Property Market latest insights via Domain 02-02-2018

DOMAIN STATE BY STATE REPORT FYI

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That was quick – breaking down NAB’s most recent residential property survey & what it means for Clients

That was quick

We break down NAB’s most recent residential property survey for brokers and buyers 

NAB has just published their Residential Property Survey for the fourth quarter of 2018. Since 2011 NAB has consulted property experts including real estate agents, property developers and investors to predict what will happen to the housing market.

Brokers

Good news: buyers need you. According to NAB “access to credit was identified as the main impediment to buying existing property in SA/NT, NSW and QLD.” Prospects also look bright for commercial brokers as property experts identified tight credit as the main constraint on new home building, for the seventh consecutive quarter.

Investors

NAB predicts a bleak few years for investors, noting that “While some prudential measures potentially have their greatest (dampening) impact on the market early on, before losing their potency over time, we may see a more lingering impact this time around, especially in Sydney.” The bank warns that the impact of interest-only borrowers moving to principal and interest loans is not yet apparent.

Upgraders

Owner occupiers – excluding first home buyers – fell slightly from 32.8% to 30.7% of total sales in Q4. However, property experts expect the proportion of new residential buyers to increase over the next 12 months. Owner occupiers with low LVRs are being targeted for discounts by the banks.

Sydneysiders

Bad news Sydney property owners; after paying the highest prices in the nation to get on the property ladder, you can now expect the value of your home to fall. NAB predicts a decline of 2.4% in 2018 and 1.2% in 2019. If that wasn’t bad enough, every other capital city in Australia is set for growth, particularly Melbourne (3.7% in 2018).

Foreign buyers

The number of foreign buyers is now at a six-year low in new property markets and a five year low in established markets. For all the fears of foreign buyers scooping up off the plan apartments, fewer than one in 10 new properties were bought by a foreign buyer in the fourth quarter of 2017.

Rentvestors

First home buyers who choose to rent out their first property, labelled ‘rentvestors’, have been impacted by restrictions on investor lending, NAB suggests. The share of sales going to rentvestors fell from 13.7% in Q3 2017 down to 9.9% in Q4. According to NAB, “this may also suggest more FHBs are preferring to buy homes to live in as price growth slows.”

Queenslanders

With expected house price growth of 1.8% over the next 12 months, the Sunshine State could beat both Melbourne (1.6%) and Sydney (-0.5%) when it comes to expected returns. Over the next two years, prices are expected to rise by 2.4%.

https://amp.afr.com/real-estate/nab-tips-first-sydney-house-price-fall-since-2011-20180201-h0sdl3?__twitter_impression=true

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REAL ESTATE Buying off-the-plan property is going to get more complicated in July Outside of that Australia has thousands of smaller developers. They can be mums and dads That cottage industry is going to have to be very prudent with how they manage their cash flow.

Feb 1, 9:00 AM

A federal government plan to plug a multibillion-dollar revenue hole will make life harder for off-the-plan buyers and mum and dad developers, property experts have warned. When GST (1/11th of the purchase price) is paid on a newly built property, it’s the developer’s responsibility to pay the Australia Tax Office some time after settlement. This leaves a loophole for unscrupulous developers to unnecessarily wind up a company and declare bankruptcy, freeing them of their obligation to pay the ATO the taxes it’s due. It’s nicknamed “phoenixing” and it’s thought to cheat Australian taxpayers of $3 billion each year. The plan to tackle “phoenixing”? From July 1, it’ll be the buyer’s responsibility to ensure the ATO gets paid. “New home buyers and off-the-plan buyers are going to become tax collectors, and the kicker is, it has to be paid before the property settles. “You’re going to still pay theoretically the same amount but consumers should be cognizant of the extra payments attached to the deposit, need for buyers to stump up extra cash early in the purchasing process could scare off keen buyers. “It’ll give people an opportunity to pause and think is this what I want to do?,” “There’d be a good percentage of people who would want to purchase new but they’d get turned off.” There was also the potential for developers to ask for more cash up front, because they may need payment plans to fund construction. “Where it may get even more tricky for buyers is because developers may be relying on that cash flow the deposits would bring,”  “That would be millions they’d be missing out on.”  buyers needed to be aware of the requirement, which he believed heightened the need for legal advice before entering into a sale for two reasons; to ensure the GST gets paid and to ensure they’re entering into a suitable payment plan. “If you were buying an off-the-plan development, you need to get legal advice from a qualified conveyancer, if you do it on your own, you risk facing penalties from the ATO if you do not remit those funds.” The change will present a challenge to Australia’s broad development industry too, Australia has two distinct markets, large-scale property developers like Stocklands and Mirvac and we don’t think there will be too much change from those guys,” he said. “Outside of that Australia has thousands of smaller developers. They can be mums and dads working on just one development at the time. “That cottage industry is going to have to be very prudent with how they manage their cash flow.”

Domain House Price Report December 2017 State Of The Market Report

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Brisbane

Brisbane is a great place to live, work and relax, and it’s the little things behind the scenes that make it a smart, connected city. Our innovative and cost-effective projects and services improve quality of life in our city now and into the future. Find out more about Brisbane’s Smart, Connected journey here:  http://bne.cc/2nky6QY 

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Queensland Property flipping was most prevalent in the Gold Coast, comprising 7.9 per cent of re-sales for properties held between one and two years in 2017. The region also experienced the biggest growth in flipping, up 1.3 per cent on a year ago. The area most likely to turn a profit was Moreton Bay North (95.6 per cent profitable), for properties sold between one and two years. The highest percentage of losses occurred in Townsville where half (48.8 per cent) of properties that were owned for between one and two years sold at a loss (up 5.9 per cent on 2016).

9 in 10 Australian Properties Are “Flipped” For A Profit

by CORELOGIC . on 29 January 2018

Global data analytics provider CoreLogic has released its first Property Flipping Report, which provides a national analysis of properties that were ‘flipped’ (bought and re-sold within a short time frame with the purpose of making a profit) in 2017.

The research measures flips within one year of purchase and within one to two years of purchase. It also tracks national trends in flipping over a 20-year period, from June 1997 to June 2

Key findings

  • Nationally, the vast majority of properties (almost nine in ten) in 2017 were flipped for a profit. This included properties re-sold within a year of purchase (89.1 per cent) and those re-sold within one to two years (89.9 per cent).
  • Property flipping accounts for only a small percentage of property sales overall. Only 1.3 per cent of dwellings resold over the year to June 2017 were previously held for less than a year. A further 5.7 per cent were put back on the market within one to two years of ownership.
  • Historically, the rate of property flipping has fallen. Over the year to June 2017, 5.7 per cent of property re-sales across the combined capitals comprised properties that were flipped within one to two years of purchase. This compares to 11.3 per cent in 2002.
  • However, property flipping is now on a slight upwards trajectory. Across the combined capitals, the past five years has seen a 0.6 per cent increase in properties flipped between one and two years (5.7 per cent in 2017 v 5.1 per cent in 2012) and a 0.2 per cent increase in properties flipped within one year of purchase (1.2 per cent in 2017 v 1.0 per cent in 2012). This trend is mirrored across regional Australia.
  • Flipping is more prevalent across the Eastern states. The highest rate of flipping occurred in Sydney, where 6.8 per cent of property re-sales over the year were flips between 1 and 2 years of property ownership. Regional Queensland (6.6 per cent) and Melbourne (6.4 per cent) also recorded a higher percentage of property sales as flips.
  • Sydney and Melbourne were the most profitable capitals for flipping.  Regional NSW (94.5 per cent) recorded the highest percentage of flips at a profit within one to two years of purchase, followed by Sydney (94.3 per cent) and Melbourne (93.7 per cent). All trended above the national average of 89.9 per cent.
  • Darwin was the least profitable capital. Around three in 10 (29.7 per cent) properties flipped within one to two years of purchase sold for a profit, followed by around half (52.3 per cent) in Perth. Regional NT recorded the least profitable market one year post-purchase. Only 50 per cent of flips were profitable, followed by Darwin at 64.7 per cent.

Key regional variations

NSW

  • Over nine in 10 flips in Sydney and regional New South Wales were profitable in 2017, reflecting the recent high growth in property values. In Sydney, only 5.7 per cent of flips within one to two years of purchase were at a loss. This compares to 37.6 per cent a decade ago.
  • The Illawarra region experienced the highest level of flips in NSW (8.7 per cent of resales) within one to two years, and the highest annual increase in flipping (up 1.7 per cent on 2016).  Illawarra was also one of the most profitable regions in NSW, with only around two per cent of properties flipped at a loss.

Victoria

  • Most flips in Victoria occurred in South East Melbourne (7.8 per cent of resales) and North West Melbourne (7.6 per cent of resales) for properties held for one to two years. These areas also recorded the second and third highest most profitable flips for resales between one and two years (3.7 per cent and 3.5 per cent losses respectively).
  • The Mornington Peninsula was the most profitable region for flipping with 1.8 per cent of properties flipped at a loss between one to two years, and 3 per cent within one year. Bendigo recorded the highest percentage of sales flipped at a loss (22.7 per cent of those resold within one to two years, and 20 per cent of resales flipped within a year).

    Queensland

  • Property flipping was most prevalent in the Gold Coast, comprising 7.9 per cent of re-sales for properties held between one and two years in 2017. The region also experienced the biggest growth in flipping, up 1.3 per cent on a year ago.
  • The area most likely to turn a profit was Moreton Bay North (95.6 per cent profitable), for properties sold between one and two years. The highest percentage of losses occurred in Townsville where half (48.8 per cent) of properties that were owned for between one and two years sold at a loss (up 5.9 per cent on 2016).

Western Australia

  • Western Australia is one of two states/territories (along with the Northern Territory) where losses from flipping were at a high in 2017. In Perth, 47.7 per cent of properties flipped within one to two years of purchase sold for a loss.
  • North East Perth recorded the highest losses, with half of all flips between one and two years at a loss.  Bunbury, Inner Perth and Wheatbelt were the only regions where the percentage of losses for flips between one and two years has slightly declined.

South Australia

  • Properties flipped within 1 year in South Australia performed better than those flipped within one to two years. West Adelaide saw the highest annual increase in flips for properties resold between one and two years (up 1.2 per cent since 2016); Barossa Yorke Mid-North saw the largest decline (down 2.0 per cent since 2016).
  • The SA outback saw the highest losses between one and two years at 45.5 per cent, followed by Barossa Yorke Mid-North at 27.6 per cent. Barossa Yorke Mid-North saw the highest losses within one year at 36.4 per cent.

Northern Territory

  • Property flippers in the Northern Territory experienced a higher likelihood of losses as a, compared to sellers in other states. Seven in ten (70.3 per cent) flips within 1 to 2 years and three in ten (35.3 per cent) flips within a year were unprofitable in Darwin in 2017. Regionally, half of properties sold within a year flipped for a loss, and 40 per cent of those sold after a year.

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Changes to negative gearing and capital gains tax are now “much more likely

Results of a study released earlier this month show that removing negative gearing would cut home prices by 1.2% and increase rents only slightly.

An earlier study done in 2016 by the Grattan Institute found that getting rid of negative gearing and the 50% capital gains tax concession would save the government $5.3bn.

The severity of the impact on investors would depend on how market sensitive the changes are.

The worst case would be if the changes were to apply to both existing and new investors when interest rates are rising and property prices are stagnant or falling.

Income tax and capital gains tax changes have not been retrospective, and that existing investors have been protected from the impact of changes.

In theory, a future government wants to maximise revenue and encourage the disposal of assets could apply the new tax provisions to all capital gains accruing after the date of the change. In technical terms, that wouldn’t be a retrospective change but it would pose difficulties for the Tax Office and investors.

Changes to capital gains tax are likely to apply only to new investors and affect only future demand for property.

Meanwhile, exempting investors in new properties from changes to negative gearing tax would favour high-level gearing of new houses. But the benefits would not necessarily offset the impact of the proposed 50% capital gains tax liabilities increase when an investor sells a property

Source Sydney Morning Herald 27-1-18

Removing the Hassle from Sales & Rentals Brisbane Wide

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We will never sell to a bank’, says aggregation boss

The head of a boutique aggregator has explained the group’s position on vertical integration following the acquisition of one of its competitors.

Specialist Finance Group (SFG) founder and managing director William Lockett told The Adviser that he has an obligation to tell brokers his intentions for the company, given the prevalence of bank ownership within the third-party channel.

“If a broker were to ask me if I had any short, medium or long-term intentions to sell or sell down part of the business to a bank, I’ve got to give them a commitment on that. Our answer to that is no,” Mr Lockett said.

“We get along very well with the banks. It’s not for me to say to bank-owned aggregators that they have the wrong model. I’m sure they have made the decisions based on what they feel is right for their business model

“We have clearly identified our business model as having no institutional ownership. We respect all the other aggregators, but their business model is their business model and ours is ours. Not seeking any institutional ownership is our point of difference. It is our view that banks shouldn’t be owning aggregators at all. We will never sell to a bank.”

Mr Lockett’s comments come after fellow boutique aggregator eChoice was acquired by CBA-owned Finconnect late last year.

The Adviser revealed earlier this month that the group’s general manager of aggregation, Blake Buchanan, was made redundant following the sale.

A number of eChoice’s high-profile brokers, who have requested that they remain unnamed, told The Adviser that they are in the process of leaving the group.

Sources close to the situation explained that their reasons for leaving the group stem from key personnel changes, the loss of Mr Buchanan and the group’s new ownership by a CBA subsidiary.

One broker, who confirmed he would be leaving eChoice, told The Adviser that he was not accredited with CBA and did not wish to operate under a CBA-owned aggregator.

Mr Hartzer replied: “Uno is a fintech start-up that we funded. It’s a pretty exciting proposition, and I encourage customers to have a look at it. Essentially, it’s a modern mortgage broker. It’s all online. It offers pretty much every bank’s mortgages, and there is no bias to any Westpac brand mortgages in that.”

Mr Keogh pressed the bank boss on whether he believes it should be made clear to consumers that Westpac owns the online broker business.

“We own a significant portion of it,” Mr Hartzer said.

Mr Keogh replied: “I think everyone would regard 90-odd per cent as you own it. You are clearly the controlling entity.”

Westpac CFO Peter King said that Westpac’s ownership is disclosed on the uno website. Asked by Mr Keogh whether the bank ownership is also disclosed to customers who take out a product from the uno platform, Mr King could not provide an answer and instead took the question on notice.

“It is no different than Aussie Home Loans being owned by Commonwealth Bank,” Mr Hartzer said. “It is a mortgage broker, but it’s a modern mortgage broker for the digital age.”

[Related: Major bank subsidiary snaps up aggregation business]

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CBA’s other interests in the third-party channel include the ownership of Aussie Home Loans. The major bank completed its acquisition of Australia’s largest brokerage last year after founder John Symond sold his remaining 20 per cent stake in the business.

Vertical integration was brought up at a parliamentary inquiry into the major banks in October last year when Western Australia Labor MP Matt Keogh asked Westpac CEO Brian Hartzer about Westpac’s 90 per cent stake in online mortgage broker uno Home Loans.

“There has been some criticism about this organisation, which Westpac holds over 90 per cent of the shares in, and whether it should be made apparent to people who are coming to that organisation for mortgages that, effectively, they are dealing with a subsidiary of yourself?” Mr Keogh said.

Source The Advisor

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