Real Estate Outlook for May 2018

The Federal Government is moving ahead with monetary tightening. Several risks are rising, in our view. First, the risk of an escalation in trade tensions, with the investigation into Chinese intellectual property practices. Second, risks in the Middle East are rising again. Third, rising tensions with European countries could hinder an already-difficult reform process. In addition, there is a flattening in the US Treasury yields. Currently, we do not think that these developments have a major significance for the real estate markets. However, if there is a return to a situation of rising risk in the US dollar, this upset could cause prices to become volatile again.

Although Treasury yields have flattened again, they are close to the recent lows. At this point, we think there is no major cause for concern yet. In the US, the downward revision of the first quarter 2018 is partly offset by some upward revision for fourth quarter 2017, and employment remained strong.. Overall, growth in the first quarter still appears to be at a 3% pace, and is expected to pick up later in the year, because of the effects of the US fiscal stimulus.

Because of robust growth and subdued inflation, we believe that this has supported valuations of the industry over the last few years. Keep in mind, there are questions during the period of moderate financial market volatility. The most recent data suggest that the Pollyanna effect may persist for a little longer. Therefore, we are staying with our belief of economic growth. However, it is still too early to jump to a conclusion as to the end of the current upswing, despite ongoing trade tensions.

The Los Angeles Times recently reported that institutional investors bought more single-family rental homes in 2017 than in previous years, the first increase since 2013, according to data compiled by Amherst Holdings.

Wall Street firms such as Blackstone Group and Tom Barrack’s Colony Capital Inc. rushed into the single-family rental business when U.S. housing markets were reeling from the foreclosure crisis and homes were available and cheap. The feeding frenzy was short-lived. By 2014, big landlords were already paring back their purchases as foreclosures dried up and they tackled the challenge of managing widespread homes. Now they’re buying again, at a time when single-family landlords are raising rents faster than apartment owners. While multifamily landlords face pricing pressure from new supply, very few single-family homes are built specifically for leasing.

Demand for rental houses “feels like it’s insatiable,” Gary Berman, chief executive of Tricon Capital Group Inc., said in an interview. Tricon, the third-largest publicly traded owner of U.S. rental houses behind Invitation Homes Inc. and American Homes 4 Rent, bought about 850 homes last year, said Amherst, which analyzed data from CoreLogic Inc. The biggest purchaser was Cerberus Capital Management, with an estimated 5,100 houses. Amherst itself bought almost 4,900 homes through its Main Street Renewal subsidiary.

There’s another factor driving Wall Street’s renewed acquisitiveness. Now with their businesses well-established, the large landlords are having an easier time financing purchases, said Greg Rand, CEO of OwnAmerica, an online platform for buying and selling rental houses.

Rental properties should remain well ahead of other major property types because they are generally more stable. Three important factors account for this stability:

1. They are less dependent on business cycles for occupancy than any other types of real estate investments. It does not matter if interest rates and home prices are high or low, rental properties are generally more affordable.

2. Rental properties have shorter leases; thereby offering greater protection from inflation than the long-term leases associated with other properties. That is, rents can be negotiated more frequently.

3. The pool of tenants is much greater for rental properties than other types of properties. This ensures a more consistent occupancy than industrial and commercial properties, which usually have only a few tenants from which to choose.

Decline in Affordable Housing Supply Confirmed

Affordable homes are hard to come by these days particularly in Melbourne and Sydney. This has been confirmed by the latest Mapping the Market Report of CoreLogic that looked into the shift on housing costs in capital cities over the past five years.

The research found that over the years, the median house prices in Melbourne kept rising every quarter for five years. In the September quarter, the median house price went up 1.3 percent. This figure is considered the lowest in a period of three years.

In Melbourne five years ago, 27.5 percent of suburbs in the area had a median house price below $400,000. For units, 51.7 percent had the same price range.

In June 2012, 9.5 percent of Melbourne suburbs had a median value in excess of $1 million. Five years after, that figure went up to 32.6 percent of suburbs. On the other hand, 24.3 percent of Melbourne suburbs had a median house value below $400,000 in June 2012. By June 2017, the figure was down to 2.7 percent.

The latest data up to September 2017, however, showed that only 2.3 percent of suburbs had a median house value below $400,000 and 21.2 percent for units. As of October 2017, the median dwelling values in Melbourne is $710,420.

Median prices for residential properties provide a perspective on what a typical property is either selling for or valued at. In Australia, the median home values across capital cities is $650,930 as of October 2017.

Melbourne’s median house price rose by 0.5 percent in October and 1.9 percent during the quarter. The growth, however, is at its slowest quarterly pace since mid-2016.

On the other hand, the QBE’s Australian Housing Outlook 2017-2020 report noted that the median price in Melbourne will reach $940,000 by the year 2020. The house price growth is expected at 10.2 percent during that period. Median prices for units, however, are tipped to drop by 4.8 percent to $535,000. QBE expects housing affordability in Melbourne will improve by June 2020.

The rise in house prices is attributed to the low housing supply and high population growth caused by an increase in interstate and overseas migration. The minimal growth in household income, however, has made it difficult for many people who don’t own a home yet to save a large amount for their deposit.

Top Things Buyers Look For In A Property

Homebuyers differ in the things they look for when buying a property. Some families prefer flat homes with a backyard while some prefer a two-level property. There are young couples who like to live near the beach with views of the water while the others opt for an apartment near the city center.

The latest data from shows the top five things buyers look for when searching for a property. These are based on the top search terms on the site this 2017. On top of the list are pools, granny flat, waterfront, views and beach.

Swimming pools have always been an attraction to many property buyers. They provide a space for rest and relaxation particularly on hot summer days. Real estate experts have also confirmed that the presence of a pool increases a property’s value and gives a great return on investment when sold.

Swimming pools are in demand in Australia. Homeowners in areas with warm climate such as Perth prefer to have pools in their homes. Many Australians also like resort-style outdoor spaces hence, the demand for pools.

Granny Flats
The granny flat is also in great demand today owing to its versatility. It should be noted that this residential property is not restricted to just the grandmas and grandpas as it is also a top choice of parents whose older children still live with them.

Financial and construction specialists in Australia have confirmed that many homeowners are converting their backyards into granny flats for additional income and to avail of tax deductions. Empty nesters take advantage of these flats and rent them out to earn extra income. But apart from the rental income option, a well-built granny flat can add value to the overall residential property. Its cost is added to the property’s price since it cannot be put on a separate ownership title and therefore, cannot be sold separately.

Waterfront, Views, Beaches
Properties close to the beach are also on top of the most-searched list. Fantastic nature views particularly those of the ocean and a property in a waterfront location always provide a great feeling of comfort and relaxation. Additionally, it’s easy to hit the beach whenever you feel like taking a dip in sea water on a hot summer day or any other day you feel like taking a stroll on the sand.

These five features add financial and emotional value to any home, according to Hockingstuart senior sales consultant David Sullivan. They are guaranteed to improve the lifestyle of homeowners and give them significant profits when they decide to sell the home.