There are more interesting articles, commentaries and analyst reports on the Web every week than anyone could read in a month.
Each Saturday morning I like to share some of the ones I’ve read during the week.
The weekend will be over before you know it, so enjoy some weekend reading.
This ‘single best indicator’ could spark a 10% fall in Australian house prices
What’s ahead for the Australian property market?
While no on has a crystal ball – there seems to be much talk of what we can expect..
An article on Business Insider look at the indicators that suggest we’re in for a price fall.
The medium-term outlook for Australian housing isn’t bright, according to Capital Economics chief economist Paul Dales.
Dales expects aggregate prices across Australia’s capital cities to fall by around 10% from their recent peak by 2021.
He cited reduced demand and the looming prospect of higher interest rates as the two main factors which will weigh on prices.
With the Sydney and Melbourne markets leading a slowdown in house prices nationally, increasing attention is being turned to the outlook for Australian housing.
That’s perhaps not surprising given the central role housing plays in Australia’s economy, and the fact the market has yet to turn around since Sydney prices fell for the first time in 17 months last September.
“The recent fall in the demand for housing relative to the supply is consistent with house prices continuing to decline in the coming months,” Dales said.
“While prices may only edge lower this year and next, higher interest rates will probably mean they fall more sharply in 2020 and 2021.”
Dales said house prices in Sydney and Melbourne are particularly vulnerable, given CE’s view that prices in those cities are around 25-50% overvalued. He also expects price falls in units to exceed those of detached dwellings.
To get a gauge on the demand outlook, Dales said the sales-to-new-listings ratio was a more accurate barometer than auction clearance rates.
He noted that only 25-30% of home sales nationally are done by auction. And while the auction rate is higher in Sydney (35%) and Melbourne (45%), it still only comprises less than half the market.
“In our opinion the sales-to-new-listings ratio is the best single indicator of the health of housing,” Dales said.
Dales said the number of new listings is still relatively low by historical standards.
Still, since early 2017 the number of new homes listed for sale each month has exceeded the number of homes sold.
Using a three-month average to smooth out the data, the sales-to-new-listings ratio indicates that home prices nationally will dip into negative territory over the next six months:
While the NAB’s latest forecast points to Sydney’s market under-performing the other capitals in 2018 and 2019, Dales said Melbourne looks particularly vulnerable.
The sales-to-new-listings ratio for Sydney “suggests that the downside risk to house price inflation in Sydney in the coming months at least is fairly small,” Dales said.
“In contrast, it appears as though the slowdown in Melbourne has much further to go as overall house price inflation there could fall from +5.3% in March to around -5.0%.”
By property-type, Dales said the number of units being listed relative to those sold is much higher than detached-dwellings, which points to much sharper price falls over the next six months.
Although he added that on a city-by-city basis, the sales-to-new-listings ratio for Melbourne isn’t particularly strong.
Looking longer-term, Dales said multiple factors weighing on demand will also serve to curb house price growth nationally.
While population growth and continued strength in Australia’s labour market will provide some support, they will be more than offset by the rising cost of credit.
For one thing, Dales said some banks may raise lending rates outside of the RBA’s rate cycle, citing the recent increase by smaller lenders in response to increased funding costs.
And althought RBA is likely to keep interest rates on hold for the rest of this year, when the next move does occur it’s likely to be up.
“That may not happen until late in 2019, but when it does demand will be reduced.”
“We expect that house prices for the eight capital cities will fall slowly throughout this year and next, before they decline faster in 2020 and 2021 in response to higher interest rates,” Dales said.
“By the end of 2021, prices may be 10% below the peak in mid-2017.”
Read the full article here
Bust looms for Sydney’s apartment developers
It looks like the Sydney apartment market is in for a slowdown.
Apartment boom over
Both new residential building and renovation activity declined significantly in 2017, with total seasonally adjusted dwelling starts down to 52,600 by the final quarter of the year, well down from the peak of 62,300 in the first quarter of calendar year 2016.
The drop was driven by a 17 per cent year-on-year decline in attached dwellings, with Brisbane’s inner city apartment market the prime culprit.
Sundry indicators suggest that activity across Queensland should now trend moderately upwards, spurred on by a healthier spread of boutique developments, ‘plexes, and townhomes.
Read the full article here
Melbourne house rents increase again as experts say more stock needed
Prices are set to soar for the Melbourne rental market.
According to this article from Domain.com.au – a shortage in stock has triggered a rise in prices.
More properties are needed to keep up with high demand for rentals in Melbourne, experts say, as rents rise and stock levels dwindle.
Median rental prices for houses rose by 1.2 per cent for the March quarter to $430 per week, while unit prices rose 2.5 per cent to $410, according to the Domain Group Rental Report released today.
Inner Melbourne, an area that spans the CBD, Moonee Ponds, Elwood and Thornbury, had the highest quarterly and annual growth for houses – with the median price increasing to $615 per week compared with $590 in March 2017.
For units, the north east (including Preston, Kinglake and Hurstbridge) saw the highest quarterly growth and the second highest annual growth with prices rising to $360 per week, while the Mornington Peninsula had the highest annual growth of 6.5 per cent to $330.
Melbourne’s rental market remained competitive due to a drop in stock on the market in the past year, Domain Group data scientist Nicola Powell said.
In the year to March, the number of rental listings for both houses and units declined across Melbourne – with only the houses in the north west increasing in number.
“There was a significant decline in the number of listings in the Mornington Peninsula year-on-year and also in the outer east – it’s really dropped,” Dr Powell said.
The number of units available in the outer east fell 18.5 per cent to 720, while houses dropped 15.3 per cent to 1882.
The Mornington Peninsula had the second largest decline for houses listed (14.2 per cent), while inner Melbourne, the inner east, north east and the west all declined by at least 7 per cent.
Real Estate Institute of Victoria vice president Leah Calnan said more stock was needed, particularly in inner Melbourne.
“I would love to see more three-bedroom apartments being built by developers,” Ms Calnan said.
“That would also accommodate the families that want to live in inner-Melbourne.”
Ms Calnan, a property manager with 20 years experience, said the demand for rentals had held strong coming out of the traditionally high period of January and February, with most properties attracting multiple applications.
“People are taking leases for 12 months and then renewing them for another 12 months – so there’s less turnover,” she said.
“I think there’s also been some delays with some buildings over the past six months, so I think we’ll see those stock levels come back up.”
While rents were up, rental yields were down by 5.9 per cent for the year for houses – though up slightly (0.5 per cent) for the March quarter to 3.14 per cent, the second-lowest of all capital cities, just above Sydney at 3.11 per cent.
It indicated house prices had been growing at a faster rate than rents, Dr Powell said.
“What’s interesting is we are now starting to see quarter on quarter growth in rental yields, so it suggests that rents are starting to rise over the quarter faster than house prices,” Dr Powell said.
Yields for units were stronger, with a quarterly increase of 3.2 per cent to 4.47 per cent.
Elsewhere, Hobart had the strongest growth for the quarter for houses (6.3 per cent to $420), while Canberra topped the list for units (4.7 percent to $450).
Read the full article here
Does flipping work?
While many renovation shows have made us feel like we’re experts – the question still remains…
Does house flipping really work?
In this article for Switzer, John McGrath looks the factors to consider.
Flipping is a strategy employed by property investors who typically buy, make improvements (such as renovating, sub-dividing or securing DA approval for development) and re-sell within a very short timeframe for a profit.
It sounds like a great idea and all those TV renovation shows make it look pretty easy.
The reality, however, can be far different, especially for people with no experience or skills relating to home renovation.
Mistakes get made, costs and timetables blow out and in the meantime, you’re covering the full loan repayments yourself with no rental income to help.
Successful flipping means recovering the cost of the purchase, the improvements, the loan repayments during your hold period and hefty trading costs, including stamp duty when you buy and agents’ fees and capital gains tax when you sell. After you’ve covered all of that, what’s left is your profit.
In short – it’s tough to do well and this is why flipping accounts for only a very small percentage of sales each year.
CoreLogic data shows only 1.3% of homes re-sold over the 12 months to June 2017 in Australia were held for less than a year.
Only 5.7% were re-sold within 1-2 years of purchase.
Does flipping work? Well, yes it can, if you get absolutely everything right, including buying the right type of property at a good price in the right location; adding enough value through high quality renovations, sub-division or other means; and selling in reasonably strong market conditions.
Flipping, by definition, is done in a very short timeframe, which is why you can’t afford to make mistakes.
There isn’t the luxury of time, which is the one factor that every investor can count on to deliver capital growth on a good quality investment.
You have a better chance of making a profit flipping during boom markets, when rapid price growth coupled with the value of your renovations can deliver a handsome profit.
In fact, you can buy a property at the start of a boom, do nothing to it; and sell within a few years for a profit, too.
We’ve seen that happen in many cases over the past few years in Sydney. But few people get all the ingredients right.
The biggest challenge for flippers during booms is buying at a reasonable price.
If you pay too much, there’s less profit to be achieved at the other end because you’re selling in such a finite timeframe.
CoreLogic recently released its inaugural Property Flipping Report, which provides a national analysis of properties that were bought and re-sold within either 12 months or 1-2 years by sellers specifically aiming to make a profit.
Among the capital cities, it found that flipping was most successful in Sydney and Melbourne, where 9 out of 10 homes flipped within 1-2 years of purchase turned a profit in 2017.
The report doesn’t go into how much of a profit, but it’s not surprising that people made money when both cities were in the midst of a boom.
In flat or normal markets, it was a different story.
Only 3 in 10 properties in Darwin and 5 in 10 properties in Perth flipped within 1-2 years of purchase sold for a profit.
The report identified several flipping trends and hot spots nationwide, as follows.
- The highest rate of flipping nationally occurred in Sydney, where 6.8% of re-sales in 2017 were flips of properties held for only 1-2 years
- Nine out of 10 flips in Sydney and regional NSW turned a profit in 2017
- The Illawarra on the NSW South Coast recorded the highest percentage of flips in the state (8.7% of re-sales within 1-2 years of purchase)
- About 98% of flips in the Illawarra turned a profit
- Most flips occurred in South East and North West Melbourne (7.8% and 7.6% of re-sales within 1-2 years of purchase)
- The Mornington Peninsula was the most successful regional area for flipping and Bendigo was the worst
- The highest rate of flipping was on the Gold Coast, with flips accounting for 7.9% of re-sales within 1-2 years of purchase
- Flipping was most successful in Moreton Bay North (95.6% of flips sold within 1-2 years of purchase turned a profit) and least successful in Townsville (48.8% of flips sold at a loss)
- Losses were high for WA flippers in 2017, with 47.7% of properties flipped within 1-2 years of purchase in Perth sold at a loss
- North East Perth recorded the highest losses
- An increasing number of people are flipping in West Adelaide
Flipping is not a wealth strategy I would recommend to the average property investor.
Read the full article here
The Latest Homewares Colour Trends for Autumn and Winter
With the season changing and temperatures cooling down, many of us are looking for ways to update our home with the latest trends, and give it that extra warmth we all need.
This article on tlcinteriors.com.au gives an insider look into the best autumn winter trends to warm up your home.
Colour trends for Autumn and Winter are headed in a rich and moody direction.
You heard it here first! All of those bright, zesty hues you were rocking in decor across summer need to be popped away.
Lime greens, lemon yellows, chilli reds and turquoise blues are taking a back seat for at least six months.
Now, that’s not to say you should throw these items away.
No no no.
We’re simply retiring them for two seasons.
Pop them in your homewares box (or cupboard, in my case!) and get them out again when September hits.
In the meantime, let me give you the lowdown on the latest colour trends for Autumn and Winter below.
All the imagery here is styled by yours truly, in my own home, using phenomenal decorator items from my mates at Lorraine Lea.
Latest Colour Trends for Autumn and Winter
Embrace the Richness of Prune
It’s not just great in juice form but it’s going to make your interior look moody and sumptuous for months to come. What’s so great about prune is that it works with so many existing shades in your home.
Now, if you’ve been a smart cookie and followed my three-step rule to layering a room, you’ll already have a sofa, bed or armchair in subdued tones.
Think soft grey, white, black, beige and any number of shades in that family.
Over these neutral pieces of furniture, you get to throw on layer two – the decor! And prune cushions and throws are a great place to start.
I always say that the smaller decorative items in a home shouldn’t cost you an arm and a leg, and these ones don’t.
They have luxury and affordability written all over them, don’t you think?
Pair it with Blush and Indigo
Other colour trends for Autumn and Winter include blush and indigo.
Both of these tones play so well with prune, so you can throw all three shades together and create your own little three-way colour combo.
If you feel the look is getting to colourful or visually crazy, simply bring more black, grey or white into the scenario to ground the look.
But honestly, half the fun is in the experimentation, so get in there and have a play!
Above I’ve thrown in Lorraine Lea’s faux cow hide rug, which is another fave of mine and perfect for adding warmth to your space when it’s a bit chilly!
Side note: the candle you see above is by one of my fave Aussie brands, Tanda.
I’ve got a complete list of my top candle brands here if you need a new scent.
Don’t Forget Purple Play in the Bedroom
Of course, the cushions and throws are important on a sofa or armchair, but don’t neglect your bedroom.
New-season bedding sets like Midnight Rose (above) are packed full of deep purple tones and tap into the huge romance trend that’s dominating interiors right now.
The great thing about a bedding set like this is that it features a double-sided pattern, so you pretty much get two colour trends for the price of one.
Flip it over when you tire of one side and you have a whole new look for your bedroom.
PS: Notice how lush deep teal tones look against a black and purple foundation? I love it.
That chunky teal Tretham throw is tassel perfection.
Can we talk about Mustard?
Another big colour trend for Autumn and Winter is mustard.
This deep hue evokes a sense of richness and is perfect in small doses across your home.
When I say small doses, I mean something like a cushion or throw.
The gorgeous throw you see above is called Trentham and he’s only 69 bucks.
I like mustard against a soft grey backdrop, but you can easily work it into any neutral living room.
If you want to up the colour a bit, add indigo to the equation to keep the look more vibrant.
These two tones work so well with my cocky print from Urban Road.
What’s not working is the arm of my sofa where the cats have attempted to claw it to pieces!
Purple and Mustard = Power Couple
So you’ve seen how well purple plays with blush, indigo, deep teal and grey.
But if you really want to create a colour match made in heaven, try pairing purple tones with mustard.
I’ve done this in my bathroom – which sports a simple black and white base palette – and it creates a punchy, invigorating moment, don’t you think?
Read the full article here
Weekend video: What Your Coffee Choice Says About You
SUBSCRIBE & DON'T MISS A SINGLE EPISODE OF MICHAEL YARDNEY'S PODCAST
Hear Michael & a select panel of guest experts discuss property investment, success & money related topics. Subscribe now, whether you're on an Apple or Android handset.
NEED HELP LISTENING TO MICHAEL YARDNEY'S PODCAST FROM YOUR PHONE OR TABLET?
We have created easy to follow instructions for you whether you're on iPhone / iPad or an Android device.
PREFER TO SUBSCRIBE VIA EMAIL?
Join Michael Yardney's inner circle of daily subscribers and get into the head of Australia's best property investment advisor and a wide team of leading property researchers and commentators.