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Downturn Less Pronounced Than First Thought

Foreclosure

Another great place to find bargains of this nature is to search through foreclosures, auctions, and homes that are preparing to enter into foreclosure. While not always the case, there are many in these situations that are willing to be a bit more flexible with the price. Never offer full asking price first. Start low and negotiate up. This may lose some properties but in the end it will be a much more profitable venture if you can get the properties you want for a smaller investment.

The property market may be in its steepest decline since the GFC, but you’ll still need the salary of a federal politician to afford a freestanding home in Sydney or Melbourne.

Australian Bureau of Statistics figures suggest the national average salary for a full-time worker is about $82,000 a year. The general rule is that homeowners will suffer ‘mortgage stress’ if their repayments exceed 30 per cent of their income.

This means those earning the average salary can only borrow about $450,000 – half of Sydney’s median price of $900,000 and well below Melbourne’s $740,000 – and live comfortably.

‘Unless you have huge savings, and a huge income, then buying in our two biggest cities will be largely out of reach,’ Sarah Tindall from financial comparison website RateCity told Nine Finance. Research from Canstar suggests people hoping to buy a home around the $1million mark in Sydney will need to earn a salary of over $160,000 to avoid mortgage stress, taking into account a 20 per cent upfront deposit.’Not too many first home buyers enter the market with a $165,000 salary,’ Canstar’s home loan expert Steve Mickenbecker told news.com.au.

In Melbourne, where the median house price is about $737,000, homeowners need to earn more than $112,000 to comfortably pay their mortgage.

Nerida Conisbee, chief economist at realestate.com.au, said buyers should wait for the market to fall further in the wake of 11.1 per cent and 9.1 per cent slides in Sydney and Melbourne respectively last year.

‘Take your time. There’s certainly no rush to buy housing in Sydney at the moment,’ she said. ‘The prices aren’t really going anywhere and if you do want to buy and you find the right home, it does give you more negotiating power and it does give you a better house for your money.’

In Western Australia, which boasts the highest average income in the country at just over $90,000 a year, the dream of home ownership is far more achievable.

The average full-time worker can borrow $497,000 – above Perth’s median house price of $465,120 – and live comfortably.

Buyers in Brisbane who earn the state’s average salary can borrow about $440,000 and avoid mortgage stress, well below the city’s median house price of $540,000.

Full-time workers in Adelaide earn about $75,000 a year on average and can accordingly borrow about $440,000.

That figure is just above the city’s median house price of $430,000.

The average house price in Darwin currently sits at about half a million dollars – just slightly more than what workers in the Northern Territory can afford.

That state’s average income of $86,000 a year allows for a loan of about $476,000.

Workers in Tasmania earn the lowest average salaries in Australia at just over $71,000 a year, which allows for a $392,000 property purchase.

Hobart’s median house price is currently $495,000.

People in the ACT earn nearly $95,000 a year on average and can borrow $517,000 and avoid mortgage stress.

The median house price in Canberra is $672,000.

Downturn far less pronounced than first thought, but the worst is not over…

We are now well and truly in the midst of a housing downturn. While conditions remain highly variable across Australia, only four capital cities saw price increases in 2018 with the rest recording declines. Across regional Australia, conditions are even more variable. The realestate.com.au House Price Index is showing that declines are far less severe than what many other commentators are saying. There is no doubt we are seeing price declines in Melbourne and Sydney, but they are not as pronounced as first thought, and we are certainly not seeing the worst conditions in 30 years. In most other capital cities, prices are either stabilizing or seeing moderate growth. The capital cities continuing to record growth are Hobart, Canberra, Adelaide and Brisbane (in order of price growth). For regional areas, it is Victoria that is doing particularly well with Ballarat seeing the strongest regional price growth in Australia. While declines are not as bad as widely reported, it does look like the worst is still to come to Melbourne and Sydney. For at least the first half of the year prices will fall and from there, it will depend on the outcome of two major events which could dramatically change the direction of the market.

The outcome of the Financial Services Royal Commission – at this stage, it is looking like restrictions on home loans will not be a big focus of the final report. Banks reacted very quickly to restrict home lending as soon as the commission was announced and as a result, it is unlikely it will get any tougher for home buyers looking to borrow. As a further indication that it is unlikely to get any more restrictive, at the end of 2018, APRA removed the cap on interest only loans. This was seen as one of the riskier types of lending given the jump in repayments once the interest-only period was over.

Result of the Federal Election and subsequent change to negative gearing and capital gains tax concessions – it is now looking likely we will see a change of Government sometime in the first half of 2019. While a more stable Government is good news for the property, it is the potential changes to negative gearing and capital gains concessions that could continue to lead to price falls. It defies common sense that the changes won’t hit house prices or rental rates and this assertion has been backed by modeling from both sides of Government, as well as independent consultants.

For house prices, best case, lending restrictions are eased up and there are only minimal changes to negative gearing. If this happens, we will see flatter conditions in the second half of the year. Worst case, finance becomes even more restrictive and negative gearing changes outlined by the ALP kick in. A continual fall is then likely for Melbourne, Sydney and potentially the rest of Australia.

There are many ways in which you can find a great property for your real estate investment. The problem lies in the fact that many would-be investors aren’t exactly certain what specific types of investment they wish to make. Unfortunately, the type of investing will greatly affect the type of property that will best suit your real estate needs. Let’s focus on finding a great property for the purpose of flipping or rehabbing a property.

Seek Bargains

This is absolutely a necessary step when it comes to finding properties with excellent potential as flipped properties. Bargains are often sold at bargain prices for a reason. The good news is that many of these reasons are purely cosmetic and quite simple to fix. Finding a realtor that is willing to work with you for lower prices, bargain properties offer an excellent place to begin. If he or she is a knowledgeable professional you should have access to properties that would have been unavailable to you had you continued the search without the assistance of a professional.

Another great place to find bargains of this nature is to search through foreclosures, auctions, and homes that are preparing to enter into foreclosure. While not always the case, there are many in these situations that are willing to be a bit more flexible with the price. Never offer full asking price first. Start low and negotiate up. This may lose some properties but in the end it will be a much more profitable venture if you can get the properties you want for a smaller investment.

Know the Neighbourhood

Before placing a bid on a potential property for flipping you need to learn as much about the neighbourhood as possible. You do not want to place a family home in the middle of a retirement neighbourhood, nor do you want to place a potential bachelor pad in that type of area. You also want to avoid areas that are entering a state of decline, as the rehab efforts are unlikely to achieve the profits you are hoping to receive. Instead, look for bargains in areas that are approaching some sort of renewal or have very low crime and excellent growth potential.

If you are rehabbing a home that is meant to appeal to families make sure the neighbourhood is safe, has a relatively low crime rate, access to good schools, and entertainment opportunities that may appeal to families. These things will affect the price you are likely to be able to expect once the rehab efforts have been completed as well as the type of renovations you will need to perform on the property. Buying a property in an area that you know nothing about is like buying a property without an inspection-which brings me to my next point.

Get a Thorough Inspection

This is one of the most important steps in the process of selecting the perfect property for your real estate investment needs. A qualified inspection will prepare you for any problems that may arise during the course of your work on the home. These are things that will affect the amount of money you should offer on the home, the amount of money you will need to invest in repairs, and the amount of money you can expect once all is said and done.

Failing to have a complete and proper inspection can lead to disaster when the renovations begin costing extra money and time as efforts are undone in order to get to the root of the problems as you go. There are very few things that can save you the time or money that having a decent inspection can manage to save. Inspections can also make you aware of any structural problems, code problems, and other problems that may mean the difference between this property offering a possible profit or a probable loss. It is much better to be armed with this knowledge before ever making an offer on the property in question.

Realize That You do not Need to Buy the First Property You See

This is an important thing to remember. If the first property doesn’t speak to you, move on until you find one that does. This process is part science and part inspiration. If you are uninspired by a property it is unlikely that this property will suddenly take on a life of its own in order to suit your real estate investment needs. Keep searching until you find the property that meets all of your needs in order to find the perfect property for your first or your fiftieth flip.

When you are first starting out with investing in houses, you should always look for ugly or bad houses that need a lot of work. These homes are much cheaper to purchase, although they will take some work to improve. You should start out by looking for houses that need some work, such as clean up, painting, and in some cases new carpet. You don’t want to buy something too run down, as it could cost a fortune to repair.

If you think of yourself as a handyman and feel that you can do the repairs yourself, you can save a lot of money. On the other hand, if you need to hire someone, you should always make sure that the individual or company that you hire is qualified to do the repairs. If you aren’t comfortable with doing any of the repairs, you should inquire about a subcontractor or company that will do it for a reasonable price, or perhaps a share of the money once you have resold the house.

If the house you are thinking to purchase and resell has any type of structural problems, you should always get an estimate from a reliable contractor before you make the purchase. If you decide to stay in the business, you’ll learn a lot more over the years, although you should always hire a contractor when you first start out. Once you get all of the estimates together, you can make that final decision on how much of an offer you want to put down on the property.

After you have a team together and successfully renovated and resold several homes, you’ll begin to feel quite a bit more confident with buying homes that need repairs. All it takes is time and practice – and you’ll be buying homes that the average investor wouldn’t think twice about. This can be a huge advantage when you are looking for homes to buy and resell, as there will be less competition to worry about. You’ll also be able to get a lower price when buying the home, simply because you can use the cost of the repairs to your advantage.

Once you are able to do repairs on homes, including structural problems, you’ll have a huge advantage in the market. You’ll be able to buy virtually any home, including those that other investors choose to ignore. Doing so can be very profitable for you, especially if the house is in a well known and well desired neighbourhood. After you have done the repairs, you can resell the home for a much higher price than you paid to acquire the home.

When you start looking for houses that you can repair and resale, you should always take your time and buy the right homes. You won’t have the money, time, experience, or support to buy the bigger houses at first, which means you won’t have any room for mistakes. Once you have purchased and resold a few smaller homes, you’ll eventually be able to work your way up to the bigger homes – which is where the big profits will come into play.

Always keep in mind that when you first start out, you’ll need to take things slow. You can expect profits to come overnight, as it will take you some time to learn. Once you have been at it a few years and have several houses to your credit, you’ll be ready to tackle anything. At that point – you’ll make a lot of money in a career that is truly exciting.

 

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