NSW Landlords are under threat from new changes that were brought to their attention in late 2009. At this stage these changes to the Residential Tenancy Act are just proposed and are yet to be introduced into the NSW Parliment. This is scheduled to occur in 2010 so if NSW landlords don’t like what they are about to read, then it is important that they make this know to their local members as well as the Real Estate Institute of NSW.

Some of the most significant changes that have been raised in the Residential Tenancies Bill 2009 include:

Fixed term tenancies – end of certainty of tenure for landlords and tenants. Section 98 of the Bill will enable tenants to break a lease, during the fixed term, without any special grounds, by giving 14 days notice to the landlord. This break clause will be subject only to the payment of a ‘break fee’, which will not exceed 6 weeks rent. Details of the maximum amount of ‘break fees’ for long-term leases (over 3 years) have not been released. What is the point of a landlord entering into a fixed term tenancy that will be unable to be enforced?

Periodic tenancies – ‘no grounds’ termination notices. Section 85 of the Bill increases the notice period required to be given by landlords to tenants (who are out of fixed term) from 60 to 90 days. While the section provides that the CTTT must now make a termination order if the notice has been validly drawn and served, the Bill still gives the CTTT jurisdiction to determine when vacant possession is to occur, if a tenant challenges the landlord’s termination notice. The Bill does not set a maximum time limit between the date the CTTT makes a termination order and the date it nominates that vacant possession is to be given up by the tenant. Once served with a 90-day termination notice by the landlord, a tenant can give vacant possession at any time. Section 110(2) of the Bill provides that a tenant will only be liable to pay rent until the date they give vacant possession.

Frustration of repossessions by tenants. Section 89(2) of the Bill provides a mechanism whereby tenants who are already (or habitually) in arrears, can further frustrate a landlord’s attempt to regain possession of their property. The effect of the section is that orders for possession and warrants for possession issued by the CTTT, will cease to have effect if the tenant pays their arrears at any time prior to vacant possession being given, or the warrant enforced. The tenant will not have to apply to the CTTT seeking the suspension of an order for possession or warrant. The section also makes no provision for the recoupment by the landlord of the costs incurred in obtaining the order for possession or warrant.

Cosmetic changes. Section 66 of the Bill provides that landlords must not unreasonably withhold consent “to a fixture, or to an alteration, addition or renovation that is of a minor or cosmetic nature”. While the section provides that the costs of installation are to be met by the tenant, no definition of what “a minor or cosmetic nature” is contained in the Bill. This section is backed by another provision (section 68), that a tenant may apply to the CTTT for an order that the tenant may install a fixture or make a renovation, alteration or addition to the residential premises without the consent of the landlord. While the Bill contains provisions concerning the removal, rectification and cost of repairs for such matters at the end of a tenancy, the potential for default or significant disputes concerning this area alone is enormous. Disputes will occur both at the beginning and the end of tenancies and landlords risk being considerably out of pocket as a result of these changes.

Partial transfers of tenancies or sub-letting. A landlord’s right to decide who inhabits a property will be able to be challenged. Section 75(5) of the Bill will enable a tenant to apply to the CTTT to review a landlord’s refusal of consent to a partial transfer or sub-letting to an additional tenant, or tenants, that the landlord would not otherwise accept as a tenant. The CTTT will be able to permit the partial transfer or sub-letting if the landlord’s failure to consent was unreasonable (the word unreasonable, is not defined). The scope for dispute here is obvious.

Rent control. Section 44 of the Bill does not, unfortunately, clarify some of the past uncertainty (and case law) relating to what matters the CTTT must, or may, take into account when hearing an application by a tenant that rent, or a rent increase, is excessive. For example, there is no compulsion in the Bill for the CTTT to take the market rent of the premises into consideration when making a determination.

I for one am against giving tenants this much control of your property. Make the fight today to ensure that these changes and others don’t impact on your investment properties in NSW.

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The folloing is a media release from the Housing Industry Association:

Housing Shortage Tracking to 500,000 by 2020

The Housing Industry Association, Australia’s largest building industry organisation, today released its inaugural Housing to 2020 report. The report finds that if current building trends persist, then Australia’s cumulated housing shortage would reach 466,000 dwellings by 2020.

HIA Senior Economist, Mr Ben Phillips said that Housing to 2020, which focuses on future housing demand and the number of dwellings required in meeting this demand, highlights a current housing shortage that already numbers over 109,000 dwellings.

“The reality in many regions and cities in Australia is that affordable, well located land is not available or abundant. Furthermore, planning restrictions, higher taxation on new housing relative to existing dwellings, labour shortages, and onerous regulation biased toward new housing all add to the problem.

“If we don’t get a comprehensive supply response to the accumulating housing shortage then the lack of affordable and appropriately located rental properties will only worsen, while pressures on existing home prices will continue at an undesirable rate, placing avoidable upward pressure on interest rates,” Ben Phillips said.

“A lack of skilled labour is an emerging threat to the much needed housing supply response. A second round resources boom this decade will draw heavily on an already tight labour market. The $90 billion worth of resource projects on the books is expected to demand an additional 136,000 direct and indirect jobs. This labour will need to be housed, adding additional pressure to the supply of labour and materials in non-resource regions.”

Housing to 2020 provides the first estimates made of Australia’s housing shortage at a Local Government Area (LGA) level.

“The report finds that shortages exist in just under half (295) of the 669 LGA’s across Australia. The majority of the shortages can be found in and around metropolitan Sydney and Brisbane.

“It was also found that many of the LGA’s with the largest housing shortage are also the same regions with the highest level of demand. Again, it’s the growth areas in the greater Sydney area and in South East Queensland where demand will be amongst the highest in the nation.

“The growth areas in and around Melbourne also show high levels of demand.

“Current construction levels in most high demand areas are simply not sufficient to meet the needs of a fast growing population,” said Ben Phillips.

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Extracts from a recent UBS Research report: 26 February 2010

We have been arguing since 2008 that the combination of a long-standing structural under-supply of housing, coupled with a cyclical improvement in affordability – via falling prices in 2008/early 2009, government stimulus & lower rates in 08/09 – would see activity rise strongly in 2H09 and 2010. Indeed, the very strong 10%+ rise of house prices in 2009 – and the 59% leap in building approvals since January – is symptomatic of rising demand.

For house prices, after correctly forecasting the 5% peak-to-trough decline through Q109, our forecast for a 3% rise through 2009 was well short of the actual 11% gain. Looking ahead, while we continue to expect a moderation beyond 2009, we take this opportunity to formalise our forecast for 2010 and 2011 price growth at around 6% (broadly in line with the economy’s trend income growth), up from 3% previously. This also partly reflects the likelihood that bottom-end prices should be softer given the expiry of the FHOB.
We have also updated our forecasts of underlying demand from 180k-185k to 200k over the next few years – incorporating the record pace of population growth over the year to Q209, as well as the Government’s upgrade to population forecasts contained in IGR3. This in turn, highlights the chronic undersupply of physical housing in Australia.

Our estimate of the ‘cumulative gap’ of under-building is currently a shortfall of around 75k, doubling to a record 150k by end-2011. As an aside, these estimates are more conservative than the National Housing Supply Council’s (medium scenario) estimate of the cumulative gap being 85k as at Q208, rising to 155k in 2011 (and then continuing to deteriorate to 203k in 2013 and 316k in 2018).

RBA Gov Stevens also recently noted the ‘under-hang’ of housing construction. One obvious solution is the creation of higher-density housing, both in terms of urban density (ie more units compared to houses), and more persons per household.

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Although rental yields are expected to fall in 2010, this is actually positive for property investors as growth of property prices are expected to exceed that of the rental market.

We need to look at the whole picture to understand what is currently happening in the market.

Many First Home Buyers were sucked into the market last year due to the Government incentives. Those that were on the edge of buying would have bought and those thinking about it would have rushed to take advantage of the grants made available. This has been the case and supported by the reported record number of first home buyers in the market through 2009. Towards the end of 2009 we saw the rate of First Home buyer lending fall as they moved out of the market as grants started to disappear and interest rates started to rise.

Rising interest rates are another major factor that is going to keep first home buyers out the market now. With affordability becoming an issue for home buyers, property investors will take their place as they are able to take advantage of negative gearing tax benefits.

Property Investors are all focused on property that is high in demand. This includes the 1 and 2 bedroom new apartments, townhouses and house and land packages. They are all affordable and demand for rental of these property types is going to grow as First home buyers stay clear of buying. It is also important to remember the high migration levels to Australia and those from interstate are putting pressure on the states property markets.

The property market is expected to move up substantially this year, possible even more so that last year which means that although property prices will grow, and rental prices will increases, the growth or property prices will exceed the growth in rentals thus reducing the investors yield.

How to ensure you get the best of both worlds… Buy sooner and hold for longer.

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Australian Property Outlook for 2010

I hope everyone had a fantastic break over the festive season. We at Find Investment Property wish everyone all the best for 2010.

In the first week of the year, the Australian Financial Review had a summary of each of the property markets across Australia. Below is a brief summary from each of the stories that appeared in the paper from the 4th January through to the 8th January 2010. The articles cover the Melbourne Property Market, Sydney Property Market, Queensland Property Market, Western Australian Property Market, Tasmanian and the Adelaide Property Markets.

In each of these articles, the journalist has interviewed a few people in the relevant states property industry that may have some bias towards each state, thus all pushing a positive sentiment for their respective property markets.

Having said this I do think they all have good arguments for why buying in each area should see capital growth occur in 2010.

Melbourne Property Outlook 2010

Comments below are from Cameron Anderson, a Director at Red C and Canopi Homes. He previously was in a senior management position at Stockland.

• 2009 property market was fuelled by federal government grants and Melbourne’s appetite for new homes (Due to Stamp Duty Savings)
• Cautious outlook for 2010 – median growth expected to be 3% before the market picks up steam in 2011.
• RP Data stated Melbourne’s median price grew 15% for the first 9 months of the year
• Little supply of apartments in the pipeline at the moment
• Rental pressure in Melbourne and it’s growing because the banks have been reluctant to lend money to high-rise developers
• Big drivers for property prices include supply constraints and population growth

Other comments on the Melbourne property market from Angie Zigomanis at BIS Shrapnel and Tim Lawless at RP Data Research

• Expected to have solid growth through the year as upgraders and investors take over from first home buyers
• Higher interest rates will slow growth down from the highs of 2009
• Late recovery in 2009 may show that first home buyers are less sensitive to rising interest rates
• New development in Melbourne is falling short of Melbourne’s migrant-driven population growth
• 2009 price growth was helped by cashed up Chinese buyers which is expected to continue into 2010

Sydney Property Outlook 2010

Comments below are from Brian Haratsis from MacroPlan Australia and Rob Ellis from Property Insights

• Population boom to lift prices
• People that can afford to buy now will stand to benefit the most
• Sydney expected to see the fastest population growth in 15 years
• Climbing prices in South-East Queensland have slowed migration from NSW to QLD
• Same levels of international migration plus high birth rate levels
• Employment generated population growth – young brains from around the world will come to work in Sydney-based financial services, IT and Business services
• Apartment market is being starved of stock owing to tight lending practices that restrict developers by loan to value ratios plus high levels of pre-sales
• Rents poised to soar even higher due to the shortage of rental accommodation, especially with rising interest rates deterring some people from buying
• Prestige property to remain flat for the next 24 months before a potential boom in the high end market
  10% price growth for 2010 wouldn’t be a surprise

Comments below are from Louis Christopher of SQM Research and Jason Anderson from BIS Shrapnel

• 6 – 8% price growth expected in the next 12 months
• Nothing to indicate buying trend will stop or slow
• Price growth in 2009 was 11.6% but affordability was its lowest level since 2002 because interest rates were so low
• Prestige prices (those over $2m) to rise by 12 to 15% in 2010
• Sydney will face an ‘extreme’ shortage of rental properties, worse than any other state
• Rental demand would boost demand for properties in outer suburbs which could result in price growth of 10%

Perth Property Outlook 2010

Comments below are from Nigel Satterley from Satterley Property Group, Western Australia’s largest private residential property developer.

• Perth property prices poised for a decade of strong growth
• 6% expected in 2010 with increases of 7 – 10% over the next 7 to 8 years
• Perth property prices fell by as much as 25% during the downturn
• Population growth and growing confidence affecting the market
• Demand is increasing for premium property
• Medium house price in Perth in September 09 was $462,000
• Prior to 2008, Perth’s property prices doubled in 4 years as demand outstripped supply
• Bank funding for property developments will remain constrained

Adelaide Property Outlook 2010

Comments below are from Michael Brock, Managing Director of Brock Real Estate and president of Real Estate Institute of South Australia.

• Enormous untapped potential in the real estate market
• Adelaide soon to assert itself as one of the most attractive investment destinations in the country
• 2009 saw house prices jump 5% and growth is predicted to double in 2010
• Adelaide’s median house price in September 09 was $421,765
• Property investors now taking the place of first home buyers
• Population Growth expected from skilled migrants and those serving the defence and mining industries
• Adelaide vacancy rate is 1.2% while North Adelaide is only 0.2%
• Many new apartment projects on hold due to finance obligations which can’t be met by Developers

Tasmania Property Outlook 2010

Comments below are from Tim Lawless, Research Director at RP Data

• Could perform well in 2010 due to lifestyle buyers entering the market
• Houses in Hobart are $140,000 cheaper than the national capital city average with an average price of $330,000
• Units average $270,000, $120,000 cheaper than the capital city average
• Tasmania does not have strong population growth or a large economic base
• Rental returns in Tasmania are above 5% with vacancy rates below 2%
• Population growth is just over 1% driven by migrants, retirees and younger families seeking affordable housing

Queensland Property Outlook 2010

Comments below are from Wayne Rex, President of The Property Council in Queensland

• Brisbane property prices increased 6.9% in the first 11 months of 2009
• South East Queensland has seen a stabilisation of prices and turnover
• Building Approval levels have dropped to low levels not seen since the 1980’s
• Many house and land packages still available in South East Queensland for under $425,000
• Release rate of new stock and lack of competition is affecting prices
• Queensland property market will be steady for the first 6 months of the year as people will still remain cautious
• Funding still difficult to attain along with substantial pre-sales

Other comments from Bill Morris, Rod Cornish (Macquarie Capital Advisors) and Lachlan Walker (Colliers International)

• Still not enough homes being built in Queensland
• South East Queensland saw a population increase of 75,000 in 2008-09 with a need for 30,000 homes, yet only 17,000 were built
• Interstate migration has dropped in Queensland (Victoria now leading the way), there is still a high number of people coming from overseas
• Developers still finding it difficult to attain finance
• Developers can’t buy land at the right price meaning they can produce a home at affordable levels (under $500,000)
• QLD suffering from a shortage but Sydney supply shortage is more severe

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Sydney Home Buyer Show (Pre-Show Guide)

Don’t miss the largest event in Australia dedicated to educating home buyers & property investors of all levels.

Buying a home or investment property is one of most important financial transactions you will ever make.
So if you’re looking to buy property but keen to make the right decisions and avoid costly mistakes – then you simply can’t afford to miss the Sydney Home Buyer Show being held at the Sydney Exhibition Centre from Saturday 31 October to Sunday 1 November.

It’s the smart way to buy property and the largest event in Australia dedicated to helping people finance, find and buy their next home or investment property. We’ll help you get on the right path to the right property with over 30 free seminars and workshops on offer each day – delivered only by impartial experts from government and industry associations that you can trust including free seminars from John Symond, Aussie; Mark Bouris, Channel 9’s The Apprentice and Effie Zahos, Channel 9’s Money for Jam.

A major exhibition will showcase over 120 leading companies with everything the home buyer or investor needs under one roof, including new and established homes, apartments, townhouses, units, builders, house & land packages, holiday houses, land estates, home loans, real estate agents, property investment advice companies and much more.

Heaps of New Products and Show Specials will also be on offer plus there’s dedicated Zones for Apartment Buyers and Property Investors.

For further information including the comprehensive educational seminar program and full exhibitor list visit: http://www.homebuyershow.com.au/home/sydney

As part of a special promotion we are pleased to offer all our Blog Readers, family and friends FREE TICKETS to the Sydney Home Buyer Show which are normally $15. Simply visit the website www.homebuyershow.com.au and quote the special promotional code FINDIP when purchasing your tickets.

Visitors to can also attend the Trading & Investing Seminars & Expo next for free – tickets are normally $15. For full details visit the Trading & Investing Seminars & Expo website: www.tradingandinvestingexpo.com.au

Event details:
Sydney Convention & Exhibition Centre
Saturday 31 October to Sunday 1 November 2009
Opening Hours: 10am to 5pm daily

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With a recent review of surveys and media articles in the press over the last 2 months, it seems that everyone agrees on one thing at the moment… Property investors are starting to come out of hiding.

So the first question we have to ask is what scared them away, especially with interest rates so low and rents continuing to increase. The answer is the Government. How? …The introduction of the Boosted First Home Buyers Grants. These boosted grants have caused a flurry of home and apartment purchases by first time property owners. Many have been renting and with the opportunity to switch to ownership without a large difference in monthly outlay, due to interest rates currently being so low, the step from tenant to home owner has been a fairly simple one…especially when the Government has been so generous with their First Home Buyer handouts. These boosted grants have caused too much competition in the current market and property investors are waiting until fewer home buyers are competing with them.

The boosted grants were meant to have ended on the 30 June 2009, however the Government took it upon themself to extend it to the end of December 2009, with a reduction in the increase from the end of September 2009. The slowdown in home buyers is expected and the increase in property investors will most likely occur.

Mortgage Choice recently ran a survey that found 3 out of 4 Australians that are planning to buy an investment property in the next 2 years were waiting for the FHOB to expire. Mortgage Choice claims that many of their clients that are looking at purchasing an investment property now are doing their homework and determining how much they can borrow, so when 2010 arrives, they will be ready to act.

Other results from the survey included:

• 37% of property investors rated their level of confidence in their states housing market as “high”, 57% rated it “moderate”, 6% low and 1% very low. Queensland respondents were most confident about their state’s housing market, followed closely by Victoria.
• 75% of respondents saw property investment as a better than investing in the share market
• 49% were looking to own two to three properties
• 47% said they were intending to keep it for 10 years or longer while 41% were planning on five to ten years

When purchasing their investment property, the features respondents considered most important in order of preference were:

• price;
• locality – convenience to amenities and transport;
• number and/or size of rooms;
• locality – prestige;
• features – such as driveway access, garage, swimming pool, backyard, fireplace and so on;
• aesthetic appeal;
• age of the property; and
• green/environmental aspects or initiatives.

There are a lot of positive factors at investors’ fingertips – historically low interest rates alongside historically low rental vacancy rates, greater demand than supply, a number of extensive infrastructure programs around the country, increasing rents, healthy migration levels and relatively stable housing prices… so I tend to agree with the outcome of the survey… it will be interesting to see what happens over the next 6-12 months.

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