C21 Market Pulse | April 2024 | Australia

WELCOME TO THE April 2024

ISSUE OF C21 MArKET pUlSE

p UB li SHE r

Century 21 Australia Pty Ltd

CONT ri BUTO r S

Chris Gray Tim Lawless

ED i TO ri A l ENQU iri ES

Century 21 Australia (02) 8295 0600

ADVE r T i S i NG ENQU iri ES

Century 21 Australia (02) 8295 0600

D i SC l A i ME r

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S HOU l D YOU BUY ONE $1M

pr O p E r TY O r TWO $500K pr O p E r T i ES?

BY CHRIS GRAY, CEO, YOUR EMPIRE

When it comes to investing in the Australian residential property market, one common dilemma arises: Should you opt for the allure of a single $1 million property or diversify with two $500K properties?

A number of buyers are currently weighing up this exact dilemma in Perth versus Sydney. Perth has certainly done well over the last year or two which is why there is a current attraction, but what some buyers are not aware of (or choose to ignore) is the 15 years of the reasonably flat period between 2006 and 2022.

As always, there’s never one answer that will suit everyone, but let’s delve into some of the considerations you should explore.

CAPITAL GROWTH OR RENTAL YIELD

If you want to create long term wealth through residential property, it’s ultimately capital growth that makes the real money as it’s untaxed until sold (if you ever do sell) and you get tax back (negative gearing) on any cash flow losses. It’s $1M doubling to $2M that creates a retirement fund, rather than earning an extra $50 a week.

CAPITAL GROWTH POTENTIAL

With a $1 million budget, you can get into most suburbs in the country given that Sydney’s median price is $1.1M and buying around 10-20% of that value means most locals should be able to afford to buy or rent it. With that choice, you can then decide (financially rather than emotionally) where to buy based on what is going to give you the most capital growth, rather than what is in your home state or local location.

TOTAL INVESTMENT

Whether you have $1M in one property or $1M in 2 properties, you’ve still got $1M invested and that’s what the graphs show will rise in value. Whilst you might think that 2 x $500K houses are bigger than a $1M unit, they still rise by a percentage and typically $1M in a blue-chip suburb will rise by more than 2 x $500K properties further out of town over the long term i.e.

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Continued from previous decade after decade. That $1M might get you 1,000 acres in the outback, but are you going to have 50-100 people queuing to buy or rent it in the middle of summer?

RENTAL YIELD

More expensive properties typically rent for less percentage than cheaper properties and so a $1M property in a blue-chip suburb might only get you 3% - 5% yield whereas a $500K property might get you 4% – 6% yield depending on where you buy it, and it may then be closer to cash neutral with our current higher interest rates. If you’re on a lower income and don’t have much extra disposable income after paying your monthly bills, you may not have any choice than to go for a nearly cash neutral property. For those on a high income with a large tax bill, having a high capital growth property with a lesser yield may well suit you better as you get tax relief in the form of negative gearing on your cash losses and don’t pay tax on your capital growth until sale.

DIVERSIFICATION

Buying two properties in two different locations will give you

more diversity and reduce your risk from buying a lemon and so that can be a definite bonus compared to buying one property. However, by having a $500K budget, you won’t be buying in the prime blue-chip areas and there is then a greater chance that you need more skill in finding the right area to buy in.

FINANCING

When it comes to borrowing money from a bank to fund your purchase, banks often come out with black spot suburbs (or the media leaks those confidential lists) where lenders are nervous over the supply of new properties in an area and are concerned about over lending. These areas don’t tend to be the established blue-chip areas, they are more likely to be areas that perhaps might have been industrial, turning to residential or areas where the councils have increased height restrictions and developers can then build thousands of new houses or high-rise units to provide more affordable housing for the local community. Buyers in these areas need to be cautious as wealth is generally created where there is a lack of supply of housing and

plenty of demand from high income buyers and renters, not the other way around.

Ultimately, the decision hinges on your financial objectives, risk tolerance, and market insights. While there's no one-size-fitsall answer, conducting thorough research, consulting professionals, and aligning your investment strategy with your goals will guide you towards the right choice.

ABOUT THE CONTRIBUTOR

Chris Gray is CEO of Your Empire, a buyers’ agency that buys homes and investments for time-poor professionals – searching, negotiating, renovating and managing property on their behalf. Chris has spent over 10 years as the host of ‘Your Property Empire’ on Sky News Business channel, where he’s interviewed various heads of property research companies and major industry figures. Chris is a qualified accountant, buyers’ agent and mortgage broker. For more information, visit www.yourempire.com.au and follow Chris on Facebook: @ChrisGraySydney

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BY TIM LAWLESS, HEAD OF RESEARCH, CORELOGIC

CoreLogic's national Home Value Index (HVI) rose 0.6% in March, on par with February’s increase, taking the current upswing in housing values through its 14th straight month of growth.

Since declining -7.5% between April 2022 and January 2023, the national HVI has increased 10.2%, or, in dollar terms, by approximately $71,832, rising to new record highs each month since November last year.

Every capital city except Darwin (-0.2%) recorded a rise in dwelling values over the month, although CoreLogic's research director, Tim Lawless, notes the monthly gains continue to be punctuated by diversity.

“At one end of the scale we have Perth’s housing market where values were up 1.9% over the month, followed by Adelaide and Brisbane with 1.4% and 1.1% growth. The remaining capitals are showing much lower rates of change, although Melbourne is the only capital city to record a negative quarterly movement, down -0.2% over the first three months of the year.”

The national quarterly pace of growth has accelerated from 1.4% in Q4 last year to 1.6% in Q1 2024. Although housing values are rising faster than at the end of last year, the quarterly trend of growth has halved relative to the middle of last year when home values were rising 3.3% quarter-on-quarter.

“Rate hikes, cost of living pressures and worsening housing affordability are all factors that have contributed to softer housing conditions since mid-last year. However, an undersupply of housing relative to demand continues to keep upwards pressure on home values despite these headwinds,” Mr Lawless said.

“The diversity in housing value outcomes can be explained by significant differences in factors like housing affordability, demand-side pressures from population growth and shortcomings

in housing supply. Focusing on the extreme growth conditions in Perth, despite such a rapid pace of capital gains, housing values remain relatively affordable compared with the larger capital cities. Housing remains in short supply and purchasing demand is still high due to interstate and overseas migration rates that are well above average.”

Last month’s ABS population data showed some of the extremes in both interstate and overseas migration trends for WA more broadly. Net overseas migration to WA was running well above average at 18,122 in the September quarter of last year (up from a decade average of 4,639 per quarter), a trend seen in most states. Unlike some of the states, net interstate migration held well above the previous decade average of -96, reaching 2,237 in the quarter.

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The extreme flip in demographic trends has delivered a significant positive demand shock across WA housing.

After being led by the upper quartile most of last year, the strongest growth conditions have migrated to the lower quartile across most capital city markets.

Across the combined capital cities, lower quartile home values increased by 3.1% in the first quarter of the year compared with a 0.7% rise across the upper quartile of the market. This trend of stronger

conditions across the lower value sector was evident in each of the major capitals.

“With housing affordability becoming more challenging and borrowing capacity lower than a year ago, it’s no surprise to see demand being skewed towards the middle-to-lower end of the value spectrum,” Mr Lawless said.

Regional housing markets are also recording a rise in values, with similar levels of diversity as their capital city counterparts.

Regional Victoria stands out with the softest growth conditions,

with values down -0.3% in the first quarter of the year; the only broad ‘rest of state’ region to record a decline in values in the year-to-date.

The volume of home sales through the first quarter of the year was estimated to be 9.5% higher relative to Q1 last year, although comparison with a year ago is from a relatively low base, with the housing market bottoming out from the downturn at the beginning of last year.

Compared to the previous decade average for this time of the year, dwelling sales are estimated to be 3.7% higher.

C OUNT rY NO r TH COWBOYS K i CK OFF THE 2024 prl FC CA r N i VA l

Century 21 Australia is proud to be a sponsor of the Country North Cowboys Police Rugby League Football Club for 2024.

Every year the league club competes in a competition governed by the NSW Police Force Rugby League Association, the Police Bank Cup.

This competition involves over 500 police officers who serve across the state of NSW and has been a major success for both the NSW Police Force and the NSW Police Force

Rugby League Association. A total of eight teams have committed to the 2024 carnival.

This year also sees the expansion of the women's competition with six teams now making up the competition. Country North is looking to field a very competitive women's side again with Cowgirls representatives from both the city and country within the team.

Both the male and female teams of Country North are comprised of Police Officers who work within the western and northern regions of NSW and encompass districts from the Central Coast, north to the

Queensland border, and west to the South Australian border. This year the Country North Cowboys team supported the PCYC and was involved in the Fit For Life Program playing touch football on the beach with at-risk youth – a fantastic opportunity to engage them with their local communities.

The women's Country North Cowgirls team recently played in Macarthur, while the Country North Cowboys men's team played their first grand final in Port Macquarie at the end of March. They both look forward to continuing to train hard for future competitions.

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H OW TO SAVE MONEY ON YOU r HOME i

OVEMENT BUDGET

Renovations can add value to your home, but the costs for those also have the potential to pile up! What do you do when you want to prepare a home for sale or give it a makeover without going into major debt?

Many homeowners opt for DIY solutions. These normally require some effort and research but the payoff can be significant - on your bank account and elsewhere. Projects like painting and power washing typically require only a few days of your time. Others, such as laying tile or resurfacing floors may take a little longer but can provide years of benefit for little cost.

Here's a rundown of some budget-friendly DIY projects that could elevate your home without denting your wallet too much:

REVAMP WITH PAINT:

A fresh coat of paint can work wonders for both the interior and exterior of your home. Interior walls with scratches or outdated colours can get an instant refresh. Whether you're aiming for something subtle or a bold statement, painting is a DIY task that can be done for a fraction of the cost of hiring professionals.

UPDATE FIXTURES:

Swapping out old fixtures like outlet covers, light fixtures, and tapware can give your home an instant facelift. These small changes might seem insignificant, but they can make a big difference in modernising the look and feel of your space. If you aren't sure where to start you can look at online tutorials on Youtube etc.

ENHANCE WINDOW TREATMENTS:

Investing in new window treatments can breathe new life into any room. Whether it's replacing worn-out curtains or installing smart shades, upgrading your window dressings can enhance privacy and aesthetics without breaking the bank.

REVITALISE HARDWOOD FLOORS:

Restoring hardwood floors can add timeless elegance to your home. Whether you're refinishing existing hardwood or uncovering hidden gems beneath old flooring, revitalising your floors

can drastically enhance your living space.

REFRESH KITCHEN CABINETS:

Instead of splurging on new cabinets, consider giving your existing ones a makeover with a fresh coat of paint or stain. If you're handy, you might opt to replace your cabinet doors, as this can often be significantly cheaper than replacing the entire cabinet. This can add value to your home if you're looking to sell!

Are you looking to sell your property? Start your selling journey with us today and partner with Century 21. Find your local office here.