John McGrath

Your Family Home as the Cornerstone of Wealth: New Statistics

Rescu Team — Sun, 20 May 2012 13:13:34 GMT

I’ve always advocated your own home as being the cornerstone asset for your future wealth. There’s a number of reasons for this but one of the most important is that you won’t pay tax on gains in the value of your property, as it’s exempt from capital gains tax. This means your own home is one of the most effective – if not the most effective, ways to accumulate wealth.

by John McGrath

John McGrath – The Block 2012: Style

Rescu Team — Mon, 07 May 2012 1:01:54 GMT

It’s great to be back on Channel Nine’s The Block and I’m seeing some really innovative stuff from this year’s contestants. It’s amazing to see The Block slowly transformed week to week from a state of total disrepair to a series of amazing new homes. And if the ratings are anything to go by, a strong passion for renovating still exists among Australian home owners today.

by John McGrath

How Other Homes For Sale Affect You

Rescu Team — Tue, 24 Apr 2012 17:17:36 GMT

Considering your competition is an important part of the strategy for selling your home. If there are 20 other houses with similar features to yours on the market in your suburb, then buyers are going to have 20 options to choose from.

By John McGrath - Real Estate Expert

Buying U.S. Property, Too Risky?

Rescu Team — Sun, 25 Mar 2012 23:23:52 GMT

There is currently a small contingent of Australians looking to buy property for investment in the US. People are seeing homes selling for the price of a deposit in Australia and they’re thinking: ‘hey, that’s a good deal’.

John McGrath’s Market Review - Autumn 2012

Rescu Team — Mon, 05 Mar 2012 16:16:49 GMT

By John McGrath, Real Estate Expert

We’re in a state of flux with ongoing uncertainty over the European debt crisis, job losses here at home and the banks signalling that the days of routinely following the Reserve Bank’s moves on interest rates may be over. Despite these events, buyer enquiry is considerably higher with more people attending opens in January and February. Australia’s largest mortgage broker AFG, reports a 40% increase in national mortgage sales in January (up 14.5% in NSW) compared to the corresponding period last year, when natural disasters significantly impacted sales.

How to Become a Suburb Expert

Rescu Team — Mon, 20 Feb 2012 14:14:48 GMT

In Australia right now, there’s a lot of ‘out of area’ buying going on. What I mean is, people are buying property in areas away from where they live and work for retirement, a seachange or investment.

The Value Of A Good Floor Plan

Rescu Team — Mon, 06 Feb 2012 18:18:17 GMT

By John McGrath, Real Estate Expert

Changing lifestyle has had strong influence on today’s home owner and the importance they place on the ‘flow’ of their property. This is all to do with the floor plan and in my opinion, a good floor plan can add serious value to a property.

Decades ago, a typical house comprised a selection of separate rooms all with doors – even the dining room had a door. Today, the open plan layout is the floor plan of choice and this isn’t going to change any time soon.

The Rising Importance Of Home Offices

Rescu Team — Mon, 23 Jan 2012 14:14:02 GMT

By John McGrath, Real Estate Expert

I’m noticing how many properties in today’s market have designated, custom-built home offices. I’m not talking about a spare bedroom that has a desk in it, I’m talking about bespoke home offices that are purposely designed to be just that. They usually have custom-made cabinetry and shelving, a built-in desk with drawers, broadband data points built into the wall and often separate access to the front of the property.

John McGrath: Tips For Buying Your First Investment Property

Rescu Team — Sun, 08 Jan 2012 15:15:51 GMT

A recent survey by Mortgage Choice found that 43% of Gen Ys are intending to buy an investment property ahead of their first home. They’re willing to sacrifice the First Home Owners Grant and stamp duty concessions because they’d rather stay renting where they want to live and suit their lifestyle and buy an investment somewhere affordable.

So let’s take a look at my top tips, mistakes and traps for first time investors. But first, here’s the overall picture.

John McGrath's Guide To Christmas Shopping For Investment

Rescu Team — Thu, 22 Dec 2011 13:13:24 GMT

By John McGrath, Property Expert www.mcgrath.com.au

There’s been a lot of investment activity in the Australian property market this year, and while I recommend investing in markets close to home or work due to familiarity and proximity, there are many aspiring investors considering regional locations these days because they’re so much more affordable than our major cities. Cheaper housing also means less stamp duty, and the rental returns in regional areas can be even stronger than in some city markets.

John McGrath’s Market Review – Summer 2011

Rescu Team — Tue, 06 Dec 2011 2:02:20 GMT

We’ve noticed a marked improvement in buyer enthusiasm following the first interest rate cut but it won’t be enough on its own to spark some serious growth. People are looking for more good news to regain their confidence to buy and sell.

Interest rates are definitely an important factor in people’s purchasing considerations, particularly in the sub $1.5 million market, but it’s not the only one. There are other macro issues that are probably a greater influence on people's current psyche. The European problems are a big dark cloud and if they’re resolved I think that will have a much greater positive impact on the actions of buyers than a quarter percent rate cut.

While we continue to wait for more positive signals, green shoots of growth and new demand continue to emerge. The market under $1 million is strong due to first home buyer and investor activity and while there have been a few good sales at the top end, the prestige sector still lags. We need to see unemployment down, retail spending up, a resolution in Europe, improved bonuses and a good consistent quarter on the stock market for the prestige sector to move. I think we'll see people getting back on the horse in 2012, as buying opportunities above $3 million are exceptional.

Australian buyers don’t need to see a lot of price growth to regain confidence, they just want to know that home values have stabilised. A lot of people are sitting there with cash in the bank waiting for the signal that the market has leveled and now’s the time to buy. The underlying demand is there, people are just waiting for the bell to ring and I think there’s a good chance that will happen in the first half of 2012.

John McGrath Helps Us Answer the Question: To Renovate or Bulldoze and Build Again

Super User — Mon, 21 Nov 2011 13:13:00 GMT

By John McGrath, Property Expert
www.mcgrath.com.au

I’ve recently spent some time in Melbourne as a judge on reality TV series ‘The Block'. The premise of the show is around four couples who are given the challenge of renovating an entire house each, with one room delivered per week for judging.

Renovating is something Australians love to do. It’s all about reinvention and adding value to one of your biggest assets. It’s also a great way to improve your living environment and it can add serious new value (and equity) to your home or investment.

But while I was in Melbourne I read about a new trend. According to The Age newspaper, an increasing number of people in Melbourne’s inner and middle rings are bulldozing their existing homes and starting all over again as a deliberate alternative to renovating.

The story quoted David Hallett, state manager of Archicentre, who said there had always been buyers who had purchased houses with plans to knock them down and re-build. “What's new is the growing number of building firms offering ''stay-put'' deals that bundle together the costs of demolition and putting up a new house,” the article said.

And Hallett is right. People have been buying ‘dumps’ and knocking them down to re-build for many years. This isn’t a new strategy. But what they’re seeing now is mums and dads deciding to bulldoze the perfectly nice house they’ve lived in for years because re-building is actually cheaper than renovating, and even cheaper still than selling (factor in agents’ fees/marketing) and buying something new (factor in moving costs and stamp duty).

Generally, when you find your current home is no longer big enough to cater for you and your growing family, you face a choice. Do you renovate and/or extend your existing property or do you move? Well now, building firms are providing a third choice and promoting ‘stay put’ packages that include total demolition and re-building. So why do it?

Here are some reasons:

If you love where you live, it’s worthwhile exploring all your options, especially if you’re on a decent sized block of land that would allow a larger house to be built on it.
Another factor is cost. Professional valuers Herron Todd White estimates the cost of renovating is double per square metre compared with building a new dwelling. There are often hidden costs with renovating, especially if you own an older style property. Rewiring, putting on a new roof and so forth are major works that can cost a lot of money.
The remaining aspect is you. Maybe you want a totally new look for your home or you desperately need more space and you simply can’t achieve it through renovating.

It will be interesting to watch this new trend and see if it further develops. If you’re in the process of considering renovations or a re-build, I have some advice.

If you live in a period home with great original features, it’s worth considering renovating instead of re-building. Buyers love period details and in my experience, well-established suburbs with period architecture tend to grow faster than newer suburbs. People appreciate the architectural uniqueness and consistency. In comparison, new ‘catalogue’ homes can be duplicated and built in any number of locations and lack the same scarcity value.

If you do decide to re-build, keep your new home sleek and modern with neutral exterior tones to help it blend with the neighbours. I strongly recommend investing in an architect to create a unique home with modern finishes that will appeal to many buyers in the future.

More From John McGrath:

1. Expert Tips for First Home Buyers
2. Market Review For Spring 2011
3. Why Auctioning Your House Off Is Better Than Selling
4. How To 'Pick The Cycle' When Buying Property

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John McGrath's Expert Tips For First Home Buyers

Super User — Tue, 25 Oct 2011 13:13:00 GMT

By John McGrath, Property Expert
www.mcgrath.com.au

For several years in NSW, first home buyers purchasing a property worth $500,000 or less have enjoyed a full stamp duty exemption worth $17,990. This is a lot of money for a young person and coupled with the Federal Government’s First Home Owners’ Grant of $7,000, young people had a real head start in the market.

As of January 1 next year, things will change. The O’Farrell State Government has decided to abolish the first home buyer stamp duty exemption on established properties and it will now only apply to newly-built or off-the-plan properties.

The underlying idea is that we need to stimulate housing construction in NSW to counter our vast undersupply. The problem is the large majority of first homebuyers purchase established dwellings.

Suddenly, our spring season is looking even more interesting! I’m expecting a surge in first home buyer demand this season, especially from those who have been sitting on the sidelines wondering what to do. This may be the incentive they need to take the plunge into home ownership.

Two issues come to mind.

1. If you’re a first home buyer, I recommend you get out into the market right now if you want to ensure that stamp duty exemption and beat the rush. When the Government changes the rules, there is always a slight lag before the masses realise they better take action. The buyers who move first in the initial few weeks of spring will not face as much competition as those who wait a month or so.
2. If you’re going to try to buy now to save that $17,990 in duty, keep that number very firmly in mind. Don’t go $25,000 over budget in order to save $17,990!

In a report released on September 5 before the Government’s announcement, Australia’s largest mortgage broker, AFG said first home buyers comprised just 15% of the market, which is pretty low. It’s been like this for quite some time now but I have always believed there are opportunities out there for the savvier first timers.

Here are my top 5 reasons for buying your first home:

1. Your home is a cornerstone asset that will provide financial security for the future, as long as you buy within your budget with a buffer for rate rises and you hold the property for at least five years to generate some reasonable capital gains.
2. Rents are very high and in a softer market, the difference between weekly mortgage repayments and weekly rents has narrowed.
3. The stamp duty exemption in NSW is worth $17,990 for first home buyers who act before January 1.
4. The First Home Owners’ Grant of $7,000 is still available.
5. The market is generally softer this year and in my view it is primed for a new cycle of growth. There is a lot of pent-up demand right now as many people hold off on buying or selling due to a lack of confidence. Interest rates are key and 3 year fixed rates have recently dropped to below the variable rate. There is also talk of a possible downward movement. Once we get that first rate drop, I think we will see an immediate affect on the market. First home buyers have a window of opportunity to buy when prices are flat in good locations that will reap capital gains.

I wish all first homebuyers the best of luck out there in the marketplace this spring. With more stock coming online, as is traditional at this time of year, young buyers will hopefully have many options in front of them.

John McGrath’s Market Review For Spring 2011

Super User — Sun, 25 Sep 2011 14:14:00 GMT

By John McGrath, Property Expert
www.mcgrath.com.au

Recent economic events have caused a heightened level of uncertainty. This will prove problematic for property at the higher end over the next quarter, however I still believe most markets are at the beginning of a long-term growth cycle. Property remains an excellent asset class for long-term investment and definitely offers more stability than the volatile share market.

Once confidence returns, Australia will be in good shape. Unemployment remains relatively low and rents are very strong. A key factor is interest rates. If the RBA moves to decrease rates further, this will supersede many macro economic issues for the average buyer. Buyers have been concerned about interest rates moving upwards and we really need to see a rate reduction that puts the steep rises of the past 18 months behind us. With three year fixed rates now below the variable, this indicates the banks’ belief that interest rates are on the way down.

In short, we are experiencing great buying opportunities. Take a long-term view and purchase quality property in blue-ribbon areas or markets that show great prospects for capital growth.

Market observations

New RP Data figures for the June quarter show a -0.9% seasonally adjusted decline in capital city property values nationally. However, most transactions in investor and upgrader markets have been sub $750,000 with fewer transactions at the premium end.

Currently the market appears to be taking a breather. A pause in any growth cycle should always be considered a positive. Markets don’t go up in straight lines, they always reflect growth punctuated by a pause or occasional corrections.

Many consumers have de-leveraged by paying down their loans. Whilst not good for retail, they have more cash in the bank and their super funds. In some markets, people are deliberately downsizing to a more affordable home specifically to reduce the size of their mortgage. People are currently conscious of debt and are acting accordingly.

Affordability is a key issue for buyers. With people less confident about taking on large amounts of debt, we are finding higher competition on the more affordable homes.

Buyer demand, although weaker across the board, still outweighs the lessening supply. In the month ending July 30, RP Data reported 5,000 fewer new advertised listings nationally compared to July 2010. In NSW alone, there were 3,000 fewer listings. However, demand is solid, with Australia’s largest mortgage broker AFG, reporting an 8.6% increase in home loans in July 2011 vs July 2010.

Sydney and Melbourne clearance rates are in the low mid-50% and trending upwards. As a company, we are seeing our auction clearance rates shift towards 70% which is still a very healthy percentage in any market.

Upgraders and investors are still active. An increasing number of young people are choosing to buy an investment property ahead of their first home. People still want to enter the market and if they can’t afford it, they will stay at home longer, save for a bigger deposit, or buy with family or friends.

Record high refinancing indicates buyers are taking advantage of better deals so they can upgrade or at least reduce the interest rates on existing properties. Three-year fixed interest rates are below the variable rate right now. As an example, ANZ is offering 6.44% for two and three years fixed vs 6.9% variable.

The US debt downgrade by Standard & Poors will no doubt make people nervous, however property still presents as a stable investment. Strong rents are driving investor demand. Many more people are using self-managed super funds to buy property – latest Tax Office figures show a 13% increase in property investment via SMSFs over the past year.

Vacancy rates are very tight with renters competing strongly in markets with little stock. Some renters are offering higher rents or advance payments. There were 9,000 less new advertised rentals in July 2011 vs July 2010 nationally, according to RP Data.

In RP Data’s June results, Canberra was the best performing capital city with property values up 0.5%. Prices are now beginning to stabilise after 3-4 years of sustained growth. Great fundamentals for investment remain with apartments under $1M still in high demand and gross yields around 6.5%. The Australian National University has announced 6,000 new places which will add further demand for apartment rentals.

John McGrath’s Top Metro Suburb Picks

Houses

Abbotsford
Breakfast Point
Frenchs Forest
Freshwater
Haberfield
Northbridge
Palm Beach
Queenscliff
Seaforth
Sylvania Waters

Apartments

Bronte
Cremorne Point
Dawes Point
Earlwood
Kensington
Newtown
North Parramatta
Pyrmont
Sans Souci
Wollstonecraft

Regional Markets

There have been ‘green shoots’ in terms of property demand in most regional areas in which we operate. Some of the hardest hit markets such as Bowral, Ballina and the Gold Coast are receiving more new buyer enquiry than they have for several years – a good sign that smart buyers are picking the bottom.

Buyers continue to look for value, however they are now starting to purchase when they see it. The backlog of buyers is starting to create activity in markets such as Bowral where demand has increased noticeably over the last quarter, where our office reports significant new interest from Sydney investors seeking long term capital growth.

John McGrath’s Top Regional Picks – Best Buying Opportunities

Balgownie
Broadbeach Waters (Gold Coast)
Burleigh Waters
Caves Beach
Ettalong
Hamilton
Katoomba
Kingston (ACT)
Lennox Head
Town Beach

John McGrath Tells Us Why Auctioning Your House Off Is Better Than Selling

Super User — Tue, 02 Aug 2011 14:14:00 GMT

By John McGrath, Property Expert
www.mcgrath.com.au
It’s interesting to see more Australians choosing to sell via the auction method at the moment. I’m sure John and Neisha from Channel Nine’s The Block would be the first to tell you that auctions work after McGrath Chief Auctioneer Scott Kennedy-Green got them $205,000 more than the reserve at a recent big event!

Although private treaty remains the most common choice, almost 30% of Sydney properties have been taken to auction this year which is a long way above the average of around 20%. In Melbourne, the country’s auction capital, it’s even higher at just over 40% compared to an early 30% average.

So what’s going on? I think there are two factors. First, we had a very strong market in 2009 and many of this year’s sellers saw amazing results occur at last year’s auctions so they feel confident in the process. Second, we’re seeing a fair few people put their homes on the internet with high asking prices just to test the market. They’re not serious about selling unless they get a big offer and this is confusing the market. Therefore, serious vendors are choosing the auction method to differentiate themselves to motivated buyers.

There’s one other possibility – have we finally turned a corner whereby more people are getting over the fear factor? Over the 29 years I’ve been in real estate, I’ve seen a lot of great properties that should have been auction campaigns go to market via private treaty simply because the owners were scared of the process. Yes, it can be stressful on the day, but can you handle one day of stress if it means an extra $20,000 in your pocket? There will always be exceptions but in my view most properties in the inner and middle rings of major capital cities are suitable for auction, particularly given our vast undersupply.

A new report by independent data house, RP Data rightly points out that clearance rates are currently lower than they were earlier in the year, yet more sellers are choosing the auction method.

As a general rule of thumb, anything above 60% represents a strong market and earlier this year we went as high as 85% in Sydney and Melbourne. We’re now around 55% in these two cities, which are pretty normal market conditions – although clearance rates in the inner city areas remain much stronger.

I actually think it’s fantastic that people are not being put off by lower clearance rates. When deciding whether to sell via auction or private treaty, the most important factors are the unique selling features of your home and the local market demand for a property like yours. It’s an important decision that you should make in consultation with your agent. Average clearance rates for your whole city shouldn’t have a bearing.

Also, try not to go into this discussion with pre-conceived ideas. It’s not uncommon for agents to hear a vendor say they “hate auctions”, which is a pretty emotional statement. More often than not, the reason they hate auctions is because they had a stressful experience as a buyer or they know someone whose home was passed in. When selling, it’s important to make decisions based solely on what will get you the best possible price!

In a seller’s mind, a lot of emphasis is placed on the auction day itself. Will it be stressful? How many buyers will turn up? What if it passes in? Try to remember that the auction process provides three opportunities to sell – before, at or after, in a nice neat timeframe of four weeks. The auction day itself is just one day in a 30-day campaign – and if you can change your mindset, you might actually enjoy it!

If you’re thinking of selling and you’re worried about the auction process, I suggest spending the next few weekends attending auctions – ideally conducted by the agency you’re considering hiring, to help you get comfortable.

John McGrath Tells Us How To 'Pick The Cycle' When It Comes To Buying Property

Super User — Fri, 01 Jul 2011 14:14:00 GMT

By John McGrath, Property Expert
www.mcgrath.com.au

With so much minute analysis of the property market these days, it seems many buyers are trying to ‘pick the cycle’ when it comes to buying.

I’ve heard of many people, especially young ones, holding off on purchasing because they’ve read somewhere that the market is going to drop some time soon. Let me tell you, it’s not going to happen.

Property is a long term proposition. Yes, markets do have soft and strong periods; interest rates impact sentiment, so do Government incentives for first homebuyers and investors. One quarterly report might say the market is off 2%, the next one will say it’s up 2% and every property researcher calculates quarterly price changes differently, which can make things even more confusing for buyers.

This is the natural ebb and flow of the market. If you’re waiting for a significant drop in property values, you’re wasting valuable time. You can never pick the top or the bottom of the market until each have well and truly passed.

Have a look at the history of property values in Australia. There’s always been a steady rise over the long term. If that’s not enough to convince you, factor in all the things that are making our property market one of the world’s most stable right now.

A strong economy
Strong population growth
An ongoing shortage of property
Increasing rents
Greater interest from offshore buyers

These are strong, unchanging trends. The market is not about to drop dramatically.

Now before you say it, yes, we did experience a significant drop (20-30%) in prices during the GFC in some parts of Australia. But that was DURING THE GFC. I stress this point because it’s not so shocking that property prices went off the boil during the worst financial crisis the world has ever seen.

And did prices recover? Yes, and then some, within about a year. And all this while many markets around the world dropped by 50% or 60% and are still flat today. Why do you think so many offshore buyers are buying Australian property today?

I suggest you actually take comfort in the fact that it takes a catastrophic once-in-a-lifetime event like a global financial crisis to disturb Australian property prices in any significant way.

Buy when you are personally ready. Don’t try to pick the cycle – you’ll end up frustrated and disheartened, and while you’re sitting on your hands, the odds are prices will rise. If you’re ready now, it’s time to buy.

One more issue to discuss. It seems to me that the buyers who are focused on picking the cycle are doing so because their budgets are very tight. I agree, it’s good to have a budget and stick to it. But I have heard of instances where young people can borrow say, $700,000, but they’re trying to find a house for $550,000 because the prospect of all that debt makes them very nervous.

It’s good to be careful about your affordability. However, it’s not the grand sum total of debt that affects you week to week, the only thing you have to worry about are the repayments. So in the example above, if you can afford the repayments on a $700,000 loan, with a decent buffer for interest rate rises, you can afford to have the higher debt and a better property.

When we were young, we were taught to pay off debt as quickly as possible. Times have now changed and most of us will live with a home loan our entire lives.

Smart debt, such as borrowing for a home, enables you to build a stronger financial future. For most people, income and super simply aren’t enough for a good life, investing is the only way to generate real wealth. So if you can afford the repayments on a better home in a better location, do it. The property will appreciate in value faster and you’ll enjoy a better lifestyle!

John McGrath’s Market Review For Winter 2011

Super User — Mon, 13 Jun 2011 14:14:00 GMT

By John McGrath, Property Expert
www.mcgrath.com.au

It is always darkest before dawn. It seems a lot of people are interested in buying quality property but many are standing on the sidelines looking in. Fear of a second correction has created some hesitation in sections of the market. However this is not representative of the general marketplace in high demand regions, where there is still reasonably strong buying up to $2M for the right properties and a reasonable depth of demand above $2M.

Last year, we saw the beginnings of a recovery but this has been punctuated by this new round of uncertainty fuelled by global and macro economic factors as well as natural disasters closer to home.

It’s not unusual that in this environment we see the property market stalling as it is generally driven up or down by the economic backdrop and consumer sentiment.

Last year I predicted solid growth in 2011. That prediction might be slightly delayed due to these changes, however I still feel the worst is behind us and we are at the beginning of a long-term growth cycle.

My best read is this will gradually move throughout the country starting in major eastern seaboard capitals and continuing for some 3-5 years.

Market Observations

Luxury property in every capital city seems to be the sector hardest hit. My experience however is when economic confidence returns this market segment can rise rapidly as high net worth buyers fight for the best homes.

Some inner ring markets (within 10km of CBD) defy the gravitational pull of uncertain economic times such as Sydney’s Inner West, which continues to show strong demand.

Interest rate uncertainty may be causing some concern for some buyers, however with 3-year fixed rates at around 7.25%, buyers can lock in repayments for the short term which should give them a level of comfort. This also suggests that lenders are not expecting rates to escalate much higher than current levels, or at the very least return quickly to those levels if they do. Banks are once again lending 95% LVR indicating a stable climate and the banking sector’s confidence and anticipation of a stronger property market with long term capital growth.

First home buyers. As rents continue to escalate there is a greater incentive for tenants to buy prior to the next growth cycle kicking in. NSW is the most popular state with first home buyers who comprise 17.3% of the market, well above the national average of 13.9%. This suggests that FHB’s continue to want to enter the market and break the renting cycle in favour of securing a quality asset. Whilst FHB Boost has been removed, there are still some incentives for first home buyers to make the move and with rents expected to continue their steep rise, it seems logical for them to find an entry point.

Excellent environment for investors with higher rental yields and slightly softer prices. One and two bedroom apartments are hot property in Sydney and there is a growing trend in Self Managed Super Fund investing. According to AFG Mortgage Index* data, VIC dominates with 38.4% of loans to investors; NSW is second with 37.5%.

Regional Markets

A continued growing confidence in regions outside major cities has been witnessed by many of our regional offices recording their best results in recent months. While it’s still early days and growth in some areas is patchy, it’s encouraging to see increasing activity and buyer confidence in areas such as Ballina, Tweed Heads, Wollongong and the Gold Coast.

Under $500,000 bracket: the strongest sector with local buyers upgrading or downsizing and out-of-area buyers investing or retiring. The exception is the Gold Coast where there is a significant oversupply – with 300+ homes in Surfers Paradise area listed on realestate.com.au in this price range.

Newcastle renaissance. Newcastle is undergoing a major transformation. The market is buoyant and positive media attention is encouraging retirees, seachangers and investors from as far afield as Melbourne, Brisbane and Sydney. Newcastle is shedding its steel city image and great value is available. A good 3 bedroom house in a decent suburb is about $500,000. The rental market is strong with a large undersupply and tenants willing to pay six months advance rent. A hot investor market with great capital growth prospects plus high yields.

Gold Coast Activity. The Gold Coast area has been the hardest hit market in Australia. With local business in South-East Queensland suffering and an overweight number of mortgagee sales taking place, prices have plummeted with some homes selling as low as 50% of their purchase price. Whilst this appears a scary time for property owners in that area, it also creates some amazing buying opportunities. We have seen a much greater number of buyers entering the market in the last 60 days. Whilst recovery won’t be overnight, right now it appears to me that buying quality residential property on the Gold Coast may deliver the best growth opportunity Australia-wide in the medium term.

John McGrath On Changing The Use Of Our Homes

Super User — Sun, 29 May 2011 14:14:00 GMT

By John McGrath, Property Expert

www.mcgrath.com.au

The way we use our homes has changed dramatically over the past decade and this has impacted the design of new houses and apartments as well as the re-configurations of existing dwellings through renovations and extensions.

The rising importance of the home office is a prime example. Previously we often saw the smallest bedroom in the house transformed to a study but nowadays we’re seeing many more properties with designated purpose-built home offices.

When a developer sets out to build a three bedroom apartment, they’re more likely these days to include a fourth bedroom-sized room designed to be a study. Many studies have built-in furniture such as long bench desks with shelving and drawers and some have separate access from the street or front garden.

The home office is increasingly important for two reasons. Firstly, technology advancements mean people have more flexibility to work from home and this is particularly so with semi-retirees.

The second reason is the rising number of people starting their own businesses. This is happening a lot with young mums who don’t want to go back to the corporate world but still want to work.

An extra bedroom is still more valuable than a study because people like the choice of how to use the room. But it’s great to see new developments with studies now an integral part of their design.

Another change in the use of our homes is the increasing desire for separation between parents and their children. This isn’t because families don’t like hanging out together, it’s because many young people are staying home well into their 20s now and it’s nice to have separate living areas so they can have their independence. The term ‘teen retreat’ is seen more and more in real estate copywriting today because many more buyers are looking for it. And having two lounge areas is also really important – the kids can play their music and video games in one room while mum and dad can relax in the other living area.

A separate studio or granny flat is ideal for a teen retreat or a home office. It’s also a great way to earn some rental income. With vacancy rates so low, many home owners are seeing an opportunity to build a self-contained granny flat or convert a garage for leasing. Sydney councils administered 1521 DAs for granny flats in 2009-10 compared to 1365 in 2008-09.

Granny flats are also ideal for in-law accommodation. Many grandparents are involved in child care these days and building them a low-maintenance home on site definitely makes sense, even if they only stay there one or two days per week. Just make sure you get council approval first.

I think the advent of the ‘parents’ retreat’ is also a fantastic change in the typical layout of a family home. The difference between a standard master bedroom and a parents’ retreat is mainly the living space. Instead of being just a place to sleep, it’s a room with space to sit and read or watch TV.

With an increasingly number of parents both working, busy mums and dads are really appreciating having their own private space to unwind at the end of the day. A typical parents’ retreat is pretty large with a designated sitting/lounge area, perhaps a balcony and also a generous ensuite – which is often larger than the main bathroom now in new properties. And the ensuite is purposely designed as a luxury space rather than a utilitarian one.

I really encourage home owners to be creative with how they use their properties. Just be careful you don’t de-value your home by making it too individualised.

For example, if you want a home cinema but don’t have several rooms to choose from, take a minimalist approach and install an overhead projector, drop down screen and thick curtains in your lounge or rumpus room. Keep the room flexible so it can be used as a living space as well as a cinema.

Same with studies. Don’t make a two bedroom apartment into a one bedder plus study as this could de-value it. Take a minimalist approach and install a longer narrower bench desk so a double bed can still fit in the room. That way buyers can use the room either as a study, bedroom or a combination of the two.

If you have some quirky ideas for changing your property, ask your local agent to come over for a look and a chat. The good agents will gladly give you their time even though you’re not thinking of selling. Their advice could prove invaluable in ensuring the changes you make add value to the property.

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Learn How To Refinance Your Home Loan And Save $7000pa With John McGrath

Super User — Wed, 18 May 2011 14:14:00 GMT

By John McGrath , Property Expert
www.mcgrath.com.au

McGrath’s Home Loans Division, Oxygen Home Loans, recently assisted a couple from Sydney’s Eastern Suburbs who wanted to refinance their loan.

The lender that Oxygen found for them had the most competitive fixed rate of 7.09% for three years. The new lender also paid the client $700 after settlement as a cash bonus for switching to them. This couple will save $7,060 per annum.

That’s serious money in anyone’s language.

And now, many other home owners can also seek big savings like this due to the ban on mortgage exit fees. Effective from July 1, refinancing or switching loans will be a lot easier and it’s a big win for the consumer.

In fact, it’s already easier to switch, as the change in law has already resulted in huge competition for refinancing customers. The banks have launched an advertising blitz to lure borrowers away from their lenders. Many of these deals include reimbursing the exit fees incurred by refinancing customers.

Oxygen estimates that in the past, 1 in 10 of their customers were unable to refinance due to prohibitive exit fees on their existing loans. Today, the ban on exit fees is creating a lot of new enquiry.

I had a chat to Oxygen’s General Manager, James Green, who reports a big surge in refinancing enquiries “to take advantage of the unbelievable offers currently available”.

“There has never been a better time to look for a better deal and switch,” said James.

There is a downside though. It’s likely that many home loans will become more expensive in the form of higher interest rates and fees because the ban will ultimately result in lost profits for the banks.

I asked James for some expert analysis and here’s what he had to say.

“The ban has been great for competition and we’ve seen a lot of new bank advertisements encouraging people to switch lenders. In fact, some banks are even paying customers if they leave certain competitors and join them.

“However, the average cost of mortgages will increase because an increase in refinancing activity will make loans less profitable for banks and other lending institutions.

“The most profound effect will be the disappearance of Discounted Loans, which are subsidised loans with lower interest rates and exit penalties if a customer leaves early, say within the first five years.

“Most non-banks specialise in these discounted loans and the ban on exit fees will require them to reinvent themselves.

“The banks will need to originate more loans to make up for the lost business. To pacify shareholders, new money will have to be made elsewhere to make up for the Reduced Loan Revenue generated per loan.

“Also, mortgage costs will need to be amortised over a shorter term because the average life of a loan, now 4.1 years, will likely be reduced as a result of greater refinancing activity.”

Based on everything James has said, I’m encouraging homeowners to look at refinancing sooner rather than later.

Right now, competition is fierce and the banks are doing everything possible to win your business. Soon enough, they’ll start raising rates and fees in response to the lost revenue, so it’s best to act now.

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Real Estate Tips: Properties To Avoid

Super User — Fri, 22 Apr 2011 14:14:00 GMT

By John McGrath.
RESCU's Property Expert?.

Despite all of its advantages, residential property investment is not a foolproof way to make money. You need to develop an understanding of the market, do your research, buy the right property and be patient while you let the capital growth take effect.

As capital growth is always the priority, the most important decision is which property to buy. Previously I’ve discussed how to identify a good investment property. This week we look at some properties to avoid.

‘Bargain’ Second-Tier City Locations

You sometimes see ads for apartment blocks targeted at investors. On paper they sound great – brand new, two bedrooms, two bathrooms, balcony, security car space, inner city location, $400,000. The pricing is very keen. Sounds like a bargain but be cautious. If something looks too good to be true, it probably is.

Once you get over the lure of the low asking price, you’ll soon realise these blocks are in inferior locations that don’t appeal to owner-occupiers. There will be little growth in the long run. The reason the pricing is so keen is probably because the developer has bought the site cheaply as no one wanted it and/or they’ve been able to get away with inferior fixtures and fittings.

Rental Guarantees

A rental guarantee is where a developer guarantees a purchaser a certain minimum rent for an initial period. The developer will subsidise any shortfall from the guaranteed amount. You’ll see a big headline in the ad: ‘Guaranteed 7% per annum for the next five years’.

Rental guarantees are often used by developers to justify inflated prices. It’s not uncommon for the rent to drop when the rental guarantee period expires, leaving you with a big hole in your budget. At that point you have to live with the market rent and make that cash flow work.

My view is that an investment property should be able to stand on its own two feet. If someone has to guarantee the rent, then it’s probably not a sustainable, realistic rent. This means you’re probably paying a premium price based on that. I’m a great believer in just letting the market rent flow through.

Serviced Apartments

Serviced apartments are a bit like hotel suites without the room service and house-keeping. They’re popular with business people and holiday makers for short or long stays. Investing in a serviced apartment carries a lot more risk than buying a house or an ordinary apartment. You’re relying on the operator to get it right; and on the tourism and business markets to remain strong. With ordinary apartments and houses, there’s always demand from people wanting to rent.

By definition, the re-sale market for serviced apartments is confined to investors. So you’re restricted to a much smaller re-sale market. Since growth generally comes from owner-occupiers, if you buy a property that can only ever be used as an investment, it’s not going to have the same growth potential either. The market for serviced apartments is still largely untested in most parts of Australia.

Refurbished Commercial Property

A building that has been purpose-built for commercial or industrial use doesn’t always work well as a residential space. Compromises often have to be made with floor plans, leaving apartment owners with unworkable rooms and wasted space.

Also, the biggest problems I’ve encountered with owners’ corporations have arisen from structural defects in retro-fitted commercial buildings. They all look great on day one, but after a couple of years they’re often beginning to show problems. There’s been a lot of structural cracking in the walls and ceilings and I’ve known a lot of buildings with major leaks.

Company Title Apartments

Company title buildings often have by-laws restricting owners’ rights to rent their apartments. They can range from a total prohibition to the prospective tenants being vetted by the owners’ committee. With so much strata title property to choose from, there’s no need to put yourself in a position where you have to jump through these hoops each time you get a new tenant.

These are the big ones to avoid. As always, I also recommend that you trust your instincts when looking for an investment property. If something doesn’t feel quite right, make some further investigations or simply walk away. A quality investment is worth waiting for.

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‘Bargain’ Second-Tier City Locations

Rental Guarantees

Serviced Apartments

Refurbished Commercial Property

Company Title Apartments

More Real-Estate Advice…

Expert Advice to RESCU your life: Style; Beauty; Wealth; Health; Love; Culture and great competitions. Image sourced at www.mcgrath.com.au.

Expert Advice to RESCU your life: Style; Beauty; Wealth; Health; Love; Culture and great competitions.

Image sourced at www.mcgrath.com.au.