Property Market a Mixed Bag
Generally speaking, the real estate market has been quite a mixed bag for the most part of 2010 to date. In speaking with many clients throughout the course of the year thus far, I have heard time and time again that the effects of the Global Financial Crisis (GFC) are still being felt and a general lack of confidence is still one of the hurdles that many of those actively buying and selling in the current market are in the process of overcoming.
With my experience in the inner city and fringe market this year, I have witnessed a very unsettled premium product segment – those properties on the market listed above $1 million have endured long ‘days on market’ periods (beyond 120 days in many instances) and in most cases, have only sold if Sellers are prepared to meet the market. The harsh reality has been that sale prices achieved have been up to 10% below the prices achieved for comparable properties in the months prior to the onset of the GFC .
Brighter news can be reported for the property market between the price bracket of $350,000 and $800,000 in the inner city and city fringe. In the past eight weeks, I have witnessed a strengthening of this segment with, on average in my New Farm office, properties priced within this price point going to contract within 17.5 days of being listed and unconditional within 23.1 days – all private treaty sales.
Even more significant at this time has been the buoyancy of the ‘off the plan’ market. With the number of development projects hitting the market drastically reduced as a consequence of the GFC a great deal of pent up demand from investors ready to buy in good quality ‘off the plan’ developments has been created.
I have received an overwhelming amount of enquiry from the recent launch of a development project in the South Brisbane area that I am marketing. With price points starting from $335,000 and so close to the Brisbane CBD, this has been an extremely attractive offering for the investment segment.
Localities earmarked for urban renewal and are enjoying local and state government expenditure like South Brisbane and Albion present investors with an excellent buying opportunity.
Interest Rate Rise
While the announcement of a rise in interest rates usually sends the media into a feeding frenzy, and home owners desperately clutching onto their wallets in fear of higher monthly interest payments, the recent decision by the Reserve Bank to increase the official interest rates by 0.25 basis points actually indicates a healthy, confident economy.
So, I wanted to take this opportunity to explain how it all works and what it actually means for the economy and home owners when interest rates rise or fall.
If economic indicators such as employment and growth patterns are favourable, this means that people are likely to start spending more. Out of control spending influences all types of things, such as the foreign exchange rate for our Aussie dollar and inflation (rising costs of goods and services.) Therefore, to encourage people to rather save their money, interest rates increase – so people are rewarded to save, and have less money to spend (due to higher loan repayments). This is how higher interest rates help control inflation. If people have less money to spend due to higher interest rates, there is more competition among sellers of goods and services so they need to be competitive with pricing.
The opposite is also true. In a struggling economy, spending helps businesses survive, so the Reserve Bank lowers interest rates to encourage retail and business activity by freeing up more of our money.
Interest rates have risen this month because the value of homes has also risen, indicating that activity within the property market has returned to a higher, pre GFC, level.
It is worthwhile to remember that as rates rise, the amount you can borrow from the banks or lenders decreases (your serviceability drops) simply because your repayments will be higher. Therefore, with all indications pointing toward an economy strengthening even further, now would be the ideal time to enter the market, rather than waiting!
Exclusive Vs Open Listings
There is often a misconception that listing your property with many agents as an ‘open’ listing over an ‘exclusive’ listing with one agent increases the chance of a successful sales result via increased exposure and therefore increased buyer enquiry.
Have you ever heard the saying – a bird in the hand is worth two in the bush - ?
This is one of those situations where this saying most certainly rings true.
Open listings (where a home can be listed with more than one agent) usually means that the agents as a collective do not work as hard as they might have, had they been solely responsible for the marketing of the property.
Furthermore, an open listing can in fact have the effect of diminishing the integrity of the property when being marketed by several different agents – particularly when the listing appears a number of times over on the same page on realestate.com.au.
It also becomes more difficult for you the owner to co-ordinate multiple sets of keys and monitor their whereabouts, co-oridinate multiple open home times with each agent (that’s if they will do open homes at all for an ‘open’ listing), and to field calls regarding market feedback from each agent. One agent being responsible for the entire marketing campaign under an ‘exclusive’ listing ensures a greater amount of cohesion, consistency and responsibility for the marketing period.
Another consideration when deciding upon a suitable agent to market your property is commission discounts. Whilst a discount can be very enticing as we all like to ensure we are receiving the best deal, it can be counter productive in some instances.
The difference between a good agent and a GREAT agent is their ability to negotiate the highest price and terms on your behalf. Opting for an agent who discounts on their commission could inadvertently cost you later on in achieving a lower ultimate sales price than an agent who can negotiate effectively the worth of their commission with you from the start.
What have your experiences been with EXCLUSIVE and OPEN listings?
Private Sale - False Economy
Recently, particularly over the last year when confidence was at an all-time low due to the GFC, I have noticed that there have been a greater number of local home owners attempting to save themselves some money by selling their property without enlisting the services of a real estate professional i.e. opting for a private sale.
With companies promoting this ‘diy’ style of marketing process popping up I can understand that the lure of paying a fixed one off price for a marketing package and avoiding paying any commission is very enticing.
However, home owners may not be aware that that this idea is in fact a false economy. If selling your home seems like an attractive option, ask yourself how long your home will stay on the market due to your lack of experience, professional office infrastructure and buyer contacts?
A common mistake private sellers make is not marketing their home at the correct market value. Professional real estate agents are able to make accurate appraisals as to what a home is expected to achieve in the current market, based on data they have access to on other similar homes that have sold in the area, as well as current listings and recent buyer feedback.
In addition, private sellers find it difficult to be objective, and make the mistake of asking for what they would like to receive for their home, or what their next investment will cost them, rather than what its market value is worth. They understandably have an emotional attachment to their home, which is counter-productive when trying to sell it. As real estate professionals ourselves, we will never market our own home again because of this very reason, having made the mistake once before!
Of course, the next valuable question is whether you have the negotiation skills of a real estate professional and will be able to achieve the best possible result for your home in the current market. Most people don’t – however this is what we are trained and skilled in.
Think of it like this: You could try and diagnose your own medical concern by trawling through websites that may or may not be reliable, or you could visit your GP and get it sorted for a comparatively minimal fee and save yourself a lot of time and inconvenience. The same applies to selling your home. Leave it to the professionals!
Sustainability Checklist
Nothing the government does surprises me anymore, but recently hearing about a new legislation that has recently been passed through parliament actually managed to! As of 1 January 2010, all sellers of houses, townhouses and units will need to complete a compulsory checklist that is designed to inform buyers about the sustainability features of a property and increase community awareness of the value of these features.
Four key areas of each dwelling are covered, including energy, water, access and safety. More specifically, owners are asked to identify features such as solar power, air conditioning, rainwater tanks, garden irrigation, and smoke alarms on the document.
The declaration does not form part of the contract of sale, however if the declaration is not completed or made available to buyers, there are substantial fines for both sellers and agents. Sellers can complete the declaration themselves, which is a simple two page document, or they can source a sustainability consultant to look after it for them.
We support the State Government’s desire to raise awareness of sustainability features. It is true that homes with sustainability features have lower energy and water costs and generate fewer greenhouse gas emissions. The government is hoping to encourage the community to make informed choices about protecting the environment against climate change.
Admittedly, however, it is less than ideal that the legislation was passed so quickly and will come into effect more or less immediately. There has not been a great deal of information made available to real estate agents or home owners, which is a shame, because sellers face inconvenient delays on the marketing of their property if the form is not completed accordingly.
We encourage any home owners thinking about selling their home to contact us for more information on the declaration, as well as their obligations as sellers. We can’t control decisions made by the government, but we can help our sellers avoid a fine!
2009 wrapped up
I know that everyone is saying it, but I am very surprised that it is so very nearly December! Someone once said to me that time flies when you get older, which may be true, but I prefer to think that time flies when you are busy kicking some personal and professional goals, and having at least a little bit of fun along the way.
Looking back on the year just gone, I would say the Bond family have been doing a lot of all that. Having acquired and rebranded Rosa’s Realty and merged it with the existing All Brisbane Realty office in August last year, 2009 was our year of building our brand and really getting it out there. Rosa’s Realty had been around for some 14 years, so it could be considered by some a real challenge to get a new brand known within the local community.
Never one to brag (ok, stop laughing), however while it was of course a major challenge, we still managed to grow our database, increase the number of property managements, achieve consistent sales AND emerge from the Global Financial Crisis moderately unscathed (except for a few bumps, bruises and the occasional eye gauge!)
When it comes to local profile and number of listings, our agency now ranks firmly in New Farm’s top 3.
Another extraordinary achievement for our team this year was the successful Diabetes Australia campaign and Bond theme party we held. The idea behind the campaign was to celebrate our second year in business by giving something back to the community that supports us so generously. We decided that, for each settled sale between March and July this year, we would donate $1000 to Diabetes Australia.
Jason’s brother lives with diabetes so when deciding upon a charity to support, it was important to us to choose the organisation that works in partnership with diabetes health professionals, educators and researchers to minimise the impact of diabetes on the community.
During the three month strategically planned marketing campaign that culminated in the office’s Bond Theme Party complete with auction, together with the generous support of their local community and clients, we raised a total of $23,150 for Diabetes Australia – an enormous achievement and triumph for a small agency.
So, with all this in mind, its really no surprise we are sitting and wondering “where did this year go?”
As well as realising there are only limited weekends to get the Christmas shopping done and that the office Christmas party is only 15 sleeps away, if you haven’t already, the arrival of December also means that its more or less your last opportunity for this year to settle on a property.
While the real estate industry is a hard working bunch and we can help you at more or less any time of the year, banks and solicitors do take a Christmas break. There can be nothing more frustrating than a finance clause or settlement date falling close to, or over Christmas, and settlement forced to extend until mid January. So, our advice is, if you think you may like to review your current situation, do so now, before everyone starts to close down for their Christmas break.
Property…A safe bet?
Melbourne Cup Day presents the perfect excuse for Australians around the country to knock off work for an hour or two (or the whole afternoon if you take it seriously, or your boss does!), treat yourself to a feast for lunch and a glass or a bottle of champers. The serious punters get right into the gambling, and hope they don’t have to go back to work for the rest of the week, month or year, depending on the size of their winnings.
Here at All Brisbane Realty, we enjoy the festivities surrounding the day, and see it as a good reason to let down our hair, have a nice lunch (this year it was an “upmarket” fish and chips spread – salt and pepper calamari, salads and white bait fritters to be precise) and enjoy some good times as a team. We had a little bit of an office sweepstake so that watching the race was more thrilling.
The Melbourne Cup favourites, Alcopop and last year’s winner, Viewed, were placed sixth and seventh, with the unlikely competitors, Shocking, Crime Scene, Mourilyan, Master O’Reilly and Harris Tweed all ahead of them. I can only imagine the upset among those punters who confidently placed hundreds and perhaps even thousands on this year’s favourites. The odds for Crime Scene, for example, were at 44 on the day of the Cup and 120 for Harris Tweed. If you indeed picked one of the top five, you would have been laughing all the way to the bookies yesterday.
I cringe when I think of the poor misguided bugger on TV the other night, who was so confident of his evidently imminent win, that he had bet $400,000 on his favourite (he didn’t say which horse, so we don’t know if he is a millionaire or a broken man today). The journalist pointed out that his bet could buy him a home outright, or at least pay a very sizeable portion of his mortgage, but he replied that if he won, he could buy multiple investment properties, (and for a young guy of his age, this was quite an attractive option).
Yesterday’s Melbourne Cup only proved that, when you gamble, that’s exactly what it is. A gamble. There are no sure wins. You could most definitely earn a quick buck, but it’s important to view this as a bonus, not a given. Betting or gambling of any kind is not an asset, or a way of making a living.
That leads me to the question: are there are sure wins in real estate? Is property investment a safe bet? The answer is a little more involved. There are no sure wins in property, and there is no guarantee that holding and then selling a property will earn you a nice healthy profit. So much rides on the economy and the market at the time, and of course in which suburb you decided to invest in the first place.
Lets look at New Farm and surrounds as an example, since this is the suburb we specialise in. As the Australian flagship for urban renewal, the area has been transformed into a bustling arts, dining and entertainment precinct, and, being just 2 kilometers from the CBD, New Farm is home to young professionals and empty-nesters alike. This means that New Farm is currently in demand and it’s likely that it will continue to be, as Brisbane becomes more populated and suburbs expand out even further from the CBD. Therefore, there will likely always be buyers for your investment.
Is real estate a safe bet? Yes, compared to shares and other forms of investment, it most certainly is. Real estate is an asset, and as the price of property increases steadily over the years, you can be almost sure to make your money back and then some. Depending of course on the structure of your mortgage as well as other personal circumstances, it is only very seldom a home owner will actually lose money.
So the moral of the story is, unless you think its fun to ride a broken roller-coaster for a day, I would be placing my bets on property in New Farm, rather than on a horse called Shocking!
