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.
Property spruiker hit with record $18 million fine
The man who claimed “You can buy a house for a dollar!” has been fined $18 million.
This article from News.com.au explains the details of the case.
A property spruiker who charged investors tens of thousands of dollars to learn “how to buy a house for $1” has been slapped with a record $18 million fine.
The Federal Court handed down the penalty after finding last August that Rick Otton and his company We Buy Houses Pty Ltd had engaged in misleading and deceptive conduct.
From around 2000, Mr Otton promoted real estate investment strategies through seminars, boot camps and mentoring programs that brought in around $20 million in revenue between 2011 and 2014 alone.
Investors were told they would be taught how to buy a house for $1 without needing a deposit, bank loan or real estate experience, create passive income streams through property and quit their jobs, build a property portfolio and start making profits immediately.
Mr Otton promoted techniques with names like “rent to buy”, “sandwich lease option”, “deposit builder”, “handyman special” or “sweat equity”, “vendor finance” or “purchase by installments” and “some now, some later”.
The Australian Competition and Consumer Commission initiated proceedings against Mr Otton in 2015 following a joint investigation with NSW Fair Trading.
The penalties of $12 million imposed against We Buy Houses and $6 million against Mr Otton are the highest ever imposed for contraventions of the Australian Consumer Law by a corporation and an individual.
Mr Otton has also been banned from managing corporations for 10 years in Australia, while he and his company have been permanently restrained from further involvement in real estate promotion.
“We Buy Houses and Mr Otton peddled false hope to people simply looking to get a foothold in the housing market or invest money in real estate for their future,” ACCC chair Rod Sims said in a statement.
Read the full article here
Rental vacancies to tighten
It appears there’s going to be a lot of changes for rental vacancies.
Au revoir to the cranes
The most timely JLL report showed that the residential construction pipeline is now shrinking fast on tighter lending criteria for developers and investors.
In time this will inevitably lead to tighter rental vacancies, especially as we head into and beyond the traditionally busy Christmas and New Year period, with more Airbnb offerings also set to eat into the rental market through this cycle.
With the greatest volume of apartment construction through this cycle Sydney and Melbourne will be the last markets to know about the tightening (although when D-Day does come the presently record high population growth in these cities means that the tightening of rentals market may also be felt most acutely).
We’re already hearing more and more stories of failed or delayed settlements, so the slowing in supply could come about sooner than expected.
The initial impacts will be felt in Hobart, Canberra, Adelaide, and an array of rental markets around regional Australia.
Indeed, SQM’s latest figures showed that rental vacancies had already fallen to the lowest level since 2014 by the end of last month, so the tightening process is well underway in some markets.
The HIA forecast today in its National Outlook that housing starts will fall by more than 50,000 from the peak, noting (or lamenting) that:
‘APRA’s restrictions were designed to curb high risk lending practices but we are now seeing ordinary home buyers experience delays and constraints in accessing finance.’
Read the full article here
Tighter lending conditions set to increase first-home buyers’ reliance on bank of mum and dad
As lending rules continue to tighten, it would seem more and more first home buyers are reliant on the bank of mum and dad.
An article on Domain.com.au looks at why the numbers are so high, despite a fall in property prices.
First-home buyers are expected to increasingly rely on the bank of mum and dad to get on the property ladder, despite improving affordability in Australia’s biggest housing markets.
Experts say tighter lending conditions mean more buyers will require parental assistance to buy a home, even though median house prices have fallen in Sydney and Melbourne.
Almost half of first-home buyers get a financial boost to their deposit from their parents, and one in five have help with both the deposit and their parents acting as a guarantor, research from financial comparison website Finder has shown.
“The harsh reality is without their parents’ help, many young Australians would not get on the housing ladder,” said Finder’s Kate Browne.
Most economists surveyed by Finder said the number of first-home buyers relying on parents won’t decline, with 35 per cent predicting an increase and 41 per cent expecting the rate will remain the same.
ABC Bullion’s Jordan Eliseo said the overall number of loans going to first-home buyers may fall, but the number of buyers relying on parents will rise.
“Any help parents can give acting as guarantor or helping with the deposit is going to become even more favourable with anyone wanting to get access to credit,” he said.
“It makes sense that the demand on parents is only going to go up as kids are struggling to get access to as much credit as they might have previously.”
Australia’s median house price fell 2.9 per cent over the year to September 2018, dragged down by a 6.5 per cent fall in Sydney and a 3.2 per cent fall in Melbourne, according to Domain group data.
However, it still takes almost seven years for a couple to save a deposit for an entry-level house in Sydney, and at least six years in Melbourne, due in part to price growth in the entry-level market.
Credit squeeze pushes buyers to parents
Domain research analyst Eliza Owen said tighter lending conditions are a double-edged sword for first-home buyers.
“The benefits of having higher loan restrictions is that there’s less capital to bid up prices, but there’s also less access to credit,” she said.
“Tighter lending restrictions would likely increase that rate of first-home buyers who are relying on their mum and dad, particularly when coming up with that initial deposit.”
Read the full article here
Jewels in the crown
What’s really going on in Melbourne’s property market?
In this article for Switzer, John McGrath explain the results of the McGrath Report 2019.
The big news in Melbourne of late was the buoyant auction results for this year’s hit renovation series ‘The Block’ in St Kilda.
Our McGrath St Kilda office achieved the highest sale price in The Gatwick for Hayden and Sara’s apartment, selling for $3.020 million – $545,000 above reserve and delivering them $645,000 in prize money.
Every apartment sold well above reserve and whilst it is a blockbuster TV show, these are also real sales to real buyers.
I agree with McGrath Chief Auctioneer Scott Kennedy-Green, who did an excellent job on the night, that high quality properties will always have an edge, even in challenging markets.
As discussed in our newly released annual McGrath Report 2019, Melbourne has been cooling down over the past year, following 51% growth in home values over five years during the boom.
The market peaked in November 2017 – five months later than Sydney, with its cooling phase starting slowly but gathering pace in mid-2018.
Properties retained their value in FY18, with 1% growth, however, overall, buyer demand is clearly weaker, primarily amongst investors but increasingly also owner occupiers, as tightened lending criteria takes hold of the market.
In the 12 months to June 2018, the number of homes listed for sale remained roughly the same as the previous year, however sales fell by -16.8%.
At the end of FY18, Melbourne’s median house price was $821,000 and the median apartment price was $574,000.
As always in a slowdown, the citywide market has become patchy with prices in outer areas continuing to grow, while the inner and middle Melbourne markets broadly taper off.
Entry level suburbs with houses under $600,000 are drawing strong interest from first home buyers aided by stamp duty concessions and the new $50 million HomesVic co-purchasing program, whereby the government takes a 25% equity share to increase affordability for buyers and reduce the need for larger deposits.
Official figures show 250 buyers have provisional approval to buy via the pioneering program, which offers up to 400 properties in Melbourne suburbs including Dandenong, Ringwood and Sunshine, and regional hubs including Ballarat, Bendigo and Geelong.
Nine of Melbourne’s top 10 suburbs for median house price growth in the year to June 2018 were located in the middle to outer ring areas in the sub-$700,000 price range.
The best performers were Coolaroo (37%), Melton South (32%), Melton (27%), Sanctuary Lakes (29%) and Sunbury (26%), according to CoreLogic figures.
Family buyers are also fuelling strong construction activity in the city’s outer east, north and west at the rate of 1,500 new family households per week, according to the Housing Industry Association.
A longstanding correlation between property prices and school zones means homes in sought-after districts should somewhat defy the slowdown, particularly given the premium that families are willing to pay.
Real Estate Institute of Victoria (REIV) sales figures for CY17 show houses in popular public school catchments were up to $400,000 more expensive than homes just outside the zone.
Aussie bricklaying robot takes on tradies, building three-bed house in 72 hours
Tradies vs. Robots – who is more likely to build a three-bed house in 72 hours?
This article from Smartcompany.com.au reveals the result.
An Australian robot is set to take on tradies the world over, after building a three-bed, two-bath, 180-square-metre home in less than three days.
Built by ASX-listed Perth company Fastbrick Robotics (FBR), the Hadrian X machine recently successfully completed a series of tests, proving it was capable of complying with various building requirements.
Once these tests were completed, the robot was free to build its first full-home structure, which it completed within the allocated three-day time period.
In a statement, FBR chief executive Mike Pivac called the build a “world-first milestone” for the company.
“We now have the world’s only fully automated, end-to-end bricklaying solution, with a massive market waiting for it,” he said.
Now, the company is considering learnings from the Hadrian X program and making amendments ahead of another demonstration for commercial stakeholders.
It will then embark on a global commercialisation strategy, to capitalise on demand for “this disruptive and game-changing technology”, Pivac said.
“What we have achieved here is a quantum leap for the construction industry,” he added.
“This points to the massive potential for the technology and FBR’s ability to shape the way the construction industry operates in the future.”
According to a Business Insider report, shares in the robotics company soared by 27% after this news was announced.
Read the full article here
Weekend video: Coffee vs Tea: What’s Better For You?
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