“Real estate is at the core of almost every business, and it's certainly at the core of most people's wealth. In order to build your wealth and improve your business smarts, you need to know about real estate.”
Donald Trump, Think Like A Billionaire
There has arguably never been a better time to buy in Rainbow Beach. With the (generally speaking) over-inflated market of late 2007/early 2008 long gone, we are now looking at good value across all sectors of the property market from units to established houses. Vacant land appears to have held its value more so than both units and houses with blocks recently selling for prices similar prices to those that were achieved by comparable properties in late 2007/early 2008.
Property prices in coastal and regional areas have tended to bear the brunt of the correction in values, mostly due to the absence of confidence by investors. Many punters close to retirement age felt the pain of the share market losses in 2008 and reeled in their discretionary spending on luxury items, ie. flash car/big boat/holiday house at the beach.
Conservative thinking will always err on the side of caution and when financial experts are warning us about the banks tightening their lending criteria and that property values will fall significantly across the nation – you need to have a bit of self confidence and rational thought to move forward with your plan of buying an investment property outside of a metropolitan area.
Rainbow Beach will benefit from the growth of nearby regional centres such as Gympie – which is expanding at an unprecedented rate and is also encouraging big business into town. Our close proximity to such a centre allows us to benefit from the strong fundamentals of the South East Queensland residential property market overall. Ie. Our current population growth is increasing at the fastest rate of any urban region in Australia, there is a large deficiency of housing stock in relation to demand and State Government infrastructure improvements are underway or planned for the near future. A good example of the last point is the upgrade of the Bruce Highway between Brisbane and Gympie which has cut out at bit of travel time for all those happy holiday makers who come and visit us on weekends.
According to the Department of Infrastructure and Planning Queensland is attracting strong population growth and increased by 92,453 people from December 2011 to December 2012, to reach a population of 4.6 million. This represents an increase of around 1,450 people per week and an annual growth rate of 2 percent. This is a significant change from 10 years ago when the population was growing by 66,000 per annum. Many of the state’s new residents moved to Queensland for the climate and many relocated due to work opportunities. These are the people that will drive the property market onwards and upwards in all areas of the state and particularly in regions which represent value to investors (either through rental returns or future capital gains).
We believe this population growth coupled with an aging population and continued growth in the mining industry position Rainbow Beach for very strong capital growth. Not only will it become more popular as a destination it is sure to benefit financially. In terms of investing in Rainbow Beach for future capital gains you would have to consider it a ‘no brainer’.
The expectations of buyers haven’t changed – they are still looking for a great house at a bargain price whilst sellers “don’t want to give away” their property. The fundamentals of the market don’t change – regardless of the economic climate. The current state of the residential property market in Rainbow Beach still sees an oversupply of stock and relatively low demand however this is beginning to change with more genuine enquiry and commitment over the past couple of months. Since the beginning of 2013, there has been a return to “normal” sales volumes (based on a 20 year average). This is mostly a result of increased confidence from buyers combined with realistic expectations from sellers.
With the local real estate market looking more and more likely to heat up over the next 12 months or so, buyers looking to take advantage of the market may need to consider putting their money where their mouth is sooner rather than later. So if you’re sitting on the sidelines waiting for the perfect opportunity to buy – you’ll probably miss it…..
Thursday, October 3, 2013
Sunday, September 1, 2013
Rainbow Realty Deal September 2013
“Change is the law of life. And those who look only to the past or present are certain to miss the future.”
John F. Kennedy
With only days left before the Federal Election, this month’s article looks at how housing values and sales volumes are affected in the lead-up to an election.
Cameron Kusher from Real Property Data Research has looked at the past five elections and analysed the performance of the housing market over the 12 months prior to the election in terms of capital city home value growth and national house and unit sales.
It is important to remember that the housing market is somewhat seasonal so the time of year the election is held is likely to have an impact; however, the 12 months’ worth of data does show the trend in the lead-up to an election.
The five most recent federal elections have been: 3 October 1998 (Coalition win), 10 November 2001 (Coalition win), 9 October 2004 (Coalition win), 24 November 2007 (Labor win) and 21 August 2010 (hung parliament but Labor took power). Looking specifically at the change in home values over the 12 months leading up to the federal elections, in each instance home values have increased. Over the 12 months to July 2013, capital city home values have risen by 4.9% so it looks almost certain that home values will increase over the year leading up to the September federal election.
The strongest annual increase in home values leading up to a federal election was in 2001, with values rising by 18.8% followed by the 2007 election where values rose by 13.2%. Over both of these periods the housing market was already in an upswing. On the other hand, values rose by 5.7% in the lead-up to the 1998 election, 2.8% in 2004 and 8.8% in 2010.
If you were to look at the change over the year in national home sales, the results are somewhat different building up to election. The most up-to-date sales information indicates that sales to May 2013 were 19.0% higher and with interest rates moving lower more recently; sales appear likely to pick-up further in the lead-up to the September election.
The number of home sales was higher over the year leading up to the 2001 and the 2007 elections. In 2001, sales volumes increased by 44.6% over the year and in 2007 they rose by 33.3%. In 1998, sales volumes fell by -2.6% over the year, in 2004 they fell by -11.0% and in 2010 they fell by -32.4%. (Which was arguably more as a result of the effects of the GFC than the pending election).
So over the past five election campaigns home values have risen while in only two of the past five campaigns have home values and sales volumes increased. Values and volumes rose in 2001 when the Coalition was returned for a second term and they also both rose in 2007 when Labor took office from John Howard.
How much the trends outlined above can be attributed to an election is debateable. Arguably the momentum of the market cycle is influencing the trends just as much as the election. Regardless of the cause, it looks like federal elections do not have a slowdown effect on housing market conditions. (Reference: Cameron Kusher, RP Data, August 2013).
Mr Kusher also believes (and we agree) that the incumbent political party would generally be quite happy to see sales volumes and home values rising in the lead-up to an election. For most people the family home is the single largest investment and rightly or wrongly, Australians tend to feel more confident and happy when home values are rising. From a political stand point, around 70% of households either own their home outright or have a mortgage and rising home values is likely to be a much more palatable message to the electorate than one where the value of their largest asset is falling. It also suggests that housing affordability will remain only a minor election issue given such a large proportion of the population either own or are paying off their own home and many also have investment properties.
On a local note, there has definitely been an increase in sales enquiry and sales transactions over the past 3 – 4 months; with approximately one sale per week for the past 18 weeks, leading us to believe that we have seen the ‘worst of it’ and confidence has returned to the market.
John F. Kennedy
With only days left before the Federal Election, this month’s article looks at how housing values and sales volumes are affected in the lead-up to an election.
Cameron Kusher from Real Property Data Research has looked at the past five elections and analysed the performance of the housing market over the 12 months prior to the election in terms of capital city home value growth and national house and unit sales.
It is important to remember that the housing market is somewhat seasonal so the time of year the election is held is likely to have an impact; however, the 12 months’ worth of data does show the trend in the lead-up to an election.
The five most recent federal elections have been: 3 October 1998 (Coalition win), 10 November 2001 (Coalition win), 9 October 2004 (Coalition win), 24 November 2007 (Labor win) and 21 August 2010 (hung parliament but Labor took power). Looking specifically at the change in home values over the 12 months leading up to the federal elections, in each instance home values have increased. Over the 12 months to July 2013, capital city home values have risen by 4.9% so it looks almost certain that home values will increase over the year leading up to the September federal election.
The strongest annual increase in home values leading up to a federal election was in 2001, with values rising by 18.8% followed by the 2007 election where values rose by 13.2%. Over both of these periods the housing market was already in an upswing. On the other hand, values rose by 5.7% in the lead-up to the 1998 election, 2.8% in 2004 and 8.8% in 2010.
If you were to look at the change over the year in national home sales, the results are somewhat different building up to election. The most up-to-date sales information indicates that sales to May 2013 were 19.0% higher and with interest rates moving lower more recently; sales appear likely to pick-up further in the lead-up to the September election.
The number of home sales was higher over the year leading up to the 2001 and the 2007 elections. In 2001, sales volumes increased by 44.6% over the year and in 2007 they rose by 33.3%. In 1998, sales volumes fell by -2.6% over the year, in 2004 they fell by -11.0% and in 2010 they fell by -32.4%. (Which was arguably more as a result of the effects of the GFC than the pending election).
So over the past five election campaigns home values have risen while in only two of the past five campaigns have home values and sales volumes increased. Values and volumes rose in 2001 when the Coalition was returned for a second term and they also both rose in 2007 when Labor took office from John Howard.
How much the trends outlined above can be attributed to an election is debateable. Arguably the momentum of the market cycle is influencing the trends just as much as the election. Regardless of the cause, it looks like federal elections do not have a slowdown effect on housing market conditions. (Reference: Cameron Kusher, RP Data, August 2013).
Mr Kusher also believes (and we agree) that the incumbent political party would generally be quite happy to see sales volumes and home values rising in the lead-up to an election. For most people the family home is the single largest investment and rightly or wrongly, Australians tend to feel more confident and happy when home values are rising. From a political stand point, around 70% of households either own their home outright or have a mortgage and rising home values is likely to be a much more palatable message to the electorate than one where the value of their largest asset is falling. It also suggests that housing affordability will remain only a minor election issue given such a large proportion of the population either own or are paying off their own home and many also have investment properties.
On a local note, there has definitely been an increase in sales enquiry and sales transactions over the past 3 – 4 months; with approximately one sale per week for the past 18 weeks, leading us to believe that we have seen the ‘worst of it’ and confidence has returned to the market.
Sunday, July 28, 2013
Rainbow Realty Deal August 2013
“Content makes poor men rich; discontent makes rich men poor.”
Benjamin Franklin
Well you could hardly say that the local property market is ‘dead’ at the moment with over 15 sales recorded in Rainbow Beach over the past three months. Yes – we would still describe it as a “buyer’s market” and supply is still above that of demand however; prices do not appear to be getting any lower now so those that have been watching the market for a while are definitely starting to make their move.
By the time this edition of the Community News comes out, the Auction at the Rainbow Beach Hotel will have happened and there may well be a new owner of the Pub. It is such a great building and it would be great to see it stay in local hands. Since the Pub was completed alongside the Plantation Resort apartments in late 2008; there has been a lot of local talk and conjecture about the style, design and layout of the complex. But, at the end of the day – it cannot be disputed that the development is iconic and beautiful. The Hotel itself has been built to the highest standards with no expense spared on features such as marble bars, pressed tin ceilings and double hung windows. We are very lucky to have such a great development in our small town and if it hadn’t of happened when it did; we probably would’ve waited another 20 years for such a thing.
No one could’ve predicted the fallout from the GFC would be so severe and last as long as it has.
However; in spite of the GFC; overall our national economy is actually in pretty good shape – especially when compared to some economies overseas. For example – the US city that was once the symbol of America's industrial boom, Detroit, has filed for bankruptcy with debts worth $15 billion (Yep….. $15 BILLION), after a long, slow decline in population and in the auto manufacturing industry. The decision to file for bankruptcy could result in civil servants being made unemployed, selling off assets, raising fees and scaling back basic council services such as rubbish collection and snow ploughing.
Public services had already been drastically slashed, leaving health and education departments in turmoil and over 70,000 properties have been abandoned as the population decreased. An estimated 40% of street lights do not work and only a third of ambulances in the city are in service, leading to massive delays in answering emergency calls. (Source: news.com.au)
The move had been feared for months, and marks a turning point for city and state leaders, who must now confront the challenge of rebuilding Detroit's broken budget in as little as a year. The decline of the motor manufacturing industry has largely been blamed for the financial problems in Detroit as that is what has sparked what has essentially been a ‘mass exodus’ of citizens and affiliated businesses from the city.
Property prices in Detroit have obviously plummeted and there is not much hope of this changing in the near future.
In contrast, at the end of the last Financial Year, the Australian economy achieved a remarkable milestone - closing off the books on 22 years of consecutive economic growth. That is a remarkable achievement. Despite enormous challenges, the Australian economy has largely ‘weathered the storm’.
It it is important to recognise the period of intense economic change we have all lived through since the GFC hit is 2008. For example, on the eve of the GFC, the Australian economy was growing between 4 – 5% per cent a year. Economic growth today is running at 2.5% - far from recession territory - but below its long term average of about 3.25%. (Source: news.com.au)
The high Aussie dollar over the past 4-5 years has sounded the death knell for many large manufacturers. Ford Australia is closing its doors and Holden is warning of more to come. In addition, the mining boom appears to be winding down. But there are silver linings to a lot of these economic storm clouds. For example, it might be a good thing if China's maturing economic growth could be made more sustainable by authorities there curbing a recent credit boom.
As the rest of the world recovers, other currencies are becoming more attractive to investors, meaning the Australian dollar has gone back down to a more sustainable level of around US92 cents. Again, this is a good thing. The falling Aussie dollar will relieve pressure on our struggling industries such as manufacturing, education services and tourism, all of which are significant employers.
Meanwhile, Australian households are sitting on a war chest of savings, having spent the last five years using lower interest rates to pay off their mortgage faster. All these things are positive and point to an optimistic outlook for Aussies. Despite the doomsayers – the sky didn’t actually fall in because of the GFC and the best thing we can do for our country right now is to inject some consumer confidence and go out and buy stuff. Buy a new car, go on a Aussie holiday or – best idea of all – buy a beach house!
Benjamin Franklin
Well you could hardly say that the local property market is ‘dead’ at the moment with over 15 sales recorded in Rainbow Beach over the past three months. Yes – we would still describe it as a “buyer’s market” and supply is still above that of demand however; prices do not appear to be getting any lower now so those that have been watching the market for a while are definitely starting to make their move.
By the time this edition of the Community News comes out, the Auction at the Rainbow Beach Hotel will have happened and there may well be a new owner of the Pub. It is such a great building and it would be great to see it stay in local hands. Since the Pub was completed alongside the Plantation Resort apartments in late 2008; there has been a lot of local talk and conjecture about the style, design and layout of the complex. But, at the end of the day – it cannot be disputed that the development is iconic and beautiful. The Hotel itself has been built to the highest standards with no expense spared on features such as marble bars, pressed tin ceilings and double hung windows. We are very lucky to have such a great development in our small town and if it hadn’t of happened when it did; we probably would’ve waited another 20 years for such a thing.
No one could’ve predicted the fallout from the GFC would be so severe and last as long as it has.
However; in spite of the GFC; overall our national economy is actually in pretty good shape – especially when compared to some economies overseas. For example – the US city that was once the symbol of America's industrial boom, Detroit, has filed for bankruptcy with debts worth $15 billion (Yep….. $15 BILLION), after a long, slow decline in population and in the auto manufacturing industry. The decision to file for bankruptcy could result in civil servants being made unemployed, selling off assets, raising fees and scaling back basic council services such as rubbish collection and snow ploughing.
Public services had already been drastically slashed, leaving health and education departments in turmoil and over 70,000 properties have been abandoned as the population decreased. An estimated 40% of street lights do not work and only a third of ambulances in the city are in service, leading to massive delays in answering emergency calls. (Source: news.com.au)
The move had been feared for months, and marks a turning point for city and state leaders, who must now confront the challenge of rebuilding Detroit's broken budget in as little as a year. The decline of the motor manufacturing industry has largely been blamed for the financial problems in Detroit as that is what has sparked what has essentially been a ‘mass exodus’ of citizens and affiliated businesses from the city.
Property prices in Detroit have obviously plummeted and there is not much hope of this changing in the near future.
In contrast, at the end of the last Financial Year, the Australian economy achieved a remarkable milestone - closing off the books on 22 years of consecutive economic growth. That is a remarkable achievement. Despite enormous challenges, the Australian economy has largely ‘weathered the storm’.
It it is important to recognise the period of intense economic change we have all lived through since the GFC hit is 2008. For example, on the eve of the GFC, the Australian economy was growing between 4 – 5% per cent a year. Economic growth today is running at 2.5% - far from recession territory - but below its long term average of about 3.25%. (Source: news.com.au)
The high Aussie dollar over the past 4-5 years has sounded the death knell for many large manufacturers. Ford Australia is closing its doors and Holden is warning of more to come. In addition, the mining boom appears to be winding down. But there are silver linings to a lot of these economic storm clouds. For example, it might be a good thing if China's maturing economic growth could be made more sustainable by authorities there curbing a recent credit boom.
As the rest of the world recovers, other currencies are becoming more attractive to investors, meaning the Australian dollar has gone back down to a more sustainable level of around US92 cents. Again, this is a good thing. The falling Aussie dollar will relieve pressure on our struggling industries such as manufacturing, education services and tourism, all of which are significant employers.
Meanwhile, Australian households are sitting on a war chest of savings, having spent the last five years using lower interest rates to pay off their mortgage faster. All these things are positive and point to an optimistic outlook for Aussies. Despite the doomsayers – the sky didn’t actually fall in because of the GFC and the best thing we can do for our country right now is to inject some consumer confidence and go out and buy stuff. Buy a new car, go on a Aussie holiday or – best idea of all – buy a beach house!
Rainbow Realty Deal July 2013
“You are not entitled to your opinion. You are entitled to your informed opinion. No one is entitled to be ignorant.”
Harlan Ellison
Well the big news this month was the decision by Judge Michael Rackeman of the Planning and Environment Court to disallow the appeal for the development of Rainbow Shores Stage 2. (RS2)
Upholding the original Department of Environment and Resource Management (DERM) opposition to RS2, the decision means that the 200 hectare site north of the current Rainbow Shores development which developers, Rainbow Shores Pty Ltd, have held a development lease on since 1984 will now remain "as is". The development would have added a peak resident and tourist population of up to 6550 people to the 4000 peak for the entire district, including Inskip Point. It was to have included units, houses and retail and commercial establishments.
Regardless of your position on the issue, the fact is that this decision will have a huge impact on the future and potential growth of our town. The judgement which was handed down and spelt out in 140 pages essentially rejected the development on environmental grounds which could apply anywhere in our surrounding bush land, effectively preventing any new land releases around the town (including the extension of Cypress Avenue and any additional land release beyond Bombala Crescent).
The development leases were offered by the Bjelke-Petersen government in 1984, in exchange for sandmining leases rendered worthless when the Commonwealth banned the export of sand from Fraser Island.
You could argue that a lack of growth and development is a good thing. Some people believe that if no additional land is released for development, the value of existing real estate will increase because what we have is then considered more unique and certainly more exclusive. Unfortunately, a lack of development can be a double edged sword with many investors and owner occupiers reluctant to buy into an area with limited potential for growth.
Clearly, we are pro sustainable development (you are unlikely to meet a real estate agent who isn't). But, we also recognise that this is a huge, contentious and complex issue with both proponents and opponents with very valid arguments. We have penned a letter to our local member, David Gibson, and given our thoughts on the issue and we encourage anyone who feels strongly (one way or another) to do the same. Our opinion/s might not change anything but we, as a community should have a say in the future of our town.
Here is an extract of our letter to Mr Gibson:
"In light of this recent decision regarding Rainbow Shores Stage 2 we have concerns regarding the future of our town. We are business owners who employ three full time staff, we also own a home in Rainbow Beach and have two children attending the local school. Our concerns are centered around the fact that it appears as if there will be very limited opportunity for growth in our town and therefore our business. Despite there being a willing party, ie. a developer who is committed to investing in infrastructure and community facilities, providing jobs and more opportunities for the local community - there is no way forward without development approval.
As you are aware, Rainbow Beach is dependant upon tourism and many businesses in town rely upon the permanent population to 'survive' throughout the year outside of holidays. Every business in town would benefit from future, sustainable development and if we were to reach and maintain a 'critical mass' of permanent residents, this would provide the impetus for more services and amenities.
In our business, we see firsthand every day the disadvantages of being such a small town. Many young families leave town when their children reach high school and many young people have limited or no opportunities for work in town so they have to move. We have over a dozen properties listed for sale because the owners are no longer able to stay in town due to a lack of medical facilities and support. In addition, there are dozens more properties for sale as investors no longer believe the town has any future growth or potential.
With the recent legal judgement against Rainbow Shores Stage 2 we would like to see the current, 'pro-economic development and tourism', government revisit the master plan in order to see a way forward in respect to growth and development for Rainbow Beach. The alternative is that we see very limited growth opportunities and this is likely to result in a loss of confidence and hope within the local business community."
Harlan Ellison
Well the big news this month was the decision by Judge Michael Rackeman of the Planning and Environment Court to disallow the appeal for the development of Rainbow Shores Stage 2. (RS2)
Upholding the original Department of Environment and Resource Management (DERM) opposition to RS2, the decision means that the 200 hectare site north of the current Rainbow Shores development which developers, Rainbow Shores Pty Ltd, have held a development lease on since 1984 will now remain "as is". The development would have added a peak resident and tourist population of up to 6550 people to the 4000 peak for the entire district, including Inskip Point. It was to have included units, houses and retail and commercial establishments.
Regardless of your position on the issue, the fact is that this decision will have a huge impact on the future and potential growth of our town. The judgement which was handed down and spelt out in 140 pages essentially rejected the development on environmental grounds which could apply anywhere in our surrounding bush land, effectively preventing any new land releases around the town (including the extension of Cypress Avenue and any additional land release beyond Bombala Crescent).
The development leases were offered by the Bjelke-Petersen government in 1984, in exchange for sandmining leases rendered worthless when the Commonwealth banned the export of sand from Fraser Island.
You could argue that a lack of growth and development is a good thing. Some people believe that if no additional land is released for development, the value of existing real estate will increase because what we have is then considered more unique and certainly more exclusive. Unfortunately, a lack of development can be a double edged sword with many investors and owner occupiers reluctant to buy into an area with limited potential for growth.
Clearly, we are pro sustainable development (you are unlikely to meet a real estate agent who isn't). But, we also recognise that this is a huge, contentious and complex issue with both proponents and opponents with very valid arguments. We have penned a letter to our local member, David Gibson, and given our thoughts on the issue and we encourage anyone who feels strongly (one way or another) to do the same. Our opinion/s might not change anything but we, as a community should have a say in the future of our town.
Here is an extract of our letter to Mr Gibson:
"In light of this recent decision regarding Rainbow Shores Stage 2 we have concerns regarding the future of our town. We are business owners who employ three full time staff, we also own a home in Rainbow Beach and have two children attending the local school. Our concerns are centered around the fact that it appears as if there will be very limited opportunity for growth in our town and therefore our business. Despite there being a willing party, ie. a developer who is committed to investing in infrastructure and community facilities, providing jobs and more opportunities for the local community - there is no way forward without development approval.
As you are aware, Rainbow Beach is dependant upon tourism and many businesses in town rely upon the permanent population to 'survive' throughout the year outside of holidays. Every business in town would benefit from future, sustainable development and if we were to reach and maintain a 'critical mass' of permanent residents, this would provide the impetus for more services and amenities.
In our business, we see firsthand every day the disadvantages of being such a small town. Many young families leave town when their children reach high school and many young people have limited or no opportunities for work in town so they have to move. We have over a dozen properties listed for sale because the owners are no longer able to stay in town due to a lack of medical facilities and support. In addition, there are dozens more properties for sale as investors no longer believe the town has any future growth or potential.
With the recent legal judgement against Rainbow Shores Stage 2 we would like to see the current, 'pro-economic development and tourism', government revisit the master plan in order to see a way forward in respect to growth and development for Rainbow Beach. The alternative is that we see very limited growth opportunities and this is likely to result in a loss of confidence and hope within the local business community."
Rainbow Realty Deal June 2013
“Travel, in the younger sort, is a part of education; in the elder, a part of experience.”
Francis Bacon
The stunning coastline that we live beside is very popular with people of all ages and many people want to own a piece of it by purchasing their own holiday home or beach side residence. There are plenty of cashed up bargain hunters around at the moment and although we are competing with the likes of Noosa, Peregian Beach, Coolum, Bargara Airlie Beach, etc – many buyers are seeking out the beauty and unique location of Rainbow Beach as their preferred holiday or retirement location. The fact that we are on the doorstep of Fraser Island is a great advantage as well.
Prices up and down Australia’s eastern seaboard have declined over the past 4-5 years and many buyers are taking advantage of this price correction and getting in now before the property market inevitably rises again. Real Estate Agents up and down the coast are reporting more sales to holiday home buyers, as many take note of the price drops by vendors.
The Fairfax-owned Australian Property Monitors has released a list of coastal hot spots that are now more affordable than a decade ago. In many, prices have continued to fall since the global financial crisis. And lower prices mean higher rental yields, especially over peak periods such as Christmas and Easter. We have a number of holiday homes that gross in excess of $40,000 per annum; some of which can be purchased for between $400,000 - $700,000. Gross rental yields of 6-7% are not uncommon; making the return on investment for buyers pretty attractive. One of the most popular holiday homes we manage rents out for just under $5,000 per week over the peak period; providing the owners with an impressive passive income on their investment.
Holiday home buyers who have held off buying in recent years are now reaping the rewards. Self-funded retirees who have been watching the market from the sidelines since around 2007 are now recognising value for money and pouncing on opportunities including the occasional ‘mortgagee in possession’ property listed for sale. Another trend we have seen growing in popularity is people investing in property through a Self Managed Superannuation Fund (SMSF). This allows people the flexibility to utilise their superannuation savings (and in some cases, borrow through their Super as well) and buy property in a location of their choosing – an option which may not be available to them outside of their superannuation.
Lower interest rates have renewed investor confidence and with the likelihood of a change of government in September, many commentators are predicting renewed consumer confidence and a strong return to the property market under a new government. Generally speaking, people buy a holiday home when they are feeling good about their financial situation as well as the broader economy.
We are all looking forward to the winter months and the clear, sunny days and calm ocean conditions that we are typically treated too between now and August. A big event in town during the winter is the Rainbow Beach Family Fishing Classic. This year, the competition will run from the 28th June through until the 6th July, 2013; coinciding with the School holidays for the first time in its long history. There have been some bold predictions that the fishing will be excellent this year, with plenty of great catches already since the beginning of May. Check out these great photos of Dee’s Mum and Dad out on the Keely Rose over the Gympie Show Holiday weekend! Amazing Coral Trout catches…we are just waiting for our invite to dinner!
Francis Bacon
The stunning coastline that we live beside is very popular with people of all ages and many people want to own a piece of it by purchasing their own holiday home or beach side residence. There are plenty of cashed up bargain hunters around at the moment and although we are competing with the likes of Noosa, Peregian Beach, Coolum, Bargara Airlie Beach, etc – many buyers are seeking out the beauty and unique location of Rainbow Beach as their preferred holiday or retirement location. The fact that we are on the doorstep of Fraser Island is a great advantage as well.
Prices up and down Australia’s eastern seaboard have declined over the past 4-5 years and many buyers are taking advantage of this price correction and getting in now before the property market inevitably rises again. Real Estate Agents up and down the coast are reporting more sales to holiday home buyers, as many take note of the price drops by vendors.
The Fairfax-owned Australian Property Monitors has released a list of coastal hot spots that are now more affordable than a decade ago. In many, prices have continued to fall since the global financial crisis. And lower prices mean higher rental yields, especially over peak periods such as Christmas and Easter. We have a number of holiday homes that gross in excess of $40,000 per annum; some of which can be purchased for between $400,000 - $700,000. Gross rental yields of 6-7% are not uncommon; making the return on investment for buyers pretty attractive. One of the most popular holiday homes we manage rents out for just under $5,000 per week over the peak period; providing the owners with an impressive passive income on their investment.
Holiday home buyers who have held off buying in recent years are now reaping the rewards. Self-funded retirees who have been watching the market from the sidelines since around 2007 are now recognising value for money and pouncing on opportunities including the occasional ‘mortgagee in possession’ property listed for sale. Another trend we have seen growing in popularity is people investing in property through a Self Managed Superannuation Fund (SMSF). This allows people the flexibility to utilise their superannuation savings (and in some cases, borrow through their Super as well) and buy property in a location of their choosing – an option which may not be available to them outside of their superannuation.
Lower interest rates have renewed investor confidence and with the likelihood of a change of government in September, many commentators are predicting renewed consumer confidence and a strong return to the property market under a new government. Generally speaking, people buy a holiday home when they are feeling good about their financial situation as well as the broader economy.
We are all looking forward to the winter months and the clear, sunny days and calm ocean conditions that we are typically treated too between now and August. A big event in town during the winter is the Rainbow Beach Family Fishing Classic. This year, the competition will run from the 28th June through until the 6th July, 2013; coinciding with the School holidays for the first time in its long history. There have been some bold predictions that the fishing will be excellent this year, with plenty of great catches already since the beginning of May. Check out these great photos of Dee’s Mum and Dad out on the Keely Rose over the Gympie Show Holiday weekend! Amazing Coral Trout catches…we are just waiting for our invite to dinner!
Rainbow Realty Deal - May 2013
“It had long since come to my attention that people of accomplishment rarely sat back and let things happen to them. They went out and happened to things.” Leonardo da Vinci
If there was ever a time to buy in Rainbow Beach – you would have to say it is now. Less than three years ago, anything within 500 metres of the beach would’ve cost you in excess of $500,000 – but in today’s market you can pick up a three bedroom house within 400 metres of the beach for $300,000. Even closer to the beach (within 200 metres); there has been recent sales activity around the mid $400,000’s for a three bedroom home.
Median house prices have decreased significantly since the market peak in late 2007/early 2008 and with the number of distressed sellers/mortgagee in possession sales increasing; there is a great opportunity to buy a beachside property for less than what you would’ve previously.
Up and down the eastern coastline of Australia – there are above average amounts of stock on the market. ‘Lifestyle’, coastal and small rural properties (or ‘hobby farms’) have been most affected by the economic downturn whilst regions within close proximity to mining towns have continued to see gains in property values over the past four – five years.
Reports from our southern Queensland based real estate agent counterparts on the Sunshine and Gold Coasts herald a mini revival in sales figures with the Gold Coast residential market clawing back some semblance of ‘normal’ after five years of turmoil. Property values on the Gold Coast have dropped by as much as half in the period 2007-2013, leaving receiverships, bankruptcies and jilted property investors in its wake. “Apart from Cairns, no market was affected more than here,” Ray White Surfers Paradise principal Andrew Bell says. (Source: Australian Financial Review February 2013)
Many property prices saw over-inflated rises over the periods 2002-2003 and again in 2006-2007. Some properties doubled in value during that time however; much of this was off the back of debt, borrowings and in some cases – heavily geared borrowing. The property market was on an unsustainable rise during that period and much of the recent price corrections have really been a case of the market adjusting back to sensible and sustainable values.
Luxury apartments on the Sunshine and Gold Coasts were once considered a must-have in millionaire property portfolios. But the asset class lost its sheen during the economic slump as investors who had locked themselves into off-the-plan contracts at 2007 prices watched the value of their asset dwindle. (Source: Australian Financial Review February 2013)
Many property experts view 2013 as a year of stabilisation - when sellers start accepting value levels and buyers less likely to make low offers but are open to negotiation. We should start to see more transactions and before long, there will be resurgence in values.
Generally speaking, coastal and rural property values tend to see a more volatile rise and fall in values over time when compared to metropolitan residential property values. There seems to be more of a ‘boom or bust’ pattern versus a steady growth/minor decline which you tend to see in the cities and larger towns. This is partly due to the sheer number of properties in a given area (which effects the percentage or volume of sales transactions) but is also due to the vagaries of coastal/rural property’s appeal. Ie. When the Baby Boomer generation began the mass “sea change” – coastal properties saw a huge increase in values because demand outstripped supply in many cases.
Fingers crossed we get back to a “normal” market before long and vendors who are keen to sell can find a buyer and the two remaining real estate agencies in Rainbow Beach can survive (it was only five years ago that there were four agencies ).
If there was ever a time to buy in Rainbow Beach – you would have to say it is now. Less than three years ago, anything within 500 metres of the beach would’ve cost you in excess of $500,000 – but in today’s market you can pick up a three bedroom house within 400 metres of the beach for $300,000. Even closer to the beach (within 200 metres); there has been recent sales activity around the mid $400,000’s for a three bedroom home.
Median house prices have decreased significantly since the market peak in late 2007/early 2008 and with the number of distressed sellers/mortgagee in possession sales increasing; there is a great opportunity to buy a beachside property for less than what you would’ve previously.
Up and down the eastern coastline of Australia – there are above average amounts of stock on the market. ‘Lifestyle’, coastal and small rural properties (or ‘hobby farms’) have been most affected by the economic downturn whilst regions within close proximity to mining towns have continued to see gains in property values over the past four – five years.
Reports from our southern Queensland based real estate agent counterparts on the Sunshine and Gold Coasts herald a mini revival in sales figures with the Gold Coast residential market clawing back some semblance of ‘normal’ after five years of turmoil. Property values on the Gold Coast have dropped by as much as half in the period 2007-2013, leaving receiverships, bankruptcies and jilted property investors in its wake. “Apart from Cairns, no market was affected more than here,” Ray White Surfers Paradise principal Andrew Bell says. (Source: Australian Financial Review February 2013)
Many property prices saw over-inflated rises over the periods 2002-2003 and again in 2006-2007. Some properties doubled in value during that time however; much of this was off the back of debt, borrowings and in some cases – heavily geared borrowing. The property market was on an unsustainable rise during that period and much of the recent price corrections have really been a case of the market adjusting back to sensible and sustainable values.
Luxury apartments on the Sunshine and Gold Coasts were once considered a must-have in millionaire property portfolios. But the asset class lost its sheen during the economic slump as investors who had locked themselves into off-the-plan contracts at 2007 prices watched the value of their asset dwindle. (Source: Australian Financial Review February 2013)
Many property experts view 2013 as a year of stabilisation - when sellers start accepting value levels and buyers less likely to make low offers but are open to negotiation. We should start to see more transactions and before long, there will be resurgence in values.
Generally speaking, coastal and rural property values tend to see a more volatile rise and fall in values over time when compared to metropolitan residential property values. There seems to be more of a ‘boom or bust’ pattern versus a steady growth/minor decline which you tend to see in the cities and larger towns. This is partly due to the sheer number of properties in a given area (which effects the percentage or volume of sales transactions) but is also due to the vagaries of coastal/rural property’s appeal. Ie. When the Baby Boomer generation began the mass “sea change” – coastal properties saw a huge increase in values because demand outstripped supply in many cases.
Fingers crossed we get back to a “normal” market before long and vendors who are keen to sell can find a buyer and the two remaining real estate agencies in Rainbow Beach can survive (it was only five years ago that there were four agencies ).
Monday, April 1, 2013
Realty Deal April 2013
“The United States have developed a new weapon that destroys people but it leaves buildings standing. It's called the stock market.” Jay Leno
Well, the Australian stock market has actually proven to be a bit of a winner of late with most stocks improving including the banks, resource and health related stocks posting positive gains. This is good news for all Australians, even those who don’t necessarily ‘buy and sell’ stocks themselves because most of us have money tied up in shares through our Superannuation.
Most Superannuation funds have at least some of their funds under management invested in Australian shares; particularly ‘blue chip’ shares such as the major banks etc. Some Super funds also invest in property trusts in order to gain the advantages of both capital growth and returns through rent etc, without having to necessarily own individual properties (which may not provide the fund manager with liquidity in the event that cash needs to be freed up for any reason).
Australians are moving more than $14 billion a year from their industry or employer superannuation funds into self-managed funds. It is a big trend, which shows that people like the control that operating their own super fund gives them. However, it is important to recognise that the control a self-managed fund offers comes at the cost of much greater responsibility. What makes a self-managed fund different from other kinds of super is that the members must also act as trustees; therefore, they have to take on the administration of the fund.
Almost a million people bear that responsibility, so it can't be too bad. But it is worth keeping in mind that the Australian Taxation Office (which is responsible for the regulation of self-managed funds) declares a couple of hundred funds non-complying each year because the trustees have done a bad job. Once a fund is made non-complying it loses all the generous tax concessions that the superannuation system allows.
And the government is increasing the burden of responsibility on trustees. Part of its Stronger Super reform package includes requirements for more rigorous fund auditing and accounting and more regular fund reviews.
One of the big new trends is the increasing number of investors buying property with their self-managed super funds (SMSFs). Back in 2007, the super rules changed to allow people to borrow through their super funds for investment. It’s taken a while for people to get used to the idea of running their own super fund, let alone borrowing through it to buy a property. However, with more and more people setting up their own super funds today, there has been a significant flow-on effect in the property market.
Figures from the Australian Tax office show a 50 per cent increase in property investment via SMSFs over the past six years. Just like the First Home Owners’ Grant prompted more first homebuyers to get into the property market, more people are taking advantage of the opportunity to borrow up to 70 per cent of a property’s value through their SMSF to buy an investment. Obviously, individual Super funds have to have sufficient funds in order to purchase/borrow to buy an investment property and this therefore normally precludes people in their 20’s and sometimes 30’s (depending on their salary and super accumulated over their working life).
Investing in property through your SMSF is becoming more popular because there are very strong rental returns available, the costs have dropped and more people are realising the benefits. It could also be that a lot of people ignored the opportunity before because running your own super fund sounds pretty daunting and the structures used to buy property through your super are pretty complicated.
On paper, buying property with your super sounds like a great idea and there are definitely many benefits. However, there are also many rules and regulations so we wouldn’t recommend using this strategy without getting some independent advice first. Here are the main advantages and disadvantages.
Advantages
• If you buy a property with your super fund and hold the property until after you retire and your super goes into the pension phase, you pay no tax on either the capital gains if you sell or the rent if you continue to hold your investment.
• Before retirement, capital gains and rent earned by your SMSF are taxed at only 15 per cent (if you hold the property for more than a year, this reduces to 10 per cent on capital gains).
• Direct control of your super investments and a real understanding of where your money is invested.
• Diversification in your portfolio (ie. if you also hold shares in your Super).
Disadvantages
• If you borrow to buy property through your super and you’re negatively geared, the tax offset only applies to other income earned within the fund – not your regular income.
• You can't live in the property and neither can any friends or family members.
• You can’t renovate a property purchased through a SMSF while it is still under a loan.
• There are thousands of dollars in set-up costs and there are sometimes higher fees involved in getting a loan through your SMSF.
• Running a SMSF is complicated and penalties for getting things wrong are high. (However, you can pay a professional to run it for you).
• Buying property through a SMSF is generally only suitable for funds with $200,000 in combined funds.
Buying property through super is a great way to invest for retirement but it’s probably more relevant for people who are only 20 to 25 years away from it. Not only do they have more super money at their disposal, they are also more likely to be able to hold the property until after retirement to realise those big tax savings. (Source: John McGrath, Property Expert)
Well, the Australian stock market has actually proven to be a bit of a winner of late with most stocks improving including the banks, resource and health related stocks posting positive gains. This is good news for all Australians, even those who don’t necessarily ‘buy and sell’ stocks themselves because most of us have money tied up in shares through our Superannuation.
Most Superannuation funds have at least some of their funds under management invested in Australian shares; particularly ‘blue chip’ shares such as the major banks etc. Some Super funds also invest in property trusts in order to gain the advantages of both capital growth and returns through rent etc, without having to necessarily own individual properties (which may not provide the fund manager with liquidity in the event that cash needs to be freed up for any reason).
Australians are moving more than $14 billion a year from their industry or employer superannuation funds into self-managed funds. It is a big trend, which shows that people like the control that operating their own super fund gives them. However, it is important to recognise that the control a self-managed fund offers comes at the cost of much greater responsibility. What makes a self-managed fund different from other kinds of super is that the members must also act as trustees; therefore, they have to take on the administration of the fund.
Almost a million people bear that responsibility, so it can't be too bad. But it is worth keeping in mind that the Australian Taxation Office (which is responsible for the regulation of self-managed funds) declares a couple of hundred funds non-complying each year because the trustees have done a bad job. Once a fund is made non-complying it loses all the generous tax concessions that the superannuation system allows.
And the government is increasing the burden of responsibility on trustees. Part of its Stronger Super reform package includes requirements for more rigorous fund auditing and accounting and more regular fund reviews.
One of the big new trends is the increasing number of investors buying property with their self-managed super funds (SMSFs). Back in 2007, the super rules changed to allow people to borrow through their super funds for investment. It’s taken a while for people to get used to the idea of running their own super fund, let alone borrowing through it to buy a property. However, with more and more people setting up their own super funds today, there has been a significant flow-on effect in the property market.
Figures from the Australian Tax office show a 50 per cent increase in property investment via SMSFs over the past six years. Just like the First Home Owners’ Grant prompted more first homebuyers to get into the property market, more people are taking advantage of the opportunity to borrow up to 70 per cent of a property’s value through their SMSF to buy an investment. Obviously, individual Super funds have to have sufficient funds in order to purchase/borrow to buy an investment property and this therefore normally precludes people in their 20’s and sometimes 30’s (depending on their salary and super accumulated over their working life).
Investing in property through your SMSF is becoming more popular because there are very strong rental returns available, the costs have dropped and more people are realising the benefits. It could also be that a lot of people ignored the opportunity before because running your own super fund sounds pretty daunting and the structures used to buy property through your super are pretty complicated.
On paper, buying property with your super sounds like a great idea and there are definitely many benefits. However, there are also many rules and regulations so we wouldn’t recommend using this strategy without getting some independent advice first. Here are the main advantages and disadvantages.
Advantages
• If you buy a property with your super fund and hold the property until after you retire and your super goes into the pension phase, you pay no tax on either the capital gains if you sell or the rent if you continue to hold your investment.
• Before retirement, capital gains and rent earned by your SMSF are taxed at only 15 per cent (if you hold the property for more than a year, this reduces to 10 per cent on capital gains).
• Direct control of your super investments and a real understanding of where your money is invested.
• Diversification in your portfolio (ie. if you also hold shares in your Super).
Disadvantages
• If you borrow to buy property through your super and you’re negatively geared, the tax offset only applies to other income earned within the fund – not your regular income.
• You can't live in the property and neither can any friends or family members.
• You can’t renovate a property purchased through a SMSF while it is still under a loan.
• There are thousands of dollars in set-up costs and there are sometimes higher fees involved in getting a loan through your SMSF.
• Running a SMSF is complicated and penalties for getting things wrong are high. (However, you can pay a professional to run it for you).
• Buying property through a SMSF is generally only suitable for funds with $200,000 in combined funds.
Buying property through super is a great way to invest for retirement but it’s probably more relevant for people who are only 20 to 25 years away from it. Not only do they have more super money at their disposal, they are also more likely to be able to hold the property until after retirement to realise those big tax savings. (Source: John McGrath, Property Expert)
Sunday, March 3, 2013
The Realty Deal - March 2013
“Prejudice is a great time saver. You can form opinions without having to get the facts.” E. B. White
Unless you have a reliable crystal ball, predicting how the property market will shape up in 2013 is a tough call to make. Uncertainties include how the global economy will play out and impact on Australia, the extent of the slowdown in the mining investment boom and how quickly non-mining sectors like retailing, housing, manufacturing and tourism can pick-up the slack.
Economists are tipping interest rates to fall further in 2013 and reach record lows, which will be good news for mortgage holders, but astute buyers and investors will recognise the economic warning signs. Lower interest rates appear to be having less of an impact on buying intentions, with confidence seeming to be the major stumbling block.
We have spoken to many prospective buyers over the past few months and the vast majority of them are still not convinced that we have seen ‘the bottom of the market’. Many are keen to buy something but want to be absolutely certain that they are getting the best value for money and the best return on investment.
Some property analysts are tipping that in 2013 we should see a recovery in the housing market and some are even saying that it is “inevitable”. Many experts expect that the luxury high-end market will be the first to enjoy price recovery having been hit the hardest by the downturn. The best advice for property investors is to look for places that went down the most and also watch the big cities – when they move it generally fans out to the regions (usually within six to 12 months).
The Queensland property market has shown some early signs of improvement with economic conditions remaining subdued but stabilised. The Bank of Queensland (BOQ) chairman, Neil Summerson, said late last year: “The bank is seeing some early indication that the downward movement in property values has started to reverse.” But he added that over the last month there had been commentary from various market participants and commentators including Stockland, Mirvac and the Insolvency and Trustee Service Australia, which reiterated the difficulties of 2012 for the State of Queensland.
The Chairman of BOQ was also quoted as saying "the Queensland State Government is predicting 4% growth over the next year …. and in addition, tourism numbers on the Gold Coast and the Sunshine Coast in the period from September to November were up substantially on the previous year and the current State Government has initiated various programs (the boost in first home owners grant for new homes, as an example) to stimulate the economy. Indeed, the Premier stated only last Friday that he thought that Queensland should see some positive economic signs within 12 months.”
We are confident that there will be an increase in buyer confidence over the coming 12 months and the result of the next Federal election should provide some certainty; particularly from a business/economy perspective. In the meantime, if you do discover one of those ever elusive ‘crystal balls’ we would love to have a sneaky look ourselves J.
Finally, this month we are pleased to introduce a new sales agent operating under our banner – specialising in Cooloola Cove and Tin Can Bay property sales. We welcome Valerie Todd to our team and we are confident that she will do great things. Having lived in Tin Can Bay for over 21 years, Valerie has seen many changes from her years’ operating the Tin Can Bay Service Station (when you knew everybody’s name) compared to now: with large supermarkets, bigger schools, more shops and a lot more people - both visitors and residents.
Understanding the importance of marketing in the Cooloola area for their business, Valerie and her husband Peter have been involved in every possible opportunity to promote our beautiful area as a holiday destination or as an ideal place to relocate. The flow on effects of these efforts has been a benefit to everyone.
Most agents can talk the talk - but can they walk the walk? Well Valerie has already proven her ability by being involved with the building and operating of holiday units and buying the old Tin Can Bay School site and designing, building and selling homes in that estate. Other successes include organising the popular Tin Can Bay Seafood Festival with over 12 years of involvement in this event which now attracts over 12,000 visitors to the Cooloola Coast every year.
With 21 years of local knowledge and a wealth of experience in business, Valerie is looking forward to a new challenge by joining us to market and sell properties in Cooloola Cove and Tin Can Bay. Welcome to the team Valerie – we wish you every success. If you are buying or selling in the area and want honest and professional advice then contact Valerie on 0419 202 867 or via e-mail at: valerie@ccrealty.tv.
Wednesday, February 6, 2013
Rainbow Realty Deal February 2013
“Travel makes a wise man better but a fool worse.” Benjamin Franklin
Much of the commentary and predictions on the Australian residential property market is recycled snippets from various ‘experts’ on historical daily, weekly or monthly house prices at a capital city level. Such general price movements, which are so short-term in nature are best described as ‘noise’ and in reality, have no bearing or consequence on small regional and coastal property markets such as Rainbow Beach. Whilst it is interesting to observe the property value trends of the metropolitan areas, we would prefer to focus on the trends occurring in more comparable markets and glean what insights we can from the various leading indicators, published by reputable institutions such as the Reserve Bank of Australia (RBA), Australian Bureau of Statistics (ABS) and the consumer sentiment survey from Westpac.
A key leading indicator for future demand for residential property is the growth in housing credit. According to the RBA, housing credit grew by 5.1% over the 12 months to June 2012, which is the lowest level of growth for over 30 years. This is reflected in both the owner occupier and investor segments, with both at or near 20 year lows. Australians are heavily in debt, pessimistic on the economic outlook and would prefer to keep their money in a bank account and pay down debt than invest in property.
According to the latest data available from the RBA, Australian’s level of housing debt to housing assets is the highest since data collection began in March 1977, sitting at a high of 30.9%. There have been demographic shifts that have enabled Australian’s to support an increased level of debt, such as two income households and recent periods of low inflation and interest rates, however the current level is still extremely high. As a comparable indicator, in March 2000 it was at 20.7% and in March 1990 it was only 11%.
Thankfully, interest rates are relatively low (in historical terms) and are forecast to come down further, so servicing this debt should be manageable by most, as long as employment remains strong. In addition, economic forecasters are predicting an almost 1% fall in the cash rate by this time next year. (Fingers crossed )
The surplus of properties on the market, combined with ever reducing number of sales actually occurring does not bode well for property owners seeking to sell. The silver lining for those wishing to upgrade is whilst you may not secure as much for your existing dwelling, at least the property you upgrade to should be cheaper. Unfortunately for those people with investment properties that are seeking to downsize or simply reduce debt; they face a hard choice, either exit at current prices, or face what appears to be a period of what we estimate to be limited capital growth and generally low yields through rental returns.
We foresee a property market recovery to eventually gain traction through the latter part of 2013 as continued growth in resource investment spending eventually flows through to other sectors of the economy. The local economic and employment outlook is looking positive and we are also seeing some minor positive effects from income generated through south-east Queensland mining. Combined with some stabilisation and improvement overseas, purchasers are forecast to enter back into the market in greater numbers, translating to greater sales volumes and a pick-up in price growth over 2013/14 and into 2014/15.
Over the past 12 months in Rainbow Beach (1 January 2012 – 1 January 2013) there have been 26 residential sales recorded (incidentally, the 10 year average is 77 per annum) and since the calendar year 2009 there have been less than 50 sales per annum. The pie chart below indicates the breakdown of residential sales achieved by local and out of area agencies and also includes private/related party sales which occurred during the calendar year 2012.
There are currently 179 individual properties listed for sale in Rainbow Beach with the average time on the market for those properties sitting at 264 days.
There are approximately 1,300 residential properties in Rainbow Beach in total – therefore, the number of properties currently listed for sale represents approximately 14% of the total. Typically, the number of properties on the market sits somewhere between 5 – 10%, so we are outside of this ‘normal’ range due to the lack of demand at present. However, with the increased number of sales enquiries and many vendors opting to ‘meet the market’ rather than hold out for an unrealistic price, the balance between supply and demand will not take long to re-establish.
Much of the commentary and predictions on the Australian residential property market is recycled snippets from various ‘experts’ on historical daily, weekly or monthly house prices at a capital city level. Such general price movements, which are so short-term in nature are best described as ‘noise’ and in reality, have no bearing or consequence on small regional and coastal property markets such as Rainbow Beach. Whilst it is interesting to observe the property value trends of the metropolitan areas, we would prefer to focus on the trends occurring in more comparable markets and glean what insights we can from the various leading indicators, published by reputable institutions such as the Reserve Bank of Australia (RBA), Australian Bureau of Statistics (ABS) and the consumer sentiment survey from Westpac.
A key leading indicator for future demand for residential property is the growth in housing credit. According to the RBA, housing credit grew by 5.1% over the 12 months to June 2012, which is the lowest level of growth for over 30 years. This is reflected in both the owner occupier and investor segments, with both at or near 20 year lows. Australians are heavily in debt, pessimistic on the economic outlook and would prefer to keep their money in a bank account and pay down debt than invest in property.
According to the latest data available from the RBA, Australian’s level of housing debt to housing assets is the highest since data collection began in March 1977, sitting at a high of 30.9%. There have been demographic shifts that have enabled Australian’s to support an increased level of debt, such as two income households and recent periods of low inflation and interest rates, however the current level is still extremely high. As a comparable indicator, in March 2000 it was at 20.7% and in March 1990 it was only 11%.
Thankfully, interest rates are relatively low (in historical terms) and are forecast to come down further, so servicing this debt should be manageable by most, as long as employment remains strong. In addition, economic forecasters are predicting an almost 1% fall in the cash rate by this time next year. (Fingers crossed )
The surplus of properties on the market, combined with ever reducing number of sales actually occurring does not bode well for property owners seeking to sell. The silver lining for those wishing to upgrade is whilst you may not secure as much for your existing dwelling, at least the property you upgrade to should be cheaper. Unfortunately for those people with investment properties that are seeking to downsize or simply reduce debt; they face a hard choice, either exit at current prices, or face what appears to be a period of what we estimate to be limited capital growth and generally low yields through rental returns.
We foresee a property market recovery to eventually gain traction through the latter part of 2013 as continued growth in resource investment spending eventually flows through to other sectors of the economy. The local economic and employment outlook is looking positive and we are also seeing some minor positive effects from income generated through south-east Queensland mining. Combined with some stabilisation and improvement overseas, purchasers are forecast to enter back into the market in greater numbers, translating to greater sales volumes and a pick-up in price growth over 2013/14 and into 2014/15.
Over the past 12 months in Rainbow Beach (1 January 2012 – 1 January 2013) there have been 26 residential sales recorded (incidentally, the 10 year average is 77 per annum) and since the calendar year 2009 there have been less than 50 sales per annum. The pie chart below indicates the breakdown of residential sales achieved by local and out of area agencies and also includes private/related party sales which occurred during the calendar year 2012.
There are currently 179 individual properties listed for sale in Rainbow Beach with the average time on the market for those properties sitting at 264 days.
There are approximately 1,300 residential properties in Rainbow Beach in total – therefore, the number of properties currently listed for sale represents approximately 14% of the total. Typically, the number of properties on the market sits somewhere between 5 – 10%, so we are outside of this ‘normal’ range due to the lack of demand at present. However, with the increased number of sales enquiries and many vendors opting to ‘meet the market’ rather than hold out for an unrealistic price, the balance between supply and demand will not take long to re-establish.
Rainbow Realty Deal January 2013
“Youth is when you're allowed to stay up late on New Year's Eve. Middle age is when you're forced to.” Bill Vaughan
In the local property market, there has been a decision made by the Receivers for Plantation Resort; (Ernst and Young), with regard to the future sale of the remaining 17 apartments, 5 commercial spaces and the Rainbow Beach Hotel. Ray White Hotels (based in Brisbane) have been appointed as Exclusive Agents for the sale of the remaining stock and they have elected to market the properties for sale by ‘Expressions of Interest’ closing Thursday the 31st of January 2013. The Hotel itself is not part of this sale and our understanding is that the Receivers are looking to trade through the peak summer period in order to produce some solid figures prior to putting the Hotel to market.
The ‘expressions of interest’ method of sale essentially asks buyers to put forward their highest offer, almost like a “closed door” auction. Tender arrangements are reasonably common for development sites and commercial real estate; however they are quite rare with residential sales. The results can be positive as many buyers offer a higher price in exchange for amended terms of sale such as a delayed settlement, or a smaller deposit. As it is not a common marketing method for residential property, it can concern potential purchasers (some buyers may feel that they are not necessarily being given all of the information and that their offer may not be completely confidential) so this method does not always work for the vendor.
The other difficulty with ‘Expressions of Interest’, as with properties being sold before a planned Auction, is the lack of transparency and public scrutiny. Unlike the Auction process, where strict rules have been put in place to restrict dummy bidding, and ‘gazumping’, it is much more difficult to regulate a tender or ‘expressions of interest’ process.
In this tough market, the traditional means of selling is generally employed, so that buyers don't feel apprehensive about making an offer to purchase. Methods of sale such as: private treaty (where a property is listed for a price) or Auction - provide a transparent and open forum for buyers. However, as the market has flattened out and there has been a decrease in prospective purchasers, there has certainly been an increase in this ambiguous method of sale.
Buying a property - if you had the money - used to be so simple: you either paid the asking price, (often after a little negotiation downwards), or bid for it at an open auction. Time will tell if this method of sale will prove effective in our local market.
Finally this month, we came across an article which we found pretty funny and thought we might share the story with you:
“Buyers looking for property in Adelaide’s western suburbs may have been surprised to see one home advertised online come complete with a crop of cannabis. The property’s photos, which gained the attention of South Australia Police, “inadvertently” revealed cannabis plants growing in pots. According to a statement from SA Police, police attended the house with a search warrant on Wednesday and subsequently seized the cannabis plants. A 28-year-old man from Henley Beach South has since been reported for cultivating cannabis.” (Source: Adelaide Now 12/12/12)
Lessons to be learned from this story: Maybe just check what’s in your back yard before the real estate agent comes around to take photos for the purpose of sale; and What on earth was the real estate agent thinking putting these pics online?
In the local property market, there has been a decision made by the Receivers for Plantation Resort; (Ernst and Young), with regard to the future sale of the remaining 17 apartments, 5 commercial spaces and the Rainbow Beach Hotel. Ray White Hotels (based in Brisbane) have been appointed as Exclusive Agents for the sale of the remaining stock and they have elected to market the properties for sale by ‘Expressions of Interest’ closing Thursday the 31st of January 2013. The Hotel itself is not part of this sale and our understanding is that the Receivers are looking to trade through the peak summer period in order to produce some solid figures prior to putting the Hotel to market.
The ‘expressions of interest’ method of sale essentially asks buyers to put forward their highest offer, almost like a “closed door” auction. Tender arrangements are reasonably common for development sites and commercial real estate; however they are quite rare with residential sales. The results can be positive as many buyers offer a higher price in exchange for amended terms of sale such as a delayed settlement, or a smaller deposit. As it is not a common marketing method for residential property, it can concern potential purchasers (some buyers may feel that they are not necessarily being given all of the information and that their offer may not be completely confidential) so this method does not always work for the vendor.
The other difficulty with ‘Expressions of Interest’, as with properties being sold before a planned Auction, is the lack of transparency and public scrutiny. Unlike the Auction process, where strict rules have been put in place to restrict dummy bidding, and ‘gazumping’, it is much more difficult to regulate a tender or ‘expressions of interest’ process.
In this tough market, the traditional means of selling is generally employed, so that buyers don't feel apprehensive about making an offer to purchase. Methods of sale such as: private treaty (where a property is listed for a price) or Auction - provide a transparent and open forum for buyers. However, as the market has flattened out and there has been a decrease in prospective purchasers, there has certainly been an increase in this ambiguous method of sale.
Buying a property - if you had the money - used to be so simple: you either paid the asking price, (often after a little negotiation downwards), or bid for it at an open auction. Time will tell if this method of sale will prove effective in our local market.
Finally this month, we came across an article which we found pretty funny and thought we might share the story with you:
“Buyers looking for property in Adelaide’s western suburbs may have been surprised to see one home advertised online come complete with a crop of cannabis. The property’s photos, which gained the attention of South Australia Police, “inadvertently” revealed cannabis plants growing in pots. According to a statement from SA Police, police attended the house with a search warrant on Wednesday and subsequently seized the cannabis plants. A 28-year-old man from Henley Beach South has since been reported for cultivating cannabis.” (Source: Adelaide Now 12/12/12)
Lessons to be learned from this story: Maybe just check what’s in your back yard before the real estate agent comes around to take photos for the purpose of sale; and What on earth was the real estate agent thinking putting these pics online?
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