MAKE PROPERTY INVESTMENT ROCK SOLID

Real estate offers many benefits for investors, and its continued strong performance has made it the preferred investment option for many Australians.

But it takes more than good luck to maximise your returns from investment properties. Property investment is still a popular option, representing a rock solid, secure and long-term method of creating wealth and growing capital.

In fact, property has delivered an average 12 per cent return for the past 24 years, even before tax and maintenance costs, so its not surprising that a recent survey shows 59 per cent of home buyers and investors plan to purchase an investment property in the next year That’s probably because Australian property performed exceptionally well throughout the GFC and still shows great resilience in the face of share market gyrations.

But for investors to maximise the financial benefits of their property they need to look at their investment as more than just collecting rent or striking a deal on management fees. The crucial component for a successful rental property yield is to appoint a trusted and reliable property manager.

A good property manager is one that provides expert advice on the opportunities available for them to take advantage of to improve the yield of their property investment portfolios. At First National Sellect we have an in-depth knowledge of the local market and can assist with the two most important criteria when choosing an investment property – location and quality.

Properties located close to transport, schools, place of work, shops and recreational facilities are in greater demand and usually command a higher rental. However, investors should not be afraid to look beyond inner city properties as lower priced outer suburbs can produce higher yields and frequently enjoy strong demand from prospective tenants.

It is also wise to maintain your asset in good repair and ensure it is well presented. That way, rent is maximised, vacancy periods reduced and a high standard of tenant is attracted, who will ensure their rent is paid on time. Sometimes, simple improvements like a fresh coat of paint in bathrooms and kitchens, or installing new window coverings, can make the world of difference.

As experienced property managers, supported by rigorous processes and systems, First National Sellect provides the highest standard of advice to investors, backed by leading edge technologies that match tenants to vacant properties and comprehensive marketing programs.

First National Sellect uses the latest technologies and prides itself on getting the best results in the shortest time.

A professionally prepared tax depreciation schedule can also play an important role in the efficient management of your investment.

Flat market, ‘strongest since March 2011’

With March quarter sales results now quantified, capital city home values have effectively stood still since 31 November 2011.

This is the strongest result since March 2011 when values increased by 0.7 per cent, according to RP Data.

Sydney’s housing market has been the ‘primary growth driver’ nationally because home values lifted 1.1 per cent over the quarter.

However, prices fell in many other capital cities, dragged the national average back to zero for the quarter. Adelaide experienced the hardest fall – homes there are now worth 1.5 per cent less than in the final quarter of 2011.

Resources rich states had a bumper quarter with Perth, Darwin and Brisbane’s home prices all increasing in value – 1.4%, 1.1% and 0.8% respectively.

Down 4.4% past 12 months

What this all adds up to is continuing softness in the national marketplace and a fall in overall capital city values of 4.4 per cent in the past 12 months.

So, how did each of our capital cities perform in the past 12 months?

• Hobart prices fell 7.3%

• Brisbane prices fell 6.1%

• Adelaide prices fell 5.7%

• Melbourne prices fell 5.4% (But they’re still up 45.5% since 2007)

• Canberra prices fell 0.3%

• Sydney prices fell 3.2%

And what about the regions?

For the rest of each state, dwelling values fell by an average of 2.5 per cent.

So, Canberra, where times are never really bad and people are always confident about their employment status, turned out to be the star performer with values down just 0.3 per cent over the year.

Affordability up, FHBs coming back According to Ben Skilbeck, managing director of Rismark International, a number of factors point toward an improvement in market conditions in recent months.

As a result of these falls in values, the price of buying a home is now below the decade average. Also, more people are preparing to buy a property.

The ABS reports that home loan approvals continue to lift as well. They’re now at their highest levels since November 2009, and, the value of all approved loans is higher. As a share of all approved loans, first homebuyers are back at levels not seen in two years.

Investors reap rewards Although capital city rental housing yields have only improved modestly from 3.6 per cent to 4.1 per cent, apartment yields are ahead – increasing from 4.4 to 4.8 per cent over the same period. However, hold onto your seat if you’ve invested in Darwin, Perth or Brisbane.

These three cities have bounced back from recent lows, improving by 22, 21 and 18 per cent respectively. Sales volumes fall The number of properties for sale continues to fall.

Having peaked late last year, the number of days it takes to sell a home should now begin to fall and, as buyers have fewer properties to choose from, negotiations will more often lead to successful outcomes.

Arrears down Australians are paying down mortgages at the fastest rates since the peak of the GFC. The Reserve Bank reports mortgage arrears have fallen from 0.7 per cent to 0.6 per cent, comparably low by international standards.

Nearly 50 per cent of owner-occupiers are ahead of schedule with their repayments. In the December quarter, total excess payments were running at twice the minimum – up 80 per cent from last year’s March quarter. Much of these payments have come from salary bonuses or sale of shares. Households have typically injecting an extra 3 per cent of disposable income into home loans since the GFC.

Price your property to move! Price it right, right from day one.

Did you know that you have a much better chance of selling your property quickly if you price it to meet the market in the first weeks of the market campaign?

This strategy is much more successful than pricing it on the highest price and hoping that someone might pay that ‘premium’ price.  You should always be careful of an unscrupulous agent promising you an unrealistic price. They may want your sole mandate so they might be telling you what you want to hear.

By overpricing your property you could lose the crucial stage of attracting your genuine buyer in your initial market exposure, you will also help to convince buyers that other fairly priced properties are a better buy, and most importantly you will end up showing the property to the wrong group of buyers.

If your property is worth $1.5m but you decided to put it up at $1.8m, you are now trying to compete against fairly priced properties that are worth close to $1.9m. How can a $1.5m property compare itself against a $1.9mproperty? This is an unfair comparison and naturally your property will not be looked at because it has been shown to the wrong group of buyers- buyers expecting to buy a $1.9m property.

You want to capture the right buyers and interest them in your property, otherwise you may have missed out on a sale.

The three major factors that will determine how your property should be priced are, from the property’s condition, the current real estate market and economy, recent transactions in the area and current properties available for sale.

With a general market slowdown in progress, it is even more important to make sure that you price right from the start. Your benefits are more rewarding and less costly. You’ll have your property sold faster, because it’s exposed to more qualified buyers, your home won’t lose it’s ‘marketability,” you will achieve higher offers because it’s closer to the market value, your property will generate competing offers because it’s well priced and all agents working on your property will be enthusiastic about presenting your home to buyers, because of being priced right.

Don’t miss out on potential buyers due to overpricing your home.  It is too easy to get emotionally involved in the sale of your home. Having a skilled and experienced agent to guide you through a thorough market analysis will help you look at your property realistically and get it priced right from the start!

Cash Drop Competition

First National Real Estate Sellect is offering customers the opportunity to win a share of $50,000 cash in its ‘$50,000 Cash Drop’ competition from 1 March.

 “All you need to do is buy or sell a house through us, rent a property, or ask us to manage your investment property and we’ll automatically enter you in the competition” Mario Valensise, First National Sellect Principal said.

 The competition runs between 1 March and 31 August 2012 and because the prizes are cash, customers will be free to do whatever they wish with their winnings.

 “We’re very excited to be able to offer First National customers this opportunity for the next six months” says Mario.

 “One lucky homeowner, tenant or landlord is going to get a very nice surprise come September”.

Property Outlook Strong for 2012

Indications that a property market recovery is likely in 2012 are strong, although it will be a slow and gradual process, with first home buyers beginning to stir, but not fully confident to part with their hard earned savings, and investors having already capitalised on prime market conditions.

According to First National CEO, Ray Ellis, this is the picture based on expectations of interest rates, market movements and local area member knowledge, underpinned by improving consumer sentiment as detailed in First National Real Estate’s 2012 Property Market Outlook released this week.

“Home prices bottoming out, falling interest rates and improving affordability are all working together and may prove the stimulus the market has been waiting for to get it moving again,” Mr Ellis said.

“In turn, increased interest and activity in the property market will see it strengthen further especially with investors who have already shown signs of gaining confidence at the end of 2011.”

Based on the survey findings highlighted in the Outlook, NSW should see an improving market; Victoria is showing signs of recovery, but still has a way to go, Queensland is demonstrating it has lots of potential and is finally on its way back from the devastating floods and cyclones it experienced in 2011; WA and NT will continue to be strong performers especially in resource rich areas; Tasmania is marking time but will pick up as it progresses through 2012; and South Australia will continue to be a solid performer.

All First National state chairpersons agreed buyer confidence should improve in the next 6 months, as a result of lower interest rates, improving local market conditions and a more stable global economy.

For some states, worsening global economic conditions and possible job losses have resulted in an increase in mortgage defaults and this trend may continue until more certainty and stability returns to the US, European and Chinese economies.

According to the state chairpersons, the key challenges for the Australian property market in 2012 will be focused on sustaining a strengthening consumer confidence, which are at the mercy of ongoing stability in global economies and job security; government policy and legislation (especially the introduction for the carbon tax and reduced government assistance for first home buyers); and interest rate movements.

While demand is still expected to remain relatively soft into 2012, a recent sharp rise in Westpac’s time to buy a dwelling index may be the cue for a housing upturn.

“This will, however, be dependent on ongoing interest rate cuts, job security and resulting consumer sentiment,” Mr Ellis said.

Interest rates are expected to drop further with rate cuts of up to 0.5 per cent, although some say it could be as much as 75 to 100 basis points.

“Any future interest rate cuts are expected to stimulate buyer activity as confidence improves and refinancing options broaden, ultimately strengthening the property market,” Mr Ellis said.

“With the Australian housing market now affected by daily international updates and commentary, confidence can change at a moment’s notice.”

Residential markets are expected to remain initially subdued in 2012 as consumers seek to pay off debts.  However, falling house prices and interest rates should stimulate some activity, particularly among bargain hunters who have been squirreling away savings and are now cashed up.

“Our members believe the strongest growth in their regions will come primarily from upgraders, followed by investors, then retirees and lastly from first home buyers,” Mr Ellis said.

Australia’s national office market is one of the best performing commercial property subsectors –with capital value growth expectations of 2.8 per cent over the next 12 months.  It currently outperforms the residential property market and this trend is expected to continue for some time to come.

“Into 2012, the commercial property market will continue to be a mixed bag, very reliant on the area and local market conditions, but the majority of members said they expected the market to stabilise,” Mr Ellis said.

According to First National Commercial members, solar power remains the most popular energy efficient feature in a commercial property, making it more rentable.

Water recycling, the ability to open windows and motion sensor lights are also sought after energy efficient features.

“Around 75 per cent of respondents said they expected sales of commercial properties to increase in 2012, as a result of their region’s attractiveness, trading up or new jobs and increased businesses in the region,” Mr Ellis said.

Growth in commercial property markets is expected to come mainly from the heavy and light industrial sector, followed by the office market and medical industry.

Regional Australia is experiencing some of the most difficult market conditions seen.  Falling prices, non-committal buyers, unrealistic vendors and consistently negative market reporting throughout the majority of 2011 have affected confidence.

However, improving housing affordability and interest rate cuts should inject some much-needed confidence into the regional housing market.

“Over 2011, the regional property markets have been influenced by economic factors such as the strength of the Australian dollar value, commodity prices, demand for Australian products and nervousness around job security,” Mr Ellis said.

“The regional market has stagnated to some degree but this is expected to steady into 2012 as confidence slowly starts to build, eventually returning as the year progresses.”

OPEN HOME ETIQUETTE

Warmer weather inevitably sees more home buyers joining the ranks of open home inspections.  That is why it is really important to follow proper etiquette when visiting an open home.

Respect and courtesy is the key – respect that the home is someone else’s private domain and treat it accordingly.

Don’t go rummaging through personal belongings such as chests of drawers or picking up and touching personal items like ornaments and perfume.  But, if an item forms part of the sale, such as a pantry or built in robe, it is fine to inspect.

Other rules of open home inspection etiquette include:

• Arrive on time. 
• Remember, it is not your house.   Take shoes off and do not take food or drink into the home, and above all, do not use the toilet or bathroom.  Facilities are there for everyone to view and inspect – not be used. 
• Leave your details.  Register your name and phone number upon arrival and leave any feedback that is constructive about the house and its price. 
• Supervise children at all times both in and outside the home. 
• Keep the driveway clear. 
• Watch what you say.  You never know, the person near you may be the home owner, their family or friends, or an interested buyer.

Open homes are an ideal way for genuinely interested buyers to assess the general condition of the home, its aspect in terms of natural light, the outlook, quality of construction, and, and if land is the drawcard, whether the block is level or ideal for their purposes.

LOOK BEYOND FEES FOR EFFECTIVE MANAGEMENT

Nearly 150 of First National Real Estate’s property managers recently gathered in Melbourne for the network’s annual Property Management Conference – ‘Network, Share, Evolve’.

The professional development forum was chiefly focused on issues affecting the efficient management of millions of dollars of property investments nationally.

Because of changes to Australian tax law, investors can now borrow for the purposes of property investment and this has resulted in an exponential increase in the amount of property acquired by Self Managed Superannuation Funds (SMSFs). As a result, property managers must be prepared says First National Real Estate Sellect Property Manager, Michale Egiziano.

‘A recent tax ruling now allows trustees to use money in their fund to renovate property as well. That means property managers need to be equipped to guide landlords who own investments as part of their SMSF toward appropriate, cost effective renovations, using licensed tradespeople. First National Real Estate has taken steps to assure that its property managers are aware of qualified specialists in the industry and can point customers towards a range of providers.’

According to First National, most property investors spend too little time assessing the skills of their property manager and need to look beyond fees when choosing who will manage their investment portfolio.

‘Property Managers frequently manage real estate portfolios exceeding the value of most financial advisors yet rarely receive such recognition’ says Michale.

‘The commitment required to effectively maintain properties, quality client relations, legislative compliance, and, excellence in customer service is sometimes extra-ordinary or even super-human’.

Yet, when choosing a property manager the network indicates that the majority of landlords and investors look only at management fees, thinking that property management represents little more than the collection of rent.

‘Investors need to consider the systems and experience behind the agency that they are entrusting the management of their properties to’ says Michale.

‘Professionally qualified and trained property managers bring so much more to the equation than rent collection. You only need to experience one problem with a tenant to begin to understand the importance of a comprehensive appreciation of the laws governing tenancy. Paying a slightly higher fee for a more professional manager makes a huge difference, even without a problem tenancy.

‘And, a good property manager does so much more than protect you from undue anxiety. They offer valuable advice about how to improve rental yields, guidance on when and where to invest and can even point investors towards the right place for advice about tax effective property investment for Self Managed Superannuation Funds’ says Michale.

Property investment remains one of the most secure forms of long-term wealth creation and, with current share market volatility as well as concerns about the economies of Europe and the United States, First National anticipates increasing interest in property investment from Australian investors in the next twelve months.

‘A climate of stable interest rates and the prospect of perhaps even a reduction in rates in the near future makes bricks and mortar exceptionally attractive’ says Michale.

First National Real Estate has over 450 offices throughout Australia and New Zealand.

 
For further information please contact Michale Egiziano, Property Manager from First National Real Estate Sellect on 9629 7888.

INSIST ON A GUARANTEE

The best advice to any person thinking of selling a property is to insist on an iron-clad service guarantee – one that gives you the opportunity to terminate the agent’s services WITHOUT PENALTY if you are not receiving the service your agent promised you at the listing presentation.

All agents will ask you to sign an agreement before you sell your property. But remember that you are being asked to sign their agreement. Many sellers bitterly regret signing that agreement with the agent.

Think about this for a minute, if the agent’s service was as good as he or she claimed, would they have any qualms about guaranteeing their service? Be suspicious any agent that tries to wriggle out of signing a guarantee.

And do be sure to READ any guarantee offered to you. Read it thoroughly. Ask yourself this question: Does this guarantee really protect us if the agent is a dud?

More agents these days do offer guarantees, but many of these guarantees are pathetic, as toothless as gummy shark. Read the guarantee and don’t be afraid to add any (fair) clauses that protect you.

At the very least you should have a ‘walk away’ clause, one that allows you to fire the agent if he or she does not deliver the standard of service offered at the time of listing the property. This clause, more than any other, is a ‘must have’.

The best agents will gladly GUARANTEE their services. Avoid agents who do not offer a solid service guarantee.

$1.2 MILLION DONATED TO AUSTRALIAN RED CROSS

As a result of its fundraising efforts and contributions to the First National Foundation, First National Real Estate Sellect has helped raise over $1.2 million for Australian Red Cross.

As a National Humanity Partner, First National Real Estate Sellect participates in the support of Australian Red Cross Emergency Services, the arm of Red Cross that helps Australian communities prepare for, respond to and recover from natural disasters.

‘We very excited to be involved in such an important community initiative and to work with an organisation as respected as Red Cross,” First National Sellect principal Mario Valensise said.

‘This partnership focuses on building stronger, more ‘emergency ready’ communities across the country.  Better prepared households can deal more readily with smaller emergencies like house fires or burst water mains, but are also be better placed to cope with larger events such as floods, cyclones, bushfires and even man-made emergencies.

‘With the increasing incidence and severity of emergencies and disasters, it’s important we’re all better prepared to withstand the impacts of these events and understand how we can best recover from them’ Mario said.

Around Australia, First National agents coordinate fundraising auctions and other events that engage local communities and businesses, bringing everyone together in a collective effort.

‘Many local businesses support our efforts by donating their products and services so we can auction them to raise funds for First National Foundation, in support of Red Cross. These sorts of donations make a huge difference,’ Mario said.

‘But it’s also the fundamental efforts of our staff who organise stands in shopping centres, sausage sizzles, lawn bowling events, raffles and all sorts of community events that deserve recognition, not to mention the day-to-day donations we receive from people who just drop into our offices.

‘Australians are famous worldwide for their willingness to give when disasters strike our international neighbours. The wonderful thing about our support for Red Cross Emergency Services is that this homegrown initiative helps Australians, and, there’s no doubt that many of us have needed plenty of help from Red Cross this year’ Mario said.

Australian Red Cross Emergency Services has sent its heartfelt thanks to First National members for their support. The funding First National Foundation provides goes towards support of the National Registration and Enquiry System (NRIS) that is used to help people find loved ones during emergency events, the staffing of shelters in affected regions, a range of booklets such as the ‘Cleaning Up After Flooding’ booklet and additional support, whenever and wherever it is needed.

STEP UP TO PROPERTY LADDER SOONER

First National Real Estate says first home buyers could be staking out their own patch of turf sooner than they imagined, despite spiraling weekly rents, rising living costs and home prices that have begun gently rising again in parts of the country.

The first step is to get together a deposit. This can be made easier by starting with simple things like cutting back on luxury habits, cooking more meals at home and taking lunch to work rather than eating out.  Doing that five days a week, will really get the piggy bank started.

Cutting back on other socialising activities so that a night out is enjoyed once a fortnight, instead of weekly or more frequently can also save money.

“With both established homes and greenfield properties in new suburbs on the city fringes becoming out of reach, first home buyers need to start being a bit more strategic in their thinking and look at things in a different light.  They should consider staying at home longer where much lower rents could be paid and parents might even consider saving the rent to help them get their deposit together.

But, the best thing to do is to seek the services of a financial planner and adviser as they have the expertise and knowledge to assist with your financial needs in the way that best suits the income and lifestyle of the individual.

First home buyers are an important segment of the Australian property market and it is incumbent upon governments and the industry to ensure there are affordable housing options for all sectors.