"87 per cent of homes sell for profit"

"Consumer confidence has increased, with 87.3 per cent of properties re-sold in Australia over the March 2013 quarter, according to a national research group.

RP Data’s latest Pain and Gain report has found the gross resale profit has totalled $9.6 billion.
Over the first quarter, 58,677 residential property resales were recorded nationally, with 12.7 per cent making a gross loss from the original purchase price, a total of $463.9 million.

Group national research director Tim Lawless said a lower interest rate environment appeared to create an increase in consumer confidence across the property market.

“We’re now seeing a lot more activity around sales compared with this time last year,” he said.
Units in lifestyle locations such as Queensland’s Gold Coast region experienced the largest resale losses, with 37.1 per cent of all March quarter resales in the area transacting at a price lower than the home was purchased for.

Regional areas, particularly those associated with the resource sectors, reported much fewer resale losses, with Queensland’s Central West,Victoria’s Loddon region, and the Kimberley and Pilbara regions of Western Australia all recording fewer than five per cent of March quarter transactions at a loss.

The biggest loss-making resales across regional Australia occurred in regional Queensland at 27.5 per cent, and in regional Western Australia at 20.2 per cent.

According to Mr Lawless, the gross capital losses experienced across the broader Queensland property market could largely be attributed to weaker conditions across the lifestyle markets, such as the Gold Coast, Sunshine Coast and in far north Queensland where the correction in home values has been more significant.

“The likelihood of making a gross profit or loss is quite different, based on the length of time a property has been owned,” said Mr Lawless. “As a stark example, of those homes that were purchased prior to 1 January 2008 (pre-global financial crisis) and were subsequently sold during the March quarter of this year, only eight per cent of resales were made at a gross loss.”
According to Mr Lawless’ findings, resales that incurred a gross loss over the March quarter had an average length of ownership of just 4.8 years.

Properties that recorded a gross profit were held for an average of 9.7 years, while those homes that recorded a gross profit of more than 100 per cent were owned for an average of 15.4 years."

This article was sourced from Real Estate Business.

"Taking a Closer Look"

 "You’ve found your dream home, you make an offer, you move in, but then you discover that things aren’t quite what you expected. Maybe there’s a power point that doesn’t work or a door that won’t shut. Carrying out a few simple inspections could prevent this.

An initial inspection
Properties are sold in reasonably the same state as when they are first inspected, and with the expectation that everything is in full working order.

It is a good idea to make a thorough visual inspection before you make your offer.  At this stage if you notice that something doesn’t work you can include a condition in the contract to repair it.  It is also worth specifying any fittings that you want to remain in the property such as curtains, pool equipment and light fittings.

Sellers, if you have made the buyers aware that something is not working or will not be included in the sale, make sure it is noted in the contract that they have been informed and accept the situation.

Building inspections
Building inspections are intended to satisfy the buyer that the property is structurally sound and free from major defects.  They generally only look at the building, so if the property has retaining walls for example, and you want these to be inspected, you will have to request that this be carried out.

If a structural issue is found the seller must be given the opportunity to rectify it.  If they are unable or unwilling to do so, the buyer may cancel the contract.

Buyers need to be aware of the difference between cosmetic issues and structural issues.  Missing roof trusses, or sagging ceilings are structural issues, cracked plaster, broken windows or hot water systems that don’t work, are not – however, these may be addressed by a pre-settlement inspection.

Pre-settlement inspections
Pre-settlement inspections allow the buyer to familiarise themselves with the property and check that everything is working properly.

A pre-settlement inspection should be carried out at least a week before settlement to give the seller time to fix any problems.  This is where you check the airconditioning, reticulation, hot water system, power points, taps, oven, lights, doors, etc.  Again it is worth noting that certain things may need to be fixed, while others, like a cracked bathroom tile, may not.

Pest inspections
Building inspections may indicate damage by white ants, but won’t say if termites are still active.  For this you need a pest inspection.

The contract is the key
When you make your offer you can insert special conditions about the types of inspections to be carried out.  You will need to word your conditions carefully and indicate what will happen if there are any major problems, for example, if a pest inspection finds active white ants, the seller will arrange for the property to be sprayed by a licensed pest controller."

This article was sourced from the Acton June newsletter.

"Building new or buying established?"

"People who buy newly established properties usually say it’s cheaper or more convenient than buying a second-hand home because all the hard work is done. Although, many buyers of existing homes eventually renovate which can be costly if it’s an older property.

Those who prefer to build from scratch say it’s worth the extra cost and effort in order to have a home that meets their particular desires. Building a new home also provides the opportunity to include some of the latest trends or environmental features that may be absent from established stock.

In recent years there has been a surge by people in their 40’s and 50’s wanting to build the dream home they have long desired and this has been assisted by the availability of land in established parts of the city through the drive for urban infill. 

Ultimately, it is the cost comparison between building and buying that will usually decide which option people choose.

In recent years Australian Bureau of Statistics data has shown that the cost of building a project home increased by upwards of 16 per cent, while in WA the occasional shortage of builders and tradesman can lengthen the amount of time needed to finish a home if a resurgent mining sector lures them away.

Now that the mining sector has wound down a bit, building costs seem to have leveled or come down a little and finding skilled workers to develop land and undertake new housing construction isn’t currently an issue.

 

As a result, there are some excellent house and land packages in outer urban areas to help buyers into the market with affordable options. 

First homebuyers should be particularly careful not to over extend themselves financially. Buying an affordable, existing home can often be a better option for many first homebuyers, but either way it’s important that people seek professional financial advice before deciding on the big commitment of home ownership.

Unusually, first homebuyers in Western Australia, unlike many other states, are fortunate to have a good supply of available land on which to build. There are currently around 1,400 blocks of residential land for sale in the metropolitan area.

Our state retains its strong housing culture propelled by the overwhelming desire by most people to live on a green title lot with a stand-alone house. For example, whereas 50 per cent of all new dwellings in Sydney are group dwellings such as units, apartments, villas and townhouses, in Perth only around 20 per cent of new dwellings are in this category: houses dominate here.  

Perth remains the most urbanised capital city in Australia because we have the least number of grouped dwellings as a percentage of overall stock than any other Australian city."

 

This article was sourced from REIWA.

"Big four raise commercial holdings"

"Australia's big four banks have collectively increased their exposure to commercial property by $1.73 bullion in the past six months, but some analysts hold reservations about the growth of non-core property lending.
The Commonwealth Bank of Australia lead the charge back into the sector, increasing its exposure by $2.1 billion to $52.8 billion in total committed exposure.

"The Commonwealth Bank has and will continue to grow its commercial property exposure on a selective basis to proven sponsors across all segments and geographies," a CBA spokesman said. "The majority of our recent growth has been on the eastern seaboard, with limited, with limited additional supply supporting sound fundamentals."

The bank's guarded remarks on its comparatively large increase in lending come as concerns to grow in the market that a cheap debt-fuelled binge on property has started.
Leading banking analyst CLSA's Brian Johnson said he was comfortable with the banks' half-yearly statements.

"The cost of borrowing from big companies has come down a lot and even though capitalisation rates on core property have come down, the spreads are still healthy," Mr Johnson said."
However, if you look at the non-core, I think there isa  problem there. I don't think there is a healthy gap on the spreads there."

Australia and New Zealand Banking Group has decreased its exposure to commercial property by $100 million to $30.2 billion in the six months ending December. It has fallen $700 million in the 12 months to December.

The bank has reduced its exposure, but it is still clearly in the market for business. It is understood that ANZ provided the lending for joint venture partners Alceon and Trident to purchase BlackRock's Foxtel building on the Gold Coast on a loan-to-value ratio of 65 per cent.

National Australia Bank saw its exposure in property slip by $1.1 bullion in the last six months to $60.1 billion. However the majority of that was off-shore. In Australia, NAB's exposure increased by $100 million to $45.1 billion. Its percentage of impaired loands has also dropped to 2 per cent from 2.75 per cent six months ago.

NAB's general manager for property finance, Andrew Balzan, said a cautious outlook on the sector was imperative.

"NAB remains committed to supporting the domestic commercial property market," he said. "All enquiries are reviewed on a case-by-case basis to ensure the underlying metrics of the transaction correspond with our prevailing view of the market sector."

NAB's quarterly commercial property survey identified that finance and fudning were the enxt biggest chalenges for property owners, after consumer confidence. Its commercial property index, which gauges market conditions, is forecast to rise over the next 12 months.
Westpac Banking Corporation also shower a slight increase during the six months - with the bank's total committed exposure up to $52 billion from $51.37 billion.

This article was sourced from The Australian Financial Review and was written by Matthew Cranston.