While a mid-50% clearance rate doesn’t suggest housing prices are set to bounce back, it does imply a closer fit between buyer and seller expectations and the improved auction success rate supports the reduced rate of decline in housing values across Sydney and Melbourne. Watch “Brisbane Housing Market Update | May 2019” on Vimeo:

The rate of property price decline continues to ease-Overall we are seeing further evidence that the worst of the housing market conditions might now be behind us. Hear all the national and state based insights here.

In this month’s housing marketing update, CoreLogic share that Australian dwelling values fell half a percent last month as the pace of home value declines continued to ease after moving through a recent low point in December last year when national dwelling values were falling at a much faster rate.  The latest figures take national housing values 7.2% lower over the past twelve months to be down 7.9% since peaking in September 2017.

The slowing of the rate of decline is attributable to an easing in the market downturn across Sydney and Melbourne where an improving trend in the rate of decline has been evident over the past three months.  In December last year, Sydney dwelling values were down -1.8%, with the pace of falls progressively moderating back to a month on month decline of 0.7% in April.  Similarly, Melbourne values were down -1.5% in December, with the rate of decline slowing to -0.6% in April.

Although the national rate of decline has improved, the geographical scope of falling values has broadened.  In April, dwelling values fell across every capital city apart from Canberra, while regional areas of Tasmania, Victoria and South Australia also avoided a fall.  The broad-based nature of weak housing market conditions highlights that tighter credit conditions are having a dampening effect across all markets.

Annually, national dwelling values were down -7.2%; the largest decline since the twelve months ending February 2009, which was associated with the Global Financial Crisis.

Overall we are seeing further evidence that the worst of the housing market conditions might now be behind us.  Values are still broadly declining, however the pace of decline has moderated since December last year and there are some tentative signs that credit flows have improved, albeit from a low base.

Considering that tighter credit conditions were one of the primary catalysts for the housing market downturn, any sign that credit availability is improving would be a welcome outcome for the housing market.

According to the Australian Bureau of Statistics, lending to households for dwellings, excluding refinancing was up 2.7% on a seasonally adjusted basis in February.  Additionally, a rise in CoreLogic valuation platform activity throughout March hints at a further improvement in housing finance, which will likely be reported in the next ABS release.

Another indicator of a subtle improvement in the housing market can be seen in auction clearance rates that are holding around the mid-to-low 50% range, albeit on low volumes relative to a year ago. The correlation between auction results and housing market conditions is strongest in Melbourne and Sydney where auctions comprise a larger proportion of selling activity.

While a mid-50% clearance rate doesn’t suggest housing prices are set to bounce back, it does imply a closer fit between buyer and seller expectations and the improved auction success rate supports the reduced rate of decline in housing values across Sydney and Melbourne.

Watch “Brisbane Housing Market Update | May 2019” on Vimeo: https://vimeo.com/335683099?ref=em-share

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Quarterly rents have increased across all capital cities, bar Sydney and Darwin.

At a glance:

  • CoreLogic has released its first Quarterly Rental Review for 2019, showing rents have risen by 1 per cent during the first three months of this year.
  • Sydney is the most expensive capital city to rent with a median weekly rent of $582 per week, while Perth is the cheapest at $385.
  • Quarterly rents have increased across all capital cities, bar Darwin and Sydney.

The first CoreLogic Quarterly Rental Review for 2019, which tracks median rents and rental yields across Australia, shows that national weekly rents have risen by 1 per cent during the first three months of the year.

“This seasonally strong first quarter has delivered the highest increase in weekly rents since the corresponding first quarter a year ago”, says Cameron Kusher, Research Analyst for CoreLogic. “Our regional housing markets are performing marginally better than the capital cities, many of which have been experiencing weaker rental market conditions in recent years due to excess housing supply and growing investor activity.”

“Quarterly rents have increased across all capital cities, bar Sydney and Darwin. Hobart is experiencing notable growth, with rents increasing by 3.6 per cent over the past quarter. However, with a median rent of $582 per week, Sydney remains Australia’s most expensive city for tenants by far.”

The Quarterly Rental Review also highlights a national increase in yields over the past three and 12 months. Gross rental yields for the first quarter are 4.10 per cent compared to 3.95 per cent in the previous quarter and 3.77 per cent a year ago. Darwin has the highest rental yield across the country with an annual median of 6 per cent.

Key findings – rents and yields

  • Nationally, rents increased by +1 per cent over the March quarter and by 0.4 per cent over the past 12 months. Combined capital city rents were 0.9 per cent higher than the December 2018 quarter but -0.1 per cent lower than the previous March quarter. This is the lowest annual change since CoreLogic started tracking rents in 2005. Regional rents were slightly stronger, with a 1.1 per cent increase over the quarter and a 1.8 per cent increase over the past year.
  • In the first quarter, rents climbed in all capital cities except for Darwin (-0.3 per cent). Hobart was by far the strongest performer, with a 3.6 per cent increase in rent over the past quarter, followed by Perth (+1.8 per cent) and Canberra (+1.5 per cent). Hobart also experienced the highest increase in rent over the past 12 months (+5.4 per cent) while at the other end of the scale the media rent in Darwin fell by -5.7 per cent.
  • Nationally, the median rent is $436 per week. The median rent across the capital cities is $465 per week, and $378 per week across the regionals.
  • Gross rental yields have increased from 3.8 per cent to 4.1 per cent nationally. Across the combined capitals, the average rental yield is 3.8 per cent (up from 3.5 per cent). Regional yields are far higher at 5.1 per cent, up from 4.9 per cent 12 months ago.

img_1498

 

Key findings – capital cities

  • Sydney remains Australia’s most expensive capital city market, with a median weekly rent of $582, despite a decline of -3.1 per cent over the past 12 months. While rents in Sydney remained the same as the previous month, they increased by 0.5 per cent over the past quarter. Sydney also has the lowest rental yields out of all capital cities, at 3.5 per cent over the past quarter.
  • Canberra reports a median rental cost of $550 per week, an increase of 1.5 per cent over the past quarter and 3.6 per cent over the past 12 months. Canberra is one of only two capital cities (alongside Darwin) to experience a drop in weekly rent over the past month (-0.1 per cent).
  • In Melbourne, rents are $454 a week – an increase of 1 per cent over the quarter and 2.1 per cent over the past 12 months. Melbourne also reported the greatest increase in rental yields out of all capital cities, with current rental yields being 3.6 per cent, compared to 3.1 per cent a year ago. Despite the rise in yields, Melbourne has the second lowest weekly rental yield out of all capital cities (after Sydney).
  • Brisbane rents are starting to climb again, with Brisbane now having a median weekly rent of $436.This is an increase of 0.8 per cent over the past quarter, and 1.4 per cent over the past 12 months.
  • Perth is the most affordable capital city to rent in with a median weekly rent of $385. However, it is showing signs of growth, achieving the second highest quarterly rate (after Hobart) with an increase of 1.8 per cent over the past 3 months. Over the past year, Perth rents have increased by 2.1 per cent.
  • Adelaide closely follows Perth to become the second most affordable capital city to rent a property in, with a median weekly rent of $386. Like Brisbane, it experienced a 0.8 per cent rise in rents over the March quarter. Over the past 12 months, rents in Adelaide have risen by 1.2 per cent. Gross rental yields have remained static over the year at 4.4 per cent.
  • Hobart reported the strongest growth in rents, up 3.6 per cent over the past quarter to $453 per week. Over the past year, rents have increased by 5.4 per cent. Hobart also reports the strongest growth over the past month, with a 1.6 per cent increase in weekly rent. Hobart also reported the second highest rental yield (after Darwin) of 5.1 per cent, which remained the same as 12 months ago.
  • Darwin has experienced the most significant decline in rent to achieve a median weekly rent of $458. This is down -0.3 per cent over the quarter and -5.7 per cent over the past year. In addition, Darwin also reports a drop of 0.2 per cent over the past month. However, at 6 per cent, Darwin has the highest gross rental yield out of all the capital cities (up 0.1 per cent on the past 12 months).

CoreLogic Research Analyst Cameron Kusher said the first quarter of 2019 had delivered the highest increase in weekly rents since the corresponding first quarter a year ago

“Our regional housing markets are performing marginally better than the capital cities, many of which have been experiencing weaker rental market conditions in recent years due to excess housing supply and growing investor activity,” he said.

“Quarterly rents have increased across all capital cities, bar Sydney and Darwin.

“However, with a median rent of $582 per week, Sydney remains Australia’s most expensive city for tenants by far.”

The Quarterly Rental Review also highlights a national increase in yields over the past three and 12 months.

Gross rental yields for the first quarter are 4.10 per cent compared to 3.95 per cent in the previous quarter and 3.77 per cent a year ago. Darwin has the highest rental yield across the country with an annual median of 6 per cent.

According to the ABS, total household assets were recorded at a value of $12.6 trillion at the end of 2018. Total household assets have fallen in value over both the September and December 2018 quarters taking household wealth -1.6% lower relative to June 2018. While the value of household assets have fallen by -1.6% over the past two quarters, liabilities have increased by 1.5% over the same period to reach $2.4 trillion. As a result of falling assets and rising liabilities, household net worth was recorded at $10.2 trillion, the lowest it has been since September 2017.

CK_001.png

 

Based on this data from the ABS, the Reserve Bank (RBA) calculates a number of household finance ratios.

The first metric detailed from the RBA are the ratios of household and housing debt to disposable income. As at December 2018, household debt was 189.6% of disposable income, a record high and up from 188.7% the previous quarter. Housing debt was also a record high 140.2% of disposable income and had risen from 139.5% the previous quarter.

CK_002.png

 

While debt levels are quite high, the ratios of asset value to disposable income are much higher. While that may be the case, it is important to understand that if asset values fall, the value of the debt typically doesn’t reduce at the same speed, which can lead to asset value erosion. As at December 2018, household assets were 927.9% of disposable incomes. This ratio has declined as property values have fallen, down from a peak of 962.1% in December 2017. Similarly the ratio of housing assets to disposable income is currently 495.3%, down from its peak of 529.7% in December 2017. The 495.3% figure is the lowest it has been since September 2016.

CK_003.png

 

As a result of a reduction in the ratio of assets to disposable income, the ratio of debt to assets is climbing. Total household debt is now 20.4% of household assets, the highest it has been since March 2016. Total housing debt is 28.3% of total housing assets, the highest it has been since September 2014. Again, this reflects the fact that asset values are falling as debt increases.

Despite generational low official interest rates, the measures of interest payments to disposable income have risen over recent quarters. This is likely reflective of lenders lifting interest rates independently of any adjustment to the cash rate by the RBA. Household interest payments represented 9.1% of household disposable income in December 2018, their highest share since September 2013. Housing interest payments accounted for 7.6% of household disposable income in December 2018, their highest share since March 2013. Despite the cash rate tracking at generational lows, households are paying a proportionally higher share of interest than they have in many years.

CK_004.png

 

With housing values falling and expected to keep falling, the ratio of assets to disposable incomes is likely to fall over the coming quarters. Although most households will likely remain in a position whereby the value of their assets is significantly higher than their debt, no doubt an increasing number of recent property purchasers will have higher levels of debt than the value of their asset. This is probably an area of most concern for the RBA. If this leads to reduced consumer expenditure an in-turn slower economic growth it may be a trigger for either lower official interest rates or changes to mortgage lending policies (or both). Furthermore, with household debt at record highs and households dedicating more of their income to servicing their debt at a time when interest rates are so low if household debt levels haven’t declined by the time interest rates rise it could create more challenges for households.

This data will be very important to focus on over the coming quarters.

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  • Open Planed kitchen/ dining and family area with ceiling fans and access to the backyard.
  • 4 Carpeted bedrooms with built-ins and ceiling fans.
  • Master bedroom has a Walk in robe and Ensuite.
  • Main bathroom with separate bath and Toilet.
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琳达姬琳达珍Debello LREA – LJ Gilland Real Estate Pty Ltd

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Posted in Brisbane, ECONOMIC OUTLOOK, LJ Gilland Real Estate Pty Ltd, ljgrealestate, property investor, propertymanagement, Real Estate, rentals, rentals sales | Tagged , , , , , , , , , , , , , , ,

Pets vs No Pets at your rental property

Tips for landlords renting to pet owners

Pet-friendly properties will appeal to more tenants and can achieve higher rents, but there’s more to consider than just the rental return.

  • Choose the right property and features – An apartment with a large outdoor area or a house with a big backyard will appeal more to pet owners. Durable flooring such as tiles is less likely to be damaged than polished floorboards or carpets.
  • Have a pet renting policy  Stipulate the number of pets allowed, acceptable animals or breeds, and any size limits.
  • Ask for a pet resume – Tenant are often happy to supply references from previous landlords or property managers. You may also wish to meet the pet beforehand.
  • Investigate strata bylaws – Some complexes may not allow animals, while others have rules about the type or size of pet and may require residents to register pets or ask for permission first.
  • Check your landlord insurance  Tenants are generally liable for damage caused by pets, apart from reasonable wear and tear, but it’s wise to check your insurance policy as well to find out exactly what is and isn’t covered.
  • Claim repairs at tax time  The cost of repairing reasonable wear and tear, such as refinishing floors and repainting walls, can be deducted from your rental income to minimise your tax bill.

Landlords who allow pets could boost their rental return by up to 30 per cent

Investors are always looking for ways to increase their rental return, but there’s one strategy that can boost rents by up to 30 per cent and it doesn’t involve renovating. 

In almost every capital city, median asking rents for pet-friendly apartments are higher than for homes that don’t allow pets, according to Domain Group data.That means landlords who allow pets could boost their rental return by simply checking a box.

Apartments advertised as pet-friendly are rarest in Melbourne, representing less than 3 per cent of all rentals, followed by Adelaide (6 per cent) and Sydney and Canberra (both 7 per cent).

Houses are more likely to be pet-friendly, but the proportion is still low in Melbourne (9 per cent) and Sydney (21 per cent). On the other hand, more than half of Greater Brisbane rental houses allow pets, while in Darwin, more than two-thirds are pet-friendly.

Sydney investors have the most to gain by allowing pets, according to the analysis of rental listings from the March 2019 quarter. Asking rents for apartments that allow pets are 11 per cent higher than those that don’t, which equates to $60 each week or $3120 per year.

With landlords in Sydney facing tougher competition as the rising supply of rental properties pushes down rents, allowing pets could provide investors with a point of difference and minimise the time a property remains on the rental market.

Sydney property manager and Property North Agency director Ben Benny said he always encouraged landlords to consider allowing pets to improve returns.

Related: How to prepare your home for a pet

“We definitely see an increase in rents when properties are pet-friendly,” he said. “Hands down it’s the biggest inquiry we get for any property.”

In Melbourne and Darwin, rents for pet-friendly units are 8 per cent higher, and in Adelaide and Brisbane there’s a 5 per cent difference in price.

Premium highest for rare rentals

In areas where pet-friendly rentals are least common, the premium is often higher. 

Less than 3 per cent of apartments in Sydney’s Canterbury-Bankstown area were advertised as pet friendly, but rents were 26 per cent higher, with landlords pocketing an extra $105 per week or $5460 per year. 

In the Liverpool and Fairfield areas, only one per cent of apartments are pet-friendly, and are advertised for 18 per cent more, costing tenants an extra $60 each week or $3120 per year.

It’s a similar situation in Melbourne’s inner city, where less than one per cent of units allow pets and rents are 30 per cent higher. That trend continues among apartments in the inner east, northern suburbs and bayside areas.

Although few rentals in Melbourne were advertised as pet-friendly, Lucas Real Estate senior property manager Emma Racky said this was relatively normal, and pets were often allowed on a case-by-case basis.

“People won’t be deterred from applying just because it doesn’t specifically say it’s pet-friendly,” she said. “It just depends on the owner’s preference. Some aren’t too fussed, but if it’s a new property, they’re worried about damage.” 

Restrictive landlords limit their tenant pool

In Brisbane, where pet-friendly rentals are much more common because tenants considered them part of the family.

In Brisbane, you reduce the pool of tenants if you say it’s not pet-friendly.

I love to give out a property which is pet-friendly because I know I’ll have a bigger pool of people coming through and the take-up is much faster.” In Sydney, the northern beaches has one of the highest concentrations of pet-friendly houses. More than one-third of rental houses are pet-friendly, and landlords who allow pets can expect rents to be 17 per cent higher.

Pet ownership is common among families renting houses there as trends were changing.

Over the past two or three years we’ve seen more of a shift towards younger couples, finding it more common for two-bedroom apartments.

Although property damage is a concern for many landlords, it was not the only issue. For strata buildings and apartments, the biggest concern is noise and upsetting other neighbors.

 

 

 

NO PETS

Allowing no pets at all will potentially reduce the pool of tenants who will want to rent your property.

On the upside though, having no pets obviously means there will be less wear and tear on the property in terms of damage to the property and potentially, odours in the property.

In our experience, around eight times out of ten the tenant will ask for a pet. It’s a common thing that happens throughout a tenancy.

PETS

At the start of a tenancy when being advertised, we always ask owners to consider listing a property as ‘pets upon application’ (this does not mean pets are a definite ‘yes’, it means that each application will be considered on its merits and each pet considered). Ultimately it is the owner’s decision on whether to allow pets.  The benefits of allowing pets is that it will open up your property to a much larger potential tenant pool, possibly decreasing vacancy time. The reality is the most pets and pet owners are not an issue, however, not all pets are created equal! Having a ‘pets on application’ approach coupled with a signed agreement from the tenant is a good step in providing the right to ‘veto’ any pets you do not consider appropriate and safeguarding your investment.

Over 85% of our properties are pet friendly, meaning we have more tenants looking at our properties and we have less vacancy.

According to Domain, owners who considered pets can also boost their rent returns by up to 30%!

In a nation where pets are family, great tenants with a pet can be worth their weight in gold. They tend to pay rent on time, look after the property really well and they stay for 2 to 3 years!

Everyone wins 🐶 🐱 🐦 🐰 🐟

https://www.domain.com.au/advice/landlords-who-allow-pets-could-boost-their-rental-return-by-up-to-30-per-cent-833532/

 

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Most Australians are spending more of their income on housing than they used to, but low-income households are being squeezed the hardest.

Many are in poverty, and many more are suffering financial stress. A growing number of Australians are becoming homeless.

A decade ago the Rudd federal government established the National Rental Affordability Scheme – NRAS. The scheme paid incentives to developers and community housing organisations that built new homes and rented them out for at least 20% below market rents for 10 years.

The Abbott government axed the scheme in 2014. Labor promised to reintroduce it if won the 2019 election. Now advocates of affordable housing are calling on the Morrison government to do the same.

But new research published by the Grattan Institute today concludes they are wrong. The NRAS was expensive, inefficient and mainly helped those not in greatest need.

Read more: On housing, there’s clear blue water between the main parties

Other policies, such as building social housing and boosting Commonwealth Rent Assistance, would be better targeted and waste less money along the way.

Poor value for money

The value of the NRAS subsidy was set much higher than it needed to be.

NRAS developers still on the program receive about A$11,000 of public money per unit per year (the subsidy was set originally at A$8,000, but indexed).

The problem is, A$11,000 is much more money than the developers need to cover the cost of the rental discount.

In 2016 the value of the 20% rental discount was slightly less than A$4,000 a year in the typical suburb in which NRAS properties were built.

Read more: Ten lessons from cities that have risen to the affordable housing challenge

The leftover value of the subsidy – about A$7,000 a year – was essentially a windfall gain for developers.

We estimate it provided windfall gains to private developers of at least A$1 billion, or roughly one-third of the total cost of the scheme.

Community housing providers also received windfall gains, although they would have reinvested the funds into more affordable housing or deeper rental discounts for tenants.

The scheme was also poor value for money because the subsidy didn’t vary depending on location or type of dwelling: the same subsidy was offered for a one-bedroom apartment or a three-bedroom home. Not surprisingly, the scheme ultimately funded a lot of small, cheap-to-build units.

Not directed at those most in need

The eligibility criteria were far too loose.

Someone can qualify to live in one of the NRAS dwellings left on the scheme with an income of up to A$50,000 – a good deal higher than the median income.

A couple can qualify if their household income is below A$70,000.

It means about half of all households that rent can qualify to live in an NRAS subsidised home. Half of them would be ineligible for Commonwealth Rent Assistance because their incomes are too high.

Only one-third of the households living in an NRAS home at the scheme’s peak in 2016 had gross household incomes below A$30,000 a year, whereas one-third had incomes above A$50,000 a year.

No extra housing

There’s also little evidence the NRAS led to much more housing being built than otherwise.

Government subsidies don’t create extra housing if they crowd out housing that would have been built anyway. Crowding out is most likely when supply is already constrained, as it is in major Australian cities where land-use rules prevent greater density in established suburbs. International research suggests affordable housing crowds out private housing.

No useful stimulus

Nor was the NRAS a useful stimulus. It began in 2008 at the height of the global financial crisis, but most NRAS properties were only approved between 2013 and 2015, by which time housing construction was already booming.

Administrative difficulties and a complex design made housing constructed through NRAS anything but timely.

Better alternatives

Instead of reinstating the NRAS, state and federal governments should focus on policies that will do the most (at least cost) to better house low-income Australians.

A Rudd-era policy the Morrison government should introduce is the Social Housing Initiative, which built 20,000 new social housing units and refurbished another 80,000 over two years at a cost of A$5.6 billion.

The economic hit was immediate: construction approvals spiked within 12 months of the announcement. A repeat today would provide a more effective boost to declining housing construction than a reinstated NRAS.

Read more: Australia’s social housing policy needs stronger leadership and an investment overhaul

Boosting Commonwealth Rent Assistance by 40%, and indexing it to changes in rents typically paid by people receiving income support, would be a fairer and more cost-effective way to help the much larger number of lower-income earners struggling with housing costs.

It shouldn’t push up rents much because only some of the extra assistance will be spent on housing.

The states should also fix planning rules that prevent more homes being built in inner and middle-ring suburbs of our largest cities. It would help a bit to make housing cheaper to buy and rent. Reforming tenancy rules would make renting more secure.

Read more: To make housing more affordable this is what state governments need to do

There is a powerful case for governments to do more to help house low-income Australians. But unless we learn from past mistakes, we will wind up with another expensive housing policy that does little to help those who most need that support.

http://theconversation.com/rudds-rental-affordability-scheme-was-a-1-billion-gift-to-developers-abbott-was-right-to-axe-it-122854

Posted in LJ Gilland Real Estate Pty Ltd

Housing market conditions are responding to lower interest rates as well as the recent loosening of loan serviceability rules from APRA and the positive influence of the stable federal election outcome

The Reserve Bank has revealed its cash rate verdict for September, following its monthly board meeting.

The Reserve Bank of Australia (RBA) has held the official cash rate at 1 per cent, in line with market expectations.

Analysts are expecting the RBA to hold off on further cuts until the end of the year, as it monitors the impact of its back-to-back reductions in June and July.  

Managing director of mortgage aggregator Finsure John Kolenda said that global instability, which has been heightened by US-China trade tensions, would not have been enough to prompt the RBA to lower the cash rate in September.  

“As yet, we haven’t seen any negative economic impacts hit the economy, and we should be cautious in reducing rates too much and too quickly because it could possibly dislocate the economy in other ways as evidenced by what has happened to the economy in Japan and Europe,” Mr Kolenda said.

“Consumers should feel comfortable that the RBA, the regulators and the federal government have plenty of options up their sleeve to help the domestic economy navigate its way through any possible challenges.”

Mr Kolenda added that while he expects the central bank to cut rates further in the coming months, the stimulatory effect of such reductions would be “minimal”.

“It is difficult to see consumers gaining confidence in spending when the global economic news is so negative,” he said.

“But positive consumer sentiment is what’s required to invigorate the economy. As the federal Treasurer Josh Frydenberg intimated, we also need to see a rise in business confidence and investment to stimulate the economy to help cushion any global headwinds.

“We are likely to see another rate cut over the coming quarter but also hopefully some positive economic news, which will help elevate confidence and consumer spending to enable us to ride out the storm.”

Moreover, CoreLogic’s research director, Tim Lawless, said that the RBA would have noted the recent pick-up in housing market conditions in its September board meeting, which he said would have further influenced their decision to keep rates on hold.

Mr Lawless said that the RBA’s cuts in June and July, as well as the Australian Prudential Regulation Authority’s (APRA) changes to its lending guidance, have contributed to a notable spike in market conditions, evidenced by the rise in national home values in August – the first increase since April 2017.     

“Clearly, housing market conditions are responding to lower interest rates as well as the recent loosening of loan serviceability rules from APRA and the positive influence of the stable federal election outcome,” he said.

Mr Lawless added that the recent improvement in housing market conditions could trigger a sharper than expected recovery, which may prompt policymakers to introduce a fresh wave of credit curbs to limit the build-up of debt.

However, despite risks associated with a “V-shaped” housing recovery, the RBA is expected to follow through with its strategy to cut rates further as it targets a lower unemployment rate.

AMP Capital chief economist Shane Oliver is expecting two additional cuts to the cash rate by the end of the year, which would take the cash rate to 0.5 per cent.

Posted in LJ Gilland Real Estate Pty Ltd

National home values grew by 0.8 per cent over August, suggesting the Australian property market may have turned a corner.

This is the first time the national index has increased since October 2017, the latest research from property analytics firm, CoreLogic has revealed. It came after a July which saw property values neither increase nor decrease. 

And, research director Tim Lawless said, not only was this the turning point, but the percentage of growth was substantial.

“The significant lift in values over the month aligns with a consistent increase in auction clearance rates and a deeper pool of buyers at a time when the volume of stock advertised for sale remains low.

“It’s likely that buyer demand and confidence is responding to the positive effect of a stable federal government, as well as lower interest rates, tax cuts and a subtle easing in credit policy.”

The lift comes after a 12 month period which saw values decline 5.2 per cent, and an overall fall of 7.6 per cent since peak.

And, the increase in values also follows two consecutive interest rate cuts from the Reserve Bank of Australia in June and July.

How did each state perform?

Housing values increased across Sydney (1.6 per cent), Melbourne (1.4 per cent), Brisbane (0.2 per cent), Hobart (0.5 per cent) and Canberra (0.8 per cent).

However, across Adelaide (-0.2 per cent), Perth (-0.5 per cent) and Darwin (-1.2 per cent), prices fell.

“While the ‘recovery trend’ is still early, it does appear that growth trends are gathering some pace, particularly in the largest capital cities,” Lawless said.

Image: CoreLogic

Image: CoreLogic

Sydney prices are still 13.3 per cent less than they were at their peak, while homes in Darwin are valued 30.7 per cent less than they were at their peak.

In Perth, values are 20.6 per cent less than they were at their peak. And even Hobart is 0.3 per cent less valuable than it was at its peak – that’s despite regional Tasmania currently sitting at its peak.

Across the regions, only the Northern Territory, Tasmania and Victoria saw property values rise in August.

Expensive homes lead the charge

As the most expensive quarter of properties fell the most, they’ve also led the return to growth.

“The rapid recovery across higher valued properties makes sense considering this sector of the market recorded a more substantial correction,” Lawless said.

“Although values have fallen across the board over recent years, the larger declines amongst more expensive properties mean that they are relatively more affordable for those looking to upgrade,” he added.

Rents continue to fall

While dwelling values have changed direction, rents continue to fall, declining by 0.1 per cent in August. That’s the third month in a row of negative rent movements.

What does it all mean?

While CoreLogic had previously predicted a slow recovery, today it said that as home loan rates grow cheaper and housing credit restrictions soften, the recovery could occur as quickly as the market fell.

“No doubt, policy makers and regulators will be monitoring the housing market indicators very closely over the coming months. 

“At the outset, it appears that a rapid recovery would confirm that low interest rates and a loosening in credit policy is reigniting some market exuberance, despite housing affordability remaining a significant challenge, rising unemployment, low wages growth and near record-high levels of household debt.”placeholder://http://www.ljgrealestate.com.au

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The latest changes to REIQ Contracts and paper Certificates of Title in Queensland. Certificates of Title no longer required

  This edition of our newsletter discusses the latest changes to REIQ Contracts and paper Certificates of Title in Queensland.
  Certificates of Title no longer required
From 1 October 2019, paper Certificates of Title will no longer be used and will cease to be an instrument under the Land Title Act 1994.
 
This means that from 1 October 2019, paper Certificates of Title will not need to be produced when registering the sale of a property or mortgage.
 
Approximately 11% of land owners in Queensland currently hold a paper Certificate of Title. Please feel free to give us a call to discuss how these changes may affect your client’s interests.  
New REIQ Contracts now live  
The latest editions of the Queensland Law Society approved REIQ Contracts are now available.
 
The latest editions are:  Contract for Houses and Residential Land Contract 16th Edition; and Contract for Residential Lots in a Community Titles Scheme 12th Edition. The key changes are:
  Electronic Settlements  
To date, the electronic settlement space has been dominated by Bank and Government owned provider, PEXA. However the entry of new players to the market like Sympli has prompted the industry, and the REIQ Contracts, to adapt. 
 
References to PEXA in the now superseded REIQ Contracts have been replaced with references to Electronic Lodgement Network Operators, or “ELNO Systems”.

This change will provide scope for clients to choose which ELNO System to use in response to greater competition in the electronic settlement market, which should deliver better, more cost effective options for our mutual clients.
  Delay Events  
Previously, the REIQ Contracts provided the parties with the ability to “suspend time” and delay Settlement without penalty in the event of a Natural Disaster, like a flood or tsunami.
 
The latest REIQ Contracts have broadened the scope of those provisions that dealt with Natural Disasters to include other things, like riots and terrorist acts, all of which are now collectively referred to as Delay Events.
 
Of key interest is the addition of orders or directions given by Government Agencies, which include Courts and Tribunals, as potential Delay Events.
 
This could mean that a party to a Contract, that is also a party to a Court Order, such as a Family Court Order, who finds that they’re unable to comply with that Order, may call upon the Delay Event provisions in the REIQ Contract and delay Settlement without penalty.








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LJ Gilland Real Estate Pty Ltd
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Even the pros don’t know what’s up. AP Photo/Richard Drew
How to invest if you’re worried a recession is coming
Alexander Kurov, West Virginia University
August 21, 2019 8.32am EDT
Although the U.S. economy continues to grow and add jobs, talk of a recession is increasingly in the air due to a number of worrying signs.

Business investment and consumer confidence are taking a hit due to the growing economic jitters and uncertainty over the ongoing trade war with China. An important bond market recession warning – known as an inverted yield curve – is spooking investors. And policymakers are actively taking steps to bolster the economy, such as the Federal Reserve’s recent decision to lower short-term borrowing costs. The Trump administration is even mulling a payroll tax cut to avert a downturn.

A question I’m often asked as a finance professor and a CFA charterholder is what should people do with their money when the economy is slowing or in a recession, which typically causes riskier assets like stocks to decline. Fear causes many people to run for the hills.

But the short answer, for most investors, is the exact opposite: Stick to your long-term plan and ignore day-to-day market fluctuations, however frightening they may be. Don’t take my word for it. The tried and true approach of passive investing is backed up by a lot of evidence.

Most of us have money at risk
While we usually associate investing with hotshot Wall Street investors and hedge funds, the truth is most of us have a stake in financial markets and their ups and downs. About half of American families own stocks either directly or through institutional investment vehicles like mutual funds.

Most of the invested wealth average Americans hold is managed by professional investors who look after it for us. But the continued growth of defined contribution plans like 401(k)s – which require people to make choices about where to put their money – means their financial security increasingly depends on their own investment decisions.

Unfortunately, most people are not good investors. Individual investors who trade stocks underperform the market – and passive investors – by a wide margin. The more they trade, the worse they do.

One reason is because the pain of losses is about twice as strong as the pleasure of gains, which leads people to act in counterproductive ways. When faced with a threatening situation, our instinctive response is often to run or fight. But, like trying to outrun a bear, exiting the market after suffering losses is not a good idea. It often results in selling at low prices and buying higher later, once the market stress eases.

The good news is you don’t need a Ph.D. in finance to achieve your investment goals. All you need to do is follow some simple guidelines, backed by evidence and hard-earned market wisdom.

Investing checklist
First of all, don’t make any rash moves because of the growing chatter about recession or any wild gyrations on Wall Street.

If you have a solid investment plan in place, stick to it and ignore the noise. For everyone else, it’s worth going through the following checklist to help ensure you’re ready for any storm on the horizon.

Define clear, measurable and achievable investment goals. For example, your goal might be to retire in 20 years at your current standard of living for the rest of your life. Without clear goals, people often approach the path to getting there piecemeal and end up with a motley collection of investments that don’t serve their actual needs. As baseball legend Yogi Berra once said, “If you don’t know where you are going, you’ll end up someplace else.”

Assess how much risk you can take on. This will depend on your investment horizon, job security and attitude toward risk. A good rule of thumb is if you’re nearing retirement, you should have a smaller share of risky assets in your portfolio. If you just entered the job market as a 20-something, you can take on more risk because you have time to recover from market downturns.

Diversify your portfolio. In general, riskier assets like stocks compensate for that risk by offering higher expected returns. At the same time, safer assets such as bonds tend to go up when things are bad, but offer much lower gains. If you invest a big part of your savings in a single stock, however, you are not being compensated for the risk that the company will go bust. To eliminate these uncompensated risks, diversify your portfolio to include a wide range of asset classes, such as foreign stocks and bonds, and you’ll be in a better position to endure a downturn.

Don’t try to pick individual stocks, identify the best-performing actively managed funds or time the market. Instead, stick to a diversified portfolio of passively managed stock and bond funds. Funds that have done well in the recent past may not continue to do so in the future.

Look for low fees. Future returns are uncertain, but investment costs will certainly take a bite out of your portfolio. To keep costs down, invest in index funds whenever possible. These funds track broad market indices like the Standard & Poor’s 500 and tend to have very low fees yet produce higher returns than the majority of actively managed funds.

Continue to make regular contributions to your investments, even during a recession. Try to set aside as much as you can afford. Many employers even match all or some of your personal retirement contributions. Unfortunately, most Americans are not saving enough for retirement. One in 4 Americans enrolled in employer-sponsored defined contribution plans does not save enough to get the employer’s full match. That’s like letting your employer keep part of your salary.

There’s one exception to my advice about standing pat. Let’s suppose your long-term plan calls for a portfolio with 50% in U.S. stocks, 25% in international stocks and 25% in bonds. After U.S. stocks have a good run, their weight in the portfolio may increase a lot. This changes the risk of your portfolio. So about once a year, rebalance your portfolio to match your long-term allocation targets. Doing so can make a big difference in performance.

Always keep in mind your overall investment plan and focus on the long-term goals of your portfolio. Many market declines that were scary in real time look like small blips on a long-term chart.

Warren Buffett knows a thing or two about investing. AP Photo/Nati Harnik
Turbulence ahead
In the long run, this approach is likely to produce better results than trying to beat the market – which even pros tend to have a hard time doing.

Billionaire investor Warren Buffett demonstrated this by easily winning a bet that a simple S&P 500 index fund could beat a portfolio of hedge funds – supposedly the savviest investors out there, at least judging by the high fees they charge.

In the words of legendary investor Benjamin Graham: “The investor’s chief problem and even his worst enemy is likely to be himself.” Graham, who mentored Buffett, meant that instead of making rational decisions, many investors let their emotions run wild. They buy and sell when their gut – rather than their head – tells them to.

Trying to outsmart the market is akin to gambling and it doesn’t work any better than playing a lottery. Passive investing is admittedly boring but is a much better bet long-term.

But if you follow these guidelines and fasten your seatbelt, you’ll be able to ride out the current turbulence.

[ Expertise in your inbox. Sign up for The Conversation’s newsletter and get a digest of academic takes on today’s news, every day. ]

Comment on this article
Alexander Kurov
Professor of Finance and Fred T. Tattersall Research Chair in Finance, West Virginia University
Alexander Kurov does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.

West Virginia University provides funding as a member of The Conversation US.

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At a glance: Although Australians in the property market have become more optimistic about house prices over the next 12 months, housing affordability remains the top worry, with 93% agreeing that ‘despite price falls housing affordability remains a big issue in Australia’, according to ME Bank’s second Quarterly Property Sentiment Report. All other perceived worries queried in the report have eased over the past three months, including concern about tighter credit policies (10 point drop), over negative equity (7 point drop), about being forced to switch to interest-only repayments (7 point drop), and concern about property values falling (5 point drop) all eased. Additionally, the report found more people sitting on the fence when it comes to transacting property; less are intending to buy (down three percentage points), less are intending to sell (down one percentage point) and more people intend to do neither (up five percentage points).

Although Australians in the property market have become more optimistic about house prices over the next 12 months, housing affordability remains the top worry, with 93% agreeing that ‘despite price falls housing affordability remains a big issue in Australia’.

This is one of the key findings from ME Bank’s second Quarterly Property Sentiment Report, conducted at the start of July 2019. The first report was conducted in April 2019 before the Federal Election, APRA’s proposed serviceability changes and two RBA cash rate cuts.

Based on a survey of 1000 Australians, the report highlighted that Australians are feeling more optimistic about property prices than they were in April, with 38 per cent expecting prices to rise over the next 12 months (compared with 32 per cent in April), and only 17 per cent expecting them to fall (down from 28 per cent). Around 30 per cent of respondents expected them to stay the same (29 per cent in April).

ME’s Group Executive Customer Banking, Craig Ralston said: “Australians in the property market have become more optimistic about house prices, perhaps reflecting a number of changes in the external environment since the last survey.”


At a glance:

  • Although Australians in the property market have become more optimistic about house prices over the next 12 months, housing affordability remains the top worry, with 93% agreeing that ‘despite price falls housing affordability remains a big issue in Australia’, according to ME Bank’s second Quarterly Property Sentiment Report.
  • All other perceived worries queried in the report have eased over the past three months, including concern about tighter credit policies (10 point drop), over negative equity (7 point drop), about being forced to switch to interest-only repayments (7 point drop), and concern about property values falling (5 point drop) all eased.
  • Additionally, the report found more people sitting on the fence when it comes to transacting property; less are intending to buy (down three percentage points), less are intending to sell (down one percentage point) and more people intend to do neither (up five percentage points).

Respondents across all major cities had a more positive outlook on prices; significantly more people in NSW, VIC, QLD are predicting prices to go up, and noticeably more people in NT, TAS, NSW, and VIC are predicting prices will no longer fall.

Positive house price expectations were also seen across all property status types, with owner-occupiers changing their tune the most since April.

Source: ME’s Quarterly Property Sentiment Report.

“House prices remain high by historical and international standards, hence perceived worries about affordability may take time to shift,” said Mr Ralston.

All other perceived worries queried in the report have eased over the past three months, including concern about tighter credit policies (10 point drop), over negative equity (7 point drop), about being forced to switch to interest-only repayments (7 point drop), and concern about property values falling (5 point drop) all eased.

Source: ME’s Quarterly Property Sentiment Report.

“Reduced concern is likely connected to the increased sense of optimism about house prices,” said Mr Ralston.

On another note, Australians in the housing market see price movements as a growing opportunity; 61% said they were happy property prices are falling (up from 59 per cent) because it increases their chances of buying a property, with more first home buyers happy with recent price movement than other cohorts (86 per cent).

Additionally, the report found more people sitting on the fence when it comes to transacting property; less are intending to buy (down three percentage points), less are intending to sell (down one percentage point) and more people intend to do neither (up five percentage points).

The most likely buyers are unsurprisingly higher income earners (45 per cent of those earning over $125,000 intend to buy). While many 25-39-year-olds were also poised to buy in April, they’re no longer as eager, with only 44 per cent now intending to buy, dropping from 52 per cent.

In terms of property intentions by property status, 44 per cent of investors, 42 per cent of first home buyers and 24 per cent of owner-occupiers intend to buy in the next 12 months.

“There are more fence-sitters who appear to be taking a ‘wait and see’ approach to the market – which is not surprising considering the recent economic and political changes,” said Mr Ralston.

Overall, the report shows a polarised market with 41% feeling neutral about the property market, 33% positive and 26% negative.

Source: ME’s Quarterly Property Sentiment Report.

However, overall property sentiment remained stable, in a net positive position.

Sentiment varies by age, property status and property intent, with younger people and investors feeling less positive (eight and four percentage points less respectively) about the market than in April.

Whereas, owner-occupiers and ‘those intending sell in the next 12 months’ are feeling more optimistic.

“The housing market has seen a moderation in the rate of house price decline in Australia’s key property markets over the last three months.

“Positivity among sellers and owner-occupiers suggests these groups see the recent market trends as a sign their homes are retaining or regaining value again,” said Mr Ralston.

“The drop in positive sentiment among investors is surprising considering negative gearing now seems to be off the table and APRA has proposed changes to home loan serviceability.”

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Brisbane, Adelaide and Hobart were the only states to experience increases in weekly rents for both houses and units.

Data released by SQM Research today has revealed the national residential rental vacancy rate increased in June 2019 to 2.3%, an increase from 2.2% in May.  The total number of vacancies Australia-wide is now at 78,690 vacant residential properties, an increase of 3,597 over the month and up 2,933 dwellings over the past 12 months.
 
Nearly all capital cities recorded minor increases ranging from 0.1% to 0.2% over the month, Darwin was the only capital city to record a decrease of 0.2% to 3.1% in vacancy rates.
 
Sydney continues to have the highest vacancy rates in the country at 3.5%, an increase of 0.2%. This is the highest for Sydney since 2005.  Perth’s vacancy rate is not far behind at 3.2%, having increased 0.1%.
 
Melbourne’s vacancy rate increased to 2.0%.  Hobart’s vacancy rate remains steady at 0.5% and continues to record the lowest vacancy rate in the country.


The increase in rental vacancies in June tends to be a seasonal rise for the start of winter however Sydney’s increases goes beyond seasonal factors and so our expectation remains that Sydney will reach a 4% vacancy rate before 2019 is completed.
 
Melbourne is also likely to record more rises in rental vacancies as newly completed dwellings purchased as ‘off-the-plan’ in the last boom, enter the rental market now.
 
In spite of the rise in vacancies this month, Brisbane, Adelaide and Hobart’s rental market is in favour for landlords as in these cities have also recorded moderate increases in asking rents for the month and continue to record muted dwelling completions.
 
Asking Rents

Capital city asking rents declined 0.4% for houses but remained steady for units for the week ending 12 July 2019 to record asking rents of $551 per week for houses and $441 per week for units. 

In comparison, over the 12 months, asking rents for houses increased 0.4% but declined 0.7% for units.
 
Sydney and Melbourne’s asking rents for houses and units both declined in July. Sydney rents dropped 0.5% for houses and 0.2% for units to 12 July and Melbourne’s drop was 0.9% for houses and 0.2% for units. 

Brisbane, Adelaide and Hobart were the only states to experience increases in weekly rents for both houses and units. Adelaide’s house rents increased 1.1% and units by 0.4%, Brisbane’s house rents increased by 1.0% units increased by 0.7%. Hobart’s house rents increased 3.6% and units increased by 4.9% (the highest among all states).


 

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