Thursday, 27 December 2012

US median single dwelling prices/gold



Interesting chart of the day (from www.chartoftheday.com) showing US median single dwelling house prices as a ratio of an ounce of gold (also in US dollars). It takes only 105 ounces to buy the median dwelling today compared to 601ounces at the peak in 2001. The chart is highlighting a turn following a dramatic 7 year down cycle. Are US houses undervalued or gold overvalued? www.chartoftheday.com

Tuesday, 18 December 2012

The ultimate cynic: Lucy Macken published a lovely tongue in cheek article in Monday's  (17/12) Sydney Morning Herald describing the process of selling her house at Christmas time as akin to a military campaign where all normal rules of family existence are suspended.  She also describes the process of appointing an agent (buying a listing) and the inevitable conditioning of vendors to meet the market, follow the link to read it while it's available: http://smh.domain.com.au/mission-accomplished-on-the-home-front-20121217-2bj2l.html

Wednesday, 5 December 2012



Going, going, gone… 
(Originally published in Pittwater Life Magazine December 2012)

In physics the notion of tension is defined as a pulling force exerted on one object by another. This month we look at the issue of tension as it relates to the local real estate market, particularly with respect to the process of selling a property by auction.

What motivated me to delve into this topic was a recent episode of Channel Nine’s ‘Hot Property’ series which featured an older style property on the Mornington Peninsula in Victoria. The property was part of a deceased estate and advertised for auction with a reserve of $290,000.

During the process of filming the open houses, the film crew captured a potential buyer and her partner, they both described the property as an ideal renovator – it had an elevated position in proximity to the water. The buyer’s partner described getting the house at the reserve price as the equivalent to winning (Tatts) Lotto. When pressed as to what they thought the property was worth they said at least $320,000.

Fast forward to auction day and there are three active bidders including the ones mentioned above out of crowd of about 50 people assembled. After slowing the bidding, the property stalled at $290,000, the bid is now with the buyers from the open house. The auctioneer declares the property on the market thinking this will spur on the other bidders but there is silence followed by going once, twice, three times, sold for $290,000….to the people who thought the property was worth $320,000. This was followed by a drama shot of the vendors looking pretty disappointed. All in all it was a neat case study of one of the main weakness of the auction process and may have been avoided.

The evening current affairs programs are rife with real estate based scams from over quoting to underquoting to so called card bombing and even fake photos of properties listed for sale. In mid-November NSW Fair Trading agents swooped on 20 inner west auctions in search of process breaches. The auction issue I refer to above is by no means a scam but actually a fundamental problem with the auction process itself - the successful bidder on your property only needs to be one bid ahead of the under bidder. You may never discover what the successful buyer was prepared to pay, only that they paid more than the next person bidding.

There has been an interesting trend in our area with agents now seemingly quick to recommend auction as the primary means of selling a property. The usual reasons cited are the benefits of maximum tension exerted on buyers and the defined time period to sell. What’s not often spoken about is the commensurate level of tension that is also exerted on vendors, the fundamental limitations of the auction process as described in the example above and the cost which in itself can be breathtaking with an extensive advertising campaign.

For whatever reasons, the Northern Beaches property market has resisted the auction process as a mainstream way of marketing property. Auction sales over the years have tended to be reserved for those quirky properties that don’t have direct comparable valuations or high end real estate where valuation can be largely made up of intangibles – views or position for example. Other areas in Sydney such as the inner city or inner west can tend to be dominated by auction sales, for many reasons again but in a nutshell it’s the way they do business over there. This trend can be evidenced by the reported clearance rates which according to the Sydney Morning Herald Domain Section fell as low as 29% for the Northern beaches in mid-November while other markets in the inner City and inner West experienced clearances around 50 - 60%.
So why list a property via auction with perhaps a one in three chance of selling?

To be effective an auction sale in theory only requires a single buyer and a vendor prepared to accept the highest bid on the day. Bids made at auction are in effect an expression of interest in the property and to have a truly delighted vendor usually means multiple bidders on the day, some of whom have probably formed an emotional attachment to the property. In the current subdued market, however, greater focus needs to be placed on the pre and post auction phase. This simply means that strategies need to be identified and agreed at the start of the campaign to manage the whole process rather than simply focus on the razzmatazz of the day itself, strategies that range from planning for the post auction direct negotiation with under bidders to the handling of pre-auction offers or even running a sealed bid process before the auction if buyers are present but nervous about bidding. Contrary to the clearance stats many homes do in fact sell in the pre or post period and these may not be accurately reflected in the published statistics.

Brian Hrnjak B Bus CPA (FPS) LREA

Brian Hrnjak is a Director of GHR Accounting Group Pty Ltd, Certified Practising Accountants, Authorised Representative of Premium Wealth Management Ltd, ABN: 11 091 418 861 Australian Financial Services Licence Number 237498 and licensee in charge of AltRE real estate. Office: Suite 12, Ground Floor, 20 Bungan Street Mona Vale NSW 2103, Telephone: 02 9979-4300, Web: www.altre.com.au Email: brian@altre.com.au

These comments are of a general nature only and are not intended as a substitute for professional advice. This article is not an offer or recommendation of any securities or other financial products offered by any company or person.brian@altre.com.au

Sunday, 2 December 2012

A very neat article from Ken Raiss published on the property observer website discussing key aspects of gearing property via self managed superannuation, for detailed information about combining self managed superannuation and direct property contact us at www.ghr.com.au. Note: this is general advice only and doesn't take into account specific circumstances. 

Four key steps to maximising your property investment through your SMSF

By Ken Raiss
Published: www.propertyobserver.com.au
Friday, 30 November 2012

With the ability to negatively gear property in superannuation while still at work against your personal tax, more people are looking at this strategy to improve their lifestyle in retirement. This ability to buy property, which will be tax free in your retirement, can greatly boost your future income. However, many people take shortcuts that reduce the upside of this strategy and unfortunately, in some cases, unintended costs are triggered. To maximise the strategy, four key steps are necessary.

1. Talk to your specialist SMSF accountant or financial planner to ensure the property you are looking at is allowable. In summary, borrowings can be used to purchase, repair, and fund interest expenses. Cosmetic renovations (not an improvement) are permitted with borrowings, and while you can improve a property by adding floor space, granny flat, etc, this must be done using SMSF cash. Off-the-plan purchases are allowable, but not the purchase of land and the subsequent construction of the building. During this talk you can discuss the rollover from other super funds and any insurances etc., you may need.

2. Get pre-approved finance. In many instances the banks will require a financial planner to sign off on your SMSF strategy, but this is normally a relatively simple thing. You may need to top up your super if you do not have sufficient deposit etc., but you can lend money to your SMSF from say cash or equity from outside super. As this is not a super contribution, there is no limit on the amount, and it can be repaid prior to retirement.

3. After steps one and two are complete you can then put in place the paperwork. Caution is needed, as not all suppliers of the required documents are equally skilled. If you are lending money to your SMSF then you need these documents, and it is also advisable to complete additional documents as in many states a future second stamp duty on the property may be payable if all required documents are not completed.

4. Now the fun stuff: go out and secure the property.

The above may look intimidating, but it is just administration that your specialty advisor will help you with and for most people, it’s no more daunting than the process of purchasing the property; it’s simply just some “extra paperwork”. The ability to leverage property in super can be very beneficial, but ensure you follow these relatively simple rules to maximise your benefits.