Wednesday, June 29, 2011

Developer Begs For Gov't Handouts & Assistance

Developer Satterley wants Govt to kick-start property market

pn news perth city
Source: PerthNow
THE boss of Australia's biggest private property development company wants the State Government to lift the first homebuyers grant and pause stamp duty to kick start the residential market again.
At a business breakfast today, founder and managing director of the Satterley Property Group, Nigel Satterley painted a pretty bleak picture of the local market thanks to massive reserves of properties for sale, declining house values and potential interest rate rises from the Reserve Bank of Australia.

“I don’t want to get carried away with doom and gloom because we have genuine underlying strength in economy,” Mr satterley said.

“Our fundamentals are very sound. We are in the middle of the biggest mining and resource program in Australian history.

“I can also assure you that we have the best property buyers’ market I have seen in my 40 years in this business.”

But hesitant buyers causing reduced transaction levels amid increasing living costs has created a difficult equation to balance
“I can’t say it loud enough: ‘This is the best buyer’s market in WA for years’,” he said. “Even so, property sales in WA have slowed. “As of this week, there are 23,000 properties up for sale between Yanchep and Mandurah. “In a normal balanced market there would be no more than 14,000 properties for sale.”

He said sixty seven per cent of potential buyers already owned a home and while they wanted to upgrade they were trapped in the slow lane - unable to sell and unlikely to trade up

“Potential new home buyers are faced with another costly problem,” he said. “I refer to the very high changeover costs which can be as much as $36,000 including agent’s fees, removalists, stamp duty and so on.” Mr Satterley called on the WA Government to kick start the residential market again by increasing the first home owners boost from $7000 to $15,000 on new and established homes up to the value of $450,000, and place a six month amnesty on all residential stamp duty up to $450,000.

“And on established homes from $650,000 to $1 million the stamp duty should be reduced by half, also for six months,” he added. “If we had a $15,000 first home buyers boost and stamp duty relief it would help to offset any further rate increase.”

Mr Satterley backed comments made by Premier Colin Barnnett last month, which were met with angry responses from talkback callers on local radio, when he advised young people not to be too ambitious when looking for their first home. “Colin Barnett was right,” Mr Satterley said. “The big double storey 15 room McMansions are ‘out’.

“For the first time in 25 years, buyers are happy with a smaller home to meet their budgets and not a large four by two.“Families don’t want to be crippled by massive monthly mortgage repayments and overheads. You need to have some disposable income.”

Thursday, June 16, 2011

Perth Property Activity at 30 Year Lows !!

Property activity still sluggish - Landgate

Remember Realtors are the biggest believers of their own HYPE & many have multiple investment properties that have heavy negative gearing as a investment strategy.

As soon as they build up equity in a property  they draw down on it to buy another property & then another & then another.

This works fine in a rising market but is fought with danger when markets turn.

They article below highlights that the activity in WA property markets has dropped to 30 year lows.

Relators who have managed to sustain negative geared investments are now faced with incomes & commissions falling by 30% - 40% yet they still have to pay the bank every month regardless.

I know 6 Realtors with 30 houses & units between them who listed them for sale.

8 of these houses have been sold to date at average discounts of 15%. So whilst realtors say one thing their own actions speak louder than words.

Extract of a story from Perth Now Website:

property traps
Landgate Report: Potential traps and pitfalls facing property investors has led to a lack of confidence and severely reduced activity in the WA market, according to Landgate.Picture: Michael Marschall Source: National Features.
THE State Government has confirmed that sluggish property activity in WA remains at levels not seen for more than a decade, despite a moderate increase in recent months. 

Landgate, the State’s official land information authority, today released its Business Activity Profile for May showing a mild increase in volumes over April on the back of historic lows.

The Business Activity Profile covers all property related documents lodged with Landgate and is a barometer of the state of the property market in Western Australia.

Landgate chief executive, Mike Bradford said while May was the busiest month so far in 2011, property activity was still the lowest May figure for sixteen years, and forty percent down on the boom years.

This followed the figure from April which was also a sixteen year low, and January and February figures which were the lowest for nearly two decades. 
Mr Bradford added that total document lodgements for this financial year had Western Australia on track to have the lowest levels of activity since the early 1990s.

“Given Western Australia’s population was thirty percent less 20 years ago, comparatively the slump in property activity is worse than the severe downturn of the early 1990s”, Mr Bradford said.

Overall activity for 2010-2011 is one third down on the peak of 2005-2006.

The Business Activity Profile provides the daily average of all documents lodged, with sections detailing land transfers, mortgages, caveats, searches and other categories of property related documents.

Monday, June 6, 2011

Mistake in Mount Lawley

Channel 10 News Monday 6th June the featured a couple {Danielle & Kevin Griffiths} trying to sell their home with little success.

At first you would feel sorry for them with their tale of financial hardship with bills mounting & Danielle the wife now being on maternity leave, they only have one income to pay the bills.

But stick with the story to the end & see if you still have sympathy for them.

37 Fifth Avenue, Mount Lawley, WA 6050

37 Fifth Avenue, Mount Lawley, WA 6050

Danielle & Kevin in March 2009 for $710,000.

They have spent approx $200K renovating & extending the house so with stamp duty & selling costs the house would owe them approx $1 million & 2 years of sweat & tears.

So naturally Danielle & Kevin would expect to make some sort of profit for their hard work & efforts?

Of course they do and accordingly they first listed their house for sale early January 2011 @ $1.395 million to $1.495 Million !!! (Code for $1,450,000)

Where did they come up with this number? Well the house next door @ #39 sold for $1.55 million (However this is a substantially better character home) 

Since listing Danielle & Kevin have steadily reduced their price as buyers are not buying. Feb 2011 Down to $1.345 Mil, Mar 2011 down to $1.295 mil & Apr 2011 down to $1.245 mil where it is still on the market today a stale listing 6 months old.

If only greed did not take over in January 2011 when the first listed. They should have listed at a more realistic price of around $1,150,000 but "Greed Is Good"

Unfortunately for Danielle & Kevin The West Australian  had a article in today's paper forecasting property prices to fall a further 8% on today's price & that prices will remain flat till at least the end of 2013!! 

Danielle & Kevin are in a "Catch 22" when they bought in 2009 interest rates were under 5% in fact there were starter rates around 4.65%, but today with a interest rate around 7% plus & now only one income to support the mortgage they have to decide if they can wait for the market to turn around. (Remember not till the end of 2013 is the forecast) 

Interest rates are forecast to rise sometime this year putting further downward pressure on property prices. But like all property speculators Danielle & Kevin will persist & hold out for their price that is just not there in today's market.

Danielle & Kevin could learn from #9A Fifth Ave it listed in Dec 2010 for $1.1 mil but sold for $980K in March. Although this is a Duplex house it is freestanding & a substantially better home than theirs. {Interestingly this house is available to Rent @ $850pw or $44K PA a yield of less than 2.5% after Rates / Maint Etc what a DUD Investment}

Or Danielle & Kevin could look at #38 that sold for $960K in Jan this year a very average house but it sat on a 867 M2 Duplex / Triplex Block substantially larger than their 540 M2 plot!! 

I see this fixation with price all the time. these Vendors will hold out for that elusive buyer whilst the market turns on them. Already today The West shaved a further 8% off their price. I expect to see this house still on the market in August unsold.




Sunday, June 5, 2011

Perth Property Prices to Fall till 2013

West Australian News says Perth property prices will fall a further 8% & not recover till 2013.

{ BTW THAT'S LATE 2013 !!! }

So why would anyone buy now in a falling market ? 

Why would investors sit on property delivering negative returns with ZERO capital growth to offset losses? 

In fact these predictions says that prices will fall a further 8% before recovering !!

The article points out that prices fell 7.3% in the past 12 months & will fall a further 8 % over the next 18 months. 

Now when you also factor in CPI increases on average 3% PA  the average property investor can look forward to a capital loss in the vicinity of 21% plus. Then if you add the negative rental returns into the equation the losses mount to 30% in a 3 year period or 10% PA.

Spruikers will tell you that you cant go wrong investing in property, well that facts show that you certanily can.

Is it any wonder Perth listings are up 75% as investors beat a path to the exists. The smart professional investors have already exited Perth property markets when the Gov't GFC Stimulus FHOG boosted sales & lifted prices temporarily late 2009 / early 2010. MUM & DAD Retail investors will believe the hype about property prices & ride the market to the bottom.

The scary bit in this forecast is that they make a assumption that prices will recover with a resources / infrastructure  led recovery. This is solely dependent on demand from China. Talk about placing all your eggs in one basket. China has its own problems with inflation driving prices up their Gov't is putting the brakes on their economy reducing demand for our resources.

What interesting times we have ahead for speculators?