MARKET OVERVIEW
With clearance rates around 63% again recently, we can see ourselves settling
in for the winter sales season. This tends to be a time where volumes become
lower, and negotiations become far more intense. If supply drops off whilst
demand stays level, then pressure occurs in certain segments of the market.
Investors have well and truly come into the market place as there are more
distressed sales of property. Your choice regarding style and location of
property will be paramount in your success as a property investor.
There is much talk of the government trying to coax institutional investors
in to offering low cost, affordable housing to those people who need assistance.
This is not being offered to the average Mum and Dad investor, who by the way
own 80% of the rental properties. We also read everyday from the “property
advisors” spruiking positive geared property is selling well.
I am not a financial advisor; I only assist people once they have made the
decision to have some direct property in their investment portfolio. Personally,
I agree with this, but each person should seek the advice of a reputable
financial planning professional. There are two main ingredients in any
investment; Yield and Capital Growth. In layman's terms yield is the rent you
receive each week from the tenant and Capital Growth is the difference between
what you purchased the property for and what you sold it for. (Or what the
property is worth today).
For the purposes of this comment, I will be very simplistic. The average
property is seen as “negatively geared” if your interest on the mortgage and
other costs (rates, insurance, body corp. etc, called outgoings) is greater than
the income you receive from the tenants. Because the government sees this as a
net loss, it is treated like any business loss and you can reduce your taxable
income because of this. When the tenants' rent outweighs the interest and
outgoings it is deemed positively geared and these funds will be added to
whatever other earnings you have and taxed accordingly.
Most areas where the capital growth rates tend to be at the higher levels
(the more established suburbs of major cities, where there is good
infrastructure) unfortunately usually have the lowest yield (%return). The
opposite is also true. Where the capital growth is limited because of distance
to infrastructure and not as many people wanting to live there, the rental
return tends to be higher.
So which is better? Higher yield and lower capital growth or vice versa? If
you can afford to negatively gear (where you will need to contribute out of your
own pocket each month to make up the shortfall in interest) and you achieve good
capital growth, I believe this will offer the greatest benefit if you wish to
grow your property portfolio. If you have limited capital growth then the only
way to get the deposit for your next property is to save, rather than use the
equity (capital growth) from your current investment property.
Go to our “how
to” series on our website to read more about Yield vs. Capital Growth in the
coming weeks.
Ian James
SAM'S FACTS
This month, something for Sports Lovers!!!
Brownlow Fact: The very first winner received only 7 votes because at this
time only one vote was awarded per match by the media. It wasn't until about 10
years after the 1924 Brownlow that umpires would award the votes.
Source: Funtrivia.com.au
The answer to the question in the April newsletter is:
Question : How many cars did Nicholas Cage have to steal in the movie Gone in
60 Seconds? 25, 50, 75,or 100?
Answer: 50 cars in just one night!
Question: Where & When was Ricky Ponting Born (The Australian Cricketer, for
those like me who don't follow much sport!!)
The answer to this question will be published in the next newsletter.
Sam James
LETTING THE HEART RULE THE HEAD
When searching for the ‘right property at the right price', adding an
emotional factor to the equation can often create additional dilemmas when
trying to secure the ideal property. With an investor the head usually rules the
heart in such matters, and it is simply a case of ticking the ‘right boxes' to
ensure the purchase will reap rewards over the long term. Owner occupiers
working within a restricted budget will inevitably get caught up with the need
to buy a property that feels like ‘home' as their first priority. As a result
they can often end up making a poor long term investment.
Once a buyer has ‘fallen in love' with a property, the process can become an
emotional roller coaster of despair. As a result the heart will often firmly
rule the head when it comes to negotiation and signing on the dotted line.
When I was working in real estate sales, I can't tell you the amount of times
someone would quote the old saying of ‘signing my life away' when it came to
filling out contracts. There are always nerves involved during the purchase of
real estate – let's face it, for most people it is the largest amount of money
they will ever commit to spending in one go! However with a bit of due diligence
and careful thinking, the process can become an enjoyable one, rather than one
resulting in sleepless nights and packets of Panadol!
Sitting down and discussing the options you have, and what you plan on
getting out of your purchase over the long term should be top of the list before
you even begin to look for a home. I often find the hardest hurdle to overcome
during the search process is finding out exactly what a buyer is looking
for. The purchasers who have taken the time to really think about their various
options are the ones that are truly ready and confident to move quickly when
needed - therefore greatly reducing the possibility of missing out to another
interested party.
Missing out can result in impulse buying. A well used real estate sale trick
is to grab the under-bidder at an auction and take them to view another house.
Agents know that the potential purchaser's emotions in this situation are ripe
for a quick sale.
Clarifying your needs prior to searching reduces the chances of making a
‘heart over head' mistake. Real estate should ideally have an investment factor
involved. You are committing a large amount of money and various sacrifices to
your life style in order to pay the mortgage, so it would be good to know you
are getting a good investment that will profit over the long term.
If you can't afford the locations you would ideally like to live in, think
about buying an investment property and renting for a period of time. You may
find that property investment is the first step to achieving your home-ownership
goals. A good investment property can often provide the needed equity to enable
you to borrow more a little further down the track.
Buying a property that won't appeal to every Tom, Dick and Harry will obviously
reduce buyer competition. Think about avoiding the fully renovated homes that
have the hefty ‘wow' appeal. These are designed to fuel emotions, and emotions
make ‘good auctions'. Take the time to research what your long term living needs
really are, and start concentrating on a property that has a good potential
floor plan and location, rather than something that has instant appeal.
There is enough information in the market place and ‘property professionals'
willing to assist when it comes to deciding your best plan of attack. Better
still, consider using a buyer advocate who can give you peace of mind to know
that the choices you make are good for the long term.
It is essential that you take the time to decide what you can afford and what
your options are before you start looking and getting emotionally caught
up with personal desire.
Putting a system into place means that the buying process can become an
enjoyable and hopefully speedy one.
Catherine
Cashmore
FISHING WESTERNPORT
With my boat nearly back in the water I am looking at getting amongst the big
Gummys. Anyone who hasn't seen the videos by Brendon Wing catching Gummy shark,
Mulloway and Snapper based on Western Port, should get a copy and have a look.
Technically, they may not be brilliant, but I can vouch for most of their
methods and a lot of the areas they target.
Winter fishing on Western Port is all about picking the right days to go out.
We have some beautiful mornings and overnight for that matter, but make sure you
cloth yourself against the cold and check weather forecasts often.
Fresh baits of couta, salmon and squid will give you the best chance on
mulloway, gummy and seven gill shark.
Good luck with your fishing.
Ian James
SPOTLIGHT ON MELBOURNE SUBURBS
In our regular spotlight section we examine a selection of Melbourne suburbs,
highlighting what's happening in these areas right now.
Belmont
Council: Geelong City Council www.geelongcity.vic.gov.au
Post Code: 3216
Area: 9.2km²
Population: 13,646 (2006 Census)
Neighbouring Suburbs: Grovedale, Highton, Newtown
Median House Prices
|
Lower
Quartile |
Dec 07
Median |
Upper
Quartile |
Dec 06
Median |
Annual
Change |
Belmont |
$245,000 |
$270,000 |
$310,500 |
$258,000 |
4.7% |
Source: REIV. |
|
Click for larger map |
Belmont is a suburb of Melbourne's second largest city: Geelong. Belmont is
located 3km south east of Geelong's centre. The Barwon River runs along the
North and East side of Belmont.
Belmont is one of Geelong's largest, oldest and most popular suburbs. With a
population of approximately 13,600 (2006), Belmont has one of the largest and
busiest strip shopping centres. Belmont is also close to Deakin University.
Belmont was settled in 1836 by Dr Alexander Thomson. It wasn't until 1865 that
Belmont began to expand; three hotels, a flourmill, tanneries and a court of
petty sessions were built. By 1927 an aerodrome was built and a tram service to
Geelong ran (this ceased in 1956). The residential growth boom in Belmont really
grew after World War II and during the 1950's and 60's.
Public transport in Belmont is primarily by bus, with a number of local
services linking to local areas and the V/line country rail network, as well as
direct coach services to Torquay, Lorne and Apollo Bay.
Rental Analysis: Belmont
Median Advertised weekly rent |
Gross rental yield (%) |
$245 per week |
4.9% |
Figures for 12 months to
End of February 2008.
Source: Australian Property Monitors. |
Courtney James
Macleod
Council: Banyule City Council: www.banyule.vic.gov.au
Post code: 3085
Area: 2.7 km²
Population: 8083 (2006 Census)
Neighbouring Suburbs: Yallambie, Watsonia, Rosanna, View bank
Median House Prices
|
Lower
Quartile |
March 08
Median |
Upper
Quartile |
Dec 07
Median |
March 07
Median |
Quarterly
Change |
Annual
Change |
Macleod |
$380,000 |
$435,000 |
$530,500 |
$447,000 |
$338,375 |
-2.7% |
28.6% |
Source: REIV. |
|
Click
for Larger Map |
Macleod is a small North Eastern suburb, located about 18klm from Melbourne.
It is established residential area with a small commercial area. Macleod is
bounded by the southern edge of Gresswell Forest Wildlife Reserve, Wattle Drive
and Harborne Street in the north, the transmission line, Yallambie Road and
Greensborough Road in the east, Finlayson Street, Stanton Crescent, Chapman
Street and Ruthven Street in the south, Waiora Road and Cherry Street in the
west. Click here for an interactive map via Google maps. Part of the suburb of Macleod is located in
Darebin City.
Major features of the area include Banyule Netball Stadium, Macleod Shopping
Centre, Macleod Park, Harry Pottage Reserve and two schools.
Macleod's main public transport option is Macleod railway station, which is
located on the Hurstbridge railway line. Journey time to the CBD is about 30
minutes. Macleod is a 'premium' station, meaning that it is fully staffed from
first train to last, seven days a week. Macleod station also serves as a major
hub for more than 20 local bus routes.
Macleod is named after Malcolm Macleod, an early land holder. Settlement of
the area dates primarily from the early 1900s. Significant development did not
occur until the post-war years. Development in the western section continued
into the 1970s. The population has been relatively stable since the mid 1990s, a
result of some new dwellings being added but a decline in average household
size.
Rental Analysis: Macleod
Median Advertised weekly rent |
Gross rental yield (%) |
$320 per week |
4.3% |
Figures for 12 months to
End of February 2008.
Source: Australian Property Monitors. |
Sam James
HOW TO BUY PROPERTY IN MELBOURNE
The following is a special pre-release extract from our latest 'how-to'
article. For the full series, please visit and bookmark How to buy property in Melbourne. Be sure to re-visit on a regular basis
for all the latest articles!!
Negotiation: a Buyer's perspective, Part 1.
Most real estate agents that you speak to have a reasonable amount of
experience but very little theory knowledge when it comes to legislation
that surrounds their industry. The vast majority of agents the public deals
with are Agents Representatives. This represents a six day course at the
REIV. Most of their ongoing training is based on their company's mentor and
internal training programs. Some of these are very good and others are sadly
lacking in structure and content.
As such you will come across a vast range of good, average and poor
negotiators in your Real Estate quest. If you are negotiating against a
professional, fully licensed Real Estate Agent, who is the agency principal
or one of its directors, you are in competition with somebody who would be a
“Queen's counsel” in the legal fraternity. Good Luck! This agent is probably
involved in a couple of hundred property negotiations each year, similar to
what we are involved with. When you are negotiating with someone who has
superior knowledge of the industry and vastly more experience, then the idea
is to “keep your eye on the prize.” Always work out your “walk away” point
and stick to it.
When dealing with the average Agent's Representative, you still need to
keep your mind on when to walk away, but don't be too scared in asking
questions. Most of the time inexperienced agents are as nervous as you are
when they are negotiating. I can remember back when I was selling, how
incredibly worried I was about losing a prospective buyer by asking for too
much money or asking for a difficult settlement.
One of the first things you need to decide is how much risk you wish to
take and what rewards that will achieve. If you have found the perfect
property that suits all your needs, and the agent is asking a fair and
reasonable price, then it is probably not the time to give a “one off” low
price and say “take it or leave it”. There is too much risk of losing the
property. Words you can live buy whilst buying property; “Paying $5000 more
for a great property is far better than saving $10,000 on a poor one”
In a flat or “down-turned” market, agents are far more likely to be
cautious when it comes to shutting down and offer. If you have ever dealt
with a Victorian inner city agent, in the peak of a sellers market, any
offer you try to push prior to auction will usually be dismissed out of hand
unless it is absolutely ridiculously over the top. We will deal with this
scenario in another topic. Whether the property is being offered at public
auction, private sale, “sale by set date”, “tender” or any one of a thousand
other euphemisms, a legally binding deal can be reached once the vendors'
statement (Section 32) is available. In any negotiation you are involved in
you must try and exercise some control. This doesn't mean you try to be
difficult for the sake of it, nor does it mean speaking “louder” to get your
point across. I am sure we have all seen the person who thinks that if he
shouts louder, he gets his point across easier.
Some of the ways of wresting some control from the agent are:
a) setting the timing of the meeting to put in an offer
b) setting the timing of when the deposit will be paid
c) talking about a slightly different settlement time than the agent had
first mooted
There are many other ways of doing this and you shouldn't try for every
one of these. Don't make the agent think you are a pain for the sake of it.
Just try and make sure the agent sees you as a negotiator, not a follower.
Do you have a question, comment or 'war story' regarding your experiences
in buying or selling property? If so, we would like to hear about it; email [email protected]. We are always happy
to offer advice; selected stories will be highlighted in future articles.
Ian James
RECIPE
Honey Joys
Here's one for the kids: a foolproof recipe that can be put together in just
minutes from ingredients you probably already have.
My children always enjoy
making these with mum, but they love eating them even more!
Ingredients:
- 1/4 cup honey
- 4 cups cornflakes
- 60 gms butter
- 1 tblsp sugar
- 24 patty cases
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|
Method:
- Place the honey, butter and sugar in a large sauce pan and heat until
they melt together.
- Remove from heat, add cornflakes and mix well.
- Place spoonfuls of the mixture into patty cases.
- Bake in a low oven at 150c for 10 minutes.
- Allow to cool and serve immediately.
A simple and delicious treat that everyone loves!
Craig Hart
STAFF UPDATE
It is with some regret that we announce the departure of Justin Lilburne from
the JPP team. Justin is moving on to other opportunities, and I know he
will be missed by everyone. We thank him for his time
at JPP, and wish him well in his future endeavours.
Kind regards from the team at JPP.
Having trouble viewing this newsletter? The online version with pictures, is available here
Contact Us
JPP Buyer Advocates
368 Hawthorn Road
Caulfield South 3162
P: 03 9523 1054 F: 03 9523 1082
E: [email protected] W: www.jpp.com.au
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