The Experts

The Great Australian Dream of home ownership – the quarter-acre block – is an exceptionally tough commodity to find in today’s tightly packed urban centres.

Unless you’re very wealthy, it’s unlikely you’ll find 1000 square metres within reasonable proximity of your major city with less than a multi-million dollar price tag.

According to independent data firm, RP Data, around 91 per cent of recent house sales within a 20km radius of our major cities involved blocks of less than one quarter acre. In some cases, much less – Sydney’s Chippendale is a great example with average lots of just 95 square metres.

These days, the big blocks are generally in the outer rings of our major employment hubs, and the long commute to work everyday for time poor families can significantly quell their desire for those precious 1000 square metres. It should also be noted that Greenfield development sites in the outer rings are increasingly made up of smaller lot sizes to raise profit margins and meet buyer demand for lower maintenance homes.

But these aren’t the only reasons why fewer Australians are living on quarter-acre blocks. The rise in apartment living is not simply related to the practical truth that our overpopulated cities require medium and high-density housing. It’s also related to people’s genuine desire for apartment living. Convenience, views, and the lock-up-and-leave factor – all of these things are prompting more people, including families, to make an apartment their home instead of the quintessential house and land package. The quarter-acre block is no longer the ultimate prize for every aspiring homeowner, particularly Gen Y buyers and the huge wave of empty-nester downsizers active in our markets today.

But Australians are very sentimental about home ownership, and the pride people feel in owning their own piece of land with a backyard for the kids can never be discounted. So I thought I’d share with you some new stats from RP Data which name the most affordable suburbs within 20km of every capital city where the average block size is a quarter acre or more. There are 86 suburbs nationwide within a 20km radius of a city that have an average land size above 1000 square metres – these are the most affordable of them.

The country’s top 10 smallest average block sizes can all be found in Sydney in suburbs such as Chippendale (95 square metres), Surry Hills (113 square metres), Paddington (130 square metres), Darlinghurst (135 square metres), Newtown (143 square metres) and Paddington (145 square metres), which immediately surround the CBD. 

If you’re going to sacrifice the quarter acre dream to be closer to the city, a good tip is to buy a property with a land size higher than the average for that area. For example, in Sydney’s Inner West, residential lots of 100 square metres to 200 square metres are very common. If you can nab a lot of just 300 square metres – less than a third of the Great Australian Dream – you’ll enjoy significantly higher capital growth and greater re-sale value in the long term.

Important information:This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.

A new RP Data-Rismark report challenges an important established real estate trend. Whether the change will continue long-term is another question but this really is fascinating stuff.

Historically, Australian house prices have always appreciated faster than apartments due to a number of factors, most important of which is our traditional desire to own a house on a quarter-acre block.

However, things are changing and, over the past 10 to 15 years, apartments have become increasingly popular. Not only are they more affordable, more of them have sprung up in our most desirable locations such beachside suburbs where freestanding houses are pretty expensive.

And while home ownership is still the Great Australian Dream, lifestyle factors are far more important in the minds of today’s buyers than the type of property they get to own. Many of them don’t want to cease renting at the beach or near the CBD in order to buy an affordable house in the outer suburbs.

Two major social trends are also increasing demand for apartments over houses. Firstly, we have an aging population and a massive wave of downsizer buying has begun. The typical scenario is an empty-nester couple selling their family home in order to downsize to an apartment. Downsizing doesn’t necessarily mean downgrading either – a lot of empty-nesters are selling $2 million houses and buying $2 million apartments at the beach or on the harbour, thereby raising demand for large luxurious apartments.

Secondly, apartments are most definitely the home of choice for our young generation of executive couples who are increasingly living together before marriage, and often raising at least their first child in an apartment setting due to lifestyle and location preferences and affordability. 

Here are the stats.  Over the past five years, apartment prices have risen an average 7.4 per cent per annum compared to 7.1 per cent for houses. This is a new phenomenon because if we take a look over a 10-year period, houses are way ahead at 9.9 per cent compared to eight per cent for apartments. Put empty-nesters and young professional couples in the same box and it’s no wonder the Bureau of Statistics is predicting the most common household type within just three years will be couples living without children (either because they’ve moved out or they have none).

Let’s talk affordability. Nationwide, there is a marked difference in the median price of houses and apartments. Darwin tops the list at $142,176.

• Sydney at $139,000
• Canberra at $134,950
• Brisbane at $90,000
• Hobart at $84,250
• Perth at $75,000
• Melbourne at $70,000
• Adelaide at $67,252

Over the past 12 months, apartment prices have grown faster than house prices in Darwin, Sydney, Brisbane and Perth. The cheapest capital in which to buy an apartment is beautiful little Hobart at a median price of $254,250. Sydney is the most expensive at a median $450,000.

So, apartments outstripping houses is certainly an interesting turn of events but I’m not sure this trend will be permanent, mainly because I suspect a slow down in the building sector over the past few years may be pushing up average capital gains on existing apartments.

One piece of land can hold 100 apartments compared to one house so there is far more scope to add to the supply of apartments. But developers have been held back recently by economic conditions and difficulty getting finance and that’s why new apartment supply is lower than usual. Once this is resolved, more apartments will come online while the supply of new houses will remain substantially lower.

So I’m not about to start recommending apartments over houses for long-term capital gains. But the good news is that no matter what type of property you buy – a house or apartment – you’re going to enjoy steady growth.

For investors, rental yields are also a consideration and it’s well-established that rental returns on apartments are higher because more of them are close to transport, cafes and shops. Right now the average yield for an apartment is 4.8 per cent annually compared to four per cent for houses.

Your best buy is a house with a backyard in a great lifestyle location close to beaches, cafes, shops and the CBD.  The problem is you’ll have to pay big bucks for it in major capitals like Sydney, Melbourne and Brisbane. So compromise where you can and if you choose to buy an apartment, do it with confidence.

Important information:This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.

If you’re planning to sell this spring, one of the decisions you’ll have to make in consultation with your agent is whether to sell via auction or private treaty.

Among real estate experts, there are strong advocates for both methods. Some say the competitive atmosphere of an auction guarantees the best price. Others warn that auctions are fraught with danger and a private treaty sale is the most effective way to wring every last dollar out of a buyer.

While there are merits to both points of view, I don’t believe there is one generic best way of selling. What will work best depends on a number of factors unique to both you and your property.

For example, if your property is unique in some way or otherwise hard to put a value on, you’re probably better advised to go to auction. If you need a quick sale, the fast turnaround of an auction campaign will be just the ticket. This fixed timetable also motivates buyers to act quickly and adds to the competitive environment.

However, if you’re just dipping your toe in the water to see if someone will make you an offer you can’t refuse, then private treaty is the way to go.

Current market conditions and the level of demand for your style of property are also important factors to be considered. If your property is in demand, it’s more than likely you’ll attract several buyers willing to compete at a similar price level, and that’s when the auction process really comes into its own.

Let’s talk about how these two methods of sale impact a buyer’s psyche.

In a private treaty sale, a buyer will ask, “What’s the price?” The agent tells them, say, “$650,000”. The buyer’s immediate thought is, “I wonder how much below that I can get it for”. Buyers know that vendors put a margin for negotiation in the asking price. So the buyer starts thinking, “I wonder how much negotiation room they’ve plugged in? Maybe I could get it for $620,000 or $600,000. Maybe they’ll take $580,000 if they’re desperate”.

In an auction sale, a buyer’s thought process is quite different. The agent will give them a price guide, but if they’ve fallen in love with the property, buyers will often start thinking how much more they’re prepared to pay to own the property. “The agent says, ‘Around $650,000’ – I wonder how much more I would have to pay to make it mine?” they will say.

Auctions are usually highly emotionally charged events and it can be hard for buyers to stay objective, particularly if they’ve fallen in love with your property. The competitive nature of auctions can also heighten buyers’ desire to ‘win’. When someone else wants what we want, we often want it twice as badly!

Now how about your psyche? Well, I can tell you that auctions are generally more stressful that private treaties because the whole selling program is condensed into a 30-day period culminating in a one-off auction event. You’ll need to make a decision on a reserve price and, if you don’t reach it on auction day, you’ll need to make a call as to whether to pass it in or modify the reserve while the buyers are outside waiting.

For some people, this stress is too much to bear. I’ve come across situations where the house was suited to auction but the vendor wasn’t. Some vendors are also uncomfortable with the public nature of auctions. They don’t want everyone knowing how much they received for their home. In these cases, private treaty provides that discretion and allows you much more time to consider offers from potential buyers.

The most important thing to do is talk to your agent. Ask them to explain why they’ve recommended a particular method of sale and be honest about your feelings. It’s part of an agent’s job to support you through the process so feel free to share your concerns.

Important information:This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.

With interest rates on hold for another month and clearance rates softening, August is shaping up to be one of the most positive windows for buyers that we’ve seen all year. That doesn’t mean it’s a bad time for sellers – I just see a special opportunity right now for buyers in the lead-up to the spring season, which is going to be big this year.

Anecdotally, we’re already starting to see a build-up of new campaigns scheduled to start on 28 August, which means 18 and 25 September will be big auction days. So what does this mean for August? It means that buyers who have been out in the marketplace for many months might find things just a tad easier right now, particularly as some of their competitors are choosing to sit on their hands until after the Federal Election.  

In buyers’ favour right now are stable interest rates. Stability with rates gives people confidence – they don’t have to worry about their buying power being degraded every few weeks. We’re also seeing lower auction clearance rates with Sydney and Melbourne both averaging just over 60 per cent in July after a sustained period above 70 per cent in Sydney and 80 per cent in Melbourne earlier this year. Now don’t get me wrong – 60 per cent is healthy, but right now, in comparative terms, it represents a decline and indicates buyers have become cautious.

If you’re a buyer who’s been out there for a while, grab this opportunity with both hands and get proactive before the spring season is upon us.  Remember, property isn’t a speculative game. It’s a long-term investment and holding back on your next purchase in the hope it might be $5000 or $10,000 cheaper next month is not a great strategy – particularly if you’re on bridging finance and so forth.

RP Data numbers show capital city property values declined by 0.7 per cent in June, which is the largest fall since April 2008. Home owners, don’t be alarmed by this – it is absolutely not a sign that the market is about to tumble. However, it does indicate a softening for the moment, and thus a window of opportunity for buyers prior to spring.

If you’re bidding at auction any time soon, I’d like to give you an important tip. If no one makes an offer, don’t take that as a sign that no one else is interested in the property. If that were the case, you wouldn’t be standing in the backyard with many times 30 other people.

In today’s market, it’s far more likely that other buyers are simply being as cagey as you – and they’re planning to make a beeline for the agent with a good offer as soon as the property passes in. So put your hand up and at least guarantee yourself the advantage of being the highest bidder. In most states, the highest bidder is extended the courtesy of first right to negotiate. If no one bids, the agent can often end up with a quasi-auction between several parties over the phone in the days after the auction. You don’t want to do that. In private treaty negotiations, agents do not have to disclose the competing offer so there’s less transparency for the buyers.

So good luck to buyers out there this month. Make smart choices with the knowledge that September/October is going to be very busy and very competitive. For further tips on purchasing via auction or private treaty, please refer to my previous commentary on this topic.

Important information:This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.

We hear a lot about housing affordability in the media and that Australian property prices are among the highest in the world. Rising prices are ‘bad news’ for buyers but certainly good news for homeowners enjoying the long-term wealth generation that real estate brings.

While I do agree that finding an affordable house close to the CBD in our major capitals is a challenge, I absolutely disagree that it can’t be done – and new statistics from RP Data prove it.

If you’re a buyer, you probably associate housing affordability with the outer ring suburbs of your city (meaning, more than 20km from the CBD). I know of some fantastic family-friendly areas in the outer rings but I also understand how unappealing the long CBD commute can be for many buyers. Sure, you can buy a three-bedroom house in Liverpool in Sydney’s west for $400,000 but it can take 90 minutes door to door to get to work!  So yes, inner city living is much more desirable. 

The median Sydney house price is $600,000. It’s $515,000 in Melbourne, $495,000 in Perth, $470,000 in Brisbane and $406,500 in Adelaide. Many buyers look at these numbers and think ‘no way’, and close their minds to the idea of buying. But did you know that in Sydney, there are three inner ring (IR) suburbs within 10km of the CBD and 39 middle ring (MR) suburbs within 10 to 19km where you can buy a house for less than the median? In Melbourne, there’s five IR and 58 MR, Perth has 11 IR and 50 MR, Brisbane 11 IR and 47 MR, and Adelaide 36 IR and 58 MR.

Let’s take a look at the most affordable suburbs within 10km of the CBD in every major capital. In Sydney, you can buy a house in Sydenham for around $550,000. Incidentally, Sydenham is about the same distance from the CBD as Bellevue Hill where houses cost a median $3.65 million.

In Melbourne, the most affordable suburb within 10km of the CBD is Braybrook at $390,000. In Brisbane, this is Rocklea at $387,000, Adelaide has Wingfield at $264,000, and Perth’s Cloverdale at $415,000.

But yes, there’s a trade-off. If you want to buy close to the CBD but under the city’s median price, you’re probably looking at an old house with maintenance issues in a neighbourhood with some factories and warehouses and very few cafes and recreational facilities.

The good news is if you’re willing to buy now and wait out the gentrification process, you’ll be rewarded – in the meantime, it’s just a 10 to 15 minute trip to work every day!

I’ll give you a personal example. In 1984, I bought a little fixer-upper terrace in Paddington, Sydney. Nowadays, Paddington is blue ribbon real estate but back then the suburb was quite run-down and bohemian. I paid $96,000 and knocked it into shape so I could put in some tenants. A few years later, when I started my real estate agency, I needed capital so unfortunately I had to sell it. I sold it for $260,000 – more than double my purchase price.

Savvy property investors are always on the look out for the hot spots of tomorrow because that’s where the greatest potential for capital growth lies. They search for the up-and-coming suburbs on the brink of transformation by urban renewal, gentrification or improved infrastructure. When people bought terraces in Paddington in the 1970s, it was a suburb in decline. But visionary bargain hunters bought anyway, renovated and enjoyed the ride as prices skyrocketed in the 1980s and 90s. Today, there are still scores of inner city suburbs in all our capital cities that are yet to be fully gentrified – in fact some of them haven’t even begun the process.

In Sydney, neighbouring suburbs Sydenham, Tempe and Marrickville are getting a lot of media airplay. Marrickville’s gentrification has been well underway for a few years and it’s actually now referred to as ‘the new Paddington’ of Sydney. Tempe and Sydenham are right next door and the spill over effect has already begun with priced out buyers going next door for affordability.

So how do you find the next great hot spot? A location close to the CBD is the perfect start. As our population increases, so will demand for property close to our major employment hubs. It’s a no-brainer.

Then it’s down to the four telltale signs of potential future growth – new infrastructure (roads, schools), gentrification (lots of renovations), redevelopment of former industrial sites (into shopping centres and the like) and enhanced lifestyle aspects (new café villages and recreational facilities).

Important information:This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.

If you’re thinking about selling this spring, now is the time to begin talking to agents. Yes, we’re still more than a month out from the start of the best selling season of the year but there’s a lot for you to consider and get done before the first day of your campaign.

I’m a big believer in spring being the best season to sell even though September and October are not the busiest months of the year in terms of sales activity. RP Data numbers for 2000-2009 show more property is sold across the country in March than any other month, followed by May, July, October and November. From a seasonal point of view, we see marginally more sales in autumn (26.6 per cent) than in spring (25.4 per cent).

But forget the stats. In my 28 years in property, I still believe spring is the best time to put your home on the market. While better weather won’t make a buyer decide to buy, it does make them more inclined to spend their Saturday mornings checking out homes for sale, and the more buyers at your opens, the more interested parties you will have by auction day.

Spring is a win-win for vendors and buyers. There’s a positive vibe in the market which is great for vendors and there’s more property available for sale which is great news for buyers. Given the Federal Election is one week before the start of the spring season, I’d say buyers will feel an extra boost of confidence once the issue of who’ll be running the country is resolved. While active buyers will still buy even when an election is pending, we do see some hesitation among passive, less committed prestige buyers and investors around elections, so the timing of this year’s federal poll bodes really well for the 2010 spring season.

Spring is an exceptionally good time to sell for buyers in coastline suburbs. On a warm, sunny Saturday morning, a property with ocean views has never looked better. Buyers know that if they buy their dream beachside home in September or October, they’ll be moved in and settled come the hotter summer months when they can really enjoy your property with their families and friends.

If you have a home like this, make sure you highlight its best features by opening all the blinds and windows to let that warm air and brilliant light through on inspection days. If you’re going to paint before selling, use light colours such as whites and beiges to accentuate that fresh summer feel. Get out your summer furniture too – put the sun lounges by the pool and your outdoor dining setting on the deck.

A good agent will advise you on how to improve your property’s market appeal. It’s amazing what a coat of paint and a simple new garden can do to the look of your home from the street. I’ve seen very average properties acquire major charm through relatively minor cosmetic upgrades but these improvements take time to organise, and that’s why I encourage you to start the process now and talk to some agents.

If you’re about to start ringing around for appraisals in time for spring, here’s my Top 5 tips as to what you should ask an agent when considering them to manage the sale of your home.

1. What do you think my property is worth? How have you come up with that figure?
2. How does my house present? What can I do to maximise the sale price?
3. What marketing strategy do you suggest? Why?
4. Why should I hire you?
5. Do you have a list of recent vendors I can speak to?

Always remember that if you don’t have a good feeling about an agent, don’t go with them. Selling your home can be stressful and you need an agent who gives you confidence and comfort during the process.

Important information:This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.

Pricing is probably the most difficult part of the selling process for vendors to come to grips with. A vendor’s biggest challenge is usually understanding and getting comfortable with the fair market value of their home.

Fair market value can change pretty quickly and we’ve seen evidence of this over the past six months. Latest RP Data figures show the average sale price for houses in April 2010 was 5.5 per cent lower than the average initial asking price – up from 4.8 per cent in June 2009 when buyer demand was a little stronger. The apartment market has remained steady with an average discount of 4.6 per cent from late 2009 to April 2010.

Generally, properties sold via private treaty do not sell for their initial asking price – it’s usually slightly lower. Different story with auctions – you start out with a minimum base price guide, usually ‘more than x’, and competition and interest on the day dictates the selling price. With private treaty sales, you advertise the desired price from the start and buyers negotiate it down from there.

In changing markets, vendors often struggle to accept that what their property might have sold for six months ago is not what it is likely to sell for today. During the GFC, discounting blew out to seven per cent for this exact reason.

Let’s take a look at current discounting on a national scale. Discounting among houses is highest in Brisbane at 6.2 per cent, up from 5.5 per cent in December 2009, and lowest in Canberra at four per cent, slightly up from 3.7 per cent last year.  Discounting in Sydney has remained pretty much steady at 5.6 per cent.

In the apartment market, average discounting in all states and territories is lower than it is for houses, probably due to the high demand from investors this year (the bulk of investors tend to buy apartments over houses due to greater affordability).

The good news is that, even in softening markets, you can avoid discounting by pricing your property correctly from the start and letting market forces take it from there. Correctly priced properties will generate strong buyer competition. Overpriced properties, in most cases, simply won’t sell.

Your agent plays an important role in all this.  A good agent should tell you what you need to hear on pricing, not necessarily what you want to hear. They’ll show you recent comparable sales and they’ll explain in detail how the market has changed and why your initial expectations may be unrealistic.

One of the great mistakes vendors can make is putting an inflated price – their ‘ultimate’ price – on their property in the hope that someone might pay it. They believe they’re doing the sale and themselves a service by creating the opportunity to get an outstanding price. If no one makes an offer at this hopeful price, they reason to themselves that they can always bring the price down.  

So a vendor might have their property valued at $825,000, but they list it at $900,000 with the intention of waiting a few months. But in a slightly softening market like we have today, the problem with this strategy is that the buyers who may have been willing to pay $825,000 when it was listed have moved on to other properties, and the other buyers left in the market will start to think there’s something wrong with the property because it’s remained unsold.

For every one instance of a private treaty vendor selling for a phenomenal price, I hear a dozen stories of vendors who reject good offers only to accept a lesser amount 12 months later.

A good agent will recommend pricing your property at fair market value, they’ll then work with you to improve your home’s presentation (and thus its appeal to buyers), then they’ll implement a strategic marketing campaign to maximise competition and thereby maximise your sale price.

Important information:This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.

The importance of pet-friendly properties continues to increase in Australia, raising many issues particularly in relation to apartment living. The reason for this is due to substantial changes in the way we choose to live. 

We all know our population is ageing and this means we have more ‘empty-nesters’ looking to downsize from family homes to apartments. Senior citizens often keep the family pet or buy one to keep them company after the kids leave home or their spouse dies. We also have more couples living together without children – many of which are deliberately choosing the ‘executive lifestyle’ and opting for ‘fur kids’ over real kids.   

The Australian Bureau of Statistics’ projections for the 25 years to 2026 provide an insight:

• Lone person households will have the greatest percentage increase of all household types, from $1.8 million in 2001 to at least $2.8 million and possibly $3.7 million in 2026.
• The number of couples without children will have the greatest percentage increase of all family groups, possibly overtaking the number of traditional families this year.

I agree with social demographer Bernard Salt, who was recently quoted in an article: “Humans have a whole lot of love to give and if they don't have kids they give it to their pets. For now, people might laugh and just think it's the gays or the very rich that treat their animals like children, but by the 2020s it will hit the middle market in a big way.”

The perpetual debate is whether allowing pets in a building will make its apartments more valuable or whether it will just create a nuisance for residents particularly in terms of noise. A barking dog late at night is enough to drive anyone crazy!

But for the fastest growing groups of our population – lone person households and couples without kids, pets are part of their family. They provide constant companionship and unconditional love and who would want to part with that?

Thus, buying or renting in a pet-friendly building is a priority, and due to the shortage of blocks that allow pets, we’re seeing renters offering ‘pet bonds’ as well as agreeing to pay higher weekly rents while buyers are happily paying a premium for a block that welcomes their furry friends.

Strata rules vary from state to state, but generally individual body corporates make their own rules on whether pets are allowed. I think we’re a long way off from the law changing to allow pets in all buildings. There’s a reasonable argument that the noise will be too much if many of the owners, particularly in high-density blocks, have pets.

However, we’re seeing more new developments allowing pets – especially luxury developments with a small number of large residences primarily designed for wealthy downsizers or executive couples. This is because developers are realising ‘pet-friendly’ means ‘price-friendly’ and elderly buyers or couples without kids are much more likely to have a small low-maintenance pet rather than large noisy dogs common among families.

Some landlords would rather have tenants with pets than children. Their argument is pet owners will pay more, and children can be far more destructive, perhaps using their crayons to write or draw on the wall.

If you’re looking for a pet-friendly property to buy or rent, you’re more likely to find this in newer, low-rise buildings. The pet-friendly dealbreaker is fairly new so it’s mainly only the developers allowing it as opposed to existing body corporates in established blocks.

Here are a few tools to help you in your search for a pet-friendly property:

• At McGrath, we were the first agency in the country to introduce a Lifestyle Search on our website in 2006. This enables buyers to narrow down their search above and beyond the staples – suburb, price, number of bedrooms etc. You can search for pet-friendly apartments to buy or rent by checking the pet-friendly box under Apartment Features.
• Domain.com.au’s new Radar Search enables you to search for properties to buy or rent that allow pets.
• Check out a website called PetFriendlyRentals. For a small fee, it will allow you to download software that will search listings on domain.com.au and realestate.com.au to find those mentioning ‘pet-friendly’. This will save you a lot of time trawling through the property descriptions of every ad.

Important information:This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.

Although largely dormant so far this year, Australia’s prestige market has recorded the strongest capital gains over the past year and that’s led to more suburbs reaching a median price of $1 million plus.

While we still have fewer $1 million suburbs than before the GFC, this exclusive club of Australia’s most desirable localities expanded in the last 12 months to February 2010 by 12 per cent, with 165 suburbs now reaching the $1 million median, up from 147 in 2009. We had 175 in February 2008.

It’s fascinating to break down the statistics on a state and territory level. Take NSW, home to one of our most expensive property markets – Sydney. RP Data says the premier state now has 95 suburbs with a median of $1 million plus, up from 84 in 2009 and almost equal to the pre-GFC level of 96 suburbs in 2008. All but one of these 95 suburbs is in Sydney, with Bar Beach in Newcastle the only regional representative.

However, in Western Australia, it’s a different story. There are $26 million suburbs in 2010, the same as in 2009, but significantly fewer than the 36 recorded in 2008. But when you consider that WA had just one suburb with a median above $1 million in 2006, it has firmly established itself in Australia’s prestige sector. In fact, WA’s Peppermint Grove is now the country’s second most expensive suburb with a median house price of $4,537,500.

Only Victoria has recorded a significantly higher number of million-dollar suburbs in 2010 compared to pre-GFC 2008 – 26 today, up from 22 in 2008, while the ACT has gained one to make three in total. The Northern Territory got its first million-dollar suburb this year, which is not surprising given the incredible boom in Darwin during recent years. Tasmania – one of our most scenically spectacular states, remains below the benchmark with no suburbs above $1 million.

Sydney was once considered the sole property powerhouse of the nation, but this has changed over the past five years as other state markets such as Western Australia have come of age. In 2005, Sydney boasted almost 80 per cent of the country’s $1 million suburbs – today it has 58 per cent.

Not too many surprises in the latest list of Australia’s most expensive suburbs, although Sydney’s cream of the crop now stretches beyond the city’s most affluent precincts – the Eastern Suburbs, North Shore and Northern Beaches. Now making the top 15 is Kangaroo Point, in the St George region, south of Sydney, and Breakfast Point, in the Inner West.

1. Point Piper, NSW $7.25 million
2. Peppermint Grove, WA $4.5 million
3. Vaucluse, NSW $3.5 million
4. Bellevue Hill, NSW $3.28 million
5. Palm Beach, NSW $2.65 million
6. Toorak, VIC $2.61 million
7. Eagle Bay, WA $2.58 million
8. Dalkeith, WA $2.57 million
9. Dover Heights, NSW $2.53 million
10. Northwood, NSW $2.45 million
11. Clontarf, NSW $2.41 million
12. Kangaroo Point, NSW $2.4 million
13. Double Bay, NSW $2.28 million
14. Breakfast Point, NSW $2.26 million
15. Forrest, ACT $2.18 million

Today, the prestige market remains somewhat untested with most activity under $2 million in 2010. We’ve seen a few outstanding sales above $5 million but supply and activity is generally low. Increasing executive pay and bonuses will create pent-up demand and accompanying price growth soon.

A good test of the country’s ultra prestige market will be the newly listed campaign for Altona, one of the country’s most revered properties, located in Sydney’s Point Piper. The vendors are hoping for $45 million, which would match Sydney’s current record set by the Coolong sale in nearby Vaucluse in 2008. Altona last sold for $28 million in 2002, so if it gets $45 million today, that will represent a 60 per cent capital gain over the past eight years.

Important information:This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.

There’s an old saying in real estate that goes: ‘When is the best time to buy property? Today!’ In the next three to five years, people will look back and wish they had bought in 2010.

While there are definitely cycles in the property market, well-located and in-demand property rarely declines in value. Property investors should be aware of market cycles and track them. But often it’s more a question of should you expect three per cent growth this year or 15 per cent growth this year?

Buying property is a major financial transaction. Even in Australia’s most affordable markets you’re still looking at hundreds of thousands of dollars, and this is enough to bring many buyers unstuck. The sheer magnitude of the decision to buy is so great that many people get nervous and they start missing opportunities.  

It’s natural to be cautious, but with risk comes reward. You should definitely sit down and carefully assess your position. Get together with your financial advisor or mentor and work out how much you can afford to spend. Don’t overstretch yourself, but be prepared to break through the fear barrier and take action when an opportunity arises.  

A Tale of Two Investors

Peter, a good friend of mine, came to see me in 2000 before the Sydney Olympics. He’d put away $40,000 and he said to me, ‘What should I do with my money?’, and I said, ‘Right, let’s find you a property.’  I recommended he secure the best thing he could afford at that time.  So I found him a little terrace in inner city Ultimo for $290,000.

It needed a bit of fixing up, but he could have put a tenant straight in. It was in a part of Sydney that I believed was likely to outpace the rest of the market. Ultimo wasn’t too trendy at that point, but it is on the city’s doorstep and I felt it had the potential to become another Paddington down the track.

But Peter got cold feet. There had been a lot of talk about the market going flat after the Olympics and he was a bit concerned about that. He also felt he needed to save a bigger deposit. So he decided to wait a while and attempt to save some more funds.

Then the market started to escalate rapidly. Peter found, as people often do, that the price of property went up faster than he could save. He got a bit disenchanted with the market and never really got into buying mode. He never got out of consideration mode.

In the meantime, I recommended the Ultimo property to another friend, Michael, who bought it. He spent around $40,000 on a renovation, putting in a new kitchen and bathroom. A few years later, he asked me to sell it and we got $590,000 at auction.

Around the same time, Peter came to see me again. He said, ‘Look, I’ve been thinking about this property thing. I know I missed the boat last time but I’d like to consider it again.’ And I said, ‘How much have you got?’, and he said, ‘Forty thousand.’ Unfortunately, Pete’s deposit would only buy him half the property it would have bought him a few years earlier.

Lessons to learn

If there’s a lesson to be learned from this story, it’s about the power of making a decision and taking action. When you buy a property, there’s a huge amount of excitement and also a sense of fear. After all, it’s a big amount of money, a big commitment and a big obligation to re-pay. But don’t let your fear prevail. There is some degree of risk in any investment and most of the risks in property can be minimised and managed with market research, competent advisors, fixed interest rate loans and building and pest reports.

Also remember there’s no such thing as a ‘perfect property’. No one property will ever fit all the criteria you’re looking for but there’s likely to be dozens of great properties that will work perfectly well for you. Even if your next purchase is not your ultimate home or investment, it can be a great stepping stone to the next level.

If you view property as a medium- to long-term investment and buy in established growth markets, you’ll find it hard not to make good returns. The feeling of making a good real estate investment or securing a home to live in is a great confidence booster and will have other amazing benefits in your life.

Important information:This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.