O'meara Property

The latest edition of our newsletter “The Bay News” is now available. Editions are currently being posted out and will also be letter box dropped over the coming two weeks. If you can’t wait, here’s a link to the online version!

The Bay News 2011_3

The latest edition of our newsletter “The Bay News” is now available. Editions are currently being posted out and will also be letter box dropped over the coming two weeks. If you can’t wait, here’s a link to the online version!

The Bay News 2011_2

The latest edition of our popular newsletter “The Bay News” is now available and can be downloaded via the link below.

http://www.omeara.com.au/wp-content/uploads/2010/07/webnewsletter.pdf

Printed editions will be posted to subscribers next week and should be letter box dropped over the coming week.

Many people feel that real estate ads often exaggerate the features of the properties advertised. Yet agents frequently report that when it’s their turn to sell, many vendors just can’t help wanting to ‘oversell’ their property by insisting that every feature of their home is highlighted in every ad, or by insisting on ‘four bedrooms’ rather than ‘three bedrooms and a study’. But what does a real estate ad really need to achieve?

There’s an important distinction that needs to be made: the ad is not the property. Furthermore it won’t sell the property by itself. A real estate ad has done its job if if makes people want to come and carry out an inspection. Then it’s up to the property to live up to the description if a sale is to be made. If purchasers feel disappointment that the property does not live up to expectation, they are unlikely to make an offer.

As such it is better to claim less for the property rather than more. Underselling works better than overselling. There should be a buildup of desire and excitement that reaches its peak by the time people set foot in the property. Purchasers should be delighted to find that the property is everything the ad said it was – and more. Purchasers are frequently buying a lifestyle and rather than listing all the features of the property, it is more effective to evoke the kind of life they might be able to live as owners of, and dwellers in, this particular home.

Secondly, too much information can actually make people decide not to inspect the property at all. To the inexperienced, this seems an unlikely situation. How could an ad that highlights the property’s desirability actually go against it in the long run? They don’t realise that potential purchasers may decide without seeing the house that it would not suit them. Some vendors think that purchasers who have already made up their minds against their property weren’t ever going to buy the property anyway, so it’s a good job they didn’t waste everyone’s time on an inspection. This approach is a short-sighted one, however, as it overlooks the very real potential for the house to sell to someone who falls in love with it even though it doesn’t outwardly meet all the criteria on their wish list, or had a feature they had decided they didn’t want.

Remember, most purchasers have to compromise on some features, and the home may meet their needs so well in some particular way that is special to them that they overlook the glaring lack or supply of something else they thought they needed.

Reports this morning from ‘Australian Property Monitors’ predict a more than ten percent rise in rents in Sydney throughout 2010. In short, it appears that the Tomaree peninsula will see similar increases as stock levels fall and costs for investor to hold properties increase.

The interest rate rises of late 2009 and the predicted rises through 2010 means that investors will be very keen to maximise the rent they achieve throughout 2010. Falling stock levels of properties to rent, particularly family homes has increased competition considerably and will ultimately lead to increases in rent prices. We’ve included below a few tips for investors to maximise their returns this year.

• Ensure your property is attractive to great tenants – if the property needs repainting or recarpeting, do it;
• Adopt the attitude that saving money by not maintaining the property costs you much more in the long term;
• Speak with your accountant or tax adviser about whether there are tax advantages to renovating your property; the answer to this question will depend on your overall financial position and requires specialist advice;
• Have all expenses ie. council, insurance, repairs paid from your funds by your managing agent so that everything shows on your statements and nothing is forgotten at tax time;
• Ensure your property is professionally managed; do they conduct regular routine inspections and provide a written report with pictures? do they assess the rent regularly?;
• Take your agent’s advice on the rent to ask for a vacant property. If you don’t trust their advice they shouldn’t be managing the property for you and getting a tenant today at 5% under what you’d ‘like’ normally beats getting a tenant in a months time.

For professional property management advice please feel free to contact me on 02 4980 4400 or email jane@omeara.com.au

*Archicentre’s recent online poll revealed that rainwater tanks are now a sought after housing feature. When asked the question: When purchasing a home, which one would you favour if all other things were equal? Water tank for garden watering, spa in the ensuite, or a large plasma screen, what do you think house buyers voted for?

A survey conducted by allrealestate.co.nz suggests that one in 10 people are prepared to pay up to 25 percent more for a sustainable home.

Australians’ attitudes to the houses they are living in are undergoing change. In fact, only 6.4% voted for a large plasma screen, 14.3% for a home with a spa in the ensuite and a huge majority – 79.3% of the 1006 participants – voted for a house with a water tank for garden watering.

Climate change awareness, with a lack of water and the potential steep rises in energy and water costs, is increasing the focus of home owners on the environmental performance of their homes as well as structural integrity and appearance.

Archicentre’s Mr Hallett reported that questions are increasingly being asked as part of the Archicentre Design Concept service by home owners wanting to save money on energy and water, but also wanting to create a ‘green friendly environment’ utilising natural resources and to design a home or renovation which in the future can be marketed as eco-friendly. Changing weather patterns, which forecast less rain but in heavier less frequent falls, means that roof design and the ability to harvest rainwater have also become an important consideration for home buyers seeking rainwater tanks in properties for sale.

Pre-purchase inspections are being used to provide home buyers with a negotiating tool where houses, especially older homes or poorly designed apartments, are energy inefficient or do not have any insulation.

The Australian Bureau of Statistics says that the proportion of homes in Australia with air-conditioners rose from 33 per cent in 1994 to 60 per cent in 2005, yet 40% of homes are uninsulated.

Insulating Australia’s 2.7 million uninsulated homes would cut greenhouse gas emissions by about 90 million tonnes by 2050, according to the Insulation Council of Australia and New Zealand.

It’s not hard to work out that, as more homes become environmentally friendly, and buyers have more choice, 90 million tonnes of greenhouse gas emissions could result in home owners missing out on a few sales dollars when they eventually sell.

After all, as energy costs rise and the negative social impact of energy inefficiency becomes more and more unpopular, the environmental performance of a home will be reflected increasingly in the sale price.

*Archicentre is The Australian Institute of Architect’s Building Advisory Bureau.

What makes some houses sell faster and for a better price than others that are to all intents and purposes pretty similar in size and features? Many of the differences between properties are hard to pinpoint and don’t come down to plain old bricks and mortar and land value. What are these elusive features that make all the difference?

 There are several factors that contribute to a home’s appeal that aren’t always immediately quantifiable – orientation, design that maximises natural light, pleasing proportions and other factors that contribute to market appeal.

What if, for example, there are two identical homes, but the living area of one home faces north and the other south? Given that more buyers write ‘north-facing’ on their wish list, the north-facing property is surely more saleable (therefore worth more) than the south-facing one. All the same, the owners of the south-facing one probably think that their home has the same features and of course value as the one that buyers prefer.

The kind of appeal that makes buyers go ‘wow’ can also come simply from regular maintenance and attention to detail in the presentation of the property. A house that looks loved and cared for is shown to its best advantage, yet it may be identical in most other respects to a less popular property in the neighbourhood.

Elusive appeal is also likely to be a function of the original design concept of the house. After all, it is not uncommon for homeowners to “save” money at the planning stage of building or extensions. They achieve the measurable features they were after but not the elusive ‘wow’ factor. Good design, especially the skilful use of natural light, window placement and correct orientation on the land adds something you can recognise but can’t always define. Many people add on, or make minor changes as the need arises without taking a holistic view of their property. They think in terms of immediate solutions to particular problems (need large fourth bedroom with ensuite to become master bedroom) rather than conceptualising the impact of the house as a whole (small living area and kitchen means scale of property is out of balance).

Extending without reference to the scale of the home, for example, creates an floorplan that is not balanced and harmonious. Such a house is likely to lack the aesthetic pull of more cohesive designs even though the number of features looks the same when listed.

Home owners who want to sve money should be aware that skimping on planning and design could mean that the house never reaches it’s full potential in terms of re-sale value, no matter how impressive its many ‘features’.

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.

Property investment owners sometimes get impatient. They think the market is going up too slowly, or the rent isn’t as high as it should be or the the current tenants are not as good as the last ones.

In most areas there has been a rush on dwellings that fall into the first home buyer category now that governments are offering grants to help first home buyers get into the market. As a result, many investment property owners are thinking of putting their properties on the market for sale while the chances of a high price are looking good.

Is this the best way for them to go?

In fact, selling too soon often delivers the opposite of what investors are hoping for. Every real esate sale incurs costs which eat into the profits, so selling too soon often reduces the overall gain especially if they sell before they have held the property long enough to see serious capital appreciation.

It seems that investors who get itchy feet have lost the sense of deferred gratification that led them to invest in property in the first place. They are tired of making sacrifices to pay the extra mortgage and they expect too much too soon. Maybe they have forgotten that the most effective way to enjoy their increasing wealth is to let capital appreciation and rent increases do their job over time. Holding investment properties long-term means greater wealth when it is needed (usually on retirement when income from work ceases.)

Instead of selling, investors who really want to improve their long-term wealth would be better off increasing their loan and buying a second investment property (provided they bought sensibly in the first place of course!) Astute investors keep buying more properties as their borrowing power increases with the rise in equity that accrues with capital appreciation.

It is true that some short-term self-sacrifice is involved in this strategy. Investors buying their first property are usually stretching themselves just to get a foot on the investment ladder and there is little money left over for luxuries. It is not until their portfolio grows in size that they will be less stretched and more able to increase their lifestyle spending without selling a property to do it.

The best strategy for most investors is to embark on a program of planned property investment at their earliest financial convenience – usually when the equity in their family home reaches a fairly high level and after consulting their accountant.

Then they simply keep adding to their portfolio until they increase their assets to the level that suits their aims and aspirations.

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.