Mornington Peninsula Real Estate April News – First National Basso
HOUSES MORE PROFITABLE THAN UNITS
CoreLogic’s Pain and Gain report for the September quarter revealed that 88.1% of property sales made a profit; an increase of 1.8% on the June quarter report.
Hobart had the highest rate of profit-making re-sales of all capital cities over the September quarter, according to the most recent data from CoreLogic. In contrast, Melbourne was the only city that saw a decline in the rate of profit-making sales over the same period.
Yet regional Victoria was the most profitable ‘rest of state’ region, with 97.5% of dwellings sold for a profit in the three months to September, with the regions seeing the rate of profit-making sales increase faster than capital cities.
Non-profitable sales did not grow in percentage, but their overall value deepened by $319 million to pass $1.2 billion, with investors more likely to sell for a loss than owner-occupiers.
Further key points from the September quarter Pain and Gain report include:
- The Sunshine Coast hit a record high rate of profit-making sales in the September quarter at 96.4%
- Profitability across both houses and units rose across Australia
- Houses are still more profitable than units, but the gap is narrowing, moving from 11.2% to 10%
- A higher portion (17.1%) of property investors sold their dwelling at a loss during the September quarter compared with owner occupiers (10.4%)
- For profit-making sales, the median hold period was nine years, and for loss making sales it was 6.7 years
- Hobart has now held the highest rate of profit-making sales since March 2018
Eliza Owen, CoreLogic’s Head of Research Australia, says coastal regional markets were also very profitable for sellers.
‘Profit-making sales represent over 95% of resales across six major coastal markets: Geelong, Illawarra, the Mid North Coast, the Newcastle Lake Macquarie region, the Richmond Tweed region and the Sunshine Coast.
‘The combined regional Australian market saw the rate of profit-making sales increase 150 basis points, to 89.2% in the September quarter, while the rate of profitability across capital city markets expanded 30 basis points, to 87.2%.’
Investors vs Owner Occupiers
Ms Owen says despite the higher rate of loss observed in investor sales in the quarter, the rate of properties re-sold at a loss was down from 18% in the June quarter, while the rate of loss-making sales among owner occupiers was down from 11.1%.
‘CoreLogic home value indices show dwelling values across Hobart have seen annualised growth of 7.9% for the five years to December 2020 – the highest annualised growth rate of the capital city markets’.
Houses vs Units
There was generally a higher rate of return for houses ($225,000) than units ($125,000), but unit profitability rose faster than that of houses.
Even though the rate of loss-making sales declined faster across the unit segment, units were still about two times more likely to sell for a loss than houses in the September quarter.
The portion of properties sold at a loss among houses fell from 10.2% in the three months to June to 9.6%, while the portion of loss-making unit sales fell from 21.4% to 19.6%. With record low mortgage rates, a faster than expected economic recovery and relatively low cases of COVID-19, profitability is tipped to trend upwards over the coming quarters.
RBA PREDICTS 30% RISE OVER NEXT 3 YEARS
With Australia seeming to have transitioned through the worst of the pandemic so far, homeowners and buyers are starting to breathe out again. Confidence is growing, largely due to the fact that some of the worst-case property market predictions of 2020 simply did not eventuate.
Analysis from the Reserve Bank of Australia in January, suggested house values could jump by 30% over the next three years. It’s thought that this growth will be driven by an unusual level of consumer confidence, that’s come out of the experience of the pandemic and will be sustained over the next few years – hence the RBA’s prediction.
There are a few key components underpinning that confidence – the primary one being record low interest rates. “Interest rates have been this level for about 3 to 5 years now, so buyers have already factored that in”, Ray Ellis from First National Real Estate explains. “Low interest rates have not only become the norm, they’ll be the norm for buyers in Australia for many years to come. They look at all the forecasting, at what they see is going to happen, do their research, then factor the results into another 3 to 5 years.” Not to mention the fact that low interest rates were sustained throughout the multiple complex challenges of 2020. This experience fuels their belief, strengthening their confidence in borrowing, which, according to the RBA could push property prices considerably high.
This is great for existing property owners, but if you’re looking to buy, surely this raises deep concerns. Not according to First National Real Estate’s Ray Ellis. “Buyers are very willing to put their cash forward, because of their strong confidence in low interest rates. With the current average new home loan sitting around $530,000, Buyers aren’t afraid to have a slightly larger mortgage, if it means buying the property that suits their lifestyle of work requirements.”
The age-old love affair Australians have had with property in general was reignited with so many of us spending more time than ever before in our homes. Ray Ellis explains. “It’s very difficult for two people to work from home in a one-bedroom apartment. It’s very difficult for people to work from home in a small house with no backyard with children. So, the great Australian dream – that slightly bigger house with a backyard or an outdoor entertaining area is now right back in fashion”.
Of course, the current seller’s market will be irresistible to many, evidenced by a dramatic increase in listings in late December. Many are making the choices around their new lifestyle requirements. “They’re taking their agenda in their own hands and they’re looking to downsize or change. What COVID has taught us is living and working requirements in our house is what’s important, and the strong market is putting them in a strong position”.
REIA CALLS FOR END TO RENT MORATORIUM
With the number of COVID tenancies in financial hardship now dropping, Australia’s peak real estate body has called for the rental eviction moratorium to be scrapped.
The Real Estate Institute of Australia’s (REIA) president, Adrian Kelly, said it is time for all COVID-19 rental eviction moratoriums to be removed so that some form of normality for both tenants and property owners can resume in 2021.
“The rental eviction moratorium was the absolute right decision at the time by our nation’s leaders and played a critical role in Australia’s initial COVID-19 line of defence,” he began.
“However, issues around tenants being impacted by COVID-19 and their ability to pay rent have not been anywhere near what was expected in early 2020.”
He argues that the policy is no longer needed, given some states have ended rental eviction policies, while unemployment has dropped to 6.6 per cent.
Mr Kelly said the percentage of COVID-19-impacted tenants is now less than 5 per cent in major cities and less than 1 per cent in regional areas.
“Despite this, almost all jurisdictions, except for Queensland and the Northern Territory, continue to extend the moratorium period far beyond six months, with most extending until the end of March.”
The president explained that Queenslanders felt minimal impact when their eviction moratorium was removed.
“And with economies now opening up, it is now time for all the states to do the same,” he iterated.
Victoria, South Australia and New South Wales have all extended their support of tenants to the end of March 2021. For tenants in the ACT, the eviction moratorium will continue until the end of April.
Mr Kelly said continuous extensions “have the potential to cause hardship on many landlords who may already be struggling”.
“Funding of sorts remains available in most jurisdictions for both tenants and property owners who remain impacted, and we call on all state governments to provide that targeted support to landlords and spend these funds,” he said.
The call from the REIA comes as paused mortgages look set to resume accumulating interest, which means property owners are reliant upon rental payments resuming to pre-pandemic levels.
Therefore, it would be sensible for moratoriums to be equally re-examined on a national basis, Mr Kelly concluded.
The national cabinet will meet again on Friday, 5 February 2021.
Rents recovering from COVID impact
December 2020 quarter CPI data shows the rental market is recovering from the effects of the COVID pandemic, according to the REIA. Rents increased by 0.1% for the quarter following two quarters of falls with a fall of 1.3% for the year, with all capital cities except Sydney showing an increase in the quarter. Sydney had no change after five consecutive quarters of falls.
The Housing Group decreased in the December quarter and the year by 0.6 per cent and 0.9 per cent respectively. The All Groups CPI increased by 0.9% in the December quarter and also for the 2020 year. This follows a 1.6% increase in the September quarter after the June quarter recorded -1.9% – the largest fall in the 72-year history of the CPI.
The quarterly changes for the analytical series of trimmed mean and for the weighted median were 0.4% with the annual changes of 1.2% and 1.4% respectively with the trimmed mean being below 2% since December 2015.
MOST AFFORDABLE CITIES
Findings from the annual rental affordability index (RAI) report were released recently, and though affordability had improved, with rental prices dropping in most cities, the report found rent still puts a huge strain on budgets for low-income earners in each of Australia’s main cities.
Perth was found to be Australia’s most affordable city for renters in the current climate, with Melbourne coming in a close second. Rents fell dramatically in greater Melbourne, greater Brisbane and greater Hobart; though the latter remains Australia’s most unaffordable city, due to generally lower than average household incomes and reduced supply of rental properties. Adelaide comes in at a close 2nd for unaffordability for the same reasons.
With the general consensus being that rent should be no more than 30% of overall household income, and a general lack of affordable social housing nationally, the situation for many became particularly dire during the pandemic. Job losses were quickly buffered with government payments, though many have been affected by incremental decreases to JobSeeker payments
If you’re looking to relocate right now, with affordable rent as your motivating factor, Melbourne must surely hold the winning ticket – especially with the Victorian Government’s Big Housing Build announced in November.
HOW TO CREATE THE IDEAL WORK FROM HOME SET UP
Many people made the shift to working from home in 2020, but little did we know how dramatically it would change the culture of work, well into the future. The struggle was real for many – especially those with small living spaces and little to no outdoor area – yes, especially you, home schooling parents!
Now, in 2021 many employers are choosing to sustain a flexible approach around employees working from home or going into the office. This is a dream for some and far from ideal for others, but whatever your situation, setting yourself up with the best home office and workspace arrangement will make the transition much easier.
What’s your new normal now?
Everyone’s home circumstances are different, so your first step is to determine how many days (or hours) you’ll be working at home for, and how conducive your current environment is to ensure that happens. What will your new normal look like? Will you continue working from home full time? Or will you phase in a hybrid situation of some office days and some home days? Are your kids going back to school? What are your housemates or partners doing with work and home life? Whatever you did to ‘get by’ in 2020 can now be disassembled or upgraded and the new version of your working life can come into its own.
It’s more than just a desk and a chair.
If working from home is becoming a permanent arrangement, a dedicated workspace should not only give you a place to sit and work; it should encourage productivity, whilst being ergonomically sound and ideally have access to good natural light and fresh air.
Nationally recognised standards are designed to protect the population across a range of areas, including in the workplace. Standards Australia set out minimum surface area, table or desk size and height and these should be adhered to where possible to ensure best practice, for your own health, wellbeing and productivity. This should be something that your work’s HR department discusses with you if their direction is for you to work from home.
Talk to your employer about what hardware and furniture they can provide you with, and make sure you have the essentials of good noise cancelling headphones (with a microphone for meetings), strong WiFi and excellent back up procedures (to external hard drives, company servers or other cloud-based solutions).
Being a tenant certainly doesn’t restrict your options where a great home workspace is concerned, but the space you have available will. Remember you can always put in a request to your property manager to put hooks in the walls, or install some shelves, lighting or power points, if you need to customise the space. It’s important though, that whatever you do stays within the confines of your lease agreement and can be easily packed up and taken with you when you move out.
Working from small spaces
If you’re in a one room studio apartment and your bed pulls down from the wall each night, then yes you have some challenges. If you have a little extra space, then adapt parts of the main living space to work where possible. If you need a desktop monitor, pick your preferred workspace – be it kitchen bench, dining table or a dedicated desk (if you have the room) and find another solution for whatever happened there before. If you’re not restricted to a desktop then a simple tray, basket or box with all of your work gear in it is ideal. You can establish a nice routine then of ‘arriving’ to work by unpacking your tray and ‘leaving’ work by packing everything away and magically making it home space again. It also gives you some flexibility to work from the table one day when you have a lot of meetings or planning, or the couch if you’re doing writing and thinking type work.
If you share your space with others, it’s worth talking over everyone’s needs and creating a schedule of who works where and when. Knowing what your workflow is going to be and what environment you need is essential, but the end result might be that everyone works on a rotation to share the home space – a few hours in a cafe, a day in the local library, a day in the office, and a day at home, then flexibility built in around whatever’s left.
Ditch the spare bedroom and make it your own
If you have a spare room and home is your new permanent work address, then all the cards are in your favour. You’re going to be spending a lot more time in there than any guest ever would so consider swapping out the bed for a sofa bed of some kind to make it feel more like your office and less like that empty echoing room that’s hardly ever used.
Make sure you take the best advantage of what your employer can provide you with in terms of hardware, furniture and so on. Freestanding furniture is ideal, because as mentioned previously – you can take it with you when you move out. Positioning your desk near a window will ensure you maximise the best light and air, whilst also accommodating for essential strategic thinking/daydreaming opportunities. A whole dedicated room also gives you the freedom to get creative and make it a great space that you’ll love to be in. Some plants, pictures on the wall, a calendar, a planner, or even a whiteboard can be the key to a more balanced and productive workspace.
Understand your options and responsibilities
Being a tenant means any changes you make to the property must comply with your lease agreement. Working from home and running a business from home are not the same thing so it’s important you define your situation clearly and keep your property manager informed about your circumstances.
Additionally, there may be options for you individually to claim a portion of home offices expenses related to the property so having everyone in the loop about your circumstances will help.
You of course should understand how your personal, or home and contents insurance is affected if you suddenly have a lot of expensive equipment on site that’s not currently listed in your policy. Workplace protections around health and safety, and employee health and wellness, will be applied in different ways than when you worked on site so discuss this with your employer and make sure you know your entitlements and responsibilities.
Whatever your work from home situation ends up being, always keep your property manager informed of any changes to your circumstances that may affect your lease or your tenancy.
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