The Property Report

OCTOBER 2013 | 0104 | OCTOBER 2013

No. 10 OCTOBER 2013with Dave LaneThe Property Report with Dave Lane

Trustworthy AgentsIn what will no doubt will come as a major shock (sarcasm inserted here), a new national survey has revealed that more than half of Australians do not trust what the real estate industry says about the property market.According to the first quarterly LEDA Real Estate and ReachTEL Consumer Property Confidence (CPC) Index, 53 per cent of the 1,700 people surveyed said they did not trust what the real estate industry said about the property market.LEDA founder Barry believes agents were talking to homeowners and selling a false hope of a higher sale price to secure business. As a result, homes were sitting on the market for long periods because nobody was willing to pay those prices. He reckons to improve trust amongst the public, agents need to be honest with clients.“They should be straight up from the day they meet them. I don’t believe they should promise anything they can’t deliver. They should be absolutely up front with what they think a property is worth, rather than adding money to it all the time,” he said.From my perspective, I am constantly embarrassed at the lack of Agents ability to be able to read the market. I often hear agents talk about a booming market or that things are slowing down. Usually these relate more to what is happening in their own micro business, rather than the actual market in which they operate. Agents should be able to accurately explain what is driving the current state of the market, where it has been and most importantly what are the comparative sales in the area when pricing a home.

Lost CommissionsI heard a startling statistic that over the last 12 months there were 110,000 properties that were listed for sale that failed to sell. That is a staggering statistic. No doubt many unhappy and disillusioned sellers. In my experience, there are only 4 reasons why properties fail to sell.Marketing – unless people know about the property for sale, they won’t be viewing it. Being on the most number of websites and standing out amongst the crowd are critical. Like google rankings, it is important to be on the first page. Professional photography and floor plans are critical.Agents performance – many people think that all agents are the same. This is definitely not the case!!! Agents that are lazy, weak or poorly trained will not have the negotiating skills to increase an offer to the level desired by the Vendor. It amazes me the number of times I talk to people about when they bought their home. More often than not, the Agent will have told them:• the Owners are looking for a

quick sale, and/or

• what the Owners reason for selling is, and/or

• the lowest price the owners will be willing to take.

We are paid a lot of money to be good negotiators, When you are selling, make sure your Agent can demonstrate this.Presentation – if you can’t be bothered preparing your home correctly, don’t expect to achieve the premium result. Choose an Agent that will be honest with you about the things you can do to improve the presentation. Price – this is the ultimate deciding factor as to whether a property will sell or not. There are different pricing strategies available and anyone who knows anything about selling will tell you the biggest way to undersell your home is to overprice it at the start. In our industry, the Agent who quotes the highest sale price will often secure the listing. Don’t choose an Agent based on the price they quote you. Listen to their plan, gauge their experience, test their negotiating ability and ask for references.

Dave Lane0415 33 22 82

4969 2001www.davelane.com.au

dave@dotcompropertysales.com

State of the marketWhat stands out to me the most over the last quarter

has been the increase in the vacancy rates as well talk of housing bubbles.

The words ‘housing bubble’ are used to describe the situation where prices are growing significantly, often fuelled by expectations that growth will continue exponentially. It usually reaches a point where prices become so unaffordable that the market collapses and price start to fall.

In recent months our newspapers and TV screens have been flooded with news about unprecedented growth in the housing market. Everybody likes to hear that we have the most expensive housing market and that it is impossible for first home buyers to get in the market (except first home buyers of course). The facts however do not support this.

As at October 2103, house prices nationally are only up five per cent for the year – and this largely reflects price growth in Sydney (six per cent year-on-year) and Perth (11 per cent year-on-year). In other cities, house price growth has been modest. For example, Melbourne (three per cent year-on-year), Brisbane (3.7 per cent year-on-year) and Adelaide (0.6 per cent year-on-year). Looking over a longer horizon – the last five years say – house prices are only up about 15 per cent or so. That’s a growth rate of around three per cent per year.

According to the Reserve Bank’s assistant governor Malcolm Edey, such talk of bubbles in Australia was “alarmist”. He said looking back over the past decade, house prices have risen at a rate “equivalent to or on average less than the growth of household incomes”.

Rising housing prices themselves do not necessarily indicate a bubble – no matter how high they go. Take Sydney – there is no stock, the population is growing by about 1.5 per cent per year, incomes growth is solid, and interest rates are at record lows. Why wouldn’t prices rise strongly? A bubble implies some ‘irrational exuberance’ or some departure from fundamentals.

Prices may be rising, but I think it is an overstatement to call it a bubble.

Meanwhile, there are changes happening in the rental market. Mortgage comparison site, RateCity are reporting that as a percentage, Investors were the segment taking out the largest proportion of homeloans in the last quarter. At 45% this was higher than upgraders (44 per cent) and first homebuyers (11 per cent).

As more properties are sold to investors, so too will the number of rental properties become available. This is good news for tenants who are likely to see a softening in rent growth, after some solid increases in the last few years.

As a comparison, over the last 20 years, first home buyers have accounted for 15% of the number of home loans taken out. Whilst this 4% may not seem a lot, it actually represents a 27% decrease in activity – which is substantial.

What happens with the rental market has a big influence on what happens with sales prices. If rents fall and prices rise, property falls out of favour with investors who will look at better options (such as shares). If conditions deteriorate too much there will be less competition in the market which is the main driver of prices. Hence the rental market has the potential to halt future price growth.

Dave Lane

“Recently we have had the pleasure of selling our home through Dave Lane at Dotcom Property. When we first met Dave to discuss listing our home, we were blown away by the time and effort Dave put into creating a full presentation for us about the different options of sale, what’s been happening in the market as well as comparable property sales.Throughout the whole sale process we were never left in the dark or unsure of what was happening. Dave called us after every inspection to give us feedback and was happy to answer any questions, no matter what time of day. Even when we were overseas for two weeks, we never worried about what was happening with the house as Dave kept us informed every step of the way. Our house sold at Auction after a four week marketing period and we could not be happier. We had some bumps along the way but Dave put us at ease as we knew he was doing everything he could to get us the best result. Once the house sold, Dave’s commitment to service did not stop there, he has been helping us with the purchase of another property located outside of the Newcastle region. We could not recommend Dave Lane any higher, and he will be a contact that we keep for years to come. ~ Keiran, Waratah

0415 33 22 824969 2001www.davelane.com.au

OCTOBER 2013 | 0302 | OCTOBER 2013

The Property Report with Dave LaneThe Property Report with Dave Lane

The Big 7 2013 Q1 Q2 Q3

Adamstown 1.1% 3.9% 1.7%

Cardiff 2.3% 0.0% 0.0%

Charlestown 2.0% 0.0% 1.1%

Mayfield 0.9% 1.5% 1.4%

Merewether 6.3% 5.2% 7.1%

New Lambton 4.0% -4.4% 3.9%

Wallsend 1.7% 0.0% 1.6%

Every 3 months I have been looking at the quarterly growth rates of Newcastle’s biggest suburbs. The reason being, that they represent a good cross section of price brackets.

More importantly, it is critical to have a large enough sample size when comparing fluctuations over a short time period. The other reason being that while figures are available from a variety of sources across all the nations capital cities, no-one seems to be bothered keeping track of our markets – even though we are the 7th biggest region in the country.

Anyway, the third quarter’s results are now in and for most part, they haven’t changed too much from the last 6 months. The figures show that prices are definitely on their way up. All of these areas showed an increase in the median price (with the exception of Cardiff, which was stable). I have been saying for some time that first home buyers are largely absent from the market. These results tend to support that as the highest priced suburbs are faring slightly better than. Merewether’s emphatic increases throughout the year, in my opinion are more likely to be being driven from consumer sentiment. If you keep an eye on what is happening in Sydney and there is a lot of talk about a housing boom. I believe that this is main driver of the top end of our market – ie fear of being left behind.

OvercapitalisingWhen people buy houses, whether they buy to live in or rent out, they can’t help themselves – they have to make changes. This is understandable as they want to make it their own place. Homes do need updating too.

Often people will overcapitalise. This means that the money spent on alterations and renovations when added to the original purchase price, would fail to make a profit if sold. Whilst this is less of an issue for people renovating a home they intend living in for the long term, it’s still something everyone should bear in mind when looking to improve a property.

When considering making changes, my best advice would be to consider the reason for the changes. Are you renovating the property to enhance your own lifestyle as you plan to live there for years to come? Or, is it to enhance the property for a future sale? Alternatively you may be considering renting the home out and moving elsewhere.

Renovating and staying indefinitely• Get an idea of what is the average price for the

surrounding streets. Try to ensure you don’t spend money to make it the most expensive house in the area

• Don’t add a pool, unless you really want one and will use it• Create a good outdoor space• Try and do structural work all at the same time. Don’t

add on a room one year, then another somewhere else – otherwise it will look disjointed and possibly ruin the flow

of the house• Create a second living area• Open the house up as best you can. Buyers like light, open

spaces

Renovating to sell• Don’t do major jobs like bathrooms and kitchens unless

you can do them cost-effectively (your tastes/style may differ from the buyers). If you are going to sell in 2-5 years, don’t update these major items until you are almost ready to sell. Things date quickly

• Paint inside and out• Spend more time removing items so the house looks more

spacious• Consider doing a building report(especially if selling

at auction) and fix critical and obvious items such as guttering, piers and downpipes. Often these things may not cost a lot, but will often see buyers pull out of a sale

• Replace door handles, kitchen benches and electrical appliances

• When considering replacing electrical appliances but don’t buy the most expensive appliances – these are rarely a decision making criteria for a buyer

• Don’t worry about solar heating, security alarm or screen doors (unless they are damaged),

• Update window coverings. If in doubt, buy venetians rather than vertical blinds

• If your roof is ageing, consider re-roofing rather than replacing

• Update light fittings• Make sure the front yard is spotless

Renovating to lease• If near the university, consider adding an extra bedroom

or granny flat• Consider replacing carpets with tiles or floorboards• Don’t worry too much about the garden, provide a good

entertaining area• Keep things neutral• Ensure things work• Keep all your receipts as major items will be tax deductible• Get a depreciation schedule from a quantity surveyor to

insure you are claiming every possible tax deduction.

Please note all information provided is sourced from RP Data, domain.com.au and found in Australian Property Investor magazine (October 2013 edition) during the prescribed period. We have in preparing this document used our best endeavours to ensure the accuracy of all the information provided. We accept no liability or responsibility for any errors or inaccuracies and recommend that all recipients make their own enquiries to verify any information given.

Home building reformsNSW Fair Trading Minister Anthony Roberts has released a Position Paper setting out reforms to the Home Building Act 1989. The Position paper provides the public and industry with a preview of the reforms before they are introduced to Parliament later this year.The proposed reforms cover various aspects of the home building legislation including dispute resolution, statutory warranties, home building contracts, owner-builders obligations, home warranty insurance and licensing. They are intended to reduce disputes between homeowners and builders.Proposed reforms will: • ensure the level of regulation of home building contracts is

equal to the associated risks; • provide greater clarity about the rights and obligations that

flow from the statutory warranty provisions and change the focus of what constitutes a defect requiring a greater warranty period;

• encourage timely and efficient resolution of home building disputes;

• ensure owner-builder permits are not used to circumvent licensing requirements and manage health and safety risks associated with owner-builder work; and

• help keep poor performing builders out of the industry.

Top ten buyer ‘turn-offs’Aussie Home Loans has conducted a survey of 1000 buyers to find out what turns them off.

1. Cigarette smells; 2. Busy road location; 3. Dirty; 4. Noisy neighbours; 5. Too dark and dank; 6. Dirty/old carpet; 7. Pet smells; 8. No storage; 9. Neighbour’s house looks dodgy; 10. Small bedrooms

When considering selling, most of the ‘turn-offs’ listed above are cheap and easy things to fix. When speaking to people who are thinking about selling, too often people are thinking about updating their kitchens and bathrooms, however this is not as big a deal as most would expect. Getting the small things right and presenting the home well will put more money in your pocket come sale time.

Did you know? At the last census some three million Australians were 20-something, up from 2.6 million five years earlier? And did you also know that 807,000 or 27 per cent of 20-somethings stated that they lived with their parents? Indeed, the number of 20-somethings living with mum and dad increased by 83,000 between the two most recent censuses.

AspirationsThe Westpac Home Ownership Report in August 2013 has revealed that ‘owning a home’ or ‘paying off your home sooner’ are the top priorities for 57% of Australians. Having children and getting married rated at 8% and 5% respectively.

Most trusted professionsReaders digest have published their annual poll of most trusted professions. Once again, Real Estate Agents languish near the bottom of the list. At least this year we made it above Call Centre Staff!

1. Firefighters

1. Paramedics

3. Rescue volunteers

4. Nurses

5. Pilots

6. Doctors

7. Pharmacists

8. Veterinarians

9. Air traffic controllers

10. Farmers

11. Scientists

12. Armed Forces personnel

13. Police

14. Dentists

15. Teachers

16. Childcare workers

17. Flight attendants

18. Bus/Train/Tram drivers

19. Locksmiths

20. Hairdressers

21. Postal workers

22. Waiters

23. Computer technicians

24. Security guards

25. Cleaners

26. Builders

27. Alternative health practitioners

28. Plumbers

29. Mechanics

30. Accountants

31. Shop assistants

32. Truck drivers

33. Charity collectors

34. Professional sportspeople

35. Bankers

36. Financial planners

37. Airport baggage handlers

38. Clergy (all religions)

39. Lawyers

40. Tow-truck drivers

41. CEOs

42. Taxi drivers

43. Journalists

44. Talkback radio hosts

45. Real estate agents

46. Sex workers

47. Call centre staff

48. Insurance salespeople

49. Politicians

50. Door-to-door salespeople