MORE CHOICE FOR BUYERS LIKELY THIS SPRING
CoreLogic’s latest Home Value Index shows that while the housing market downturn has evened out with an annual growth rate of 2.2% across the country, more fresh stock is being added in capital city markets - promising more choice for buyers this spring.
Compared with August 2021, 13.4% more fresh housing stock was listed for sale in Australia’s capitals last month and the trend is running 6.5% above the five-year average.
Sydney & Melbourne show above average levels of homes for sale and the nation’s other capital cities are anticipated to follow suit as listings rise through spring and demand continues to taper.
Housing values declined a further 1.6% in August, with every capital city but Darwin now officially in downturn. Brisbane is the latest city to reverse its trend of rising values after nearly two-years of sustained growth.
After gaining 40%, regional price declines catch up to cities
Regional properties experienced strong prices growth throughout the pandemic but have now started to mirror the rates of decline being experienced across city real estate.
Values were down -1.5% in August, compared with -1.6% across the combined capitals, but after gains of 40% between March 2020 and March 2022 this would hardly concern regional homeowners.
The largest falls in regional home values have tended to be in the areas that are closest to cities; those that are the ‘most commutable’ according to CoreLogic. It’s no coincidence that these were the lifestyle areas that increased the most during the pandemic, so now there’s a predictable adjustment taking place.
Over the past three months, values are down -8% across the Richmond-Tweed, -4.8% across the Southern Highlands-Shoalhaven market and -4.5% across Queensland’s Sunshine Coast.
Seven regions bucking the trend
Across the 41 sub-regions analysed, just 7 recorded an increase in values in August. The northern suburbs of Adelaide saw an increase of 0.9%, Perth’s North East and Mandurah rose 0.6% / 0.5%, and the Coffs Harbour-Grafton region went up 0.6%.
Most owners well buffered against downturn
Across our capital cities and regional areas, home values remain 15% above the levels recorded in March 2020. The implication is therefore that most homeowners have a significant equity buffer before their home is likely to be worth less than what they paid.
With many homeowners having paid at least a 10% deposit and having paid down a portion of their principal, the risk of widespread negative equity remains low.
Housing prices are not anticipated to stabilise until interest rates find a ceiling and consumer sentiment starts to improve.
Monthly change in capital city home values
MONTHLY ANNUAL
Sydney q 2.3% q 2.5%
Melbourne q1.2% q 2.1%
Brisbane q 1.8% p 17.5%
Adelaide q 0.1% p 21.8%
Perth q 0.2% p 4.9%
Hobart q 1.7% p 5.8%
Darwin p 0.9% p 6.3%
Canberra q 1.7% p 7.8%
National q 1.6% p 4.7%
4 MISCONCEPTIONS WHEN SELLING YOUR PROPERTY
1. You can drive up the value of your home by overpricing it - WRONG!
There’s only one thing worse than selling under your goal price and that is not selling at all! An overpriced property has a much greater chance of sitting on the market for longer, especially if it’s priced above other similar properties in the local area.
2. Getting building and pest inspections is an extra expense that buyers can take care of – WRONG!
Getting all the relevant building and pest inspections before you put your house on the market will reveal any issues and give you the chance to take care of them swiftly and thoroughly before a buyer gets even a hint of trouble.
3. The more open inspections you have the better your chance of selling – WRONG!
Not only does this make you look desperate and wastes time, but it also decreases the perceived value of your property to the market. Organising open houses is almost a science and you should consult closely with your agent about the best days and times to schedule them.
4. The more you spend on fixing up the property before selling it, the better price you’ll get – WRONG!
Attention to the overall appearance of your property will help to encourage buyer interest and achieve your desired sale price. Any improvements made should be practical and improve aesthetics where necessary.
IS INVESTING IN A HOLIDAY RENTAL ALL IT’S CRACKED UP TO BE?
The uptake of home sharing and online holiday rental sites started with a slower burn in Australia than elsewhere, but today they have well and truly taken off and investors all over the country are smelling the dollars and reassessing their options.
In many cases it seems almost too good to be true, with some properties earning the equivalent of their monthly rental in a 1 week booking. The flexibility offered is also appealing – with owners being able to choose to use the space as they wish, whenever they want; when friends or family come to visit, or when they want to do repairs or renovations, the apartment can simply be blocked out on the booking site’s calendar for the preferred dates.
However, there is a downside and though it has not yet burst, the home sharing/holiday rental bubble has definitely developed a slow leak in recent times.
There can be confusion for hosts and guests alike, as rules around holiday lettings are often set by local councils, which of course means they vary from postcode to postcode.
Some of the restrictions have borrowed from foreign strategies that have been successful in other cities, such as requiring that property owners obtain a licence, or that they register as a holiday rental business, or by applying a cap to the number of annual bookings that can be taken.
There has also been the possibility of compensation payments to neighbours and fines for owners of properties where disruptive activities are reported. Strata corporations have also been given the right to ban short term holiday renting in their buildings.
There are also practical elements that shouldn’t be overlooked. Though the income earned on your investment could be significantly more, the investment in time and maintenance required to run a holiday rental property is also considerably higher.
It’s impossible to be at arm’s length from all things that need to be dealt with immediately, usually at all hours of the day and night. The wear and tear on the property is also increased due to a higher volume of traffic through your property and varying levels of care applied, by what can be a real mixed bag of guests.
If your property is part of an apartment building, you (or worse, your guests) will inevitably deal with angry neighbours or disgruntled body corporate members at some point too.
Investing in property to run a holiday rental is certainly an option for those with a suitable property. There are tax considerations that should not be forgotten, because you would be increasing your income as well as changing how the tax office views your property.
You’ll need to keep comprehensive records of your holiday rental income and expenses and understand how capital gains tax may come into play for you when you decide to sell your home. Though there may be the perception of a constant stream of guests in a holiday rental, or big cash windfalls during peak periods, there will always be lulls and if you have regular mortgage payments to cover you may find yourself falling short more often than not.
Talk to one of First National Real Estate’s Investor Relations Managers to find out more about how to get the best result from your investment property today.