This newsletter has been designed to keep you updated on what is happening within the industry and our real estate office
October Newsletter 2014 PDF (Click to Open)
This newsletter has been designed to keep you updated on what is happening within the industry and our real estate office
October Newsletter 2014 PDF (Click to Open)
MORE than 250 suburbs around Australia are predicted to double in value in the next 10 years.
And tenants in almost 800 suburbs are potentially set to see their weekly rent double in the same time, according to new research by RP Data.
The real estate data firm’s Autumn Investor Guide has revealed the nation’s top property investment prospects include 263 suburbs or towns with the potential to see 100 per cent growth in the next decade, 792 where rental growth will do likewise, and 582 suburbs where rental margins are currently are topping 5.5 per cent.
It is thought these factors will make the suburbs a hit with investors, but they may also prove a nightmare for those renting and trying to get their feet on the property ladder.
Despite house prices tumbling from this time in 2010 until about May last year, Victoria is the nation’s most likely state to see property values double, according to the report.
A total of 68 suburbs around the state are identified in the report, narrowly topping NSW at 65.
The real estate data analysis firm tipped houses to double in Williams Landing (current median $407,970), while units are set to do likewise in Derrimut ($391,589) and Travancore ($443,507).
Among the nation’s capital cities, the top earners over the past five years, and top picks to see values double in the next 10 are extremely varied.
Berrimah in Darwin tops the list with a 25.7 per cent average annual growth over the past five years, followed by Deakin, Canberra, and Potts Point, Sydney, at 19.8 per cent, and Williams Landing in Melbourne at 19.4 per cent.
RP Data analyst Cameron Kusher said a large number of the tipped property winners are in regional Queensland, NSW and WA – with mining growth a significant factor in their performance recently and a major element of their future prosperity.
“We don’t necessarily say that that is going to continue, but there are some good opportunities from over the last five years,” he said.
Mr Kusher said that while not all the suburbs mentioned in the report would continue on trend, those hoping to buy or who are still renting could take heart that many others would not see such dramatic growth.
“From the investors perspective these are the ones that have done very well in the last five years,” Mr Kusher said.
“(And) there are some (suburbs) in Victoria where rents are falling or haven’t moved.
“Over the past five years some of these areas have done quite well, perhaps they have cooled off over the last year or two.
“Renters in Sydney are most likely to feel the pinch if the predictions, based on growth over the past five years, come to pass.”
A whopping 249 suburbs have been identified in Sydney, including ritzy Vaucluse where rent for houses has grown by about $1015 (15.3 per cent per year) in the past five years and Potts Point, where houses now rent at $377 (13.9 per cent per year) more than they did in 2008.
Perth was a close second, with 181 suburbs tipped for a potential rental price double.
Houses in Menora are expected to see median rents double after they rose from $400 in 2008 to $1,100 currently, according to the RP Data figures.
Report co-author and RP Data analyst Tim Lawless said the growth had been predicted on suburbs with annual growth topping 7.2 per cent.
“By using a scenario based on compounding growth calculation, the value of an asset will double in ten years if it records an annual increase of 7.2 per cent,” Mr Lawless said.
“Based on this measure we have identified 263 suburbs where values are on track to double over a ten year period and 792 where weekly rents are on track to double over ten years.”
Mr Lawless said that investors were encouraged to view the free report as a guide or starting point for investigating investment opportunities.
In my experience, these “No Deposit” offers require the purchaser to set up a payment program where they spend the next 2-3 years paying into an account to build up the required deposit. They are locked into this agreement, with potential risk of losing any money paid if they wish to get out. In most cases they are also locked into a specific property which increases in cost the longer it takes to reach the required deposit. So in the end, you’re better off just being disciplined and saving the money yourself.
MOST people think that spring is the best time to sell a home.
And vendors are often attracted to the idea of putting their home on the market in time for what is known as the spring selling season.
But the reality is that while the spring months can turn on some great weather, they are not necessarily the busiest months in terms of sales activity.
Seasonal factors usually play a minor role in the sale of property – which has more to do with supply and demand.
What generally happens in spring is that the supply of property on the market increases but demand may or may not.
An influx of properties onto the market means that buyers have more to choose from and hence reduce their offers in terms of price and conditions.
So despite the hype, spring can sometimes be a buyer’s market.
But that said, this time of the year brings with it a certain buzz. The warmer days mean that more potential buyers are willing get outdoors and inspect properties; and auctions tend to have higher attendance numbers. Activity in the market ramps up.
One of the biggest mistakes that sellers can make, especially in a buyer’s market, is not getting their home in the best possible condition prior to sale.
In the critical early stages after a house is placed on the market, first impressions are vital. A buyer with a negative impression will not be back.
For those who may be getting ready to sell this spring, or any time, here’s a minimum to-do list to help improve your property’s market appeal:
Street appeal – people see your yard as an extension of the house. An unkempt property that is in disrepair or in need of a coat of paint spells neglect. Tidy the yard, rake, mow and do whatever it takes to make a neat outdoor space. The addition of a few colourful pots with flowers and some pavers can do wonders.
Refresh with paint – this is the easiest and most inexpensive way to breathe life into a home, both indoors and outdoors. A coat of paint can lift the mood; change the character of a home; or add street appeal.
De-clutter – some of the best money you will spend is on renting a storage unit and getting the clutter out of your house. A clutter-free, simple arrangement allows for maximum impact.
Clean – make sure your house sparkles. And attend to any dampness or mould, as these are telltale signs that suggest possible leaks, unwelcome expenditure or future health consequences.
However, if you are not quite ready to put your home on the market, don’t stress – it could be to your advantage to wait until summer instead.
While spring has the reputation, research shows that the best time to sell a resale residential property, especially in Queensland, is in late summer – in fact, between March and May; while the best time to sell new property is in the first half of the year.
For more information visit www.matusik.com.au
AS low interest rates prompt a fresh surge in real estate activity, a Battle Royale is looming between first-home buyers and property investors.
Sadly for the first-home buyer crowd, it’s a one-sided contest. Low interest rates help both parties with their repayments, but investors typically have more financial firepower when it comes to a bidding war.
Data released this week by mortgage broker AFG shows that investors snapped up between 28 per cent and 50 per cent of all mortgages processed in August, depending on which state you live.
And the RP Data-Rismark Home Value Index reported the strongest quarterly gain in house prices in four years.
It’s good news for sellers, but not so great for buyers who have been scraping a deposit together and now must fight cashed-up investors for properties, plus a growing number of wealthy foreign buyers.
So in the interests of helping the underdogs, here are some ways that first-home buyers can compete in the real estate market.
Firstly, get pre-approval for a loan. If a seller has a choice between a pre-approved offer or one that is subject to finance, it’s no contest.
It’s also important to think about supply and demand. If there is high demand for an area or property, you’re going to have to pay more and battle others for it. In many cases taking that first step on the property ladder makes more sense in an area where there is abundant supply and lower demand. You can always trade up later once you have built some equity in your property.
Remember that most property investors think with their heads rather than their hearts and will seek simplicity in their purchase. That means first-home buyers may have a better chance at grabbing a bargain if they target properties that need a little renovation work to get them into good shape.
Search for opportunities before they get listed by building a network of real estate agent contacts. Property experts suggest always making the first offer and asking the agent for the opportunity to make a counter offer.
Finally, take emotion out of your buying decisions, just like good investors do. New properties will always be popping up.
A SURGE in auction numbers after the election will officially kickstart what promises to be a strong spring property market for Melbourne.
The combination of the federal election and the AFL Grand Final have pushed almost 2000 homeowners to list their property for auction in the two weeks between the two big events.
The Real Estate Institute of Victoria is expecting up to 1000 auctions in a Super Saturday event on the weekend immediately after the poll. A further 900 are anticipated the following week.
Its predictions come after RP Data recorded a preliminary clearance rate of 73 per cent in Melbourne last weekend. According to RP Data, the clearance trend in Melbourne for auctions is 72 per cent.
The winter selling market was the strongest in recent years, but according to RP Data analyst, Cameron Kusher, there is further room for improvement.
“Given the strong winter season there’s definitely potential for the market to go back up to the 80 per cent clearance rate,” Mr Kusher said. “It’s been a long time since we have seen those levels – but it’s a real possibility.”
But even strong sales won’t result in the same massive price growth for property of 12 to 13 per cent a year seen in 2010, according to Mr Kusher.
RP Data figures indicate about 22 per cent of properties in Melbourne are selling via auctions, but that ratio is expected to grow after the election.
“A lot of real estate agents around the country seem to see a lot of people holding off going to market until after the elections, and buyers may have a bit more confidence after the election as well.
Buyers advocate Monique Wakelin, Wakelin Property Advisory director, echoed the sentiment and said it was possible a “honeymoon period” may lend strength to the market in the two weeks following the polls.
But the real strength of the market would only be revealed in October when pent up demand from the winter months cleared.
“We have the football finals and now we have the election and it wouldn’t surprise me to see significant fluctuation in the clearance rate,” Ms Wakelin said.
“But the acid test will be into October … if we still see clearance rates in the high 70s and into the 80s it will be a sign the market has turned.”
Check out last week’s sales results in our interactive map below. Zoom on the location to see details of properties that sold.
THE Reserve Bank of Australia has kept the cash rate at 2.5 per cent as it waits for recent rate reductions work their way through the economy.
The decision was expected, with all 14 economists surveyed by AAP last week forecasting no change at the September board meeting.
The RBA last cut the cash rate in August, by a quarter of a percentage point, and before that in May by the same amount.
In a statement accompanying the decision, RBA governor Glenn Stevens said growth was still below trend and would stay that way for a while as the economy moved away from one driven by the mining sector.
“Recent information is consistent with global growth running a bit below average this year, with reasonable prospects of a pick-up next year,” he said.
“Commodity prices have declined from their peaks, but generally remain at high levels by historical standards. Inflation in most countries remains well contained.”
Mr Stevens noted that the Australian dollar was still high by historical levels despite falling 15 per cent since April, currently around 90 US cents.
The currency’s average level since it floated in December 1983 is 75.5 US cents.
“It is possible that the exchange rate will depreciate further over time, which would help to foster a rebalancing of growth in the economy,” he said.
“The Board will continue to assess the outlook and adjust policy as needed to foster sustainable growth in demand and inflation outcomes consistent with the target.”
SEVENTY years from now, we will all be millionaires, witness teleportation and pay $34 for a loaf of bread, experts say.
Using the year 2083 as a benchmark, researchers from an investment firm used historical data calculated with annual growth rates to compile an astonishing list of predictions.
Data projections have found bread will cost about $34 a loaf in 70 years. Picture: Milan Scepanovic Source:News Limited
Homeowners can expect to pay an average of almost $12 million for new properties.
The data projections also found people would live much longer.
“Many of our investors … want to know how to plan for their children’s future and what that future might look like financially,” said DGCAssetManagement.com managing director David Garner.
“We used historical data to calculate compound annual growth rates, which we then applied over the next 70 years to 2083.
“We also adjusted for inflation, to provide a better comparison with today’s prices.”
Separate research at FutureTimeline.net predicts that hyper-intelligent computers will perform “the equivalent of all human thought over the last 10 thousand years in less than 10 microseconds”.
The 2080s are expected to make house prices today look super cheap. Picture: Supplied Source: News Limited
Researchers also say that the average citizen will have access to a wide array of biotechnology implants and personal medical devices.
These could include fully artificial organs that never fail, bionic eyes and ears providing superman-like senses.
The 2080s will not be so bright for many animals, though, as lizards and polar bears will be extinct.
Polar bears will be extinct in the 2080s, according to data projections. Picture: Supplied Source: Supplied
Spain, Italy and the Balkans will turn into desert nations, with climates like North Africa, and agriculture will suffer.
Enjoy it while you can, Italy is expected to be a desert nation in 70 years. Picture: Supplied Source: Supplied
On a brighter note, experiments in quantum entanglement, made possible by artificial intelligence and picotechnology, will provide major breakthroughs in travel.
By 2083, the future experts claim it will be possible to teleport macro-scale objects from one location to another.
New research by accounting network UHY examined property taxes in 25 countries and found that high-end purchases hurt Australian buyers the most, but we are expensive at all price levels.
Lowering your stamp duty is a tougher task than escaping other tax hits, but property experts say some strategies are possible.
UHY Haines Norton found a $US500,000 ($545, 000) property attracts tax at 3.7 per cent of the purchase price, while a $US350,000 ($382, 000) purchase brings a 3.2 per cent tax hit. This ranks poorly alongside similar western countries such as the US, which is below 1 per cent, and Canada, below 1.3 per cent.
Australians who buy a $US3.5 million ($3.82 million) property will pay 5.3 per cent of the purchase price in taxes, the fourth highest rate in the study, behind India, Spain and Britain.
Dario Nazzari, a partner and indirect tax specialist at UHY, says stamp duty comprises the majority of property taxes, and raked in more than $1.2 billion for state governments in the 2011-12 financial year.
“Aside from making it harder to enter the homeowner market, higher property purchase taxes may discourage people from moving interstate for a new job,” he says.
Nazzari says unlike land tax, which people can minimise by buying in different states and with different structures, stamp duty is hard to avoid, and he does not see the costs falling soon. “At the moment it’s probably difficult because governments are looking to plug deficits.”
Buyers’ few choices include seeking cheaper properties, which attract a lower rate, or targeting Queensland, where stamp duty rates are about one-third the cost of other states.
Real estate author, academic and investor Peter Koulizos says stamp duty is a huge barrier because it is a large proportion of a deposit, and is often a disincentive to investors, who can buy shares without paying the tax.
Koulizos says people can lower their stamp duty costs by building. “Buy the land, then build – you only pay stamp duty on the land,” he says. “If you’re a first-home buyer, there are many concessions and some of them include stamp duty.”
Hopes for much-needed new supply have been boosted by record numbers of homeowners having properties appraised in August for future sale.
In NSW, LJ Hooker recorded a 32 per cent rise in interest compared to August 2012.
“Any uncertainty that clouded the market before the federal election date was called has definitely lifted, with vendors now wanting to know what their property could fetch,” LJ Hooker head of residential sales Chris Mourd said.
Once the air clears from the election, we’ll see one of the biggest listings of stock for spring hit the market in some time.”
Smartline mortgage broker Scott McCray said the result of the election does not matter – just the fact it is happening.
“People are talking more about it being a good time to buy a property than which party would be better for the market. Whoever gets in, it will still be a positive and the uncertainty will be removed.”
Liz and Michael Scerri are taking their house at 82 Wilson St, Botany to auction on September 14 and believe they are perfectly nestled between the election and the onset of a flood of new listings.
“We are happy to be selling after the election and before school holidays,” Mrs Scerri said.
“We wanted to sell before the spring market took off so there would be more competition between buyers for our property and more stock on the market when we look for our next one.”
McGrath agent Marnie Seinor said she was aiming between $800,000 and $850,000 for the Scerri’s home and had already received decent offers.
“We’re just going to go for it at auction,” Ms Seinor said. “There’s currently no new stock coming on but after the October long weekend I think it will.”
RP Data senior research analyst Cameron Kusher said listings had been low since much earlier in the year than usual.
“You typically see listings trend lower during the winter months but it happened earlier this year, which may link back to the election uncertainty,” Mr Kusher said. “You usually see a pick-up in spring but it might be greater than normal this year because people have been waiting for the election.”
A likely Coalition win may also have some upside for the property market, with research showing house values rose in the periods following the most recent Coalition election victories, while dropping after the past two Labor wins.
“In 2001 and 1998 we saw strong growth in values, keeping in mind that it has to do not just with the election but how the economy is running at the time,” Mr Kusher said.
“In 2001, the housing market right across the country was booming, while following the 2007 (Labor victory), the financial crisis happened.”
The minutes of the RBA’s August 6 board meeting, at which it cut the cash rate to 2.5 per cent, contained unfamiliar language from the board about the possible timing of future rate decisions.
“Members agreed that the bank should neither close off the possibility of reducing rates further, nor signal an imminent intention to reduce rates,” the RBA minutes said.
The minutes effectively rule out a pre-election rate cut when the board next meets on September 3, indicating its view is more long term.
“The board would continue to examine the data over the months ahead to judge whether policy was appropriately configured.
The minutes also said the Australian dollar, despite falling to three years lows, remained at historically high levels, supporting the case for a cut in August.
“It was possible the exchange rate would decline further over time, which would assist in rebalancing growth in the economy,” the minutes said.
ANZ foreign exchange strategist Andrew Salter said the comments caused a small amount of volatility for the Aussie dollar.
“The minutes seem to have suggested that the RBA is thinking a little more deeply about its communication and how it communicates the outlook for policy,” Mr Salter said.
“Participants are unsure how to read this.”
Mr Salter said the Australian dollar had already fallen by almost one US cent overnight, after being sold against the euro following comments from the German central bank that the European Central Bank could hike rates if inflation pressures increased.
Meanwhile, Australian bond futures prices were unchanged from 1630 AEST on Monday.
At 1200 AEST, the September 10-year bond futures contract was at 95.970 (4.030 per cent).
The September three-year bond futures contract was at 97.170 (2.830 per cent).
MELBOURNE has again been rated the world’s most liveable city – for the third year in a row.
The Victorian capital edged out Vienna, Vancouver, Toronto and Calgary to claim the top ranking by The Economist Intelligence Unit.
Three other Australian cities were in the top 10 – Adelaide (5), Sydney (7) and Perth (9).
Issues covering stability, healthcare, culture, environment, education and infrastructure were considered in the survey.
“Improvements to infrastructure in Australia, where the federal government initiated an ambitious long-term road-building programme in 2010, prompted rises in some cities in 2011,” the report said.
The worst ranked cities were Tehran, the Cameroon capital Douala, Tripoli, Karachi, Algiers and Harare, Lagos and Port Moresby.
|Thursday, 15 August 2013|
A vast majority of agents are not happy with how the federal government has managed the Australian economy, according to a recent industry survey.
The Real Estate Business Half-Yearly Sentiment Survey has revealed 82.6 per cent of 287 respondents have said the federal government is not doing a good job of managing the economy. When asked, only 13.2 per cent said ‘no’, while the remaining 4.2 per cent were ‘unsure’.
Principal of Harcourts South Coast in South Australia Mark Forde told Real Estate Business he felt the government was making poor decisions for the economy.
“Small business confidence is completely shot. I think that transgresses all the way back down the pipeline,” he said.
“No-one has any clarity of the direction of the government and its decision-making is poor, so there’s a real lack of confidence in the community which transcends all businesses, particularly retail and property.”
Managing director at Morton & Morton and Australian Real Estate Awards Thought Leader, Ewan Morton, said he felt the government had managed the economy well in light of the recent economic crisis.
“When I think about the confidence since the GFC [global financial crisis], I think the way they lowered the interest rates and they managed that actually probably averted us from a much harsher landing than what could have been,” he told Real Estate Business.
“I think from an agent’s point of view, turnover has dropped significantly as a result, and probably the financial hardship of people has been minimised as a result of that.”
The sentiment survey also revealed that 62.5 per cent of agents believed the upcoming federal election had a negative effect on the property market due to the uncertainty of a possible change of government. Thirty per cent said the property had continued as normal and another 7.4 per cent were unsure.
The result echoes another survey conducted by Loan Market, which found the federal election was discouraging potential borrowers from purchasing property.
The online poll of home loan shoppers found 43 per cent of 674 respondents were slightly more apprehensive about purchasing property, while 40 per cent said they weren’t deterred at all.
According to Mr Forde, a lot of people were in a state of flux and wouldn’t make a decision to sell or buy.
“Once the election is behind us and we’ve hopefully got a government elected with a clear mandate, I think it will give people a degree of certainty that whatever we’ve got, at least we can get on with it. Right now, there’s just too much uncertainty,” he said.
Mr Morton agreed and said, “Elections always make people a bit on their hands regardless of whatever everybody thinks the outcome will be. I think it does create a sense of uncertainty and I think it is one of the factors that has led to the current stock shortage, as people are waiting to see what will happen.”
Reserve Bank Board meeting
The Reserve Bank Board has left the official cash rate at 2.75 per cent for the second straight month. In May the RBA cut the cash rate by 25 basis points to the lowest levels recorded in 53 years. The next RBA Board meeting is on August 6 2013.
The interest rate statement was once again short at just 360 words. Basically the Reserve Bank left rates on hold cause the falling Australian dollar is helping to re-balance the economy and stimulate activity. In addition rates are low enough to boost economic growth. But if the economy continues to lag and inflation stays low, the Reserve Bank has vowed to cut rates further.
What does it all mean?
• Economists were in agreement that rates wouldn’t fall this month. And financial market pricing suggested only a 18 per cent chance of a rate cut. And indeed this month there were no surprises. The continued improvement in the health of the US economy, together with a weaker Aussie dollar, provided sufficient reasons for the Reserve Bank to keep rates on hold for this month. But the Reserve Bank warned last month that it would do what it takes to restore growth, and indeed the central bank still has plenty of ammunition left.
• One of the key drivers of keeping interest rates on hold concerns the Aussie dollar. The Aussie dollar has fallen by over 12 per cent in the past two months and it is already starting to have a significant impact in rebalancing the economy and supporting activity. The latest manufacturing reading has highlighted that the sector does seem to be on a recovery path as exports receive a boost from the cheaper Aussie dollar. In addition Aussie farmers have been enjoying historically high prices global prices which will result in higher incomes given the falling currency. In fact all manner of exports will benefit from recent currency weakness.
• Interest rates are sufficiently low to get consumers and businesses borrowing again. But the “new conservatism” continues with people more comfortable about using their own funds to make purchases. And the question that needs to be asked is would another rate cut make all the difference to activity levels? Unlikely. The long drawn out Federal election campaign is the main driver of uncertainty, and most businesses want the election out of the road before committing to major new spending or investment. The Reserve Bank is likely to take a cautious approach to further rate cuts, particularly given that interest rate sensitive areas of the economy, like housing are starting to respond to low rate settings and in addition confidence levels should rebound after the election.
Interest rate decision and past cycles
• The Reserve Bank Board has left the cash rate at a 53-year low of 2.75 per cent. The previous rate cuts were in May 2013 (25 basis points), December 2012 (25 basis points), October 2012 (25 basis points), June 2012 (25 basis points), May 2012 (50 basis points) and November and December 2011 (each by 25 basis points). Prior to those moves the Reserve Bank had previously lifted rates seven times from October 2009 to November 2010 – a total of 1.75 percentage points, from 3.00 per cent to 4.75 per cent.
• In the last rate-cutting cycle the cash rate fell to a low of 3.00 per cent in April 2009. In the previous rate-cutting cycle the cash rate fell to 4.25 per cent in December 2001. In the two previous rate-cutting cycles, the cash rate fell to lows of 4.75 per cent.
• The Reserve Bank looks more closely at the variable housing rate to gauge how close rates are to “normal”. Currently the variable housing rates of major banks are around 6.20 per cent, below the long-term average or “normal” rate of 7.20 per cent but still modestly above the 41-year low of 5.75 per cent recorded in April-May 2009.
What are the implications of today’s decision?
• Interest rate stability is a good thing. Many Aussies are worried when rates are cut from already super-low levels, as shown by the poor response of consumer and business surveys after the May rate cut. If rates are cut from high levels, the move provides relief. Rates that are cut from low levels raise questions about the true state of the economy.
• Certainly there is more activity in the housing market at present, but the response has been more by investors rather than owner-occupiers. Not only do analysts need to consider the environment, but also the different reaction funds of demographic groups, from Generation Y to baby boomers.
• The Reserve Bank has made mention in recent times that only “some” of the scope to ease policy was used, keeping some in reserve. The Reserve Bank has kept the easing bias firmly in place. So we continue to pencil in the risk of another rate cut in August after the inflation data released in late July. Of course if the Federal government looks at early timing for the election this would shift our view.
• The statement from the June meeting is on the right; the statement from today’s July 2013 meeting is on the left. Emphasis has been added to significant changes in wording in the recent statement.
Source – Savanth Sebastian, Economist, Comm
Yesterday, unemployment rose significantly to 5.7% putting a record 700,000 Australians on job queues, while youth unemployment hit a 15-year high at a staggering 27%. Some 4,400 Australians who had full-time jobs last month are now looking for work.
The Property Update includes statistics and features to ensure Members and the public are informed of the latest and most comprehensive data and commentary on the Victorian residential property market.
The industry call centre, Sales Results, a joint initiative with realestateview.com.au, ensures the REIV receives reports from estate agents of more auction and private sales than any other source, leading to a better Property Update.
These initiatives further enhance the REIV’s reputation for providing the most timely, useful and reliable data.
Key features of our quarterly Property Update include:
If you would like me to email you a copy send me an email to email@example.com and put Property Update in the subject line.
The Research Bulletin builds on the REIV’s wealth of data and knowledge about the property market.
Each editon contains a range of features, including;
The publication is free to download for REIV Members, let me know if you would like a copy, email me at firstname.lastname@example.org please put Research Bulletin in the subject line.
Those considering investing in any form of property will continually see a couple of terms used to discuss the investments performance, namely; capital growth, investment return and gross rental yield.
Capital growth. The term capital growth is often used in real estate to describe the increase in the price or value of a property. For instance the median price of a 3 bedroom house in Coburg in the March quarter of this year was $629,000 and twelve months ago it was $625,000. Therefore the capital growth is the difference between the two, $629,000, divided by the earlier figure, $625,000, which equates to 0.64 per cent over a year. Capital growth is also known as capital appreciation.
Investment return. From a real estate perspective the term investment return is very similar to the capital growth figure. It is the percentage of change in value of the investment over a given period of time.
Gross rental yield. Gross rental yield is a term that is frequently used to compare the investment return on a property investment. To calculate the amount you divide the yearly rental income by the purchase price of the home. For instance the yearly rental income on a 3 bedroom house in Coburg is $21,580 and the median house price is $629,000 resulting in a gross rental yield of 3.43 per cent.
Investors who are looking for comparative data on the investment potential of different homes will find that the REIV is able to assist, just visit www.reiv.com.au to find out more.
Not surprising, the RBA has decided to keep the cash rate ON-HOLD today in their monthly meeting – meaning that homeowners will have to face another month of interest rates at their current levels. This does not come as a surprise as in line with our findings last week – most economists predicted that that a rate cut was unlikely given the present state of the economy.
Although conditions are being worsened somewhat by the recent sharp slide of the Australian dollar – highlighting a growing lack of confidence in our economy with interest rates predicted to fall further – the move to reduce interest rates is being viewed as a last resort by the RBA with rates already at historical levels. Furthermore, although improvements in consumer confidence data and housing approvals were not what the RBA expected following its other policy decisions this year – there is still a little bit of further room for results to deteriorate before any action is required.