News

Residential property market revival tipped for 2009

NOVEMBER 3, 2008: Leading economic forecaster and industry analyst, BIS Shrapnel expects that residential property prices will rise over the course of 2009, following a weak performance this year.

The company says it is likely that residential property prices declined in most cities in the September quarter of 2008, following on from a marginal fall in the previous quarter.

"On the surface, these two quarters of decline may appear to represent a 'recession' in residential property markets," BIS Shrapnel Managing Director Robert Mellor said. "However, we do not expect that the recent weakness represents the beginning of a sustained decline in prices of the type that is underway in the US and UK. In the US there is clearly an oversupply of housing and, combined with much tighter lending conditions, there have been sizable falls in property prices."

BIS Shrapnel notes that difficult credit market conditions flowing from the US have affected other countries. The UK mortgage market had secured 70% of its finance from international funding sources, meaning when the cost of debt rose during 2007 and 2008, there were far greater restrictions placed on loans.

"While UK housing interest rates have declined in 2008 to date, demand was constrained and house prices have continued to weaken this year," Mr Mellor said.

Australia's mortgage market is less dependent on international funding sources and availablity of finance is solid, in contrast to the UK. "In Australia there is a clear undersupply of housing and an environment of housing shortgages provides fertile ground for interest rate cuts," he said. "Recent Government policy moves, like the boost to the First Home Owners Grant, are likely to be successful because of the current housing shortages."

BIS Shrapnel believes the global credit crunch will actually support Australian residential property prices in 2009, as financing constraints reduce the pipeline of new rental developments. National starts of new medium and high density dwellings are forecast to plunge by 18% in 2008/09 and, as supply declines, the rental markets in all cities will tighten further, which will support property prices.

"For example, in Sydney, the number of new medium and high density dwellings being completed is forecast to fall to a 20-year low in 2009, pushing the vacancy rate to below one percent," Mr Mellor said. "Rental properties will remain in short supply, and the national average rental growth is forecast to rise to 10% in 20009, up from the current rate of 8.2%, according to the Australian Bureau of Statistics Rental Index."

BIS Shrapnel forecasts further turbulence in property markets as unemployment rises. The national unemployment rate is expected to rise to 6% by the end of 2009 and employment growth is expected to be very low. However, an outright decline in the total number of people employed is not anticipated. Mr Mellor said it was important to note that increases in unemployment in 1997 and 2001 did not lead to sustained decreases in property prices.

"There may be unfortunate home owners who lose their jobs and may need to sell their properties, but at the moment there are many rentors who will be seeking to buy," he said. "Interest rate cuts and the increase in the First Home Owners Grant are providing motivation for these people to buy before the end of 2008/09, and this outcome will support growth in property prices."

In addition, BIS Shrapnel expects a return of investors to the market by the latter part of 2009, which will also help to support modest price growth. Overall, residential property prices are expected to gradually recover in 2009, with growth of up to 3% across Australia's capital cities as the market strengthens in the second half of the 2009 calendar year.

Commercial sales drop 53%

OCTOBER 29, 2008: The global credit crisis and concerns about a slowing local economy have driven Australia's commercial property sales to a six-year low according to new research from CB Richard Ellis.

CBRE Research and Consulting Executive Director Kevin Stanley said that in the first three quarters of 2008, sales of properties over $5 million totalled just $5.6 billion - 53% down on the same period last year. The results are consistent with trends around the world.

"Investment activity has slowed due to uncertainty about how far prices may yet fall and a lack of debt available for larger transactions," Mr Stanley said. "Sellers are not under sufficient pressure to be forced to drop prices enough to interest buyers, who are waiting for a discount from the peak of the market late last year. This standoff has persisted all year."

Mr Stanley said reduction in trading activity had been the most immediate and direct impact of the global crisis. However, there were signs that conditions conducive to investing in real estate were returning.

"The cost of capital is coming down and the yields from property are rising, creating a positive spread in return," he said. "The lower value of the Australian dollar will also add further interest from the many active foreign investors."

Study reveals costs for new housing

OCTOBER, 2008: The Local Government Association of Queensland has released a report on the breakdown of new housing costs in South-East Queensland (SEQ).

The analysis was based on the most recently published statistics for house and land sales and development cost benchmarks in new residential estates located at Calamvale, Doolandella, Upper Coomera, Springfield Lakes, Mango Hill, Narangba and Sippy Downs.

The study defined the most typical new house in SEQ as being a 200sqm brick veneer home with four bedrooms and two bathrooms. Land area ranged from 400-700sqm while the cost of house and land packages ranged from $430,000 to $540,000.

The LGAQ revealed these costs could be broken into the following categories: house construction 41-43%; land purchase, site preparation and earthworks 20-21%; developer's return (before sales and marketing expenses and company tax) 18-19%; Federal Government taxes and charges 5-9%; infrastructure charges (water, sewerage, stormwater, parklands) 4%; State Government taxes and charges 3-4%.

Yields need to rise for investors

MARCH 20, 2007: PROPERTY investment has produced excellent returns averaged annually over five and 10 years, ranging between 7.5% and 25.5% across Australia. However, according to Real Estate Institute of Australia President Graham Joyce, rental yields, currently between 2% and 4%, would need to rise in order to attract investors back to the property market and alleviate the apparent rental shortage.

Vacancy rates reported in the Mortgage Choice/REIA Real Estate Market Facts December quarter 2006 edition, released this month, show that vacancies range from a low of 0.5% in Adelaide to 2.3% in Hobart.

Only Darwin has reported a vacancy rate outside this tight range, with a rate of 4.6% attributable to seasonal population movement. Median house prices rose during the quarter in all cities except Darwin and Hobart, with Canberra leading the price rises at 6.1% over the quarter. Sydney remains Australia’s most expensive city with a median price of $523,600, with Perth in second place with a median of $450,000. Adelaide and Hobart share the lowest price of $290,000. Prices in Perth for other dwellings have closed the gap with Sydney to reach $350,000 - just $600 less than the Sydney median. Prices for other dwellings in Darwin rose a massive 20.2% over the quarter, reflecting the changing cityscape of Darwin from low density to higher density housing. Over the year to December 2006, house rents moved upward by between 4% in Hobart and 17.4% in Perth. Other dwelling rents rose over the year by between 3.3% in Sydney and 25.0% in Perth. "The tight rental market and potentially improving yields offers opportunities for investors," Mr Joyce said. "While healthy economic growth, strong employment and low inflation are positive indicators for stable interest rates during 2007, a move from a low rent to house price ratio to a more balanced ratio is essential in attracting investors back into the market."

Mortgage Choice National Manager Corporate Affairs, Warren O’Rourke, said that with housing affordability at a low for a significant number of homebuyers, now was a good time to think about initially becoming property investors instead – perhaps in an area with cheaper housing.

"There are good long-term opportunities to be had for those willing to research outside the areas within which they were previously aiming to purchase," he said.

New guidelines to prevent residential bidding

MARCH 20, 2007: TWO of Australia’s real estate institutes have recently released new guidelines for property managers facing increasing pressure because of the current low vacancy rates being experienced across the country.

With the emergence of rental auctions and bidding wards in the eastern States, both the REISA and REIV have been prompted to announce new measures to ensure total transparency in rental transactions.

In South Australia, the REISA said its tough new guidelines would work to prevent rental auctions and strengthen consumer rights to create a fairer playing field for all parties involved in residential leasing. These new guidelines clearly state that property managers must not actively solicit offers for higher than the quoted price.

"The market is extremely tight at the moment and tenants have been confused about what the process of offer is," REISA President Mark Sanderson said.

"These new guidelines make it very clear that property managers can only quote a price that the landlord is willing to accept. If a potential tenant wishes to make a higher offer, then that is entirely their choice. The important distinction is that property managers must not encourage rental auctions."

Meanwhile in Victoria, the REIV said many prospective tenants were now offering more than the advertised price for rental properties.

"With residential vacancy rates in Victoria currently at a 20-year low, there is considerable pressure on prospective tenants to obtain properties," a spokesman said. "The current market has led to the phenomenon of rent bidding with prospective tenants offering more than asking rents to secure accommodation.

"The REIV has also seen the emergence of advertisements quoting rent ranges for residential lettings and market conditions mean agents now often have to refer competing offers to principals for a final decision."

REISA guidelines include:

Property managers must undertake proper checks to ensure anyone making an offer will be suitable as a tenant, should the landlord accept their offer. These checks should be carried out before offers are referred to the landlord.
If a property manager receives multiple offers, they must be properly recorded. Every person making an offer must be advised there may be other offers and the landlord will make the final decision on which offer will be accepted. In assessing any offer, price may not be the only factor taken into consideration by the landlord.
Once a landlord has accepted an offer and the successful applicant has been advised, a property manager must not accept any further offers for the property.
All unsuccessful offers must be advised as soon as reasonably practicable.

REIV guidelines include:

Agents should not use a rental range in advertising; agents should be able to determine a market rent and advertise accordingly.
Agents should ensure that the initial advertising price is in line with market expectations. Rental property can not be advertised at a price at which it will not be let. This constitutes bait advertising, is misleading and deceptive, and contrary to the Fair Trading Act and Trade Practices Act.
An estate agent cannot initiate a bidding process for a rental property. If prospective tenants offer more than an advertised rent, the offers must be referred to the principal. Agents must recognise the distinction between receiving higher offers and actively soliciting them.
In the event of a higher offer being received the agent should inform all other pre-qualified applicants of the offer and give them a timeframe to respond.
If an agent receives multiple offers, they must be properly recorded. Every person making an offer must be advised there are other offers.
Once a tenant has been informed their application is successful a counter offer for that property must not be accepted.
The final decision on the choice of tenant is made by the property owner.

Network raises funds for victim's family

MARCH 1, 2007: MORE than 70 women working in the real estate industry have attended a fundraising function in memory of 23-year-old property manager Rachael Myring, who was shot dead at a Brisbane Elders Real Estate office in January.

The fundraiser, organised by the Women’s Real Estate Network Brisbane South Branch, raised more than $3,400 for Rachael’s family through entry tickets, raffles, auction items and donations.

WREN Branch Manager Lenore Sieber, from RE/MAX United Vision, said the money had been forwarded to Rachael’s partner Nathan Edwards and their three-year-old son Jacob.

Nathan and Rachael had been planning their wedding and were renovating a home they had only recently purchased. A devastated Nathan, also an Elders employee, said the couple had been looking forward to the future. He was represented at the WREN luncheon by Phillis Pearson, Amy Stamp and Glynis Binder, colleagues from the Elders Real Estate Logan City/Marsden branch.

Elders Real Estate Queensland Franchise Manager Keith Walker was overwhelmed by the donation. “Just the fact that the Women’s Real Estate Network took the time to do this is incredible,” he said.

“The real estate industry tends to be so insular that it’s not until a tragic event like this that you are forced to look outside your own office. It’s a big thing that people within the industry, from across different real estate groups, stopped to think about how they could help in this tragic situation.

“I congratulate WREN for their efforts and thank them sincerely for such an outstandingly generous result.”

Lenore said women from across Brisbane had been bighearted in their support of the fundraiser which featured auctioneer and renowned real estate identity Anne Lindsay as guest speaker.

“We greatly appreciate Anne’s involvement in the event and thank her for her wise words and spirited auctioning,” Lenore said. “Some of our luncheon guests were so very generous with their bidding and we truly thank them. Special recognition must also go to corporate sponsors domain.com.au, Caseco, Rent Pay, Console, Real Estate Dynamics and RE/MAX Australia for giving either cash or prize donations to the cause.”

Lenore said WREN was founded in Brisbane in 2006 with the aim of connecting women working in the real estate industry.

“Providing information to women about personal safety while at work has been an important issue for WREN which acknowledges female salespeople and support staff often find themselves working alone with strangers or in confrontational situations,” she said. “Therefore, we felt it was only fitting that we offered our support to a colleague in a time of great need.”

Stress levels at breaking point

FEBRUARY 13, 2007: AN Australian study looking at the health and well-being of real estate agency staff has revealed high proportions of stress within the industry.

Study author Dr Jackie Holt said there was increasing concern about the hours worked among real estate professionals and the impact this had on work-life balance.

"There is increasing recognition that work-life balance is not a warm and fuzzy concept," she says. "We are only now beginning to see the true costs of long working hours; not only on the individual but also on the organisation and the community."

Key survey results show that 75% of respondents reported three or more physical/behavioural stress symptoms while more than half (58%) reported moderate occupational stress.

But, while work was the most frequently reported stressor, the majority of respondents also reported that they were satisfied or very satisfied with their role.

"This paradox of high satisfaction levels and medium to high perceived stress is often a feature of people who are involved in 'emotional labour' - that is providing services to clients," Dr Holt says.

This latest research has revealed similar results to studies conducted in the United States.

"A survey of over 1000 US real estate agents found that 55% said real estate gave them more flexibility than a traditional office job," Dr Holt says. "However, despite this flexibility, many real estate agents forgo this flexibility and work long hours.

"The study also found that 50% of family members were unhappy with their real estate spouses' working habits; 40% of real esate agents reported that work frequently or very frequently interrupted their family life; 35% of real estate agents report that they do not have enough time for their families and, 21% are not able to fulfill commitments to spend time with their families."

Dr Holt says that while the 24-hour society has been effective in producing greater productivity and a higher level of competition within business, it has come at a cost to the individual and community.

"There is an urgent need for people to reflect on the amount of time they are spending at work and how they can take back their time," she says.

Market outlook for 2007

FEBRUARY 6, 2007: A CONTINUED softening of the residential sales market in the eastern states, plus rental increases in response to tight vacancy rates, will ultimately lead to improved residential investor yields according to the Real Estate Institute of Australia.

In its 2007 Real Estate Market Outlook report, the REIA predicts this will ultimately create new interest to re-stimulate the market and values.

REIA president Graham Joyce said house prices rose across Australia in 2006, from 0.6% in Sydney to 38.7% in Perth.

"Current evidence suggests that Sydney and Adelaide prices will likely remain flat into 2007," he said. "The more moderate growth in Melbourne, Brisbane, Canberra and Hobart during 2006 has already begun to slow in all cities except Hobart, and it is likely that price growth in these cities will also be more subdued in 2007.

"Strong interstate migration to Queensland, along with strong commodities prices, may assist in maintaining positive price growth, particularly in south-east Queensland.

"Perth and Darwin had an outstanding year for median house price growth in 2006, although there is evidence that the boom times are slowing in Perth. However, net overseas migration to Western Australia is high, and the unemployment rate is low (3.1%), which will assist in maintaining stronger demand than in other parts of the country.

"Darwin continues to have strong prospects for price growth into 2007, in response to the commodities boom and high demand for quality contemporary property."

Other findings of the REIA's 2007 market outlook include:

The two-year slowdown in residential building activity in the eastern states will result in reduced availability of housing stock for sale or rent.
The demand for rental properties is outstripping supply in every capital city in Australia and this is not likely to improve in the short term.
Renters who are saving for a deposit to purchase a home will have less saving power, thus making a home purchase even more difficult.
Australian families required 33.8% of family income to pay an average home loan in September 2006 - the worst result for 25 years aside from an 18-month period from March 1989.
Among OECD countries, only the Netherlands and New Zealand have a higher percentage of mortgage debt as a percentage of household disposable income, with the level of debt in the Netherlands being promoted by a policy of negative gearing for owner-occupied homes.
Three interest rate rises during 2006 had a significant impact on home loan affordability, as increases in median weekly family incomes have not kept pace with the increased amounts required to meet home loan payments.
First-home buyers have been most affected by the deteriorating affordability and the increase in interest rates.
Office property has experienced a tightening in vacancy rates during the past two years with yields increasing accordingly - this is expected to continue.
The industrial property market will remain buoyant in 2007, reflecting the continuing growth in GDP and recent changes to superannuation.
A tight rental market is an attractive proposition for property investors who intend to make quality long-term investments and are not seeking short-term capital growth.

Connecting women working in the real estate industry