C21 Market Pulse | September 2023 | Australia

C21

WELCOME TO THE September 2023

ISSUE OF C21 m ArKet pULSe

p U b LISH er

Century 21 Australia Pty Ltd

CON tr I b U t O r S

Tim Lawless

Chris Gray

Josh Brockhurst

YourPorter

e DI t O r IAL e NQUI r I e S

Century 21 Australia (02) 8295 0600

ADV ert ISING e NQUI r I e S

Century 21 Australia (02) 8295 0600

DISCLAI mer

We have in preparing this information used our best endeavours to ensure that the information contained therein is true and accurate, but accept no responsibility and disclaim all liability in respect of any errors, inaccuracies or misstatements contained herein. Prospective buyers and sellers should make their own enquiries to verify the information contained herein. All information contained in the CENTURY 21 Australia Pty Ltd website is provided as a convenience to clients. All links to property prices displayed on the website are current at the time of issue, but may change at any time and are subject to availability.

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Century 21 Team Brockhurst Principal, Josh Brockhurst

C O re LOGIC HO me VALUE INDEX SHOWS HOUSING re COVerY GAINS m O me N t U m IN A UGUSt AS NAt IONAL HO

CoreLogic’s national Home Value Index (HVI) marked a sixth consecutive monthly rise, up 0.8% in August.

The monthly gain was a slight acceleration from the 0.7% increase in July, interrupting a two-month trend of slowing capital gains. Since bottoming out in February, the national HVI is up 4.9%, adding approximately $34,301 to the median dwelling value.

The recovery trend remains broad-based, with every capital city except Hobart (-0.1%) recording a rise in dwelling values over the month. Gains were led by a 1.5% increase across Brisbane, followed by Sydney and Adelaide where home values were up 1.1%.

CoreLogic Research Director, Tim Lawless, noted the trend in housing values, although generally positive, is diverse.

“Sydney has led the recovery trend to-date with a gain of 8.8% since values found a floor in January this year. Brisbane has also posted a strong recovery with values up 6.2% since bottoming out in February.

“At the other end of the scale, some other capital cities are better described as flat, with Hobart home values unchanged since stabilising in April, while values across the ACT have risen only mildly, up 1.0% since a trough in April. These are also the only two capital cities where advertised supply is tracking higher than a year ago, suggesting a rebalancing between buyers and sellers is a key factor contributing to the stability of values in these regions.”

Within the capital cities, it is generally house values rather than unit values that have showed a sharper recovery trend. At the combined capital cities level, house values are up 6.3% since bottoming out in February, compared with a 4.9% rise in unit values. The more

BY TIM LAWLESS, HEAD OF RESEARCH, CORELOGIC

significant rise in house values comes after a larger drop through the preceding downturn, where house values were down 10.7% compared with a 6.5% drop in unit values.

“Most cities are showing a larger rise in house values compared with units, however Sydney stands out with the most significant difference through the recovery cycle to date, possibly due to the more substantial decline in house values which fell by 15.0% through the recent downturn,” Mr Lawless said.

Conditions across regional housing markets were mixed, with values down over the month across the non capital city regions of NSW (0.2%) and Victoria (0.6%), rising firmly across regional Queensland (0.8%) and SA (0.9%), and holding relatively flat in regional WA (0.1%) and Tasmania (0.0%).

Click here to read the full article

H OW DO YOU CASH FLOW A PROPERTY SHOrt FALL?

When you buy an investment property in Australia and finance it with an 80% - 100% mortgage, the chances are, they’ll be a negative cash flow difference between the rent you collect and the mortgage payments and other expenses of owning it.

So how can you own one or multiple properties without that shortfall affecting your lifestyle too much?

In 2021, we had it about as good as it gets from a property cash flow perspective. Rents were around 3-4%, a mortgage was only 2-3% and so even after 1-1.5% of expenses (strata, maintenance, property management etc), many properties were cash flow neutral or very close to it. However, many people still complained and said rents had fallen from 5% to 3-4% and so they still sat on the fence and didn’t want to buy until rents bounced back. They’re now regretting that decision as they haven’t got the serviceability to get a loan.

Now we’re in 2023 and rates have jumped a massive 4% in a very short

period of time, shocking virtually everyone (including the RBA) and turning our investments from cash neutral to massively negative geared. So much so that some owners and investors maybe considering selling.

When I came to Australia in the late 1990’s things were very similar. Inner city rents were around 5%, but mortgages were around 7% – 8%, meaning that a property could be costing you about 2% – 4%. That would be a whopping $20K - $40K on a $1M property before tax and depreciation, but luckily properties only cost $300-400k in those days and so it might have only cost you $5K - $15K/year which was manageable.

So, from a mindset perspective, we could all sit around saying that life is unfair, and the RBA and government have acted unfairly. Or we could take it from a positive perspective and say the current rates of 5-6% are actually the same or slightly lower than the long-term norm, and we’ve actually had it really good for a number of years. In hindsight we should have made the most of the situation and saved those extra repayments we would normally have been paying and thank god many parts of Australia got 20-30% growth

BY CHRIS GRAY, CEO, YOUR EMPIRE

in 2021 as otherwise we might have been in negative equity too. The key to successful property investing and wealth building is to be able to hold on for the long term and to try and retain a positive mindset in the meantime. The secret to cash flowing this loss over the long term really comes from being able to pull the equity out by refinancing and using that to pay the difference, rather than taking it from your limited wages.

If you refinanced at the end of the last increase when rates were still low, then ideally you would still be holding a lot of redraw or offset to help you manage that negative cash flow. But if you didn’t refinance, things could well be a lot tougher as many people can’t currently service a new mortgage with many lenders still using a 2-3% buffer on top of the 5-6% interest rates we’re already paying.

The property market and economy moves in cycles and circumstances rarely stays the same for long.

No matter what a property is costing you right now, calculate how much that would change if you got a 0.5-1% rise in rents and

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a 0.5-1% drop in interest rates. You might be pleasantly surprised by the difference.

Rents have been rising over the last year, especially for those that were forced to lock in big discounts during Covid. As tenancies come up for their 12-month anniversaries, this is the time to chat to your professional property manager. Those that self-manage properties or decided to go with the property manager that charged the cheapest commission may find it harder to manage any changes in the current legislation and know how to navigate tenants’ rights. For those that have investment properties in beachside suburbs, you’ll often find there could be a 20-30% difference in a lease that starts in winter compared to one that gets renewed in summer which we’re just coming into.

In August and September, the RBA held rates and there’s talk of rates dropping in 2024, so there’s a good chance you’re at the worst cash flow position right now and there’s some blue sky on the horizon.

Some banks are also dropping the 3% buffer they add into their serviceability calculators, meaning it should become easier to refinance than it was over the last 6-12 months.

Just like in my Effortless Empire book, I still think of a $1m property costing me say $10k - $20k a year but going up by $50k - $100k over the long term. If I can borrow an extra $50k from the equity, that will help me cash flow the property for 2.5 - 5 years. In some years, or if I’ve just bought it with 100% finance, it might be costing me $30-40K, but I don’t think that will last forever, especially when the property and rents have risen, and so I might take an average of $20k or a 2% break even point.

In the good old days of low doc loans, you could just tick a box to say you can afford the extra repayments, whereas these days they do want to prove that you can service it from rent and from your wages. So, if someone is on $50k, there will be a limit of how much the bank will lend them, hence that’s why it’s more a high-income earner strategy especially if you want to buy multiple inner-city properties where the rent doesn’t cover the mortgage. You don’t need to follow the strategy 100% - the main idea is to understand the often contrarian philosophies and mindsets and then adapt it to your situation. For those without a high disposable income, the strategy might be to buy further out of town where the properties

are cash flow positive. They might not grow by as much, but at least they don’t drain your wages.

A strategy like this is definitely not for everyone and if you walk into a high street bank and say I want to cash flow my property losses by capitalising the interest and using my equity they’ll show you the door pretty quickly. It’s not a common mindset to have personally, but in a business it’s normal – i.e., using your balance sheet to provide working capital to fund a business in the short term. Many mortgage brokers are fairly used to this strategy with multiple property owning investors as they know that in time, properties rise and so do rents and within a property cycle that property can then turn positive cash flow.

Whether or not this strategy is for you, try and be open to different ways of thinking and then, with the aid of your professional team of advisers, choose which is the best way forward for you.

A b OUT THE CONTRI b UTOR

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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I A m LOOKING tO S e LL m Y p ROPERTY. WHAT Are tHe mOSt COmmON MISTAKES, AND HOW CAN I AVOID t H em ?

Sellers should look at strategies to reduce chances of both “underpricing” and “overpricing” their property.

Sellers should look at strategies to reduce chances of both “underpricing” and “overpricing” their property.

In the current market, many homes are sold for well above expectation

and on most occasions it’s best to “feel the market” for a week or two before either accepting an offer or pricing their home.

Over the last few years, most properties I sold achieved approx 5% to 10% above seller and agent expectations. When we are talking properties mostly between $500k and $1M, that can mean another $50K to $100k.

To minimise the risk of under selling, 98% of my sellers choose

BY JOSH BROCKHURST,

to market their property using the successful Century 21 “Express Sale” method, which can minimise sellers’ risk of both “over pricing” or “underpricing” their most valuable asset.

The best advice I can give is to approach agents with Sold signs in your area, rather than agents with the most For Sale signs, even though they look active, you’ll just be listing your home in competition with the other sellers who’s home the agent hasn’t sold.

CENTURY 21 TEAM BROCKHURST

U ND er S tANDING t H e re C e N t e L e C tr ICI t Y pr IC e INC re AS e S

BY YOURPORTER

As of July 1, Australians have experienced an increase in their electricity costs, adding an extra layer of financial strain to households and businesses already grappling with other economic pressures.

In this Electricity Market Update, we'll delve into the reasons behind these price increases, the implications for consumers, and why it's essential to explore cost comparison services to ensure you aren’t paying too much.

PRICE INCREASES

Wholesale electricity and gas prices increased during the April to June period but remained well below the unprecedented highs of 2022, according to the Australian Energy Regulator’s (AER) latest Wholesale Markets Quarterly Report.

The report shows that average spot prices in the National Electricity Market increased in the second quarter of 2023 compared to the preceding quarter. This was driven by higher seasonal demand in southern states, the seasonal decline in solar generation, and reduced cheap coal capacity offered in Queensland and New South Wales.

New South Wales posted the highest spot pricing with an average of $148 a megawatt hour, up from just over $100/MWh during the first three months of the year. During last winter’s energy squeeze, prices averaged about $320/MWh.

For the June quarter, Queensland and South Australia’s wholesale prices averaged about $140/MWh, and Victoria’s just under $100, while Tasmania’s were cheapest at $65.

KEY DRIVERS bEHIND THE PRICE INCREASES

There are several contributing factors that have led to the recent price increases in the electricity market. These are outlined below.

Rising Wholesale Costs

power plants, and fluctuations in fuel prices, particularly for natural gas.

Regulatory Changes

The government has introduced new regulations and policies to facilitate the transition to renewable energy. These changes can impact the prices in the short term as the grid is upgraded and adapted to handle different sources of energy.

Network Costs

Prices for transmitting and distributing electricity are a significant component of electricity bills. These costs can increase due to necessary investments in infrastructure, such as poles and wires, to ensure a reliable electricity supply.

WHY CHOOSE YOURPORTER

Prices on the wholesale electricity market have seen an upward trend. The reasons for this are complex, but include increased demand for electricity, a decrease in supply due to the retirement of older coal fired

Retailer Operating Costs

Retail electricity providers have their own set of operating costs, including customer service, billing, and marketing expenses.

Impact of Extreme Weather Events

Natural disasters and extreme weather events can damage

Independent – we are not aligned with or panel of providers to compete for your Freedom – stay in total control, making or supplier preference

infrastructure and disrupt the supply of electricity. With rises in both in recent times, the costs of repair and restoration are being passed on to consumers.

Changes in Market Demand

Patterns of electricity consumption have evolved, with more people working from home and changing their energy usage habits. These changes in demand can have repercussions on the electricity market and pricing.

IMPLICATIONS FOR CONSUMERS

Despite the recent price increases, there are still opportunities to find competitive electricity plans in the market. One effective way is using cost comparison services to compare different electricity plans and providers to find a plan that suits your specific needs and budget.

Whether you are moving home or are looking for ways to save at your current home YourPorter can are here to help you navigate the electricity market and find the best value for your money.

moving made easy

YourPorter specialises in connecting household utilities ensuring your moving experience is made easy.

WHY CHOOSE YOURPORTER

Independent – we are not aligned with or owned by any energy retailer. We have created a panel of providers to compete for your business

Freedom – stay in total control, making choices to suit your needs be it cost, product features or supplier preference

Simple – use our easy, online signup process or speak to one of our friendly consultants Our service comes at no cost and no obligation

Based in Melbourne, we are 100% Australian owned and operated

CONNECTING SERVICES HAS NEVER BEEN EASIER

STEP 1

Once referred by an agent, YourPorter will contact you via SMS, email, and/or phone.

STEP 2

Choose your service providers via the online connection platform, or with the help of one of our friendly call centre team.

STEP 3

W e LCO me t H e SEASON WITH STYLE: EFFORTLESS IDEAS tO Spr UC e Up YOU r HOME FOR SPRING

As the vibrant colours and pleasant scents of spring permeate the air, it's the perfect time to breathe new life into your home.

In this article, we will share easy and creative ideas to add spring style to your home. Whether you're preparing to sell your property or simply want to refresh your living space, these tips will help you create an atmosphere that exudes warmth, beauty, and a touch of springtime magic.

EMBRACE NATURE‑INSPIRED DÉCOR

Bring the beauty of the outdoors into your home by incorporating nature-inspired elements. Arrange fresh flowers in colourful vases, display potted plants or create a small indoor herb garden. Incorporate earthy tones, floral patterns, and botanical artwork to

infuse a sense of spring's freshness throughout your space. These natural touches will instantly brighten and enliven any room.

PLAY WITH LIGHT AND AIRY FABRICS

Swap heavy winter drapes for lightweight curtains or sheer fabrics that allow the sunlight to filter through. Opt for lighter bedding and cushions in pastel shades or vibrant floral prints to create an airy and cheerful ambiance. The softness of these fabrics will evoke a sense of comfort while enhancing the overall spring aesthetic.

INTRODUCE SPLASHES OF COLOUR

Inject bursts of colour into your home to mirror the vibrant hues of spring. Add colourful throw pillows, blankets, or rugs to instantly transform the mood of a room. Consider incorporating shades like soft blues, sunny yellows, or refreshing greens to evoke a sense of renewal and joy. Don't be afraid to

mix and match colours for a playful and lively atmosphere.

CREATE INVITING OUTDOOR SPACES

Spring is the perfect time to enjoy the outdoors, so create inviting spaces to savour the fresh air and sunshine. Set up a cosy seating area on your patio or deck with comfortable outdoor furniture and colourful cushions. Hang string lights or lanterns to create a warm and enchanting ambiance for evening gatherings. Enhancing your outdoor space will not only make your home more appealing but also expand your living area during the pleasant spring months.

PAY ATTENTION TO SCENT

Spring is synonymous with delightful aromas. Introduce scents that evoke the season, such as fresh linen, citrus, or floral fragrances. Use scented candles, diffusers, or room sprays to infuse your

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home with a refreshing scent that welcomes visitors and adds to the overall sensory experience.

DECLUTTER AND ORGANISE

A clutter-free home not only looks visually appealing but also creates a sense of tranquillity. Take the opportunity to declutter and organise your space. Clear countertops, organise storage areas, and create a sense of order

throughout your home. This simple yet impactful step will enhance the overall aesthetics and make your space feel more inviting.

With these easy and creative ideas, you can effortlessly add spring style to your home. Embrace nature-inspired décor, play with light fabrics and vibrant colours, refresh your walls with paint, create inviting outdoor spaces, infuse delightful scents, and declutter your surroundings. By incorporating

these elements, you'll create a warm and welcoming environment that captures the essence of spring and appeals to potential buyers or simply elevates your everyday living experience.

Image: Hutomo Abrianto on Unsplash