The latest RPData research shows that there has been a massive increase in Queensland rental properties listed in March 2011 as compared with March 2010.  The properties listed for rent this March are 28,331compared with 23,139 last year.  While it is harder to sell properties on the Coast at the moment and there is more on the market being sold, the supply of rental properties is also on the increase, especially on the Gold Coast.  The high Aussie dollar and high unemployment is starting to have a detrimental impact on property.  The good news is that properties are starting to sell again - all be it with some discounting - with some agencies reporting improved results and greater buyer enquiry.  It is not across the board, but any improvement is positive news after the summer we have had.

What we want now is some innovation from our levels of Government to get things moving again on the employment front.  Not long now 'til the next local and State Govt elections - should be very interesting to see who stands up to sort the mess out!  You would think the emcumbents would be shaking the tree's to make something happen???

Do we have a housing bubble in Australia and if so, will it crash and cause big problems for everyone?

There are so many contradicting views in the news that it makes you wonder if anyone really knows what the reality is.  If you look into the background of some of the commentators though, you can get an idea that some opinions are weighted depending on the business interest.   I had to laugh yesterday, I got an email from a financial advisor saying the property market was doomed and to get out quick.  He then went on to list some great stocks to buy into on the ASX.  2 minutes later I got another email from a property investor saying the time was never better to buy residential real estate as an investment!

To my mind we all have to live somewhere.  There will always be rental properties because some people do not want or cannot afford to buy their own home, thereby creating an opportunity for investors.  Government regulation impacts on property prices and also on rental prices - its up to them to keep things on as an even a keel as possible.  As long as the national economy keeps ticking along, there will be investors seeking investments.  I cannot see a major change in Govt policy looming that will adversely impact any mainstream investor - regardless wether it be stock market or property.  Nothing has changed from our historical perspective - those who live on the edge of debt servicing are most exposed to the big gains and the big loses.  Anyone who is concerned just needs to be a little more conservative and spread the risk with their investments.

On the week end I read an article in the real estate section of the local paper. the Gold Coast Bulletin. In brief, the article was about an accountant-cum-real estate agent who has opened an office and to attract clients immediately is offering an extremely low commission (to the point of ridiculous!).

I never really take the time to respond but I am so passionate about improving the image of our industry that I just had to take a moment (compose myself) and write to the Property Editor to let her know why property management fees should not be negotiated.

Let me know what you think ......

Dear Barb,

I read your article in the Bully (Gold Coast Bulletin) on Saturday and have just had to respond. No doubt you were inundated with passionate property managers and principals giving you their “2 cents worth” regarding your article on Neil Hart and the commission he is charging.

Here’s my 2 cents worth ....

Where have all the good property managers gone?

There are 2 types of stress. Stress that comes from dealing with landlords financial investments and tenants living space. The second type of stress can be much reduced or eliminated and is generally in the control of the principal and property managers. This stress is often self inflicted due to, not only poor work habits, but also to working conditions not conducive to an efficient work environment.

I believe more and more that property managers must reduce the amount of properties they can competently manage compared with, say, 10 years ago. With increased duties and regulations comes increases in compliance to the ever changing legislation. This means the ratio of properties to staff member must be in balance. Good staff don’t come cheap and the increased cost of compliance is a significant factor when calculating fees and applying the service. Where the fees match the level of service you can certainly compare the difference in agents who know their business and their figures compared to an agent who believes in quantity over quality. These days client and tenant demands seem to accelerate faster than the level of service that can be provided.

To bring systems under control eliminates costly errors that require 2-3 more times to fix later becomes a reactive complex problem. Bringing time systemisation into the mix we get a greater efficiency, a more successful outcome and happy clients, tenants & staff.

A principal must take an interest and care in the staff they employ and the clients they work for. Staff want to work with a principal who cares about them and about property management in particular. Principals who still treat rentals as the “poor cousin” just won’t cut it and will not only repel good property managers but also attract incompetent property managers that will cause them and their clients only harm.

The balance is not there when you have loads of properties but can’t afford to engage quality staff because the fees are not being generated to cover the most basic expense i.e. wages. I know property management is his sideline business and main focus is elsewhere but when agents do this to gain business it only serves to harm the agents who are not in business to skimp on fees.

I can’t speak for other people but our property management business is based on quality of clients and their properties, working with quality staff providing a quality service. I can’t do this on a shoe string budget. I know this from experience and my accountant has also reinforced this every year at tax time.

Be very wary when an agent cannot even negotiate a good wage for himself let alone run a good business. How can he possibly negotiate a good rental return on the clients investment? This type of justification on fees only serves to seriously harm the industry where the reputation mostly teeters on the edge anyway.

I did like your wariness – good call!

Many property investors use negative gearing to get a nice tax refund but should remember they don’t get all their expenses back. With rental income yields below home loan interest rates (although yields have been increasing with the latest reductions in interest rates), investors need to ensure they have the spare cash to cover not only the interest cost differential but also such expenses as council rates, land tax, water rates, maintenance costs and management fees.

A well planned annual budget on the property investment is the best way to ensure that you don’t fall short when an expense presents itself.

Include in your annual budget a projected budget of 2 – 5 years that will have the possibility of having to re-paint, new carpet, replacing air conditioning units or dishwashers.

One more thing – keep a month up your sleeve (or in your account) for vacant periods or where the tenant may fall behind in their rent.

I attended a very interesting seminar last night. The speaker was Gold Coast Valuer, Tod Gillespie, from Herron Todd White Valuers. They are the largest Valuers in Australia and he gave the group some good insite into property prices and hot spots to buy on the Gold Coast.

Many Sellers are still holding out for a better sale price on their property. Some are even saying "The market is starting to move in my area". While there may be some "sold" signs around there is generally extenuating circumstances. In some instances Sellers have had to take a considerable drop in the original list price.

Tod re-confirmed that if a Seller really doesn't have to sell then withdraw the property from the market. If the Seller does really have to sell then there is a number of things to consider on this market. 

1. Is the property listed at realistic price for today's market?

2. Is the agent telling you how it "really" is?

3. Can you determine why a property sold for what it did? I.E. such a high price or such a low price.

There is currently 10 to 12 months supply of stock (properties for sale) on the market in certain suburbs on the Gold Coast. This doesn't take into consideration stock that will be listed in the coming weeks.

Sales all over the Gold Coast are at an all time low and the properties that are selling are either at a realistic sale price or the bank has had it sold on the Sellers behalf.

Tod indicated there have been a number of contracts that have collapsed due to the valuation. If the valuation does not come close to the contract price the Buyer can and generally will terminate the contract. The price can be re-negotiated at a better sale price or the Buyer simply walks away because there is so much for them to choose from they will move onto the next property. It is possible and recommended for a Buyer to get a valuation on a property before going to contract.

Banks have indicated that the recovery of the real estate market can take up to 18 months. They are basing this on the mortgage stock to clear. "Mortgagee in Possession" sales are on the rise and this is where an opportunistic buyer will be rewarded.

Great News for Investors! The market is ripe for the picking. Investors are very well researched and are savy in their offers to purchase. They look for certain pockets of growth, brand new -v- established due to tax depreciation reasons and just as important the rental return.

Buyers are taking longer to make decisions even if they have their finance pre-approved. Many are waiting to see if there is a further drop in the market. Again, there is no immediate hurry for them to make decisions unless it is for their own current living arrangements.

Banks have become very strict on their lending criteria. Previously money was more readily available and they were approving loans where in some circumstances the margin was too tight and maybe shouldn't have been approved. This too has lead to some property owners now being forced to sell.

In summary, if you don't REALLY have to sell then don't. If you do REALLY have to sell then talk to your agent about the list price and the number of properties for sale in your area. Are you comparing Apples with Oranges?

If you're looking to purchase and your finance is sorted - GO FOR IT!