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REIANEWS ISSUE 29: NOVEMBER 2013

ASIC WARNS AGENTS O N SELF-MANAGED SUPER FUNDS

ALSO IN THIS ISSUE H A I L T H E P RO P E RT Y M A N A G E R I S N O L A WA S T I N G TA X PAY E RS ’ M O N E Y ? F I RS T H O M E B U Y E RS LO C K E D O U T M I N I S T E R A N D R E W S ’ H O U S I N G S P E EC H


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Mr Peter Bushby REIA President

PRESIDENT’S REPORT

WELCOME FROM REIA’S PRE SIDEN T Welcome to the November edition of REIA News. Where has the year gone? The Standing Committee on Federal Financial Relations (SCFFR) is due to meet shortly to vote on the latest version of national licensing of the real estate profession. However, we have been told the decision could be made in the first quarter of next year. This comes after two years of lobbying by REIA against the denigration of our profession through the National Occupation Licensing Authority’s proposed reforms. We urge all state and territory Treasurers to vote ‘no’ to the current model. We were not surprised that the COAG Reform Council’s (CRC) report, Lessons for Federal Reform illustrated that 15 out of 32 key

performance indicators show little, no or negative progress of reform.

REIA will continue to advocate for

What is important in interpreting this assessment of reform is the underlying detail, the reasons behind such a poor outcome. Many of those reasons are explained in our document “Vote NO!”

improve the ratio and enable and

It’s time to go back to the drawing board and talk to those directly affected by proposals to ‘dumb down’ their skills and workplaces, through REIA, which represents around 80% of Australia’s agents, auctioneers and property managers. Real estate has asked to be moved the second tranche of licensing with valuers, surveyors, conveyancers and builders so that the matters raised can be adequately addressed. Also, high on the REIA agenda is the state of play with Australia’s first home buyers. Disappointing news again with the proportion of first home buyers in the number of owner-occupied housing finance commitments falling to 12.5 per cent in September which is the lowest figure since data began to be collected in July 1991.

the re-introduction of measures to assist first home buyers to take the first step to home ownership. Another issue of concern is the chatter around negative gearing, which REIA has always supported because it helps in the provision of rental accommodation. The myth that negative gearing is a plaything of the wealthy also needs to dispelled. The majority of taxpayers with a negatively geared property earn less than $80,000 a year. Good news though with the $2,000 cap on deductable education related expenses being removed by the Abbott government after the Scrap the Cap campaign by REIA and other organisations. REIA will continue to work hard to advocate on your behalf regarding these and other issues affecting the real estate profession. Mr Peter Bushby R EI A P R E S I D EN T

Follow us on Twitter @REIANational


This article is brought to you by REIA Manager Policy, Jock Kreitals Jock can be contacted at jock.kreitals@reia.com.au

COVER STORY

ASIC WARNS AGENTS O N SELF-MANAGED SUPER FUNDS

The SMSF sector is currently around $500 billion or one-third of Australia’s total superannuation funds. It is also showing the greatest growth. An improving property market has seen increased interest in buying property as part of an SMSF. ABS data shows that in June 2013 there were nearly 510,000 SMSFs, an increase of 36 per cent in the last five years. Residential property holdings totalled $17.5 bn.

With this increasing popularity has come the attention of regulators, financial planners and commentators. In a recent speech ASIC Commissioner Greg Tanzer expressed concern about the aggressive marketing of geared property investment strategies to SMSFs. He said that ASIC was worried by the increase in the number of SMSFs that were being targeted by unscrupulous operators. He added that the regulator was taking a close interest in the issue The Governor of the RBA has also engaged in the debate on SMSFs. The RBA is not comfortable about the growing use of property in selfmanaged superannuation funds, which are gaining popularity in Australia. The minutes of the September RBA Board meeting state that “property gearing in self-managed superannuation funds was one area

identified where households could be starting to take some risk with their finances” and the rising risk “would be closely monitored”. ASIC has found that increasingly advice provided to those contemplating a SMSF has been poor. ASIC has also said that some real estate agents were offering commissions or benefits to financial advisers for recommending investors to use an SMSF to purchase the real estate agents’ properties. In a publication entitled SMSFs: Improving the Quality of Advice to Investors1 ASIC indicated that it would increase the level of compliance activity so as to ensure that: • only those investors for whom an SMSF is suitable are advised to establish an SMSF. ASIC does not want to see an influx of trustees »» article continues

1 Report 337 April 2013: http://www.asic.gov.au/asic/pdflib.nsf/LookupByFileName/rep337-published-18-April-2013. pdf/$file/rep337-published-18-April-2013.pdf


who are ill-equipped to cope with the responsibilities and obligations inherent in running an SMSF; and • SMSF investors receive good quality advice and services from gatekeepers in relation to SMSFs. ASIC has said: A person provides a financial service (i.e. financial product advice) if they recommend that an existing or proposed trustee/member of an SMSF purchase real property through their SMSF. This is because the vehicle through which the underlying investment is made is an SMSF and an interest in an SMSF is a financial product. It does not matter for licensing purposes that the underlying investment (real property in this case) is not a financial product. A person who carries on a business of providing financial services in

2 Report 337 Page 54

Australia is generally required to hold an Australian Financial Services licence. For the avoidance of doubt, we note that this does not mean that a real estate agent will ordinarily require an AFS licence. A real estate agent who does not specifically market to SMSFs, or carry on a business of recommending that SMSFs be used to purchase real property, is not required to obtain an AFS licence.2 Agents must be aware that if they provide what falls within the definition of ‘financial product advice’ they may face penalties under s911A (1) of the Corporations Act 2001 up to $34,000 for an individual ($170,000 for a corporation) or imprisonment for two years or both. ASIC has indicated there are no plans to require a real estate agent to have a financial services licence

and REIA is working with ASIC to ensure that agents and agencies do not contravene corporations law. REIA has been proactive in engaging ASIC as it is imperative that the professionalism of agents is maintained without imposing draconian obligations and that a large market for property is maintained. ASIC has both written to REIA and the REIs and released a Press Release on the issue which can be seen here. Further developments will be reported in future editions of REIA News.


MINIS T ER FOR S OCIAL SERVICE S, KE VIN ANDRE WS’ FIR S T MA JOR SPEECH ON HOUSING

The Hon Kevin Andrews MP MINISTER FOR SOCIAL SERVICES

Addressing the National Housing Conference in Adelaide, the Minister for Social Services outlined the Government’s approach to housing and marked the commencement of a new dialogue between the housing sector and the Abbott government. Stressing that the Coalition would listen, Mr Andrews said his approach would focus on developing housing policy through consultation and it would focus on delivery and outcomes. The Minister acknowledged a national housing problem saying that “as a nation we do not build enough private dwellings for our growing population.” Mr Andrews proved the point saying that despite the fact the population has grown by 45%, or by 7.1 million people, since the mid-1980s, nationally on average, the number of new private dwellings produced annually has remained stable at around 150,000. Mr Andrews said that “there has been an absence of national leadership by

government in driving a solution to the housing supply crisis that is looming.” The Minister called renewed construction development a “worthwhile antidote” at a time of slowing mining investments and rising unemployment. Mr Andrews said, however, that as the Commonwealth Minister he had little direct control over land release and development and called upon the governments of states and territories to take the lead in the supply of housing, e.g. to drive more regulatory reform in housing, to streamline development processes, to cut red and green tape and to adopt the Commonwealth’s lead to pursue a strong plan for deregulation. Importantly, the Minister said that “the states and territories need to closely look at the taxes levied on our nation’s development.” Highlighting the importance of maintaining high levels of home

ownership in Australia, Mr Andrews slammed comments that suggested taxes on the benefits of home ownership. Contributing to the discussion on private investment in housing, Mr Andrews said, “It is important that we continue to attract a variety of investment portfolios into housing, specifically private rental. This in turn supports economic growth. Addressing inefficiencies in the market will help improve the viability of investing in housing and attract more private investment to the sector.” The Minister noted that if the Government balances the budget it will help create the environment for greater investment in housing. Among other issues addressed by the Minister at the Conference were the National Affordable Housing Agreement, National Rental Affordability Scheme and homelessness.


PROFESSIONALS INVESTING AS MARKET SURGES

Professionals Real Estate Group has scored a trademark coup and is ramping up its internet presence as it moves to further grow its position in Australia and New Zealand while the region’s property sector surges. The real estate network, which is one of only a few membership groups in the market, has welcomed another eight Australian agencies to its stable since June and it is looking is to encourage more principals to move away from existing privately owned franchised networks. Professionals Global chairman Ian Cornell said Professionals was in a strong position to grow its presence within Australia and it was investing heavily in the network’s future.

affairs; real estate affairs, services for providing food and drink and temporary accommodation. Mr Cornell said the real estate chain had also invested heavily on the network’s websites and its internet presence.

National Breast Cancer Foundation CEO Carole Renouf; Amanda Lynch, CEO of REIA; and Professionals Global chairman Ian Cornell

“With the huge growth in the use of tablet devices in recent years, we have made a major shift in focus when it comes to the design of web platforms,’’ said Mr Cornell. “Desktop users are now no longer the focus.”

“Franchisees in Australia are always looking for better options than the standard model and our model, which is focussed on providing real value for money, is very attractive because it provides for more upside.

“With the new Professionals websites, tablet and mobile users became the initial focus, with the idea that ‘if it works on a tablet, it will work on a desktop’.”

“Under our model the agents only pay their membership fee, which gives access to a whole suite of service offerings, and our members enjoy the full benefits of their achievements when they grow.”

The group has secured Australian trademarks for the “Professionals” brand in classes covering trademark clauses 35, 36, and 43.

Mr Cornell said the move would mean users switching between devices such as a tablet to a desktop computer, would always experience the same websites, with no new or different navigation tools or layouts.

Those classes include advertising; business management; business administration; office functions, insurance; financial affairs; monetary

He said the membership group was aggressively looking to target agencies who were tired of dealing with the privately owned franchisors.

Mr Cornell said the recent surge in property sales across Australia was good news for agents and for the Professionals group. The Professionals is a big supporter of breast cancer research, so far raising $2,185,625 to fund projects. For information go to www.nbcf.org.au and the new Professionals site is www.professionals.com.au


This article is brought to you by REIA Chief Executive Officer, Amanda Lynch

HAIL THE PROPERTY MANAGER

Think of Cirque de Soleil. Property managers are jugglers, trying to keep several balls in the air at the same time – all care and all responsibility.

Many property managers feel the strain of needing to keep all parties satisfied, being the meat in the sandwich so to speak. Landlords believe tenants have too many rights and tenants are too demanding. Tenants want things fixed and problems attended to and landlords keep a weather eye on whether the rent levels are at the market rate. And with 95% of property managers women, they may also be juggling children, a partner and the school run at the same time! But whatever way you look at it, property management is the bedrock of the real estate industry. They may feel unappreciated at times but they are the heroes and heroines and should be awarded Orders of

Australia – having saved many real estate companies from going under during the property downturn in the aftermath of the GFC. Historically, property management has tended to be overlooked by some real estate agencies which have been sales-focused. With an increasing role to facilitate accommodation for a significant and growing part of the community and the enormous value held in rental properties managed by real estate agents, this should not be the case. The need for shelter is a basic human requirement and putting a roof over someone’s head or providing a home for a family is an important service to society. The role of providing housing to those who either cannot afford to purchase their own home or choose to stay in a landlord-tenant arrangement is left to the private rental market, which is the second largest source of housing in Australia. The total value of rented properties managed by agents nationally is estimated at $600 billion. According to 2011 Census data, private rented dwellings made up 29.6 per cent of the total occupied private dwellings, providing housing for 26.8

per cent of Australians. Real estate agencies manage 54.3 per cent of the rental market. These are 1,247,851 dwellings providing housing for a wide variety of households in Australia. The Australian housing market has been subdued over the past couple of years. Buyers have lacked confidence and subsequently activity on the market slowed down. During these years, however, many agencies managed to adapt to market conditions using the resources the business already carried, namely, rent rolls. The average rent roll of an Australian real estate agency increased from 375 in 2009 to 436 in 2011. And it is hardly unexpected. REIA estimates the annual amount of rent collected by property managers in Australia is over $25 billion. Rent roll guarantees reoccurring revenue while sales commission income can be variable and volatile. Property management is a very real driver of revenue and business growth. Of agencies who reported revenue growth in 2011, 78 per cent cited property management revenue growth. A correlation between »» article continues


profitability in agencies and the size of agencies’ rent roll has been found: • Agencies generating 20 per cent plus in profit manage on average 558 properties; • Agencies generating 10‑19 per cent in profit manage on average 449 properties; • Agencies generating 1-9 per cent in profit manage on average 439 properties; • Agencies operating at a break‑even or loss manage on average 285 properties. For the last 40 years, the home ownership rate in Australia has been hovering around 70 per cent. However, after four decades of stable levels, home ownership is declining and first home buyers are finding it increasingly difficult to enter the housing market. Over the five years to 2011, home ownership declined by 1.1 percentage points to 67 per cent. The drop was evident across all states and territories and was most pronounced in the 35 to 54 age group. The National Housing Supply Council, in its 2012-13 report, shows that it seems certain that the rate of home

ownership will drop further. Despite interest rate cuts, first home buyers are still finding it hard to access the market with stamp duty as a barrier, and high numbers of Gens Y and Z are still living with their parents (no longer are granny flats for granddad or grandma!) or in rental accommodation. Subsequently, the role played by the private rental market has become more important, prompting extensive research on the Australian private rental sector. In its recent study, the Australian Housing and Urban Research Institute (AHURI) shows that the sector has undergone fundamental changes in recent decades, affecting the nature and experience of private rental demand and supply. AHURI found that the position of the private rental sector within the Australian system, its character and circumstances, as well as the role it plays in the lives of tenants who occupy private rental housing, are significantly different than in previous decades. These days, we see a growing proportion of one and two-parent families with dependent children and a relative decline in the proportion of

single person households. In addition, there has been an increase of the middle-aged Australians living longterm in the private rental sector. No longer making the transition from parents’ home to home ownership, many Australian families now reside in the private rental sector. A third of all private renters are long-term renters (33.4 per cent), defined as renting continuously for periods of 10 years or more. This is a substantial increase from a figure of 25 per cent in 1994. Notably, long-term private renters now outnumber public housing renters and make up 7.4 per cent of all Australian households. These findings confirm the significance of the private rental sector and the importance of property managers in operating of it. There are challenges but there are also opportunities ahead. While the outlook for sales is brighter than it has been for the last couple of years, a strong focus on property management is still likely to be the top strategy for increasing profits in the near future.


Luna fantasy at the REISA Awards

Highlights of the

SA

2013 REI State/Territory Awards for Excellence

WA

NT

Brendon Habek (left) from ‘Real Estate 88’ is presented with the award for Residential Salesperson of the Year, by WA Attorney General, The Hon Michael Mischin MLC at the REIWA Awards

REINT CEO Quentin Kilian joined 450 people for a night at the ‘Moulin Rouge’ REINT Awards

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ACT President Michael Kumm with Mark Terracini of Raine & Horne Commercial Canberra - Hall of Fame Commercial Sales Person at the REIACT Awards

Tas

ACT Chris McGregor of McGregor First National presented with Life Membership of the Real Estate Institute of Tasmania at the REIT Awards

Vic

Highlights of the Gary Peer and Associates celebrate at the REIV Awards

2013 REI State/Territory Awards for Excellence


SHADOW MINISTER FOR SMALL BUSINESS

The Hon Bill Shorten MP L E A D ER O F T H E O P P O S I T I O N A N D S H A D O W M I N I S T ER F O R S M A L L B U S I N E S S

New Labor leader, Leader of the Opposition and Shadow Minister for Small Business, William Richard “Bill” Shorten has represented Maribyrnong in the Australian House of Representatives since 2007 and served in a number of ministerial positions in the Rudd and Gillard governments, including Minister for Education and Minister for Workplace Relations. Prior to entering Parliament, he was the Secretary of the Australian Workers’ Union for six years. At the election on 24 November 2007, Shorten was elected to the House

of Representatives as the Labor Member for Maribyrnong. It was speculated that with his high public profile and general popularity within the Labor Party, he might be given a front-bench portfolio; however, when asked about the possibility, Prime Minister-elect Kevin Rudd said that he believed parliamentary experience was essential when designating frontbench portfolios. On 29 November Rudd announced that Shorten would become the Parliamentary Secretary for Disabilities and Children’s Services. As the parliamentary secretary,

Shorten pushed hard for a National Disability Insurance Scheme, something which was later to become a policy of the Labor Government. Immediately before the June 2013 Labor leadership spill, Shorten announced that he would back Kevin Rudd as leader against the incumbent Prime Minister, Julia Gillard; and would resign from Gillard’s cabinet should she win. Rudd subsequently won the leadership of the Australian Labor Party and appointed Shorten with additional cabinet responsibilities as Minister for Education, with carriage of the Gonski school funding reform package. Following the defeat of the second Rudd government at the 2013 federal election, Shorten announced his candidacy as the Leader of the Labor Party in a contest with Anthony Albanese. Shorten subsequently gained 63.9% of the party caucus vote and 40.8% of the rank-and-file members’ vote, weighted equally to give Shorten a 52.02% victory. Shorten’s wife Chloe is the daughter of the Governor-General, Quentin Bryce.

Council of Small Business of Australia (COSBOA) CEO Peter Strong, REIA CEO and COSBOA Chair Amanda Lynch and Opposition Leader Bill Shorten. The REIA CEO, Amanda Lynch met with the Opposition Leader Bill Shorten who is also the Shadow Minister for Small Business. The meeting provided an opportunity to brief Mr Shorten on issues of concern such as penalty rates, superannuation, general small business industrial award issues, and our concerns over national licensing


SHADOW MINISTER FOR HOUSING

Senator the Hon Jan McLucas S H A D O W M I N I S T ER F O R H O U S I N G

The newly appointed Shadow Minister for Housing, Jan McLucas has represented Queensland in the Senate since 1999. From 1979 until 1989, she worked as a primary school teacher in state schools in Queensland, and was active in the Queensland Teachers’ Union. She began public life with her election as a Cairns City Councillor in 1995, and then was elected to the Australian Senate representing QLD in 1998. The Labor Party under Kevin Rudd won government at the 2007 election

and Ms McLucas was appointed Parliamentary Secretary to the Minister for Health and Ageing. She was re-elected in the 2010 election and was sworn in as Parliamentary Secretary for Disabilities and Carers in the original Second Gillard ministry. In March 2012 she was appointed to the additional role of Parliamentary Secretary for the Prime Minister and as the Minister for Human Services until the September election which saw the ALP defeated.


REIA ARTICLE

IS NOLA WASTING TA XPAY ER S’ MONEY?

The Real Estate Institute of Australia (REIA) is greatly concerned at the way the National Occupation Licensing Authority (NOLA) is spending its taxpayer funding. NOLA is conducting a round of interstate visits which appear to be both unnecessary and beyond the role the Authority should have.

should not be a ‘player’ in the field ‘championing’ particular outcomes.”

“The process for national licensing is at the stage where the state and territory treasurers will be deciding on the matter later this year. Consultation at the jurisdictional level, which includes input from NOLA, has concluded. NOLA’s involvement at this stage is totally unnecessary and would appear to amount to no more than lobbying which is inappropriate for NOLA,” said REIA President Mr Peter Bushby.

“Again, it was inappropriate for an administering agency to speculate on what an incoming government may or may not do. It was even more inappropriate that a public servant should be making such comments whilst in caretaker mode.”

‘NOLA’s role is to establish a national occupational licensing system for specific occupations across Australia if and when the states and territories agree to do so. It

“These actions by NOLA come on top of it stating in a media interview during election campaign that the incoming Coalition Government will not change Labor’s implementation of national licensing for real estate agents.”

“NOLA’s actions are eroding support for national licensing and more generally for initiatives developed through the COAG Council process. They should be sticking to what they were set up to do and not wasting some of their 2013/2014 budget of $8.4m on inappropriate travel and activities,” concluded Mr Bushby.


REIA ARTICLE N AT I O N A L L I C E N S I N G LESSONS MUST BE HEEDED

REIA is not surprised that the COAG Reform Council’s (CRC) report, Lessons for Federal Reform illustrates that 15 out of 32 key performance indicators show little, no or negative progress.

This separate reform, which seeks to harmonise conduct requirements is being undertaken by the Legislative and Governance Forum on Consumer Affairs.

REIA president Peter Bushby says, “One of the most common reasons put forward by the National Occupation Licensing Authority (NOLA) for national licensing, is the capacity to allow labour to move around the country in response to opportunities in the market place. Yet for the real estate profession this has been grossly overstated as there are licensees in each state who live in another jurisdiction – the highest being 33% of ACT licensees. Surely this suggests that the current system does not impair the mobility of a licensee who wishes to work in another state or territory.”

“So it was disappointing that the meeting last week of Commonwealth, State, Territory and New Zealand Ministers responsible for fair trading and consumer protection did not have harmonisation on the agenda.”

“If delays in other areas of reform on COAG’s agenda are similarly attributable to valid reasons, reform will not occur until they are satisfactorily addressed,” concluded Mr Bushby. Real estate has asked to be moved the second tranche of licensing with valuers, surveyors, conveyancers and builders so that the matters raised can be adequately addressed.

“The Decision RIS admits that the benefits from improved labour mobility are difficult to quantify and that benefits are based on ‘scenarios or assumptions’ and, it appears have been grossly overestimated.” “Another fact not considered is that whilst jurisdictions continue to operate under different conduct legislation, the full benefits of national licensing won’t be realised. This is why REIA has called for the conduct harmonisation process, which stalled in July 2011, to be reactivated.”

Small Business Minister Bruce Billson and REIWA President David Airey discuss national licensing


REIA ARTICLE

N E G AT I V E G E A R I N G MUST NOT BE MEDDLED WITH

The Real Estate of Australia (REIA) says it agrees with the new Grattan Institute Renovating Housing Policy report that a major overhaul of housing policy in Australia is needed, but differs in what needs to be done. REIA President Peter Bushby says, “We strongly agree with the report’s recommendations to eliminate stamp duties, however it’s essential negative gearing be retained in its current form for the purpose of property investment.” “REIA has always supported negative gearing because it helps in the provision of rental accommodation. Negative gearing for property investment is complementary to the goals of the Government’s Housing Affordability Fund (HAF) in addressing the supply of rental accommodation.”

“To remove it would show that we haven’t learnt anything from history. When negative gearing was abolished in 1985 it had disastrous consequences for the property market and for people trying to rent. Rents rose 37% across Australia and by 57% in Sydney. Thankfully, negative gearing was reinstated in 1987.” “It is far too short sighted to link investor interest in housing to negative gearing alone. Negative gearing is only one of a range of factors that contribute to the level of investment in property. Other factors include interest rates, availability and accessibility of finance, share market performance, the unemployment rate, housing supply and consumer confidence.”

“The myth that negative gearing is a plaything of the wealthy also needs to dispelled. The majority of taxpayers with a negatively geared property earn less than $80,000 a year.” “Findings in the Renovating Housing Policy report are important and let’s hope they assist in kick-starting a debate on housing policy. With the new government, expectations that industry will be involved in finding workable solutions to these old issues are high.” REIA’s housing policies can be found here.


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CONTACT REIA MANAGER COMMUNICATIONS ANDREA CLOSE ON 02 6282 4277 OR AT ANDREA.CLOSE@REIA.COM.AU FOR FURTHER INFORMATION.


LJ HOOKER HAS ANNOUNCED NEW P R O P E R T Y M A R K E T I N G F E AT U R E S

Guy Innes from Property Training Solutions and Liveability Real Estate Specialists Peta Swarbrick (ACT) and Robert Paridis (NSW)

Dr Chris Reardon, principal author Your Home

People seeking homes with reduced running costs, increased comfort and connection to a vibrant community experience are driving a new trend in real estate. At a recent design and building industry briefing in Sydney recently LJ Hooker CEO Georg Chmiel identified sustainability and liveability as one of the five trends impacting real estate.

the sustainable design, building and construction, and assessment industries. We can then use our unique real estate perspective in how we appraise and market these properties.”

“This trend is being felt on the ground as our agents report that some buyers are now asking to look at power bills at open homes,” he said.

LJ Hooker has spent almost three years developing an understanding of the drivers for this new market, researching consumer sentiment and working with a range of knowledge partners from the sustainable design, building and construction, and assessment industries.

“We believe it’s important that we, as real estate agents, are active participants in this market alongside

»» article continues


The results are the Liveability Property Marketing Features™ and The 17 Things™ Checklist, created to meet a need in the market to recognise property features that go some way in addressing the reduced running costs and increased comfort potential of a property. The checklist covers such things as insulation, window systems and energy and water efficiency devices. “These property marketing features and the special appraisal checklist have been developed for agents by agents,” Mr Chmiel said. “This is not a rating system but rather a real estate property marketing perspective: to enable an agent to simply identify features of the property at the time of sale. Working with specialist advisor Dr Chris Reardon, principal author of Your Home Technical Manual, and RTO Property Training Solutions, the LJ Hooker sustainable real estate team developed the Liveability Real Estate Specialist training which underpins this initiative.

Liveability Real Estate Specialists are trained to: • identify The 17 Things™ in a property • appraise and list properties with these features • know why the features are important to liveability potential • know how to market these properties responsibly In addition, to be eligible to do the training their office must be signed up to LJ Hooker’s 3Ps Program, which helps take control of running costs by monitoring the use of paper, power and petrol in the office. Liveability Real Estate Specialist training and the Liveability Property Marketing Features™ have, to date, received endorsement and letters of support from the following organisations, institutions and member groups: Institute for Sustainable Futures, University of Technology Sydney, Bond University, School of Sustainable Development, Master Builders Green Living, Archicentre, Alternative Technology Association,

Building Designers Australian, Australian Building Assessors Association, Clean Energy Council. LJ Hooker’s Head of Sustainable Real Estate Cecille Weldon said it’s about health, efficiency, comfort and connection to the community. “Consumers want to get some sort of control over their energy use at home so we’re looking at property differently and we’re now able to provide that information in a more comprehensive way,” she said. “The bottom line is it’s all about empowering owners, investors and renters so they can be more energy efficient, live comfortably and be in control of their running costs. It’s about having a better home.” For all enquiries contact liveabilitytraining@ljhooker.com


INDUSTRY ARTICLE HOW COMPE T IT IVE IS YOUR BUSINE S S? John Goddard

Most business owners and their staff would not normally consider reading the latest report from the World Economic Forum on global competitiveness. Why would you? Well I am currently ploughing through the 560+ pages to see what messages it contains for Australian businesses as I have a personal interest to better understand how to operate an effective and profitable real estate business. A report that details 148 countries performance according to a welldefined set of measures is bound to contain buckets of data, but paging through the document I have extracted vignettes of value to any real estate professional wanting to understand parallels for their business. For clarity I have used direct quotations from the report and I thank the “World Economic Forum and the reports principal editor Professor Klaus Schwab.” The number one competitive country is Switzerland closely followed by Singapore, Finland and Germany. The report confirms that “the vast majority of the top 10 most competitive economies share strength in innovation and a strong institutional framework.” The editors specifically report that Switzerland retains the number one spot due to factors including: • “Innovation • Labour market efficiency

• A business sector that offers excellent on the job training • Citizens and private companies are proactive in adopting the latest technologies” You may wonder where Australia sits as a nation. Well this year we dropped one place to 21st, only to be pipped by New Zealand who jumped five places to 18th. Please don’t get too depressed by this as the ratings were close. Switzerland scored 5.67 on the 0 to 7 scale, New Zealand a 5.11 and Australia a 5.09. So what does this really mean for a real estate or property management business and should we care? Let’s remember that every business contributes to the overall Australian economy and therefore our international ranking. Businesses that employ less than 19 staff (a typical real estate office) make up 90% of all Australian business that employ staff. Of course there are other factors that affect our global competitiveness that business owners have little opportunity to impact, namely our institutions and day to day government policy. But if you focus on what you can do; why not start asking some questions in the office such as: • What are we currently doing to improve the way we manage our team?

• What investments are we making this year to improve our business? • What is our plan for staff development and learning? • Do we have a plan that everyone in the business understands? • Do we have goals and key performance measures that drive us to do better? Good business owners and their key staff understand their responsibilities for daily and weekly control of the business. Sometimes they also need to take more time to think about the big picture and reflect on what’s happening in their market. At Rockend we know the importance of developing a balanced plan that considers our customers, our staff, our business processes and our financial goals. Balance is key, as is an eye for the now and the future.

John Goddard is General Manager Marketing and Sales at Rockend. He was Rockend CEO from 2004 to 2012. He is a Chartered Engineer with a BSc (Hon) in Industrial Engineering and an MA Research Methods. John has led Rockend through a period of significant change to become the clear market leader in property and strata management software solutions.


Changing software is easier than you think. Call us to find out how.

www.rockend.com.au | 1300 657 700


This article is brought to you by REIA Research Officer, Evgeniya Hawthorne Evgeniya can be contacted at evgeniya.hawthorne@reia.com.au

L O N G -T E R M R E N T E R S

Australia

69.5

Austria

51.6

Luxemburg

69.3

Denmark

51.6

Canada

68.9

Germany

41.0

US

68.7

Switzerland

38.4

Italy

67.9

Source: http://www.oecd.org/eco/growth/evolution%20of%20 homeownership%20rates.pdf

Figure 1 (following) shows a downward trend in home ownership from 71.4% in 1994-95 to 67.5% in 2011-12. Further, over the same period, the proportion of Australian households owning their home outright has fallen by 10.9 percentage points from 41.8% to 30.9%.

2011-12

54.8

2009-10

France

2007-08

70.7

2005-06

UK

2003-04

55.4

27.0 2002-03

66.0

Netherlands

37.0

2000-01

Finland

71.7

47.0

1999-00

83.2

Belgium

57.0

1997-98

Spain

67.0

1996-97

rates in selected OECD countries

PROPORTION OF HOUSEHOLDS, TENURE AND LANDLORD TYPE, %

1995-96

T A B L E 1 Aggregate homeownership

F I G U R E 1

1994-95

For the last 40 years, the home ownership rate in Australia has been hovering around 70%. However, after four decades of stable levels, home ownership is steadily declining. No longer making the traditional transition from parents’ home to home ownership, many Australian families now reside in the private rental sector.

Owner without a mortgage Owner with a mortgage Owner with or without a mortgage Source: ABS, Housing Occupancy and Costs, 2011-12

With falling rates of home ownership, the role played by the private rental market has become more important. The proportion of households renting from the private landlord has increased significantly over the last decade and a half from 18.4% in 199495 to 25.1% in 2011-12 (ABS, Housing Occupancy and Costs, 2011-12). High housing costs leave renters little left to save towards the deposit and further delays home ownership. The recently released 2013 Mortgage Choice Future First Homebuyer Survey

found that 31.8% of respondents would continue renting longer than desired to save for larger deposit. On average, households in private rental spend $347 a week on housing, or 19.7% less than households owning their home with a mortgage. However, due to lower incomes, housing costs as a proportion of gross income for these households are the highest across all tenure and landlord types. Table 2 (over page) shows that on average, renters with a private landlord spend 20% of their gross income on housing. »» article continues


T A B L E 2 Housing costs as a proportion of gross income by selected household characteristics 1994–95 1995–96 1996–97 1997–98 1999–00 2000–01 2002–03 2003–04 2005–06 2007–08 2009–10

2011–12

Owner without a mortgage

%

3

3

3

3

3

3

3

3

3

2

3

3

Owner with a mortgage

%

18

19

19

18

17

17

17

18

19

18

18

18

State/territory housing authority

%

17

17

18

17

18

18

18

19

18

19

19

19

Private landlord

%

20

20

20

20

19

19

20

19

19

18

20

20

Total renters

%

19

19

19

19

19

19

19

18

19

18

20

20

All households

%

12

12

12

12

12

12

13

14

14

13

14

14

Renter

Source: ABS, Housing Occupancy and Costs, 2011-12

As a result, both the number of households renting long term and their proportion in the total number of households, rise. The Australian Housing and Urban Research Institute (AHURI) has found that a third of all private renters are long-term renters (33.4%), defined as renting continuously for periods of 10 years or more. This is a substantial increase from a figure of 27% in 1994. AHURI found that the position of the private rental sector within the Australian system, its character and circumstances, as well as the role it plays in the lives of tenants who occupy private rental housing,

are significantly different than in previous decades. These days, we see a growing proportion of one and two-parent families with dependent children and a relative decline in the proportion of single person households. Furthermore, there has been an increase in middle-aged Australians living longterm in the private rental sector. The study discovered that long-term private renters experience lower rates of financial satisfaction than all private renters combined or homeowners. Importantly, long-term renters have significantly lower rates of satisfaction about feeling part of

their local community than other private renters or other tenure groups overall. These findings confirm the social benefits of home ownership that we have written about previously. Given older renters spend the largest proportion of their gross income on housing costs compared to households of any age group or tenure type, the problem of ageing in the private rental market needs to be addressed and the market’s transitional role should be reinstated.


This article is brought to you by REIA Chief Executive Officer, Amanda Lynch

FIRST HOME BUYERS ARE BEING LOCKED OUT

The proportion of first home buyers in the number of owner-occupied housing finance commitments fell to 12.5 per cent for September, the lowest on record. Recent changes to the First Home Owner Grant (FHOG) in most states and territories have added to the uncertainty and impacted on the activity of first home buyers in the market. As part of the Intergovernmental Agreement (IGA) on the Reform of Commonwealth/States Financial

FIGURE 1

Jul-2013

Aug-2012

Oct-2010

Sep-2011

Nov-2009

Jan-2008

Dec-2008

Feb-2007

Apr-2005

0.0 Mar-2006

0.0 May-2004

50.0

Jul-2002

5.0

Jun-2003

100.0

Aug-2001

10.0

Oct-1999

105.0

Sep-2000

15.0

Nov-1998

200.0

Jan-1997

20.0

Dec-1997

250.0

Feb-1996

25.0

Apr-1994

300.0

Mar-1995

30.0

May-1993

350.0

Jul-1991

35.0

Jun-1992

The Australian residential property market has recently been showing signs of improvement. Investors and changeover buyers are being drawn back to the market following interest rate cuts and the positive outlook for housing in many centres. However, first home buyers are being totally left out of the equation due to a number of reasons – stamp duty, the size of deposit required and the ability to save for it, unemployment and underemployment concerns.

FHBs, % of all dwellings financed FHBs, average loan, $’000

Relations signed in June 1999, all states and territories agreed to provide uniform financial assistance to Australians who are buying their new or established first home through the introduction of the First Home Owner Grant. According to the recently released QBE Lenders’ Mortgage Insurance’s (QBE LMI) 2013 Mortgage Barometer Report, 84% of first home buyers

believe property prices are close to reaching or are above what they can afford and 69% worry they will never be able to afford their own home (compared to 24% of all respondents). First home buyers spend 23% of their gross income to cover housing costs and of all first home buyers, 82.1% buy established homes. However recent changes to the FHOG will force more purchasers to decide against their preferences and buy new dwellings.

»» article continues


Table 1 adjacent shows recent changes to the First Home Owner Grant.

TA B L E 1

FHOG for established homes

Two out of three first home buyers in NSW and Queensland surveyed by the QBE LMI’s indicated the new policies made an impact on their purchase intentions.

New South Wales

Ceased on 30.09.2012. Grant of $15,000 for new homes

Victoria

Ceased on 30.06.2013. Grant of $10,000 for new homes

Queensland

Ceased on 10.10.2012. Grant of $15,000 for new homes

South Australia

Reduced to $5,000 from 22.11.2012 to end on 30.06.2014. Grant of $15,000 for new homes

In a recent Mortgage Choice survey, 31.8% of respondents said they will continue to rent longer than desired to save for the required larger deposit. Tenants in the private rental market pay 20% of their gross income towards housing. This is the highest level among all other tenure groups.

Western Australia

Reduced to $3,000 from 25.09.2013. Grant of $10,000 for new homes

Tasmania

To end on 30.06.2014

Northern Territory

Grant of $12,000 if the home is an established home in the urban area; otherwise - $25,000

Australian Capital Territory

Ceased on 31.08.2013. Grant of $12,500 for new homes

Data from AHURI, the Australian Housing and Urban Research Institute, says long-term private renters make up 33.4% of all private renters – a significantly higher figure than 27% in 1994 – and that long-term renters have significantly lower rates of satisfaction with feeling part of their local community. Of course there’s nothing wrong with renting if that is your choice, but for more and more young Australians wanting to buy their first home, choice is not even an option.

FIGURE 2 I M PA C T O F F H O G C H A N G E S O N I N T E N T I O N T O B U Y

28%

27% 20%

19% 13%

Considering a different locaon

Considering a smaller property

Considering buying something else and upgrading

Will need to borrow (more) money from family/friends

Considering a larger loan


Chris McGregor

FIABCI AUS T R ALIA REPORT

So it’s November and each year I’m stunned by how quickly time flies. Before we know it, it will be Christmas.

Sheehan from Victoria, John Garland (WA), John Sexton (SA), Marnie Ralph and yours truly from Tasmania.

In December, Robyn Waters, Kevin Sheehan and I will be heading to the winter meetings in Dublin at the Clyde Hotel in Ballsbridge. The Irish Chapter have organised a welcome reception and farewell dinner and I have been informed that Ireland has a temperate climate, resulting in relatively mild winters. The mean daily temperature in December is 6-7 degrees Celsius, so we Tasmanians and Victorians should feel right at home and I am looking forward to again meeting up with the FIABCI Presidents and delegates from across the globe.

On the agenda will be FIABCI office bearer opportunities, World Congress promotion, liaison with kindred associations and reporting to the wider membership.

In other business, the FIABCI Australian Chapter AGM will be held by teleconference on 26 November. Office bearers will remain the same as they have a two year commitment. Robyn Waters, Phillip Webb, Kevin

Membership will be due soon and we as a committee are looking forward to our current members staying on board and encouraging new members as well, to network with leading professionals worldwide and attend world class events. Membership is steadily growing and we are delighted that the Directors and CEOs of our REIs are becoming members as well. We really do appreciate their support. Best wishes Chris McGregor P R E S I D EN T • F I A B C I AU S T R A L I A N C H A P T ER


wealth

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Work out what portion of your salary you can contribute to super. Any extra can give your balance a real boost.

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INDUSTRY UPDATE Industry news from around Australia

Harcourts CEO CEO Harcourts Victoria, Sadhana Smiles, has been named 2013 Telstra Victorian Business Woman of the Year. In addition to being the overall winner, Sadhana took out the Private and Corporate Sector Award, having been shortlisted amongst six other finalists. The Telstra Victorian Business Women’s Awards program was established to recognise and reward the incredible achievements of business women across the country. In addition to her role as CEO Harcourts Victoria, Sadhana is the sum of many parts, with her personal and professional acumen a result of factors including: • Founder of Not-for-Profit organisation, Links Fiji, where she focusses on testing for cervical cancer, diabetes and high blood pressure in areas of epidemic need across Fiji (her country of origin) • Winner of multiple industry awards including the 2007 PricewaterhouseCoopers Franchise Woman of the Year • Mother of two as well as seven adopted Fijian children • Recently published author of management, recruitment and training book “Did you have them @ hello?”

Asbestos awareness November is Australia’s first national Asbestos Awareness Month with the plan to urge all Australian’s to ‘stop playing renovation roulette’ in a campaign to fight the current wave of asbestos-related diseases caused by inhaling dangerous asbestos fibres while renovating or maintaining homes. Don’t play renovation roulette Australia! Visit asbestosawareness.com.au to

learn where asbestos might be in your home and how to manage it safely because it’s not worth the risk!

Strong outlook Respondents to the 31st API Australian Property Directions Survey have predicted a strong outlook for residential property across Sydney, Melbourne and Brisbane, but say the commercial property market in these three cities has come to a halt. The survey, conducted by the Australian Property Institute (API) NSW Division, found that the residential property market is furthest along the upswing in Sydney and Melbourne in comparison to other property sectors. It is also performing well in Brisbane, however the industrial property market is further along the cycle in this city. Tyrone Hodge, API NSW President, said the majority of respondents are confident the residential property market will continue to surge ahead. “Respondents to the survey saw this improvement in the residential property market continuing across all cities in the next two years, while 70 per cent also believe that the changing Australian dollar will have a positive impact on foreign investment in Australian property,” said Mr Hodge. The outlook is less positive for the commercial property market, with survey results indicating the market has been at a standstill for the last year.

A tale of four cities In its Perennial Perspective monthly investment update, Perennial Investment Partners published an article comparing housing markets in Sydney and Auckland and outlining fundamental long term changes happening in New York and Shanghai.

A Tale of Four Cities lists constrained credit growth and prudence of Australians among the reasons for a housing boom in Australia to be doubtful. The thought of a bubble induced by non-recourse SMSF borrowing is named by the article “a bit fanciful” due to the requirement of large deposits, high rates and substantial set up fees. The article mentions the International Energy Agency’s forecast that the US will be the largest oil producer in the world by the mid 2020’s and will have achieved energy independency by 2035. With regard to the Chinese economy, the article says that it is changing radically, moving into services and increased imports as its massive growing middle class continues to expand and consumption levels slowly increase to developed country levels. To access the article, click here.

Extra super Saturday REIV predictions that ‘Super Saturday’ – the weekend auction frenzy that precedes Melbourne Cup would deliver strong results were exceeded. Saturday 26 October accounted for 797 auction sales, the highest figure recorded in one day. Another record was broken, with over $ 914 million worth of property sold by auction hat weekend. Nearly one billion dollars’ worth of property sold by auction over a single weekend is an amazing result, said Enzo Raimondo, Chief Executive Officer, REIV. In total 1460 properties were sold over 26-27 October, with 1064 going under the hammer, yielding a clearance rate of 73 per cent.


MAKING NEWS General national news

New Australians’ interpreting service Licenced real estate agencies operating in eligible areas of new settlement are now able to register with the Translating and Interpreting Service (TIS National) to access free phone interpreting services until 30 June 2015. The service may be used to communicate with Australian citizens and permanent residents on any private residential property matter such as residential tenancies and purchases. The expanded real estate agencies’ pilot allows eligible real estate agencies to register to access TIS National phone interpreting services free of charge when communicating with non-English speaking Australian citizens and permanent residents. The Pilot is designed to assist non-English speaking humanitarian entrants and newly arrived permanent residents to independently navigate the private residential property market. An evaluation of the initial extended pilot indicated that it had successfully met its objective of assisting non-English speaking, newly arrived permanent residents and humanitarian entrants independently engage with real estate agencies. As a result, free telephone interpreting services through TIS National have now been expanded to more licenced real estate agencies operating in areas of new settlement throughout Australia.

Global wealth Zurich-based Credit Suisse bank released its 2013 Global Wealth Report aiming to provide the most comprehensive study of world wealth. The report says that the average annual growth rate in Australia between 2000 and 2013 has been 13 per cent. Excluding the factor of the exchange rate appreciation, Australian wealth has grown on average by 3.3 per cent per annum since 2007.

According to the report, Australia’s wealth per adult in 2013 is USD 402,600, the second highest in the world after Switzerland. Furthermore, its median wealth of USD 219,500 is the highest in the world. Compared to the rest of the world, very few Australians have net worth below USD 10,000. The proportion of those with wealth above USD 100,000 is the  highest of any country – eight times the world average. At USD 294,100 real assets compose 59 per cent of gross household assets – the second highest level in the world after Norway. The report explains this high level with a large endowment of land and natural resources as well as high urban real estate prices.

discrimination in the workplace related to pregnancy at work and return to work after parental leave, as well as leading practices and strategies to manage these challenges. The National Review is consulting all relevant stakeholders to ensure that we gain an in-depth understanding of the concerns of relevant stakeholders including industry and employer groups, community organisations, unions and affected women and men. The National Review team is currently conducting consultations around the country as well as creating an opportunity for employers to provide input into the National Review.

Expensive business

The National Review will be conducting the following consultations with employers in the coming weeks:

Australia has four of the 10 most costly cities in the world for business travel, and the strong domestic currency is only part of the reason. Concur general manager Michael Eberhard says it is as much about the cost of accommodation and other travel expenses as it has been the powerful Australian dollar. Concur looked at dining, entertainment, ground transport and lodging expenses in cities around the world. Brisbane was the most expensive at $US547 a day, mainly because of accommodation costs. Sydney and Perth were ranked third and fourth, respectively, while Melbourne was seventh.

Supporting working parents: Pregnancy and return to work national review The Australian Human Rights Commission is currently conducting a National Review, led by Elizabeth Broderick, Sex Discrimination Commissioner, which seeks to identify the prevalence, nature and consequences of

BRISBANE Consultation with employers Date: Tuesday 19 November Time: 2:30 – 4:00pm RSVP to Mackayla.Jeffries@adcq.qld.gov.au A L B U RY Consultation with employers Date: 9 December 2013 Time: 1:30 – 3:30pm RSVP to http://www.eventbrite.com/ event/9217587051 and enter the password ALBURYEC In addition, the Commission is inviting employers to complete an online questionnaire about the challenges they face in managing pregnancy, parental leave and return to work following parental leave. The questionnaire will be available on the following website next week: http:// www.humanrights.gov.au/pregnancydiscrimination. The questionnaire will be open until January 2014.


POLITICAL WATCH

Information and news from government

Top End building activity The Northern Territory recorded its highest quarterly level of building activity on record in June, according to the Treasurer David Tollner. “In the June quarter 2013, trend building activity increased by 6.0 per cent to $441 million,” Mr Tollner said. “This is the eighth consecutive quarterly increase, highlighting the strength of the Territory construction industry. Driving growth in the quarter was a 36.3 per cent increase in non-residential building, reflecting work on the new Darwin Correctional Precinct and the Ichthys worker camp.”

Mobile Housing Assistant Shadow Treasurer, Dr Andrew Leigh, has raised concern about a new draft Australian Tax Office ruling that could see thousands of mobile home owners face higher rents. The ATO has issued a draft ruling on the Goods and Services Tax (GST) paid by park owners managing properties where mobile homes are based. The draft ruling, now out for consultation, will mean park owners are slugged double the GST paid on leased sites. “The ATO ruling would not just lead to higher costs for park owners but that those costs will be passed on to lowincome Australians who permanently live in demountable or mobile homes.” There are at least 3,000 Australians living in mobile homes in privately run home parks. There are many more people living long term in mobile homes in caravan parks.

Kids’ safety NSW Minister for Fair Trading Anthony Roberts announced that new window safety laws to help prevent children

falling from residential strata buildings have now passed through Parliament. “Owners corporations must have window safety devices installed above the ground floor that allow windows to open no more than 12.5cm when the lock is engaged,” Mr Roberts said. “Residents will still be able to open their windows as they do now, however they will have the security of knowing that when the lock is engaged, children in their care will be protected.” “Warmer weather is upon us and residents of strata schemes should make sure that windows in their homes are safe.” In 2011-2012, 39 children aged nine or younger were hospitalised in NSW due to window falls. There are over 72,000 strata schemes in NSW with an average of five new schemes registered each day, accounting for more than 600,000 residential lots.

Residential Tenancies Authority The Queensland Newman Government has revamped the board of the Residential Tenancies Authority as part of its ongoing commitment to revitalising frontline services for families. Housing Minister Tim Mander said the RTA had a strong track record but there was still room for improvement. “The new board will be responsible for making sure the RTA is an efficient, customer-focused organisation,” he said. “As well as providing advice and information on things like dispute resolution, maintenance and right of access, the RTA is also responsible for investing rental bonds worth three quarters of a billion dollars and safeguarding 513,000 properties worth around $160 billion.”

Opening doors More than 1,000 families, singles and seniors have realised the dream of owning their own home since the WA State Government’s Opening Doors initiative was launched in September 2011. The Opening Doors initiative is an important part of the Government’s Affordable Housing Strategy. WA Housing Minister Bill Marmion said the median price of Opening Doors properties was $293,000 – around $200,000 less than Perth’s median house price. Mr Marmion said the homes were either sold under the Department of Housing’s shared ownership scheme, where the Government retained up to 30 per cent equity in the property, or sold with the purchaser acquiring 100 per cent of the property.

Planning Victoria In a strong attack on the new residential zones policy, Property Council of Victoria executive director Jennifer Cunich said Melbourne would struggle to accommodate its rapidly growing population. “If we are going to have 90 per cent of the suburbs shut down then we’re not going to be able to deliver this growth,” she said. “That’s a really serious issue, and I don’t think anybody is fully understanding the implications of this zone reform.” But Planning Minister Matthew Guy hit back, saying the Government didn’t believe Melbourne should be a “one size fits all construction site”. “We have a policy of directing growth to defined areas and we make no apology for this,” he said. Councils are drawing up maps for their municipalities based on the new planning zones, which range from minimal development to high density apartment projects.


THE WORLD

Property news from around the world

China on the rise Home prices in China’s four major cities jumped the most since January 2011, heightening concerns a bubble is forming as the government refrains from introducing more property curbs that would hinder economic growth. New home prices in September rose 20 per cent in the southern business hubs of Shenzhen and Guangzhou, 17 per cent in Shanghai and 16 per cent in Beijing from a year earlier as prices climbed in 69 of the 70 cities the government tracks. Property stocks fell in Shanghai on speculation Premier Li Keqiang will be forced to impose stricter policies to rein in prices and limit risks to the economy. Li has held off tightened restrictions on property this year as his government strives to meet a 7.5 per cent annual economic growth target. “Home prices, especially in big cities, are a bit out of control,” said Liu Li-Gang, a Hong Kong-based economist at Australia & New Zealand Banking Group Ltd. (ANZ), in a phone interview today. “China’s facing an increasing risk of a property bubble.”

Germany over-valued? Germany’s central bank has warned of a housing boom in the country with soaring property prices in the country ‘difficult to justify’. According to Bundesbank, a surge of foreign investment has seen housing in some of the economic powerhouse’s major cities overvalued by as much as 20 per cent. In a monthly report, the country’s top financial institution fired a warning that price rises for apartments and flats in the major cities, did not stand up to valuations based on basic methods.

In popular cities such as Berlin, Munich, Hamburg, Cologne, Frankfurt and Stuttgart, the price of apartments and flats had risen by 25 per cent on average since 2010. The report reads: ‘Over the past three years, the prices for houses and apartments (nationally) have risen by a total of 8.25 per cent.’ The bank said that property prices were driven up by an increase in demand for German property, caused by slumps in other countries during the economic downturn. It also said that housing had become seen as more reliable than other forms of investment. But whereas Asian cities such as Singapore and Hong Kong have put legislation in place to tax foreign buyers in a bid to maintain stability in their housing market, Germany have welcomed investment.

Dubai recovery Thousands of apartments still sit vacant in Dubai, the wreckage from a massive property bubble that burst in the tiny Persian Gulf emirate only five years ago. The unlikely response: Developers are moving ahead with billions of dollars in new projects. A new boom has begun in the emirate, which became known for its grandiosity during the bubble by building the world’s tallest skyscraper and a palm-shaped development jutting into the sea. About 45,000 units are in the supply pipeline, according to Jones Lang LaSalle. Private and government-owned developers have unveiled billions of dollars in new projects in recent weeks including a new island with a 690-foot Ferris wheel and a thicket of residential towers surrounded by freshly-dredged lagoons.

The new boom is being fueled by strong demand from investors attracted to the emirate’s political stability and haven status in the Middle East. Apartment prices rose by 42 per cent in the 12-month period ending 30 September, according to a recent report by Asteco, a local brokerage. At a regional real-estate conference last week in Dubai, investors came close to fighting to make bids on a new development, even though many of them conceded they didn’t know where the development would be.

French Riviera The French Riviera hasn’t lost its cachet, topping the list of prime residential enclaves for the ultra-wealthy, according to research from Savills. Cote d’Azur ranks highest on the Prime Enclave Index, ranking properties on average prices of luxury properties and hotels as well as exclusivity and global draw, according to research produced by Candy & Candy, Savills World Research and Deutsche Asset & Wealth Management. A typical five-bedroom luxury property there costs around $28.5 million, outstripping nearby Monaco, which ranked fifth on the list with a $25.0 million price tag on a similar property, the report said. Rounding out the top twenty places the ultra-rich want their next home are many of the usual haunts, such as Aspen in the U.S., St. Barts in the Caribbean and Italy’s Venice as well as a few off the beaten path, such as the Seychelles, the Maldives and Emirates Hills in Dubai. Most of the ultra-high-net-worth individuals hail from North America, but they tend to stick closer to home, primarily doing their extra home shopping in the Caribbean and North American hot spots, the report said.


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