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14-11-2015, 08:57 AM
(This post was last modified: 14-11-2015, 09:13 AM by greengiraffe.)
Falling clearance rates point to slower housing market next year
NaN of
Property market: Sydney vs Melbourne
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by Michael Bleby
The heady auction market of mid-year - when almost every house and apartment on the block sold - looks unlikely to return soon.
In Sydney and Melbourne, which have dominated the auction market this year, the proportion of properties successfully sold through auctions peaked in May at 86.2 per cent for Sydney and 80.3 per cent for Melbourne, CoreLogic RP Data figures show.
By last weekend, those figures had dropped to 58.4 per cent in Sydney and 69 per cent in Melbourne.
"Earlier we were getting 80 per cent to 85 per cent auction clearances," CoreLogic RP Data research analyst Cameron Kusher said. "It was pretty good odds. Now people are seeing the low 60s, high 50s. It means you've got a better chance of selling than not, but it's not as strong as it was earlier this year."
[Image: 1447396715231.jpg]Looking for the buyers? Auction listings - and clearance rates - are likely to keep falling, reflecting the quieter housing market. Jamila Toderas
For now, conditions remain strong. This weekend, Melbourne is expecting 1563 auctions, up on last weekend's 1189. Sydney's 1270 scheduled auctions are more than last week's 1222 but fewer than the 1417 of the equivalent weekend a year ago.
The majority of homes sold in all cities are still sold by private treaty, but auction numbers tend to rise when markets are stronger. Over the first seven months of the year, auctions accounted for 35 per cent of all sales in Melbourne and Sydney, CoreLogic figures show. In Perth, by contrast, they accounted for only 1.9 per cent of sales and 2.9 per cent across Tasmania. In Brisbane the figure was 6.4 per cent and in Adelaide it was just over 11 per cent.
Slower population growth and a rush of new houses and apartments is reducing demand, especially in Melbourne and Brisbane, where investors face the prospect of falling rents. Buying is slowing in Sydney despite a lot of demand for housing. Price increases above 10 per cent have outstripped wages growth and put property out of the reach of many people.
Price growth has slowed in Sydney, where the median dwelling price shot up from $875,000 in June last year to $1,090,000 by May this year, but has since bounced around at that level. The median price in October, the last full month for which figures are available, was $1,110,000.
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Sydney's strength is likely to add impetus to Melbourne's housing market. The Sydney-Melbourne price gap - now as much as 83 per cent when comparing house-and-land packages in equivalent growth corridors - was now prompting intrastate migration south to the Victorian capital, Stockland chief executive Mark Steinert said on Friday.
"The median house price in Sydney now is $1million, and I am talking about asbestos-clad premises, or old red brick," Mr Steinert told a Committee for Economic Development of Australia audience. "I'm not talking about McMansions or anything like that. The affordability gap between Melbourne and Sydney is quite incredible. As a result, in the last four months for us, 20 per cent of our inquiries are now coming from people in Sydney who want to move to Melbourne, as long as they can get a job."
With more auctions an indicator of a stronger market, both clearance rates and listing numbers are likely to subside, CoreLogic's Mr Kusher said.
Houses and apartments being auctioned now will likely have been advertised for weeks already but fewer people would now be planning auctions.
"People looking to bring property to market now will be less inclined to take that property to auction at the moment," he said.
With just six weeks to go until year-end, thoughts are turning to the next selling season in autumn. Autumn is a weaker season than the key spring season, but even so, activity was likely to be weaker, reflecting the relatively weaker market, Mr Kusher said.
"You do see less auctions typically during those months than at this time of year, but I would think auction listings next autumn will not be as strong as this," he said. "I don't think clearances will be as strong, either."
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Another reason for a red hot mkt to come off the boil... how it will end will remain to be seen. This is an accountant's view but certainly a consolidation after the last few heady years will provide genuine buyers a chance to re-enter not unlike what is happening to Singapore prop mkt.
- Nov 18 2015 at 1:09 PM
One in three off-the plan buyers in trouble
[img=620x0]http://www.afr.com/content/dam/images/g/l/1/u/f/p/image.related.afrArticleLead.620x350.gl190p.png/1447816617718.jpg[/img]Peter Ristevski, near his office in Bankstown, says property buyers under stress. louise kennerley
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by Duncan Hughes
One-in-three off-the-plan investors are facing financial stress completing purchase of their properties because of tough new lending rules, creating fears about a 'flood' of properties coming back onto the market, a veteran mortgage and financial adviser is warning.
Many property investors are considering forfeiting deposits rather than having to take out additional loans or find more funds to bridge gaps up to 20 per cent of the property value, warns Peter Ristevski, a partner with Chan & Naylor, a national advisory group.
"I fear a flood of investment properties coming back onto the market will drive down prices and force a correction," said Mr Ristevski, who is also an accountant and councillor with Liverpool City Council.
He is repeating warnings recently made by national real estate group Century 21 Australia chairman Charles Tarbey about pressure on investors finalising off-the-plan property purchases.
[img=620x0]http://www.afr.com/content/dam/images/g/k/w/a/w/6/image.imgtype.afrArticleInline.620x0.png/1447214401365.jpg[/img]Charles Tarbey has warned about pressure on investors finalising off-the-plan property purchases.
Banks' recent decision to require bigger deposits, typically a rise from about 10 per cent to 20 per cent has caught many investors that agreed to purchase on the earlier terms.
It is a particular problem for self managed super fund investors that have to find up to 30 per cent and are also ineligible for mortgage insurance because the loans are limited recourse, which means the lender has limited claims on the loan if the borrower defaults.
Mortgage brokers estimate there are 90,000 apartments being constructed around the country that have been sold off-the-plan but are not yet settled.
The buyers of about 20 per cent of these, or 18,000, have paid a deposit of just 10 per cent of the full purchase price, according to analysis of statistics from RP Data Core Logic.
[img=620x0]http://www.afr.com/content/dam/images/g/k/v/0/5/f/image.imgtype.afrArticleInline.620x0.png/1447115938408.jpg[/img]Mortgage brokers estimate there are 90,000 apartments being constructed around the country that have been sold off-the-plan but are not yet settled. Andrew Quilty
Problems can arise when prospective buyers seek additional funding for the balance of the deposit in the lead-up to the project's completion.
Mr Ristevski claims one-in-three of his clients that have invested in off-the-plan have problems.
He said his experience is replicated by his colleagues in Sydney and across the company's national network of advisers.
"Many do not have an extra 10 per cent in cash to complete the deal," he said.
Their options are to borrow additional money, possibly by taking out a second mortgage at a higher interest rate.
It is more pressing for DIY super investors who face caps on the amount of annual contributions into their schemes.
The federal government recently rejected recommendations from the financial system inquiry and retained limited recourse borrowing arrangements for the schemes.
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This is another Australian born and bred company since 1932 that is proudly owned by our luxury property tycoon Simon Cheong - delisted SC Global:
http://www.valuebuddies.com/thread-3051-...#pid122773
While the strength and extent of the recovery is still moot, Mr Summers was confident "a more thorough analysis" showed there was plenty more of the boom to build.
Sydney has experienced increased production of both apartments and other residential products, he said.
"But the huge shortfall of housing that has been built up through a lack of supply for over a decade continues to dominate the market drivers.
"In particular, the non-apartment market has been slower to respond to this shortage due to the need for greater infrastructure such as water, power, roads.
"We strongly believe this part of the market has a sustained period of strong market conditions ahead."
In Melbourne, where the Reserve Bank of Australia and others have warned of a potential oversupply, Mr Summers agreed there had been a "significant increase" in production of apartments.
But markets excluding apartments were still well under supplied in the Victorian capital, he said.
"Even within the apartments segment, most of this rapid increase in production has been in certain pockets.
"In other areas, the demand for apartments is still solid, as shown by our research for our new project at Williamstown."
Mr Summers said there were improved conditions ahead in the Brisbane market, especially as interstate migration picks up. Adelaide, however, was a challenging market, and Perth's prospects were not bright.
The AVJennings chief also tackled the second spectre haunting the equities market: concerns that development boom has been driven too much by investors.
Some 26 per cent of AVJennings are local investors and around 1 per cent are foreign buyers.
"Most investors in residential are not speculators but every day Australians," Mr Summers said.
"So whilst we understand the factors which have led to the recent negative sentiment towards residential markets, we do not agree with the conclusions that have been reached overall and certainly not in terms of the markets in which your company operates," he told the meeting.
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North Australian cattle station values set to take off
[img=620x0]http://www.afr.com/content/dam/images/g/i/d/g/n/q/image.related.afrArticleLead.620x350.gl3omr.png/1448168921716.jpg[/img]Wollogorang cattle station on the shores of the Gulf of Carpentaria.
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by Matthew Cranston
Values for cattle stations across northern Australia are on the rise and experts say watch out for Queensland where summer rains could trigger a boost in the state which has lagged behind because of drought.
The latest analysis by CBRE, which has been valuing the S. Kidman & Co portfolio of cattle stations, shows values rising across the Northern Territory, Western Australia and to a slightly lesser extent Queensland.
"Where we have seen the big growth has been in the Northern Territory and Western Australia and the reason for that is because they have come off such a low base," CBRE head of valuation Tim McKinnon said.
"We expect sustained growth in values and we expect Queensland will show the big growth over the next 12 to 18 months."
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While the CBRE data includes major deals such as Australian Country Choice's joint venture with the Acton Land & Cattle Company, Chinese billionaire Xingfa Ma's $47 million purchase of Wollogorang and Wentworth cattle stations on the shores of the Gulf of Carpentaria, and Chinese group Hailiang's $40 million buy up of Hollymount Station, there are a host of recent deals that have not been included and will likely show a lift in Queensland values.
Such deals include M.P. Evans Group's sale of Woodlands, near Westmar in southern Queensland for $28 million to China's Fucheng Group, BRW Rich Lister Tom Strachan's purchase of Lighthouse Station for $14 million, and Canadian pension fund backed Hewitt Pastoral company's purchase of multiple stations including Sir Graham McCamley's Oakleigh and Stoodleigh properties north of Rockhampton for $13 million.
"We expect premiums will continue to be paid for A-grade properties but the B and C-grade properties may still be a drag on values," Mr McKinnon said.
He said the lift in values was due to a range of factors such as strong beef prices, low Australian dollar, low cost of funding, increasing foreign investment interest and improved property management.
"We are seeing more development for water infrastructure which helps increase the carrying capacity of these properties which in turn increases capital values."
In the Northern Territory major transactions such as billionaire Brett Blundy's prospective buy up of two huge cattle stations owned by Macquarie Group's Paraway Pastoral are expected to boost values.
So far only smaller transactions have registered such as the sale of barrister Allan Myers' Douglas Station for $8 million which showed an increase on its last valuation of more than 20 per cent.
In Western Australia deals such as the queen of mining Gina Rinehart's $30 million purchase of Fossil Downs are also expected to boost value analytics in the fourth quarter.
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Harold Mitchell’s Kimberley cattle station could fetch $80m
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Harold Mitchell: ‘Agribusiness is one of the best long-term investments’ Picture: Aaron Francis
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Seven years ago, nearing the end of a lengthy career, advertising stalwart Harold Mitchell began considering his next move.
“I think it was young James Packer who said to me the world will need protein and I thought that was so very true,” Mr Mitchell told The Australian.
“I’d always had a struggle with the stockmarket, but I knew there were two big things emerging — one was the digital age and the other was the emergence of Asia as a major market, which would soon be 50 per cent of the world’s economy, and the growing middle class of Asia would want many things; one of them was protein.”
With former Seven Media and News International director Doug Flynn and the Sale family, Mr Mitchell purchased the Yougawalla Pastoral Company, which owned the expansive Yougawalla Station in the Kimberley region.
Now he is hoping to sell the 1.4 million hectare portfolio, which could be worth $80 million.
The 73-year-old is taking the pastoral holdings to the market through KPMG Corporate Finance and ANZ after shelving earlier plans to sell as competition heated up for the giant S. Kidman & Co pastoral company.
“I’d love to hang on because this is going to boom for another hundred years,’’ he said.
“It’s basically a realignment of our assets and the opportunity for a bigger group to go on with what is a great property.”
The property is understood to have attracted early interest from Shanghai Pengxin, a leading contenders for the Kidman portfolio before Scott Morrison’s intervention this week to prevent it being sold to foreign buyers.
Mr Mitchell, who sold his media buying business to British giant Aegis Group in 2010, said he had no problem with “any international organisation buying any part of Australia”.
“I’ve lived in an international world of advertising for 40 years, it doesn’t mean a thing,” he said.
“I have no problem because, after all, for 150 years we’ve had European and American companies here, particularly British, buying all sorts of things.”
As for Australian superannuation funds and investment managers reluctant to put their money to agribusiness ventures?
“This is one of the best long-term investments you could have, and the market of Asia is sitting there,” he said. “What we’ve done in seven years has beaten every quarterly return you’ve seen.”
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Australian house design evolved for climate and prestige
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For the better part of the past 200 years there was not an “Australian house”, or at least not within the main cities. The one early concession to Australia’s non-English climate in housing design was the addition of a veranda to rural homesteads to provide shade.
English country houses of the era stood proud amid a Capability Brown Romantic landscape without shade protection as none was required.
[img=316x0]http://cdn.newsapi.com.au/image/v1/7f06cc0d629929b26178d9a434e487e3[/img]This worker’s cottage had the adaptation of a corrugated-iron veranda.
In Australian cities, housing initially took the form of either worker cottages or terrace housing, the designs for which I am sure would have been lifted directly from England. Even grand suburban villas took the form of an English house albeit with awnings and veranda but merely transported to the colonies.
The practice of painting corrugated-iron roofing sheets alternative colours above the veranda was inspired by the coloured canvas awnings of colonial India.
[img=316x0]http://cdn.newsapi.com.au/image/v1/2eb5c1a97412976e306e7c9e451da1dc[/img]The classic cream brick veneer with small porch out front.
By the middle of the 20th century a uniquely Australian housing style had evolved, the three-bedroom brick veneer house on a quarter-acre (1000sq m) allotment. However, even this housing style was deeply shaped by our English heritage. The block may have been big but the house was small and there was no concession to the Mediterranean idea of indoor-outdoor living.
There was a front porch and a back veranda. There may have been outhouses. A washhouse later known as a laundry and a lavatory later known as a toilet. Vast parts of metropolitan Australian were still not connected to the sewage system until the 1950s.
[img=316x0]http://cdn.newsapi.com.au/image/v1/e49d66b95e3644fcdae139eb63fcfe1d[/img]Check under the seat: the outdoor dunny.
Land surrounding the house was used in the post-Depression era for practical purposes like a vegetable garden or a chook pen. Kitchen and other waste might have been retained (and composted) on site in a rubbish dump. Anything flammable was burnt in an incinerator.
If nothing else modern housing is adept at removing waste like sewage, like weekly rubbish collections, like garden refuse and even hard rubbish. In the days of modest council rates waste was the household’s problem not the community’s. Hot water inside the house was heated by combustion stove. Weekly baths and daily washing sufficed.
I think if you could magically transport yourself from 2015 back to the inner suburbs of urban Australia in say 1955 the thing that would most impact modern sensibilities would be the all-pervading smell of sewage, garbage and body odour. We are a clean people; some might say obsessively clean.
[img=316x0]http://cdn.newsapi.com.au/image/v1/db5a55ab4c931cffc7965a15dd860db0[/img]The Mediterraneans introduced the colonial Australians to the concept of indoor-outdoor living.
By the 1980s our housing style began to change. The deference to English housing receded; what advanced was a new and truly Australian concept of modern living. I have no doubt that Italian and Greek migration from the 1950s onwards changed not only the Australian diet but also our sense of urban style. The worldly Mediterraneans introduced the colonial Australians to the concept of alfresco dining and to indoor-outdoor living.
The Australian climate was always more aligned to a Mediterranean way of living. Housing changed as the Australian market absorbed and reinterpreted an Australian way of living. The front porch became an Italian portico. The back veranda became alfresco. The kitchen and the lounge room merged to become the family room. All of a sudden the kitchen bench was the new hearth of the family home.
[img=316x0]http://cdn.newsapi.com.au/image/v1/061a27ec60163a1dfdfbbc6e07d23c38[/img]The kitchen, dining room and lounge room have merged to become the family room. Picture: Thinkstock
Even the family car was on the move. The external garage modelled on the idea of an external stable migrated from the back of the block and attached itself to the house. Australia’s prosperity from the 1990s onwards and new ways of living with fewer but more indulged children reshaped the family home. Houses now needed two bathrooms as well as separate space for kids and parents. The family room begat the home theatre and the formal rooms at the front of the house diminished.
Whereas two generations ago visitors were entertained in the parlour today they are welcomed — all Mediterranean-like — into the bosom of the home, into the kitchen. If this is where guests are entertained then this is where the household must display its success and social status.
The kitchen bench, which is a bit like Houston’s Mission Control for the household with a parading flight director overseeing the family, upscales from wood to Laminex to granite to marble. In fact waterfall marble leaves no visitor in doubt as to the resources of the household.
[img=316x0]http://cdn.newsapi.com.au/image/v1/096827b8817e787a95c7d8aa03af70e2[/img]You can tell a lot by the tapware.
Appliances are European suggesting a cosmopolitan style that is always prized in remote colonies and tapware is silver, elegant and prominent. Upright gooseneck tapware delivers a social statement as well as, oddly enough, water.
The house expands to accommodate the interests and the private-space aspirations of generally fewer family members. All this can be afforded because both partners now work full-time. The garage must accommodate two cars as well as the paraphernalia of an active consumerist household. Out-dated furniture as well as sporting equipment and anything too good to throw out but not good enough to showcase in the modern minimalist home must be stored.
[img=316x0]http://cdn.newsapi.com.au/image/v1/6abfa89efe93773b4a7c2dec0a23c02d[/img]Goodbye Hills hoist, vegie garden and traditional shed.
The backyard has contracted. Gone is the planet-killing incinerator, the offensive refuse dump, the unhygienic chook-pen and the time-consuming vegetable garden. If both partners work then there’s no time to tend vegetables on a weekend. Even the Hills hoist clothesline has been collapsed and reinvented as a fold down version along the blind side of the house. No need for a clothesline now that the household has a clothes dryer.
[img=316x0]http://cdn.newsapi.com.au/image/v1/33592175334c3281f8c530b95406767b[/img]When too many pillows is barely enough.
Within the house everything is a showcase opportunity. From the size of the flat-screen television to cookery books artfully arranged to imply culinary sophistication. Even bedding has got all uppity because I suspect it can be glimpsed by visitors as they pass the bedroom. Where there were once two pillows there are now four, including pillows that are used and pillows that are for show.
In the course of a single generation the Australian household has been transformed. There is nothing remotely or uniquely English about the way we live today or at least not within middle-class metropolitan Australia. If there is an overseas influence in housing then it is the Mediterranean influences of the Italians, the Greeks and others. Sydney’s climate, even Melbourne’s climate, is more Milan than it is Manchester. And yet it was the likes of Manchester and London that determined how we lived for generations.
Bernard Salt is a KPMG partner and is an adjunct professor at Curtin University Business School; bsalt@kpmg.com.au
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House prices are cooling, not crashing – but may force RBA cut, Citi says
DateNovember 27, 2015 - 9:04AM
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Vanessa Desloires
Reporter
The housing market isn't crashing, but it could force the RBA to cut interest rates again, Citi economists say.
Why house prices are so high
Peter Martin explains how concessional treatment of capital gains tax has driven Australia's housing prices.
Video will begin in 1 seconds.
The housing market isn't crashing, but it is cooling, which could force the Reserve Bank of Australia to cut interest rates again, Citi economists say.
Stretched valuations that have fuelled speculation of an impending crash had been driven by under supply in the market, which peaked at 49,000 dwellings in 2013-14, versus the RBA's estimate of 13,000, economists led by Paul Brennan said in a research note.
Paul Brennan, Citi Wrote:If all potential pipeline construction for apartments comes into market, it will pose a significant downside risk to price growth for the next two years.
Citi expects the under supply will narrow to around half that rate on average over the next two years. Population growth will slow as the mining boom winds down and immigration levels drop, while regulatory restrictions will lower demand for property from investors and foreign buyers.
"This narrowing should underpin ongoing slowdown in house price inflation, from 10 per cent in 2014-15 to 0 per cent to 5 per cent in 2015-16 and in 2017."
Gradual slowdown
The slowdown would be gradual, as supply remained strong with plenty of construction in the pipeline. Building approvals hit a record 230,000 in the 12 months to September. But the risk in this cycle was that apartments being built were outstripping houses two to one.
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Citi says house price growth is expected to cool from 10 per cent this year to between 0 and 5 per cent in the next two years. Photo: Michele Mossop
"If all potential pipeline construction for apartments comes into market, it will pose a significant downside risk to price growth for the next two years," Mr Brennan said.
"Given this significant pipeline of work, especially for apartments, our forecast is for a gradual, rather than rapid, decline in activity over the next few years, assuming interest rates do not rise sharply."
This long pipeline also means housing activity should support economic growth, but as the housing peak has passed, the contribution to the economy may be halved from 0.5 per cent this year to 0.25 per cent.
Citi's modelling anticipates house price growth to slow to 4 per cent in 2016-17 and 3 per cent in 2017-18, and other economic challenges may mean the RBA will be forced to cut interest rates again below the record low 2 per cent.
"With housing prices cooling, consumers still cautious about spending, housing construction expected to make a smaller contribution to growth and no concrete signs yet of a recovery in non-mining business investment, interest rates will need to stay low for longer than normal," Mr Brennan said.
"Indeed, our central case for over six months has been that the RBA could cut the cash rate again to 1.75 per cent."
Signs of improvement from job numbers may have reduced the chance of another cut, but Mr Brennan said inflation was also expected to track below expectations.
"Consequently, further easing remains a live option in our view," he said.
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28-11-2015, 08:39 AM
(This post was last modified: 28-11-2015, 02:50 PM by greengiraffe.)
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Tread carefully with off-the-plan funding solutions
Don't let property investments be sunk by demands for bigger deposits. suzanne whiteby Duncan Hughes
Dump, pump or confront are the tough-love strategies that advisers and brokers recommend to off-the-plan apartment investors facing financial distress because lenders are demanding bigger deposits.But dumping a deal, finding more money to pump into a deposit or confronting the shortfall by cutting other costs often involve new risks, particularly if friends or family have to provide extra money.One in three off-the-plan investors are facing financial distress completing purchase of their properties because of tough new lending rules, according to Chan & Naylor partner Peter Ristevski's analysis of the advisory group's national client base."Look at all your options," says Ristevski about what investors caught short should consider."In most cases it can be renegotiated. We have not had anyone fall through yet," he says about off-the-plan property investors facing problems.THREAT OF PROPERTY CORRECTIONMortgage Choice, the nation's biggest mortgage broker, and developer Century 21 Australia chairman Charles Tarbey have also raised concerns about cash-strapped apartment buyers struggling to seal a deal.Ristevski, who is also an accountant and councillor with Liverpool City Council, fears a flood of investment apartments coming back on to the market could drive down prices and trigger a property correction.Mortgage brokers estimate there are 90,000 apartments being built nationally that have been sold off the plan but not yet settled.Buyers of about 20 per cent of these, or 18,000, have paid a deposit of just 10 per cent of the full purchase price, according to analysis from RP Data Core Logic.Off the plan can be a terrific deal in a bull market for buyers wanting to lock in at today's prices for a building usually completed in about 18 months.The buyers also get the advantage of having additional time to save, and often receive tax breaks on the purchase.BUYERS TOO STRETCHEDBut Tarbey fears many buyers are distressed because the financial stretch to make the original deposit means many are struggling to find another 10 or 20 per cent of the purchase price as deposit at settlement. It's stickier for self-managed superannuation fund (SMSF) property investors whose capacity to top up a deposit is limited by strict contribution caps enforced by the Australian Taxation Office.SMSFs have also been attractive, effective and hugely popular for property investment, particularly for business owners and professionals investing in their work premises, such as factories and surgeries.Funds using limited recourse borrowing arrangements – which means there are limited claims on a loan in the event of default – have increased during the past five years from about $755 million to nearly $16 billion, an annual compound growth of more than 80 per cent.Best-guess estimates is about 40 per cent, or $6.6 billion, of SMSF purchases are residential property.Jessica Darnbrough, from Mortgage Choice, says brokers are advising struggling property buyers about how to deal with any problems. WAYS TO COVER SHORTFALL"Buyers can show their lender they have sufficient funds to cover the shortfall caused by the loan-to-valuation policy change and allow their original lender to lend them the rest," she says. The loan-to-valuation ratio is the amount being borrowed as a percentage of the value of the property being used as a security for the loan."If you don't have sufficient funds, ask the mortgage broker to investigate other lenders to see if there is another mortgage provider on the market that will approve the loan," she says.Another option is bridging finance, but it's expensive. Three months bridging finance for a $1 million loan could add nearly $30,000 of interest payments plus extra costs and expenses.The average bridging loan is 70 basis points more expensive than a standard home loan, according to Canstar, a company that provides comparisons on the costs and returns of finance products.Terms and conditions can also vary widely between lenders.WORST-CASE SCENARIO"Another option might be to use equity from another property or ask a family member to go guarantor on the loan by using the equity they have in their property," says Darnbrough.The worst-case scenario is family members or friends caught in a snowballing financial collapse that engulfs their home and possessions and results in a bankruptcy court barring them from additional loans or directorships.Using a home as a security could also result in caveats, or legal directions, on their property that need to be removed before it can be sold, postponing or removing any chance of cashing in on rising prices."Don't wait too long to take action," added Christopher Foster-Ramsay, managing director of Capital Home Loans, a mortgage broker."Waiting until just before settlement is not the way to go about it. Get moving," he says.
- Nov 28 2015 at 12:15 AM
Solutions for funding off the plan property buys
[img=620x0]http://www.afr.com/content/dam/images/g/l/9/e/w/g/image.related.afrArticleLead.620x350.gl7jcv.png/1448601011383.jpg[/img]Sas Colevski had to renegotiate payments on his investment loan. Dominic Lorrimer
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by Duncan Hughes
[/url]Sasa Colevski, a diagnostic engineer, had to quickly find another $40,000 after the[url=http://www/afr.com/personal-finance/tread-carefully-with-off-the-plan-funding-solutions-20151125-gl7ixv.html] minimum deposit on his first investment property was increased by 10 per cent.
Colevski, who has two teenage children, purchased the off-the-plan apartment about 12 months ago for about $480,000. He plans to rent it out.
"The bank came saying the maximum they could approve is 85 per cent even though I had an approval of 95 per cent at the time of purchase and my circumstances had not changed," he says.
His financial adviser, Chan & Naylor, arranged a second mortgage against the apartment in Liverpool, about 30 kilometres south-west of Sydney.
"This has cost me additional interest at a higher rate for the second mortgage, which seems unnecessary because none of my personal financial circumstances had changed," Colevski says.
Like many investors, he was surprised by his bank's decision to require a bigger deposit, typically a rise of between 10 per cent and 20 per cent.
"But I'm still enthusiastic about buying investment property," he says. "There are plenty of opportunities for an investor in this area."
Investors trying to settle on an apartment, or facing higher borrowing costs, have a range of options, says Tim Mackay, principal of financial advice firm Quantum Financial.
His recommendations for those facing a deposit shortfall and/or financial stress caused by higher costs after taking possession include: - Reviewing the family budget and reducing expenses by cutting back on luxuries.
- Earning more with extra part-time work.
- Increasing the investment property's rent.
- Seeking a better deal on your loan.
- Reducing costs, such as real estate, management and maintenance fees.
- Considering whether the investment is worth keeping. Property markets are at record highs, so this could be a good time to sell.
- Considering temporary interest-only repayments.
Now read about SMSF solutions to off the plan property funding problems.
SMSF solutions to off the plan property funding problems
[img=620x0]http://www.afr.com/content/dam/images/g/l/9/e/l/d/image.related.afrArticleLead.620x350.gl7j3d.png/1448578769732.jpg[/img]Nik Vujasin has had to pay a higher deposit to keep his investment property. Dominic Lorrimer
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by Duncan Hughes
Changes to banking lending meant Nik Vujasin was told by his lender eight weeks before settlement that he would have to find another $59,500 deposit for his investment apartment, bought through his self managed superannuation fund.
"The problem was I did not have the cash in my SMSF bank account," Vujasin says about the apartment on which he paid an initial deposit of 10 per cent. St George Bank increased the deposit to 30 per cent.
Vujasin, like most SMSF investors, has most of his SMSF investments in long-term assets, such as shares or property, particularly during the accumulation phase which is the period when the fund is amassing assets.
"My accountant organised a loan where I could tap into the equity of my home via a credit facility," Vujasin says.
"But the problem was $25,000 was the maximum I could claim as a tax deduction on a contribution to my SMSF," he says. The $34,500 deposit balance was a non-concessional (or after-tax) contribution.
"St George Bank's abrupt lending policy change meant I lost out on valuable tax deductions," he says.
"The whole exercise was unnecessary as my business is making bigger profits now than 18 months ago when I paid the deposit."
FOLLOW THE RULES
Tim Mackay, principal of financial advice firm Quantum Financial, says investors struggling to pay deposits on properties purchased through their SMSFs need to ensure they do not breach Australian Taxation Office rules.
His other recommendations include:- Consider if the investment is worth keeping. It might be worth cutting losses rather than losing generous tax concessions or being forced to liquidate scheme assets on unfavourable terms;
- Reduce costs;
- Sell other assets in the fund to reduce the debt;
- Contribute more to your super – either through personal contributions or salary-sacrificing (making pre-tax contributions);
- Seek a better deal on your loan;
- Review existing advice and question how it allowed you to get into mortgage stress.
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- Nov 27 2015 at 3:44 PM
- Updated Nov 27 2015 at 5:48 PM
Auction numbers hit record as prices fall
[img=620x0]http://www.afr.com/content/dam/images/g/l/9/h/u/9/image.related.afrArticleLead.620x350.gl8hay.png/1448606891597.jpg[/img]No stopping on Saturday: Kay & Burton's Gowan Stubbings will be running between six sites in Melbourne's eastern suburbs - the most auctions he's ever conducted in one day. Chris Hopkins
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by Michael Bleby
Australia will have its biggest-ever day of auctions on Saturday - just as signs emerge that prices have started falling in the key markets of Sydney and Melbourne.
More than 2700 houses and apartments will be auctioned this weekend, the most ever, as Melbourne posts a record for any capital city with over 1600 and Sydney sets a new monthly record with about 1100 auctions, according to Domain Group.
Other cities also have strong numbers, with 56 auctions scheduled for Canberra, 115 for Adelaide and 152 for Brisbane.
"That will be a record day nationally – the biggest day of auctions ever in Australia," Domain senior economist Andrew Wilson said. "This is the apogee of the market."
[img=620x0]http://www.afr.com/content/dam/images/g/l/9/f/2/z/image.imgtype.afrArticleInline.620x0.png/1448601345716.jpg[/img]One in 1100: 32 Joanne Sparke's family home at Highfield Rd, Lindfield, NSW goes up for auction on Saturday, part of the country's biggest-ever day of auctions, according to Domain Group. Supplied
Domain is owned by Fairfax Media, publisher of The Australian Financial Review.
The dream housing run that has driven prices up 15.6 per cent per cent in Sydney and 12.8 per cent in Melbourne over the past 12 months is coming to an end. Prices in the two largest cities are likely to show a fall in November, according to CoreLogic RP Data, which will on Tuesday publish its full-month figures. For the first 26 days of the month, the headline index of prices in the five largest capital cities is down 1.4 per cent, dragged lower by Sydney and Melbourne.
"The weaker housing market results come at a time when auction clearance rates have continued to trend lower, particularly in Sydney, and approved housing supply is moving through a record peak," CoreLogic head of research Tim Lawless said.
It's not necessarily the end of rising prices. Isolated months have seen price declines - both Melbourne and Sydney fell in May but then picked up - and only several months of decline will make it clear the peak has passed.
Joanne Sparke, who is auctioning a four-bedroom house in Lindfield on Sydney's upper north shore, is one of the 1100-odd owners selling on Saturday.
Ms Sparke had little say over timing of the sale - her mother's September death prompted Ms Sparke, her brother and sister to sell the family home of 54 years. But she wants to do it quickly.
"It's better to do it quickly, so we can all start the healing process," she said.
It's also practical.
"They're saying the market's dropping, but there's not a lot we can do about it," she said.
CoreLogic final figures show the average clearance rate of auctions they tracked across all capital cities last week was 59.5 per cent, down from 62.3 per cent the previous week and the lowest weighted average clearance rate since February 2013.The pace of price growth is expected to drop into single-digit figures next year.
Notwithstanding the coming slowdown, Saturday's heady day of auctions is a logistical nightmare for auctioneers. Gowan Stubbings, a director of Melbourne real estate agency Kay & Burton, faces the busiest day of his 15-year career, with six auctions scheduled between 10 am and 3:30 pm and will have to sprint between the suburbs of South Yarra, Malvern, East Melbourne and Armadale to conduct them all.
"Saturday traffic around South Yarra is horrendous," Mr Stubbings said. "The one good thing is we do get to know our way around back roads and shortcuts on a Saturday pretty well."
He's already gearing up for the day. "There will be nothing happening for me on Friday night," he said. "I'll be very early to bed, making sure I have a healthy breakfast on Saturday for the day ahead."
Mr Stubbings said all his properties were likely to sell.
"The only reason they won't sell is if vendors have got caught up in the excitement of the market and want too much," he said.
Ms Sparke said the weekend's strong market could work for or against the sale of her Highfield Road house, being marketed by North Shore-based Savills Cordeau Marshall Gordon at a price of $1.5 million upwards.
"There are two ways of looking at it," she said. "There's a lot of people out there looking but also a lot of properties to sell.
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29-11-2015, 07:49 PM
(This post was last modified: 29-11-2015, 08:53 PM by BlueKelah.)
The music is stopping and looks like the investor herd is rushing for the big EXIT sign with all those big auction numbers coming up...
Pretty poor preliminary clearance rates when just few months back they were running at 80%+
NSW 56% 1284
https://www.realestate.com.au/auction-results/nsw
Vic 65% of 1828
https://www.realestate.com.au/auction-results/vic
Correction or crash coming? Tide is turning, who's gonna be swimming naked?
As the deadline for declaring illegally owned property ends on tomorrow, divestment orders are going to start flowing out from the aus tax office for illegal china/foreign property buyers starting next month.
hopefully SG developers developing down under with significant debt dun go down under when reality hits, especially if Yellen decides to liftoff in December, starting to look bad for SG listed companies like CES/Weehur/SL/FCL/ChuanHup..
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