Property Insight Across Australia

Once every few months I would like to present an insight from my research on what is happening within each of the Australian state’s capital city property market. In general according to the Australian Financial Review home values across 5 of Australia’s capital cities up to September of this year are up .4 %. Anyway here  is a snapshot of what is happening in each of the state’s capital cities:

Sydney:

In general over the last year Sydney’s market has shown median house prices down by around 1%.
However the top end of the market is still  showing signs of increasing demand, particularly  the eastern and lower north shore suburbs. Also in the middle and lower end of the market there is an increasing demand for houses, but was interesting is that over the last few years Sydney’s apartment market has outperformed the housing market with stronger rental and capital growth. In  Sydney’s eastern, and beachside suburbs apartments are also performing well. However, buyers are being very selective and tending to avoid properties that are overpriced or apartments that are in secondary locations and not within prime locations. Overall still as a result of a combination of the following factors: Strong rental demand, Rental properties shortage. tightening vacancies and increase in rents means investors will go for the same apartments as owner-occupiers, underpinning prices.

Perth:
For the last 5 years The Perth property market has been in a slump and hibernating, but from reports it appears to be moving again with median house prices increasing by 3.17% and apartments by 10.05% over the last year again according to Residex. Western Australia is still being voted as the nation’s strongest economy, with a low unemployment rate and high wages. For both units and houses rents are rising and there is a shortage of accommodation for the increasing number of buyers and tenants. Residex is reporting that house rents last year in Perth have grown around 16%.

Brisbane:
Over the last year Brisbane median house prices fell 0.60 % and unit prices fell 0.61% over the last year according to Residex and is now hovering near the bottom of its cycle. However talking to other investors in Brisbane I am seeing more strategic investors recognising  that it’s a “buyers market” and taking advantage buying good valued property. Like Melbourne’s CBD there is an oversupply of apartments in Brisbane’s  CBD, Fortitude Valley and surrounding suburbs, with over 30 projects currently being marketed. Many of these apartments will remain unsold and this oversupply of properties will put downward pressure on prices and rentals. Overall  Brisbane is beginning to enter a stabilisation phase  i.e. prices are stabilising  but I am expecting that prices are unlikely to start rising until 2013.
For those property investors who already own rentals (me included) house rents in Brisbane have grown approximately 14% over the last year.

Melbourne:
Melbourne’s housing market has been a bit of a surprise, performing better than many expected with prices rising around 2.5% over the last quarter, clawing back half of their losses as a result of  values  falling over the first quarter of the year. Due to a substantial oversupply of newly built house and land packages in the outer suburbs, especially in the west and north property values in these locations may drop slightly due to oversupply. The top end of Melbourne’s property market is still quiet with an oversupply , however there is more demand for real estate priced between $500,000 and $900,000 in the inner- and middle-ring suburbs of Melbourne. With too many new apartment projects under construction there is an oversupply of CBD and near city apartments at a time when there is less demand. This will put downward pressure on prices and rentals for apartments, yet reports by Residex  are revealing that Melbourne’s house rents over last year have increased by 10.53%. As a result this oversupply of apartments will linger Melbourne’s market for a few years, causing prices to fall slightly as I said before.
However apartments with an element of scarcity and not commonly seen, are still selling well as a result of a limited supply of these unique properties. Overall I expect the property market in Melbourne from what I gather to be dull, but if you are smart there are properties out there that can be bought at good pricing, and with a renovation make over can add value to them thus making some money.

Darwin:
Darwin’s property markets have performed well. Residex has reported that  last year  median house prices has increase by 3.37% and unit prices by 5.95%. Darwin’s market has been supported by the increased activity in the resources sector, especially offshore resources.


Adelaide:
At present Adelaide’s property markets are flat.  According to Residex, median house prices fell 2.45 % and unit prices fell 2.1% over the last year. However median rents have remained steady. Since the  news that the expansion of the  Olympic Dam project has been put on hold, local’s confidence is lacking as many were hoping this project would turn South Australia into the next big mining state and boost the economy. Unfortunately there is nothing in the wings to suggest this market will change in the near future.

Hobart:

Median  house prices in Hobart fell 6.36 % and unit prices fell 6.68% over the last year. If you look over the longer term Hobart’s  property market has performed relatively well. However since Hobart’s economy does not shine or compare  the mainland’s resources economy  and its relatively isolated,  I believe there are better places within Australia to invest.

Canberra:

For the good old ACT (Australian Capital Territory) according to Residex median house prices fell 0.26 % and unit prices fell 5.47% over the  year. Since  Canberra has low unemployment, relatively high public service incomes and a shortage of accommodation, as a result of combination of these factors the market has stabilised and should be turning.

My conclusion:
From my own personal opinion I believe there is some very good buying opportunities for the astute and long term investor. Remember property investing is not a get quick rich scheme, but with reading, talking to other like-minded people,  and from people like myself presenting information when you put those together it helps one to make an informed decision.

Buying Off The Plan

Buying Off The Plan basically means entering a contract to buy a property from a developer prior to its construction. The property must be built from a subdivision plan and will be commonly be a unit or townhouse. A subdivision is a block of land that has been divided into lots (parcels of land varying in size). The developer will generally offer you a lower purchase price than what its expected market value on completion will be.

It can be very fruitful in a rising property market by buying off the plan. Since you lock in the purchase price early prior to construction,  if the market has risen  after a couple of years  when the property has been finally built, it  will be worth more than what it has been bought for.  However one needs to do their market research to at least ensure that this will be the case. For if research is not done, then the market can also drop and the buyer ends up with a property that is worth less for what they bought it at initially. So you can end up owing more than what it is worth.

In some states of Australia buying a property off the plan can save you thousands in stamp duty. As a result by buying off the plan, one only pays stamp duty on the vacant land (not the entire entity). Also significant tax deductions can be obtained by buying a new property,  as one can claim deductions for depreciation on the building and its fittings.

Generally on contract signing you will pay 10% on deposit and the stamp duty (if applicable in that state) say 3 months after signing.  The deposit can usually be secured via a deposit bond or bank guarantee. Once the buyer has received finance approval, the buyer can approach a bond provider. The bond gives the buyer the right to buy the property without dipping into their savings. Also the delay in settlement gives you more time to save for future mortgage payments. The delayed settlement from date of purchase can sometimes be up to 2  years.  Usually a normal mortgage is used to finance the property that you are purchasing.  Once the property is 100% completed the balance can then be paid.

It also pays to do research on the developer. If possible see if you can visit the last project that they have built to see how the project was finished, and if possible see if one can talk to the buyers in that project to see if there was any issues. Oh and one last thing please seek professional accounting and legal advice prior to acting on any of this information to see if buying off the plan suits your particular situation (refer to my disclaimer in my profile).