Fairfax Says, Don't Trust Real Estate Agents

Fairfax, which earns a large part of its revenue from real estate agents advertising on Domain and in the SMH and The Age, warns not to trust real estate agents.

"Don't take the word of an agent about what your property is worth. Make up your own mind through research or, if you're still unsure, pay to have a professional valuation carried out on your property. That will cost you between $400 and $600."

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Investing in the Brisbane Property Market?

If you are planning on investing in the Brisbane property market, then take care! This blog focuses on apartments, primarily in inner city Brisbane. Some thoughts:

1. There are less overseas students wanting to rent apartments this year. This trend will continue.

2. There are less investors willing or able to purchase apartments, particularly high end apartments.

3. A number of people in their 50s and 60s, who may have considered purchasing an apartment to live in (downsizing) or as an investment are not buying at present. Either their super funds have less money than they hoped, they are more risk adverse, or banks will not lend. Also, people who were looking at riverfront apartments have paused buying decisions due to the floods.

4. There are a huge number of apartments on the way. At current sales rates, it will take years to sell these apartments. Many are small 1 or 2 bed apartments. Would you want to live in them? See list of apartments currently being built or being sold.

5. Many are predicting no capital growth this year; some a predicting 10% decrease in values, some predicting 35% decrease in values. This makes buyers nervous. Many are waiting. Maybe prices will not go down -- who knows? But there is no urgency in buying, and those who are making offers on investment properties are doing so at a significant discount to the list price. So sellers are not selling, and the number of apartments listed for sale is increasing. The only sellers who are selling are those who are dead, heading for bankruptcy, are bankrupt, are getting divorced or have lost their job. So it is hard to work out what the market price for a property (willing but not desperate seller; willing but not overly keen buyer) is actually doing at present. Maybe if salaries increase and unemployment does not decrease, then prices will go up? I hear that 25 year old storemen and labours in central Queensland are earning $150,000 a year plus overtime -- and are buying investment properties.

6. Rental returns on apartments are average. Interest rates, council rates, water charges and body corporate levies are increasing, thus decreasing net returns. This decreases property values.

7. The Gold Coast is dead dead dead. There are a huge number of unsold apartments in The Oracle. Juniper's Soul is coming up to settlement soon, and smart money is betting that it will end up like The Oracle. Juniper must be sweating. And Gold Coast apartment returns will take a dive, because fewer tourists are coming to the Gold Coast. What does this mean for Brisbane? Bad news about the Gold Coast impacts the mood of investors in Brisbane, and of interstate and international investors thinking about investing in Brisbane.

So not a good time to sell. And probably worth while waiting to buy. But if you listen to the real estate agents, who only make money if you buy, they will tell you otherwise.

Dishonest Real Estate Agents

I came across this illegal trick that a "reputable" city real estate agent is doing. This is the story. Let's say that the apartment is listed at $1.4M. He receives an offer of $1.2M. So to butter up the vendor, he first puts in a fake offer (a forged contract) to the vendor at say $1.025M. The vendor is disappointed, and rejects the offer. Soon after, he presents the real $1.2M offer (telling the vendor that this is a good offer; and also telling the purchaser that there is another person bidding on the the property.) The vendor is more likely to accept the $1.2M offer.

So if you are an investor selling your apartment in Brisbane, take care! Especially if the address of the purchaser is a PO Box. If you get a low ball offer, have someone check out to see if the offer is from a real person.

Bubble?

Is there a housing bubble in Australia?

See this article from The Trump and also this article.

See also comments on the RP Data blog and Domain.

Also:

"SQM Research founder Louis Christopher says vendors have "not yet woken up to the reality of the new market".

"There are fewer buyers out there. When houses are selling the best way to sell is at auction. But in a slower market, that's not the best way because you're not going to get as good a result."

"There are listings everywhere. We're in a situation now where buyers are backing away, but there are still people trying to sell. They're not going to get the prices they had hoped for, and it's going to be disappointing for them."

Christopher says that over the rest of the year, there will be an oversupply of stock in the market, which will put downward pressure on prices.

Additionally, he says property investors wanting to sell should have made their move in the first four months of the year. Now, he warns, they may have missed their chance."

See Property Market Has Cooled from SmartCompany

Google Search - Shows Less Interest in Real Estate

Google Insights allows you to examine what people search for on Google. In the real estate category, Google shows that searches are down for 2009, particularly in December 2009. (Google shows that the peak month for searches for real estate in Queensland and Australia are January followed by September). December 2009 was worst on record.

Onsite or Offsite Real Estate Agent?

If you own an apartment, and wish to rent it, there is often a choice between using the onsite building manager (who will often have a real estate agent license) or an offsite real estate agent. There are positives and negatives of both. This is the view of Chris Hinds, an offsite agent, as set out in a recent mailing from him:

"In this day and age, the majority of On-site management offices can provide generic Property Management services. Inappropriately trained staff are usually placed within minimal staffed offices and a heavy reliance is placed on technology and computers to deliver the required service. The business owner is normally no-where to be seen whilst the management of your property is generally handled by unaccountable staff that do not even own an investment property themselves. Sound familiar? Common concerns that generally arise from the above are…

• The Caretaker/Building Manager condoning backpackers or short term letting.
• Poor or unsupervised tenant selection.
• Overcrowding and increased wear and tear contributed by the excess of students, back packers & short-term lets within the building
• Is the most appropriate amount of rent charged to the tenant based on rental market conditions.
• Levies and bills attended to and paid on time.
• Entry and Exit Condition reports completed and done so thoroughly.
• Caretakers/Building Managers wanting an extension could signify their desire to sell out!
• Watch out for those Hotel operators, they are well known to reduce the value of your property."

RP Data - Rismark Index

"The falls in Brisbane property values witnessed during 2008 appear to be a thing of the past. On an annual basis dwelling values in Brisbane are still down by -3 per cent during the year with house values falling -2.9 per cent and unit values declining by -3.4 per cent. Over the first four months of 2009 Brisbane has begun to once again show positive growth. During the first four months of the year house values climbed 1.9 per cent whilst unit values fell by -0.2 per cent despite the fact Brisbane is home to mainland Australia's most affordable unit market. Rental returns for houses have softened slightly and currently sit at 4.6 per cent whilst unit rental yields continue to improve and are now recorded at 5.4 per cent."

Home values continue to recover, recording a healthy 2.8% increase over the first four months of 2009

The RP Data/Rismark Australian Home Value Index out today confirmed that housing values around Australia rose by a healthy 2.8 per cent over the first four months to April 09—virtually wiping out the price falls seen in 2008 according to RP Data National Research Director Tim Lawless.*

Unlike the Australian Bureau of Statistics House Price Index, which excludes terraces, semi-detached homes, and apartments, the RP Data/Rismark International hedonic methodology, which is reported by the Reserve Bank of Australia, includes all dwellings. In addition, RP Data benefits from the largest sample of early property sales and property attributes (such as number of bedrooms, bathrooms and land area) of any index provider in Australia.

Over the first four months to April 09, every mainland capital city apart from Perth recorded an increase in home values with the most significant gains in Darwin (+5.3 per cent), Melbourne (+4.4 per cent), and Sydney (+3.9 per cent).

According to Rismark International Managing Director Christopher Joye, “Our analysis demonstrates that home values are rising in around 80 per cent of all suburbs with only the top 20 per cent of suburbs ranked by price suffering material falls.”

The return to capital growth comes as weekly rental rates start to level. Mr Lawless said, “Rental rates across Australia have powered ahead over the last three years, providing the best gross rental yields investors have seen for a long time. We are now seeing growth rates for weekly rents start to level due to decreasing rental affordability which is causing many renters to consider buying a home instead of renting. Gross rental yields are likely to peak over the coming months suggesting that now is probably the best time for investors to roll up their sleeves and become active,” he said. In terms of housing stock, units are continuing to outperform houses where over the first four months of 2009 values increased by 3.3 per cent while house values increased by 2.7 per cent. In closing Mr Lawless said “The stronger performance of the unit market is due to a number of factors. Comparing median house and unit values nationally, the price gap between is just over $90,000, so the value proposition of a unit is very compelling. Additionally, units are generally located closer to the city and along transport spines which is very appealing to many Gen Y and Gen X buyers,” he said.

See www.rpdata.com/news/rp/20090529_media.html
and Tables

Real Estate Investment Books

List of real estate investing books (that can be shipped to Australia)

• What Every Real Estate Investor Needs to Know About Cash Flow... And 36 Other Key Financial Measures
• After the Fall: Opportunities and Strategies for Real Estate Investing in the Coming Decade
• The Complete Guide to Locating, Negotiating, and Buying Real Estate Foreclosures: What Smart Investors Need to Know - Explained Simply
• Short-Sale Pre-Foreclosure Investing: How to Buy "No-Equity" Properties Directly from the Bank -- at Huge Discounts

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