"Beware the mother of all housing booms"

"If we are not very careful Australia is going to have the mother of all dwelling booms. What we are seeing is a three-pronged boost to prices. First is a dramatic push to lift the demand for dwellings by banks offering cut mortgage rates thanks to Reserve Bank Governor Glenn Stevens. But second, and just as importantly, there is reluctance by banks to fund new supply.

In any commodity if you inflate demand and squeeze supply, prices go through the roof.
Thirdly taxpayers will subsidise the boom via a massive increase in the use of negative gearing via both personal and superannuation tax breaks.

Longer term, that will damage the economy and the Reserve Bank will have to take responsibility for pulling the price boom trigger. The market accepts further interest rate cuts but surely the Reserve Bank board members will now have second thoughts about future cuts.
To understand what is now happening, let’s go back to basics.

 

Where do you put your money? Glenn Stevens has priced bank deposits out of the market for long-term savers who want a fair return. Unless banks are once again prepared to go abroad for their money it means that there will be no abundance of long-term bank deposits, although there will be plenty of short-term money.

The sharemarket has delivered great returns but a large number of people have been burned in the last five years and brokers are no longer excited about value in the market. In this low interest rate environment shares will do well but that is not where the big money is going to go.

Australians are going to rush for bricks and mortar as they always have in situations like this. And when they see the market about to rise they just jump in. In Sydney, real estate agent John McGrath told a mortgage brokers' conference that the city's inner city property demand was “red hot”, although in Melbourne there is a fair amount of supply in the market. Melbourne, along with Brisbane, will quickly follow, although perhaps not with the same intensity.

Most of the demand will be from investors, including those using their self-managed funds, plus the Chinese. First home buyers will obviously contribute at the lower end.

When you see a rush of demand, what you need is supply. Given that the main demand is in inner city areas supply takes a long while to generate. Banks are reluctant to lend to developers – especially given recent failures – and the approval process is very slow.

In addition, the capacity of the building industry has been curbed by the slump and many have been forced out of business. The tax office and the banks played a big role in this.

All the conventional signals told Glenn Stevens he should lower rates. Yet if Tony Abbott wins the election we are going to see a surge in plant investment because the political crisis has held people back. The August rate cut will have had no effect. Because we are dealing with existing properties, an inner city boom does not boost employment until developers can fund and gain approval for new projects. Of course, when it spreads to outer suburban areas then it does boost employment.

At some time (not in the short term) Glenn Stevens will be forced to address the inner city property boom which he triggered in August 2013 – probably by increasing interest rates at an inappropriate time.

Negative gearing may also be curbed."

This article was sourced from Business Spectator and was written by Robert Gottliebsen.

"Laidback and loving it"

"The city has a sense of grittiness that suits its bohemian young residents, writes Samantha Hutchinson.

   Just 30 minutes drive from Perth, the historic port of Fremantle offers heritage architecture and a laid-back, creative culture with a prime location on the West Australian waterfront at prices more attractive than the inner city.
   A city with strong working-class roots (the mascot of the local AFL team, the Fremantle Dockers, is a giant dock worker) and migrant bohemian influences, Fremantle has retained a sense of grittiness that makes it an attractive destination for hip, innovative restaurants and retail spaces, and a magnet for your professionals.
   Little Creatures Brewery has installed itself in a converted industrial shed on a fishing wharf, and epitomises the blend of heritage architecture, industrial roots, and modern styling that is quickly becoming the city's defining feature.
   Fremantle is serviced by a rail line linking it with Perth, putting commuters within easy reach of jobs and services, while retaining quick access to the Perth waterways, the ocean, and Rottnest Island off the coast.
   "Everyone goes there for restaurants, cafes and the entertainment. There's great shopping too," Hegney Property Group principal Gavin Hegney says. "It can also be a bit of an alternative area, which some people really like."

Market Overview

   The popularity of the area with owner-occupiers, as opposed to investors and speculators, has shielded Fremantle market prices from the same peaks and troughs that were experienced throughout Perth, particularly during 2005-2006, but some of the newly built properties in the area have suffered steep devaluations after being bought for record prices at market peak.
   Australian's Port Coogee Marina residential development injected fresh stock into a market dominated by small workman's cottages and limestone homes built at the turn of the century.
   The marina's homes, including waterfront apartments, townhouses, and stand-alone houses, hit the market between 2--7 and 2010, fetching prices up to $3.45 million. Hegney says it is not uncommon to see many of the development's top-selling homes now fetching around $1.5 million.
   The median price for the area currently sits at $756,917, slightly down from $777,208 in 2011. This compares with the $1.7 million in the beachfront suburb of Cottesloe, closer to Perth, and $1.01 million in Perth.

Who buys   Fremantle is most popular with professional couples who don't have children, according to RP Data.
   The predominant age group in "Freo", as it is called by the locals, is 2 to 34 years, with owner-occupiers making up about 52 per cent of the local population.
   The Notre Dam university campus in Mouat Street is one of the area's strongest drawcards for renters, who occupy about 45 per cent of the area's properties.
   But homes in the area's elevated streets, with price tags well into the millions, are attracting more professionals with families.
   Space Realty agent Toby Astill says proximity to the water attracts sailing enthusiasts.
   "A lot of people get particularly attached to the area because it's close to a whole bunch of yacht clubs," Astill says.

In focus

   Located in one of Fremantle's highest streets, the four-bedroom home owned by Keywaters director Mark Franklyn has views across North Fremantle to the harbour and the ocean.
   The newly built house has several balconies to take in the views and the ocean breezes, while a pool makes the most of the northern aspect.
   It is expected to sell for more than $2.4 million."

 

This four-bedroom house for sale is on one of Fremantle's highest streets.

(Deb's Note: This property, featured in the original article, is 23 Herbert Street, North Fremantle. For more information on this property, please click here.)

This article was sourced from the Australian Financial Review and was written by Samantha Hutchinson.

"SUCCESSFUL SELLER TIPS: BEAUTIFUL BATHROOMS"

"First impressions count and if you are listing your property for sale there are some easy things you can do to ensure that your property presents in the

very best light possible.

Bathrooms are one of the key focus areas for buyers and therefore it is worth the time and effort to make them as appealing as possible. You will be surprised at the big difference a few small tweaks will make.

1. Update tapware

– this automatically modernises a bathroom..

2. Update accessories

– including towel rails, toilet roll holders, towel rings and other hooks.

3. Clean floor and wall tiles

– professional tile cleaning can transform tired and grubby into clean and sparkling.

4. Replace silicone seals around the back splash on your vanity.

5. Clean everywhere

– sinks need to be stain-free and shiny. Shower recesses need to be mould and calcium-free.

6. Replace cupboard handles

– we often find that modern silver handles are a good choice.

7. Replace shower curtains

– we recommend that you use white show curtains. Avoid patterns and colours as they will date your bathroom."

These handy tips were sourced from Spruce Ups.

"Perth leads the lot, despite rising prices"

 The following article was sourced from the Australian Financial Review.

"Residential lot sales soared by 50 per cent in Perth, and by 42 per cent in Sydney, during the six months to the end of March compared to the same period in 2012.
The Perth surge came despite the city remaining the most expensive quarter in which to buy land per square metre, and without the improved home-buyer incentives that bolstered Sydney and Adelaide markets.
Housing Industry Association and RP Data figures showed that in Perth, land prices rose $22 per square metre to hit a media lot price of $250,000 or $558 per square metre.
The Perth-based executive chair of Hegney Property Group, Gavin Hegney, said the figures were showing the momentum that had been gathering in the market for a year, as migration remained strong and rental vacancy tight.
 The HIA attributed the Sydney spike to the first owners grant rising from $7000 to $15000 in October 2012.
Sydney's median lot price was higher than Perth's at $285,000, but the price per square metre was lower at $549.
nationally, land sales rose 4.3 per cent in the March quarter, after gaining 11.9 per cent in the tree months prior.
the rise can be largely attributed to a 5.5 per cent rise in capital city land sales, which trumped a 2.4 per cent rise in regional sales.
"At this juncture, any clear improving trends are limited to New South Wales and Western Australia. WA is the only state to have achieved clear and consistent improvements in residential land sales over the past 18 months," HIA chief economist Harley Dale said.
The weighted median residential lot value rose 2.5 per cent in the quarter to $198,152, driven by a 3.2 per cent lift in the capital city figure, to $225,781.
Adelaide lots rose by 14.8 per cent on the prior corresponding period, after the grant for buyers building their first home rose from $15,000 to $23,500 and incentives for established homes dropped. Melbourne land sales dipped 4.9 per cent in the half-year, as the state's FHOG for new dwellings was cut from $20,000 to $7,000 in July 2012. The cut to the grant drew demand forward during the June 2012 quarter.
Brisbane's lot sales weakened markedly, despite the FHOG in October 2012 rising from $7,000 to $15,000 for new dwellings. Lot sales dropped 16.6 per cent year on year.
Outside the capital cities, the most expensive residential land markets were the Sunshine Coast at $418 per square metre, the Gold Coast at $285 and Victoria's Barwon at $385."

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