Questus Realty

Fundamentals are improving

2011-04-07T00:14:00.000-07:00

I had the good fortune to attend a recent presentation by Gavin Hegney, a local property expert, you have probably heard him on 720 radio.

Consider Gavin's opening words, "recovery usually happens when we don't feel it". Makes sense, if we look at the share market, it is up 50% since the GFC and yet sentiment is still weak.

Gavin is reasonably upbeat about the property market future, he suggests fundamentals are improving in WA, whilst sentiment is lagging behind.

Fundamentals such as rental vacancies, population growth and employment are suggesting positive outlook. Gavin shared how in the last cycle eastern states money was a big reason for the WA property growth and he predicts this will happen again as WA is starting to look more affordable, with strong fundamentals. Interesting at the crest of the WA slump, WA was the least affordable in Australia, now we are the most affordable again.

In the meantime WA remains slow, Gavin suggested the number of listings is artificially high, he proposes that 10-20% of these are subject to sale and will soon come off the market. He also believes 2 in 3 properties are overpriced and this correction will come either as reduced prices or removed from the market.

So are we there yet? According to Gavin we are in for a 3-4 year recovery phase which will see modest growth at around 4-5%.

As for tips of where to buy, consider this "8 in 10 people are looking for a home", his lesson is buy where people want to live, can't argue with that.

How can we protect ourselves from inflation?

2011-03-27T23:42:00.000-07:00

A headache for economies around the globe and dominating finance report headlines. Question for us households is what can we do to protect ourselves.

Apart from becoming more self sufficient such as producing our own food resources, it seems many experts are also suggesting residential real estate can protect you against inflation.

Few people think of real estate when they think of inflation. But apparently we should. Of course, home prices are subject to a range of economic forces in the near-term, but in the long-term, they are simply a function of purchasing power. If inflation builds over time and workers secure higher earnings to keep up with inflation, their relative purchasing strength moves up in tandem.

Are we there yet?

2011-03-27T23:35:00.000-07:00

There is plenty of data to confirm that the market has been slow. Perth sales volumes were well below average during 2010 with an overall dip of 23.7% for the year according to research released today from RP Data. Research analyst Cameron Kusher confirmed this result is the lowest level of dwelling sales activity of any year during the past decade.

Big question is have we reached the turning point and what does the future hold. According to RP Data analyst “Although we are not anticipating much in the way of property value growth during 2011 some indicators suggest that sales volumes will improve. Housing finance commitment volumes have leveled and are now improving slightly, unemployment is at 5.0 per cent, wages are growing at a level above inflation and limited growth in property values coupled with wage growth is likely to improve housing affordability.

Lets hope this all translates to movement and confidence in the sector as the gridlocks of 2010 are loosened. The biggest problem with lack of movement is that our real estate assets becoming completely illiquid. Maybe new realistic pricing will allow people to get on with their lives to upgrade or downsize as their lifestyle demands.

Lessons from Real Estate Rural Network conference

2011-02-08T22:16:00.000-08:00

Kris & I attended the Nov REIWA rural network gathering. I thought I'd jot down some prompts to recall some of the outcomes for future research:

1. Small Landholders (by definition 1 to 100 ha) by Dept of Ag, Neil Guise.

Neil shared interesting research on small landholders, which by the way is no small group - some 60,000 in WA (versus 6,000 commercial farmers). Apparently 95% of the small landholders are there for lifestyle reasons (no surprise) and 80% would like the farm to be viable but here's the catch within time constraints. I totally understand that - I explored a number of options with our farm but to be honest, despite my marketing knowledge all roads kept coming up against hard manual labor, which to be honest I'm just not built for that. But I haven't given up - lets face it, these are the dreams that keep it exciting as you look across a few acres and wonder what could be. I did come away inspired to plant lime trees - maybe one day.
He shared information about the foodlink program which is of course very commendable and a great start to helping niche players find a market. At this years show they showcased 8 WA niche success stories; from bananas to honey all very positive. I particularly liked the local Gingin success story Fruity Fanatics, frozen fresh fruit - having great success with school canteens as a new healthy choice. I wish I thought of that one.

2. Food security presentation by Stuart Clarke from Ag Dept.

Stuart provided some great insights into how to have a win against the power of the supermarkets and the sobering facts of food inequality across the globe.
He had these 3 words of advice for farmers:

Create
Capture
Defend value

3. Juliet Grist from Rural Financial Counselling Service WA

Juliet provided a very impressive presentation on the role of the service in helping farmers in need. She warned of a tough year ahead and the need to be ever so professional and honest when dealing with farmers when dealing with the stress of poor harvest and financial frustrations.
Key lessons included;

understanding the holding cost of property
retirement & handover issues (no one wants their kids to take-over and the importance of off farm activities & skills
the importance of professional marketing plans (banks will step in if they can do a better job of marketing the property)
she pleaded with real estate agents to provide meaningful appraisals as it often takes months to undo unrealistic expectations. She stressed it shouldn't be about winning the sale but managing expectation.
possibility of chemical fallow which is proven to increase the value of future harvests
"homesteading" - potential for farmer to keep 200 acres if emotional attachments

She shared her 4 point plan;

Calm the situation - listen, empathise
Provide clarity - some people can't see the wood for the "tree" in front of them.
Back up plan
Awareness of personal factors - for e.g. maybe they don't want to farm anymore.
Focus on de-personalising the plan - giving them control, providing regular updates - keeping them constantly informed.

Mental health awareness - above all Juliet shared the importance of understanding your clients mental position as well as farm position and don't leave it until it is too late to refer to the Financial counselling service. Which reminds me I must connect Global Mindscreen with this service.

4. Disclosure and prudence:

Update from landgate on "land interest" enquiry database. All very positive and hopefully they will spend some time with REIWA to ensure they are integrating these new tools into the way we currently prepare disclosures etc.
Afternoon finished with a legal presentation on the importance of prudence when selling property with no mortgage given recent case in City Beach of stolen title. I think they have made the right decision that the title is always upheld, otherwise it would be mayhem but yes definitely worth staying alert for such circumstances. I imagine higher risk in lifestyle properties where people may hold title and are not always living there. Certainly is a good case to keep a mortgage - even if only small to avoid the risk of your lawyer stealing your title:)

Some level of optimism please!

2011-02-08T22:11:00.001-08:00

Maybe I'm an optimist but surely the flip-side to this release is that over 55% will not delay purchasing property.

Based on my recent customer experience, what the market needs is movement so people can sell theirs to then buy another. I have 4 prospects waiting to sell their homes to buy a change of life in Bindoon.

Media release distributed by AAP Medianet.
Australian Home Buyers Delay Major Purchases into 2011
Property, new cars, holidays on the backburner, Homeloans research shows
A poll released today by mortgage provider Homeloans Ltd shows that almost half (45 per cent) of Australian home buyers will delay purchasing a property in 2011 due to rising interest rates and the cost of living. And one in three of those will put all major household spending such as a new car, holiday or consumer goods on hold for 2011.

Interest rates stay on hold

2011-02-08T22:09:00.001-08:00

In the first meeting of 2011 the Reserve Bank opted to keep rates on hold at 4.75 per cent.

The decision comes on the back of economic data out last week showing inflation was running lower than expected.

The official interest rate is now 4.75 per cent. Mortgage holders on variable interest rates are being charged a standard variable rate of about 7.83 per cent by their lenders.

Today's decision will be a boost to the opening of this year's property market, which is just starting to ramp up now that the summer holidays have officially ended.