A LITTLE
news update
May 2015
1st QUARTER 2015
Property market results
PURCHASING PROPERTY?
Buy with a tenant in mind
CHANGING DEMOGRAPHICS
More people are renting for longer
Available to view online at littlerealestate.com.au/news
CEO update
Every quarter the LITTLE news update brings you a snapshot
of Australia’s economic data (see page 5). Interesting as it is
to see the current Q1 2015 ﬁgures, the picture becomes
clearer when we check back to the Q4 2014 snapshot and
look at how the two compare.
They are not great numbers: economic growth is at 2.5 per cent,
down from 3.1 per cent; inﬂation has fallen from 3 per cent to
1.7 per cent; and the Australian dollar has fallen 10 cents to
US$0.77. It’s hardly surprising when you look at these ﬁgures
that the Reserve Bank of Australia Chairman, Glenn Stevens, is
hinting at a further interest rate cut to kick-start the economy.
He is qualifying his remarks with comments that any cut would
be far more effective if the Federal Budget came up with other
stimuli to ignite the Australian economy.
The Federal Budget is on 12 May and already the government,
despite ﬂoating several ‘conversations’ in the media over the
past few weeks is foreshadowing few big changes.
For property owners, the quarterly snapshot shows continued
heat in the property market, with the average price of residential
dwellings up to $572,000 from $555,000 (that’s a rise of
3 per cent nationally over the quarter) and average weekly
earnings are staying almost the same at $1,129. So not only have
we seen capital gains on the back of the February interest rate
cut but those of you with home loans and investment loans
have seen a decrease in your interest costs, leaving you more
money in your pocket every week.
NAB released its Quarterly Australian Residential Property
Market survey results for the ﬁrst quarter of 2015. The results of
the survey are discussed in the ‘State of the markets’ article on
page 4. As well as looking back on the quarter they make
predictions going forward 12 and 24 months which makes for
interesting reading.
We’re into the second month of autumn, when traditionally the
heat starts to come out of the property market but this year
there is still little sign of it slowing down. CoreLogic RP Data
reported a national auction clearance rate of 79.2 per cent the
week ending 19 April, with 2,541 auctions held across combined
capital cities. This is the strongest result since September 2009.
So with interest rates still low and the market still showing
strong indications of growth, there are plenty of opportunities
for property investors.
Phil Meggs
Chief Executive Ofﬁcer
LITTLE Real Estate
Market
overview
Glenn Stevens, Chairman of Australia’s Reserve Bank was
widely quoted in April for referring to the Sydney market as
“exuberant”—a word used to describe the excesses in booming
share markets before a bust.
Looking at the 31 March CoreLogic RP Data, “exuberant” could
be a ﬁtting description, with further 3 per cent growth reported
in Sydney, bringing the 12 month growth in residential property
to 13.92 per cent. The chart below puts this into context when
you see how the Sydney market is out-pacing Melbourne and
Brisbane.
Change in dwelling values over March 2015
3.5%
3.0%
2.5%
2.0%
1.5%
1.0%
0.5%
0.0%
-0.5%
Combined
Sydney
Melbourne
Brisbane
Source: CoreLogic RP Data
Melbourne
It seems as if the February interest rate cut gave continued
strength to the residential property market in Melbourne as well
as Sydney. The CoreLogic RP Data Home Value Index reported
a monthly increase in Melbourne property of 0.59 per cent
which brought the 12 month total to 5.58 per cent. The auction
clearance rate for the weekend after Easter was very high at 78.7
per cent, an outperformance of every comparative period for the
last 12 years. Melbourne’s outer east was the best-performer
and the inner south was also very strong.
Sydney
As noted above, March values growth was 0.03 per cent short of
3 per cent. The auction clearance rate was 88.3 per cent which
set an all-time record for Sydney. The eastern suburbs were the
best performers with 95.9 per cent of reported auctions sold.
North Sydney, Hornsby and Blacktown were also in the 90 per
cent range.
Brisbane
The combined Brisbane and Gold Coast values fell by a quarter
of a per cent over March which brought the 12 month growth to
2.95 per cent. Auction clearance rates were down for the month
but remember that the popularity of auctions in Brisbane is not
comparable with that of Melbourne and Sydney.
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Renting for life
With property closer to CBDs becoming more unaffordable
but offering the most attractive lifestyle, there is a trend
towards longer term tenancies—even renting for life.
property with these attributes in tenant-friendly locations. Other
ways landlords can attract good long-term tenants are:
•
Keep on top of repairs and maintenance – having a longer
lease in place doesn’t mean you can be a lazy landlord. In
fact, long-term tenants are more likely to insist on regular
maintenance and prompt property repairs as they are there
for the long-term and don’t want to see the property
presentation compromised.
•
Don’t be greedy with rental increases – with long-term
tenants you are not suffering any vacancy periods so your
rental income is steady and reliable. Be sure to keep this in
mind when it comes to assessing rental increases.
Today, around 4.5 million Australians live in private rental
property. That equates to 1.8 million households—twice the
number of renters now as compared to 1981.
In previous decades, renting was for students and other young
people or people who moved around a lot for work or other
reasons. Most renters saw this as a short-term proposition.
They were saving for a deposit for their own property and they
planned to rent until they had the means to take out a mortgage
on a property of their own.
Australian Housing and Urban Research Institute (AHURI)
research shows that renting is no longer just for the young—
one-third of renters were aged between 30 to 44 and one-third
were 45 to 64.
The European example
In many European cities, long-term renting is very common
and more accepted. In Germany for instance 60 per cent of
households rent. The Europeans look at renting differently.
Renting frees up cash for other discretional spending or
investing in other asset classes and allows tenants to live in
places they could never afford to buy. They are enjoying the
lifestyle without the burden of debt.
How can landlords attract longer-term
tenants?
Property selection is key to attracting long-term tenants (see
article on page 6 ‘Buying with a tenant in mind’). Landlords
should research the features that tenants look for and invest in
Best of both worlds
In the current housing market, more and more people are
choosing to rent a property close to the city or the beach, cafes
and entertainment, with a minimal commute to work AND they
are buying investment properties further out in suburban
locations where house prices are more affordable. This way they
get the best of both worlds. They enjoy the lifestyle that they
favour but are still investing in a property that will eventually
provide them with good capital gains.
Leaving home-ownership to rent
Another group of renters have turned their back on homeownership, preferring to sell up and move to a rental property
where upkeep and maintenance are someone else’s concern.
They are no-longer saddled with hefty mortgage repayments or
perhaps they have paid off their home but are tired of being
asset rich and cash ﬂow poor. You don’t hear these people
apologising for “only renting” as they enjoy the ﬂexibility and
freedom that renting offers and are content with their decision.
littlerealestate.com.au
3
State of the markets
NAB released its quarterly Australian Residential Property
Survey for the ﬁrst quarter (Q1) of 2015. This always makes for
interesting reading as it is compiled from a survey taken from a
broad range of property industry participants. NAB also
publishes a Residential Property Index which rose 21 points in
Q1, 2015—up from 12 points in Q4, 2014. It is now comfortably
above its long-term average.
Alan Oster, the Group Chief Economist at NAB, published
comments upon the release of the report, in which he stated
that: “Overall sentiment remains strongest in New South Wales,
followed by Victoria and Queensland,” the Queensland and
Victoria property markets being the most optimistic for the next
one to two years.
According to another bank’s research, the Westpac Melbourne
Institute Index of Consumer Sentiment claims conﬁdence
around the housing market has deteriorated. Westpac chief
economist Bill Evans said, “it is probably being driven by recent
price increases in Sydney and Melbourne with respondents
assessing that prices have moved too quickly.”
Brisbane market is expected to outpace the national market and
post growth of 5.7 per cent; Melbourne and Sydney will stick
close to the national average (3.5 per cent and 3.4 per cent
respectively).
NAB house price forecasts
20%
15%
10%
5%
0%
-5%
-10%
Percentage changes represent through the year growth rates to Q4
2011
2012
Australia
Sydney
2013
Melbourne
2014
Brisbane
2015f
2016f
f = forecast
Source: NAB Quarterly Residential Housing Report
Outlook for capital city markets
NAB Economics is forecasting average national house price
growth of 4.4 per cent through to the end of 2015. Sydney is
predicted to lead this capital city growth with an increase in
values of 7.7 per cent, Melbourne’s growth will follow not too far
behind at 6.2 per cent with Brisbane expected to grow by a
respectable 3.8 per cent.
Looking even further ahead, (please see graph) NAB predicts
modest national growth in 2016 of 3.4 per cent. However the
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Building activity catching up with demand
In April, the Australian Bureau of Statistics (ABS) released its
building activity data for the December 2014 quarter which
showed a record number of dwelling approvals coming through
the system. January posted an all-time high number of
approvals and the second strongest month on record in
February. There is a clear picture now of the pipeline of housing
construction continuing to grow and this will result in a
heightened level of completions over the next few years at least.
Interestingly, NAB commented in its Q1 2015 report that
demand for new CBD apartments had improved in all states,
including Victoria despite continued reports of a supply glut in
the Melbourne CBD.
Suburbs tipped for above-average growth
Every quarter, the NAB survey offers predictions of suburbs that
might experience above-average growth. Below are suburbs in
the Brisbane, Sydney and Melbourne areas that show signs of
promise.
Queensland:
Brisbane, Gold Coast, New Farm, Paddington, Sunshine Coast,
Toowoomba, West End
New South Wales:
Blacktown, Campbelltown, Castle Hill, Eastwood, Kellyville,
Marrickville, Parramatta, Penrith, Schoﬁelds, Surry Hills,
Sydney, Ultimo
Victoria:
Box Hill, Brighton, Melbourne, Richmond, Thornbury,
Ringwood, Toorak, Werribee
Rental markets
Stronger property prices are continuing to offset falling rents
and this is to be expected. The NAB report predicted a national
rent increase of 0.5 per cent (1.8 per cent in Victoria, 0.9 per
cent in New South Wales and 0.6 per cent in Queensland).
Looking further out over the next two years, nationally an
increase of 1.2 per cent is expected, with Victoria leading the
way (2.4 per cent) and New South Wales (1 per cent).
Rental expectations
Next 12 months
Next 2 years
4.0%
3.0%
2.0%
1.0%
0%
Vic
NSW
Qld
Q1 ’14
Vic
Q4 ’14
NSW
Qld
Q1 ’15
Source: NAB Australian Residential Property Survey
Source: NAB Quarterly Residential Housing Report
Snapshot
How the Australian economy is looking in the ﬁrst quarter of 2015
Economic
growth
2.5%
A$1 =
US$0.77
Inﬂation
1.7%
Cash
(interest rate)
2.25%
Average price of
residential dwellings
Average weekly
earnings
$572,000
$1,129
Data updated as at 8 April 2015 (Source: RBA)
littlerealestate.com.au
5
Buy with a tenant in mind
Buying an investment property is very different to buying
your own home.
First and foremost, it is a business decision rather than an
emotional, lifestyle choice. You probably set a budget for both,
but you are more likely to go over budget when you are buying
your own home because you have ‘fallen in love with it’. When
you are buying an investment property you will have calculated
your borrowing costs and worked out the rental return to see
whether the investment will have a positive or negative effect on
your cash ﬂows. The other big consideration is the potential for
capital gain.
Of course, the numbers need to stack-up when you are
selecting an investment property to purchase but the actual
type of property is very important. Front of mind throughout
your search should be what tenants would be looking for. Many
property investors make the mistake of choosing property
according to their own tastes, wants and needs. These are not
important. You need to buy with a tenant in mind.
Here are some characteristics of a property that tenants look for:
Appeals to broad tastes. Throughout your ownership of the
rental property it is likely to be home to several sets of tenants,
so it needs to appeal to a wide variety of tastes. Plain and
neutral is usually best so whatever the tenant’s furniture or
furnishings they will ﬁt in. You might like bright colours but if
they are the wrong bright colours they will clash with the
tenant’s furniture and put them off. White walls are clean and
fresh and won’t offend and a plain hard-wearing carpet will be
best. You’ll ﬁnd that no tenant will reject a property for being
too plain.
Built-in robes and cupboards. When you are renting you
tend to own less furniture—after all, you have to move it around
with you. So tenants like properties with good storage space
and built-in robes, otherwise they have to buy these pieces of
furniture for themselves. The same goes for the laundry and
kitchen—the more cupboard space the better to keep
everything neat and tidy. Sometimes apartments come with
additional storage space in the basement and this can be a real
plus for tenants who might want to store a bike or furniture that
they don’t currently need but don’t want to get rid of in case
they need it in the future.
Parking. This is an essential feature for home-owners and
property investors alike. Despite being encouraged to use
public transport these days, especially if we live in the inner-city
suburbs or CBD, people still use cars. Even if your tenants don’t
own a car themselves, they will most likely have visitors who will
need somewhere to park when they stop by. Undercover
parking is preferable, off-street parking is second best and even
street parking (with or without permits) is a value-add.
Close to public transport. Being close to public transport is
another plus. Despite the previous paragraph insisting on a
property with parking, even car-owners appreciate the
convenience of public transport. Tenants without cars will not be
able to do without it. So investigate the public transport services
in the area. Ideally, you want the property to be within 10 minutes
walking distance from a bus or tram stop or a train station.
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Close to schools and recreational facilities if it is a family
home. Not all investment property is an apartment or ﬂat and
you may be looking for a three or four-bedroom, two bathroom
family home. The same rules apply as far as plain walls, blinds,
carpets and good storage. The other requirement would be that
it is located close to schools and parks and sports grounds. You
might also consider a property that is fenced in for the family
pet and so that the children don’t wander off when they are
playing outside.
Secure and low maintenance. The ﬁnal feature of property
you are looking at buying, that again will be on the wish-list of
tenants, will be good security and low maintenance. Dead locks,
window locks and secure ﬂyscreens are valued features of any
property. As well as giving tenants the conﬁdence that they are
safe in their own home, these features keep the cost of their
contents insurance down. Low maintenance gardens are a must.
Many tenants won’t be interested in a property with a big lawn
that needs watering in a dry summer. Typically they will only
consider a lawn or gardens if there is a watering system in place
using recycled water (after all they will probably be responsible
for the water bills).
Check out the competition. Here’s where it pays to ﬁnd a
friendly, reliable property manager so that you can speak with a
specialist. Find out what competing rental properties offer
before you make your purchase. There could be a feature that
your property does not offer such as air conditioning or laundry
facilities. If yours is the only property in the area without these
features, you will be marketing to a reduced tenant pool.
Watching those
power bills
There’s an app for Androids and an app for iPhones, to
help all smartphone users to watch their power usage
during the cooler months.
Energy Saver
The Energy Saver app enables users to
consistently keep up-to-date with their
electricity usage, compare and ﬁnd the best electricity
deals and it provides insightful tips into how you can
conserve energy. (Available for Apple through iTunes)
Energy Consumption Analyser
This all-in-one app keeps track of your
household gas, electricity and water
consumption. It allows you to input the relevant meter
recordings and from the entered data it calculates the
average normalised rate of consumption per hour, day,
week or month. The information is then displayed in easy
to understand graphs and tables with all information able
to be synced to the cloud for safe and durable data
storage. (Available for Android)
Meet your local Hear from our
team member clients
Many of you will know at least one
of these LITTLE Real Estate team
members
Victoria
Terri Nicolia
Business Development Manager
Carlton
Working in real estate for over a dozen
years, Terri’s extensive industry and
product knowledge gives her clients
an edge. “I am at my best when my
negotiation skills are put to the test,”
she says. “Meeting a client’s needs and achieving the best
possible result for them keeps me motivated every day.”
Terri believes that LITTLE Real Estate’s reputation for superior
customer service and cutting-edge technology sets it apart.
New South Wales
Soraya Wheatley
Sales Consultant
Lane Cove
This month’s LITTLE Real Estate investor is Vince who
comes from Queensland.
“My family has had investment properties in Brisbane for
more than 40 years. We have had long term relationships
with a few different property management ﬁrms during
that time and apart from one agency in the early years, we
have always been reasonably satisﬁed with the service we
have received. In our experience the biggest issue has been
the change in personnel. Often property managers have
moved on to other areas such as sales or decided on a new
career.
“Our ﬁrst experience with LITTLE Real Estate was when
Danielle Yarnold (from RUN Property as it was then called)
managed a unit for us in St Lucia. She provided us with
great service and we shifted our other 13 rental units in
Brisbane to her when our previous agent managing those
other properties decided to exit property management. We
moved the other properties to LITTLE Real Estate because
of the good service we were receiving.
“We have had excellent service from Danielle and the team
at Toowong. We like LITTLE Real Estate because it offers
expertise in property management. We receive regular
inspections of our properties, updated market advice and
we beneﬁt from the great technology with the client portal
enabling 24 hour, seven day a week access to our property
information. Our dealings with LITTLE Real Estate
Toowong have always been professional and courteous.”
An award-winning sales consultant
with a special talent for negotiation,
Soraya has an impressive record of
achievement on Sydney’s North Shore
with more than eight years of local
experience. “I am completely focused on the needs of my
clients. My primary aim is to reward a client’s faith with a result
that is above and beyond their expectations.”
Queensland
Debbie Scowcroft
Business Development Consultant
Springwood
Debbie has a genuine passion for
developing positive, friendly
relationships with landlords while
taking great pride in ﬁnding the right
tenants for each and every property
she manages. “My greatest satisfaction comes from helping
owners grow their portfolios,” Debbie says.
Debbie strives to offer every client individualised customer
service and deliver premium results.
Important dates
May
Tuesday 5
Sunday 10
Tuesday 12
Tuesday 26
RBA board meeting
Victorian State Budget
Mother’s Day
Federal Budget
National Sorry Day
littlerealestate.com.au
7
Some recent sales
Victoria
Rushall Crescent
North Fitzroy
1
1
Samada Street
Notting Hill
1
$413,500
2
2
Kensington Street
Kensington
1
$395,000
2
1
1
$477,500
2
$1,210,000
2
$315,000
New South Wales
Campbell Parade
Bondi Beach
2
1
Cleveland Street
Surry Hills
$980,000
1
Quarry Road
Ryde
1
$635,000
5
3
Queensland
Sarah Street
Loganlea
6
4
Oates Avenue
Holland Park
4
$550,000
3
1
Jasmina Parade
Waterford
1
$485,000
3
2
Interested in what your property is worth?
For a free, no obligation appraisal, contact a LITTLE Real Estate
sales consultant at your local ofﬁce.
Victoria 03 8809 5888 New South Wales 02 9301 5600 Queensland 07 3833 6660
[email protected] littlerealestate.com.au
Disclaimer: The information contained in this newsletter is for information purposes only and is not to be taken as advice.