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housing affordability

The Real Estate Institute of Australia (REIA) says that in the September quarter of 2016, housing affordability in Australia declined marginally with the proportion of the median family income required to meet average monthly loan repayments increasing to 29.5% from 29.4% in the previous quarter.

REIA President Neville Sanders said, “The recent Adelaide Bank/REIA Housing Affordability Report shows that whilst the proportion of the median family income required to meet average monthly loan repayments increased by 0.1 percentage points, it is still at the lower end over the last seven years. Unfortunately, historically low interest rates were unable to offset the increasing size of mortgages resulting in the rise in the proportion of the median family income required to meet average monthly loan repayments.”

“Over the September quarter, affordability improved in Victoria, South Australia, the Northern Territory and the Australian Capital Territory. New South Wales remained the least affordable state or territory for home buyers. Tasmania had the smallest average loan size while the proportion of first home buyers on the owner-occupier market was the largest in Western Australia.”

“The September quarter brought good news for renters. The proportion of the median family income required to meet median rents decreased by 0.6 percentage points to 24.2% during the quarter and South Australia was the only jurisdiction where rental affordability worsened.”

“The Australian Bureau of Statistics has recently revised its housing finance survey with the changes affecting statistics on owner-occupied and investment housing, the number of first home buyers and housing loan outstanding to households. These changes affected our September quarter publication.”

“The revision downgraded the proportion of first home buyers in the total number of owner-occupier housing finance commitments. It is extremely disappointing that the revised figures show fewer first home buyers since 2012 than previously reported. First home buyer financial commitments are down to 13.1 per cent of total owner – occupied housing in September. This is the lowest figure since the ABS series was commenced in June 1991 and compares to an average of 18.5 per cent over the period. With the average loan sizes continuing to rise REIA is concerned that the proportion may fall even further in the coming quarters,” said Mr Sanders.

Story source: www.reia.asn.au

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PPG_Blog_Nov_image 4_ 2 mil is new 1 mil

The Melbourne property market is driving a national spike in $2million+ property prices.

Not that long ago, $1 million guaranteed the purchase of an exceptional family home – a property where you could settle in and expect to be comfortable for life, only looking to down size when the nest became empty.

Over the past 12 months until June, the national figure for the number of properties selling for greater than $2 million exceeds 11,000 according to figures released by Core Logic. And this is more than double the number from five years ago. Twenty years ago, there were just 236 $2 million + sales across Australia.

The breakdown between houses and units in the $2 million+ range shows 9,882 were house sales and 1,437 were units. The largest concentration, not surprisingly, was in Sydney and Melbourne. Australia’s other states and territories combined represent only one tenth of all $2 million+ house sales and a quarter of $2 million+ unit sales in the past year.

In the June 2016 quarter, the REIV has released figures showing that there were five Melbourne suburbs that recorded a median price of greater than $2 million*.

Core Logic’s Cameron Kusher says this data provides dramatic evidence that the cost of housing in Melbourne and Sydney is detaching itself from the rest of the country.

*This is based on 30+ sales. Other Melbourne suburbs also recorded medians of $2 million+, but these figures were based on fewer than 30 sales.

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PPG_Blog_April_image 3_first quarter market update

REIA recently released the REIA Real Estate Market Facts for the September quarter 2016 which shows that the weighted average capital city median price increased by 1.4% for houses and 1.6% for other dwellings.

“The weighted average median house price for the eight capital cities is now $712,776. Reflecting the differing fortunes of state economies, over the quarter, the median house price increased in Sydney and Melbourne while the rest of the capital cities recorded decreases. Compared to the corresponding quarter of the previous year, the median house price went up by 2.2% and, with the exception of Perth, Canberra and Darwin, all the capitals contributed to the increase”, said Mr Malcolm Gunning, President of the REIA.

“At $1,076,878, Sydney’s median house price is the highest among the capitals whilst Hobart retains the lowest at $385,000 – the figure is 46% lower than the national average ”

“The weighted average median price for other dwellings for the eight capital cities was $558,565 in the September quarter 2016. Sydney, Melbourne and Perth contributed to the quarterly increase while the rest of the capitals had decreases. When compared to the same time last year, the weighted average eight capital cities median price for other dwellings increased by 2.0%. Increases were recorded in Sydney, Melbourne, Adelaide and Canberra”.

“Over the quarter, median rents showed varied results. In Canberra rents remained unchanged despite the vacancy rate dropping to 1.3 per cent during the third quarter of 2016. Rents in Adelaide and Melbourne increased whilst in Perth, Darwin and Hobart they decreased.

In Sydney rents in some locations remained unchanged whilst in others they decreased and in others increased.”

“Over the last three years the proportion of investors purchasing houses has increased and at the same time developers have responded to the increased demand by building more apartments. This has resulted in falling rents.

The ABS’s CPI figures support this. The September quarter 2016 CPI shows that the annual increase in rents to September has been the lowest since December 1994.”

“Providing further evidence that the current taxation arrangements which provide many Australians with the opportunity to invest in property adds to the housing supply and keep rents lower than they would otherwise be”, concluded Mr Gunning.

Story source: www.reia.asn.au

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Mortgage Mistakes

PPG_Blog_Nov_image 1_mortgage mistakes

Most mortgagees will refinance their home loan several times over the period of the loan. In fact, loan experts agree it’s important to reassess your loan every 5 years or so to ensure you are still on the right financial path.

Be careful though, many borrowers make one of more of the following mistakes when looking to refinance:

1 Stick with their current lender for no real reason – Don’t be afraid to look around and change lenders providing the alternative is a better option for your needs. Lenders don’t generally make an effort to keep your business so don’t feel obliged to stick with them.

2 Choose the lowest interest rate – Assuming the lowest rate is the best option is sometimes short-sighted. Be sure to choose the loan that meets all of your requirements e.g. offset account, redraw facility etc. The overall package is what’s most important.

3 Apply with several lenders – a common mistake is applying with a great deal of lenders and brokers to find the best deal. The more you apply, the more often a lender or broker conducts a credit check. More credit checks, more often actually harms your credit history and may lead to rejection or less than ideal interest rates.

4 Don’t read the fine print – a mortgage is a huge financial commitment. Not fully understanding what you are signing up for can come back to bite you later. Check the terms and conditions of the loan carefully, this is your money at stake.  And never be afraid to ask for explanations of fees you are being asked to pay.

5 Blindly trusting the inexperienced – lenders that have been in the mortgage market for a short while may not offer the same level of service or ongoing competitive pricing. Lack of flexibility in loan products can also add significantly to the cost of a loan especially for property investors.

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PPG_Blog_Nov_image 2_most liveable city

Did you know we reside in the world’s most liveable city? Yes, that’s right, Melbourne has been honoured with this accolade by the EIU for the last six consecutive years.

The Economist Intelligence Unit (EIU) is a British business providing forecasting and advisory services through research and analysis, such as monthly country reports, five-year country economic forecasts, country risk service reports, and industry reports. The EIU also produces regular reports on livability and cost of living of the world’s major cities that receive wide coverage in international media.

Contributing to our ongoing top ranking from the EIU is Melbourne’s consistent performance across five broad categories – healthcare, education, infrastructure, stability and culture & environment.

This year we achieved a perfect score in healthcare, education and infrastructure whilst we outranked the nations other major cities in the areas of stability, and culture and environment.

Melbourne’s scores out of 100:

• Stability: 95

• Healthcare: 100

• Culture and Environment: 95.1

• Education: 100

· Infrastructure: 100

Melbourne was rated 97.5 out of 100, just ahead of Vienna. Adelaide came in equal fifth with Calgary in Canada, followed by Perth at seventh. Sydney came in 11th.

Whilst Melbourne is not without some imperfections, you have to admit we are very fortunate to call this beautiful city home.

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At its meeting today, the Board decided to leave the cash rate unchanged at 1.50 per cent.

In Australia, the economy is continuing its transition following the mining investment boom. Some slowing in the year-ended growth rate is likely, before it picks up again. Further increases in exports of resources are expected as completed projects come on line. The outlook for business investment remains subdued, although measures of business sentiment remain above average.

Inflation remains quite low. The continuing subdued growth in labour costs means that inflation is expected to remain low for some time, before returning to more normal levels.

Low interest rates have been supporting domestic demand and the lower exchange rate since 2013 has been helping the traded sector. Financial institutions are in a position to lend for worthwhile purposes. These factors are assisting the economy to make the necessary adjustments, though an appreciating exchange rate could complicate this.

Conditions in the housing market have strengthened overall, although they vary considerably around the country. In some markets, prices are rising briskly, while in others they are declining. Housing credit has picked up a little, although turnover of established dwellings is lower than it was a year ago. Supervisory measures have strengthened lending standards and some lenders are taking a more cautious attitude to lending in certain segments. Considerable supply of apartments is scheduled to come on stream over the next couple of years, particularly in the eastern capital cities. Growth in rents is the slowest for some decades.

Story Source: www.rba.gov.au

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PPG_Blog_Nov_ image 3_market update_

The 2016 spring property market is delivering everything home sellers desire: solid price growth, high clearance rates and strong buyer demand.

September quarter median house figures published by the REIV also indicate a positive and growing market. Melbourne’s median house price increased 3.25% since June to settle at $740,000. The inner and middle suburbs were the main growth drivers in the September quarter with house prices in these areas up 4.2% and 3.5% respectively.

Outer suburbs were not without positive results, however. Langwarrin, for example, recorded the city’s largest price growth with the median house price increasing 20% over the September quarter to $561,000. Many outer suburbs like Langwarrin remain attractive to home buyers and investors because of their value and space. Better affordability in Melbourne’s outer neighborhoods is also an appealing factor for many first home buyers just breaking into the market.

Meanwhile, apartment prices across the city also increased in the September quarter with the overall median up 2.1% to $545,500. These figures are stronger than expected by many market experts, including the REIV.

The auction clearance rate across Melbourne is up around 80% with numerous properties still attracting multiple groups of bidders all competing for the purchase. Whilst demand remains high there are still fewer houses and apartments on the market than in previous years.

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Young Investors

PPG_Blog_Oct_image 2_young investors

For several years now, there has been a significant focus on how difficult it is for young people to break into the property market.

Compared to 30 years ago, there’s now twice as many Australians renting, and for many Generation Y’s now in their 20’s and 30’s, buying their own home is still an unattainable dream.

Not helping the cause is figures released by McCrindle that suggest four decades ago, an average home in a capital city was 5 times the average annual earnings, and in 2013, it was as much as 10 times the average annual earnings.

Whilst this is certainly the case for some, it doesn’t necessarily mean the younger generations can’t become property investors. Investing in bricks and mortar can be an excellent stepping stone to eventually owing your dream home.

For the many professionals who work in or close to the CBD, high property prices can be a barrier to living in that vicinity and hence enjoying the ease and efficiency of short travel times. So what we are seeing is a number of young professionals investing where they can afford and renting where they want to live.

Depending on your financial position, a 5% deposit is often all that’s required to purchase an investment property. In some situations, such as when parents act as a guarantor, you can borrow up to 105% of the cost of the property, which includes purchasing costs such as stamp duty and solicitor fees.

The idea of ‘rent money is dead money’ only applies if you aren’t putting your savings towards something else, which will appreciate. The benefits of investing whilst renting are tangible in the short term – renting where you want to live, and substantial in the long term – getting into the market and building your investment portfolio.

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PPG_Blog_oct_image 3_depreciation schedule health check

The tax benefits from depreciation on an investment property can be extremely valuable, but are often overlooked by some landlords.

The issue is that some investors either aren’t aware of the benefits associated with depreciation, or they don’t have an up-to-date depreciation schedule.

The Australian Taxation Office (ATO) allows property owners to claim the wear and tear, depreciation, of their investment as a deduction. In order to claim these deductions, investors should engage a specialist Quantity Surveyor to complete a Tax Depreciation Schedule. The costs associated with a depreciation schedule, which can be between $500-$700 per report, are also tax deductible.

Each year, landlords can claim between 10% and 40% of a variety of depreciable items, and sometimes more. In many cases, 2.5% of the building cost of the investment home is also claimable on an annual basis. New homes in particular, can provide significant and cumulative depreciation claims over several years.

So if you don’t currently have a depreciation schedule for your investment property or you think your existing schedule might be out of date, seek advice from a professional. Claims can sometimes be back dated by up to two years.

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PPG_Blog_Oct_image 1_new standards for apartment developments

With Melbourne’s population predicted to increase from 4.6 million today to 8 million by 2051, pressure is mounting on the world’s most liveable city to accommodate increased demand for housing.

According to the Victoria State Government, “Apartments provide our growing population with affordable and diverse housing options, and the high number of apartment buildings being constructed, indicates that they are a popular alternative to conventional detached houses in terms of cost and lifestyle.”

However, the state government says Victoria has little design guidance in place when it comes to development of apartment blocks, especially when compared to other Australian states and jurisdictions.

To address this gap, the state government release the Better Apartments – A Discussion Paper to start a statewide consultation with the community, local government and industry about internal apartment amenity and potential future design standards.

Nearly 1700 survey responses and about 150 submissions were received on the discussion paper. Community survey participants ranked the key issues affecting apartment amenity by most to least important – identifying daylight, space, natural ventilation and noise as the top issues.

A summary of the outcomes of the public consultation was released at the end of 2015 and this has now led to the latest publication – a draft of the government’s proposed apartment standards – Better Apartments – Draft Design Standards. There was further public consultation from August to September this year and the final Design Standards will be introduced in Victoria in December this year.

According to the state government, The Better Apartments draft design standards will address a popular concern that many apartment developments are just “dog boxes”. They will ensure:

  1. New apartments are well-designed
  2. The needs of a range of households (including the elderly, people with disabilities, and families with children) are met
  3. There is greater transparency and consultancy for both the community and development industry
  4. The effects of climate change are mitigated and environmental impacts are minimised
  5. Melbourne’s identity, productivity, liveability and attractiveness as a place to live, work, visit and invest in is maintained and enhanced.

The proposed introduction of these standards comes as new data from the Victorian Building Authority shows that building permits in the 2015-2016 financial year exceeded $31 billion for the first time.

Apartment building approvals in Victoria rose by 23.7% and house building approvals were up by 12.5%.

To find out more about the new apartment design standards, please visit the Victorian state government website.

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