Up, up and away!

On one hand Perth vacancy rates have eased slightly. This is good for the rental market. On the other hand interest rates have gone up twice and this is not so good for the rental market. With Perth’s population increasing and any government intervention unlikely to make an impact for more than two years, the experts are divided on how, and when, our red-hot rental market will begin to find some balance.

Recent figures released by the Real Estate Institute of Western Australia show the number of rental properties on the market increased during the September quarter by 3.4 per cent. This is still tight, but at least a small an improvement on previous quarters. It might just be enough to lift the spirits of thousands of Perth tenants who have long found it difficult – and expensive – to find quality rental options. The light is finally starting to shine at the end of the tunnel. Maybe…

Supply is also at an all time high and still being fuelled by investors looking to feed the strong demand with CBD apartment development at a consistently high level. However with a net positive population growth in Perth and plenty of young people choosing an inner city lifestyle, this supply is in constant demand.

A recent article in The West Australian suggests Perth tenants can expect little relief for at least the next two years. Westpac senior economist Mr Matthew Hassan believes the current market conditions will either stay much the same, or even worsen slightly before they improve.

“It’s very difficult to envisage anything but a continuation over the next couple of years at least,” said Mr Hassan.

Even if the government intervenes by releasing new land areas for development, completion of any construction is years away. In the meantime, the demand continues to grow as disenchanted buyers flood the rental market and other would-be buyers are choosing to invest in equities as opposed to bricks and mortar.

REIWA president Rob Druitt also believes the recent interest rate rises will not help reduce the heat in the current rental market.

“Typically a rate rise will see owners and investors pass on the additional cost to the tenant through rent increases, however this will depend on whether or not the current market will support it.”

November through to March is recognized as a busy time in the rental market as people look to settle in to a property before starting work or university. So it looks like a case of “watch this space…”

Look outside the square when tackling rental affordability

Record high median prices and increasing interest rates have made the “Great Aussie Dream” of owning a home a challenge for a lot of Australians, especially first home buyers. But there are now more financing options available than ever to help you break in to the market or grow your property portfolio. You just need to think a little outside the square.

The topic of housing affordability has been hotly debated in recent times, especially in the lead up to the recent federal election.

In Western Australia, the average mortgage has risen by $28,000 in the past 12 months. For most people this means finding an extra $5,500* per year to service this increase.

The factors leading to the this affordability challenge are well documented: the recent property boom and house price increase, a steady rise in interest rates since 2004 and lack of supply have all contributed to forcing some people out of the market.
But, according to RFS Finance Manager Simon Randall, there are gradual economic changes afoot that would indicate a swing back in favour of home buyers.

“Housing prices in Perth have steadied dramatically over the past year,” said Mr Randall.
“This normalization is good news for first home buyers.”

“Other positive economic factors are a strong labour market and low unemployment
– around one per cent in Perth
– and an increase of 6.3% in the average household’s disposable income.”

Mr Randall recommends seeking out the advice of an experienced finance manager before leaping into the market. “They have access to a wide range of lenders and will be able to talk you through the many home loan options available,” says Mr Randall.

“A lot of lenders are looking outside the square to tackle the affordability issue. This means offering less-traditional lending options such as increased loan terms – up to 40 years, no deposit home loans and equity finance mortgages.”

“Talking with a finance expert will help you negotiate through the many options and loan types and can help tailor something to suit your exact needs.”

Simon Randall is a Finance Manager
at RFS Finance – Realmark’s
approved supplier of customer
finance. www.rfsfinance.com.au
*Source: Reserve Bank of Australia,
Australian Bureau of Statistics, AFG
Mortgage Index

Innovation Regeneration

When Realmark launched their new brand two months ago, it was more than a cosmetic change of logo. It was a statement to the market place reflecting their values and service, designed to meet the needs of their contemporary clients.

Realmark started nearly 20 years ago as a single office with less than 10employees. Today the business comprises five offices with more than 100 staff. Along the way they have operated independently, as well as part of a franchise. Now they are a stand-alone group again, with innovation as their mantra.

“Perth is a young, fresh, contemporary city with a fast corporate life,” says Realmark principal Mr John Percudani. “Realmark differentiates itself from its competitors by being first to market with new ideas and fresh concepts. That’s why we are a recognised innovator and communicator in the marketplace.”

This is supported by the team’s outstanding success at the recent 2007 Real Estate Institute of WA Excellence awards where they collected the prizes for both Innovation and Communication. Launching their new brand is another way of promoting their unique marketing approach, which embraces full utilization of the web through their e-marketing campaigns and other methods.

“We provide buyers with information about our properties which is rich in information, including quality photography and virtual on-line experiences,” say Mr Percudani. “This gives our clients an advantage because buyers arrive at property inspections with all the facts. They are ready to make informed buying decisions. Our properties sell quicker and both sellers and buyers are satisfied.”

Mr Percudani and his team researched what leading marketers do across the world to promote and deliver products to their client base.

“A lot of agencies go through cosmetic brand changes,” says Mr Percudani. “But we have made real changes – to systems, tools and marketing methods. And our clients benefit from this ongoing improvement.”

2007 The year that was...

Off the back of a high-speed property market in 2006, Perth real estate stabilised over the past 12 months. Median prices in the western suburbs and riverside areas remained strong, but it was the smart buyers who discovered value for money in less established pockets who were the winners in 2007. And it’s time to act now in preparation for 2008.

The year 2006 was a big year in the property market. Strong demand coupled with limited supply led to a surge in real estate values. Since then the variables have changed, with a sharp increase in the number of properties on the market and subsequent stabilisation throughout 2007.

Realmark principal John Percudani describes the change in the market this past year as fairly sudden and abrupt. “The volume of stocked doubled year-on-year in 2007,” he says. “Naturally, this had an effect on prices. Overall, prices eased. But it was patchy. Not all areas behaved in the same way.”

Put off by a 30 per cent jump in median prices in the more traditional western suburbs and riverside areas of Perth, smart buyers have looked to less-established areas to fulfill their lifestyle needs. As a result, they have found excellent value for money.

“This is a growing trend where buyers are discovering the benefits of ‘newer’ pockets such as Perth’s northern coastal strip – North Beach, Watermans, Marmion and Trigg,” says Mr Percudani. “These areas are appealing for all the right reasons – great beach-front living, close proximity to amenities and bigger blocks of land.”

“In fact we achieved the highest price in Perth this year – $5 mill for a property on West Coast Drive in Trigg. Suburbs that adjoin these areas will also be ones to watch over the coming months.”

With a mixed market and plenty of stock, emphasis needs to remain on developing a marketing campaign that attracts and talks to buyers. And the team at Realmark will not be resting over the summer holiday period.

“There are genuine buyers out there deep into December and early January,” says Mr Percudani. “It is a time when both real estate agents and sellers need to be active and energized in preparation for a strong summer.”

A fine equilibrium

After a lengthy renaissance, the Perth property market is beginning to normalise. But with around one per cent unemployment and hundreds of people arriving in Western Australia every day to service the resource boom, the outlook is still strong. The key is to keep properties turning over.

All indicators suggest Australia is driving along a road of strong economic growth. And Perth is sitting in the driver’s seat. As a result, there is always strong demand for good property

“When the property market began its strong upward swing in recent years, Perth was behind the eastern states and was playing catch up,” says Realmark Principal John Percudani. “It was undervalued so it only makes sense that it has also enjoyed a boom”.

“It probably peaked last year and over the course of the past 12 months has reached a state of equilibrium between buyers and sellers. I would say the market has normalised”

Mr Percudani believes that the market is reflecting a slight adjustment in buyer mentality, especially when it comes to “emotional” buying.

“Compared with this time last year, there are nearly 30% more properties on the market. This means buyers have plenty of stock to choose from and are not feeling the same pressure to buy in a hurry,” says Mr Percudani. “The issue of affordability is also key in the sale of property. If buyers do not see value, they are prepared to let is pass.”

This has meant that properties are sitting on the market nearly twice as long as this time last year. Mr Percudani believes sellers can avoid this outcome by reaching realistic price expectations as well as holding real estate agents accountable for the services.

“Sellers need to make sure their agents meet with them weekly and provide campaign reports. If there is no offer within 30 days, then the campaign is in crisis.”

“Sellers should not accept that it will take longer to sell their property, in fact it is imperative it sells as quickly as possible in this high volume market. The property market outlook is strong going forward, but factors such as innovative marketing are going to play an increasing role in the successful turn around of properties.