Tuesday, November 4, 2014

Valuer's view of Brisbane property

"Firstly, interstate migration is a long way off its heady peaks in 2003. It’s flat performance isn’t a total deal breaker for our state’s rising market, but certainly if these numbers were to pick up, you’d think good things are set to follow.

Recent sales evidence would indicate there has been a levelling of prices and values over the past quarter. There’s a little more urgency amongst buyers, which has led to growth in the 12 months to June 2014. Values are up around 10% for near-city detached housing, and entry level housing within 5 kilometres of the CBD remains a market that is outperforming other sectors.

We do seem to be entering a phase of upgrading – although this is taking form in increased sale numbers, and consequently values, for vacant land and renovating existing dwellings, not to mention the downsizers (but not downgraders) into the prestige unit market. The stagnation in the market during the 2010 to mid-2013 stalled the upgrader market – due mainly to them being unable to offload their existing residence before shooting for something a bit better.

Like the stone that drops in the pond, the ripple affect is real for Brisbane’s property market. Starting with inner/near city detached housing and extending from there, how far the wave travels is dependent upon the strength of the boom.

The only standout in the supply and demand equation remains the unit market. With a significant increase in supply on the way, coupled with low interstate migration along with existing tenants taking the opportunity to buy or enter the market, we believe this sector has potential for a rising vacancy rate in the short term."

Source:  HTW November 2014 Month in Review

Monday, November 3, 2014

October is a better month for Brisbane apartment median values

The RP Data CoreLogic Home Value Index registered a 1.0% capital gain across the combined capital cities over the month of October, however the annual rate of growth has continued to trend lower.
According to the RP Data CoreLogic Home Value Index, dwelling values across Australia’s capital cities increased by 1.0 per cent over the month of October. The data highlights that despite a slowdown in growth in September, values continued to rise, increasing by 2.2 per cent over the past three months. Although combined capital city home values were up by 1.0 per cent over the month, only Sydney (1.3%), Melbourne (1.9%) and Brisbane (0.6%) actually recorded value rises over the month.
Dwelling values rose by 2.2 per cent over the three months to October 2014 however, only half of the capital cities actually recorded an increase in values. According to Mr Lawless this result highlights weaker housing market conditions outside of Australia’s largest cities.
According to Mr Lawless, Sydney, Melbourne, Brisbane and Adelaide (which happen to be four of the five largest capital cities), were the only capital cities to record an increase in home values over the past three months. [Note - this does not apply to Brisbane apartments, which recorded a decline for this three month period.]  Sydney continues as a standout with home values increasing at a rate of more than 1 per cent a month, up 3.9 per cent over the past three months. He said that Perth and Canberra have clearly moved through the peak of their growth cycles.
Brisbane apartment prices (to 31 October 2014):
October 2014 - up 1.6%
Quarter - down 0.4%
Year to Date - up 2.6%
Year on Year - up 4.5%
Median price based on settled sales of Brisbane apartments over the quarter - $380,000

Tax for foreign investors on transactions involving taxable Australian property

On 31 October 2014, the Government released a discussion paper outlining the proposed design options for implementing the previously announced non-final withholding tax in relation to disposals by foreign residents of certain 'taxable Australian property' assets. The measure is proposed to commence from 1 July 2016.

The measure was originally contained in the former Government's 2013-14 Budget. The current Government announced on 6 November 2013 that it would proceed with the measure.

The release of the discussion paper will be of interest to those foreign investors who may be considering divesting their Australian real property or business assets over the next few years, as well as investors who are considering acquiring such assets from foreign investors over the same time period.

For full details, see King & Wood Mallesons publication

Saturday, November 1, 2014

No capital growth for Brisbane property over last six years

Most recent property investors in Brisbane are likely to have lost money.

From a recent report from RP Data:

"The next time you hear someone talk of the booming national housing market remember these statistics.  Yes combined capital city home values are rising and this is due to the influence of the Sydney and Melbourne housing markets where values are rising.  Real home values in Brisbane, Adelaide, Perth and Hobart are still lower than they were before the financial crisis and have seen no real growth in more than six years."

When we abandon traditional underwriting standards

"The regulators believe that lower loan underwriting standards promote homeownership and make mortgages and homes more affordable. The facts, however, show that the opposite is true. ...

After the financial crisis, Representative Barney Frank — the Massachusetts Democrat who led the House Financial Services Committee during the crisis, and a champion of credit programs for low-income buyers — admitted, “It was a great mistake to push lower-income people into housing they couldn’t afford and couldn’t really handle once they had it.” Policy makers who support homeownership would be wise to consider who is hurt and who is helped when we abandon traditional underwriting standards."

See:  Underwriting the Next Housing Crisis

My view is that government policy that encourages people to buy rather than rent often leads to poor results.