RBA keeps interest rates at 1.5% due to housing concerns

According to the minutes of the Reserve Bank of Australia’s (RBA) March 17th meeting released to the press, it has decided to keep interest rates at 1.5%.

Though the RBA was generally bullish about Australia’s economy, which is presently shifting away from the mining success of the past 10 years, it expressed concern over the potential risks in the housing sector and the increase in the amount of debt within the country.

The warning from the central bank comes as worries of a bubble appear in Sydney’s property market, where prices have increased twofold since 2009. Melbourne prices are also soaring, with investors rushing to secure cheap money and invest it in property.

In contrast, post-mining boom Western Australia is seeing housing prices decline and businesses shutting down, underlining the increasing economic gap in the country.

According to Bloomberg Australia, the annual gross state product growth in Western Australian has declined to 1.9% from 9.1% over the last five years. In comparison, the number has nearly doubled in Sydney and Melbourne.

Figures released by the Australian Bureau of Statistics (ABS) shows that housing values in Sydney and Melbourne increased at a near-record rate in the December quarter, rising 5.2% and 5.3% respectively.

These figures strengthened fears of housing affordability in the two eastern cities. Also, there are worries of a potential oversupply of apartments in Brisbane.

It is not yet clear how the government will address the issue of housing affordability but in the meantime the RBA is pleased to keep interest rates at the historic-low of 1.5%.

The central bank’s view reiterates the ‘Big Four Banks’ previous statement that, while a housing bubble is just a possibility at this point, there are risks and the government must not be hasty when dealing with the property sector.


Home Sale: Why is Listed Price Different from Bank Value?

How can a home for sale have different values? What is the right price? Let us use a hypothetical home as an example to examine this price confusion.

Here is the Holmes family who currently resides in the inner city suburb of Adamstown. They have outgrown their home and so are planning to purchase a larger house. They need money to pay the deposit for a new home, so they call their bank to arrange for a refinancing of their current home.

They also call a local real estate agent to request for a price appraisal before deciding to list their home. They sell the home using auction. Meanwhile, the family receives a notice in the mail advising them of the current land valuation.

It was while Mrs Holmes was packing their belongings that she noticed that their home had five different “prices”, including the price she and her husband came up with on their own. She’s more than pleased with the outcome but wondered if she had taken another approach, could the results have been different?

So, what is the reason for these different prices?  Why is it so confusing?

The bank value
The bank will value your property if you are going to mortgage it. The lender does this to makes sure the property has sufficient security against the loan, if something happens and you are unable to continue the repayments and the bank needs to sell it to recover its loss.

Hence, it’s not surprising that the value from the bank will typically be conservative, sometimes 10-20% below the present selling prices of similar properties.

In the case of the Holmes’s, the bank valued their home at $520,000.

The price appraisal by the selling agent
Real estate agents are usually approached to provide a market value of the property to help the seller identify who their target market is and how much they may pay.

Before being hired by the seller, the agent will normally inspect the property and look at comparable sales in the local area before providing a written appraisal which is likely an estimation between X and Y.

Sellers can use this as a price guide when deciding what price to market their home.

After conducting an inspection, the Holmes’s agent estimates that their home will sell for between $550,000 – $600,000, based on the good condition of the two bedroom weatherboard home, on a small flat block in Adamstown, close to transport, parks and the local primary school where demand is high.

The sale price
It doesn’t matter whether the property is sold through auction or private sale, the price that the successful buyer is willing to pay, and the seller is willing to accept, on the date of contract signing is the home’s legally binding sale price.

The final sale price can be influenced by a host of factors, including strong marketing, hot demand in the suburb and a huge number of participants at open homes and on auction day.

In the Holmes’s case, eight enthusiastic buyers were among the participants at the auction. From the start, bidding was fierce and the price rapidly went beyond even the agent’s optimistic appraisal. The winning bid was $630,000.

Notice of Valuation from NSW Valuer General
In general terms, this value is used by councils, water and fire authorities to determine the amount that property owners owe them for rates and utilising their infrastructure and services.  

On the Holmes’s Notice of Valuation, the Site Value is $280,000, which is the land value only and does not including buildings.  The Holmes feel to replace their 2 bedroom home on the site would cost $195,000 and so believe the total value to be $475,000.

The homeowner’s valuation
Each homeowner who wants to sell has a “wish price”. Normally, they also have a number that they designate as “the lowest they can go.” Usually, these two prices are based on where the house is located, aspects and features. But sometimes emotion rather than facts influence the valuation of the seller.

Mr and Mrs Holmes have no idea how to price their home when they decided to sell it even after conducting their own research by attending other open homes in Adamstown.

They were relying on a price data for Adamstown, which indicated a $551,500 median price for a two bedroom home in Adamstown within the last 6 months. Mrs Holmes believed that their property’s sale price should be in line with the median price, but Mr Holmes believed that $50,000 should be added to the sale price because of the new pool they built last year.  They felt their dream price would be $601,500, their bottom price would be $551,500 and would accept $576,500.

In the end, the final price will typically be determined by what a purchaser is willing to pay at auction or in a private sale and in this scenario the final price of $630,000 which was $53,500 more than they were expecting.

To find out what your home may be worth in todays market, call Annette directly on 0418447856, email her annettep@oneagency.com.au or request an appraisal here!

Home Renovations: Unforeseen Costs

As depicted in the video above,
 a survey conducted by realestate.com.au found that most people had difficulty staying to a budget when renovating their home.

There are many renovation expenses that homeowners have to deal with and one of them is for unforeseen costs.

According to 24% of respondents their budget went over due to unforeseen issues such as asbestos removal.

A significant number of houses built in the 1970’s will have asbestos. So, many homeowners thinking of renovating must include the cost of removing this dangerous material in their budget.

A professional builder will be able to identify signs of asbestos fibre, such as hairline cracks in the walls. However, these signs might be overlooked by DIY-ers.  So never forgo a building inspection.

Creating structural problems when people want to remove walls, particularly walls that support the ceiling, is another common issue novice renovators come across. A big trend in homes these days is the open-plan living. This entails removing walls, but sometimes people don’t factor in that the wall is load bearing. If you remove load-bearing walls, you will need to install reinforcements before the removal so that the ceiling won’t collapse.

Another common issue is incorrect measurements for kitchen renovations.  Especially when the walls are not straight and ‘packing’ may be required which then pushes the cabinetry beyond the allocated space resulting in a kitchen that doesn’t fit and in need of modification.

It is also important to have the correct measurements when it comes to your furniture and décor. Inexperienced renovators may end up finding that their oversized furniture no longer fits the space and new furniture needs to be purchased adding to unforeseen costs.

Again, here is where planning is vital.

7 Things You Can Do If Your Property Does Not Sell

If your property has not been sold after being on the market for a long time, here are seven things you can do to finally move your property and put that sold sticker on it.

1. Shake up your advertising – photos, wording and placement
If you have not changed your marketing for weeks, your prospective buyers will notice and, as a result, will overlook your property.  Making even the slightest changes can help your property to stand out again and bring new buyers to enquire and inspect.

2. Adjust your price
Don’t get stubbornly attached to your price, as you will lose in the end.
Location, presentation and price are the three factors buyers are interested in and will value your home based on how well or not so well they rank in comparison to your competition.

Simply put, if buyers see better value elsewhere, that’s where they will go!

3.  Update your property or make improvements
Review the feedback from your agent.  By updating or improving the buyers concerns you’ll not only be overcoming the objections of future buyers but also adding value back into your home.

If the property is empty, consider investing in home staging. There are literally dozens of thing you can do to make improvements but remember not to over capitalise. At the end of the day there is no guarantee that you’ll get a price that would cover the money you spent on the improvements.

4. Look at comparable properties
Aside from doing your homework on how to sell your property, it is also important to investigate your competition.

  • Ask your agent for an updated appraisal to research recent sales and your new competition.
  • Go to auctions and open inspections. Gather insights by talking to other buyers in those places.
  • Don’t stop at comparing the property itself. Find out how the properties are being presented, how the open inspections are being carried out, how they are being sold (by auction, by private treaty, etc.), and other things that come to your mind. Check out what’s trending and what people are talking about.

5. Be receptive to advice
If you ask for help from people you trust, be really receptive to their advice, suggestion or recommendation. Especially your agent!  Expect a reality check and be open to constructive criticisms.

6. Don’t put blame on anyone (particularly on you)
It is common to start blaming yourself or others when your property has been languishing for months in the market. It is stressful trying to sell a house, especially if you’re a financial bind or already committed to purchasing a new home.

If you’re feeling stressed, avoid feeling upset or angry. Even if you decide to change agents, don’t end the relationship with bitter feelings on your part, because you will find it difficult to concentrate on your second chance to sell your home. An agent and seller relationship is a two-way street, and it just so happened that your partnership did not work out.  Besides, if your second agent doesn’t work out you might want to go back to your original agent.

7. Take your property off the market for a while
There are three things that can happen if a property is kept on the market for a long time with no break.

Buyers will avoid it, thinking that something is wrong with it.
Buyers will try to exploit it’s time on the market to negotiate a lower price.
Buyers will ignore your property all together because it has been pushed back several pages on the internet and they won’t even see the ad.

Taking your property off the market for a while will help you get back on track and end the blame game. Don’t let your optimism dim. Perhaps, it wasn’t the right time for you to sell.  Perhaps you will have to wait until the market meets your price.

Recharge, take a break, and equip yourself with new techniques or support to get back to the market. Often its a minor, inexpensive improvement that gets your home sold so whatever you choose to do, do it NOW!

If you are thinking of selling or would just like an appraisal, call Annette directly on 0418447856.

Do you have an un-renovated home to sell?

A study showed that nearly 8.4 million, or 62% of the 13.6 million homeowners in Australia, have made improvements in their homes in the last 12 months in 2016, compared to 7.5 million, or 57% in 2013.

This study compares the figures obtained from two individual surveys carried out in 2013 and 2016 on home improvements carried out by homeowners themselves who already owned their houses or still paying for it.

The latest study from Roy Morgan indicates that during the past few years, a growing number of Australians are performing improvements or repairs to their properties. The trend towards internal renovations continues to rise, even taking into account that the number of individuals who own or are paying off a home has increased by 400,000 since 2013.

As a result of popular reality TV shows like “House Rules” and “The Block” inspiring DIY zeal among Australian viewers and homeownership increasing despite overblown property prices, hardware and home improvement stores and tradespeople are poised to gain from this thriving market.

The study also found that the most popular type of home improvements was minor repairs like alterations, with just over 5.8 million homeowners doing it. This was followed by painting with 3.7 million homeowners doing it in the last 12 months,

Homeowners who have been residing in the same house for a year or less are more liable to perform renovations, alterations or repairs compared to owners who have been in the same address longer. This shows that they are new owners of a house previously owned by another person, and are trying to make it their own. It doesn’t mean that renovations decline after they have been living in the property for some time, but that renovations are high during the first year.

In the study, plumbing and electrical were the usual fixes among 3.4 million people respectively, while 2.9 million homeowners performed more decorative improvements like installing wallpaper, carpets and new curtains.

It was also found that home improvement projects were performed more by Australians who have homes instead of villa or terrace.

Meanwhile, Australians who are renting are less apt to spend on improvements and repairs (normally those are the landlord’s responsibility) or even redecorating. Once they engage, they follow a different timing and decision-making process, with long-standing renters being more likely to perform home improvements. This may be because they feel secure in their lease and are established in their rental accommodations.

Do you have an un-renovated home to sell?  Are you contemplating doing some renovations before going to the market?

My recommendation is to consult with me before doing any improvement.  You might end up selling for way more than you expected without the time and expenses to get there.  Take a look at my recent sale at 12 Kalinda Road Charlestown as an example.