Buying

EXPERT INSIGHT

With the stamp duty waiver for purchases of Victorian residential property set to end on 30 June, the next fortnight may prove fruitful for investors considering their next purchase.

The Australian property market is continuing to grow at an unprecedented rate, with the latest data from CoreLogic showing national home values rising another 2.2% in May.

However, not every suburb in every city across the country will experience growth.

The question then, particularly for those looking to grow their property portfolios, is when do I buy, and where?

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<h2>When do I buy?</h2>

Last November, the State Revenue Office Victoria initiated a land transfer duty waiver for purchases of Victorian residential property with a dutiable value of up to $1 million, and on 30 June, this incentive will end.

The waiver reduces stamp duty by as much as 50% for new residential properties - 25% for existing residential properties and vacant residential land. In other words, property investors stand to save up to $15,000 - and this is after other eligible benefits, such as the principal place of residence, and pensioner concessions, have been applied.

With some easing in the impact of government incentives, and Victoria being the only state with any such concessions available to investors, for Australians looking to diversify their property portfolios at a discount, the time to buy is now.

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<h2>Where do I buy?</h2>

Savvy investors purchase properties in locations where developers are out of sync with market demand.

In the face of significant and unpredictable lockdown measures, common sense might dictate that now is not the time to invest in Melbourne. After all, it fell six places in the 2021 Economist Intelligence Unit&rsquo;s Global Liveability Index, and according to a report by the Centre for Population, published in December, interstate migration out of Victoria is expected to grow as residents seek greater stability.

However, a strong investment is one built on strong data, and this data does not paint a complete picture.

There are select suburbs, even streets, in Melbourne where growth could be substantially greater than others.

Among these regions is Geelong. Unlike most other regional cities, Geelong is relatively close to a major capital city, being only a 90-minute drive to the Melbourne CBD.

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The planned Geelong Fast Rail will not only boost Geelong&rsquo;s transport infrastructure, but shorten the travel time into Melbourne, encouraging even greater numbers of city workers to take up residence in the region.&nbsp;In fact, the City of Greater Geelong is one of the fastest growing regions in Australia, with its population of 250,000 expected to swell to 350,000 by 2041.

Its unemployment rate (4.3%) is well below the national average (6.7%), and in the last five years alone, median house prices have risen over 46%.

Scott Kuru and Lianna Pan are&nbsp;Co-Founders of Freedom Property Investors

With the stamp duty waiver for purchases of Victorian residential property set to end on 30 June, the next fortnight may prove fruitful for investors

Melbourne real estate is ripe for investment: Freedom Property Investors

As national house prices continue to climb, consumers are not convinced that now is a good time to buy property, according to new research by Finder, Australia&rsquo;s most visited comparison site. &nbsp;

Finder&rsquo;s Property Positivity Index shows that the proportion of Australians who think now is a &ldquo;good time to buy&rdquo; is at its lowest ebb since lockdowns started last year.

As of May 2021, the index is sitting at 49% &ndash; only a few points higher than the pessimistic low of 42% in April 2020.&nbsp;

In December 2020, a record-high number of people (67%) said it was a good time to buy, however this figure has since dropped by 18 points.&nbsp;

Graham Cooke, head of consumer research at Finder, said that Australians&rsquo; property optimism has yoyoed throughout the past 12 months.&nbsp;

&ldquo;As lockdowns rolled out across Australia and open house inspections declined, Finder&rsquo;s Property Positivity Index nosedived only to recover again as the housing market sprang back to life.&nbsp;

&ldquo;Both the rock-bottom cash rate and FOMO have turbo-charged prices but fears of a property bubble are making many Aussies pessimistic that now is the time to buy,&rdquo; he said.&nbsp;

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Property positivity toward prices spikes

Despite fewer people thinking now is a good time to buy, approximately 74% feel that property prices in their area will continue to rise over the next 12 months &ndash; up from a low of 24% in April 2020.&nbsp;

When asked about whether prospective first-time buyers with a deposit saved may miss an affordability window if they do not purchase within the next year, Finder&rsquo;s RBA panelists were divided.&nbsp;

In total, 9 experts said they would miss out (64%), while the remaining 7 (36%) said they wouldn&rsquo;t.

Dale Gillham, stock market analyst from Wealth Within said buyers would not be missing a window.

&ldquo;This situation has been talked about since Adam was a boy and it will continue to be into the future. I have never seen a time when we thought property was cheap for anyone let alone first-time buyers,&rdquo; he said.&nbsp;

Rebecca Cassells of Bankwest Curtin Economics Centre said buyers may miss a window if they don&rsquo;t buy.

&ldquo;Increased house prices driven by significant stimulus and low interest rate environment has the potential to lock out future first home buyers by making it even harder to come up with the deposit needed to enter the market.&rdquo;

Cooke said that window of opportunity or not, there&rsquo;s been a significant turnaround in property price expectations over the past year.&nbsp;

&ldquo;The last 6 months resulted in the largest amount borrowed to buy housing in any 6-month period in Australian history. The property market really is surging back into life,&rdquo; Cooke said.&nbsp;

Finder’s Property Positivity Index shows that the proportion of Australians who think now is a “good time to buy” is at its lowest ebb since lockdowns started last year.

jordan_55689

Consumers increasingly unconvinced to buy property: Finder Survey

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Expert Observer

The big dilemma facing many Australians is whether to confront the frenetic markets in many parts of the nation – or wait for things to settle down before seeking to buy.

I can understand people wanting to avoid the circumstances they currently face in so many locations: properties are selling very quickly, sometimes even before being formally marketed, and often for prices well above the asking price or price guide.

If you want to buy safely and sensibly with due diligence, it’s difficult to compete with cash buyers purchasing properties sight-unseen via a phone call. Surely it would be more sensible to wait until the frenzy dies down and conditions become more normal.

Actually, no. I think it’s a mistake to wait.

I don’t think the boom is a short-term fad, as some in media have suggested. This market scenario has been building for the past six months or so, it’s underpinned by multiple strong factors and it will extend throughout 2021 and into next year.

It’s a genuine nationwide real estate boom, the kind that we see only rarely in Australia. The last one was 2001-2002-2003 and before that it was in the late 1980s.

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These events happen for identifiable reasons and this one has many factors. My list of influences, which I published in this space a month ago, has 16 dot points. It’s not about low interest rates and it won’t be stalled by the end of JobKeeper. The Reserve Bank might change its mind and lift the official interest rate, but the boom will roll on.

So if you wait until it dies down before buying, you may be waiting a long time and you’ll be paying a lot more for your next home or investment property. If you delay until saner times, you could conceivably be paying 20% more. That means a property worth $500,000 now will be priced around $600,000. A $1 million property will cost $1.2 million.

We already have many suburbs and towns across Australia where the median house price is now 15% or 20% higher than it was a year ago.

Sunshine Beach on the Sunshine Coast has risen from $1.23 million to over $2 million in the space of 12 months.

A $600,000 purchase a year ago on the Sunshine Coast is now worth between $700,000 and $750,000, based on the growth in median house prices for locations such as Birtinya, Mt Coolum and Coolum Beach.

An investment of $550,000 to $650,000 12 months ago in the Central Coast market north of Sydney would now be worth $90,000 to $100,000 more, based on the growth in median prices in locations such as Long Jetty, Berkeley Vale and Umina Beach.

But many markets are only just getting started. Rapid price escalation is likely to continue well into next year. The most conservative of the forecasters, the bank economists, are predicting big growth this year and next year.

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So if you’re ready to get into the market now, don’t wait. You need to find a way to cut through the current frenzy and get the property you want.

If you’re an investor, there are locations in Australia with the credentials for long-term price growth but not yet “bonkers”.

The best way to proceed is to get your finances sorted, engage a reliable buyers’ agent, give them clear parameters and let them go find you a good investment property in a location with long-term growth drivers.

Terry Ryder is the founder of hotspotting.com.au

ryder@hotspotting.com.au

twitter.com/hotspotting
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I don’t think the boom is a short-term fad, as some in media have suggested

terryryder

Buy in a frenetic market, or wait it out? Hotspotting's Terry Ryder

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Reduced migration will likely make apartments cheaper, according to BIS Oxford Economics chief economist Dr Sarah Hunter.

“In terms of long-term sustainability, there’s still demand shock around [reduced] migration, which will likely make apartments cheaper,” Dr Hunter said.

Overall if local coronavirus cases remained under control and unemployment remained stable, Dr Hunter forecasts regional areas and detached houses in smaller capitals should continue to streak ahead.

She said there was residual demand from buyers capitalising on buyer’s grants and stamp duty concessions.

“Falling interest rates improved affordability which helped demand, but supply hasn’t responded all that much yet as the volume of transactions – although they are turning – have not risen anywhere near as much,” Dr Hunter told The New Daily earlier this month.

In July Hunter anticipated Sydney's property prices would fall for 18 months — and "maybe even beyond that" — because of coronavirus.

While she did not see a sharp drop in prices, she envisaged demand for rental properties dropping due to the lack of international students, tourists and overseas workers living in Sydney. 

Ms Hunter suggested that may result in property owners withdrawing homes from the rental market and selling them instead. 

"We might see some landlords look to sell their properties if they can't see a quick resolution to the situation, which does seem likely in the next 12 months,” she told the ABC.

“It does look very challenging."
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“In terms of long-term sustainability, there’s still demand shock around [reduced] migration, which will likely make apartments cheaper."


jchancellor-FAypfDUnLy

Reduced migration to make apartments cheaper: BIS Oxford Economics

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Around 65% of economists who weighed in on this question (17/26) say now is a good time to buy property, with recent ABS data revealing a surge in owner-occupier purchases worth $1.2 billion between June and July 2020. 
Almost all respondents (86%, 24/28) agree that the housing market is showing more resilience than expected, despite a rising unemployment rate, JobSeeker cuts and the Victorian lockdown.
Rebecca Cassells of Bankwest Curtin Economics Centre said that government stimulus measures during the pandemic have largely propped up the property market.  
“The current resilience of the housing market is related to the stimulus that both federal and state governments are directing to the sector and not necessarily driven by current economic conditions,” Cassells said.
When asked about the areas where house prices are most likely to retain their value, those who weighed in cited the coastal surrounds of Sydney (50%, 9/18), followed by Greater Melbourne (41%, 7/17).
Where do you think house prices are the most likely to retain their value?  <img src="https://mcusercontent.com/cc5e9bce699fa1d71a67cf499/images/2eb82b1e-4ddb-4737-8b9e-18e3176ef79c.png" data-imagetype="External">
When it comes to the rental market, experts predict prices to decrease in both Sydney and Melbourne by 5% and 8% respectively, yet minor price hikes are forecast for Canberra and Darwin (+2%), as well as Hobart (+1%). 
Economic Sentiment Tracker 
Experts are feeling optimistic about Australia's GDP, with two-thirds (66%, 19) expecting GDP growth before the end of 2020.
Yet over three-quarters (77%, 23) believe Australia has not seen the worst of the unemployment rate, and expect it to rise before 2020 ends. Only three respondents (10%) think that it will go down from here.
Finder's Economic Sentiment Tracker gauges experts' confidence in five key indicators: housing affordability, employment, wage growth, cost of living and household debt.
Cooke said that sentiment toward housing affordability is tipping down after a record high last month, signalling that property prices may not be set to plummet as hard as previously predicted.  
<img src="https://lh4.googleusercontent.com/CxZhj5xApfMZsSbfvzkYXwV4Lb27JdCV-fKVtBSCsG7jIanihy613VWXX1jBrZJRzrFwC-acTjOYGysXQavMGkrHvUL_M-sOPFGqg0QGBN0lkG1vbbXyHyGtByZPqHpdatMl2p_K" data-imagetype="External">
“In terms of economic sentiment, there has been a curious rise in positivity around employment this month. 
“With government benefits on the chopping block, it seems economists are increasingly confident that the slowly awakening economy will cushion the blow,” he said.  
<img src="https://lh5.googleusercontent.com/QGDaBqrz1yL1nEtglAeg1jRIBm0J9HppQ87IFQKY2f5HGhaLwit7VkiYFuEW5RbbKUZJFTRcLjJoXp93qbB1f4DwVZfsp4yhACg4mAUO3JX7YYPTierHppY0kCl9vFPPr8wwpy_e" data-imagetype="External">
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j.ballantyne1990-6AQqhLzZaK

Two thirds of economists say buy property: Finder

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When buying a property – be it a detached dwelling or an <a href="https://www.urban.com.au/developments">off-the-plan</a> apartment, it’s essential to make sure you have your legal documents drawn up correctly. Which is why getting legal advice early in the process is so important. 

Here’s what a sound off-the-plan contract should include: 

<h2>A reasonable cooling-off period</h2>

The cooling-off period affords the buyer time to change their mind. Once this period ends, the buyer is legally bound to buy the property. 

In NSW, new legal protections (which came into effect in December 2019) give buyers a 10-business day cooling-off period. This period is longer than the usual five business days for most properties. Buyers who change their mind will forfeit 0.25% of the purchase price. The cooling-off period can be waived or shortened, but only if the buyer’s lawyer or <a href="https://www.urban.com.au/guides/a-new-step-by-step-home-buyer-checklist-for-2020--post-covid-19">conveyancer</a> provides a certificate to prove the buyer understands the consequences of varying the cooling-off period. This helps protect the buyer from exploitation. 

Make sure the cooling-off period in your contract is reasonable and in line with the legislation in your state. If the seller asks to shorten or waive it, give this a serious consideration first and talk to your lawyer or conveyancer about whether this is a good idea. 

<h2>The disclosure of key information by the developer</h2>

Your off-the-plan contract must include <a href="https://www.urban.com.au/news/everything-you-need-to-know-about-australias-25000-homebuilder-grant">key information about the project</a> such as proposed plans and specifications, a floor plan, a detailed list of fixtures and finishes, sunset clause dates, other conditional events, and draft by-laws.

Before signing the contract, ensure you have a thorough understanding of the plans and are satisfied with the level of disclosure. Make sure you have asked questions if you’re confused about anything listed in the plans. 

Remember that developers will almost always have a right to alter their plans, within reason, to complete the project. Make sure your conveyancer reviews the contract to make sure enough information has been disclosed and that only reasonable alterations are permitted. 

<h2>The ability to withdraw or be compensated if significant alterations take place</h2>

While the contract will require the property to be constructed in accordance with what is disclosed in the contract, developers usually have the right to alter things in certain circumstances. Those changes must be delivered at the same quality and must not materially prejudice the buyer. 

To mitigate the risk of the <a href="https://www.urban.com.au/news/why-is-design-important-is-bigger-better-a-developers-perspective">developer making alterations</a> which substantially change the quality of the project and disadvantage the buyer, the contract should be very clear on warranties and inclusions. It should also give the buyer the right to withdraw and have the deposit returned to them or claim compensation. 

In NSW, for contracts entered into from 1 December 2019, vendors must notify purchasers of changes outside of what was disclosed, and which will adversely affect the use or enjoyment of the lot being purchased. Make sure you seek legal advice on the rules in your state. 

<h2>Other things to consider:</h2>

Building/apartment defects 

Other parts of the contract that require <a href="https://www.urban.com.au/guides">close review</a> include how defects are treated. Ideally, it will be up to the developer to remedy defects prior to settlement. Your lawyer and conveyancer should review your contract to make sure you are protected. 

Deposits

You should also have a look at the rules in your state on who holds your <a href="https://www.urban.com.au/news/build-your-deposits-to-grow-a-large-investment-portfolio">deposit</a>. In NSW, for example, deposits are held by the stakeholder (usually the real estate agent) and that money cannot be released to the developer before settlement. That protects the buyer in the event the developer becomes insolvent. 

Sunset clauses 

A <a href="https://www.urban.com.au/guides">sunset clause</a> provides a deadline whereby if the property has not been completed in time then the potential buyer’s deposit is refunded, and the contract is cancelled. The problem is that the clause has been exploited by developers who were delaying completion of projects in order to cancel contracts and re-sell properties at a higher price in a rising market. 

In NSW, new legislation has been introduced which requires that developers seek the buyers’ consent before ending contracts using the sunset clause. Alternatively, the developer will need to apply to the NSW Supreme Court to justify terminating the contracts. Seek advice from your lawyer or conveyancer on the sunset clause in your contract and the rules in your state. 

For both property investors and potential new homeowners, the <a href="https://www.urban.com.au/guides">concept of buying off-the-plan</a> is enticing due to its affordability and flexibility compared to buying an already existing property. However, it is important that you take all these considerations into account and seek legal/conveyancing advice before you sign the contract of your future home or investment property. 

Want to learn more about off-the-plan contracts? Leave a comment below.
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vivian_48447

Sign with confidence: How to ensure you have a sound off-the-plan contract

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GUEST OBSERVER
Over the past five years, the inner south of Melbourne’s property market has consistently performed strong. And with the area’s population forecasted to grow by a steady <a href="https://forecast.id.com.au/stonnington/home" target="_blank">19,000 residents by 2036</a>, we expect it to remain that way for years to come.
Homes are flying out the door in suburbs like Prahran, Windsor and Armadale. Auction clearance rates for houses and apartments are well above the <a href="https://www.homepriceguide.com.au/Research/?LocationType=LGA&amp;State=VIC&amp;LgaId=452" target="_blank">state’s average</a> with Armadale and Prahran the star achievers, clocking 86.5% and 81% respectively. Notably, <a href="https://www.reiv.com.au/Property-Research/Median-Prices/Growth-suburbs" target="_blank">annual growth figures</a> show the value of Prahran properties have increased by an average of 6.4% which, again, is above the state’s average. So, what’s driving the demand in one of Melbourne’s most popular prestige areas?
The amenities of Stonnington are no doubt one of the biggest draw cards. There’s the array of parklands, public transport, cafes and shopping strips – and it’s in close proximity to the CBD. A significant number of area upgrades are underway to ensure the City of Stonnington can support its future growth. For instance, as part of the Chapel Street Master Plan, the iconic street is undergoing a facelift to improve the streetscape, transport infrastructure and enhance village squares. The Stonnington Council is also pursuing a range of important initiatives including underground car parks to create more open space and parkland, promoting and encouraging green spaces in the area. This follows a recent <a href="https://instonnington.realviewdigital.com/?iid=117763#folio=2" target="_blank">City of Stonnington</a> survey which found that 91% of local residents believe it’s important for the Council to create open space for current and future generations to enjoy.
But when it comes down to it, the inner south real estate market has remained strong because it appeals to a range of buyers. For example, we’re currently selling <a href="https://www.hockingstuart.com.au/83_PEEL_STREET_PRAHRAN_VIC_3181" target="_blank">83 Peel Street in Prahran</a>, a red-brick Edwardian which has sparked interest from downsizers who want to live amongst the action whilst not compromising on space. On the flip side, a single-fronted Victorian house at 64 Pridham Street, Prahran that we recently sold attracted the interest of young professional couples. Investors are also flocking to the area opting for apartments which can be rented out easily (Stonnington vacancy rates are currently 2.3% on average). This broad spectrum of buyers means it doesn’t matter where we are in the property cycle, the area will always be in demand.
However, it’s a different story when it comes to first home buyers. As the median house price in Stonnington is more than $1 million and competition is increasing, this demographic is realigning its expectations and considering other options to get a foothold on the inner south market. They are beginning to challenge the ‘Great Australian Dream’ and opt for an apartment, townhouse or unit, which you can still get on a budget – $600,000 is the median price for apartments in <a href="https://mail.privatemedia.com.au/owa/redir.aspx?SURL=BSYlwFdojixDq-4fuWm5JeXV_rnxN-jSJF3p7s4yJO0bNIhr0WrSCGgAdAB0AHAAOgAvAC8AdwB3AHcALgBkAG8AbQBhAGkAbgAuAGMAbwBtAC4AYQB1AC8AYQBwAG0ALwBSAGUAcwBlAGEAcgBjAGgALwA_AEwAbwBjAGEAdABpAG8AbgBUAHkAcABlAD0AUwB1AGIAdQByAGIAJgBTAHQAYQB0AGUAPQBWAEkAQwAmAFMAdQBiAHUAcgBiAEkAZAA9ADMAMwAzADkANwA.&amp;URL=http%3a%2f%2fwww.domain.com.au%2fapm%2fResearch%2f%3fLocationType%3dSuburb%26State%3dVIC%26SuburbId%3d33397">Prahran</a> and <a href="https://mail.privatemedia.com.au/owa/redir.aspx?SURL=dgp7VSX9A457VQfpV6tqbiCOpOq300C8X8xEhIoeHscbNIhr0WrSCGgAdAB0AHAAOgAvAC8AdwB3AHcALgByAGUAYQBsAGUAcwB0AGEAdABlAC4AYwBvAG0ALgBhAHUALwBuAGUAaQBnAGgAYgBvAHUAcgBoAG8AbwBkAHMALwBhAHIAbQBhAGQAYQBsAGUALQAzADEANAAzAC0AdgBpAGMA&amp;URL=http%3a%2f%2fwww.realestate.com.au%2fneighbourhoods%2farmadale-3143-vic">Armadale</a>. Some are also investing in more affordable older style properties which can be renovated over time as their income grows. There are still many streets in South Yarra that have been coined to have renovation potential, according to data.
Looking forward to the next five years, we predict the City of Stonnington will remain just as popular. However, we’re likely to see changes in the demographic of home buyers as demand booms. If younger buyers can no longer break into the area as a result of increased competition, then the age bracket of owner-occupiers will start to increase. As the population in Stonnington rises and people want to live closer to the action, there is no doubt that demand is hardly set to wan in the inner south.
As the council continues to improve the area to support population growth, and savvy young buyers are looking for ways to break into the market, the area will continue on its trajectory to success and will continue to experience strong performance.
Andrew James is Director of hockingstuart Stonnington. He can be contacted <a href="https://www.hockingstuart.com.au/?pagecall=staffMember&amp;staffID=293" target="_blank">here</a>.
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