Puzzle Finance Blog

Nine reasons why your home may not be selling

You’ve put your place on the market but months later you still haven’t had any offers and you can’t figure out why it hasn’t sold. We asked some real estate experts to come up with the main reasons some properties languish on the market. 


The most obvious reason a property does not sell is because the price is too high. Fiona Hellams, licensed real estate agent at Ray White in Drummoyne, Sydney, says an unrealistic reserve price will often be why a property fails to sell at auction. “This can be caused by a lack of communication from the agent, a price guide being too high or sudden changes to the market such as elections, rate rises or changes to zoning.”

“Just because a similar home sold for a certain amount three months ago doesn’t mean that your property is worth the same,” says Damien Sienkiewicz, senior sales consultant of Beller Real Estate, in Melbourne. “The market is constantly changing and three months is a quarter of a year. Especially in a falling market, most vendors and their agents reduce prices to meet the market too late and end up chasing the market down. This normally results in a lower sale price than a vendor who responds to the market.”


Advertising the highest price in the area won’t necessarily attract the best buyer, says Jay Peters, director and licensee of Harcourts JP Elite Group, in Sydney. But “advertising a price guide with a lower scale will encourage more buyers and actually provide some competition between buyers when they all show up to an open house.”

Noisy locations

Too much noise nearby will put off potential buyers. “A property situated on a train line or a major car thoroughfare with heavy traffic and a shopping strip can present a selling challenge as people have a preconceived idea that it will be noisy,” says Stasi Adgemis, director of hockingstuart, Doncaster, Melbourne.


Adgemis says he always recommends to vendors and local developers that they install double-glazed windows and invest in thick, quality doors to block out the sound. “This shows potential buyers when they come to visit the home that there is a long-term solution to manage the noise and that the home is in fact comfortable to live in.”


“Poorly presented, under or partly renovated properties or properties needing repairs can deter buyers,” says Peters.

Sienkiewicz agrees. “With the younger generation of buyers purchasing a bigger proportion of the properties each year, you need to tailor your sale to them. The internet is the biggest source of buyer inquiries but there is always a sea of properties online at any time so you must ensure yours stands out.” 


“Where possible a coat of paint and a good clean always helps but also inquire into getting a stylist through to help you with your presentation or to fully furnish vacant properties to give it that wow factor,” says Sienkiewicz. Poor street appeal

Most buyers will do a drive-by past a home they are interested in before inspecting it, says Sienkiewicz. “If your gardens are dry and unloved, weatherboards are rotting or front door is hanging off its hinges, most buyers will keep on driving and won’t bother to inspect the interior.

First impressions last.”


If you can’t do it yourself, hire a handyman to tidy the front of the property and any gardens. Building works in the neighbourhood

Building works commencing in the street during the marketing campaign or neighbouring properties under construction will definitely put off buyers, says Hellams. 


Do your research to find out what building works are coming up and when and try to time your sale to avoid the disruption.

Over supply

Too many similar properties for sale in the area will affect the speed of your sale, and may even affect the price when you do sell. 


While this is beyond the control of home sellers, if you are in a position to hold off putting your property on the market until there is less competition, it is worth considering. Otherwise, speak to your agent about ways you can set your house apart from the pack.  

Choice of agent

Sometimes it isn’t your home that is the problem, it’s the agent says Sienkiewicz. “A good agent will give you a realistic price with comparable sales to back them up, handle all the marketing to ensure the property is presented in the best light and you should have a sale in a reasonable amount of time. A good agent will also build rapport with the buyers and know who the serious candidates are. However there are cheap agents out there and like everything in life, you get what you pay for.”


“When you are selecting your agent, don’t necessarily go for the cheapest or the most expensive, go for the best,” says Sienkiewicz.  “The one who you feel will do the best thing by you. I have seen a lot of people lose tens of thousands of dollars on a sale price just in order to save a couple of thousand on commission.”

House to block proportion

“These days, many builders will put the biggest house on the smallest block,” says Peters. “Now this may be all well and good if you want low-maintenance yards but many buyers looking for a family home want space for their kids to enjoy the outdoors, entertain their family and friends and enjoy some downtime. We have many buyers saying the house is ideal but the yard is not. It is all about what the particular buyer is looking for and how that home is marketed.”


Target your market. “If it is a small block with little yard space, it may be perfect for that buyer who has little to no time to spend on maintenance so it should be marketed to those buyers,” says Peters.

Poor marketing

You need a strong marketing campaign to reach every potential buyer and achieve a successful sale. Don’t do your own marketing or settle for photos that portray your property in an unflattering way.


“Make sure you have professional photographs taken of the property and a property video highlighting your house’s key selling points,” says Peters. “Make sure your agent markets your home through all avenues. At JP Elite we use several marketing avenues from print to social media as well as the major real estate websites and through our database of clients. With technology playing a major part in today’s society the biggest avenue would be social media.”

Posted by Sandy Smith - Domain (Fairfax) on 27th July, 2016 | Comments | Trackbacks | Permalink

Want to renovate your home but don’t know where to start? A step-by-step guide to renovating


Don’t wait until you are halfway through your renovation to discover that you should have painted the walls before laying the solid timber floors or that the wiring should have been finished before the new ceiling went in. Follow a checklist in your renovation project for less stress and mess.

“The benefit to working from a checklist is clarity,” says property entrepreneur Michael Tiemens from property consultants, Peak Property Group in Melbourne. “It provides complete transparency about what needs to happen and when. It can then assist you in rolling out the process and managing your tasks and trades people in the right order. This creates overall efficiency and project flow.” 

Design and planning 

“Keep it simple and be as final about your decisions as you can be before you start. Changes to designs and materials during the process add delays and costs that can really destroy your budget,” says renovating expert Tim Carter, from Foreshore Projects in Sydney. Decide if you are going to do it yourself or hire a project manager or builder

“Employ a project manager/builder as this will keep the work flowing and they will employ licensed trades that will turn up and do a good job. You will also receive a seven-year warranty for the work completed,” says Angeline O’Shannessy, project manager and designer from Beautiful Hunter Homes, who has been buying and renovating homes for over 20 years. 

“If you decide to go it on your own you need to arrange the required trades in the correct order and make sure their work is done to Australian standards. I would recommend that you ask for a copy of their licences and insurances so you are covered if anything goes wrong.”

Get council approval

You will need to check with your council to clarify the local regulations before you start renovations, says Bernadette Janson from The School of Renovating in Sydney. “Are you doing additions? Are you changing the use of any rooms? (for example changing a bedroom to a bathroom.) Are you making structural changes? Are you planning a deck larger than 20 square metres and higher than one metre? Some areas require council approval for changes to the external appearance of the property, even changing paint colours,” she says.

What to buy

“Look at what needs to be purchased,” says Tiemens. “Many times the hot water systems, heating and/or cooling, roof tiles, weatherboards, wiring, plumbing can be costly items which can blow your budget. Don’t forget the cosmetic elements to the property, for example painting, floor coverings, tapware, kitchen, bathrooms, tiling, wardrobes, storage, landscaping and fencing.

“Purchase all your fittings and fixtures before you start, this will reduce the chance of delays on the job site,” says O’Shannessy. 

Sequence of works

In general, work from the top to the bottom of a room. For example, start with the ceilings, then the walls and the floors. “If you are laying new floors, it is best to have the painting done first to avoid splashes or spills,” says Dickins. As Janson points out, “it is best to co-ordinate the work by trade rather than room by room.” 
Dickins suggests the following easy guide for the sequence of works for a kitchen renovation. 

Design: Work out what you are doing, run it past the trades involved, such as the builder and electrician, and check requirements for special fittings, such as connecting the fridge to plumbing or tapware with filters. 

Demo: Remove all the rubble so there is a safe, clear space to work. Pull up the flooring and remove all the cabinets.

Rough in: This is when new wall framing goes in, plus electricals, plumbing and gas are positioned.

Walls and ceilings: Plasterboard is installed, with new ceilings if needed. 

Doors and windows: All trims, skirtings and architraves should go in before the cabinets.

Cabinets: Install the carcasses, leaving the doors until later so there is access for the appliances, like the dishwasher.

Bench sink and taps: The bench is usually cut to fit the sink so have them installed together.

Paint and splashback: Finalise all the painting before tiling or installing the splashback  and laying the floor.

Flooring: Lay the floor after the cabinets, but before the appliances.

Appliances and lighting: Call the plumber and electrician back to install these.

Cabinet doors: Hang the doors, position the drawers and add any open shelves.

Finally remember that the renovation is likely to be more costly and messy than you imagined. Tiemens has some sound advice for getting to the end of your project. “No matter which style of renovation you are pursuing, the last 20 per cent will take you longest and cost the most so it is important to persist right the way through until the end without cutting corners and be diligent in following your budget and check list.”

Posted by Sandy Smith - Domain (Fairfax) on 21st July, 2016 | Comments | Trackbacks | Permalink

What I wish I had known before buying a brand new apartment


When my husband and I were house-hunting, I had one demand: new construction. I’d spent most of my adulthood in “charming” apartments with “character”, which is real-estate code for tiny apartments with decades-old appliances.

For our first home, I wanted something brand new, and we lucked out: we found an apartment that was so new it wasn’t even built yet. The construction zone of a building had a model unit primed for viewings, and we went to look at it twice in two days before putting in an offer just 48 hours later.

The whole time, I’d been wearing rose-tinted glasses, confident that we’d avoided all the hiccups that come from buying an older home. No hidden lead paint for us! No replacing the furnace in the next 10 years! No creaks in our wood floors!

Sure, there were some serious benefits to a never-before-lived-in abode, but as a novice homeowner, I wasn’t prepared for some of the surprises that revealed themselves along the way. Here are some of the biggest lessons learned after buying a newly minted home.

1. Don’t have them install things you don’t want

The apartments in our building came standard with a 50-bottle wine fridge that took up a third of the kitchen island. I love a nice Chardonnay now and then, but I love storage space more. Because it wasn’t yet installed, I was able to have them put the cost of the mini fridge toward building out more drawers in its place. Speak up if there’s some add-on that, while impressive, isn’t a feature you’ll use.

2. Customise what you can, trust them on the rest

I always fantasised about designing my own home from scratch (who hasn’t, I suppose?), so when the developers told us we’d put in our offer when there was “still time for customisation”, I was elated. I couldn’t wait to study different tile samples and pick out paint swatches. It took one week – which included an epic, heated knob-vs-handle debate with my husband — before I threw in the towel. I made some requests, like different pendant lights in the kitchen and a grey subway tile backsplash I’d always swooned over in interior-design magazines, but for the most part, I stuck with what was in the model unit.

My thinking? The development team — which included professional stagers — selected finishes that worked for the space and the style, and without a ton of knowledge, I was likely to choose some fixture that, once installed, really wouldn’t “go”.

3. Ask for more than you think you can get

When touring the model unit, I’d see something and think, “Aw, too bad, I wouldn’t have chosen that,” before realising that they hadn’t even put our floorboards in yet. I figured it was worth a shot in asking for big-ticket tweaks if it meant me saving thousands of dollars in replacements … or a lifetime of aggravation. Our powder room had a pedestal sink, and I preferred a standard vanity (hello, storage space). The fridge had a side-by-side freezer, and I’d grown fond of having the freezer component as the bottom drawer.

To my surprise, on both counts, the developer made it work, without pushing added costs onto us. Miracles do happen; you just have to request them.

4. Assume nothing

One of the biggest draws of our apartment was that it was in an elevator building. Because we were on the top floor, and because I had grown to hate navigating a stroller down a flight of stairs in my last apartment, it was a big deal. But because the building was a construction zone for most of the waiting period before closing, I didn’t realise that the developer wasn’t entirely honest about the lift access.

For some reason that still mystifies me, our elevator begins on the second floor. From street level, in order to get to the elevator, you have to go through a separate door, up a handicap-accessible chair lift, and then down a corridor to the elevator. It’s still a ridiculous hassle, and even though I remind myself that me noticing it earlier wouldn’t have changed anything (we weren’t going to back out and they weren’t going to completely rebuild an lift shaft because I was annoyed), I wish I had paid more attention to what was unfinished as much as I did what was on display.

5. Prepare for everything to get sloppier as time progresses

After our offer was approved, we were at the construction site frequently. The first visits were so hopeful – we’d see workers installing the wood flooring with expert precision. Then a few weeks would go by, and we’d pop in to see contractors studiously installing the closet shelving. A few more weeks later, and painters were priming the walls … and spilling some drops on the floor. Then, the appliances arrived, and one hurried guy who I assumed was supposed to be there dented the fridge while trying to shimmy it in place. The closer to the contractor’s deadline, the less TLC our home got from those making it. Understandable, sure, but still painful to witness.

6. Get an inspection even if it seems unnecessary

With new construction, developers have inspectors coming in daily to ensure everything is being built to code. That, coupled with the fact that all the appliances are new, might make you think it’s a waste of money to hire an inspector on your own dime. Not true. Thankfully, our inspector detected a small, persistent gas leak (that would one day rear its head in ways I try not to imagine), and it was fixed.

It’s also worth keeping in mind that most inspections will have to take place further down the line than when buying a finished home. By the time you have it with new construction, it might be too late to walk away without a sizeable financial hit if you aren’t satisfied with the findings.

7. Get every little thing in writing

It’s by scrimping and saving that we were able to afford to buy a home in the first place, so I wasn’t about to trust handshakes and verbal agreements when it came to who was paying for what. During our closing appointment, the developer’s attorney asked for a cheque for the average cost of the fridge, since we’d gone for a more expensive option. Instead, I just handed him a copy of the email that stated we didn’t have to pay any extra.

8. Accept that the house will change

With a new home, what you walk into on move-in day won’t be exactly the same as what you’re living in a year later. Houses, and apartment buildings, need to “settle”, and that only happens with time. Like clockwork, at the end of every new season, we’d notice cracks in our windowsills and along our crown moulding. Certain doors would all of a sudden be tighter and harder to open. The best advice we got to minimise these subtle but sometimes frustrating changes was to install a home humidifier and use it diligently.

9. Be flexible on timing

In life, and in home buying, it’s best to operate on the philosophy that what can go wrong will go wrong … and it’ll go wrong later than you anticipated. We’d been warned that closing dates on any type of property, new or old, can get pushed back, so we made sure that we had an extra month on our lease as padding. With homes in the process of being built, those delays can be exponentially longer. Thankfully, we were able to close and move in before our final lease was up, but you can bet we regretted not having a Plan C.

10. After close, it’s all yours

For better or worse, once you sign on the dotted line, the apartment is your responsibility. No landlords or superintendents to call when a hard-to-reach light bulb goes out. Most new-construction homes come with a one-year warranty for building-related issues – if, for instance, the lock on your back door falls right off or you get mould from a poorly ventilated bathroom (both of which happened to us). That way, you aren’t completely on the hook for every issue that bubbles up.

It’s also a smart idea to organise documents for all your appliances, fill out warranties, and get an idea of what is included in coverage, before a need arises. Our developer maintained our building warranty didn’t cover the fact that I wasn’t getting any hot water in my gorgeous, marble-tiled shower, so I had to scramble to go straight to the source on that one. And, now that the year-long window of coverage is up, our home is officially ours … and ours alone.

Posted by Kate Schweitzer - Domain (Fairfax) on 15th July, 2016 | Comments | Trackbacks | Permalink

How buying with friends can get you on the property ladder

Priced out of the real estate market but desperate to buy? More and more people are turning to friends to help them buy a home or an investment property.    

When Julie O’Donohue and her husband wanted to secure a property in a good neighbourhood of Melbourne, they discussed the idea with friends who said they would be interested in buying it with them. 

“This gave us a way of buying a two-bedroom property in a reasonable location,” says O’Donohue, who lives in a regional town of Victoria. Together, the two couples were able to purchase an older unit with large rooms in South Yarra.

O’Donohue enjoys the fact that they are building an asset and “can add value without disrupting the tenants, as the tenants are our family”.

“We have adult children and they were both paying rent which we were helping them with, so it made sense to secure a home to pay off for ourselves. They would then benefit in the long run.The friends are younger and they know their children will probably study in Melbourne, too. We see this as a 10-year plan,” says O’Donohue. 

ME Bank head of home loans Patrick Nolan says it is a favourite first-home buyer strategy “to team up with friends and family to purchase a property jointly”.

“Co-buying offers valuable advantages. By pooling resources, buyers can afford a better-quality home or a more desirable location. Ongoing costs like rates, insurance and maintenance are also more manageable,” says Nolan. 

Research by ME suggests 4 per cent of buyers have purchased with friends, but that trend looks set to increase. 

“Co-buying is becoming prevalent because of affordability,” says John Cunningham, president of the Real Estate Institute of NSW. “It’s probably now becoming one of those options that people have to seriously consider. People are looking for opportunities where they can live together at far less cost than it would be for them to actually go and buy those properties separately. It’s a smart idea. It gets them into the market.”

But, warns Nolan, despite the pluses, buying a property with someone else calls for planning. “Rather than simply hoping it will all work out, it makes sense to have a formal co-ownership agreement drafted by a solicitor. This will set out in writing how varying possibilities will be handled by everyone, from the arrival of a partner on the scene to what happens when one owner wants to sell up.”

Dr Adrian Raftery, senior lecturer in financial planning and superannuation at Deakin University, Melbourne, says there are two big risks in property ownership between friends. The first is the risk of loan default.

“Whilst you technically own only half of the property, you are liable for 100 per cent of the debt. So if your mate doesn’t stump up his or her half of the loan repayments then expect that you will have to, otherwise expect a nasty call from the bank.”

The second risk concerns what happens to the property should you die. “Do you want your half of your property to go to the beneficiaries named in your will or do you want it to pass automatically to your mate?” says Raftery. 

“You also need to consider that joint ownership may impact on future goals you may have, particularly if you want to start a family down the track. Your borrowing capacity greatly reduces. For example, when you go to borrow for another property, the bank will only assess half your asset but 100 per cent of your combined loan.” 

And what happens if you can’t live with your friend? “You may love going out every weekend and having a few beers or wines, but what happens if they are a pain to live with? Who moves out? Things can get complicated rather quickly.”

Buying with friends is not without risk, agrees O’Donohue. It is important to be clear about who is responsible for what element, she says, but on the upside “we also have a place to crash which doesn’t cost us”. 

In fact, co-buying has worked out so well for the couple that they have purchased another property with their friends that they are in the process of developing.

Posted by Sandy Smith - The Age on 4th July, 2016 | Comments | Trackbacks | Permalink

How to invest in industrial property

PROPERTY investors with an eye for extra income are increasingly looking into industrial real estate.

Buying factories, warehouses and workshops may be cheaper than you think, although property specialists warn that they come with many differences that would-be investors need to understand.

Industrial property’s income yield is higher than residential property, at about 6 to 9 per cent compared with 3 to 3.5 per cent, but comes with higher risk, says Metropole Property Strategists CEO Michael Yardney.

“When they become vacant, they are usually vacant for a long period of time,” he says. “It needs somebody with deeper pockets who can afford to hold onto it.

“It also is a much more complicated lease, usually organised by a solicitor, for longer periods of time — usually a minimum three years with a couple of options (to extend the lease).”

Like other forms of commercial property, leases are based on net rent — which means outgoings such as council rates and maintenance are paid for by the tenant. Investors also need to deal with GST, and rental income that is typically linked to inflation, which is currently low.

Many smaller industrial properties can cost between $350,000 and $500,000, below median house prices in most capital cities.

High rental returns and low interest rates are driving more residential investors into the industrial property market, says asset management company Bawdens Industrial.

Managing director Barry Cawthorn says cash flow is king, and that is what industrial property delivers.

“Astute investors are realising you can’t eat capital growth,” he says. “We are witnessing a shift towards investors purchasing industrial property in their self-managed super funds to generate an income for life.”

Cawthorn says statistics show that the average annual return of industrial property for the year to March 31 was 15 per cent.

Newspapers and websites such as realcommercial.com.au are good places to search for industrial properties, and some have handy online guides and tips.

Yardney says new industrial property investors sometimes fail to recognise that they should be getting a higher yield than they do on houses. When buying smaller properties within a complex, always check that car parking is sufficient, he says.

Buyers should look for properties that have quality tenants, a flexible layout and are close to freeways for transport.

“High ceilings are important because a lot of people stack and store.”

People nearing retirement may benefit from industrial property’s higher cash flow.

“We often recommend industrial properties or other commercial properties to clients to blend the mix,” Yardney says.

Posted by Anthony Keane - News Limited Network on 1st July, 2016 | Comments | Trackbacks | Permalink

Your Mortgage Might Be Making You Sick

With an election in the air, it is a great time to reflect on our life priorities and values. Do we vote for the right, the left, the middle, or the independents whose views can just float in the breeze? Do we vote for more money for day care, and more for health? Do we vote to reduce the tax burden on business so they can employ more people and reduce our social services debt -- more people employed means less on unemployment benefits. Or do we vote for our mortgage?

What? Vote for our mortgage? Yes, should we vote to make owning our home the top priority? Why would we consider voting to put our mortgage first?

Because many of us already do it every day, often without realising it. In fact, we even vote to put our mortgage ahead of our children and families, and it is making us sick.

Ridiculous, you say, I'd never do such a thing. My family comes first, I'd never put a house ahead of people.

That's not what I see.

As a GP specialising in mental health, I commonly see men and women feeling trapped in debt. Treating people in a mostly middle class suburb of Brisbane, the most common debt I see isn't that of living in a rental unit and not being able to pay the electricity -- though I see that sometimes too. More commonly, what I see is the distorted price all too many of us put on owning our own home -- the mortgage.
What are some of the common repercussions of such a choice?

Anxiety, stress, and depression.

Way too often I see men and women feeling trapped by their financial commitments. The women, for instance, would frequently tell me of their husband working long hours, them working full time, and having two or more children to look after. It's busy, busy, busy -- all hands on deck 24/7.

It's getting the children's lunches made, getting them up and dressed, making sure they get some breakfast into them before everyone hurries to get into the car and off to school, day care, and work... not necessarily in that order.

Then it's do shopping on the way home, have a meal planned, clean what mess you can, cook a meal, and try to take a breath after the kids have had their bath and are finally to bed. And that's just during the week.

Weekends are just as hectic; the soccer, the piano classes, the dancing or gymnastics, perhaps tennis coaching. It's go, go, go. Not even time to blink. Worse still, there is no apparent end in sight.

Suddenly the realisation hits them... I've got to do this tomorrow, and next week, and -- dare I say it -- next month, and next year. I'm exhausted, stressed. I can't do it anymore. What's wrong with me?
Worse, what's wrong with my child, or children?

Another problem I see way too often is children suffering anxiety and stress too. Many have low self-esteem, especially once they hit their teens. Their parents don't understand it, it's usually one child not coping as well as the others. They come -- quite rightly -- to seek professional help for their daughter or son. Can you fix his or her anxiety, they ask? On gentle questioning they will then share some of the hectic elements of their life. Then I sit back in amazement.

Wow, and they wonder why their child is stressed in such a household. I'd be stressed out of my brain. I'm often amazed they are coping so well, considering what is happening around, and expected of, them.

Why the low self-esteem?

There can be many reasons, but in the end it comes down to how valued we feel. How valued would you feel if everyone and everything else came first -- you were always lowest in everyone else's list of priorities? How valuable and worthwhile would you feel if no one listened to you when you needed them to, or never found the time to just be with you, one on one, sharing quality time together?

How valued do you feel when others always have something more important to do? Like pay off a mortgage?

We live in societies being sold on the dream of owning our home. Many are now struggling just to get into the market -- house prices are increasing beyond many couple's reach. Those who are already in it are often trying to own the best home in the best suburb, and mortgage themselves to the hilt to get it. This means everyone who can work must work, and as long as they possibly can so the family can 'get ahead'. But at what price to the family? At what price to the mothers and fathers, and especially the children?

Before the arrival of Europeans, the Oglala Lakota -- Native Americans of the plains of North America -- placed exceptional value in raising their children during their early, precious, years. They recognised this was the most important time in determining the character and happiness of their children, and hence success of their tribe. To this end they ensured they only had children once every six years. This allowed them to be always be there for their child when they needed them the most, when they were most receptive to learning, and needing to be shown others truly cared and valued them. For them, people were more important than property.

Is the mortgage really more important than our health? Is it worth the price of our children's mental health and self-esteem? With our focus on working longer hours, so many of our children in child care, and the lack of time we find to care for ourselves and each other, it seems to be.

Mortgages are powerful; it is rare I see families prepared to downsize, or let them go.

It's election time. What priorities will you be voting for?

Posted by Winfried Sedhoff - The Huffington Post on 29th June, 2016 | Comments | Trackbacks | Permalink

One in 10 apartments sold for a loss in March quarter: report

One in every 10 apartments in Australia sold for less than what the owner paid for it over the March quarter, new research shows. 

All capital cities across Australia, apart from Sydney, saw more than 10 per cent of apartment owners sell at a loss in the first three months of the year, according to the latest CoreLogic Pain and Gain report for the March quarter.

In total, 11.7 per cent of Melbourne apartments and 14.1 per cent of Brisbane apartments sold for a loss, while in Darwin more than a quarter of apartment sellers took a hit.

The best result for unit sellers was Sydney, where just 1.9 per cent of apartments sold at a loss. House sellers were more fortunate than apartment sellers in every capital city, apart from Sydney where 2.2 per cent of sellers reported a loss. The Sydney result for houses was still the strongest in the country.

The price falls for apartment sellers, particularly in Brisbane, may be the start of things to come, Domain Group senior economist Andrew Wilson said.

“It’s the nature of the beast, due to years of high-rise construction pushing supply ahead of demand,” Dr Wilson said.

“There’s no doubt there is weakness in prices and [it’s] no surprise capital cities, with the exception of Sydney, have shown lacklustre results,” he said.

And the majority of those that resold at a loss were investors – 8 per cent of owner occupiers and 11.8 per cent of investors who sold their properties over the quarter did so at a loss. Sydney and Darwin were the only two areas where loss-making investors made up a smaller proportion than owner occupiers.

A part of this could be the popularity of inner-city apartments with investors, HSBC chief economist Paul Bloxham said.

“On our estimates there is an oversupply in the Brisbane and Melbourne markets and we’re likely to see some continued price declines,” Mr Bloxham said.

Notably, Sydney investors have been pouring into the Brisbane market where building approvals have reached record highs and the median apartment price has fallen for seven consecutive quarters.

It would be unlikely the expected price declines in apartments would significantly affect the detached housing market and in Sydney “there isn’t an oversupply,” he said.

But the lacklustre apartment result could also due to the length of time some of the properties had been owned for. 

Homes sold at a loss across the capital cities were owned for an average 5.4 years, compared to 10.1 years for those sold at a gain, CoreLogic research analyst Cameron Kusher said.

Those sold for more than double their purchase price had been held for an average of 17.2 years.

“Property ownership, whether for investment or owner occupier purposes, should be seen as a long-term investment,” Mr Kusher said.

Capital city property owners faced fewer loss-making resales than their regional counterparts. There was an average $72,042 fall in resale price for loss making capital city properties, with the average profit achieved on a home at $294,045. For regional areas, the average loss was $60,689, while the average gain was $140,992.

“The trends in regional areas are shifting with the proportion of loss-making resales trending lower in areas linked to tourism and lifestyle,” he said.

“On the other hand, housing markets linked to the resources sector are generally seeing an elevated level of loss-making resales after housing market conditions in many of these locations have posted a sharp correction.”

Across the capital cities, there were $187.0 million in losses with an average of $72,042 per loss-making resale compared to $10.2 billion in profit at an average of $294,045.

Posted by Jennifer Duke - Domain - The Age on 29th June, 2016 | Comments | Trackbacks | Permalink

Should you use a trust to buy a property?

When Janet Schier purchased a block of land earlier this year, she didn’t name herself as the title holder. Rather, she bought the property via a trust, subsequently building two sets of duplexes via additional trust structures.

For Ms Schier, the use of multiple trusts was the right choice because of tax minimisation and asset protection; but in reality, it’s a complex process.

And while most people are aware of trusts and the general reasons for their use, many have only a vague understanding of how they work, and under which circumstances they become beneficial.

A trust is an arrangement where a person or company (the trustee) holds assets (property) in trust for the benefit of others (the beneficiaries).

“So before you purchase a property via a trust, you need to establish a trust deed,” says chartered accountant Brett Hetherington. “The deed sets out the rules for establishing and running of the trust. Once the trust has been established then the trustee can go about including or stating the trust will be the owner of the property.”

According to Mr Hetherington, there are a number of reasons for utilising a trust to purchase property, such as asset protection, holding assets for the benefit of children or other family members and avoiding capital gains tax and stamp duty within families.

There are various forms of trusts including unit trusts, discretionary or family trusts as well as hybrid trusts.

A unit trust is where beneficiaries – or unit holders – purchase a fixed interest in a trust by purchasing units.

“A unit trust is useful where parties desire fixed ownership, and the ability to claim interest on a loan to purchase units as a tax deduction,” says Mr Hetherington.

In a family or discretionary trust the trust has the discretion to distribute income and capital to beneficiaries. Beneficiaries do not have a fixed interest but a right to trust assets depending on the trustees desire to distribute income or capital or both.

“A discretionary or family trust is a great investment structure for families as an intergenerational tool, assets can be handed down to children or grandchildren without incurring capital gains tax or stamp duty.

“The trustee has the discretion as to what family members can receive income and/or capital distributions.

“The fact you are a beneficiary of a trust does not mean you have any ownership in trust assets.”

A hybrid trust has the workings of both.

While trust structures do offer benefits, Mr Hetherington says there are some common mistakes to be aware of, such as thinking that you can distribute losses and not structuring the investment to take advantage of tax benefits.

It’s also important to be aware that tax or legal changes might require an amendment of the trust deed.

“Interestingly, professionals agree a trust structure could be an appropriate vehicle to save for retirement other than superannuation,” says Mr Hetherington.

Posted by Nicole Madigan - Domain (Fairfax) on 13th June, 2016 | Comments | Trackbacks | Permalink

Costly mistakes that will blow your renovation budget

Renovating or extending a home can be a significant investment and there is too much at stake for you to get it wrong. Unfortunately, the dream too often turns into a stressful and expensive nightmare. The good news is that it doesn’t have to be that way. Cost control and preventing budget blow-outs starts from the very beginning. It is influenced by the team you choose to work with, the brief you formulate, the decisions you make, the documentation you prepare, the way you engage and deal with your builder and the level of discipline you maintain throughout the construction process.

Here are seven common reasons that I see cause renovation budget blow-outs and a few tips to help you avoid them.

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1. Poorly established scope of works
One of the tricky things about managing a renovation or extension and controlling costs is knowing where to start and where to stop. If you do not understand that properly, the risk of your costs blowing out during the build will increase significantly. However, understanding what needs to happen in your own mind is only part of the solution, as once you’ve got it clear in your head you’ll then need to be able to communicate it clearly to the trades or builder. This is where you will be relying upon your documentation set. Your documentation set should include a set of professionally prepared plans and an Inclusions Specification, which is a document that itemises all of the inclusions, fittings and finishes that are missing from the plans (have a look at the ProSpex tool here).

It is critical that the builders quoting the project have access to this information to ensure that the quotes are accurate, thorough and easily comparable. One good way to ensure that the builder’s understanding of the project is consistent with yours is to ask them to present their own written Scope of Works and to also document what is excluded from their quote. It’s a bit like reverse engineering, as sometimes the clearest way to highlight what is included is to detail what is excluded. This will draw your attention to things that the builder sees that you have not considered and is a great way to iron out any grey areas. Eclectic Bathroom by Studio 74

2. Demolition is expensive!
Demolition is a process that is inherent in any renovation or extension project and it is labour intensive. It can also be like opening a can of worms because it is hard to know exactly what to expect once you start your building project; and that is why demolition can often lead to additional costs. Before a wall is removed, you must ensure that it is not load bearing, otherwise you will need to make an allowance for restructuring the wall.

Where possible, try to minimise the amount of demolition involved and, if it can’t be avoided, make sure you get professional advice about how to deal with removing load bearing walls.

3. The knock-on effect
One of the reasons that renovation projects have a habit of leaking money is because of the knock-on effect, where one decision will have an impact on several others down the line. For example, the decision to remove a non-load bearing wall may seem like the obvious thing to do to open a room up. However, that wall is also connected to the floor, the ceiling and two other walls; and once the wall is removed, you will then be required to repair and patch the gaps that the wall leaves behind.

This is where the knock-on effect can send costs spiralling upward, as you will also need to repaint the walls and ceilings where the repairs have been completed and, because you don’t want it to look like you’ve only painted the patched walls, you’ll need to repaint not only the entire room (which is now one big room because you removed the wall) but also the hallway that the room is now openly connected with. This scenario is played out again with the impact the removed wall will have on the flooring and at a much greater expense if you are trying to retain timber flooring, for example. These costs simply may not be avoided to complete the project as you would like, but you will need to think about it holistically and be realistic about the costs involved so that you can budget appropriately. Contemporary Kitchen by CplusC Architectural Workshop

4. Electrical oversights
Electrical work is one area that often experiences a blow-out in the budget. Unless they are advised otherwise, builders will often only make allowance for the bare minimum requirements of electrical items in their quotes, which may only be one light and one power point per room. Often there will be no allowance for light fittings either, just the batten holder with a globe. If you are not aware of this then you are left exposed to the additional costs of more light points and power points (you will get charged per point) as well as the costs of the actual light fittings.

To rub salt into the wound, any additional expenses over and above what was quoted may also attract a builder’s margin of up to 20% on top of the additional costs. This is another example where using an Inclusions Specification will ensure that the quotes being prepared by builders or trades are thorough and consistent with your expectations. Once again, it’s about being properly prepared and informed so that you can be realistic about the costs.

Browse thousands of lighting options for your home Contemporary Exterior by Vibe Design Group

5. Not making realistic allowances
Too often I hear stories where people have been attracted to a competitive quote only to be disappointed by the outcome and shocked by the final cost of the project. This is often the result of clients not having enough input into the quotes that are prepared, or not properly understanding what is included in them. Unless a builder is given instruction otherwise, they will be left to make their own allowance, for potentially dozens of items, of their own accord. It is important to understand that the allowance is just that; a dollar figure attributed to the cost of a particular item. Quite simply, if the builder has allowed $300 for a toilet and the toilet you select is $800, then you will need to pay the $500 difference as an extra, or variation, as they are known. You will also be exposed to the requirement of paying a builder’s margin of up to 20% on top of the difference for the variation.

When assessing quotes from builders, it is important that you understand all of the allowances contained in them. You will probably also find that the quotes you are assessing are all presented quite differently, which can make it difficult to evaluate and compare ‘apples with apples’. So, unless you have prepared properly, you’ll probably need to ask lots of questions to give you clarity around what is actually included in the quote. Ideally, you should also spend some time visiting showrooms so that you have a better idea about what allowances are realistic for you. The best way to communicate all of these important allowances to builders is by using an Inclusions Specification, which keeps everybody on the same page and will become part of your contractual documentation, providing a clear understanding of your requirements and expectations. Contemporary Living Room by ORBIS Design

6. Not thinking about what’s going on outside
If your project involves any sort of extension, you will also need to consider the impact it will have on the external spaces surrounding the home. We spend a lot of time pouring over floor plans and kitchen layouts, but this is sometimes at the expense of attention we should be giving to the spaces around the home. For example, retaining walls are often overlooked as drawings are developed; which means that the builder will not be aware of any requirement to include them in his quote. Unfortunately they won’t build themselves, so at some point this will become an additional cost you will need to pay for.

You may also need to factor in refinishing of external walls. Rendered surfaces have become popular and people often take the opportunity of an extension to render the entire house to modernise it. Again, the cost to render and paint the whole house will be much more than just the new extension, so you will need to communicate your expectations to the builder to ensure that all of the costs are accounted for and your budget doesn’t blow out.

Look to thousands of home exterior photos for inspiration

7. Surprise surprise…
The most common cause for budget blow-outs in renovation and extension projects is the element of surprise. There are any number of items that can pop up to catch even the most experienced designer or builder, like upgrades to electrical work, remediation of previous work done and structural upgrades; all of which generally can not be assessed until the project is underway. The sobering reality is that a renovation or extension project is inherently more likely to run over budget than building a home from scratch, so it is sensible to keep that in mind and allocate a contingency to your budget so that you are financially prepared. The size of the contingency required will vary greatly depending on how thoroughly you are prepared (see earlier points) and the type of project you are doing.

For a simple extension to a conventional home, a contingency of 5% may be ample if you are well prepared, however, if you are dealing with a much older heritage property, or a terrace-style dwelling, a contingency of 30% may not be enough if you haven’t prepared properly. Preparation is the key to minimising the impact that these surprises will have, as is working with a designer and builder who are familiar with the type of project you are planning. Their experience will help to foresee and minimise any significant blow-outs.

Posted by Houzz Australia (Fairfax) on 10th June, 2016 | Comments | Trackbacks | Permalink

Ten things to check before buying a home

Buying a home is one of the biggest decisions you will ever make so how can you be sure everything will go to plan?

Here are 10 things to check before you sign the deal.

1. Research the local area

“Purchasing a house should never be an impulse buy,” says Bessie Hassan, a money expert at financial comparison website  Finder.com.au. According to recent data from the website, 33 per cent of first home buyers wish they had looked around more before they purchased their property and 22 per cent regret the area in which they bought.

“You should thoroughly research the suburb you’re contemplating. Is there considerable crime in the area? Has the local council employed restrictions that prohibit you from building extensions in the future? What amenities are available that will cater to your requirements?”

2. Find out why the property is on the market

Ask the agent why they are selling, says Anna Porter, principal and senior property adviser at property investment specialists, Suburbanite. “Try to dig into the story a little but do it in a chatty friendly way, not a confrontational way. This might reveal more than you think.” 

3. Make sure your finance is in place

“One of the pieces of advice I give most often when people tell me they are going to buy a house is to get their finance sorted before they even go on  Domain.com.au,” says Ben Munro Smith, licensed real estate agent at McGrath Estate Agents, in Balmain, Sydney.

“I was once at an auction where the property sold to a young couple who had only seen the home for the first time that week. They had the deposit so could exchange at auction, but they later realised their borrowing capacity couldn’t get them the loan for the full amount. In the end, thanks to the bank of mum and dad, the property sale went through, but save yourself the hassle and call a mortgage broker first.”

4. Check out the neighbours

“There is no reason why you can’t knock on the neighbour’s door to have a chat and get their feedback on the area,” recommends Porter. “Remember that you could be living next door to these people for a long time. If they are lunatics, it would be better to know before you move in. A bad neighbour can really impact your quality of life.”

“Neighbours doing extensions can be a reason for people to move” says Munro Smith. “Sometimes there is a falling out, sometimes it’s a gentle push that it might be time to look elsewhere, sometimes they may just hate the finished product.”

5. Visit the property at different times

“I once sold for a client who was selling after only a short amount of time in the property,” says Munro Smith. “When I asked what the reason was for the sale, she confided that she had only seen the property once before the sale, on a Wednesday. She fell in love with it being across the road from a park and had big dreams of walking her dog there on weekends and enjoying the peace and quiet. What she didn’t realise was that there was children’s sport in the park at the weekends and so the street was bedlam during those times. She never had the chance to enjoy the serenity she had hoped for when she bought it.”

6. Get legal advice

“This is simply a must when signing a contract in NSW,” says Porter. “Always get a conveyancer or solicitor to review the contract.”

7. Get a building report, strata report and pest inspection

Have a building and pest inspection even if the property is new as not all properties are built to the same quality, says Michelle Amarant, director of Amalain Buyer and Vendor Advocates in Melbourne.

“We always recommend a building report for all purchases, even units,” agrees Porter. “This is because the builder can find issues that owners and tenants may not know exist. Like failing waterproofing or leaks in the roof. If the property occupants don’t know the problem exists, they will not report it to strata and it therefore will not be in a strata report. A building inspector can also lend commentary to issues that could arise in the future from poor design, problems starting to present that could become costly if not fixed or bad workmanship that will deteriorate.” 

8. Check the surrounding zoning

“This will help you know if a property behind you or next to you is zoned for high-rise units or something else that you may not like to live near,” says Porter. “If you are buying a house in a nice quiet street and next year a seven-storey unit block goes up over the back fence, will that be a deal breaker? The surrounding zoning can give you some indication if this is at all possible in the near future.”

9. Check for proposed arterial roads

Finding out if there are any major road proposals for next to or near you is very important, says Porter. “Imagine buying your dream home, only to find out that a four-lane freeway is being built over the back fence in 12 months. There are a few ways you can find this out. You can check the RTA website, the local council website, call your local council, check the zoning (arterial roads will be zoned differently and you may see a corridor of rezoned homes – this can be an indication of future planning intentions), and in some instances you can see it on online maps like Google maps or  Whereis.com.” 

10. Check for environmental hazards

Always, always, always check for environmental hazards that could impact the property, says Porter. “Known hazards can impact insurances as well as values. If your property is in a known flood zone, land subsidence area or bushfire zone to name a few, this could mean that your insurance may not cover you for these disasters. Or they could significantly premium load your policy to get full cover and that could cost you thousands of dollars extra per year.”

Posted by Sandy Smith -- Domain (Fairfax) on 6th June, 2016 | Comments | Trackbacks | Permalink

Property investors should not be so negative, but look to positively geared property instead

IT IS the tax break that could define a Federal Election, but some property industry insiders say truly savvy investors aren’t focusing on negative gearing.

Instead, many are taking a more positive approach. Those investors hoping to stay financially safe while building wealth though property portfolios are using positive gearing as a tactic.

Just like you wouldn’t run a small business at a loss, experts who live and breathe residential real estate investment say a portfolio built on negative gearing is no way to climb the property ladder either.

Bessie Hassan from financial comparison site finder.com.au said to create a positively geared low risk investment portfolio, investors need to do their homework.

“Positively geared properties are hard to find in areas where property prices are high compared to rents, so it suits someone who has time to select the right property,” she said.

With the bulk of Australian property investors being city-based residents, most are tempted to buy in metropolitan areas they know well, but Ms Hassan said those seeking positively geared investments needed to look further afield.

“For investors who don’t mind slower long term growth, a positively geared property is often located in regional areas (rather than capital cities) where capital growth is generally slower,” she said.

Michael Xia, 31, took that tack when he started building his own property portfolio. Although the first two homes he bought were in northern Sydney where he grew up, Mr Xia’s third and subsequent property purchases were mostly located in regional areas where positive gearing is more achievable.

More than a decade and 14 properties later, Mr Xia has quit his day job in online marketing and launched his own mortgage broking business, Mortgage Channel, where he encourages other investors to concentrate on positive gearing.

“I actually think negative gearing is really dangerous and ultimately it’s a losing strategy. Who in their right mind will go into business knowing they’ll lose money?” he said.

“People who are negative gearing are hoping to gain a lot through capital growth, but capital growth by definition is speculation. No one knows what Sydney will do within the next six to 12 months, or Melbourne, or Brisbane for that matter. So you’re just gambling with the future. And I think as an investor you need to speculate less and invest more.”

Bryce Holdaway, buyer’s agent, property adviser and co-host of the Lifestyle Channel’s Location, Location, Location agreed that investing shouldn’t be a gamble.

“There’s a difference between being an investor and being a speculator. An investor doesn’t go to the casino and put everything on red or black whereas a speculator at times does,” he said.

“They rely on the growth from this one going to fund the growth on the next one. They say ‘I’ll borrow any growth out of the portfolio to service any short fall’ and it just becomes this spiral of credit that’s funding the portfolio and that’s a pretty white knuckle ride, I don’t recommend that to anyone.

“I always say growth is what you get out of the market and rent is what keeps you in the market.

“It’s got to be conservative, it’s got to come back to cashflow, how much cashflow do you have at the end of the month? That’s the first question I ask a client, because that’s going to determine what we buy them.”


Put simply, it’s really the opposite to negatively gearing. Whereas a negatively geared property is an investment that actually leaves the property owner in debt at the end of the financial year (albeit with a Federal Government tax break in hand) positively gearing a property investment means the owner is left with a profit in their pocket.

Positively geared properties are actually giving the property owner an income stream, so at the end of each week, month, or year, the owner has money left over that they can reinvest into that existing mortgage, or put towards a portfolio, save or just spend.


The Labor Party is heading into the July 2 election with the promise of reforming negative gearing in order to “put the Australian dream of home ownership back within the reach of middle and working class Australians” according to the ALP’s website.

Opposition Leader Bill Shorten’s policy is to limit negative gearing to new housing from July 1, 2017 however, all investments made before that date would not be affected by the change.

As for it being a huge election issue, Mr Holdaway said the reality of how most investors used negative gearing had been misunderstood.

“What’s always forgotten in these arguments is that properties are only negatively geared in the early part and then they moved to break even. And with interest rates being so low they move to break even pretty quickly, then they go positive,” he said.

It’s at this moment, Mr Holdaway said, that the government is then making money out of Australia’s passion for property investing.

“When these properties do turn positive, then they’re positive to the tax payer. Investors have got to pay tax on it, but in the early accumulation phase there is a tax advantage to help them get ahead,” he said.

“I mean that’s the whole reason we do it in the first place, then it actually adds to the government’s tax collection profits. No one talks about that, they only talk about the headlines around negative gearing squeezing people out.

“The majority of the people that I see in our business are middle Australians, not rich CEOs. Really, the portfolio’s goal is to go positive as quickly as possible, no one wants to make a loss forever.”

And neither did Mr Xia, especially considering he was walking away from his career.

“I know that personally I would never have left my day job if I’d had a negatively geared portfolio, it would have been too much of a risk. If my mortgage broking business didn’t take off then what would have happened to my portfolio?” he said.

“But the fact that it was returning around $30,000 to $40,000 a year, if everything fell to place then at least I’d have that to fall back on.”


The best candidates for positive gearing are those people who want to get into property investing, but don’t have excess income to service extra mortgage repayments.

The tactic is considered an almost “set and forget” type of property investing as the homes tend to pay for themselves.

Ms Hassan said the real bonus with positive gearing was the income stream that turns into a safety net.

“Cash-flow positive properties can help subsidise personal income if the owner was to lose their job or have a change in circumstances such as a marriage breakup,” she said.

“Surplus funds generated from a positively geared property is a passive income stream that could help with living costs.

“If expenses such as insurance, rates, body corporate fees and water bills don’t have to be funded from other income — that keeps a lot of money in the investor’s pocket each year.”

“Also, the extra income can increase your attractiveness to lenders for additional loans.”

Mr Xia said it the positive approach beat out the negative route almost every time.

“Negative gearing traps you in a kind of rat wheel race because if you’re not creating an income and you can’t service those mortgages then you can’t really escape. If you go down the positive gearing path then it won’t happen over night, but over time you can escape that because you’ve got a recurring source of income,” he said.

“Let’s say you’ve got an average Australian earning about $80,000 a year and they go and buy one or two investment properties. My fear for those people is if they lose their job, if they’re negatively geared they’re going to lose their portfolio.

“If they’re forced to sell at the wrong time, that’s when they crystallise the losses. But if they’re positively geared and they’re not taking money out of their pocket then even if they lose a job the portfolio is all there.”

Posted by Kirsten Craze - News Limited Network on 29th May, 2016 | Comments | Trackbacks | Permalink

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