Families looking to upgrade to a bigger house have been noticeably absent from the Sydney real estate market for much of this year but that might be about to change, experts predict.

Agents are starting to see more of these buyers at open houses and in some of the more affordable upgrader areas – where these properties sell for less than $1 million – they are very active. This is in contrast to more affluent suburbs, where interest has been much more subdued.

“The top end of the market is generally the one that suffers in an increasing market,” says Harry Charalambous, “as they are the last to go up in price. They are also the first to feel the pinch in a declining market, as they are the first properties to be hit, and usually with significant decreases.”

The chief executive of LJ Hooker Real Estate, Janusz Hooker, says the catalyst for upgraders re-entering the market has been the Reserve Bank’s interest rate cut. This recent interest rate cut has put more money in the pockets of existing first home owners. ”So at our open for inspections over the past couple of weeks since the RBA’s announcement, we’ve seen an increase in activity of about 10 per cent [in these buyers], which is pretty significant,” Janusz Hooker says.

The principal of Belle Property Mosman, Tim Foote, says upgrading is the ”number one opportunity” for buyers at the moment because selling and buying in the same flat market means ”the difference between what your property is worth and what you can buy is smaller”.

Upgraders tend to follow the pattern of first-home-buyer to mid-range property, then upgrading their mid-range to top end when considering their next property purchase. This is the reason that this group are being identified as being active on the market now. They can get a decent return on their existing property, and look for larger homes in similar areas for a relatively marginal increase in pricing. Previously these larger homes would have been priced outside their budget.

For those that are seeking to subdivide and renovate in the current market, looking at the needs that a home must meet for upgrading to be attractive is a key part of your investment strategy – ensuring that value is provided to these potential buyers. Room numbers and sizes, fittings and fixtures, proximity to key amenities are all considerations with regards to the upgrading market.

Before starting a development project understand who your buyer is – are you targeting a family, downsizer or an out of area buyer?  Along with the different buyers comes a new set of must haves. You must always provide value and meet the market to receive the best results.  Speak to local trusted agents about the demographic of your suburb and design your property to meet these buyers needs.

Friday, 04 November 2011
www.theadviser.com.au
Staff Reporter

Property commentators are “quietly confident” that property prices have bottomed out and will steadily increase from here on in.
Speaking to The Adviser, RP Data’s chief executive officer Graham Mirabito said all the data suggested the property market has hit rock bottom.

“We are starting to see house prices track sideways, which is really good news for the property market. It suggests we have hit the bottom and will now see things improve,” he said.

Earlier this week, RP Data’s Home Value Index recorded the lowest drop in capital city home values in seven months.

The Index, which captured nearly 251,000 sales in the first nine months of 2011 alone, showed the September monthly decline was actually the smallest decline since February 2011 and was crucial in reversing a trend of accelerating capital losses since end March 2011.

Capital city home values fell just 0.2 per cent, while regional house values actually managed to increase, growing 0.1 per cent.

“We are quietly confident this is the bottom, but there are still a few things in the mix to know for sure. We will definitely know whether or not this is the case by February, March,” Mr Mirabito said.

www.theadviser.com.au
Thursday, 03 November 2011
Staff Reporter

Building approvals fell again in September, suggesting the Reserve Bank was right to cut the official cash rate on Tuesday.

Data from the Australian Bureau of Statistics found seasonally adjusted building approvals fell by 13.6 per cent in September, driven by a 32 per cent decline in the highly volatile “other dwellings” segment of the market.

“It’s best to abstract from monthly movements in the volatile ‘other dwellings’ segment as it can be misleading. When we examine the September quarter, “other dwellings” approvals are actually up by 1.9 per cent,” HIA acting chief economist Andrew Harvey said.

The core detached housing segment of the market saw approvals rise by 0.7 per cent in the month of September although they are down by 1.8 per cent over the September quarter.

“The headline result paints a worse picture than reality although it does have to be noted that the market conditions surrounding residential building are soft at present – total approvals in the year to September 2011 are down by 9.3 per cent when compared to the year to September 2010,” Mr Harvey said.

“Today’s figures confirm that yesterday’s interest rate cut was warranted – it was a necessary first step to an eventual recovery in new home building. This is not just because it will save around $50 a month off the average mortgage, but more importantly because it should help boost confidence as home buyers realise rates are no longer on an upwards trajectory.”

Wednesday, 12 October 2011
By: Matthew Sullivan

Residential property is set to trail equities and commercial property as the nation’s leading wealth generator in the next decade, an ANZ report has claimed.

ANZ’s Asset Returns: Past, Present and Future report revealed that residential property was the highest returning asset over the past 24 years. Owner-occupied housing (OOH) generated the highest annual total returns of 12 per cent, followed by investor housing at 9.6 per cent and equities at 8.9 per cent.

However, ANZ’s key forecast assumptions for the next decade predict a fall of four per cent in the average annual total returns for residential property.

This is in sharp contrast to commercial property and equities, which are expected to experience a strong rise in returns, climbing to 9.5 per cent and nine per cent respectively.

“Our forecast of asset class returns shows that equities will be the strongest performer over the next 10 years. Commercial property also shows strong returns, sitting between equities and OOH.

“The forecast model, however, is very sensitive to assumptions,” the report cautioned.

“Risk adjusted forecasts show that equities and commercial property will have similar returns. Despite having a higher return, the increased risk in equities gives it a similar risk adjusted return to commercial property.”

Source: Taylor Nicholas

Wednesday, 14 September 2011
By: Staff Reporter – www.spionline.com.au

A draft ruling by the Australian Taxation Office has given self-managed superannuation fund members the ability to use money from inside their fund to renovate their property.

Previously, the ATO said SMSFs could not use money from any source to improve property, however, under the draft ruling they can potentially renovate to improve the value of the property.

Charterhill Group Chartered Accountants chief executive officer George Nowak told Smart Property Investment that the draft ruling would ultimately make real estate a more attractive option to the $420 billion SMSF sector.

“We have been in support of this outcome since the 7th July 2010 when the remodelled legislation was delivered. It is an absolutely positive move,” he said.

According to Mr Nowak, the drafted legislation clarifies some nuances of error in the original legislation.

“The ATO understands that the future buoyancy of the property market will be heavily dependent on SMSFs’ investing in property as well as providing rental occupancies for younger people.

“This new drafted legislation, which will almost certainly become law, addresses everything everyone I have spoken to in the industry has been scratching their heads over.”

But while SMSF trustees will be able to renovate using money within their funds, borrowing to renovate will remain prohibited.

Ken Raiss, director of Chan & Naylor, told Smart Property Investment, the prohibition of borrowing to renovate property held in a SMSF was very difficult to understand.

“Hats off to the ATO – a lot of good things have come out of this draft ruling,” he said.

“The fact that you can now renovate, with non-borrowed money, is very good.

“But the main problem is that the ATO’s draft ruling neutralises or diminishes the sole purpose test which is to provide retirement benefits to members.”

With the ability to manufacture capital growth through renovation a big drawcard for property investors, the same capacity should also be available through SMSFs, he said.

“If you’re looking to provide retirement income you should be allowed to maximise it.”