bound to achieve the highest possible rent and / or market price for a property in times where supply is tight and demand is high, impacts those on the buying and renting side. It follows that a buyer or tenant can feel ‘forced by the agent’ to pay more and that translates asunethical behaviour. It is the daily, necessary work of agents that can be misconstrued as unethical when the reality is the agent is simply respecting their legal obligations.
Apr 11, 2023
Local Market Looking Good
By Hayden Groves This week’s Reserve Bank decision to keep the official cash rate on hold at 3.6 percent will be welcomed by those carrying the burden of the recent surge in interest rates. Inflation remains well outside the 2-3 percent band palatable to the Reserve Bank, but they finally appear ready “…to provide additional time to assess the impact of the increase in interest rates to date.” February’s inflation figures reveal a 6.8 percent rise over the past twelve months, a pull-back from January’s 7.4 percent and December’s 8.4 percent annual inflation numbers. The downward trajectory in inflation seems clear. Some economists have boldly claimed interest rates have now peaked, suggesting that the next rate move will be a cut. government over-reach is now on full display Housing remains a major driver of inflationary pressures, particularly construction costs and residential rents. Rental affordability has deteriorated across almost all capital cities as the supply crunch leads to rapidly rising rents. So far, cost-of-living pressures are no match for population gains and short supply, with underlying demand continuing to put upward pressure on rents. Core Logic’s latest data set has Perth at the top of the national rental list for houses with a 12.7 percent increase in twelve months and continuing its upward trajectory. Local apartment rents have jumped by a similar amount, up 13.1 percent since last March. Elsewhere, house rents have peaked and whilst most capital city rents are up on a year ago, they are now falling or steady. Rents in Melbourne are on a sharp incline as government laws introduced last year begin to impact supply. In Victoria, a typical sample of 100 house sales included 27 rental homes of which only 9 were retained as rentals. The damage caused by government over-reach is now on full display. Lack of supply is not contained to rentals with new ‘for sale’ listings down 17.7 percent on last year and trending downwards. Total listing numbers are down too, 19.5 percent below the five-year average. Sales volumes have started to pick up too with auction clearance rates in east coast cities consistently above 70 percent in recent weeks. This lack of supply is beginning to impact property values with property prices across the nation turning positive again last month, up 0.6 percent marking the end of 10 months of falls. Perth remains the only capital to have recorded positive growth over the past month, quarter and year. Other cities continue to adjust with Hobart pulling back 12.9 percent in the past year, Sydney is down 12.1 percent as is Melbourne (9 percent) and Brisbane (8.6 percent). The Reserve Bank’s decision to hold on further rate increases, combined with an underlying supply shortage is likely to breathe new life into property markets despite affordability constraints in cities such as Sydney where median dwelling values are at $1,014,393. Perth’s median house value of $567,111 and unit median of $409,253 has us remaining the most affordable state capital in Australia. Migration rates, supply shortages, strong economy, high wages and relative affordability continue to underpin values in our property market. REIWA’s prediction of 2 to 5 percent growth by end of June is looking more likely as our market gains momentum.
Apr 3, 2023
What’s Wrong with Real Estate?
By Hayden Groves Some readers of this column would have tuned into ABC’s Four Corners program, Agents of Influence aired earlier this week. As a representative of the real estate industry, it was unpleasant watching. The program touched on several issues; conditioning, underquoting, hidden commissions, conflicts of interest, buyer agency and compliance. Taking each of these in reverse order, it might be useful to explore these matters from within a local industry context. Compliance: Real Estate agents are licensed and regulated by both state and federal laws that hold agents accountable for their conduct. Complaints against agents are taken seriously with very few leading to disciplinary or legal action. In NSW, where the program explored agent compliance, a miniscule 0.008 percent of agents were prosecuted by the regulator in that state last year. These comments are the author’s own and may not reflect the opinions or policies of the Real Estate Institute of Western Australia / Australia. These laws treat buyers like they’re idiots Buyer Agents: Buyer agents are duty-bound to act in a buyer’s best interest in a real estate transaction. The program demonstrated conflicts of interest whereby sales agents were recommending the services of buyer agents that they had a personal and/or linked financial relationship with. In short, buyer agents must be clear about their fiduciary responsibility and actively avoid actual or perceived conflict of interest in their dealings with selling agents. Conflicts of Interest: Agents need to better understand this part of their function. Consumers need to be acutely aware that agents representing sellers must act in their sellers’ interests and follow their instructions, unless those instructions are unlawful. Agents themselves sometimes stray into failing to discharge this fiduciary responsibility in the pursuit of finalising a sale. These laws treat buyers like they’re idiots.Hidden Commission: Referring business to or recommending the services between agents is reasonably common (particularly amongst large franchise networks) whereby an industry standard of 20 percent of the commission earned is shared with the referring agent. Such referrals generally make sense but these arrangements must be disclosed to the client and are more reliable than the commercial on-line ‘agent finder’ services.Underquoting: A lot of fuss about is made about underquoting and the flouting of laws that ban the practice. In brief, an agent is outlawed from quoting a likely sale price of a property that is substantiallybelow the realistic market price. These laws treat buyers like they’re idiots. Buyers know the market well and understand that it’s the relationship between a willing buyer and seller that reveals the price, notwhat an agent says. Buyers are not disadvantaged by under-quoting; it just makes the agent look like a fool.Conditioning: An unfortunate practice whereby agents seek to provide a vendor with an unrealisticallyhigh expectation of a selling outcome in order to secure the listing then, once obtained, condition the seller down to accept a lower, or realistic, market price. Sellers should see this one coming a mile off and simply insist the agent provide proof and empirically justify their opinion of value before appointing them. Real Estate is a career built on reputation. Those in the business that act unethically or outside the law get found out quickly and don’t last long.
Mar 27, 2023
<strong>Housing Less Affordable</strong>
By Hayden Groves The Real Estate Institute of Australia’s (REIA’s) latest Housing Affordability Report was released last week revealing housing affordability declined by the end of 2022 across Australia. As expected, NSW and Victoria remain the least affordable places to buy property (with Sydney the second most expensive city in the world to buy behind Hong Kong) with an eye-watering 54.8 percent of a family’s income devoted to meeting the average loan repayment in NSW. In Victoria, 45.8 percent of their hard-earned goes to meeting mortgage commitments. The national average is now 44.7 percent, well above mortgage-stress territory. We are fast approaching record levels of housing un-affordability. Happily, Western Australia remains astonishingly affordable with 33.8 percent of our median weekly family income of $2,423 covering the average loan of $479,772. In contrast, mortgage holders in NSW hold average loans of $749,521 with a median family income of $2,336. As expected, housing affordability has deteriorated over time declining 13.9 percent over twenty years with much of that decline (10.9 percent) occurring in the past five years. Tasmania’s decline in affordability tops the chart with a 15.3 percent fall in affordability over twenty years. Once more, WA’s affordability performance remains appealing to home buyers and investors with a modest 7.5 percent deterioration in affordability in twenty years. Western Australia remains astonishingly affordable Rental affordability has had plentiful media coverage of late due to its recent deterioration. With the average tenant across Australia paying 22.9 percent of their income on rent, leasing remains significantly more affordable than property ownership. Rental affordability appears to have stabilised, improving in the December quarter by 0.1 percent thanks to an increase in average wages. Whilst property ownership affordability has rapidly declined over the past five years, national rental affordability has proven more stable, dropping a mere 0.8 percent in twenty years. Rental affordability has, in fact, improved over the past five years across the nation, up 0.7 percent. 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. In Perth, median house rents have moved from $350 per week to $470 per week over two years, encouraging first home buyers into home-ownership. 36.1 percent of all WA buyers in the December quarter were first-time buyers, the highest proportion in Australia. Investors should take note too as WA property continues to deliver the best rental yields in the nation at 3.9 percent. Despite these appealing yield numbers, the proportion of lending to households for dwelling investment in WA remains behind all east-coast states at 24.6 percent.
Jan 23, 2023
Buyers, Know Your Rights
By Hayden Groves In the process of selling real estate the Agent is normally acting for and on behalf of the seller and is obliged under an industry Code of Conduct to follow the sellers’ instructions unless it is unlawful or unethical to do so. When acting for the seller, the agent is also obliged under the same Code to be “fair to all other parties” which includes the buyer. But what does “being fair” really mean in the context of a property transaction? The answer to this question has several shades of grey but certainly, the agent is obliged to disclose any “material fact” about a property prior to a contract to buy being formed. Material facts are loosely defined as being bits of information that may cause a buying decision to alter its course. This is tricky as what might be considered unimportant to one buyer may be of critical importance to another. Either way, buyers are advised to be well prepared Being fair includes answering questions honestly and providing general advice but in my opinion does not extend to suggesting which conditions a buyer may want to include in an offer to purchase. It is in the seller’s interest to receive an offer with as few conditions as possible, therefore an agent who suggests to a buyer they ought to include, for example, an “everything to be working at settlement” clause, might be acting against their legal obligation. Agents approach this matter differently. Many will suggest a series of standard conditions that a buyer should include with their offer and whilst this may be outside the agent’s mandate, it is common and an industry accepted approach. Conversely, some agents will simply ask, “Do you wish to include any other conditions with your offer?” and leave it at that. Either way, buyers are advised to be well prepared before making an offer to purchase. You ought not assume the Agent is there to provide guidance as to what conditions might suit your needs. Certainly, asking the agent pertinent questions about the property’s age and condition and if the Seller has, for example, undertaken any improvements during their tenure ought to receive an honest answer. Most importantly, predetermine what special conditions will suit your individual needs and ensure they are drafted in a manner that provides the contractual protection you’re looking for. Be mindful that you are buying a property “as inspected” so the seller is generally not obliged to fix something that wasn’t working when you first inspected the home unless it’s specified in the special conditions that it should be.
Jan 16, 2023
Perth Values Hold Firm
By Hayden Groves The latest numbers from property data gurus Core Logic revealed national housing values had fallen at their fastest rate on record, dropping by 8.4 percent since prices peaked in May last year. The cities most impacted are those that typically experienced the strongest gains in the ‘COVID’ years prior to the peak. Unsurprisingly, Sydney’s housing values have pulled back 12.1 percent over the past twelve months, Melbourne is off 8.1 percent and Hobart has declined 6.9 percent. It’s worth remembering national property values have risen 28.9 percent since government stimulus and emergency interest rate settings were introduced to counter COVID-related economic shocks. Adelaide is suddenly leading the capital city pack showing a 10.1 percent rise in house values in 2022. Darwin’s prices held positive at 4.3 percent growth and Perth moved forward 3.6 percent for the year. Perth’s property prices peaked in July 2022 and have only retreated 0.6 percent since then, the smallest fall across the nation. Perth property values have gained 25.9 percent since late 2019 with our regions still climbing after already having put on 31.5 percent. Looking more closely at the numbers, Perth is looking the most likely capital city to weather the current higher interest rate and inflationary environment best as 2023 unfolds. Last month, Perth was the only capital to post a positive price gain albeit a moderate 0.1 percent, but it does indicate that all other capitals are past their peak. With a median house value at $560,902, Perth remains the most affordable city compared to east coast capitals. Adelaide’s median price is $88,139 higher than Perth’s and it is still $112,431 more expensive to buy in Hobart than locally. As interest rates continue to climb, property values across eastern Australia are likely to continue their decline. However, the chances that they’ll give up their recent gains is highly unlikely. Population growth is tipped to expand as 2023 unfolds and most economists predict interest rates will stabilise in the back half of this year as inflation moderates. These factors, along with low unemployment rates and healthy consumer bank balances, will help most households cope with rising interest rate costs this year. As Australia’s most affordable state capital, Perth’s fundamentals are poised to deliver property value gains this year due to our more moderate response to the ‘COVID boom’, strong employment opportunities and population gains.