Sydney’s spring property market means a boom for buyers’ agents

...Since 2000, when 15 buyers’ agencies were in operation, buyers’ agencies have soared to 120 nationally, according to the Real Estate Buyer’s Association of Australia (REBAA).

Agents help buyers find and negotiate the purchase of a property. The majority of agents are in Sydney and Melbourne, where each property boom has seen interest in expert help surge, said Byron Rose, chief executive of one of Sydney’s longest-running buyer’s agencies, Rose & Jones...read the full article

The Perpetual Bubble Argument

We have never thought that there is a bubble - that is not to say however, that they're aren't upward pricing pressures and in some cases they are getting "toppy" in some markets/suburbs.  Moreover, we are pretty silent generally and have been for some time with our commentary because there are more than enough points of view about property as well as vested interests being pushed on the property reader - we aren't experts, we are professionals, and there is a difference...worth thinking about!

We thought it was worthwhile re-publishing and discussing the table below, given the buying depth across the core Sydney markets and the price growth that has been recorded month on month since May 2013.  

We are often asked, "is this a good time to buy property?" our answer...it is always a good time to buy when you are ready - factoring in your hold strategy and your cost of ownership (including future interest rates rises for example); speculation about where property prices will be and if they will come down is not a discussion worth having because it is crystal balling and yes, there will always be a correction 'cause markets have peaks and troughs - its always about asset selection and value versus price (where does it not make sense to you and at what level are you overpaying against the purchasing strategy and your own affordability?) this is why we are here, to sort the wheat from the chaff!

The following table shows capital city house prices from their last peak.  Sydney for example had its last (total market) peak in prices 10 years ago.  They initially dropped 21.2% and currently sit at only 4.3% higher after adjusting for inflation over the same period, that's less than half of 1% of average annual growth over the past 10 years. There are other variables like capacity, LVR's and so on but, they don't change the numbers regarding property prices as tabled.  Apart from Sydney, the rest of the capitals have experienced real value deductions since their more recent peaks...arguments about asset values will persist however, this is interesting in the context of the market we find ourselves in now...

To see the full article from RP Data's Research Blog click here

Chinese Demand Inflating Australian Property Prices

CS - Market Talk

According to Credit Suisse, Growing Chinese demand for Australian residential property should keep inflating prices here, even though Australia already has some of the highest price-to-income ratios in the world, according to Credit Suisse. The broker says Chinese nationals are already buying more than A$5 billion (US$4.48 billion) of Australian residential property a year--accounting for 12% of new housing supply--concentrated in Sydney and Melbourne. It estimates that the number of Chinese who can easily afford to buy an apartment in Sydney will rise 30% to 1.43 million by 2020. "This should support a further A$44 billion of Australian residential property purchases over the next seven years," Credit Suisse analysts Hasan Tevfik and Damien Boey say in a report. "As long as Australia remains open for business, our companies should also benefit from the next stage of China's economic development." Companies that should continue to benefit from this theme include developers, building material companies, property websites and banks, the strategists say. They don't discount the possibility of a Chinese entity taking over one of these companies. Based on this view, Credit Suisse has added Fairfax Media (FXJ.AU) to its model portfolio, which already includes Mirvac (MGR.AU), CSR (CSR.AU) and National Australia Bank (NAB.AU). (david.rogers@wsj.com)

Contact us in Singapore. 65 64154 140; MarketTalk@dowjones.com

Warren Buffett's five tips for investing in real estate

By Katherine Jimenez

Wednesday, 05 March 2014

He is known as the Wizard of Omaha and considered to be one of the world's most successful investors.

And for thousands of investors around the world, Warren Buffett has become their investment guru.
Every year, through his letter to Berkshire-Hathaway shareholders, the legendary investor offers his wisdom on anything from his rules for investing in stocks to the US and global economies or even Bitcoin.

This week, Buffett he again released his highly anticipated annual shareholder newsletter and this time, front and centre of his letter was real estate investment.
Specifically, he reflected on two small properties that he purchased long ago and offered some insights on real estate investment.

One purchase involved a 400 hectare farm in Nebraska, which cost him $280,000 in 1986.
The other purchase, which he made with a small group of investors a few years later, was a retail property in New York.

The common theme in these tales was that he purchased both assets after property collapses.
In his letter, Buffett says he cites the tales to "illustrate certain fundamentals of investing".
He then goes on to highlight his five tips for real estate investing.
They are:

You don't need to be an expert in order to achieve satisfactory investment returns.  But if you aren’t, you must recognize your limitations and follow a course certain to work reasonably well. Keep things simple and don’t swing for the fences. When promised quick profits, respond with a quick “no.”

Focus on the future productivity of the asset you are considering. If you don’t feel comfortable making a rough estimate of the asset’s future earnings, just forget it and move on. No one has the ability to evaluate every investment possibility. But omniscience isn’t necessary; you only need to understand the actions you undertake.

If you instead focus on the prospective price change of a contemplated purchase, you are speculating. There is nothing improper about that. I know, however, that I am unable to speculate successfully, and I am sceptical of those who claim sustained success at doing so. Half of all coin-flippers will win their first toss; none of those winners has an expectation of profit if he continues to play the game. And the fact that a given asset has appreciated in the recent past is never a reason to buy it.

With my two small investments, I thought only of what the properties would produce and cared not at all about their daily valuations. Games are won by players who focus on the playing field – not by those whose eyes are glued to the scoreboard. If you can enjoy Saturdays and Sundays without looking at stock prices, give it a try on weekdays.

Forming macro opinions or listening to the macro or market predictions of others is a waste of time. Indeed, it is dangerous because it may blur your vision of the facts that are truly important. (When I hear TV commentators glibly opine on what the market will do next, I am reminded of Mickey Mantle’s scathing comment: “You don’t know how easy this game is until you get into that broadcasting booth.”

news@propertyobserver.com.au

WHEN the world's richest investor speaks, people SHOULD LISTEN.

Warren Buffett, an 82-year-old American worth about $44 billion and nicknamed the "Oracle of Omaha", is the most quoted investor on the planet and countless financial experts swear by his words of wisdom.

Here are 10 of the most common Buffett quotes, and some lessons we can learn from them.

1. "Rule No.1: Never lose money. Rule No.2: Never forget rule No.1."

It's a handy rule to follow, but even an expert such as Buffett lost billions in the global financial crisis and said he did some "dumb things".
However, over the long term he has benefited by being conservative with his share investments and avoiding fads.
Bourke Shaw Financial Services principal Lawrence Orlando says that people can minimise losses by doing their research and avoiding a potentially fatal "she'll be right" attitude. "Investing ultimately is about making money, not losing it," he says.

2. "It is better to hang out with people better than you ... you'll drift in that direction."

Orlando says people should never be afraid to ask successful investors what they did and how they got there.
"I have found that experts are always willing to help out where possible," he says.
Catapult Wealth director Tony Catt says people should look for attributes in others that can help them.
"Success leaves clues," Catt says.
Wealth For Life Financial Planning principal Rex Whitford says you should avoid people who like to point out they are better than you.

3. "I don't look to jump over 7-foot bars: I look around for 1-foot bars that I can step over.

"Huge gains often only come from taking huge risks where the chances of losing everything are magnified.
"Too often investors go for a single big win rather than do the many small things that are already available such as having a strategy, reviewing regularly and diversifying," Whitford says.

4. "I buy on the assumption that they could close the market the next day and not reopen it for five years."

Catt says this mindset is crucial for investing in shares. "The quote truly tests your decision-making and your ability to think long term," he says.

5. "Someone's sitting in the shade today because someone planted a tree a long time ago."

This is one of Catt's favourite Buffett quotes and illustrates perfectly why taking a long-term view is important.
"We should never forget why we enjoy some of today's luxuries - most of them are because someone else had a long-term vision and was prepared to invest for the future," Catt says.
Orlando uses a bank savings account as an example.
"Saving $50 a week over 10 years will allow you to save $26,000, not including interest, and like the tree it has taken years to grow," he says.

6. "Price is what you pay. Value is what you get."

The price of an investment can mask its true value because of factors such as emotion, market booms or busts, and even tax considerations. "Sadly, all most people see is the price," Whitford says. "They are often unable to perceive value."
Orlando suggests following Buffett's strategy of seeking undervalued assets.
"Sometimes buying the worst house in the best street may provide good value for money," he says.

7. "We simply attempt to be fearful when others are greedy and to be greedy only when others 
are fearful."

This is probably Buffett's most famous quote and is at the heart of his belief in avoiding the herd mentality.
Catt says sharemarkets are often priced on emotional reaction and not logic.

8. "The investor of today does not profit from yesterday's growth."

Many investors like to jump on an investment that's doing well - that's why we have booms and busts - but they really should look to the future.
However, Assist Finance chief executive Jason Di Iulio says that people should still use historical trends, past performance and research data as important tools for making investment decisions.

9. "Whether we're talking about socks or stocks, I like buying quality merchandise when it is marked down."

Orlando says waiting for the right time to buy can be an opportunity within itself.
Whitford uses ANZ shares as an example. "Did anyone really think ANZ shares were only worth $11.83 in February 2009, down from $31.74? ANZ was and is quality merchandise and it still has not recovered to its previous high," he says.
Di Iulio says investing should never be a search for the next big thing.

10. "If a business does well, the stock eventually follows."

Catt says a key to sharemarket investing is to find good-quality businesses that will grow over time. "The share price will take care of itself," he says. Di Iulio says getting a return is important, but so too is the return of your investment. "Only invest in relatively liquid assets or those assets that can be easily redeemed," he says.

Anthony Keane

National Features NEWS.com.au

October 15, 2012

Homebuyer Confidence index rises 7.2% to its highest ever level

If you are interested in the property market you should take a look at this link. A very clever report by Genworth.

Genworth is Australia's biggest Mortgage Insurer and their role is to provide insurance to the banks against a loss when a property is sold for less than the loan.

This can be a risky business when you take into account that a new loan can be taken out at 97% of the property purchase price. 3% does not provide a lot of room for mistakes (somewhat ironic today given the Government are now introducing another levy for something the banking system are already well covered for).

An organisation that takes on this much risk must spend a lot of time and money researching and analysing the property market.

http://www.genworth.com.au/streetsahead/

This report gives us a state by state breakdown on the following items.

1. Confidence- up by 7.2%
2. Over 50% of income spent on debt- down by 3%
3. Comfort with debt (when the borrower has less than 20% equity)- up by 4%
4. Has recently experienced mortgage stress- down by 6%
5. Has an expectation of mortgage stress in the near future- down by 10%
6. Good time to buy a home- unchanged (up by 3% in NSW)

Well worth a quick five minute read.

By the way, next week there is going to be a 0.25% cut in interest rates by the RBA next Tuesday (yes I am saying that with a lot of confidence). This only means one thing for home buying confidence!
 
Source; Ian Simpson, Smartline Mortgage Advisor

Housing market sentiment improving but still favouring buyers

I interpret the data another way and counter the view it is a 'Buyers Market" rather, its as a "sellers market" - certainly sub $ 2mill in Sydney within a 7-10km radius of the CBD. Its a buyers market when there are more sellers than buyers - not when 80% of respondents think it is a good time to buy. Currently transaction volumes are up because there are more buyers than sellers ergo - "sellers market". Stock levels are down 20-30% on the same time last year in established/prime markets. If stock levels were at the same levels then transaction levels would probably not be up. Clearance rates reflect that its turned to a sellers market but we are now seeing a tightening and its happened in the last 2 weeks, stock levels are falling (which is consistent with this time of year) and I would suggest the 56% or respondents that think prices will rise over the next 6 months are the vendors whose expectations are still at the 2010 price level. I would also point out that if 86% of the 41% who think house prices will grow less then 5% over the next 6 months expect growth of more than 4%, if this happens then annualized growth would be circa 8% which is back at pre-gfc levels for many suburbs - I don't think this type of growth could be considered "subdued", if it materialised. I think the market and its satkeholdersshould want for and want 5% annualised growth at best, to allow the market to recover - it will lead to sustained confidence and lasting recovery in the housing sector for home owners and for investors looking at property as as an asset class again. I for one am not confident in the confidence level of this survey...the coal face tells a different tale! Housing market sentiment improving but still favouring buyers

Four secrets behind the fortunes of the BRW Rich 200: Myriam Robin

Reading through the stories of the 200 richest people in Australia, as ranked by BRW last week, it quickly becomes clear that no two fortunes are the same.

But there are commonalities in how Australia’s 200 richest people got that way.
The men on the rich list (all but 14 are men) worked long and took risks to get there. They chose strategic industries and saw their fortunes rise with global trends. They bet on economics as well as on themselves.

Want to join the Rich List? Here’s how to do it:

1. Start a business
The majority of the names on the Rich 200 are there because they started and led a business to national and global success.
But not just any business. Certain industries stand out.
For all we wring our hands about the future of retail, plenty of the fortunes on the Rich List were made off businesses that did just that. In fact, 27 out of the 200 made their fortune in retail.
Another area that can make you a fortune if you do it right is technology. As we revealed last Thursday, there are four Smart50 winners on the list, and all of them made their fortune in IT.
There are a few reasons why tech businesses make so many people rich. For one, your running expenses are likely to be relatively lower, giving you strong margins if your model is sound. Not to mention technology businesses can be scaled up relatively quickly, which makes them ripe for growth and economies of scale.
And when sold, technology businesses can command multiples far in excess of many other industries, landing their founders in the money even if the business itself isn’t making much money yet.

2. Failing that, invest in property
It’s not just a successful business that can make you rich. A full quarter (52 out of 200) made their wealth in property.

In Australia, this figure hasn't budged much for the last 30 years. No other single investment has been as likely to deliver steady returns over the past three decades.

3. Go it alone
Many businesses are founded by groups of two or more people. To get around the difficulties of separating out jointly held fortunes, the BRW list can consider cofounders and families to hold a fortune jointly. You’d think that, given this is the case, there would be plenty of duos and trios on the list.

But this isn’t the case. There may be benefits to working with a cofounder, but when it comes to making a lot of money, the experiences of the Rich Listers suggests you’re better off going alone.
In the 2013 list, there are a few families, but no cofounders. Atlassian cofounders Mike Cannon-Brookes and Scott Farquhar are both on the list, but with separate entries, holding $250 million apiece.

4. All work no play makes you very, very rich
At an age when most Australians are looking forward to retirement, plenty of people on the list are still signing deals and making money. For example, 86-year-old Len Ainsworth could have been happy resting with one company, Aristocrat. But in his 80s he built another – Ainsworth Game Technology – whose shares rose 400% last year.
The average Rich Lister is 65 years old, but far off retirement. Plenty of them aren’t the type to relax and smell the roses anyway. For example, Glencore Xstrata chief Ivan Glasenberg (fifth on the list with $5.61 billion) recently said that his staff “don’t do” work-life balance. Instead, he said, they were all rich.

This article originally appeared on SmartCompany.

There are always "off market" listings, but tracking these down if your an expat or even a local can be difficult and time consuming!

Increasingly the most valuable resource is Time and most of us don’t have enough of it!  

So if your house hunting, how do you know if you’re seeing everything that is available in the suburbs you want to live in, and honestly, who has the time to uncover them all anyway? 

Agents and increasingly vendors, let us know that a property will be coming on the market or in fact will be marketed only via an agents database.  Everyone’s property path is different and for many sellers – particularly over $3 million, a discreet listing and sale is preferable for many reasons; its less disruptive, they feel they have more control over the next move perhaps, they don’t have the neighbours “tyre kicking” at open inspections, they don’t have friends, family and colleagues knowing their business, for these and other reasons an off market transaction can be desirable.  

Agents and vendors will seek out buyers agents because we only act for retained and finance enabled clients so that we can perform for them and pounce on the right property when it comes up, agents of course want to sell to buyers who can perform, if they have a property and we have a client, selling agents and vendors are very interested.  This is true of residential and commercial property.  Our clients like that we give them access to the total market and that we have relationships with the agents already established, they get to see properties they ordinarily may not have sourced as well as pre-market (we often deal before they reach the market) opportunities and of course off market.  It’s important though to vet, not all properties at a high level meet the criteria, so knowing what to ask and filtering saves a tremendous amount of time. 

You can deal with every agent between Woollahra and Vaucluse or Avalon to Palm Beach or you can deal with on agent and get access to the total market and leverage someone else’s time so you can use your time to do the things that are more productive, enjoyable and profitable.

MP talks to property acquisition specialist, Stuart Jones from Rose&Jones about increasing offshore interest in the local Australian property market and their recent $19million AUD acquisition

We were just interviewed by Mandi Prager of MP Property Group to talk about off shore property buyers, buyers agency, what's trending and why engage a buyers agent for property advice, assessment, negotiation and execution?

Visit the MP Report click here

Boutique buyers agency firm Rose & Jones, based in Double Bay, deals predominately with high net worth's looking to expand their residential property portfolio as well as offshore groups looking to enter the Australian residential or commercial property market. With over 50 years of expertise and an impressive private client base, Stuart Jones talks purchasing trends and why of late off shore individuals are so keen to call Australia home.



MP: Can you give us an example of some of the transactions Rose & Jones have completed for clients his year?

Stuart: We are very fortunate to work for great clients who value what we do and bring to the property transaction, they prize our service and advice.  A couple of examples of good deals we have done this year included  the purchase of an office building for one of our South African clients (we now manage over $40 million worth of assets for them) for around $19 million in the western corridor of Sydney’s CBD.  We did this transaction off market, fully tenanted with a net yield of 7.4% (and in case you were wondering, it was under rented with a good expiry mix, enabling us to improve the returns through negotiations and in time ne tenants).  Our client was looking for good passing income on an asset that presented good upside via the tenancy and reversion of the asset over the medium term as well, and they sought our advice on the locations and why.  We ended up focusing on the western corridor for a number of reasons, some which included it offers great value, its under developed, is an emerging market but buyers need to be discerning – a great reason to come and talk to us. Our client is really happy which we are delighted about, we are also managing the asset, it suits our client to work with us because we understand the strategy, we worked with them to devise it so it makes sense for them to have us roll it out – an end to end solution!

It’s not just the commercial piece, we purchase between $60 and $100 million worth of residential property annually, from $15 million plus homes to $600,000 investments. We bought a great semi in Bronte for a couple of New York based expats.  The property was purchased for $1.58 million, it had sold for $1.72 million in 2009, it is fully renovated and we have been able to lease it on a 5% yield. Our client is happy, they have secured their first home for when they return in about 3-5 years, they are getting a over 4% net in income + capital growth (they will get total returns of 9% pa + on the conservative side) and they purchased below replacement cost which is a great outcome for them – valuer was happy too.

Another good buy was a 2 bedroom unit in Stanmore, in a small block of 12, north facing with off street parking and over 120m2 on title + parking.  Our client is getting a 6% yield + Growth, it was bought at auction – with quite a bit of competition but our strategy worked, we secured the property below what we were prepared to buy it for, our DD showed it working as an investment, purchased on a 5.2% yield minimum, given the current return our “assessment” was vindicated.

MP: Why is Australian property so popular offshore?

Stuart: Firstly, Australia offers security for investors – politically, economically and  financially, I think this is attractive to investors. These reasons have gained even more credibility since the GFC, predominately from our Asian neighbours but South Africans also see Australia as both a safe haven and good place to invest.  The appetite for Australian property is stronger from Asia though, the strength of the AUD has seen this contract slightly in recent years and it deters US and European investors generally. The reality is that off shore investors, are affected by the strength of the AUD which is still at historically high levels and if/when the dollar returns to its long term average, I’m sure we will see significant weight in the market from off-shore investors, the “significant investor” visa is a good hedge for the government against the strength of the AUD at the moment and the maintenance of investor inflows has been underpinned with the “residency” carrot. That said, the savvy investors are in the market now, counter cyclically, they know that a big trigger for off shore inflows will be a drop in the AUD, they are capitalising on opportunities now, by building in a currency and physical hedge, they know that property isn’t just about numbers – the property you want on the cap rate you prefer to buy it at will probably not be available when the AUD is at $0.85…the smarter buying is going to be seen as now, when we look back!

Secondly, the Australian property market is attractive because it provides good diversity for investor types, whether they are passive investors or active, looking for reversion or strategic assets.  Although property is subject to vicissitudes like any market, it has proven to be robust, It is going through changes at the moment as we are seeing retail under threat but yields in office and industrial are strengthening- offering good returns and in the case of industrial (bought well) a future land bank hedge.  Alexandria, Waterloo, Zetland being a case in point as these become the new residential suburbs for Sydney.  Good yields can be found nationally, tenancy risk is certainly a lot less than in the US and Europe, we have a good legal system, unemployment under 6%,  and a strong banking system all under pinning the property sector.

MP: What recent trends have you been noticing with offshore purchase interest in Australian property?

Stuart:Interest in Office and Hotels is strengthening, Hotels look to have the strongest “visible” appetite at the moment from the Chinese/Asian investors particularly .  The long term future of the tourism sector is excellent and with the wealth piling up on our door step in India and China, we will increasingly benefit from our proximity to these countries – and they know this; so are looking for hotels to accommodate their countrymen on their travels, get good returns on their investment and off-shore (bank) money.  The inflows are going and will continue to strengthen into “direct property”, we agree with Ric Butler from CBRE, who pointed out recently that the “significant investor” visa program juts introduced, will see the majority of investor funds being deployed on a deal-by-deal basis into specific deals, not Funds.  The Chinese prefer to own and control an asset, they invest differently to the traditional western style investment models.

Increasingly, the appetite for Australian property from Chinese buyers in particular is growing.  If the number are right this could equate to around $3.5 billion a year. In China alone it is estimated there is around 1.2 million HNW households with a combined $4 trillion worth if investible assets.  But off shore buyers need to be careful and they need to think about changing the way they think about sourcing and securing Australian property.  They need to have a clear strategy, a clear path to completion, be sure they aren’t buying an over rented asset whose future vacancy could cause compress cap values, they need to consider that our legal system is different and also that the properties they are buying have agents representing the sellers interests and giving them advice, they should be sure to get a good team of advisers – legal, financial, technical DD and of course a Property Adviser (buyers agent, they are the manager and the striker if it was a football team)!

MP: Buyers agency is big in the USA but Australian property culture seems to have preferred to take advise from selling agents, when selling agents are remunerated by the vendor to get the highest price possible this seems a bit backward. What are your thoughts on this?

Stuart: You’re right, 70% of buyers in the US use a buyer’s agent however (unfortunately for them) they don’t pay the buyers agent, he/she gets there fee from splitting the selling agents fee.  On the surface that sounds great right? But the problem is it isn’t independent, the buyers agent cant negotiate the best price and terms for his/her client if they are getting paid by the selling agent, the selling agent can just say no, its this much or nothing, the agent wants to get a fee so is conflicted and would probably say ok.  It may make the path to completion smoother but the buyer is not have 100% independent representation by their agent – they can’t be, who ever pays is your master! Back in Australia, fortunately for buyers who use a buyers agent here, the agent is paid by the purchaser, it is illegal to take a fee from both sides of the transaction. Obviously i think its strange that more buyers don’t use buyers agents given we have engaged selling agents for over 100 years and happily paid them around 2% to get us the best possible and never given a thought to the fact that they work and are paid by the vendor.  I here all the time that I have an agent on the hunt for me and it isn’t costing me anything – really? At the point the agent finds a property and brings the buyer into the deal, the agent needs to get paid and it will be the vendor paying the agent, and so right then and there the agent stops working for you and is working for the pay master.

MP: What are the benefits of engaging a buyers agency like Rose&Jones for an acquisition? Are there drawbacks?

Stuart: The major benefit is getting independent, objective, risk managed – “advice”. We wouldn’t go and invest $500,000 in the stock market without advice but we will do that with property and increasingly this is in the millions, in a single asset and with no “advice”. Information is not advice and purchasers need to know this, there is so much on the internet, we also seek it from family and friends and a good sales agent will have you seek his/her counsel and they will happily oblige providing the buyer with select information which crafts the story they want the prospective purchaser to buy into – conditioning to compete for the asset. 

Not all buyers agents are the same, like not all selling agents are the same.  The myth portrayed by many buyers agent is they will “save you money”, unless the valuation is more than you purchased the property for then you can’t claim a “saving” and 99.9% of the time this is the case.  We have done it a few times but it’s not the norm and we have purchased over $1 billion worth of property. The correct approach is the buyers agent should make sure you don’t “over pay”  (they are legally required to buy for the best price and terms) this is where you “save” but this is also at the end of the deal, there is a lot of work to do before you get to execute.  It’s the advice piece buyers invest in, we are an investment – not a cost; it starts with the brief, then the Search (on and off market), short listing, reporting, assessing value (what is underpinning price and value – performance, floor plate, aspect, elevation, quality, uniqueness, peer testing, comparable analysis), risk adjusting (top down bottom up), asset performance (home or investment), technical due diligence, purchasing strategy, negotiating, price and terms, execution, exchange and settlement.  Unrepresented buyers will be paying a fee most of the time, by paying more to an agent and a vendor for a property then they need to.

Clients will benefit from confidentiality and anonymity and our clients also tell us that they love that we are the only agent they need to deal with and best of all, we work for them!
The only draw back is not speaking to a buyers agent and in the process, and recognising that not all buyers agents are the same.  You need to do your DD, REBAA.com.au is a good place to start.

Contact stuart on m + 61 414014783 | e stuart@roseandjones.com.au
Rose & Jones + 61 2 9327-6944 w www.roseandjones.com.au

Age wearies house values

by confessionsofarealestateaddict

What do Wahroonga, Woollahra, Clontarf and Northwood have in common?.........Their median age is all over 40!

And what do Annandale, Surry Hills and Alexandria have in common? Apart from being a lot closer to the city than the first lot of suburbs, that is. Their median age is well below that of the national median of 37.

What does that tell us? That too many questions in a blog bore the reader?
 
True, but may I also suggest a correlation between what were once golden oldies (metaphorically but now literally) and hip young suburbs with values on the ascendancy.

After all, when the RPData figures are crunched in the 12 months to September, Wahroonga’s house values are down 1 per cent, Woollahra’s are down 12.1 per cent, Clontarf’s are down 2.4 per cent and Northwood down 2.6 per cent.

Meanwhile, as you can by now guess, Annandale’s house values are up 6.8 per cent, Surry Hills is up 4.7 per cent, Alexandria is up 6.2 per cent.
Admittedly, median figures are a fickle measure, particularly in that far more volatile prestige market where one great sale one year will throw the median out for the following. Just look at Point Piper. Median age 48 and house values down 12.1 per cent.

But there is something to this. Some more examples?

Vaucluse has a median age of 39 (not over 40 but over the national average) and house values fell 16.5 per cent in the 12 months to September, Burradoo has a geriatric median age of 58 and values are down 1.3 per cent (but those falls are modest compared with the 13.8 per cent fall the year before and even the 15.9 per cent fall in 2010). Palm Beach is down 2.3 per cent, which is bad news for the median aged 53-year-old local. Haberfield’s median age of 44 is…. you guessed it, down 6.3 per cent.

And all this while Tempe’s median aged 38-year-old basks in the 11.2 per cent rise in values of the past year.

Of course, there is another factor clearly at play. Distance from the city. All the growth areas are less than five kilometres from the city, except Tempe which is 7.6 kilometres. And all the hard-hit prestige pockets tend to be outside the 5 and even 10 kilometre radius, except Northwood (5 kilometres) and Woollahra (3.8 kilometres).

But the point is, we all already knew that the close-to-city market was a growth area and the prestige market has been hard hit by the continuing fallout from the GFC (and only those aged in their 40s and more can afford those areas). That’s not news though.

What is worth considering is the median age of the area. After all, as many an inner west family will tell you, where the yuppies once moved in, gentrified and then took off for the suburbs, home buyers now won’t budge for love or property. It’s too easy living close to the city, near each other and with so many diverse types of us nearby. And once kids are enrolled in local schools, well… it just makes moving all the harder.

Sydney is keeping pace with its Global peers, ranking No. 3 in the world!

Chinese property buyers have the potential to create top-end housing market momentum in key cities across the world, including Sydney, according to international real estate group Savills.

But not until Chinese currency and offshore investment rules are relaxed, says Savills global research director Yolande Barnes.

“Emerging markets, and Chinese buyers in particular, still have the potential to move other world city markets,” the report, Savills World Cities Review Index, suggests.

“The unleashing of high-net worth Chinese investor monies could boost London’s prime markets by 15% and the same must be true of other top cities, but this will require the relaxation of currency export controls and overseas ownership restrictions.”


Sydney ranked among the international cities showing positive prestige price growth, although Hong Kong led the Savills World Cities Index for the first half of 2012 with a price rise of just over 7%.

CITY	Capital growth Jan-June 2012	Capital growth June-Dec 2011	Capital growth since June 2005	Rank by capital value
				June 2012	June 2005
Hong Kong	7.4%	-3.4%	105.9%	1	1
Moscow	5.5%	4.1%	113.5%	8	8
Sydney	3.7%	-2.0%	31.7%	9	6
London	2.8%	1.0%	34.7%	2	2
Singapore	1.5%	3.6%	110.3%	4	7
New York	1.1%	2.0%	10.5%	7	3
Tokyo	-0.3%	-0.2%	42.9%	3	5
Mumbai	-1.7%	0.0%	149.7%	10	10
Shanghai	-2.6%	0.1%	137.3%	6	9
Paris	-3.4%	4.4%	47.6%	5	4

Sydney was up 3.7% in a period when the residential markets of the world’s leading cities had become more localised. 

"The strongest price growth has been seen in those world cities that were buoyed by domestic demand, while international investor cash has retreated to a few core markets with established, long-term investment credentials," the report says.

Paris was the worst global city in the Savills index, with prices falling because of the ongoing eurozone crisis and proposed increases to taxes on high-end property and investor gains that followed the election of President François Hollande, who's set to impose taxes on the rich. 

"Paris is the biggest loser of 2012 and faces a period of uncertainty," the report notes, adding further price falls now seem unavoidable in the French capital. London is the potential beneficiary as international money seeks an alternative haven within the geography of Europe, but outside the eurozone.

London remains the second most expensive world-class market, but it too faces uncertainty regarding the impact of new stamp duty rules, announced in the March budget, which has already slowed activity and price growth at the top of the market.

"A period of flat prices now seems likely, though market fundamentals (high occupier demand and limited supply) favour growth longer term," the report notes.

Barnes says that New York is poised for a strong recovery with steady price growth, low mortgage rates, short supply and growing offshore demand.

An extract from PropertyObserver:-"Hunters Hill mainland Chinese prestige property purchase signals emerging international trend", By Jonathan Chancellor Tuesday, 11 September 2012

ING DIRECT (Australia) launches LVR-based pricing

Jessica Darnbrough (The Adviser, Tuesday July 3, 2012) One of Australia’s non-majors has announced it will set its interest rates in line with LVRs. Effective from 9 July, ING DIRECT will offer LVR-based interest rates on its popular Orange Advantage and SmartPack Mortgage Simplifier products to reward customers taking loans with lower LVRs. Customers for new borrowings with LVRs of less than 80 per cent will be eligible for reduced interest rates. Lower LVR customers borrowing $500,000 or more will receive an interest rate of just 5.88 per cent p.a. with an Orange Advantage or SmartPack Mortgage Simplifier. “We’re looking to attract additional sub-80 per cent LVR business and this pricing structure will make us more attractive to upgraders and investors,” ING DIRECT’s head of broker distribution Mark Woolnough said. “We’ve also taken on feedback and reduced the threshold under Orange Advantage and SmartPack from $300,000 down to $250,000 which will appeal to a wider market. “Whilst we’ve made various improvements to our service proposition this year, we certainly haven’t overlooked the importance of sharply priced, competitive products, and these changes highlight this. “Another positive, based on feedback from our broker partners, is that we’ve aligned Orange Advantage and SmartPack Mortgage Simplifier price points for loan amounts above $250,000 with LVRs below 80 per cent.” ING DIRECT will also continue to waive SmartPack and Fixed Rate application fees, until further notice.

Why investors are turning back to property, particularly in Sydney!

BIS Shrapnel have just released their Residential Property Prospects, 2012 to 2015 and stated that...

“Sydney is forecast to record 17 per cent increase in median house prices over the next three years, compared to nine per cent for Adelaide, five per cent for Hobart, three per cent for Melbourne, and just one per cent for Canberra.”

  

Whether there growth forecasts are correct or not, it is clear that Sydney will be the focal point for price growth (driven by demand) over the near term.

So apart from organic population growth and migration, what will support growth in Sydney property prices? Investors!

Investors are slowly turning their attention back to the property market as they consider their future returns from current investments. For many, property is slowly starting to make its way back onto the radar and into their mind share. Investors naturally want to preserve and grow wealth, so what will turn them back to investing in property? Oddly enough, confidence! This is what is drawing their attention back to property - the opposite of course is true - currently for home buyers. 

So why is there growing confidence in property? The lack of confidence in the stock market due to volatility supported by uncertainty and the headwinds from Europe, China's slowing economy, falling interest rates locally however, property is showing good and strengthening rent returns ( in the numbers not the hyperbole) as well as offering the bonus of some capital growth in the asset class proving to be the least volatile and therefore is looking interesting again. 

We have noticed this interest from investors in our business,  and whilst it is not overwhelming and we don't expect “weight” to return to the market or that investors returning will drive up values greatly, savvy investors are certainly looking at select residential and commercial investment again and getting strong returns with bonus growth.  On the western corridor of Sydney’s CBD fringe for example, we recently purchased an off market property for under $19 million dollars with a net yield of 7.4 percent,  and in the residential sector, a house in Clovelly (at a discount to market) delivering a 5% yield which will provide growth of between 3-4 percent minimum providing total returns of circa 9 percent.

Investors are starting to look at property (according to our private bank and HNW affiliates) as TD's for example start to mature and interest rates tail off, income returns for property are looking attractive again - with the bonus of some capital growth, investors are targeting minimum total returns of between 7-9% pa. Even with the heady days or property doubling in value every 7-10 years (probably behind us for sometime), property has always kept pace with CPI historically, so with an average of about 3.2 percent pa over the long-term and face yields of circa 5.5% on units for example, the returns whilst not sexy, are safe ,less volatile and makes gearing look attractive again in the current interest rate environment.

The trick as always will be knowing what to buy and where -  factoring in all the variables including on costs, anticipating future ownership/rental demand, finding assets that complement an individual’s investment style and strategy as well as managing the downside risk - or, if you have or want to sell within 3 years of ownership, has the asset that has been purchased likely to get you the purchase price + costs back and if it was, how would you know?

Its probably worth getting some independent property advice (from a Buyers agent) in addition to any financial advice you may want to get.

17% growth for Sydney property over the next 3 years?

BIS Shrapnel have just released their Residential Property Prospects, 2012 to 2015 and stated that...

“Sydney is forecast to record 17 per cent increase in median house prices over the next three years, compared to nine per cent for Adelaide, five per cent for Hobart, three per cent for Melbourne, and just one per cent for Canberra.”

  

Whether there growth forecasts are correct or not, it is clear that Sydney will be the focal point for price growth (driven by demand) over the near term.

So apart from organic population growth and migration, what will support growth in Sydney property prices? Investors!

Investors are slowly turning their attention back to the property market as they consider their future returns from current investments. For many, property is slowly starting to make its way back onto the radar and into their mind share. Investors naturally want to preserve and grow wealth, so what will turn them back to investing in property? Oddly enough, confidence! This is what is drawing their attention back to property - the opposite of course is true - currently for home buyers. 

So why is there growing confidence in property? The lack of confidence in the stock market due to volatility supported by uncertainty and the headwinds from Europe, China's slowing economy, falling interest rates locally however, property is showing good and strengthening rent returns ( in the numbers not the hyperbole) as well as offering the bonus of some capital growth in the asset class proving to be the least volatile and therefore is looking interesting again. 

We have noticed this interest from investors in our business,  and whilst it is not overwhelming and we don't expect “weight” to return to the market or that investors returning will drive up values greatly, savvy investors are certainly looking at select residential and commercial investment again and getting strong returns with bonus growth.  On the western corridor of Sydney’s CBD fringe for example, we recently purchased an off market property for under $19 million dollars with a net yield of 7.4 percent,  and in the residential sector, a house in Clovelly (at a discount to market) delivering a 5% yield which will provide growth of between 3-4 percent minimum providing total returns of circa 9 percent.

Investors are starting to look at property (according to our private bank and HNW affiliates) as TD's for example start to mature and interest rates tail off, income returns for property are looking attractive again - with the bonus of some capital growth, investors are targeting minimum total returns of between 7-9% pa. Even with the heady days or property doubling in value every 7-10 years (probably behind us for sometime), property has always kept pace with CPI historically, so with an average of about 3.2 percent pa over the long-term and face yields of circa 5.5% on units for example, the returns whilst not sexy, are safe ,less volatile and makes gearing look attractive again in the current interest rate environment.

The trick as always will be knowing what to buy and where -  factoring in all the variables including on costs, anticipating future ownership/rental demand, finding assets that complement an individual’s investment style and strategy as well as managing the downside risk - or, if you have or want to sell within 3 years of ownership, has the asset that has been purchased likely to get you the purchase price + costs back and if it was, how would you know?

Its probably worth getting some independent property advice (from a Buyers agent) in addition to any financial advice you may want to get.