Friday, July 25, 2014

To rent or not to rent?

That is the question everyone is asking after the Reserve Bank of Australia (RBA) released a statement last week saying if property prices slow, 'the average homebuyer would be financially better off renting'.

And it's got everyone talking.

Like any debate, there are always two views of the world. 

On one side, a number of people are mounting and publishing arguments pro renting. The old saying that 'rent money is dead money' has been fired back at; with some saying interest payments on home loans are no different. This camp is arguing that on top of paying huge sums of money to your bank over the life of the loan (usually 25 years), there are also add on costs such as stamp duty and legal fees incurred. The benefit of not having to worry about the uncertainty of large expenses home owners face appeals to renters as well. Significant maintenance items, such as a new hot water system or brand new roof, can come out of the blue and when you're a tenant, this falls cost  squarely with your landlord.

They believe other investments, such as shares, are a wiser alternative and that you are better off in the long run choosing to remain a renter rather 
than purchasing a home.

The other side?

The pro buying camp maintains home owners are the ones who come out ahead financially without a doubt. Any contrary argument has been quickly shut down by property reporters who claim there is a big ticket item that those in the other camp are forgetting – long term capital gains. 

From my experience, and growing up in a family who lives and breathes residential real estate, I have to agree with the latter. There are so many other benefits, some non-financial, that come with actually owning your own home, including: 

1. Increased Certainty. You are not exposed to the uncertainty of renting, that is, whether your landlord will chose to renew your lease at the end of the term or whether they will increase the rent... Moving every twelve months isn't much fun and certainly not ideal if you have a young family or a lot of belongings.

2. Flexibility. You have more flexibility to improve or change your living environment when life or family events happen. Adding on a new room or updating the kitchen are options that are simply not available to tenants. 

3. Leverage. There is the ability to use equity accumulated in your home to add to your property portfolio and expand your investment opportunities. 

4. Security in Ownership. Having a place to call home later in life is a really important factor for most home owners. They see huge benefit in the financial security of owning their own assets which can be disposed of down the track if needed.

The RBA speaks of the 'average homebuyer' being better off. From my experience taking the time to educate yourself on the market, speaking to the right people and ensuring the fundamentals stack up can put you miles in front. Being realistic about future capital gains is really important when looking to purchase a home and shouldn't be overlooked. 

As a tenant myself for over six years, I have been on both sides of the fence. But when looking at the different approaches, if you are in a financial position to buy property and the right opportunity comes up, I believe you should make the most of it.

Adelaide is the least volatile residential market and we are very fortunate to live in a city that is the most affordable in the country. Our state provides great buying opportunities and at Toop&Toop we are here to help steer you in the right direction.

Suzannah Toop

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Friday, July 18, 2014

Winter Wonder... Should you wait for spring or just get on with it?

When winter weather hits like it has this week, it seems sellers go into hibernation. They batten down the hatches as they wait for spring to arrive before they even think of selling their property, believing the common misconception that spring is the peak period for real estate.  

The lure for sellers making their move in spring is that their gardens will be blooming and looking their best, the days warm up and people are out and about more often. This all adds to the perception of spring being the prime time to sell a home. The other spring phenomena is that the 'lookers' are out enjoying some free weekend entertainment by going to opens and boosting the feeling that spring is the best time to put a property on the market. 

The reality: winter sale results are exceptional and every year we continue to find winter sale prices are strong. This can actually be explained mathematically. Adelaide listings are 19.7% lower than they were at their peak last spring, and with buyer numbers remaining statistically unchanged (notwithstanding activity levels drop due to less properties available to view). Right now conditions are very favourable. The number of genuine buyers in the market is consistent regardless of the season, while stock levels plummet and demand drives prices. It's that simple. Exactly the opposite is true in late spring when the market floods with stock.

Right now at Toop&Toop we are witnessing the reality of winter selling with incredible sales continuing. Current stock levels across Adelaide and the entire State are critically low; buyers are flocking to new listings as they hit the market. Our team are finding record numbers through their new release properties, with up to 80 through just one open last weekend. New releases are hotly pursued at the moment and sales before or at the first open are becoming a regular event. The sales are exciting; the lack of property is frustrating. 

As most buyers would know, Toop&Toop assist buyers across the SA market as all of our team are recording needs and requirements constantly. We have built the number of registered buyers to over 10,000 qualified and active house hunters. We can help them to tap into our client's sale at any time. With our ability to keep these buyers informed, and monitor activity levels all year round, we know how the buyers are acting. Buyers are so eager to hear from us, especially at the moment. So the message is, let's go now, let's sell before that spring madness.

Buyers never seem to stop searching for property until after they have bought, and like us, they are addicted to seeing what's new. Contrary to popular belief, they may not necessarily just go online to search in winter and they seem to get frustrated with the lack of properties available during this time. So, with the limited new stock available, we put some of our winter success to this unique VirtualAgent "matching capability". It is working a treat.

Supply and demand is the cornerstone of any market. Toop&Toop have the demand at our fingertips, and you have the stock we need to supply the market! Winter can be a serious time to sell.

Genevieve Toop

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Thursday, July 10, 2014

Piecing together the full picture

Reflection on last financial year has begun and we have a world of information at our fingertips, particularly in the property investment space. News articles such as 'The Best Suburbs for unit investment', 'Top 50 Growth Suburbs', and 'Houses versus apartments' are appearing everywhere. It's an exciting time for property investors as there's an increasing amount of information and analysis available. It is now even easier to keep up to date with property news and what's happening in the property market.

With the financial year behind us, a number of reports have surfaced. Dissecting this information and comparing what we see day-to-day on the ground has been really interesting. 

RPData have recently released a summary of the financial year and property cycle, which revealed that Australia's capital city dwelling values achieved double digit growth over this financial year with an increase of 10.1%. There's no doubt that it's been a great year for property across the nation.

Locally, when comparing Adelaide's growth of 2.9% over the financial year to Sydney at 15.4% growth and Melbourne at 9.4%, it's interesting to see that on paper Adelaide appears to be underperforming the nation by a significant portion. 

When looking at the current real estate cycle however, the question investors are asking is whether we are underperforming or whether we are merely lagging behind the capital cities and further growth is to come.

When compared to our previous peak, Adelaide's dwelling values are down 1.6% and RPData statistics are telling us we are only 5.6% off the bottom of the trough. This is the lowest increase across the nation and if we look to the outperformer in the market, Sydney has achieved a staggering 23.1% increase from the bottom of the cycle. 

From these figures, South Australia has clearly not experienced the same highs but property analysts are predicting growth to come as we follow suit behind Sydney and the east coast. South Australia has been named as 'the market on the move' and is starting to pick up momentum.

Whilst we don't expect our investors to be achieving the huge upswing as seen in Sydney and Melbourne, there is a silver lining. Adelaide is still extremely affordable. With a median 'dwelling' price of $400,000 (houses at $420,000 and units at $345,000), we are still the most affordable mainland capital city.  

Toop&Toop is focussed on what our property investors should be doing. For our investors, we are looking at options for them to grow their portfolio in the current market. Looking to rental returns, Adelaide is second only to QLD in both houses and unit rental returns, ahead of both Sydney and Melbourne. Achieving 4.3% and 4.9% returns for houses and units respectively, Adelaide provides a great landscape for investors who are looking for long term results.

It's become clear just how essential it is to consider the statistics and figures in context. What we are seeing are positive signs for the Adelaide market – it is still the most affordable and steady market, and rental returns are strong. When you're wading through all the information, it's important to remember that a financial report, newspaper article or group of figures are each only one piece in the puzzle.

From where we sit, Adelaide is looking very promising.

Suzannah Toop

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Friday, July 04, 2014

Demand runs hot for the ‘renovators delight’.

Thinking about renovating your home is an exciting prospect! After two years in our house, my fiancé Tom and I are starting to plan and prioritise our renovation ideas... but before jumping into the world of takeaway dinners and cold showers, I can't help but think about what's happening right now in the market and if renovating a property in this current market is necessarily the best option?

With the influx of home improvement shows hitting the screens, making things look so easy and keeping renovating front of mind for everyone, it seems so many of us are in the same boat. We're all getting excited about bringing individuality to our home! With apps like Houzz, Pintrest & Instagram, which can provide amazing inspiration, it's no wonder you can get ahead of yourself and start dreaming about how you would extend or change up your property... well before you are ready to start.

It's is not just home owners with the renovation bug... buyer confidence is up, interest rates are still on hold, and there is a constant stream of buyers coming into the market looking for their own 'renovators delight' to tackle. They too are swept up in the romance of putting their own touches on their new home. This is a significant trend right now which is hard to ignore.

For property owners with a house in this key market segment, this trend provides some fantastic opportunities to think about...

I am a textbook example, we are so excited about renovating, that I have been 'pinning' and saving ideas to my Houzz 'lookbook' for over a year now... but looking at the current market trends it seems crazy not to step back for a minute and spend some time exploring the opportunity of potentially selling, instead of renovating, to capitalise on this buyer demand.

At Toop&Toop we are seeing clients achieve premium prices for homes that need updating. In some cases, these properties are achieving $40,000 -$200,000 over their reserve. If you compare properties in this hot area of the market to brand new, fully renovated homes, you can see that new homes are proving to be extremely good value for buyers in comparison.

As real estate agents, we can help by appraising your property and giving you some insight into what we believe your property could achieve in the current market. Then if you do some research and look at what you could buy with the combined resources of strong market values and your budgeted renovation costs, you may be surprised to find a house that already fits your criteria, one you could start enjoying straight away and also stand to benefit financially in the long run.

DIY is so heavily promoted through websites, apps, reality TV and with the likes of Bunnings and Mitre 10 jumping in to provide education in-store, it's no wonder almost 7 in 10 Australian home owners are planning to renovate in the next 12 months.

But for property owners, the big question is... does your opportunity lie in the renovation of your home, or does it lie in a sales strategy built on the momentum of the DIY movement?

Genevieve Toop

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