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Why neighbourhood has never been so important when buying property

neighbourhood buying property

The coronavirus pandemic has forced all Australians to reevaluate how we live our lives.

Offices are shut, lockdowns are in place and people are now working at home more than ever.

Gone are the days where our ‘home’ was simply the place we rest our heads and enjoy some down time between work and our social lives – the coronavirus social distancing has put an end to life as we once knew it.

If social distancing and the Covid-19 environment has taught us anything, it has taught us the importance of the neighbourhood we live in.

If you can leave your home and be in walking distance of, or a short trip to, a great shopping strip, your favourite coffee shop, amenities, the beach, a great park, the recently implemented coronavirus restrictions might seem a little more palatable than if you had none of that on your doorstep.

neighbourhood buying property

Why is neighbourhood so important?

In short, it’s all to do with capital growth, and we all know capital growth is critical for investment success, or just to create more stored wealth in the value of your home.

Sure there is always the opportunity to add value through renovating your property or making a quick buck when buying well.

But these are one off’s and won’t make a long term difference if your property is not in the right locartion because you can’t change its location.

This is key, because we know that 80% of a property’s performance is dependent on the location and its neighbourhood.

In fact, some locations have even outperformed others by 50-100% over the past decade.

And it’s likely that moving forward, thanks to the current environment, people will place a greater emphasis on neighbourhood and inner and middle-ring suburbs where more affluent occupants and tenants will be living.

These ‘livable’ neighbourhoods with close amenities is where capital growth will outperform.

What makes a ‘good’ neighbourhood?

A good neighbourhood means different things to different people, but there are some key factors which help to determine which locations have the potential to grow in value faster in the future.

neighbourhood buying propertyGenerally, a good neighbourhood is determined on the physical location, suburb character and its close proximity to amenities such as a shopping strip, park, coffee shops, education, and even some jobs.

It’s obvious then that in our new ‘Covid’ world, people will want to be in a location where everything they need is in a short 20-minute proximity – whether that is on public transport, bike ride or walk – to their home.

In planning circles this concept is known as the ‘20-minute neighbourhood’.

Many inner suburbs of Australia’s capital cities and parts of their middle suburbs already meet the 20-minute neighbourhood tests, but very few outer suburbs do because there is a lower developmental density, less diversity in its community and less access to public transport.

The key criteria for a ‘good’ neighbourhood

Here is a list of 7 primary neighbourhood factors which have the potential to drive up property prices:

1. Close proximity to public transport

neighbourhood buying propertyNeighbourhoods with properties that are within walking distance to public transport, such as the train, bus, ferry, or light rail, are popular with buyers and therefore are likely to add value over the longer term.

2. Close proximity to schools

 Some buyers will pay a premium to be in the catchment area for particular schools and as such, high demand generally means higher property price points.

3. Accessible amenities

 As we have previously discussed, a neighbourhood with all the local amenities you could want – parks, shops, restaurants, cafes, gyms, the beach, etc. – would fetch a premium price for its local properties.

4. A low crime rate

 It goes without saying that a property in a neighbourhood with a low crime rate will be more valuable than one with a high crime rate.

5. It’s well maintained

neighbourhood buying propertyNeighbourhoods and homes which are well maintained and clean indicate a level of community care that can help add value to properties in the local area.

6. Planned upgrades which are beneficial

 Neighbourhoods with planned upgrades could be beneficial or detrimental to property prices in the area.

For example, improved public transport and any plans to make the neighbourhood more visually attractive (improvement to the appearance of buildings or footpaths for example) could increase property prices.

7. Any historic charm

Historic charm brings a unique character to a neighbourhood that is often in demand by buyers and in the long term buyer demand for this type of area has the potential to translate to higher property prices going forward.

It’s all about the neighbourhood

Neighbourhood has always been a key factor to consider when buying an investment property, and now it’s even more important.

neighbourhood buying propertyNot only do we already know that location does the heavy lifting when it comes to capital growth, with some areas fetching 50-100% greater capital growth than other locations, we’re also in unprecedented times which has forced us to adapt to a new normal.

This is a new normal where restrictions are put in place on our movement, social distancing has been implemented and your home now doubles as your office.

This is shining a spotlight on the neighbourhood we live in and what we have available at our fingertips.

As the world around us evolves and adapts, homeowners and investors must do the same and view properties with a post-pandemic eye.

Looking at the bigger picture remains key to your success as a property investor and now, whether you’re looking for a new home or to add to your investment portfolio, the right neighbourhood is absolutely crucial to success.

-Now is the time to take action and set yourself for the opportunities that will present themselves as the market moves on

 

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The post “Why neighbourhood has never been so important when buying property” by Michael Yardney appeared first on the propertyupdate.com.au Blog

 

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Brisbane

This is how long it takes Brisbane first-home buyers to save for a house

home buyers

Brisbane first-home buyers have bucked a nationwide trend. They are now taking less time to save for a deposit, with closed borders, government grants and a softening of entry-level house prices launching locals onto the property ladder faster than a year ago.

Despite the city’s soaring property market recently pushing median house prices to record heights, new data from Domain’s First-Home Buyer Report, released on Monday, revealed it now takes the average couple four years and two months to save a 20 per cent house deposit – which is four months less than this time last year.

Brisbane was the only capital city to see savings time slashed over the 12-month period, with Sydneysiders forced to tack an extra six months onto their already painfully slow savings haul – which is now seven years and one month for the average couple.

Time to save for a 20% deposit on an entry-price house

Entry price Time to save Annual change, months 5-year change, months
Sydney $770,000 7y 1m 6 11
Melbourne $631,000 6y 1m 0 13
Brisbane $429,000 4y 2m -4 2
Adelaide $405,000 4y 1m 3 4
Perth $395,000 3y 7m 2 -3
Hobart $455,000 4y 11m 6 22
Darwin $440,000 3y 8m 6 -4
Canberra $691,000 6y 9 20

Domain senior research analyst Nicola Powell said the data revealed just how sunny the market remains in the Queensland capital – with grants and wage growth easing the squeeze for first-home buyers alongside COVID, which had worked wonders for savvy savers.

“Brisbane bucks the trend really in terms of what we’re seeing across our other cities, and while it doesn’t have the quickest time to save, it’s seen more favourable conditions over the past year,” Dr Powell said.

“It was the only city to see a decline in time for houses while for units it remained stable … and what we’ve also seen is tax cuts and compounding interest on savings have helped speed up that time.

“I think over the past 12 months, we’ve all saved more, and for first-home buyers, it has supercharged their savings pot … the pandemic has also really unlocked an element of affordability. For those first-home buyers who can work from home, they are able to now seek different locations to reside, which opens the door to affordability.”

Time to save for a 20% deposit on an entry-price unit

City Entry price Time to save Annual change, months 5-year change, months
Sydney $590,000 5y 5m -4 -6
Melbourne $440,000 4y 3m -2 1
Brisbane $340,000 3y 4m 0 -5
Adelaide $278,000 2y 10m 0 0
Perth $275,000 2y 6m 1 -3
Hobart $390,000 4y 3m 2 20
Darwin $248,000 2y 2 -18
Canberra $397,000 3y 5m 0 1

While the Domain report revealed it takes a first-home buyer just one year to save for a house with a five per cent deposit using the federal government’s First Home Loan Deposit Scheme, Dr Powell warned the road to property ownership was still tough.

“It’s still a long journey time to save … and for any single person, that time is double. So, I think there are two sides to affordability and what we have seen is home loan repayments have improved thanks to falling interest rates, but the hurdle is saving for that deposit,” Dr Powell said.

North Brisbane Home Loans CEO and mortgage broker Patrick Cranshaw said over the past year, the swathe of first-home owner grants released in response to COVID had sent first-home buyer numbers soaring – with young couples quick to pounce on low interest rates and money-saving schemes.

“The property market has also softened in the past two weeks, and there hasn’t been as much activity, and it levelled off a bit, so for some first-home buyers – if they are in a couple situation on $70,000 each – they certainly have the capacity to pay that loan down, so it’s just coming up with the equity and the deposit,” Mr Cranshaw said.

Federal government initiatives and the impact on time to save for an entry-priced home

Houses Units
5% deposit FHLDS $60k FHSSS (based on couple) 5% deposit FHLDS $60k FHSSS (based on couple)
Sydney 1y 9m 4y 3m 1y 4m 2y 8m
Melbourne 1y 6m 3y 2m 1y 1y 4m
Brisbane 1y 1y 3m 10m 4m
Adelaide 1y 1y 8m 0m
Perth 10m 10m 7m 0m
Hobart 1y 2m 1y 8m 1y 11m
Darwin 11m 1y 2m 6m 0m
Canberra 1y 6m 3y 5m 10m 10m

“But I 100 per cent think Brisbane is still affordable when you compare the money they earn to the purchase price … that’s why so many people moved to Brisbane. There’s value here.”

Roxanne Paterson of Ray White Bracken Ridge said while the stars were indeed aligning for local first-home buyers, they were facing incredible challenges due to increased interest from interstate and rising house prices.

“What’s frustrating for them in one regard is when buyer’s agents are out in force as well as investors – they are getting thrown into some pretty significant competition,” Ms Paterson said.

“And they can’t just offer an extra $30,000, but they are in competition with clients who have money at their fingertips.”

In Bracken Ridge, a suburb that Ms Paterson said had always been a hotspot for first-home buyers, the sizzling market sent entry-level house prices soaring over the past 12 months, with $500,000 houses now fetching $100,000 more.

“Here we are that last stop before the end of Brisbane City Council, so we do have a lot of first-home buyers coming in … but now they are having to stretch themselves or go further out for a house. That said, I think they are still giving it a red-hot go,” Ms Paterson said.

It was that enticing melting pot of grants and the inability to travel that inspired Sarah Bauer and Luke Bishop to buy a three-bedroom house on a 600-square-metre block in Arana Hills for $654,000 through Ms Paterson just a week ago.

“We spent the majority of 2020 really knuckling down because we wanted to go into this process with no debt … and COVID helped 100 per cent because we had two overseas trips planned for last year. I mean, my Uber Eats bill probably went up, but in terms of not being able to travel and not go places meant we could save much more,” Ms Bauer said.

“Then we started looking seriously in January … and to be honest we got in as it started to get super hectic and the first house that we put an offer on, we actually offered $30,000 over the listing price, but it sold for $60,000 more, so straight away we thought we were so out of our league,” Ms Bauer said.

“So, we took a step back and had to look at what suburbs were taking off and which ones were still affordable because Brisbane is hectic. We were both set on the north side of Brisbane, and we didn’t want to go further than 15 kilometres from the city as we work there … but then as we got knocked back, we had to look further out.

“The third house we put an offer on (in Arana Hills) was listed at $589,000, and we offered $650,000, and then it sold for $800,000 … there were 46 offers on that one, so you’re just competing with ridiculous offers.”

But while the couple, who spent a solid year saving to boost their own personal pot, confessed the constant knocks almost forced them to step back, it was fear of missing out that kept them in the game.

“We wanted to get our foot in the door, especially if this was going to be the lowest it would be in a while and in the end, I think we were quite lucky,” Ms Bauer said.

Across Greater Brisbane, first-home buyers in Springwood-Kingston enjoyed the biggest cut on time spent saving for a house, where it is now taking 14 months less than a year ago to save a 20 per cent deposit. At the other end of the spectrum, couples looking to buy their first house in Brisbane Inner are facing an extra 10 months of savings time, where a 20 per cent deposit on the median house price is now $182,000.

 

Article Source: www.domain.com.au

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Opinion

Stamp duty v land tax: the pros and cons explained

tax

Housing affordability continues to be a hot topic and the often-raised suggestion of replacing stamp duty on the sale of a property with a universal land tax is back on the table again.

The idea has been around for more than a decade after former Treasury secretary Ken Henry claimed that stamp duty not only is a disincentive for people to move, but also gives state governments erratic income – their coffers overflow when the property market is booming but withers away when the market slumps.

The NSW government is dusting off the idea again by commissioning a consultation paper and inviting interested parties to provide their views until July 30.

The proposal envisages that a homebuyer could either opt to pay stamp duty on a property purchase price, or an annual land tax that would be based on a property land value that would then be attached to it forever. In other words, once a purchaser opted for the annual land tax option in lieu of stamp duty, there would be no going back.

In the event of the scheme proving popular, the paper envisages a price threshold based on the value of the property. If that was the case, a buyer of a $5 million property could still be liable for stamp duty on its purchase and could not opt to pay land tax instead.

State governments receive more than $20 billion a year from stamp duty, so any introduction of a new scheme would need to be phased in.

The proposal floats the possibility of the amount of stamp duty forgone being capped at, say, $2 billion a year in the early years, with the cap changing over time as the number of people opting out of stamp duty increases.

Proponents of the scheme claim that the property market would boom because buyers could use the extra money now required for stamp duty to increase their home deposits and qualify for bigger mortgages. However, this begs the question, do we really want to encourage homebuyers to take out even bigger loans? After all, interest rates are at rock bottom and must rise in the future.

If you think mortgage stress is bad now, imagine what a 2 percentage point rise in mortgage interest rates would do.

The biggest problem with a tax based on land values is that, in many states, it is common practice to leave the rate of land tax unindexed, which means that each time a property increases in value, the land tax bill increases, too.

A homeowner who chose the land tax option would most likely be faced with an increasing land tax burden as the years passed. This could be particularly hard on retirees, who could see their home costs increase while their capital decreases.

Another major flaw in the proposal is that it would likely provide a “free kick” for property speculators. It is generally accepted that speculators competing with regular homebuyers has been a major reason for property prices soaring to record highs.

In NSW, a person who buys a property today for $800,000 would pay stamp duty of $31,335, irrespective of whether or not it is their primary residence. This large upfront cost is a major disincentive for speculators who want to buy property now and quickly flip it.

However, speculators may have a field day if they could choose an annual land tax bill instead of stamp duty. If they held the property for only a short time, there may be no land tax at all payable.

There is a further complication with the land tax proposal.

Investors already pay land tax on rental properties and this cost is usually passed on to their tenants.

It would be manifestly unfair if stamp duty – which is a capital cost, not a deduction – was waived on property purchases for investors, while continuing to allow them to claim a tax deduction for the land tax, which had already indirectly been passed on to tenants.

The land tax proposal is merely in the consultation stage. Let’s hope there are further deep discussions of all the pros and cons to avoid any potential property market disasters.

 

Article Source: www.brisbanetimes.com.au

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Opinion

Return of property investors raises questions for regulators

property

It is becoming clearer that the window for large numbers of first home-buyers to scramble into the property market is fast closing, with investors and speculators chasing big capital gains returning.

With the house price boom showing few signs of cooling, this baton-pass should ensure an ongoing and lively debate about whether it is time for regulators to place restrictions on mortgage lending.

Earlier this year, first-home buyers were flooding into the property market in numbers not seen since 2009, attracted by generous taxpayer incentives and record-low interest rates. Sadly, the first-home-buyer party appears to have been short-lived. New lending to this group has fallen for three months in a row, no doubt partly in response to the explosion in prices.

Meanwhile, investors are flooding back into the market, with their share of new lending rising from 23 per cent to 26 per cent. New investor commitments in April were at their highest level since 2017, when we were in another property boom.

Importantly, investors’ share of the market is still well below the sky-high 46 per cent of new lending reached in 2015, and below its long-term average of about 35 per cent. However, the harsh financial realities of this property market suggests that this trend still has a lot further to run.

For one, CoreLogic analyst Tim Lawless says first-home buyers tend to be the most sensitive to rising prices, especially when it comes to scraping together enough cash for a deposit.

Investors, on the other hand, typically have better access to funding because they can borrow against their owner-occupied residence, or other property investments. They also often have higher incomes, and Lawless says they’ll probably become more active in the market chasing capital gains.

So far, banks say there are only early signs that investors’ interest is stirring, and owner-occupiers are still overwhelmingly driving the market. That is one reason regulators have pushed back against imposing credit restrictions so far. But with the Reserve Bank of Australia (RBA) saying it expects to keep official interest rates at just 0.1 per cent until at least 2024, more house price growth looks likely.

If there is a further significant rebound in investor lending accompanied by related property price surges, it could force regulators to think more carefully about introducing housing credit curbs.

Why? The RBA has made it clear that an investor-driven market has distinct risks.

In 2015, the central bank said that when house prices were being fuelled by “speculative demand” from investors chasing big capital gains, it tends to “amplify” the run-up in prices, while potentially raising the risk of bigger property price falls in the future.

To be clear, we are not in a 2015-style investor housing boom today. However, interest rates are much lower and asset prices everywhere are rising, suggesting these risks are as relevant as ever.

Politicians might also find it more challenging to allow the market to continue its red-hot run if investors start playing a bigger role, while first-home buyers dwindle.

So far, the financial regulators have argued they are not responsible for house prices and will only act if the banks erode their lending standards. That does not appear to be happening, suggesting credit curbs are not imminent.

Even so, the growing signs of investors coming back to the market, as first home buyers head for the exits, is an important shift the authorities will be watching closely.

 

Article Source: www.brisbanetimes.com.au

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