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Jan 4, 2018
FREO’S TOP FIVE – 2018
Disclaimer: These comments are the writer’s own and do not necessarily reflect the current opinions and policies of the Real Estate Institute of Western Australia or dG. Agents are often asked to predict future growth potential in the different suburbs and whilst opinions vary, most agree that property located close to the coast, shops, popular schools and transport infrastructure increase in value more rapidly than those that are not. For in and around Fremantle, these are my top five suburbs to watch in 2018: 1. White Gum Valley. Ten years ago, it was unimaginable that property would fetch more than $1,000,000 in the Valley whereas nowadays, quality family homes fetch above six figures regularly. I was astonished to recently hear a seller of a property on the Fremantle side of the border with WGV, ask if we could advertise the home as being in WGV rather than Fremantle; a huge shift in perception. 2. South Fremantle. South Freo has been an outstanding performer over the past 12 months with 4.3 per cent growth. The village atmosphere, shops, cafes, pubs and beachside lifestyle opportunities will continue to underpin strong demand for limited housing stock in the suburb. Much of South Fremantle was “cottage built” and with Heritage constraints, land availability will always be tight. The increase in housing diversity has also increased South Freo’s popularity which will keep upward pressure on apartment and unit prices too. 3. Hilton. Popular as the entry point into the Fremantle lifestyle now with its own “village” atmosphere with community gardens, a leafy local school, cafes and gourmet grocers. Its median house price has remained stable over the past year and Hilton remains affordable with great opportunities to commence your Freo lifestyle. 4. North Fremantle. With small sales samples, it can be difficult to predict the market direction of this “old meets new” river and ocean suburb. Recent upgrades to its Queen Victoria street commercial precinct, has breathed new life into the area. Its median house price has grown around 10 per cent over the past year. Recent subdivisions and housing off McCabe Street are magnificent and will drag up the median over time. A great place to live. 5. Fremantle. Diverse, eclectic housing options throughout the 6160 postcode remains a key feature of Fremantle’s residential property market. Fremantle’s popularity as a housing destination has taken a hit in recent times and with prices down and the market transitioning forward, now is a great time to acquire property in the heart of our port city. Infill housing projects sensitive to our existing historic built environment are crucial to the city’s economic prosperity with existing projects such as the King’s Square re-development helping Fremantle out of the doldrums. These top five are by no means an exhaustive list and if thinking of buying in any suburb, be careful to choose a property that meets all your needs. By Hayden Groves – REIWA President & dG Principal
Dec 19, 2017
BENEFITS OF USING A PROPERTY MANAGER
With Christmas on our doorstep investors and home owners are getting prepared for the new year, what better time to talk about the benefits of using a property manager. Property management is more about managing the tenancy than it is about managing the property. This makes sense given the tenant is the one living in and caring for the property, whereas the property manager usually visits it a handful of times per year. This being the case, 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. 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 madness not to utilise the services of a competent property manager for a rented property. Management fees are not exorbitant and are normally tax deductible. 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 the Act 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. And now that almost all prospective tenants are exclusively reliant on the internet to find a property, owners without access to the favoured websites find it difficult to attract a tenant in the first place. There is great value in having an agent 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. Acting at arm’s length affords the property manager a ‘no excuses’ approach to rent payments and the lease agreement more broadly. Self management often works well and for extended periods, but when a tenancy goes wrong, it is costly and stressful. It has been my experience that with all things considered, it is not worth the risk. Hopefully you find some of these benefits evidence enough that engaging a property manager is, for the most part, the way to go. Be well, stay safe and have a very Merry Christmas! By Hayden Groves – REIWA President & dG Principal
Dec 13, 2017
LOCAL MARKET REPORT
Apologies for the tardiness of this update on the local market, but I have been delaying it deliberately hoping that I’d be able to report some positive numbers after several quarters of falling property rents and values. September’s final numbers from Landgate and REIWA reveal the number of property transactions throughout Perth fell back 10 per cent for houses and 18 per cent for units on the June quarter figures. Sales volumes remain subdued but so do stock levels, dropping gradually throughout 2017 to settle at 13,036 metro-wide at the end of September. This is about the long term average level of supply considered representative of market parity although supply has crept up again to be at near 15,000 listings this week. Median house prices remained stable for the quarter reported to be $515,000 up (yes up!) from the June quarter by 1 per cent. Preliminary data for November reports the median at $520,000 – another rise! Trade-up activity is increasing as demand for higher valued properties begins to increase as supply in these markets reduces. Much of Perth’s supply is concentrated in outlying areas where there’s been too much new building activity such as Baldivis, Bertram, Alkimos and Ellenbrook. Fremantle’s median house price remained stable for the 12 months ending 30th September across all her suburbs registering zero growth for the year. Beaconsfield dipped 2.8 per cent for the year as did Hilton, down 3.2 per cent on 68 sales and White Gum Valley surprised by returning a median of $675,000 down 4.6 per cent on a year ago. Bright spots were North Fremantle, up 10.4 per cent, East Fremantle up 4.9 per cent and the red-hot-popular South Fremantle rose 4.3 per cent over the year. We have noticed that Fremantle’s 6160 housing stock itself has been less desirable of late so the dip of 9.8 per cent in median house price is unsurprising. The apartment market across Greater Fremantle improved in the September quarter with a 3.6 per cent lift in median unit prices clawing back some of the losses over the past twelve months. Overall, apartment prices have dipped 10.8 per cent in median terms in a year. The rental market has been steady for several months now with Perth’s overall median rent of $350 per week unchanged for nine months. The overall median rent in Fremantle is $430 per week, down $10 on about a year ago with leasing activity and vacancy rates steadily improving in recent months. The market has transitioned with the “bottom” having already passed us in certain sectors of the local market. There’s solid demand in trade-up suburbs like White Gum Valley, Beaconsfield, South, North and East Fremantle with moderate price gains expected in these areas next year. It will be interesting to see how the market behaves come mid January 2018.
Dec 6, 2017
BUYING AND SELLING IN THE SAME MARKET
Property market commentary is almost always focused on the numbers although unless you are a sophisticated property investor, many of these statistical observations can be confusing to the “mum & dad” buyer trying to read the market. When buying the family home, as long as you buy and sell simultaneously under similar market conditions, then the state of the market is almost irrelevant. In fact, upgrading your home in a slow or falling market can be beneficial. That’s because, if you assume a property market has fallen 5 per cent, your $550,000 home might only fetch $522,500, yet your new home previously worth $770,000 now sells for 5 per cent less at $731,500; a $9,000 net benefit. Alright, this is a crude example but in recent years, it is the $1,000,000 plus price bracket that has adjusted down more than property priced around the Perth median of $515,000. That’s why the median house price has been falling up until now. Buyers are now emerging from their holding pattern with the latest numbers showing upward pressure on median prices, sales volumes improving and supply of quality homes constrained. If you are an upgrading buyer, this market is ideal and you ought to proceed with confidence in such a low inflationary and interest rate environment. Property has always been a long term prospect and the family home purchased in 2017 for the median $515,000 ought to (if history repeats) be selling for $1,030,000 sometime over the next decade. Even if price growth is more subdued (such as it has been over the last decade in Perth) over the next ten years, most commentators agree that the bottom of the market has already passed. It is somewhat inevitable that property prices will continue to rise over time and affordability constraints aside, those hesitating to buy when there is good choice about is counter intuitive. In a rising market when people gain confidence to buy, stock levels fall as demand increases and choice becomes so constrained that many buyers are forced to buy homes inadequate to their needs or end up competing for quality homes and paying more than they should. If you’re upgrading through the market and have recently sold, I recommend you make a buying decision soon.
Nov 29, 2017
LET THERE BE NO REGRETS
As market conditions improve, buyers will often find themselves making an offer to purchase in competition with others. Agents have differing approaches as to how to deal with multiple offers but normally will inform buyers that their offer is one of many. Details of competing buyers’ offers are not normally revealed so as a buyer offering in competition with others, it is difficult to know what price and conditions will ensure purchasing success without paying significantly more than the next highest offer. Buyers ought to remember that agents have a legal responsibility to act in the best interests of the seller unless it is unlawful or unethical to do so. They are paid to ensure the buyer pays the highest possible price on the best possible terms. One of the most effective ways to achieve this and discharge their fiduciary responsibility is to have multiple purchasers competing to buy. Naturally, buyers don’t like having to compete as it is almost impossible to gain a negotiable advantage in such circumstances. When faced with buying in competition my advice to buyers is to ask the agent if there are any other offers on the property before submitting your own offer. This knowledge might influence your initial offer. Also, consider removing some of the conditions of your offer such as a Building Inspection Report clause especially for more modern homes and consider aligning the settlement date to suit the seller. The notion that agents should assume the buyer’s first offer is not their “best offer” is nonsense. A buyer who tells the agent that this is their best offer should not assume the agent thinks it a lie and remember that the seller is under no obligation to provide you an opportunity to negotiate further. Believe the agent when they tell you there are other offers in play. Buyers are prone to thinking the agent is telling fibs; it is rare nowadays that they are and ask yourself if your best offer is really at your limit. Please don’t shoot the messenger if you miss out. Being told your offer was one of many, choosing not to submit your best offer and missing out ought not to give rise to admonishing the agent. By Hayden Groves – REIWA President & dG Principal
Nov 9, 2017
BUYERS – HAVE YOUR CONDITIONS READY
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. 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, a building inspection clause might be acting against his or her legal obligations 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 especially when dealing with inexperienced buyers. Conversely, some agents will simply ask the question, “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 are seeking. If Immediately after settlement, should you find that not all is as it should be, a buyer typically has only 10 business days to properly notify the seller’s representatives advising of an item that’s not as the buyer had expected. For example, a dishwasher that was expected to be in sound working order upon settlement is not working at all. By Hayden Groves – REIWA President & dG Principal
Nov 1, 2017
IS SPRING REALLY THE SELLING SEASON?
Disclaimer: These comments are the writer’s own and do not necessarily reflect the current opinions and policies of the Real Estate Institute of Western Australia. Spring is considered to be the “selling season” for real estate, a time where gardens, moods and sales volumes improve. In the middle of winter, it is tempting to suggest a rainy weekend was the reason a buyer was not found. REIWA numbers report an increase in listing stock of over 800 homes last week alone as spring entices sellers to the market, hopeful that warmer weather and an improving market will produce a sale. However, according to REIWA Research, the notion that more properties sell during spring compared to the rest of the year is more urban myth than truth. Analysis of sales volumes since 1994 for the September to November period each year shows sales activity slowed for eight of the past 22 spring periods with little change in 1998, 2014 and 2016. Interestingly, the month of September normally considered the start of improved selling conditions has shown itself as being a poorer performer compared to the other spring months October and November. Since 1994 on only one occasion has September out-performed October and November (September 2008) with every other September over the past 22 years seeing sales falter. This is probably due, in part, to September having one less selling day than the months either side July, August and October, it normally being the month of the AFL Grand Final and the start of the school holidays. With spring not necessarily being the selling season it is purported to be, it is noted that neither is summer. In fact, the greatest occurrence in fall-off sales is in summer with sales volumes dropping comparatively twelve times over the past 22 years. Consequently, autumn is the season that comes to the fore with sales numbers increasing on sixteen occasions since 1994 during the collective months of March to May. Overall it appears that the Perth property market relatively ignores seasons as a contributing factor to sales activity or median prices. Here, major economic, political and social factors play more of a role in affecting sales prices and changes to interest rates, population growth, employment levels, consumer confidence and policy stimuli impact more substantially irrespective of the season. By Hayden Groves – REIWA President & dG Principal
Oct 17, 2017
CONSIDER A BUYER AGENT
Disclaimer: These comments are the writer’s own and do not necessarily reflect the current opinions and policies of the Real Estate Institute of Western Australia. When first deciding to buy a property whether it be your first or fifteenth, one to live in or rent out, most buyers look to the internet for inspiration, information and insight. The sheer volume of property information available on line is staggering; the days of having to pour over the classifieds and spend countless hours dashing through home opens are behind us. Lessened too are the days of buyers asking an agent to seek out suitable property for them. Before property industry de-regulation and the re-writing of REIWA’s Rules of Practise, it was common for an agent to introduce a buyer to another agent’s listing under a conjunctional arrangement and receive a handsome slice of the listing agent’s fee. A 60/40 split was almost always a given. The demise of the multi-listing service (a system whereby all properties on the market have a lock-box secured on the property and participating agents could simply access the property at anytime) has contributed to the reduction of conjunctional arrangements too. The boom of the mid noughties brought with it limited market supply and high demand thereby limiting the need for a listing agent to give up a portion of their fee to a sub-agent; they were simply able to deal with the buyers themselves. In such market conditions, buyers worked out pretty quickly there was no advantage using a sub-agent because the listing agent was more likely to favour offers from buyers that she’d introduced. The quieter, well supplied market of post GFC where buyers were scarce saw the conjunctional come back into popularity but with a well priced listing still an agent’s priority, running about after a buyer on the chance of securing a sale for a small portion of the listing agent’s fee no longer seemed worth it. Enter Buyer Agents. Seizing on a growing gap in the market, a buyer’s agent acts for and is paid by the purchaser. Time poor investor types find this service particularly worthwhile. A good buyer agent will undertake substantial research before choosing a property to buy for their client, assessing yields, rents, affordability, suburb infrastructure, growth history, etc. And because the buyer agent is acting for their purchaser, they negotiate with the listing agent in a manner that sets out to buy the property for the lowest possible price on favourable buyer terms. Neatly, the buyer’s agent is not seeking to claim a portion of the selling fee. The vendor’s agent need not find or deal with the buyer either; all negotiations are done through the buyer’s agent. Buyer agents are growing in number, provide an excellent service to their clients and make the listing agent’s job easier. By Hayden Groves – REIWA President & dG Principal