There seems to be no end in site for home buyers and renters who are looking for accommodation.
Victoria is currently facing a significant challenge in its housing market. Despite various efforts by the government and private sector to address the issue, the supply of housing in Victoria is failing to meet the increasing demand, leading to a worsening crisis.
Factors Contributing to the Crisis;
Population Growth:
One of the primary drivers of the housing supply crisis in Victoria is the state’s rapid population growth. Melbourne, has consistently ranked among the fastest-growing cities in Australia. The population influx, has put immense pressure on the housing market.
Land Use Regulations:
Strict land use regulations and zoning laws have also played a significant role in constraining the housing supply. Lengthy and complex approval processes for new developments further delay the construction of new homes.
Construction Costs and Labor Shortages:
Rising construction costs and labor shortages have exacerbated the housing supply issue. Building costs have surged by approximately 40% over the last 4 years. Furthermore, a shortage of skilled labor in the construction industry has slowed down the pace of new housing developments.
Impacts of the Housing Supply Shortage
Affordability Crisis
The most immediate and visible impact of the housing supply shortage is the affordability crisis. Rents have soared and property prices have also increased significantly in many areas, although not as widespread as other states.
Increased Homelessness
The lack of affordable housing has also contributed to a rise in homelessness. More individuals and families are finding themselves without stable housing, leading to increased demand for emergency accommodation and social services.
Economic Consequences
The housing crisis has broader economic implications as well. High housing costs can deter skilled workers from relocating to Victoria, impacting the state’s economic growth and competitiveness. Additionally, the financial strain on households due to high housing costs can reduce disposable income and consumer spending, further slowing economic activity.
The worsening housing supply crisis in Victoria is a multifaceted problem that requires a coordinated and comprehensive response. Addressing the root causes, such as population growth, regulatory constraints, and construction challenges, is essential to ensure that the state can meet the housing needs of its residents. Through thoughtful planning, investment, and policy reform, it is possible to mitigate the crisis and create a more equitable and sustainable housing market for all Victorians.
The state government is seeking to unlock more vacant land as it looks to build more than two million new homes over the next 30 years.
Councils have been invited to demonstrate where new builds could be located as part of a consultation process with the Allan government on draft housing capacity targets.
Under the current housing statement, the government is aiming to boost new builds in established suburbs by 70 per cent, and by 30 per cent in outer growth areas.
While the current policy looks to address Victoria’s housing crisis we are well short of where we need to be and without real progress the pressure on housing prices and rents will be significant.
In this months newsletter we provide our regular housing updates, a property management update, some recent purchases and our tip of the month relating to the importance of depreciation schedules.
Insights
Source: Corelogic 2024
CoreLogic research director, Tim Lawless, said extremely low levels of available supply across the strongest markets provide the best explanation for the difference in growth rates.
“The number of properties available for sale in Perth and Adelaide remain more than -40% below the five-year average for this time of the year while Brisbane listings are -34% below average,” Mr Lawless said.
Other highlights from the CoreLogic Monthly Housing Chart Pack include:
- CoreLogic estimates the combined value of residential real estate rose to $10.7 trillion at the end of May.
- The pace of quarterly growth continued to tick higher in May, with values up 1.9%, up from a recent low of 1.1% over the three months to January.
- Despite the uptick in quarterly growth, annual growth continued to ease from 9.4% over the year to February, to 8.3% over the 12 months to May.
- Over the three months to May, lower quartile dwelling values (3.0%) rose at more than twice the pace of upper quartile values (1.2%), with growth conditions continuing to be skewed toward the more affordable section of the market.
- Perth dwellings once again led the capitals in value growth, up 6.1% in the three months to April and up 22.0% over the past year.
- New listings are trending higher than the historic five-year average and higher than this time last year, driven by above-average vendor activity in Sydney and Melbourne in particular.
- Despite new listings tracking above average, overall listings levels have remained fairly subdued, due to a strong rate of absorption from sales. Across the states and territories, Victoria stands out as having significantly higher total listings than this time last year.
- Compared to this time last year, annual national estimates are up 7.1%, but have eased slightly from an annual peak of 505,623 in the 12 months to April.
- The national median time on market was 31 days in the three months to May, which is steady on this time last year. Beneath the relatively stable national figures, days on market across Perth dropped to just 10 days (from 15 days this time last year), while homes are taking longer to sell in Sydney, Melbourne and Hobart.
- The combined capital cities clearance rate has gradually trended lower since early February, suggesting slightly weaker selling conditions amid high interest rates and a weakening economic environment.
Property Management Update
The annual change in national rents held steady for a fourth consecutive month at 8.5% in May. Underneath the headline figure, the annual pace of growth in regional rents has accelerated to 6.9% (up from a recent low of 3.7% in the year to September 2023), while the pace of growth in capital city rent values has slowed to 9.1% (down from 10.6% in April 2023).
Gross rental yields continued to expand in May to 3.75%, up from a revised 3.74% in April. This is the highest national result since October 2019 (3.77%). While gross yields have seen a significant improvement from recent lows, it is likely that highly leveraged investors’ net yields continue to be weighed down by high interest rates.
We are excited to bring you the latest updates for property management across Victoria.
We are currently in the thick of winter, however the rental market is still experiencing low stock rates, and advertised properties are being leased at a great pace!
At Buyers Advocate, we make leasing your property our priority and commence open homes before the renters have even moved out. This ensures we minimize vacancy periods, attract serious renters by showcasing a lived in home, and a smooth transition that allows for any necessary maintenance or repairs to be scheduled conveniently in-between.
MINIMUM STANDARDS
There have been recent discussions that have outlined new changes to minimum standards for rental properties in Victoria, planned to take effect in 2025. These standards stipulate that any rental property under a new lease agreement must include ceiling insulation, draught proofing, energy-efficient heating and cooling systems, and only electric appliances for any new appliance installed. The proposed regulations are expected to be finalized by October 2024 to commence the following year. We will be keeping our rental providers up to date once this bill has passed. Please reach out to Rachel or Liz if you were interested in any further advice relating to this.
PM TIP OF THE MONTH
Residential Rental Providers –
Regular Maintenance keeps your property in great condition and addresses any issues promptly. This not only preserves the value of your property but also keeps your renters satisfied and happy.
Renters –
Do you have contents insurance? A Residential Rental Providers insurance doesn’t cover renter’s own belongings. Contents Insurance can provide you help to cover the cost of repairing or replacing your belongings, furniture, appliances, electronics if they are lost or damaged in an insured event.
If you are unhappy with the level of service you are receiving from your current Property Manager, have a chat to Liz or Rachel It may be time for a change. If you would like a confidential chat, please contact us (03) 9818 4499.
Property Purchases
We have had some great results for our clients in 2024. Below are a couple of examples.
Investment – Sale
Our repeat clients returned, again, this time to buy a rural property due to an employment change. Our clients had viewed the subject property on the Saturday morning, with a number of other buyers expressing an interest in the home also, BA knew this property would be popular, to both families and investors alike. After a quick phone call on the Saturday afternoon to engage our service, BA jumped into action. Sunday, the usual day spent away from real estate related activities, was spent doing the necessary due diligence required in order to catch the other buying competition on the hop; BA had secured the property by lunchtime the next day.
Home Buyer – Burwood East
Buyers Advocate was able to secure this fantastic townhouse at auction for a lovely young family. This property has a number of unique features which makes it stand out from the crowd. It is 1 of 2 with no owners corp, a large 4 bedroom with a study nook at the front and two living spaces including a separate retreat upstairs. The neighbors completed the development some years ago and continue to live in one and sold this one. This was a great sign and was fairly obvious given the quality of the finishes that it was built to live in, not to generate a quick profit. We were able to secure this with some good quality bidding that enabled us to secure the property $60k lower than our conservative valuation. A great outcome and a happy home for our clients that they can grow into over time.
Home Buyer – Boronia
After searching and missing out on a number of properties over the previous months, our clients came to us due to our experience and time available, to give the job in securing them their home, the time it deserves. A lovely three bedroom home on a sizeable portion of land with no further work to be done. The Auction commenced with some competition but plateaued shortly thereafter with the highest bid being held by BA. After the half time break, which takes place often at Auction, the Auctioneer came back out and put the property up for competition one more time. Managing to extract one more bid from an older couple, BA sprang back another bid to again hold the highest bid. The property was formally passed-in to BA, where we were able to negotiate a brilliant outcome for our clients, well under their expectation.
Investment – Portarlington
This was a rare negotiation, down on the Bellarine peninsula, that lead to a very successful outcome. Our clients came to us via referral and BA jumped at the assignment based on the clients needs. There were several properties that may have been options but there were also obstacles more often than not, with small land sizes, covenants in place, easements, or town planning restrictions, that may have hindered the overall objectives of the client. This property received a price reduction after a period of time on the market and BA jumped on it. Securing the property inside the newly quoted price range, with an offer more enticing to the Vendors through strong questioning technique, than our competition buyer put forward. Deal done.
Vendor Advocacy Service
Did you know we offer a vendor advocacy service to assist clients achieve the best result in selling their home. The service facilitates the sale of your property in conjunction with a sales agency. All fees, sales methods, and campaign are negotiated in consultation with you.
Starting with independent advice on the property value, we will also;
- Help select only the most competent, senior and professional agency team to represent you
- Advise on the different methods of sale and marketing campaign
- Advise on any offers that are received and also attend the auction whilst the selling agent conducts the auction
- At all times provide you with complete independent advice and manage the campaign with the upmost professionalism
Once the campaign is underway Buyers Advocate will assist with the communications with the agent and provide a sounding board for any questions or issues you may have during the campaign.
Tip Of The Month:
Make certain to obtain your tax depreciation schedule
As we approach the end of the financial year it is important to obtain a tax depreciation schedule from a qualified quantity surveyor.
Did you know that 70% of investors in Australia don’t buy a tax depreciation schedule for their investment properties?
Depreciation schedules are one of the most effective but underused tools available to a property investor to maximise their returns.
Depreciation is a non-cash deduction that allows you to claim a portion of the cost of your property over its useful life. To claim depreciation, you need to order a depreciation schedule from a quantity surveyor.
As a building gets older, its structure and the assets within the building are subject to general wear and tear. In other words, each year, the value decreases and thus, depreciates.
The Australian Taxation Office allows property investors, who generate income from their investment property, to claim the property depreciation as a tax deduction.
What sets a depreciation claim apart from other rental expense tax deductions for your investment property is that it is a non-cash deduction – you don’t have to spend any money to claim it.
The structural component of a building usually depreciates at a fixed rate over a long period of time—usually 40 years. In contrast, plant and equipment assets depreciate according to their effective lives as they generally wear down faster than the building itself.
There are two main types of property depreciation: capital works deductions (Division 43) and plant and equipment (Division 40) deductions.
Investors can claim a capital works deduction for the building itself, as well as plant and equipment depreciation deductions for assets within the building, such as furniture, fittings, and appliances.
If you’re looking at ways to get a tax depreciation schedule, the best way is to contact a quantity surveyor.
The schedule is valid for up to 40 years, which means you can claim tax deductions each year with the same report, and even the quantity surveyor fees are tax deductible.
