One minute we are told there is an apartment glut and house prices could crash any minute. The next, our leaders are calling for negative gearing changes that will push prices down even further. So are we headed for housing armageddon or not?
PRICES ARE TOO HIGH …
Housing prices have been rising for over a decade and warnings about a property bubble have been brewing for years.
One of the latest warnings came last month from property analyst Louis Christopher, of SQM Research, who said the national property market was overvalued by 22 per cent.
This is being driven by prices in Melbourne, which hit its highest overvaluation level of 40 per cent and Sydney, which was at its second highest level of overvaluation at 40 per cent.
Mr Christopher warned that if changes weren’t made, such as lifting interest rates or tougher restrictions on home lending, prices in Sydney and Melbourne would continue to rise by up to 16 per cent in 2017.
“However it is likely 2017 will be the last year of price falls generated by the mining downturn for these cities,’’ he said.
Mr Christopher said if interest rates were cut again, prices would rise even further, paving the way for a possible correction in 2018.
BUT THERE’S AN APARTMENT GLUT COMING …
At the opposite end of the spectrum, there are fears that construction of new apartments will lead to an oversupply in the next few years.
The construction boom already seems to be impacting Melbourne apartment prices, where there’s been record levels of building in the last two years.
On Thursday, Corelogic’s November Hedonic Home Value Index showed Melbourne dwelling prices had fallen by 1.5 per cent.
Head of research Tim Lawless attributed this to new units coming on to the market. Prices for units fell by 3.2 per cent last month.
Overall, prices for Melbourne units have only grown by 3.9 per cent this year, compared to 12.2 per cent for houses.
But this is where things get really interesting for Sydney.
While Sydney unit prices are not increasing as fast as those for houses, they are still rising.
In November, unit prices increased by 0.9 per cent, which was actually slightly higher than 0.8 increase achieved by houses.
Across the year, unit prices grew by 10.6 per cent compared to 15.3 per cent for houses.
Earlier this year BIS Shrapnel released a report that predicted Melbourne would have an oversupply of more than 20,000 homes by 2017, but managing director Robert Mellor said Sydney was still suffering from an undersupply of housing.
“It’s so severe we won’t see an oversupply in Sydney in the next four years,” Mr Mellor said at the time.
“A downturn in Sydney between 2004 and 2012 was so severe, basically only in the last 12 months we’ve started to see construction move above the level of demand.”
SYDNEY IS DIFFERENT
Prices in Sydney have outstripped those in other areas and it remains Australia’s most expensive city, with a median dwelling price of $845,000, according to the latest statistics released by Corelogic.
Since 2009 dwelling prices in Sydney have risen by a staggering 96 per cent, Corelogic head of research Tim Lawless told news.com.au.
Melbourne is not that far off, with growth of 78 per cent, but the next best performing market after that was Canberra, which has only seen growth of 33 per cent.
The difference was even more stark in Perth, which only grew by 6.5 per cent, and Hobart on 4.5 per cent.
Mr Lawless said Sydney’s astronomical growth had been achieved against the backdrop of record low wages growth of about 2 per cent.
“So the byproduct of strong capital gains (for housing) and relatively low income growth is that affordability is becoming stretched,” he said.
One way of measuring housing affordability is to look at the dwelling price to income ratio.
In Sydney this ratio is 8.4, which means it takes 8.4 times the typical household salary to buy the typical Sydney dwelling.
If you look at houses only, this ratio is closer to 10, while for apartments it is 7.1.
These figures are still higher than in other cities.
Melbourne has a ratio of 7.2 for dwellings, while Brisbane’s ratio is 5.7.
“It highlights that Sydney is becoming increasing unaffordable,” Mr Lawless said.
However, Mr Lawless said there was some confusion in the market because the measure of “serviceability”, the proportion of household income that goes towards paying a mortgage, which has been really flat because of record low interest rates.
“This hides the fact that dwelling prices have risen at a substantially higher rate than incomes in Sydney and to a lesser extent, in Melbourne.”
A TARGET FOR INVESTORS
All the analysts seem to agree on one thing — the Sydney real estate market is different and property prices in other areas are not growing as strongly.
His comments were later backed by NSW Premier Mike Baird, who said changes should be considered. But this is in direct conflict with Liberal Party policy.
During the election Prime Minister Malcolm Turnbull said the coalition would not change the measures, and warned Labor’s policy to reform negative gearing and the capital gains tax discount would lead to price falls. Estimates have ranged from between two per cent to as high as six per cent.
Mr Turnbull pointed to the need to increase housing supply to improve affordability.
But in his speech, Mr Stokes said supply alone wouldn’t solve Sydney’s housing affordability problem.
The state is currently building 185,000 homes over the next five years to try and address an undersupply of close to 100,000 homes in NSW.
But with interest rates at record lows and generous federal tax incentives, Mr Stokes said Sydney had become a prime target for investors.
Property investors can use negative gearing to reduce the tax they pay if they make a loss, for example if the rent they collect is less than their mortgage repayments.
Once they sell the property, they only pay tax on half of the profit because of the capital gains tax discount.
Mr Lawless said statistics showed investors currently made up more than half the demand for mortgages in NSW.
States are now trying to wind back incentives for investors.
This year NSW introduced higher taxes on foreign investors buying residential property, following in the footsteps of Victoria and Queensland.
HOUSING MARKET IS STILL HOT
AMP chief economist Shane Oliver said NSW must think there’s still some extra capacity in the property market as the state planning minister probably wouldn’t be talking about negative gearing if the market was weaker.
“They are probably thinking there is still room in the market as it’s not altogether clear that the market has peaked,” he told news.com.au. “They are probably thinking there’s a long way to go.
“I would be more cautious, I think a supply glut could hit next year,” he said.
However, if prices did fall, Mr Oliver said the market could still be propped up by two types of buyers.
Firstly, first home buyers may re-enter the market, especially if prices fell by 20 per cent and interest rates remained low.
Ironically foreign investors could also be lured by lower prices and move to snap up a bargain. Prices in Sydney are still reasonable compared to those overseas, especially because the Australian dollar is quite low at the moment.
Population growth in Sydney also remains strong and this would also cushion the market against a big fall. Mr Oliver said he didn’t think any price falls would go beyond 15-20 per cent.
“You wouldn’t be looking at a fall like what happened in the US or eurozone.”
SO SHOULD THEY CHANGE NEGATIVE GEARING?
By restarting the debate on negative gearing, NSW is basically trying to push some of the responsibility for fixing housing affordability back on the Federal Government.
While Mr Oliver believes supply is more connected to affordability, this doesn’t mean some changes shouldn’t be looked at — especially the capital gains tax discount.
“This is a bit of a distortion and that’s what makes negative gearing so profitable,” Mr Oliver said.
But Treasurer Scott Morrison did not seem to be taking the bait, and said on Friday that abolishing negative gearing would hit mum-and-dad investors in rental properties, pushing rents up and putting immense pressure on the market.
Another tricky thing about changing negative gearing and the capital gains tax discount, is that the measures would impact property markets around Australia, not just Sydney.
Meanwhile, Housing Industry Association chief executive Graham Wolfe pointed to the state taxes and levies charged on the sale of every new home.
“State-based stamp duty on the purchase of a typical new home alone adds a $91 per month burden on household mortgage repayments,” Mr Wolfe said.
Stamp duty is something the NSW Government could change to help first homebuyers but has left untouched.
In his speech, Mr Stokes said if states were to consider getting rid of inefficient state taxes, the Federal Government needed to outline how it would help states raise money for schools and hospitals to cater to a booming population.
Providing investors with generous tax breaks such as the capital gains tax discount, costs the Federal Government billions. In 2014/15, the CGT alone was estimated to have cost the federal Budget more than $6 billion.
And despite all the talk of housing bubbles, apartment gluts and falling rental prices, this hasn’t deterred investors.
ABS housing finance data has shown a consistent rise in finance commitments for investment purposes since May this year.
“Clearly investors are continuing to see housing as the preferred investment option, despite low yields and a mature growth cycle,” Mr Lawless said.
Mr Stokes believes it’s time for a real debate about policies and for the Federal Government to partner with states to address housing affordability.
“Why should you get a tax deduction on the ownership of a multi-million dollar holiday home that does nothing to improve supply where it’s needed?” he said.
“We should not be content to live in a society where it’s easy for one person to reduce their taxable contribution to schools, hospitals and other critical government services — through generous federal tax exemptions and the ownership of multiple properties — while a generation of working Australians find it increasingly difficult to buy one property to call home.”
Originally Published: http://www.goldcoastbulletin.com.au/
IT’S the dilemma facing homeowners this spring selling season: renovate or sell? We asked the experts and it seems Queenslanders are made for keeps.
The Courier-Mail SEPTEMBER 9, 20185:00AM
David Chapman and Charlotte Hyndman at the Queenslander they have just bought in Newmarket. Image: AAP/Sarah Marshall.Source:News Limited
ANDREW Winter and Neale Whitaker know all about the headaches of renovating.
As well helping hundreds of homeowners transform their rundown properties, the property guru has just spent 12 months giving his Gold Coast home a complete makeover, while the interiors expert is in the middle of refurbishing a cottage in country NSW.
The co-hosts of Love It Or List It Australia will battle for the hearts and heads of homeowners across the country in a new season of the show as they grapple with the dilemma of whether to renovate or sell.
And while the stars sit on opposite sides of the fence on the show — Mr Winter always wants the homeowners to sell, whereas Mr Whitaker wants them to keep the property and renovate — both agree the Queenslander is for keeps.
Neale Whitaker and Andrew Winter co-host a second season of Foxtel’s Love It or List It Australia.Source:Supplied
The sunshine state features heavily in the new season of Love It Or List Australia, which resumes on Foxtel on September 26.
In fact, about 50 per cent of the series stars homes in the suburbs of Toowong, Corinda, Daisy Hill and Boondall in Brisbane, and Ashmore on the Gold Coast.
Last financial year, Queenslanders spent $1.6 billion on home alterations and additions, according to the latest Australian Bureau of Statistics figures.
In Brisbane alone, residents forked out $872 million for renovations in 2017/18.
‘TIME CAPSULE’ SELLS FOR MILLIONS
Homeowners in Brisbane’s south splashed the most cash on upgrading their properties — spending a whopping $132.5 million, followed by Brisbane’s inner north, where homeowners spent more than $117 million.
The suburb where the most money was spent on renovating in the past financial year was Paddington-Milton, with residents there forking out more than $32 million.
New Farm was next, with homeowners spending $24 million on renovations, followed by Ashgrove at $22 million and Bardon at almost $21 million.
Queenslanders spent $1.6 billion on home alterations and additions, according to the ABS. Image: iStock.Source:Supplied
Mr Winter said the Queenslander style home leant itself to being loved, rather than listed.
“It’s only recently Queensland, and Brisbane, has taken notice of its old homes,” Mr Winter said.
“The interesting thing is that the Queenslander home is probably one of the most popular forms of architecture I’ve ever come across in Australia.
“I’m not saying everyone wants to own them, because of maintenance, but these days there are so many options.”
INSIDE THE KARDASHIANS’ EXCLUSIVE HOLIDAY HOME
Andrew Winter on the set of Love It Or List It Australia. Picture: Tim Hunter.Source:News Corp Austral
Mr Winter said it was hard to go wrong investing in a property that had history.
“There’s nothing like an original Queenslander, so if you happen to have an original one, then you’ve got something that is likely to be really sought-after in a couple of decades,” he said.
“Sydney and Melbourne’s old houses are taken seriously — really, really seriously.”
Mr Whitaker agrees.
“Queenslanders are up there as one of my favourite homes,” he said.
“I love the architectural style — I find it so elegant and full of character and personality.”
Mr Whitaker said he loved the traditional look of the Queenslander home from the outside, with a modern interior.
“They do lend themselves well to be opened out and modernised,” he said.
“The layout of the Queenslander allows you to do that.”
But he warned about the dangers of overcapitalising when it comes to renovating.
“Really have a look at what you’ve got before you start spending big,” Mr Whitaker said.
“We’ve got the renovation bug in Australia, which is great, but at the same time, it can get you in financial trouble.”
Neale Whitaker, co-host of Love It Or List It Australia. Picture: Damian Shaw.Source:News Corp Australia
David Chapman and Charlotte Hyndman have just bought their first home in the inner Brisbane suburb of Newmarket.
They fell in love with the 1930s, three-bedroom character home, even though it could do with a makeover.
“It’s a little rough on the outside, but on the inside there’s some really good spots in there somewhere,” Mr Chapman said.
“You can’t not fall in love with a home like this.
“It just has some old-world charm to it.”
This character home at 14 Farm St, Newmarket, has just sold and its owners plan to renovate it.Source:Supplied
The couple plans to spend the next three to five years renovating the property with a budget of about $50,000.
“There is just so much work to be done to it, but it’s all achievable — the bones of it are amazing,” Mr Chapman said.
“We’ve already made 10 visits to Bunnings within three weeks of buying it.”
Brisbane residents forked out $872m for home renovations in 2017/18, according to the ABS.Source:Supplied
ANDREW WINTER’S TIPS FOR RENOVATING IN QLD:
*Preserve the old, rather than build new
“We’ve always presumed you need to flatten it and put a slab down — that’s not the case anymore.”
*Don’t put the bedrooms upstairs in a raised, two-level Queenslander
“It’s a big mistake to raise and put the bedrooms upstairs because you’re hiding all the character of the original home in the bedrooms.
“You need to put the living areas in the original part of the home, otherwise it’s a bit of a waste.”
*Remember that even the most dreary home can be resurrected
“You can install roof lights into rooms, get rid of sliding windows, and put in louvres to inject more light.
“And don’t be scared of internal brickwork — you can whitewash it to perfection.”
Love It Or List It Australia hosts Neale Whittaker and Andrew Winter.Source:Supplied
NEALE WHITAKER’S TIPS FOR RENOVATING IN QLD:
*Consider whether you’re renovating for resale or for yourself
“If you’re renovating for resale, of course you want to maximise the size and potential of the space.
“The best thing you can do is keep it as neutral as possible. Allow your buyer to dream.”
*Use the climate
“You have the most wonderful climate in Queensland, so maximise the light and indoor/ outdoor flow as much as possible.”
“It’s easy to go over budget. Look seriously at what comparable properties are going for, and what are you likely to achieve, and be realistic.
“If you’re planning to sell, don’t rush out and put in a brand new kitchen or bathroom because you think you have to. Think about a spring clean before a whole scale renovation.”
Many homeowners face the dilemma of whether to list their home or renovate. Image: iStock.Source:Supplied
A new wave of confidence has swept the Brisbane property housing market in time for peak spring selling season.
Ninety-five properties are registered to go under the hammer on this first weekend of spring, amid reports of record numbers at open homes and a renewed confidence in Brisbane’s housing market off the back of positive growth.
Brisbane’s auction clearance rate skyrocketed last week, jumping almost 20 per cent above average.
More than seven properties achieved more than $1 million under the hammer, with particular success for family homes in tightly-held suburbs.
44 Moreton Street, New Farm, will go to auction on Sunday, September 16.
Tyson Clarke of Queensland Sotheby’s Brisbane said more than 70 per cent of his contracts right now were cash deals.
“To give you some context, my average sale price is $3.21 million,” he said. “So the fact these sorts of sales are being made with cash, to me that’s an indication of where the market is at at the moment.
“What I’m noticing is a real change in confidence in the Brisbane market. People are putting their money into Brisbane, they’re confident making those purchases and that’s reflected in the prices that people are getting for their homes.”
Inside 44 Moreton Street, New Farm. Marketing agent Henry Hodge says buyers can purchase confidently in Brisbane because of its steady market.
With recent data showing Brisbane to be one of the best-performing capital cities in the country, Mr Clarke said buyers appreciated Brisbane’s slow and steady growth.
“We don’t want the boom and bust here like Sydney. Brisbane’s growth is reliable, it’s steady and that’s what is giving people confidence when buying property here at the moment,” he said.
The peak selling season is off to a flying start for Nicholas Given and Matt Lancashire of Ray White New Farm, who managed to close a deal on a landmark riverfront development opportunity in New Farm this week.
Spring selling season is upon us and the mood in Brisbane is positive, agents say.
The 941-square-metre block at Maxwell Street had expectations of setting a record for the suburb but the sale remains shrouded in secrecy, with Mr Given unable to disclose any details.
“What I can tell you is that we had a lot of interest both locally and nationally, and sold the property in just under four weeks with an expression of interest campaign,” he said.
Mr Given said there were more cash buyers in the Brisbane housing market than ever before.
Light-filled luxury: 9 Crucis Street, Coorparoo, recently went under contract, sold by Tyson Clarke of Queensland Sothebys. Photo: Supplied
“It’s going to be a busy spring selling season but what I would tell buyers is: have your finance or your cash ready to go,” he said.
“I’m seeing a lot of buyers getting gazumped on houses they love because they’re not ready to go unconditional.
“If you want to be in a house by Christmas, buyers need to lock something down in the next 60 or 70 days, so they need to be ready to go.”
Henry Hodge of McGrath New Farm reported 150-plus groups through open homes for properties at New Farm and Teneriffe and said he expected the spring selling season to be busy.
“I think in Brisbane, where there’s steady growth, people can move forward with confidence that they’re not spending too much on a property,” he said.
“We’ve got a healthy market, the buyer numbers are really strong and there’s a lot more property to hit the market yet. Buyers need to be ready.”
Mr Hodge recently listed an historic, circa 1895 residence at 44 Moreton Street, New Farm, which has been transformed into a commanding six-bedroom family home.
With heritage restoration work completed by Chapman Builder, the solid masonry and brick construction is one of only four similarly distinctive homes in the area, which are rarely available to purchase, Mr Hodge said.
The house will go to auction on Sunday, September 16, at 1pm.
William and Misty Barsby with their children Annabel 6 and Jackson 3 are looking to upgrade to a bigger house in Wavell Heights for their growing family. Picture: Jamie Hanson.Source:News Limited
THEY are the “upsizers” — an emerging market of aspirational home hunters with growing families, healthy bank balances and big dreams for the future.
And property experts are urging them to “act now or miss out” on securing their forever homes while southeast Queensland’s housing market is in a sweet spot.
RiskWise Property Research has run the numbers and identified the 10 best suburbs for buyers looking to upgrade to a bigger or better property.
The top three — Albion, Wavell Heights and Stafford — are all on Brisbane’s northside and within 10km of the CBD, while half are on the Gold and Sunshine coasts.
Wavell Heights has been identified as one of the top suburbs in southeast Queensland for upgraders.Source:Supplied
RiskWise Property Research chief executive Doron Peleg said southeast Queensland’s housing market had the perfect fundamentals for medium to long-term investment — relative affordability, population growth, an improving economy and modest capital growth.
RiskWise Property Research chief executive Doron Peleg.Source:Supplied
But he said buyers needed to act fast before those factors pushed prices up.
“This puts upgraders in a good position to achieve a bigger property or a better location for a relatively reasonable price,” Mr Peleg said.
“There’s a good selection of suburbs in southeast Queensland that provide the desired quality and location without the million-dollar price tag and with the second benefit that it is likely to enjoy long-term capital growth.”
The Gold Coast is a good market for home buyers looking to upgrade, according to RiskWise. Picture: Mike Batterham.Source:News Corp Australia
According to Knight Frank’s Australian head of residential research, Michelle Ciesielski, the Brisbane market saw more buyers upsizing in the past year to take advantage of green shoots appearing in the prestige market.
“This was from those already placed in the local market and those relocating from interstate with a desire to make their money go further than what could be purchased in other east coast cities,” Ms Ciesielski said.
“We see this trend continuing into 2019.
“Price growth will continue to follow this trend, with a sustainable annual growth of 3-5 per cent by year’s end.”
Some of the prestige homes in Brisbane.Source:News Corp Australia
Mr Peleg said there were two types of upgraders — those living in a house and wanting to move to a bigger one or a better location, and those living in a unit and looking to buy a house.
He said upsizers in southeast Queensland needed to factor in an extra $200,000 to $300,000 — less than the $400,000 to $500,000 needed to upgrade in Sydney.
“They are key drivers in comparison to Sydney, where the market is declining, you need to add far more money to upgrade and investor activity is actually going down,” Mr Peleg said.
Upgraders are being urged to act now if they want to get a bigger or better house in the southeast Queensland market. Picture: Richard Walker.Source:News Corp Australia
In compiling the research, RiskWise considered only houses with a median price of $600,000 to $800,000 to appeal to a broader audience.
“Another consideration was that from a value-for-money perspective, these suburbs present great lifestyle, education and opportunity in comparison to other suburbs in southeast Queensland as well as strong internal migration and affordability,” Mr Peleg said.
”They also enjoy future projected and strong long-term demand but have also enjoyed good capital growth in recent years and are already considered very popular among upgraders.”
Will and Misty Barsby are looking to upgrade to a bigger house closer to the city and have their heart set on Wavell Heights.
“We’re looking for our ‘forever home’, as my wife calls it,” Mr Barsby said.
The couple and their two young children currently live in Burpengary, but would ideally like to move in to a renovated character home with at least three bedrooms, two bathrooms and on a minimum 600 sqm block.
“We’ve done a bit of research, but what we really liked about Wavell Heights was the accessibility,” Mr Barsby said.
This house at 55 Sunny Ave, Wavell Heights, is for sale.Source:Supplied
“It’s in between the Sandgate Road and Gympie Road rat runs, close to the city and it has lots of options in terms of public and private schools.
“It’s also reasonably affordable at the moment in terms of family homes and decent sized blocks.
“It feels like an opportune time for us to get the right home for the right price.”
John Andrew of Place Nundah said Wavell Heights had become an appealing suburb for families because it was predominantly residential, had good public and private schools and didn’t have density issues like nearby Chermside.
Mr Andrew said values had risen in the area, but it was still relatively affordable.
“We see people decide; ‘OK I can get a small lot in Clayfield or a bigger house in nearby Wavell,” Mr Andrew said.
“If you bought a simple post war home for $600,000 and put $250,000 to $300,000 into it, you’re not going to overcapitalise.”
TOP 10 SUBURBS FOR UPGRADERS IN SOUTHEAST QLD
Suburb Median house price Change in 12 mths Change in 5 years