Welcome to our December newsletter. This month we take a long range view of the real estate market in the context of capital growth. We discuss ways to attract quality tenants to your investment property, take a brief look at the role of the valuer and finish with a few options to light up your garden this summer.
TAKING A LONG TERM VIEW OF THE MARKET
With clearance rates, prices and buyer activity all increasing, there is talk once again about a “boom” in the local housing market. But any seasonal assessment fails to take into account the long-term performance of the real estate market.
Experts will encourage buyers to take a longer-term view of their investment rather than focusing on what happened in the market last weekend or last month.
Like any broad-based market reliant upon the participation of thousands of people each week, it will be bound to fluctuate over the short term, but due to most households wealth being in housing and the fact that most people only buy and sell infrequently, what really matters is the medium to long term performance.
A review of the performance of the market over the past decade indicates that the only time that prices fell significantly was during the global financial crisis, the reasons for the drop of around $70,000 in the median house price between 2008 and 2009 are well known and home owners and investors should be pleased that once local economic conditions improved so, too, did the market.
The alternative would not be welcomed by anyone. In the same way, as rapid increases in value are unsustainable and ultimately not positive for the economy so, too, are substantial falls.
If prices fell strongly and remained low then many home owners and investors would face the scenario of negative equity, increases in mortgagee sales and investors leaving the market.
There is no doubt the residential market is much stronger than it was a year or 18 months ago - stimulated by record low interest rates and a stabilised economy. Smart buyers will still be researching where they are buying - looking for long term capital growth based on features such as location, access to schools and public transport and the general character of the street or suburb.
A general review of the residential market in Victoria will show that is based on solid fundamentals and has provided reasonable capital growth over the last decade.
MAINTAINING YOUR INVESTMENT PROPERTY WILL ATTRACT QUALITY TENANTS
Property investors can spend a lot of time researching a suitable purchase but this is only half the skill of successful real estate investment. The other important factor is keeping the property in good condition.
Understandably, there is a tendency to minimise ongoing expenditure and to maximize returns, but experienced investors know that spending money to keep a property in good condition results in better performance, including more conscientious tenants, above average rents and fewer vacancies.
Ultimately, a well-maintained property is likely to attract a better resale price.
Unless you have plenty of spare time and are familiar with the legal processes involved in renting property, it pays to ensure your investment is looked after properly by appointing a licensed property manager.
Such properties are more likely to require less long term maintenance than those handled privately, simply because property managers conduct regular inspections and advise owners of any upkeep.
A good property manager will also advise owners of any up-coming major work identified during an inspection.
Having appointed a property manager you should conduct a thorough inspection of the property to determine any repair work.
If a rental property is in top condition when leased, it is much more likely that a tenant will keep it that way. It is important that owners set a high standard for the condition of their property at the start of the lease in order to maintain that standard from the tenants.
This is particularly relevant for investors who may have purchased older, possibly run-down properties.
For owners, it pays to spend money on quality locks, security screens, a fresh coat of paint, air-conditioning, floor coverings, window treatments, tap fittings, contemporary tiling and repairs to cupboards.
Better-presented properties will attract more appreciative tenants and a better rental return.
THE ROLE OF THE VALUER
The role of a valuer is to assess the value of property. Their services have a wide application, such as determining the valuation used by municipal authorities and state government to assess rate and taxation liabilities, and how much a property may be worth in the event of a compulsory acquisition.
When you take out a mortgage, the financial institution will use a valuer to help determine the extent of the loan they are prepared to make.
Often people need to settle a property without a sale on the public market, for the purposes of dividing assets in the event of a divorce or deceased estate. In those cases valuers provide a valuation.
Our courts also rely on them to provide their expert advice, as do parties involved in negotiating a retail lease.
Valuers utilise a range of tools and systems to form their professional view. They look at recent comparable sales, the size and location of the property and its particular features. The valuation they provide can differ from the price paid when a property is sold because a valuer is unable to determine how much a property is worth to a buyer or the amount they are willing to pay.
A valuation may also differ from the estimated selling price provided by an estate agent because a valuer can only take into account past sales, while the estate agent is providing a view about what a home may be worth in the near future.
Information courtesy of the REIV
LIGHTEN UP YOUR GARDEN
When planning your outdoor entertaining paces, don't forget to give consideration to lighting. There are many options that, when placed thoughtfully, will give your garden or decking the “wow” factor.
There are a few things to consider when planning garden lighting including the four basic lighting options: standard line lighting, solar outdoor lighting, low voltage halogen lighting and LED (light emitting diode) lighting. All of these different types of lighting can be used in a variety of ways throughout your property. The first step is choosing the right kind of lighting for your needs, and then you can work on determining the best layout fo the lights.
Standard line lighting is not usually recommended because it can require extensive excavation that could damage any nearby landscaping. Outdoor solar lighting is an option, but a full garden of lighting will require solar roof panels. Small, individual solar lights can look great along the edges of an outdoor pathway, but if there hasn't been a lot of sun, they may be too dim to be effective.
Low-voltage and LED Lighting
Low-voltage halogen lights are an ideal choice for outdoor lighting. They are affordable, safe, and still bright enough to provide sufficient outdoor lighting. Outdoor LED lighting is quite often recommended because it helps reduce energy costs and still provides plenty of illumination. They may cost more initially, but they use only a fourth of the energy of traditional light bulbs and a LED light can last more than 10 years.
The lights that you choose for your garden or deck can vary from garden spotlights, pond lights (for water features), LED deck lights or step lights. Each will achieve different lighting effects.
Always seek professional help when working with electricity. Your local garden centre will be able to provide advice on any DIY choices.