April 2013 Property Market Update
Housing markets strengthen but further action needed
by J Edwards
of Residex Pty Ltd.
As housing markets grow in strength I am again drawn to the issues and problems associated with the Reserve Bank’s single tool of economic management – the setting of the cash rate.
I have just completed an analysis on the economic circumstances and future of the housing markets for all states and territories in Australia as at the end of March 2013. These are available in the State Market Reports, which will be released over the coming week.
Table 1 presents the results to the quarter ending 31 March 2013.
The analysis reveals three groups of performers:
2. In need
3. No need
The two particularly weak states economically are Tasmania and South Australia. Both have struggling housing markets and basically anything that would help lift their economic activity would be a blessing.
The second group is the ‘in need’ group of states. These states are Victoria, New South Wales and Queensland. While these are all improving, they would benefit from some stimulus via an interest rate reduction. Victoria is in the poorest position, followed by New South Wales and then Queensland.
Victoria has a dwelling oversupply problem and needs new industry to rejuvenate its economy. Interest rate reductions are not going have a great impact on this market because even with additional reductions affordability will not be solved.
New South Wales also has affordability issues but does not have the same housing supply issues as Victoria. NSW currently has a deficit in required stock. Coal and gas exploration, coupled with government expenditure on new infrastructure development, is regenerating the state’s economy. Interest rate reductions will help this market even though it is the most un-affordable market in Australia.
Following the natural disasters over the past couple of years, Queensland is finally regaining ground. Of the three ‘in need’ group of states it would move forward stronger than the others if a rate reduction came to pass. Queensland has the most affordable housing market of the group and given its resource base, it has the capacity to grow more strongly. In fact, there could be risks that parts of the state could boom and cause a housing bubble if there were significant interest rate reductions.
Finally, the third group of performers is the ‘no need’ state of Western Australia and the Northern Territory. Both of these markets have no need whatsoever for reduced interest rates and are on paths of strong growth. In fact, it is arguable that their current growth is too strong. These two areas could quickly become places where interest rate reductions cause significant problems and price bubbles.
There is a clear shortage of stock in Western Australia and a build-up of population numbers at the same time. It appears that problems in other states and constant positive news about job prospects here may be causing people to move to Perth. The increase in population at a time when there are housing shortages and a gradual increase in unemployment as the resource boom comes to a close could pose problems on its own. Should interest rates also be decreased and house prices bid up quickly, there could be a serious issue in the medium term.
All of the above makes it exceptionally hard to decide what the RBA should do with interest rates. I have often pondered what the alternative is to the blunt tool that the RBA has. In essence, I believe it should be retained; however, just as the government has set a range for inflation to be maintained I suggest a range in which the RBA is charged to keep our currency trading within should also be set. This is not a new idea as the RBA does enter the market on occasions to keep the currency at what it believes is an acceptable level.
If we take an objective view of the actions of the Japanese, Chinese and even the US and Germany it is clear that they are managing their exchange rates via various tools. These tools take the form of many disguises from bond issuing programs to holding together a community in the EU, which allows them to operate using a currency that is much lower in value than it would be if it were to stand alone.
Australia is a small nation and it seems silly to me to be doing what one might call “the right thing” when major nations of the world are not. As a nation, Australia needs to be competitive in all areas of activity and not just resources exports (even these activities are coming under pressure as manufacturing industries fail). Allowing the Australian dollar to climb to its current level is killing off manufacturing and business generally. It is time to get the RBA to manage the dollar within a sensible range, which is probably something between $US 0.70-0.90 to the Australian dollar.
L J GILLAND REAL ESTATE
LJ GILLAND REAL-ESTATE OFFERS A BROAD RANGE OF STRATEGIES AND ADVICE TO ADDRESS THE UNIQUE AND COMPLEX PROBLEMS THAT IMPACT ON YOUR VALUABLE PROPERTY. OUR EXPERTISE LIES WITHIN THE FOLLOWING SERVICES:
– PROPERTY MANAGEMENT
– INVESTMENT SOLUTIONS
– FREE MARKET APPRAISALS
– INNOVATIVE ADVERTISING
– NEWSPAPER/INTERNET ADVERTISING
– OPEN HOMES
– ONE ON ONE CONSULTATION WITH OUR CLIENTS
– FOCUS ON MAXIMUM RENTAL RETURNS WITH MINIMUM VACANCIES
– BODY CORPORATE MANAGEMENT
OUR NICHE OVER ALL THESE PAST FEW YEARS SEEMS TO BE PROPERTY MANAGEMENT. WE WILL BE MUCH HONORED TO WORK WITH YOU SO WE CAN OVERCOME ANY CHALLENGES AND TO OFFER YOU OUR INNOVATIVE SERVICES AS WE PREFER LONG TERM WIN-WIN RELATIONSHIPS.
FROM PAST EXPERIENCES WE’VE DEVELOPED SUCCESSFUL COACHING, CONSULTING AND FACILITATION PRACTICES. WE CONDUCT OUR BUSINESS ACCORDING TO CURRENT LEGISLATION AND DISPLAY HIGH STANDARD OF ETHICS. WE LOOK FORWARD TO WORKING WITH YOU TO OVERCOME CHALLENGES AND OFFER YOU INNOVATIVE NEW OPPORTUNITIES.
PLEASE DO NOT HESITATE TO CONTACT US SO WE CAN DISCUSS YOUR BUSINESS AND FAMILY PLANNING NEEDS AND HELP YOU DETERMINE WHERE YOU CAN PROFIT FROM OUR ASSISTANCE!
Dear Valued Friend and Associate,
At a recent REIQ zone breakfast the topic was selling tenanted properties.
Brad Kerrisk, Member Liaison Manager from the REIQ pointed out some tips to help when selling a tenanted property.
When an Owner/Vendor is ready to sell the first step is to notify the Managing Agent of intention to sell. This is best to come from the Owner. The Selling Agent should also contact the Managing Agent to discuss. The Owner/Vendor may select one or multiple agents to appraise their property.
The Managing Agent then gains the consent to carry out an appraisal from the Tenant (Form 9, Entry Notice is issued) on behalf of the Sales Agent, the Sales Agent then conducts the appraisal. The Tenant must be given 24 hours clear notice from time notice is received to gain entry to the premises. Best Practise is to call and discuss this with the Tenant.
The Owner/Vendor then completes and signs the appointment of Real Estate Agent – Sales and Purchases (Form 22a) with the Sales Agent. It is best practise to provide a copy of this form to the Managing Agent to verify that the property is on the market.
The Sales Agent must inform the Tenant that the property is officially on the market by issuing a Form 10 Notice of Lessors Intention to Sell Premises. (It is best practise that the Sales Agent issue this form to ensure that the notification is definitely given) and a copy provided to the Managing Agent.
It’s important to remember to work with the Tenants, not at them. Be consultative, be professional, they could be your next buyer and biggest advocate. Take time to explain what to expect now that the property is on the market. Negotiate terms and build a relationship with them. Always get Tenant consent forms signed it’s absolutely critical when using internal photos, conducting auctions and carrying out open homes.
Once a contract of sale is entered into inform the Tenants that the property is under contract, inform the Managing Agent. Managing Agent will then explain to the Tenant their options under the lease.
When the contract is unconditional and if new Owners want vacant possession of the premises then a Notice to Leave (Form 12) marked with grounds, for sale contract, must be issued for the Tenants to vacate the property (subject to the terms of the lease).
Minimum settlement time is 48 days for a tenanted property however that is a very tight schedule and it is best practise to set approximately 60 days.
§ Day 1 sale date
§ Day 2 inform agent of contract
§ Day 15 unconditional Tenants given notice
§ Day 45 4 weeks is up for the Tenants to vacate
§ Day 47 Exit cleaning, repairs, pre settlement inspection
§ Day 48 settlement ( business day) 60 days is best practice
If a fixed tenancy is in place the details of the lease are to be recorded on the contract and as best practise a copy of lease should be attached to the contract.
Remember if the lease is a periodic lease the Tenant can give 2 weeks notice on Form 13 (Notice of Intention to Leave) at anytime.
At the end of this process everyone should feel informed and a smoother, more streamlined process accomplished. Communication is the key.
Further, have your Managing Agent sell your Tenanted property, they are the best Agent for the job.
Choose an Agent that is interested in the relationship of everyone involved and takes into account what’s best for all parties not just earning a commission.
Your Managing Agent will always have a relationship already formed with your Tenant which makes it so much easier to sell your Investment Property with a Tenant in place.
It makes sense that keeping a Tenant in place on a fixed term lease ensures that the property is still income producing and if your Agent knows the market well, then the rental return should look attractive to a Prospective Purchaser.
In my experience most Agents will recommend that the Tenant be evicted and the property left vacant whilst on the market. This is poor advice as there is no income generated on the property whilst on the market for sale, and it will not look appealing to Prospective Investors.
Choose LJ Gilland Real Estate to sell your Tenanted property. If your property is managed by another Agent and you want to sell, transfer to LJ Gilland Real Estate and we will remove the hassle from sales and rentals aiming at the best result possible in any challenging real estate market, whilst making selling a sweet, smooth and nurturing experience for all involved.
Thinking of selling? If you would like a current Market Appraisal contact us now.
Looking forward to hearing from you.
Phone: (07) 3263 6085
Fax: (07) 3263 5985
Mob: 0400 833 800
Mob2: 0409 995 578
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Linda and Carlos Debello
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