Analyst: Regulators or Economic Trends May Stop Housing Boom

Analysts warn that regulators may not intervene this year, despite worries about the pace of property price growth in the country. Without regulators’ intervention, most economists believe that property values will continue to increase through 2021, perhaps by 10 per cent or more.

But in the longer term, Australia’s multi-decade property boom could be approaching its end, and that prices could weaken through the decade when the current short-term price upsurge has concluded.

However, this could happen depending on the outlook for immigration, the continuance of the working-from-home trend, and the level of interest rates in the coming years.

Price growth to continue in the short-term

Australia’s major banks have been keeping track of the country’s property markets.

Per ANZ, Melbourne’s home values had finally turned around in 2020 and the pace of price increase was gradually getting close to those of other cities.

Property prices around the country have been getting significant support from the intensity of recovery in national employment, which has been far stronger than what was recorded after past downturns.

ANZ’s job advertisements were at a 12-year high and job creation was moving solidly, which indicated job losses from the JobKeeper scheme ending would only lead to a “temporary blip” in the unemployment stats.

Supported by historically low interest rates, solid employment growth, and high consumer confidence, the results of the federal HomeBuilder program had been excellent.

Demand for stand-alone homes was flourishing and building costs for homes were increasing fast around Australia (while building costs for units and apartments were declining).

 

However, there was a possibility that regulators would have to intervene at some point, similar to what occurred in New Zealand recently.

Regulators Not Likely to Intercede in 2021

According to the Commonwealth Bank, strongly increasing house prices had raised the possibility of regulators intervening to control lending activity at some point, but this will not happen this year.

The Reserve Bank and the Australian Prudential Regulation Authority (APRA) was focusing on financial stability and lending standards, instead of dwelling prices.

What this means is that they are prioritising on important metrics like the share of investor lending, interest-only lending and high loan-to-valuation ratios. At this time, none of these metrics were an issue. Based on present trends on these metrics, no macroprudential policies are expected to be issued in 2021.

Moreover, proposed amendments to responsible lending policies may result in a little less stringent lending in the near term.

How About in the Longer Term?

Meanwhile, AMP Capital has presented a more general outlook for Australia’s property prices.

Australia’s real property prices have increased an average of roughly 3 per cent annually over the past hundred years and three major long-term booms have occurred (see green in the graph below) as well as two significant long-term weak periods in that time.

The third (and present) long-term boom started in the mid-1990s and it boosted real property values from well below trend to well above trend.

The cyclical growth is expected to continue into 2022, with a price increase of another 15 per cent by the end of 2022.

 

However, the end could be fast approaching for some of the structural aspects (globalization, deregulation, etc.) that had propelled the long-term decrease in interest rates over the last 40 years, which had buoyed dwelling prices for a long time.

The decline in population growth over the past year led to a change from persistent undersupply in housing to oversupply, provided population growth continues to be on a decline.

However, the property market may continue to shock, for example, the implementation of one final low-interest rates (with the RBA approving negative interest rates), and a faster than expected recovery of the population when borders reopen.

Nevertheless, there are strong reasons to assume that the factors that have boosted the average Australian capital city property prices to well above trend and above price-to-income ratios reported in comparable countries for the past 20 years may be at, or near to, its end.

Don’t you wish you had a crystal ball?

 

4 Decorating Pieces That You Need to Invest In

If you’re redecorating or wishing to purchase new furnishings, here are some tips to help you properly allot your hard-earned cash. The trick is choosing quality pieces that will last a long time – regardless of your taste or home changes.

Here are four classic pieces that just have to be included in your redecorating budget.

  1. A Great Lounge

The hero piece in any living space and a real investment is the lounge. The perfect lounge has to be functional, not just beautiful. It should be the right size, the right comfort-level and the right look.

You can find lounge products that can be tailored according to your preference in size, shape, colour and comfort. The modular parts of these lounges can be adjusted to fit any space, changing effortlessly into several shapes that include shelving and storage. This flexibility will serve you well down the road as it can adapt to your changing lifestyle. So when you change your address, the lounge can move with you.

Pro tip: Don’t follow trends; pick a lounge in a neutral colour palette as it is timeless.

  1. Artworks

With so many cheap, mass produced wall art in the market, people can overlook the fact that quality artwork is a good investment.

Purchasing from a trustworthy art gallery means your art piece may increase in value. Even if there is no assurance, there are legitimate methods to resell a reputable artwork in the future rather than selling it on Facebook Marketplace for $10.

The sole disadvantage is that you need to shell out the initial cost, which could reach a minimum of $3000-$10,000.

If you decide to buy from a reputable small gallery, which is a good place to start, you can benefit from schemes like Art Money, which offers zero-interest loans to support Australia’s art industry.

In Australia, you can also find some of the world’s first and best abstract art forms through its indigenous communities. Check out the Indigenous Art Code or Desart to look for good and reputable recommendations.

  1. A Big Rug

The right pieces to invest in are those that are both functional and beautiful. They can jazz up a room while also providing a purpose. For example, rugs serve as insulation for a room or protection for floorings, but can also help spice up a room with refreshing colours, patterns or textures.

Rugs can be expensive, particularly those hand-woven pieces or woollen fabric. Luckily, there are good quality rugs that can last for 20 years or more if you care for them properly, so your money is worth it.

When choosing a rug, opt for a style or colour that is adaptable – and one that is really to your taste. Darker or subdued colours of red, green or blue are likely to complement several different styles and can be changed to fit various looks and spaces. Unlike most lighter colours, marks are less likely to show in darker shades.

To prolong its life, choose simple patterns. 

  1. A Statement Chair

If your living space or bedroom needs an armchair, show your creativity in terms of form or colour. An armchair can effortlessly be a decorative accent and a cozy space to sit.

If you’d like a classic piece, invest in a tub chair that is stylish and doesn’t occupy a large space in your living area, home office or bedroom.

You can also get creative with materials. If you fancy the Hamptons style, you can experiment with an armchair without your living area becoming full of rattan. Likewise, you may want to avoid a big velvet couch, but a couple of velvet armchairs will add character without being overpowering.

Most of all have a little fun and create a unique style that your buyers are going to like, feel comfortable with and will remember your home for!

 

Tips to Make Your Open Inspection a Success

We often hear the saying “first impressions matter” but when it comes to open inspections, the motto to remember is “every impression matters.”

The reason is that the way a home is shown for an open home can determine whether prospective buyers are left in awe or dread.  Open inspections are not only impressing potential buyers with a home’s lovely features, but also presenting how well it is cared for and maintained.

Here’s what I recommend sellers pay attention to before starting an open inspection.

 

The General Vibe

Presenting the home in its best possible light is the simplest advice you can follow. Make the property neat, tidy, cool and fresh – all things that buyers check when looking at properties. Open doors, turn on the lights, adjust the temperature and attend to any awful pet smells to satisfy all senses.  I also recommend getting rid of personal items in your home, but it’s a fine line. There is no need to completely depersonalise because you don’t want your home to look and feel sterile. You want prospective buyers to see that your home is loved.

 

Hire Furniture

Hire furniture for the length of the sales campaign. With hire furniture, you can sell the dream of how a buyer would live in your home. A living area is just an open space until you add furniture, and then it transforms into a room where people could see themselves living there.

 

Styling

I always warn against “over-styling” your property. When styling for open, less is more. Make your property feel loved and comfortable and not overdone.

 

Don’t Overlook the Exterior

Focusing only on the interiors of a property is a trap. Outdoors is essential, especially if it’s an area for entertainment. Apply the same level of beauty you do on the interior to the exterior. Arrange tables and chairs and tidy up the gardens, lawns and edges.

 

Getting Ready to Sell

Typically your open home should run for around 30 minutes but sometimes I will recommend a longer open home time for larger homes or for your first open home.   This will depend on the number of active buyers attending viewings or the amount of enquiry coming in on your home.  I may also suggest a weekday open home or VIP Open Home!    The next step is to ensure that you are not present or spying on the property from your car or a neighbours home.  It’s now time to leave your home and let both your buyers feel comfortable and for your agent get to work! 

Thinking of selling this year?  Call me to arrange for an appointment to discuss my ideas to increase the value of your home and to make recommendations specific to your home!

Warning Signs to Watch Out For When Buying a Renovated House

You might consider a freshly refurbished house as a dream purchase, but you have to look beyond the new paint, shiny tiles, and polished floorboards before parting with your money.

While many homeowners make sure their properties are renovated to high specifications, there are still those who cut corners or ignore major issues to try to get the highest possible price for their property.

Being aware of the warning signs and having experts to help you can boost your chances of buying a quality home instead of a problematic house.

Look Out for the Flip

A home that had been refurbished prior to sale can fall into one of three categories, which may impact its quality.

The 3 categories are:

  • A DIY renovation by the owners who lived in it and loved it. This is normally not bad because the renovation has been made according to the owners’ standards.
  • A renovation that the landlord did for their renter. This is fine too because renters will tell you if they aren’t satisfied.
  • A flip, can be a warning sign. This is because someone who is doing a flip is trying to maximise their profit, and maximising profit sometimes means minimising costs.

Discovering Problems

It’s not uncommon to see pre-sale renovations where many corners get cut. They are done to hide problems or sometimes use cheap, low-quality products to save money. The house might be lived in, so you might find it hard to ascertain if all is in good working order. You have to be prepared to check everything.

One example is painting over problems without properly fixing the surfaces. There is a correct way of removing mould, but people renovating their homes may not know this. Mould can remain inactive on a dry surface but can spring back to life once moisture is introduced.

Another hotspot for problems is bathroom renovations. Some of the issues you need to check out are improperly repaired subfloors, insufficiently waterproofed surfaces, and joint failures or leaks due to the use of the wrong adhesives and sealants.  Having a pre-purchase building and pest inspection done on any home is a wise move.

Experts suggest that buyers ensure that the renovations are council-approved, ask for the information of any engineers, architects, or tradespeople hired for the project, and find out if there is any warranty related to the project.

Pricing Refurbished Homes

You shouldn’t believe that a renovation will add more value than it costs. Unless you have the related experience and qualifications of a tradesperson, you tend to realise that the money you spend on refurbishing a home is about what you add to it. People making more is the exemption rather than the rule.

Buyers should be aware that a cosmetic renovation doesn’t make them overlook the major issues that haven’t been fixed.

That is where buyers become victims of a flip. If there are costly problems hiding under those renovations, you will still pay the premium.  But homes that have undergone high-quality renovations will command wide-ranging interest, and buyers of high-quality refurbished homes should expect to face plenty of competitors.

If you’re purchasing a property that has been refurbished or reconstructed, search for high-quality construction, fixtures, and fittings.  You might even consider asking the sellers if they have any before, during and after photos – particularly when it’s structural work and behind or in walls.