O'meara Property

The latest edition of our printed newsletter, ‘The Bay News’ is being mailed out right now. Residents of the area will also receive it in their letter box next weekend.

A link to the online .pdf version is below for those that can’t wait.

The Bay News

Whilst it was certainly no surprise that the reserve bank lifted the official interest rate today it was a surprise that they raised the rate by just 0.25 percent.

Recent comments from the majority of financial commentators indicated that the RBA would raise rates by 0.5% based on increasingly positive employment and spending data in an effort to ensure inflation doesn’t soar. Personally, I see the 0.25% rise as welcome news rather than a sudden sharp jump. The property market will better accept a moderate rise in rates over a sustained period of time. Certainly, the buyer activity around the area in recent weeks shows that buyers have a very strong opinion of the local proeprty market at the moment and a couple of moderate rate rises isn’t expected to have an adverse effect.

Of course, when the RBA lifts official rates the race is on between the banks to get their rates up. The winner this time round? ANZ lifted their variable rate by 0.25% within minutes of the RBA. No word from the other major players yet but they’re all expected to announce rate rises with the next 24 hours.

The Government has recently raised the national home insulation assistance package to $1,600 for owner-occupiers, landlords and tenants.

One of the great initiatives of the Rudd Government, this package along with the solar hot water grant helps home owners tackle climate change while providing a clear point of difference in a rental or sale property.

To be eligible, the property must be currently un-insulated – or have very little ceiling insulation – and was built before the mandatory thermal performance requirements under the Building Code of Australia were introduced commencing in 2003.

If the total cost of installation is less than $1,600 there will be no more to pay. This will be the case for most households.

The industry has seen unprecedented demand and many clients have already told us lead times for installation have been running into several months.

With these recent spring heat waves the demand will only increase so make sure you register now to be prepared for summer.

The interest rate rise this week, the first Reserve Bank rise since March 2008 marks the start of an upwards trend in interest rates for the foreseeable future. Market analysts are tipping rate rises again in November and December and predict that the average variable mortgage rate will be around 6.5% before the end of the year (still well below the last 20 year average of 8.8%).

The increase in interest rates is unlikely to see any real burden placed on recent borrowers as banks have been quite ‘gun shy’ lately and will most certainly have assessed loan applications based on a higher interest rate than what we see at the moment. With most lenders lately requiring a minimum deposit of 10% and a track record of genuine savings the banks have been showing a much more considered approach to lending. Current mortgage arrears rates are reported to be 0.5%, the lowest rate in quite some time.

The number of investors entering the market is increasing solidly as first home buyers continue to taper off and there are still plenty of owner occupiers looking to buy. According to information provider RPDATA the number of properties going onto the market in the past three weeks is the highest in many months but the total number of properties for sale is decreasing. A clear sign if any that sellers are showing confidence in the market and demand from buyers is increasing at a faster level than stock coming onto the market; the next six months could be very interesting!

Many home owners who extend or renovate their homes make money when they sell, while others wonder why they have trouble getting their money back. What are the main things to consider before embarking on a renovation or extension?

Firstly, ask yourself whether improvements will make your house significantly better than the others in your street. The best-house-in-the-street phenomenon is often an unhappy one as the values of the other houses in the street affect the upgraded one – after all, this is not a street where purchasers will be looking to spend the higher prices the vendor is after. Those who renovate above and beyond the level of surrounding homes are less likely to get good capital appreciation when they sell.

Furthermore, do the changes you are making really improve the home? Many home owners simply increase the cost of their home without necessarily adding to its value, because some alterations don’t improve the standard of the property enough to compensate for their cost. Others leave a mishmash of disparate styles, or serve only to emphasise the datedness of the original house, or are too personal in their application to have wide appeal and so end up worth less than they cost.

It is not even uncommon for home owners to sacrifice one feature to gain another, thereby adding cost but not value. Frequently reported examples of this sort of expenditure include turning a bedroom into a dining room or a garage into a rumpus room.

Ideally, extensions should be seamlessly integrated with the original home. Many three-bedroom homes don’t “work” once a fourth bedroom and family room are added – the original rooms may be too small to balance the extensions. Furthermore, bad design resulting in poor natural light or an inconvenient floor plan will be reflected in the sale price of the property. Many of these problems could be avoided if architects were consulted before the work was undertaken. “Saving” on the cost of an architect is nearly always false economy.

Sometimes renovators over-capitalise by deviating from their budget during the course of their renovations. Many homes and locations don’t justify the top-of-the-range appliances and fittings some renovators choose. And if renovators run out of money before completing the work or have to skimp on the finishing touches, the overall effect can be disappointing and limit the ultimate selling price.

Home owners concerned about investment potential should also think twice before making changes for their own unique needs. Above all, major work should not be carried out if homeowners plan to sell in the near future. Sometimes a homeowner will ask a question such as: “I am planning to sell in a year but the house could do with a new bathroom. Should I undertake the work?” It could be argued that the home owner will get the benefit of using the new bathroom for the year until the property is sold, but unless they are in a location or marketplace or price range where the cost of the bathroom will be easily absorbed in the overall capital increase during the next year, it would be pointless to renovate the bathroom only to sell it. Prospective buyers may want an entirely different bathroom, or a bathroom that is very new might make the kitchen or other areas of the house look as if they need work.

The state of the market can also be an important factor in the overall cost-effectiveness of renovating a property. In a buyers’ market, such as we are currently experiencing in most parts of Australia and New Zealand, it often makes sense to take advantage of someone else’s hard work and expenditure rather than embark on costly and time-consuming renovations of your own, unless you are so attached to the property that you can’t bear to leave it, or unless you live in an area or type of home where there is always strong demand and low supply. Trading up in a buyers’ market should actually produce a financial advantage as you inevitably ‘save’ money when you purchase a more expensive house on a slow market. (For example, do your sums and work out why a 10% ‘loss’ on a $500,000 home that you are selling is less than a 10% gain you make on the $750,000 house you are buying which is also ‘losing’ its owner 10%). Trading up makes even more sense in areas where First Home Buyers’ Grants are raising the price of the kind of house you might be selling but not affecting the cost of the home you are planning to purchase.

At the same time, quality of life is also important and the good news is that if people stay in a property long term the cost of idiosyncratic changes will usually be absorbed in most locations experiencing growth. The question of whether they would have made more money by making different choices often simply doesn’t come up.

Homeowners wanting to maximise the investment potential of their homes should consider consulting an estate agent with whom they have a good relationship before making improvements. In many instances, agents aren’t called until the work is nearly completed and it’s too late to choose a different path. Builders can tell you what your renovations will cost but only an experienced, well-referenced estate agent can tell you whether the value is worth the cost sufficiently to justify the expenditure.

Many people think it’s simpler to move out of their home before selling it while others find themselves doing it by default, because they have already found another home. But selling an empty home should be avoided where possible.

It’s hard for an empty house to ooze charm or vitality. And few prospective buyers are good at visualising a house’s charm potential. Empty houses usually take twice as long to sell and often sell for less. After all, people don’t buy houses they buy homes. In other words, when they walk into a property for sale, while their heads are looking at features and benefits, their hearts are engaged only when the atmosphere makes them feel at home. If their hearts aren’t engaged, the fact that the features of the property add up on paper rarely makes a sale happen.

Empty houses also make it hard for people to do decide whether their furniture will work. Without chairs or sofas to indicate size and scale, how can they make the translation from their current living room to the one they are looking at? If there are, say, two two-seater sofas, buyers can quickly make comparisons with their own living room without resorting to time-consuming measurements when they are simply trying to form their early impressions. Uncertainty makes people lose interest, especially when the house isn’t sending out lifestyle vibes that engage their emotions.

Above all, when the house is empty, prospective buyers tend to focus on negative details. It is all too easy to see chips or cracks when there are no paintings, furniture or window coverings to take their attention and camouflage imperfections.

If you have to move out, it’s worth contacting a home staging company (available in most areas these days) whose services include moving in furniture and accessories to make a house look like a home. The costs will be worth it in the long run, as the house will sell faster for a better price.

The reserve bank may have decided to leave interest rates on hold this week but there is no doubt that the next movement we see will be upwards. Economists are generally speculating that we’ll see a minimum 0.25% increase before the end of 2009 and many believe we’ll see a solid rise as soon as next month.

Throughout Australia the average standard variable home loan rate sits today at 5.75% so a 0.25% increase will certainly be seen as affordable by the vast majority of borrowers. There is speculation however, that by February 2011 we’ll be seeing the official cash rate reach 5.23% which on exisiting bank margins would give us a variable rate of almost 8% and meaning that the average home owner will be paying roughly $100 more than they are today off their mortgage.

Of course, all of this is fine if you’ve factored in rate rises when applying for loans or extending existing loans. Based on the speculation about at the moment, you should be counting on paying between 7.5% to 8.5% interest within the next 18 months.

We’ve all heard how over the past year the first home owners grant has greatly increased activity in the lower end of the real estate market which has in turn led to increases through the middle range of the market as many people ‘trade up’. Premium property has so far seen little increase in activity and may present the ideal long term investment for those keen to take a chance.

Prices on top end properties are very competitive at the moment through the Port Stephens/Nelson Bay area and there is plenty of stock available which has led to pretty substantial price reductions over the past six months. Waterfront properties are slowly starting to move again showing, in my opinion the first signs of the top end recovery but properties in the $700,000 to $2,000,000 range have remained very slow, particularly units and a search on www.realestate.com.au shows over 150 properties available in that price range. In many cases these properties have seen reductions in their asking prices of 10% to 20% over the past year and will regain that ground plus much more once the market moves again.

For those that have the financial ability to buy now and hold these sort of properties over the next few years I’m convinced that there are going to be some pretty impressive capital gains to be had.

On behalf of all of our team at O’Meara Property I am happy to reveal our new www.omeara.com.au website. As a custom project developed by real estate specialists agentpoint the new site contains a myriad of features to help those looking to buy, rent or holiday in Port Stephens.

Just a few of the features include:

• Automatic notification of new sales & rental listings as well as property news items to subscribers via email and/or rss feeds;
• Integrated blog providing constant property information. It’s easy for us to do so it will be done regularly;
• Viewers can create a list of favourite properties making it easier to come back later and review them;
• Whilst looking at a property you can click the ‘similar properties’ button and instantly come up with other listings that may be of interest;
• Instant, easy search for waterfront properties or properties with views;

I personally believe that this new site leaves all other Port Stephens property websites in the dark ages and will become chock a block full of information over the coming weeks. Our interactions with buyers, sellers, renters and holiday tenants has told us that you want genuine localised information from a real estate website, not just properties for sale and lease. This is what our new site is designed to deliver.

As it’s our intention to build and maintain the most comprehensive Port Stephen real estate website I welcome your comments and suggestions which can be made below.

Our dedicated holiday website www.nelsonbayaccommodation.com.au remains fully operational and once we’ve recovered from this website creation we’ll be working on an update there as well.