Market Update – March 2015

The market continues to be robust with pressure on prices as listing stock levels continue to decline. Purchaser enquiry remains strong for properties priced to market expectations. Generally the market has now exceeded price levels realised in the top of the market in 2007.

Although there was a market resurgence in 2009 after the GFC the price levels realised did not reach the peak of 2007. Given that the market is cyclical, in a 7-10 year cycle, we would expect the market would level out and slow in 2015/2016.

There has been a diversity of property being sold, for example, 3 to 4 bedroom houses from $400,000 to $425,000 range with more up market homes selling at around $700,000. Duplexes and townhouses are selling in the range of $300,000 to $400,000 and 3 bedroom apartments, with river or ocean views are selling in the high $700,000’s. Similarly, units and villas ae selling in the range of $325,000.

The rental market continues to remain strong with tenant open homes seeing, in some cases, up to 20 prospective tenants attending. Houses, rather than apartments, seem to be in high demand at the moment.. We are also seeing increases in rents across our managed properties to keep up with market prices.

Property vs Shares:  Which is the Better Investment?

You may have heard the term ‘as safe as houses’ when it comes to investing – however, as the appealing Australian lifestyle has drawn more investment to our housing market, people view dwellings more as portfolio assets than buildings to live in. As a result, Australian housing markets have seen higher volatility and lower rental returns. Between June 2005 and June 2014 alone, the average house in Sydney provided returns between -1.00% and 20%.

Higher risk surrounding Australian houses and units made us wonder: Are houses and units still the safest investment?

This report compares the amount of risk and the amount of money to be made on houses, units and shares. The report explains three surprising pieces of information:
1. Houses and Units Do Not Always Provide the Best Return
Shares tend to provide higher returns, at less risk, within a shorter period of time. Houses and units provide higher return in the long run. The report reveals the amount of time needed to hold houses and units in order for them to outperform the ALLORDS.

2. The Rules are Different for Houses and Shares
People are able to borrow much more against property (up to 90%) than against shares (up to 50%). This is because shares are perceived as more risky. However, as dwellings become more volatile, these levels of borrowing may be subject to review. The report reveals the effect that specific levels of borrowing have on risk and return for houses, units and shares.

3. The Rules of the Game are Changing
Excessive investment in Australian dwellings have spurred policy makers to review tax benefits associated with housing, in order to relieve pressure on the market. Assets in the full report are considered under possible changes to legislation around the Capital Gains Tax and Negative Gearing. The report shows the full impact of changes to policy.

If you would like a copy of the full report please call or email on our team. Learn how to make the most of your portfolio with this report.

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