NOVEMBER 28, 2012 | RESEARCH |
“The little-known suburb of Murarrie has been Brisbane’s best performing suburb for house prices over the past 12 months, according to REIQ. House prices in Murarrie have risen 9.6% over the year to September to a median of $509,500”.
What a load a BS!
And read on to find out why.
Brisbanites must be shaking their heads at this one. Murarrie – the best place for house price growth – come on! Where’s the catch?
Sadly the media have run with this story too; with several property digital outlets biting at the chaff to print more nonsense. Digital portals need to question the material being forwarded to them and instead of being in a rush to fill-up their daily posts, they should cut the volume and up the quality.
The REIQ is correct – the median house price across the 55 “normal” settled house sales across Murarrie was $509,500 during the twelve months to September this year. And the median house price was $461,000 during the twelve month period before. The difference between the two equates to a 10.5% annual change. I removed a $10 million industrial sale from the 2011 figures, which dropped the median value during the twelve months to September 2011, which saw – technically – the median house price gain rise from 9.6% to 10.5%.
BUT the devil is in detail and when a result like this pops up, one must check the numbers. It was quite amusing to read the various ramblings as to why Murarrie is Brisbane’s apparent “top of the pops”.
Below is a table of the settled house sales across Murarrie. Importantly, they have been displayed by price range. And this analysis tells us that something more than just rising prices is going on in Murarrie.
The large shift in the volume of sales between $500,000 and $700,000 – from 24% to 47% of the sales – between 2011 and 2012 strongly suggests that different types of housing are being sold between the two time periods.
There are two parts to Murarrie’s urban landscape – two relatively new residential estates. Houses in the newer estates sell for about $200,000 more, on average, than those in the older “blue” area of Murarrie.
During the 2011 study period, only 20% or 12 of the 59 settled house sales took place in the new red areas. A year later this volume had increased to 36 sales or a 66% market share of the 55 detached housing transactions settled during 2012.
When you compare like with like – i.e. house sales in the newer areas or similarly isolated sales within the older area of Murarrie; you find what most would expect – very little change in actual prices.
Now there is little stock listed for sale across postcode 4172 – just 34 properties according to SQM Research and the average time taken to sell a property is tight at 104 days (APM). But the time taken to sell has increased from an average 89 days a year ago.
The message here is very clear – a change in median price, more often than not reflects what has been sold during the two time periods rather than actual price growth. This is especially the case when it comes to small-scale or suburban analysis.
Sadly, the industry (and media) is hooked on this baloney. Yes, I know it sells more newspapers – but it really just causes more grief than good. Real estate agents need to get many vendors out of the clouds. A valuer’s job is made even harder – more so because of mis-perception than anything else. (Valuer’s are only covering their collective backsides and charging for it)
Median values should only be used for large areas – a city-wide comparison for example – and only then over the longer term. We use a ten-year moving annual average. The year on year figures – as illustrated above – often turn out to be bunkum.
The only real way to test price growth is to look at resales i.e. the same dwelling being resold over time (and, of course, only those without substantial improvements between sales).
Property investment proceeds not an alternative to full-time job: Australian buy-to-let landlord survey
By Larry Schlesinger
Tuesday, 27 November 2012
Only one in 20 property investors is making enough money from his or her rental portfolio to no longer have to work full time, according to a landlord survey carried out by research consultancy group BDRC Jones Donald.
Based on an online survey of 500 Australians who own one or more rental properties, it found that just 6% of respondents earn a profitable full-time living from rents paid by their tenants.
Just over a third (35%) derive income from their rental properties to supplement their full-time income, while a quarter (26%) break even on rental activity, and just under a third (32%) make a small loss.
While the report does not delve into the actual dollar earnings of the landlords who are making a living off their rental yields, it does reveal that the average property value for those making a profitable full-time living is $915,000, with these landlords holding a portfolio with an average of 4.3 properties, equating to total average value of $3.9 million.
"Of these people, the average household income is $111,000 before tax," says a spokesperson for BDRC Jones Donald.
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The most recent statistics from the Australian Tax Office (ATO) for the 2009-2010 tax year show that the majority of property investors own just one investment property, indicating that it is not a full-time occupation for most.
Of the 1.7 million individuals who reported net rental income from rental property in the 2009-2010 tax year, 73% own just one rental property.
The ATO figures also show that 63.4% of property investors with net rental income reported a taxable loss (net rental income less than zero) from their rental property.
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The results of the Australian Private Property Investor Study also suggest a degree of complacency among landlords about the performance of their investments, with more than a third (34%) being unaware of the rental yield earned on their investments.
This lack of awareness is even higher (40%) for those landlords who manage their own investments, compared with 34% of landlords who use a professional property manager.
Sentiment about property investing remains positive, though, with 77% of Australian landlords feeling very positive about their rental investment and nearly a half of respondents noting an increase in demand from tenants. Only 12% reported a decrease in demand from tenants.
Overall the survey found that landlords are better off financially if they use a property manager both in terms of rental yields achieved and profitability.
Around 20% of landlords that used a property manager earned yields of 6% or more compared with 15% of landlords that managed their properties themselves.
Similarly, 46% of landlord that used a property manager derived a positive income return from their investments compared with just 34% of landlords that that managed their properties themselves.
The findings of the survey indicate that the majority of landlords (77%) use the services of a property manager.
“In the current market, landlords are seeking advice to ensure that their investments are working hard for them,” says Roger Donbavand, managing director of BDRC Jones Donald.
“Along with real estate agent support, six out of 10 landlords would welcome receiving more information and advice from their lender.”
The survey suggests there is some appetite among landlords to increase their investment portfolios, with 21% looking to increase the number of properties they own over the next 12 to 18 months – higher than the 12% who plan to decrease the size of their portfolios.
Half of landlords (48%) don’t plan to make any acquisitions over the next 18 months, while a significant proportion (18%) remain unsure whether to buy or sell.
Donbavand says the study reveals that to get the best results Australian private property investors must consider both houses and units when looking for an investment opportunity.
“The Australian Private Property Investor Study has shown that more private property investors have purchased houses over units. However, units may offer better returns in some instances,” he says.
“While Sydney, Perth, Darwin and Canberra all boast increasing unit rental returns, our in-depth research demonstrates that investors who seek real estate advice will see better financial results overall.”
According to the study, the majority of property investors are typically married, professional couples with an average of 1.9 properties in their portfolio.
The study can be purchased in full from BDRC Jones
Also, here is the link to the Selling Guide website specifically set up for our sellers.
Linda & Carlos Debello
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