Residential Property
www.wsba.com.au
Tailwinds for Build-to-Rent sector USTRALIA’S Build-to-Rent (BTR) development pipeline has surpassed a landmark threshold of 11,000 units – across more than 30 projects – through a major acceleration of new projects. This is one of the key highlights in a recent CBRE report: Build-to-Rent Development Pipeline, which profiles the sector’s supply and development in Australia over the first half of the year. As the BTR asset class continues to gain momentum in the Pacific market, the report credits a weakening of new residential supply across Australia, which was already in decline pre-COVID-19, providing potential tailwinds for the sector over the next 12-24 months. In 2019, residential commencements were circa 35% below 2018 levels, with CBRE Research estimating that the
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Ben Martin-Henry.
market will tip back into an undersupply situation from 2020 onwards for the first time since 2014. CBRE Research’s Ben Martin-Henry said the impacts of a much lower rate of population growth from 2020-22 would,
however, offset lower supply scenarios and push dwelling undersupply in many markets out to 2022 – rather than this occurring earlier. “Build-to-Rent has a role to play in filling this market void, with the sector facing a perfect storm of ideal conditions,” Mr Martin-Henry continued. “We expect to see developers capitalise on the dynamics accelerating structural shifts in demand drivers, such as young, well-educated urban professionals prioritising lifestyle aspirations over home ownership (due to unaffordability) and thereby seeking to rent in well-located, high-quality residential developments.” CBRE’s Puian Mollaian, Associate Director of Structured Transactions & Advisory Services, said Build-to-Rent projects were being delivered across the country,
with majority of activity in dense, urban locations like Melbourne and Sydney. The report reveals that there has been a clear emphasis on scale and delivering large institutional-grade product, allowing owners to achieve operational efficiencies through economies of scale, with an average size of over 350 units per BTR project. In another key takeaway, the yield gap between commercial office and residential has been narrowing – boosting the relative attractiveness of the asset class, given its innate defensive characteristics. “As a result, a growing number of seasoned international institutional investors are diversifying their portfolios into the BTR sector and seeking exposure to this asset class in Australia, mirroring their substantial exposure across global holdings,” Mr Mollaian said.
Considerations when buying a reno S a buyer-renovator, you need to have a budget that covers off the cost of the property itself and funds for renovations. If you don’t do your numbers and only have a vague renovation budget in mind, you might find yourself in over your head financially once you start the renovation rescue. A good starting point when it comes to choosing a property to renovate typically involves finding the worst house on the best street in a popular locale. Revamping an ordinary property on a pleasant road is usually a better strategy than picking a smart home on less popular street and overcapitalising beyond the neighbourhood’s prevailing standards. Avoiding overcapitalising is crucial if
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you plan a quick sale for profit once the renovation is completed. When choosing a house to renovate, establish whether the makeover will require structural or cosmetic building work. Most renovation rescuers will tell you it’s typically best to steer clear of properties that need expensive structural repairs, which won’t provide significant capital improvements to offset the cost of the restoration. A better strategy is to seek out a property with good fundamental bones, and that comes with bathrooms and kitchens that won’t cost an arm or leg to bring up to date. By buying a fixer-upper with no significant issues, allows you to focus on cosmetic renovations that visually update a property.
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For example, adding a new verandah is more than a cosmetic restoration, and will be relatively costly. In contrast, it might be considered a cosmetic improvement if the verandah floor only requires retiling. Before buying a fixer-upper, check whether the local council’s planning department has renovation restrictions in place.
You might the local planning regulations either will not allow you to extend the property or build beyond a certain height. Also, check whether it’s possible to remove trees from the property if that is part of your makeover plans. From Raine and Horne.
Breaks in lenders mortgage insurance CLOSE to half (48%) are saving more to buy in their desired area, and nearly three in every 10 first home buyers are struggling to find a property that suits their needs. In response, Westpac-owned St George Bank has slashed its lenders mortgage insurance (LMI) charges to just $1 for qualified first home buyers borrowing up to 85% of the property value despite heightened economic uncertainty during the pandemic. St. George General Manager, Ross Miller, said: “By reducing the expense of Lenders Mortgage Insurance, first time purchasers may be able to afford a property that meets their needs sooner and save thousands of dollars.” The St. George research found that one in every 10 Australians looking to
buy a home are doing so for the first time and that the COVID-19 pandemic has made one third of Australians want to save for that goal quicker.
Benefits available to upgraders too In acknowledgement of the challenges shaped by the pandemic, a leading credit union has gone a step further by slashing LMI obligations for essential workers regardless of whether they are first-time borrowers or not. Through Community First’s Community Support Employees home loan offer, eligible, essential front-line workers such as nurses, firefighters, police force employees, ambulance officers and teachers can borrow up to 90% of the value of a home without the need to pay LMI.
Protection for the lender, not the borrower Lenders’ Mortgage Insurance, or LMI, is an insurance that protects the lender, not the borrower against a shortfall in the sale of the home and the outstanding loan amount should they default on a loan, explains John Tancevski, Chief Executive of Community First Credit Union.
“LMI is usually levied on a borrower if they take a loan of more than 80% of the home’s value. “LMI is a one-off payment made by the borrower at the time of the loan settlement, and this fee can add many thousands of dollars to the size of the mortgage.” Generally, for a family home with a property value of $650,000 a buyer would also be looking at a one-off payment of more than $6,000 for the cost of LMI if they had less than a 20% deposit, according to numbers crunched by St George. John concludes: “Our home loan offer is available to eligible vital essential services workers on owner-occupied properties and could save them many thousands of dollars
Empowering home owners to save energy INDING ways to save money and reduce household costs has never been so important, and a new online video series created by Penrith City Council aims to help residents to do just that. The video series titled Empowering Penrith covers a range of useful and important topics to help residents understand their energy use, reduce their energy consumption at home and save money on energy bills. The seven short, informative and entertaining videos are co-produced by energy expert, Adam Corrigan from Your Energy Friend and are available to view on Council’s YouTube channel and on Council’s website. Penrith Mayor Ross Fowler OAM said as we head into the middle of winter there’s small, simple changes that residents can make around the home to reduce their energy consumption.
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“Energy is very expensive especially as we all try to heat our homes at this time of year, but there are ways you can reduce your energy use, stay warm and save money,” Cr Fowler said. “From switching off standby to installing solar power, the online videos are full of hints and tips to empower residents to upskill and update themselves with the latest energy saving information and technologies. “The videos are short, entertaining and informative but most of all, they will show you that just a few small, simple changes around the home can make a big difference to your bank balance, and to the environment, “ Cr Fowler said. View the Empowering Penrith video series at youtube.com/penrithcitycouncil or for more information visit: penrith.city/empoweringpenrith WESTERN SYDNEY BUSINESS ACCESS AUGUST 2020
