Newsletter - Inner Circle February 2018

Inner Circle

Confidence is up, despite the headlines

The results are in for total growth over 2017, with Melbourne almost tripling that seen in Sydney. Our city had annual growth of 8.9%, compared to 3.1% in Sydney, according to CoreLogic figures. Melbourne was second only to Hobart, where the median dwelling price came in at 12.3%, but far ahead of Canberra, which had the next highest growth at 4.9%.

Overall, growth has slowed, as is the natural course of things in the property market cycle, but that doesn’t mean it’s all doom and gloom. Recently we’ve seen both positive and some negative headlines predicting what’s ahead this year, and while there will always be some doomsayers, those of us in the market everyday know the sky isn’t falling in.

For Melbourne in particular, the outlook continues to be positive, with most experts predicting at least some growth. While some forecasts are moderate, others are more ambitious, with Louis Christopher of SQM Research, for example, predicting growth of anywhere between 7% and 12% for Melbourne.

Meanwhile the ANZ/Property Council quarterly confidence survey has found confidence in Melbourne’s property industry has outranked New South Wales for the first time in four years. Confidence in the NSW market has fallen, in line with property prices, but in Victoria industry members are expecting further price growth and strong construction activity. Other surveys have made similar findings, with the result that the outlook for Melbourne is bullish.

Melbourne’s resilience is coming from a combination of factors, including strong population growth and a strong economy, including jobs growth. Affordability is another contributing factor. Even though prices have grown significantly, CoreLogic data shows Melbourne is still much more affordable than Sydney, with the median dwelling price sitting at around $720,000, compared to Sydney, which is close to $900,000.

Lending may also push the market along further into 2018, with some predicting restrictions will ease up. This will make finance more accessible, which in turn means people can buy. But it will be a wait and see prospect for now.

If you want advice about where to what to buy this year, If you intend on making a purchase this year, contact us today to find out how we can help.

Which property type should you buy?

Affordability is a key driver of market demand, and as I explained in last month’s newsletter, this year townhouses and villa units will continue to be in strong demand due largely to the price point. But while the price point is driving villas and townhouses, with this property type appealing to downsizers, investors and first homebuyers, the added attraction is that they can still be cosmetically updated to add value. The beauty about these properties is that they offer land value (as opposed to a unit or apartment) and the ability to manufacture equity via cosmetic or structural updating.

We’ve all heard about the importance of having a land component when you purchase a property, and while houses are the ideal property type in that sense, buying a villa or townhouse is a way of attaining some land without paying the higher price tag for a house.

If possible, buyers should stay away from units completely, especially small CBD apartments of less than 40sq m, which will suffer from a lack of demand, partly due to the realisation that they are of substandard quality.

As I also noted last month, this year Melbourne properties built 10 to 12 years ago that have more space and are better built will also be attractive to buyers, both homebuyers and investors. For investors, the added bonus of these properties is that they’ll still be able to claim depreciation, if they opt to update the home with a renovation, which will add further value. The Federal Government recently legislated to limit depreciation claims for second-hand properties to capital allowances (relating to the structure of a building) only, with plant and equipment (removable items such as dishwashers and blinds) only able to be claimed for new properties. But if investors buy a second-hand property and renovate, the new plant and equipment items they buy can be depreciated.

Remember, selecting the right type of property will ensure that even when overall growth moderates, you’ll still see strength in your investment, as the most in demand property types in the right areas will always maintain or increase their value.

Making the right selection isn’t easy, requiring an intimate knowledge of the market. If you need help on how to go about it contact us for an obligation-free discussion.

For one of our recent clients, the housing type was of fundamental importance to their purchase in order to achieve their future property goals. Michael and Amber engaged Property Mavens to find them a high-performing capital growth ‘add value’ property to secure their presence in the rapidly rising market.

They bought this house on 597sq m in Sunshine to develop in the future by building at the rear and updating the house in front.

We purchased this property on their behalf in post-auction negotiations for $35,000 under the vendor’s reserve, and under our client’s budget, giving them instant value.

It’s not easy to find these opportunities, as there are many factors to consider and competition to beat, but we, as experts, help our clients unearth these gems. We know the market value for these properties, and how to negotiate to secure the home at either market value or below.

If you would like help to identify an ' investment grade' property like this one, whether it’s a family home or an investment property, and you’re ready to get started, click here to book a time to discuss your requirements. It’s 100% obligation free.

Ascot Vale

When we purchase a Melbourne metro property for our clients, we always buy with capital growth in mind, and the results of our careful selection speak for themselves.

We bought three properties for our clients Alice and Simon back in 2015 to establish their portfolio. Since they were living in Queensland they needed a locally-based buyers’ advocate with the knowledge and expertise to source and secure the right properties for them.

Two and a half years later all three properties are all performing well, but we are thrilled that one in particular – an investment grade property in Ascot Vale - has experienced outstanding results.

This 3-bedroom, 1-bathroom period home in Ascot Vale has outperformed the market, growing in value by 40.4% in only 30 months.

This is 24.3% higher than the Melbourne market during the same period, which grew at 16.1%.

Alice and Simon can now buy a fourth investment property with their massive capital gain on this property.

If you want similar results, click here to book a time with us to discuss your requirements. It’s 100% obligation free.

 

If you want to invest or buy the right home for your budget, click here to book a time, or call us for a chat about securing your financial independence.

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Property Mavens - Smart Property Buying