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What is a property cycle?

A property cycle starts with a boom, when prices and demand are high amid limited supply.

The boom is typically followed by a downturn, which can happen due to an oversupply of properties in the market, a reduction in borrowing capacities, or a combination of factors. In this phase, prices may fall, and demand is low.

With fewer buyers in the market, prices start to level off or fall – this is known as the stagnation or stabilisation phase.

Slowly, the property market starts recovering and more investors and buyers start entering the market, which is the upturn phase that leads to the next boom: the start of a new cycle.

Dr Nicola Powell, Domain’s chief of research and economics, says there’s a widely-held view that Australian property prices go through boom and bust phases when in fact it’s less dramatic than that, with ups and downs indicative of a healthy property market just like the expansion and contraction of an economy.

“In reality, what you tend to find is that prices, particularly in our big capital cities, go through substantial periods of an upswing, when we see rapid gains in property prices, and then they move into a contraction phase of the market,” she says.

What drives a property cycle?

There are many different drivers says Powell, with population growth, interest rates, the availability of credit, tax and policy settings, health crises, big spending from federal government on infrastructure and buyer incentives all in the mix.

One of the factors that contributes to a downturn can be the loss of borrowing power when interest rates go up or when lending standards are tightened.

When prices stabilise, the Reserve Bank and economists tend to change their outlook and we hear talk of lowering rates or relaxation of lending criteria.

Is there just one property cycle in Australia?

Powell is at pains to point out there’s no one single property cycle in Australia.

“A property cycle happens at a capital city level, but it also occurs at a sub-geographic level as well,” she says. “Suburbs across the city move through the property cycle at different paces, and they can react to different things occurring such as infrastructure, investment and things like that, which can change the demographics and the amenities within a particular area.”

Media headlines often talk about the property market as if it were a single market, but while general in nature, this coverage can still be useful when combined with analysis at a more local level.

“I think the broad headlines that cover your city give you a good finger on the pulse for where the property cycle is,” says Powell. “But I think that local knowledge and research on your local area is very important because it’s really hard to pick a peak and it’s really hard to pick a trough of the market.”

Grantham says talking to real estate agents or buyers agents can be helpful because they’re “on the ground” and can provide insight into what’s actually occurring as opposed to what you’re hearing in the news.

How understanding property cycles can help your property decisions

While buying low and selling high has long been the dream for property owners, it’s difficult to predict how long each phase of a property cycle will last, and therefore difficult to “time the market”.

“When you look at the price cycle overall what it tells us is it’s not about timing the market,” says Powell. “It’s actually time spent in the market that counts.”

That said, there can be some advantages to buying during the slump and stagnation phases.

Powell says one of the big benefits that comes with buying in a downturn is the fact that you usually have a bit more time on your side and can therefore be a bit more strategic in the decisions you make.

Grantham points out there’s likely to be more property to choose from, so buyers may be able to tick more items off their wish list.

The beginning of an upswing is a prime time for builders and developers to jump into the market, says Grantham.

“Everyone is sensing things are changing, consumer confidence is increasing and people are trying to get back into the market,” he says. “If you can buy and sell in the same market it’s the best way to protect yourself during an upswing.”

On the downside, when you’re buying in the latter stages of an upswing the fear of missing out can take over rational decision making, says Powell.

Ultimately there’s no substitute for doing your due diligence and sticking to your budget regardless of what phase a property cycle is in.

“Whatever market you’re buying in caution needs to be taken,” says Powell.

Source: Domain Website

First home owners who buy a property this weekend can choose to pay a land tax rather than stamp duty after NSW Premier Dominic Perrottet’s long-touted property reforms passed parliament.

While the new property tax scheme will not be fully operational until January 16, any first home owners who buy property this weekend will be able to seek a refund on their stamp duty before switching to the annual tax.

The historic new laws will allow a first home buyer to opt in to a land tax for properties under $1.5 million and would pay an annual levy of $400 plus a 0.3 per cent tax on the value of their land.

Property tax rates will be indexed so that the average annual property tax payment grows at the same rate as gross state product (GSP) per capita. However, to avoid bill shock, annual increases will be capped at 4 per cent.

Eligible first home buyers will be able to access the scheme from Saturday and, while they will be required to pay stamp duty on purchases made until January 15, they will then be able to apply for a refund of their stamp duty if they choose to opt into the annual fee.

Source: Sydney Morning Herald

For most of us, it’s the biggest purchase we’ll every make, yet many home buyers don’t complete the necessary due diligence before signing a contract.

Research conducted by Australian bank ME last year revealed 26 per cent of 1000 property owners surveyed discovered issues with their property post-purchase, with 23 per cent experiencing a degree of buyer’s remorse.

If you want to avoid that sinking feeling, add these oft-forgotten tasks to your home-buying checklist.

1. Visit the house at different times

The ME survey found 58 per cent of property owners spent less than 60 minutes checking out the property they went on to purchase and 36 per cent said they missed picking up issues with a property because “they fell in love with the property and overlooked them”.

It’s important to spend as much time at the property as you can and don’t be shy about requesting a viewing outside the advertised opens.

In her newly released book SOLD!, buyer’s advocate Nicole Jacobs lists inspecting the property outside normal open times as one of six must-dos.

“People often fall in love with a home and don’t think of all the practicalities,” she told Domain. “They can be swept away with emotion.”

Jacobs advises buyers to go back for a private viewing, sit on the lounge and contemplate if the space feels right.

“Don’t be afraid to move the furniture, open up the blinds and turn off the lights,” she says.

Buyer’s Domain principal Nick Viner agrees.

“Agents pick the sunniest time on a Saturday morning to show the home so go back later on in the day and on different days of the week,” he says.

“You’ll also want to check out the traffic. It may be fine on the weekend but it may be a rat run through the week.”

Viner also recommends a check on flight paths to find out what kind of noise you’ll be in for overhead.

2.  Talk to the neighbours

We’ve all heard stories about “the neighbours from hell”, so it makes sense to see who’s living next door before you outlay hundreds of thousands of dollars on a home. Not only does this give you the opportunity to size up your future neighbours, these people have front-row views to the house that may become your biggest asset.

“Neighbours are gold,” says Jacobs. “Knock on their door and see how they like living in the area, ask if they rent or own, and see if they know why the vendors are selling.”

Viner also makes a habit of touching base with other agents in the area on behalf of his clients, especially if they were invited to do a listing presentation for the vendor.

“Those conversations can be very revealing,” he says. “They may have information on the neighbours, or knowledge about price expectations or any problems with the property.”

3. Talk to the local council

REIA president Adrian Kelly says making an appointment to chat with the town planner at the local council can save a great deal of hair-pulling down the track.

“It’s always good to find out what’s happening nearby,” he says. Your neighbours may be planning major renovations or your street may be earmarked for a zoning change.

Jacobs suggests using online tools to pinpoint what’s planned for the area. She uses landchecker.com.au to check the zone, approvals and rejections for Melbourne properties and there are similar tools available in other states, such as the NSW government’s planningportal.nsw.gov.au.

“It’s really critical,” says Jacobs. “You don’t want to buy a beautiful home and then find out they’re building a block of apartments next door.”

Viner gives the example of properties within spitting distance of Westconnex, a 33-kilometre motorway connecting Sydney’s M4 and M5.

“If you look on the map you can see that there are provisions for tunnels to go straight under properties,” he says. “This is where local knowledge of the area is imperative, and if you don’t have it then you should speak with someone who has.”

Kelly also advises buyers to confirm that boundary fences are actually on the boundaries and to check properties for any unapproved works.

“The owners might have a deck that has been added, or a shed or workshop built in the backyard without approval or they might have added an extra bedroom or an en suite,” he says. “You need to know what you’re getting into because council can ask you to demolish unapproved structures.”

4. Investigate commute times

It’s not uncommon for people to move house specifically to be closer to their place of work, but don’t just rely on Google Maps or Trip Planner to crunch the commute time.

Consider doing an actual commute from the property you’re interested in, says Jacobs.

“Arrive in the morning at the time you might leave and then commute to work from there and see how that feels,” she says.

Jacobs also recommends a thorough walk around the neighbourhood to figure out how long it takes to get to schools, shops and cafes.

5. Check mobile and broadband coverage

Most of us would be lost without reliable access to our mobiles, computers and other devices yet there are still plenty of neighbourhoods across the country where access is limited, patchy or slow.

Viner says with more and more people working from home, poor coverage could potentially be a deal-breaker.

You’ll need to find out if NBN has been implemented in the street and if not, you’ll need to investigate other internet connectivity options such as via cable, ADSL and mobile broadband.

It’s also a good idea to test your mobile reception in different parts of the property as coverage can vary considerably between providers or you may find yourself in a mobile blackspot with no coverage at all.

 

The Source: Domain Website 

NSW Parliament today approved amendments to the Conveyancing Act 1919, strengthening protections for buyers who purchase properties off the plan.

Minister for Innovation and Better Regulation Victor Dominello said the new laws are intended to prevent rogue developers from rescinding contracts using the sunset clause to make windfall profits.

“The NSW Government has listened to the community’s concerns and acted swiftly to provide home buyers with greater certainty,” he said.

“Any developers who are thinking of acting unethically should know that their behaviour will no longer be tolerated.”

Effective from 2 November 2015, developers must gain the consent of a purchaser before rescinding a contract using a sunset clause.

If consent is not given then the developer must apply to the Supreme Court to justify the proposed termination.

Some NSW consumers have reportedly had their contracts rescinded by a developer using the sunset clause, only for the land or apartment to be re-sold the same day for a higher price.

639 people responded to the three week public consultation which closed on 14 October. Industry groups were also consulted.

The amendments passed with bipartisan support.

More information about the new law is at www.lpi.nsw.gov.au.

 

Here are five more tips to help you form a winning auction strategy:

1. Boost your knowledge

“This will also give you a realistic insight into the prices properties are advertised for and the prices they actually sell for. Before you attend the auction, ensure that you have a plan including knowing when you intend to commence bidding and at what price point you should stop.

2. Be ready and confident

“If you have any questions about the auction rules, ask the agent in attendance.”
Buyers agents will tell you that confidence goes a long way on auction day. They often recommend that you position yourself where you can be seen and heard by all. Your bids should be loud and clear.

“You need to control your emotions at auction because emotions will cost you money,” says founder of EPS Property Search, Patrick Bright. Bright suggests that auctions aren’t for everyone and that if you’re at all nervous it’s a good idea to have someone else to bid on your behalf.

3. Get a feel for the numbers

“If you blow your limit, your dream home can become your nightmare liability as you struggle to make mortgage repayments that are more than you budgeted for,” says Bright.

4. Be organised

All of these tips boil down to being organised. From taking the time to learning about the suburb you’re interested in, to preparing your finances, then checking your ability to secure a home loan and getting to the auction early, it all helps build your game plan.

5. Contact a Conveyancer

Contact a Conveyancer to inspect the Contract for Sale of Land before Auctions and to take care of the legal side of the deal. If you think we can be of further assistance contact us on 02 9601 1392.