Should you sell at auction?

 

By REIWA President – Hayden Groves     https://reiwa.com.au/

Market conditions have been tough and whilst recent improvements have been encouraging, the average time on market for a home in Perth is at 67 days. Those who need to sell and sell quickly often opt for an auction given reported statistics for days on market for such campaigns is 26 days.

I’m an advocate for the auction process as a method of sale for a number of reasons. Certainly it’s a transparent process with all buyers able to see their competing buyer and the auctioneer bound by a strict REIWA code of conduct that brings fairness to the process. Buyers also usually have time – unless the seller accepts an offer prior to auction – to view the property several times, undertake all necessary diligence and arrange finance prior to auction day, with only a slim chance of not having an opportunity to buy on auction day.

The benefits to sellers include a cash, unconditional contract, a settlement period that suits their needs, a healthy deposit and the delivery of what is the very definition of fair market value. The ‘no price’ marketing strategy in the lead up to the auction day is beneficial, as it captures all possible buyers, including those deterred by an unrealistically high asking price for property offered for sale by private treaty.

And if the property is being sold under an executorship arrangement, then auction really is the best option.

However, offering a property to market via the auction process each and every time for each and every property is not necessarily the right approach.

Sellers are often under significant pressure from their agents to ‘meet the market’ on the day of auction, even if the best live bid is below their original reserve price. The lead up to the auction day can be stressful too, with multiple home opens and inspections during the weeks prior.

Some buyers remain deterred by the auction process; they are either too nervous to bid or unprepared to by a property without certain conditions, such as finance approval.

In the event the property is passed in, the seller’s disappointment is palpable, despite the auction day being only one part of the marketing and selling process.

When selling be sure to ask your agent about all the options when coming to market, as there are benefits to all methods of sale. It’s a matter of choosing one that suits your needs and circumstances, and agents should be offering you that choice.

The Rules Behind R Codes

What are R Codes?

Wherever you live, whatever site you are planning to build on, subdivide or develop, you will be subject to a planning regulation called R Codes. The R stands for residential and refers to the Residential Design Codes.

“They’re basically designed to help suburbs, towns and cities in WA control their population growth in a structured and equitable way, and consider things like height, density, design, amenity and sustainability,” Stratawise Sales Manager Sue Marshall said. “All new developments – from a single residential house to an apartment complex – are assessed against the R Codes before they are approved.”

How do R Codes work?

Put simply, the R Code of an area stipulates how many residences can go on a one hectare (10,000sqm) parcel of land, and the minimum and average size of a residential block in that area. “For example, an R Code of R20 means you could have up to 20 dwellings per hectare of land, with each dwelling requiring an average site area of 450sqm and a minimum site area of 350sqm,“ Ms Marshall said. But R Codes are much more complex than just density and block size. To ensure the best outcome of a potential development, it will also be assessed by the R Codes over things like:

  • Type of dwelling
  • Type of title – strata vs green
  • Maximum site coverage
  • Minimum open space requirement
  • Maximum dwelling height allowed
  • Required boundary setbacks
  • Managing overlooking and privacy
  • Extent and number of boundary walls
  • Access to parking required on the site
  • Site works

What does this mean for you?

The R Codes will determine your site’s development potential. “The higher the number, the more dwellings can fit onto the site, so savvy investors will likely lean towards a home site with the most subdivisible potential, with an R Code that allows a greater number of dwellings to be built on it,” Ms Marshall said. “Your local council or shire will assess your development against the rules around setbacks, overlooking, height and open space – just to name a few.” Ms Marshall said zoning was constantly evolving, causing R Codes to change over time. “It’s important to check the code before you commit to a piece of land to ensure it can achieve what you are planning,” she said.

Who decides what the R Codes are?

The Western Australian Planning Commission designates the R Codes, but they are administered and applied by local government – your local council or shire.

 

Signs Point To A Lift In Local Property Market

 

By Hayden Groves – President REIWA   http://reiwa.com.au/

Across the board increases in sales volumes, lower stock levels in both the sales and rental market and more activity in the trade-up market herald an improvement in the WA property market, according to REIWA president Hayden Groves. “I think the market has been at the bottom for the last six to nine months and is starting to transition,” he said.

“We’re seeing more sales but downward pressure on listing stock despite the fact that spring is here, and for the first time in a number of years the supply of rental stock is falling at the same time.” Mr Groves said the conditions had created an interesting situation, typical of a transitional market. “There’s been downward pressure on prices, demand is still pretty soft, as is the WA economy, so if people haven’t had to sell they’ve held off; that’s while sales volumes have been so low.” he said.

“Suddenly in some areas, supply levels have tightened to such an extent that it’s putting upward pressure on prices.” Several suburbs across Perth have already recorded strong median house price growth, according to the latest data from reiwa.com. Cottesloe recorded the highest growth at 18.2% in the 12 months to June, followed by Attadale 17.7% and Salter Point 17.5%. Two Albany suburbs were also among REIWA’s top 10, with Lower King recording 12.7% median house price growth and Yakamia increasing by 11.9%.

Most of the growth was across Perth suburbs in the $800,000-$1.2 million price bracket, reflecting greater activity in the trade-up market. Mr Groves said when this section of the market started to move, the median house price would start to rise.

“I expected to see the Perth median house price increase in the June quarter as a result of the greater activity at the higher end of the market, but that didn’t eventuate.” he said. “I’m more cautious to call it now but would not be surprised to see median price rise in the September quarter, through to December and March next year.”

WA SUBURBS WITH THE LARGEST GROWTH IN MEDIAN HOUSE PRICE

SUBURB                               GROWTH*

1              Cottesloe                            18.2%

2              Attadale                               17.7%

3              Salter Point                         17.5%

4              Lower King                          12.7%

5              Wannanup                          12.5%

6              Coogee                                12.0%

7              Yakamia                               11.9%

8              Woodlands                         11.8%

9              Perth                                     11.1%

10           North Beach                       11.1%

* Year to June 2017. Source: REIWA

 

 

Business as usual’ budget fails to reinvigorate property market

NEW

REIWA welcomes the WA Government’s decision not to increase property taxes, but is disappointed in the distinct lack of leadership on display in the 2018-19 State Budget, with no new initiatives included to address housing affordability or reinvigorate the property sector.

REIWA President Hayden Groves said while it was pleasing there were no increases to property taxes, this year’s budget was a mundane budget for the property market.

“The McGowan Government have missed an opportunity to introduce measures that open doors in the property market for those that need it most. We are particularly disappointed the First Home Owner Grant remains unfairly skewed towards new-build properties and that there is no transfer duty concession for seniors to enable them to ‘right size’ into more suitable accommodation,” Mr Groves said.

In a blow for the property market, Treasurer Ben Wyatt MLA confirmed the McGowan Government would be proceeding with their election promise to introduce a new residential property tax for foreign buyers. The surcharge, which comes into effect on 1 January 2019, has increased to seven per cent from the initial four per cent proposed.

Mr Groves said introducing a foreign buyer tax was shortsighted and would have far-ranging consequences for the WA property market, which was just starting to show signs of a recovery.

“This will deter much needed investment in the state, while doing nothing to make housing more affordable for West Australians, in fact rent prices could increase due to a lack of stock as investors look elsewhere,” Mr Groves said.

“This policy measure also puts construction jobs at risk, as off-the-plan developments usually rely on securing a portion of pre-sales from foreign investors before funding can be secured. While this does not affect large-scale apartment development, it contradicts the WA Government’s push for more medium density housing. Deterring foreign investment means these projects may never eventuate, costing WA jobs.

“The short-term financial gain of this surcharge is likely to be counteracted by long-term losses as investors seek an alternative place to invest.”

REIWA will continue to call for leadership and the introduction of initiatives that will make the housing market more accessible for all West Australians.

Agent finder websites need to be transparent about their fees

 

By Hayden Groves – REIWA President      https://reiwa.com.au/

The perception of agent finder websites is that they are a ‘free’ service that connects sellers with agents. Unfortunately, this is not the case. Commercial agent finder websites require the agent to pay a fee and vendors should be made aware of how this impacts them.

While on the surface it appears vendors don’t pay to use the services of an agent finder website, this is not necessarily the case. There is a lack of transparency from these websites, which promote that they are a ‘free’ service, because the consumer ultimately pays for the cost of the service down the track.

The real estate agents who agree to take leads via these sites are charged about 20% of their commission. These agents then seek to increase their service price to cover this cost, resulting in the consumer bearing the brunt of the agent finder service charge.

Last month, after it was revealed the Commonwealth Bank had entered into a partnership with one of these websites, the Real Estate Institute of Australia (REIA) made a submission to The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry about this very issue.

In its submission, REIA said it was disappointing that the Commonwealth Bank had partnered with an agent finder website, considering financial advisers were obligated to be transparently remunerated by the client. They said agent finder websites should be treated the same as financial advisers and called for them to be directly remunerated by the vendor – not the agent.

REIWA is in full support of REIA’s submission. Agent finder websites should be 100% transparent about their fees so the general public is clear on exactly what they are paying and what those costs are for. Vendors should be paying the fee upfront, not disguised as part of the cost of hiring the agent.

We believe connecting vendors with real estate agents is an important service, which is why REIWA launched the 100% free (for both client and agent) www.reiwa.comAgentFinder in 2016 as a genuine alternative to commercial agent finder websites.

Vendors should be connected with the best real estate agent for their requirements – not just those who are willing to pay a fee to secure a lead.

If you’re searching for a real estate agent online, keep in mind that these commercial websites are not the vendor advocate they purport to be and be aware that using their services comes with hidden costs.

Dawdling councils really do cost us money

By Allison Hailes – CEO Urban Development Institute of Australia WA https://udiawa.com.au/

The time is money adage could not be more true than when it comes to property.

Simply put, the cost of unforeseen delays to projects, particularly during approvals, increases the final price paid by the end purchaser.

In fact, Urban Development Institute of Australia research showed a one year delay to an approval raises the same price of a greenfield lot by 13 per cent. That’s why the UDIA wants action to increase local government accountability and transparency in relation to the services they provide as part of the planning and development approvals process.

The UDIA has met with State Government ministers and outlined concerns about assessment and decision making applications. We’ve requested the introduction of mandatory performance reporting on planning matters by local governments and greater transparency and accountability for the funds they collect through Development Contribution Schemes.

Despite the recent legislative amendments to increase local government accountability by extending the Auditor-General’s powers to local governments and providing independent oversight to improve local government standards, the changes didn’t go far enough.

While there are some local governments that perform relatively well, it is too often the case that processing times are blown out, decision-making processes constantly change and fees and charges vary significantly across local governments. This causes additional risk and costs for developers navigating the approvals system. That cost gets passed onto purchasers.

The introduction of a planning performance reporting system, similar to the one in the Eastern States, would enable local governments that are performing well to be recognised and those that are not to be given the support they need to meet benchmarks. It would introduce some accountability for landowner funds collected by local governments under Development Contribution Schemes and voluntary agreements.

The schemes allow local governments to collect a cash contribution toward the cost of new infrastructure from project developers. Our research shows that at least $1.5 billion in contributions is sitting in the metropolitan local government accounts. However there is no way to check on this figure.

And there have been problems managing these schemes. They include continual extension of the time over which contributions are collected, cost increases for new infrastructure despite significant price reductions for civil works elsewhere, and double the funding required for a piece of infrastructure.

The UDIA is keen to see the system perform as efficiently as possible so that unnecessary costs and delays do not cause a knock-on effect to the price of property.

A reporting system will provide evidence and clarity of where there are ongoing problems and these issues can then be addressed.

What condition should the property be in at settlement?

What condition should the property be in at settlement?

by Hayden Groves – REIWA President    https://reiwa.com.au/

One of the most widely misunderstood elements of real estate is what condition a property should be in at settlement or possession.

In short, a property is sold to the buyer ‘as inspected’. This means, for example, that if there was dust on a ceiling fan when you first viewed the property, then the fan can be dusty at settlement. The same goes for a dirty oven, a blown light globe or a squeaky laundry door. If it was dirty, blown or squeaky at inspection before purchase, then so it should be at settlement.

Buyers will typically expect that the property is handed over to them spick and span and thankfully most house-proud sellers leave their homes in an appropriate condition when moving out, however, legally there is no obligation for them to do so.

If you’re buying a home, it’s smart to have a realistic expectation of what to expect at settlement. Unless otherwise specified in the contract, the seller is under no obligation to have the property professionally cleaned for settlement and it is surprising how few buyers ask that such a condition be included.

The seller’s only obligation under the contract (Clause 6.1(b) of the General Conditions) is to “…remove from the property, before possession, all vehicles, rubbish and chattels, other than the property chattels”.

Many modern contracts to purchase include provision for essential plumbing, gas and electrical components to be working at settlement. Hence, if at settlement the toilet cistern leaks, then the seller is legally required to rectify this, as it is specifically outlined in the contract.

It is trickier when, for example, a telephone jack doesn’t work at settlement. It is not strictly an electrical issue, but it is probably reasonable for a buyer to assume that it was functioning at inspection. This is partly because, caveat emptor (buyer beware) is all but gone, according to some legal practitioners. The onus is probably on the seller to disclose (in this case) that the telephone jack didn’t work.

My view is that buyers need to take reasonable steps to ensure the property they have purchased will be presented to them in a condition they are satisfied with. This can be achieved by either specifying this requirement in their contract with the seller to guarantee it and/or being more thorough in inspecting the property in the first instance.

Ask the agent if it’s okay to turn on the taps, flush toilets, flick switches, open and close doors, open the oven, turn on the dishwasher and so on before making an offer to purchase.

 

 

 

The Reserve Bank has kept official interest rates on hold at the record low of 1.5 per cent.

Key points:

  • RBA keeps interest rates on hold for 18th consecutive meeting, the equal longest run since the bank’s independence
  • RBA statement says GDP growth will now be faster than 2.4pc, rather than the 3pc it mentioned earlier
  • Volatility caused by US trade policy and tighter credit globally are mounting concerns for the RBA

It is the 18th consecutive board meeting where the RBA has not budged from its emergency setting.

The non-move equals the previous longest stint without rates changing since the RBA became independent from Federal Treasury, set between January 1995 and July 1996.

The RBA last moved in August 2016 with a 0.25 percentage point cut.

Despite many economists believing the RBA had lost some conviction in its GDP growth forecasts, the decision was widely expected.

Futures markets had priced in a 0 per cent chance of a change.