February Perth Property Update- “Who wants a Crystal Ball?”

Welcome to my first Perth Property Update for 2012, where I bring you the latest on the Perth market and this month I feature how you can drastically improve the timing and quality of your buying and selling decisions with the help of John Lindeman, one of the leading authorities on our Australian property markets. John has spent over 20 years professionally researching the nature & dynamics of our housing market including 10 years with major housing data providers such as the Australian Bureau of Statistics.

Having John’s help is as close as you can get to having your own crystal ball so read on!

Perth Sale Market Update

The market took a break for Christmas with the number of Perth properties for sale pulling back from 15,500 in mid December to just over 13,300 at the start of January. The number of sales per week in January averaged between 600-700 compared with 500-600 sales per week at the same time last year.

As new properties came on the market in January the number of properties for sale has steadily risen to the current level of 14,188, which is still much tighter than all months of 2011.

Over the last 3 months buyer numbers at home opens have continued to increase but buyer demand is strongest for the family friendly homes priced between $450,000 and $550,000. We are finding demand to be particularly low at prices below $350,000 and above $600,000. Affordability is a struggle at both this low end and high end of the market.

With the banks levelling out their interest rates and in some cases going against the trend of the RBA’s cash rate, this will not make borrowing any easier.

Perth Property Outlook Report- By John Lindeman

So what is the outlook for Perth property in 2012?

John Lindeman is the housing market research columnist for Australian Property Investor Magazine and chief property consultant at innovative housing market analysts, Property Power Partners. This month we have put him to work to produce an exclusive free report for our readers, that looks at the outlook for Perth Property market… a very interesting read indeed.

Click here to download your free copy now!

Perth Rental Market Update

We have seen growth in all rental prices over the last 2 months and the stories you see in the news of 30+ people turning up to rental viewings is true in some areas… especially where the rental asking price has not been increased enough to account for the additional demand.

With such tight supply and strong demand from tenants, we always look to test the market asking a higher price for 2-3 days and adjusting to the level of enquiry until we are priced right. Even with this approach, in many cases we are still receiving multiple applications at 20-30pw above asking rent. It is indeed a great time of year to have tenants changing over and that is why we write all our leases to expire in January-February each year.

Who wants a Crystal Ball?

The two questions I get asked the most by property owners is-

1. What is my property worth?
2. Is my properties price likely to grow over the next few years?

I can answer the first question by appraising the property, taking a detailed look into comparable properties that that have recently sold and what competition is currently for sale. If you would like an online or onsite appraisal of your home, click here.

To be completely honest, answering the second question with any degree of accuracy is a challenge. Uncovering the deep inner workings of supply and demand, requires serious research power and a degree in statistics!

The good news however is that I came across one of Australia’s expert property analysts and have pinned him down to help you answer this burning question with his Property Power Reports.

So why is it important to know the likely price growth?

Whether you are a home owner or investor, knowing the predicted rental and sale price growth for your suburb gives you a basis to make crucial decisions-

  • When buying which suburbs within my price range are about to grow in price and rent?
  • What is the opportunity cost of holding this property instead of another?
  • When is the best time to sell?

Making the best return out of your investment is all about timing of when to buy and when to sell.

How I have used a Property Power Report to support my decision to sell…

My property at 30 Farringdon Way, Huntindale

Over the last 3 months I have used a Property Power Report to make a crucial decision on whether I held or sold my property at 30 Farringdon Way Huntingdale.

I bought the property 8 years ago for $189,000, buying below market value with the seller responding to a flyer they received in the mail from me offering them a no hassle quick sale & settlement. The bank valued it at $220,000 at settlement. We then spent $32,000 on a complete renovation and with the market going up at the time, 4 months later  it was valued at $340,000.

Hindsight is a beautiful thing and it was then that I should have sold the property. The reports would have showed me that the market was turning from a seller or boom market to a neutral or buyer market. In an ideal world I would have made the decision to sell well before it became a stressed market as it is now.

My property was now rented at $380pw no longer costing me any money to hold but what is the opportunity cost of having my borrowing capacity and money tied up?

See the prediction for Huntingdale to move from a neutral market to a stressed market below:

With a stressed market predicted, Huntingdale has a bleak outlook for growth over the next 12-36 months. The best time to sell would have been 5 years ago when the market started to change from a seller market to a neutral market, the next best time to sell was now.

The Result…

So I vacated the tenants at the end of their lease, prepared & presented the property for sale and 2 months later the property has been sold and settled for $337,000. I can tell you that after 7 years it feels great to take the capital gain and be free to move on with the next opportunity. Where will that be? The same report showed me that Morely is moving from a neutral to a boom market, so now could be the time to buy using a strategy to actively add value, plus pick up the passive growth that will substantially lift my equity in just a few years.

Instead of suffering a potential 5% to 10% annual fall in the value of my old investment in Huntingdale, there are much better opportunities in another suburb like Morely, with forecast growth of at least 10% to 15% each year. John’s Property Power Report has saved me over $33,000 in potential loss and buying elsewhere stands to provide me with a predicted gain of over $100,000 instead. A net result of over $133,000 in just two years? That’s what I call making an informed decision.

Creating a successful plan to add to your portfolio

When helping clients develop a plan to maximise their profits with a property that will best suit their situation I work through the following steps…

Goals > Strategy > Budget > Where > When

Your Goals: When making any decision to add to your portfolio we always encourage you to first decide on your goals for the investment (cash flow, depreciation, capital growth, etc..)

Your Strategy: This then allows you to look at the most appropriate strategy for you to meet those goals (renovate, subdivide, develop, build, buy & hold, etc..). We suggest that you have a specific strategy to add value to your property so that you are not reliant on capital price growth alone, more that it is a bonus. Your choice of strategy will also depend on how active you want to be involved and your time frame for realising a profit.

Your Budget: From there you can put a budget together, which will depend on your own personal financing ability, the size of the project you feel comfortable with and what access to other finances you have.

How you can use a Property Power Report to support a decision of where and when to buy…

Once you know your goals, strategy and budget you can narrow down the list of potential suburbs  for where this type of property exists.
Looking at the median price of suburbs you can focus on which suburbs meet your budget. Then wouldn’t it be incredibly powerful to know which of these suburbs has greatest predicted capital price growth?

Property Power Reports predict capital price growth at suburb level…

The Property Power Reports rank suburbs in your price range for growth potential according to current and predicted local housing market demand and supply indicators and their likely performance trends.

The types of buyer and seller housing market in each suburb are identified as follows:

Stressed: Many potential sellers and few intending buyers (Prices will continue to fall)
Buyer: More potential sellers than intending buyers (Prices are falling)
Neutral: Equal numbers of potential sellers and intending buyers (Little or no price growth)
Seller: Fewer potential sellers than intending buyers (Prices are rising)
Boom: Few potential sellers and many intending buyers (Prices will continue to rise)

These types of buyer and seller housing markets identify suburbs where you can find bargain priced properties, or select those where prices are at their lowest and also those areas where prices are about to rise. In addition they also indicate suburbs where rising prices will continue, where they are likely to boom or where rising prices are about to come to an end.

Property Power Report predicts rent market changes at suburb level…

The report compares the numbers of private investor owned properties to renters in each
suburb and reveals whether rents are likely to rise, fall or not to change. Very handy to know if you are planning to own a property in the suburb!

Each suburb’s rental stock forecast is identified as follows:

Surplus: More available investor owned stock than potential renters (Rents may fall)
Balanced: Equal numbers of investor owned stock and renters (No change in rents)
Shortage: More potential renters than available investor owned stock (Rents may rise)

Making Informed Decisions

I have only just begun to see the value from using these reports as a 3rd party basis to support the making of the most importance property decisions of when and where to buy and sell. For more information see the following example property power report and info brochure-

       

Click Here to download an Example Property Power Report
Click Here to download the info brochure

Exclusive Discount Available to our readers

We have been able to convince John Lindeman to give our clients and the readers of my Perth Property Update an exclusive discount when ordering their reports directly through us, so for full details and an order form email- admin@investorsedge.com.au

Signing Off

I hope you have gotten some value from this month’s Perth Property Update, I would love to get any feedback you have or requests for future feature topics so please post your comments below or send me an email at jarrad@investorsedge.com.au

If you are weighing up any buying, selling or renting decisions I am only too happy to help you work through your options to get the best and most profitable result for you. My contact details are here.

 

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