4 property phases you need to know

LIKE every other investment, residential property follows a cycle. Picking the best time to buy and sell to maximise profit often depends on understanding where you are in a cycle.

Conventional wisdom is that residential property follows a seven to 10-year cycle between peaks. Within those cycles are the usual value, growth, peak and correction phases.
But unlike other general asset classes, property is so segmented that individual residential property blocks can have a different cycle to a surrounding suburb or city.
Knowing where you are on a property cycle means following a strict process of understanding the macro and micro elements affecting your decision.
Local influences
In many areas local influences can be as narrow as being on the “right” or “wrong” side of the street/railway line when it comes to investment returns.
New infrastructure (roads, rail lines) can boost or deflate values depending on your proximity and access.
Likewise the release of new housing areas can affect demand and supply and, therefore, prices. A building boom means more stock and a dampening of prices.
Changing demographics within an area can either turn new buyers on or off and can narrow the appeal of properties.
Having the right property for buyers attracted to that area is a key element.
Property condition
Assessing the suitability and construction of an individual property determines the risk of any future costs to rectify problems. Those rectification/modification costs can be pretty hefty if they are unplanned, unexpected and unbudgeted.
City variances
Every capital city and major regional centres have their own unique influences which affect their cycle.
The Gold Coast goes through higher peaks and lower troughs than virtually any other property region.
It’s a real big boom/big bust kind of town.
Hobart is really at the mercy of the Tassie economy which, unfortunately, is in steady decline and has been for a few years now.
Darwin, like Perth, is driven by the commodities cycle and relies heavily on the prosperity of the resources sector.
The Sydney market is influenced by overseas migration numbers and the natural impediment of the Great Dividing Range on new land releases.
Brisbane is influenced by local migration from the southern states chasing the sun.
Adelaide and Melbourne seem to be more predictable around construction levels.
Economic indicators
Residential property tends to be a good barometer of a country’s economic health.
Maybe that’s why on a comparative global scale Australian property prices are among the most expensive in the world.
The most important economic indicators which affect property markets are:
– Unemployment: The more people out of work the less likely they are to be able to afford to buy or upscale.
– Interest rates: Lower interest rates mean lower repayments or ability to borrow more to trade up.
– Population growth: A baby boom fuels demand for bigger houses while migration increases the number of potential new buyers.
– Exchange rates: A falling Australian dollar makes our property prices cheaper for expats and foreign buyers using other currencies.
– Consumer confidence: Buying property is a big-ticket item. Low consumer confidence means buyers are less likely to take the risk of staying and more likely to stay put.
Where are we now?
Property guru Louis Christopher from SQM Research says our major capital cities are recovering from a two-year downturn.
That downturn saw residential prices drop 3-10 per cent from their peak. This year there is a modest recovery and he expects that to continue as long as there is no major global economic catastrophe.
– Opportunity Phase: best time to buy. Beginning of cycle.
– Growth Phase: investors more confident as they see values rise.
– Peak Phase: inexperienced and timid investors pile in.
– Correction Phase: buyers over extend, banks tighten credit. 

Making tenants feel right at home

Property bought with the heart not the head


MOST real estate is bought with the heart rather than with the head.


That’s fine if you’re buying a dream family home, but if you’re a property investor it’s your noggin that’s needed most.

Investors must think differently than a typical home buyer. All their decisions need to be made with a view to making the most profit or income on the property, rather than impressing their mates or relatives.

Here are five ways to put the emotional stuff behind you and think like a hard-nosed property investor.

1. The old saying about buying the worst house in the best street is a load of garbage. You don’t want to buy a property that needs months of renovations before tenants move in and start paying you an income. Unless it’s your investment strategy to do up dodgy homes, aim for something that is low maintenance and will be attractive to tenants.

2. Be bland when buying. There’s little room for fluoro orange feature walls in an investment property. Neutral colours will make it much easier to rent out because as furniture can easily be matched. Remember that you’re not buying an investment property to suit your own tastes, but something that will be tasteful to most of the population. The average tenant won’t pay a lot extra if the home has a spectacular water feature and swimming pool in the backyard.

3. Match the property’s location with your prospective tenants. If your target tenants are likely to be students, make sure it’s close to public transport. If it’s a family, there should be schools nearby. It all comes down to researching the area and trying to understand who lives there and the services they need.

4. View it as a business. This one comes from author and buyers agent Patrick Bright, who says investors should evaluate their property every six months and ask the tough questions. Does it need extra investment in renovations or improvements? Do the tax benefits still work for you? Are you still getting the best finance deal? Is it delivering you the best possible investment return? Real estate investment is not fire-and-forget.

5. Have a long-term plan. Most of us don’t have a long term plan for what we will do with our own home (that said, we still tend to move every five or ten years and pay exorbitant stamp duty costs when we do). But an investor needs to think about their exit plan before they buy, and write down that plan.

Property investments will cause headaches and go through flat spots like now, but if you treat it like a money-making purchase and remove emotion, dealing with that will be much easier.

Anthony Keane is editor of Your Money, which appears in News Limited newspapers on Mondays.

Renovate your home on a budget

MORE than half of Australia's homeowners plan to renovate in the next four years, and doing it right doesn't have to blow the budget.

A national survey by Appliances Online has found bathrooms are the prime focus of renovators. However experts say that money may be better spent elsewhere.

The survey found South Australians are the most likely of all people to renovate in the next 12 months, at 34 per cent, with 37 per cent targeting the bathroom and 28 per cent planning a kitchen upgrade.

Appliances Online chief executive John Winning (inset) says if choosing between renovating a kitchen and a bathroom, go for the kitchen. "Clean the bathroom and renovate the kitchen," he says.

"It’s really obvious if you have an old kitchen."

Winning advises that self-closing cupboards, soft-closing drawers, classy benchtops, induction cooktops and steam ovens are among the kitchen features that impress, and many prices have recently dropped.

"Never go cheap on the rangehood. Everyone tries to save money on it but it’s the most important appliance for the longevity of a kitchen," Winning says.

His other top tips are:

* Draw up a plan before you start your project.

* Put a cost on your time if taking the DIY road: "If you complete the renovation yourself but it takes several years it might not be worth it."

* Don’t move the plumbing – relocating sinks and toilets is expensive, so try to plan the renovation around them.

* You get what you pay for, so use quality materials and goods that will stand up to the tests of time. "You could also consider the efficiency of your lights and appliances – an inefficient fridge will add to your yearly energy bill."

Toop & Toop sales partner Tim Thredgold says the best budget renovation for people looking to add value to a home is a new paint job.

"A good paint-through will change a home, clean it, brighten it, and lighten it," he says.

Thredgold says the major renovation projects with which to add value are, in order, a family room addition, outdoor living spaces, kitchen, and then the bathroom.

"Pay attention to the money areas, kitchens and bathrooms. A change of fittings, taps and towel rails can give a lift if they match. Appliances in a kitchen can give a mighty lift," he says.

Realistic approach to selling the key

WHEN Rachel and Michael Dixon put their home in the Brisbane suburb of Moorooka on the market, they received four offers after the first open for inspection.

They took an offer for $455,000 and a deal was quickly secured.

Now looking to upgrade and spend a little more on their new property, the couple reckon homes over the $500,000 mark don’t seem to be trading as quickly as those that sit under $500,000 or around Brisbane’s median house price of around $430,000.

The couple put an asking price of offers over $440,000 on their home when they went to the market.

Mrs Dixon says they had decided to be realistic and not greedy.

"We sold it on the first weekend and that was the intention (when setting the price level)."

Mrs Dixon says owners need to be more realistic when setting a selling price.

"(Sellers) need to stop looking at what other people are marketing their property for; rather look at the prices they are being sold for."

The couple have done a lot of research in preparation for selling their property and buying a new one and realised homes around the median house price or under $500,000 were selling faster.

"We have been looking at sold prices, comparing them to asking prices and there is a huge difference between the two."

The couple have a long settlement period for their home and are keen to find something else in the Moorooka area, which is about 7km from the Brisbane CBD.

Go Gecko Moorooka/Annerley principal William Fea who negotiated the sale of the Dixons’ home, says the most interest he is getting for properties at the moment seems to be under the $500,000 mark.

Where to look for affordable homes

1 Carina
2 Everton Park
3 Mt Gravatt

1 Braybrook
2 Epping
3 Geelong

1 Quakers Hill
2 Mount Druitt
3 Punchbowl

Ten tips to sell your home for more

PROPERTY prices might be falling or stalling in most areas, but there are tricks of the trade that can still boost the value of your home – without the need for a major renovation or spending thousands of dollars.

Your Money asked our property experts to round up their top tips to quickly add value to a home to help make it stand out and add thousands of dollars to the price tag.

If you want to add value to your biggest asset, here are our experts’ top 10 tips to do it quickly.


You are often not the best person to pass a critical eye over your property before embarking on any changes or improvements.

In most cases, it helps to have a friend or someone independent to go through the property with a notebook and jot down everything they don’t like or think needs improvement, as well as noting the wow factors and the good points.

"Think like a buyer and take a walk through your own home. Make a list of all the things that would raise major issues," Archicentre managing director David Hallett says.

Valuer WBP Property chief executive Greville Pabst says start your inspection from the end of the street on the other side of the road.

"Walk from across the street towards and right through your property as if you’ve never been there before. By doing this, you will notice all the small faults your eyes have got used to," Pabst says.

It is only after this critical assessment that you can see things through new eyes.

You might have got used to a barren front yard, overlooking neighbours and a dodgy back door, but when it comes to adding value, fixing these small things can often provide the biggest boost.


Make sure your front garden, fence and path makes a good first impression. Tidy or landscape the front yard, paint the fence and gate, and ensure the house is clearly numbered.

Make sure the facade of the house is in good condition. This can include cleaning the windows, front porch, gutters or even hiring a water blaster to give the exterior walls, front path, fence and woodwork a professional clean.


Wash or paint the front door, put welcoming pot plants either side of the entrance, provide a coat hook, table or stool to place shopping on while you fumble for the door keys.

Install a motion sensor front light as a safety measure and to welcome your visitors when they arrive at night.


Other easy updates include replacing old door handles on interior doors and updating light fittings in all rooms.

These small items help give a clean, contemporary and well-cared-for impression, as well as being very practical and easier to live in the home.


Remove heavy drapes, blinds and curtains and replace them with light-filtering fabrics.

You still get the privacy but more light is able to stream through the home.

Alternatively, make sure all curtains and blinds do not cover any window space when they are opened fully.

Fit skylights to bathrooms or any other areas that do not have enough natural light.


Metropole Property managing director Michael Yardney says the impression you want people to have when they visit your property is that they would like to live there themselves.

This means ensuring that the home is well furnished, is welcoming and comfortable.

"Rearrange furniture to make rooms bigger and create spaces that allow easy access," he says.


Archicentre’s David Hallett says don’t be too afraid to rearrange the floor plan.

"If you have a two-bedroom home, the quickest way to increase the value is rearrange internal space to create a third bedroom or have a design concept prepared to show how they can add a bedroom."

The same goes for a study nook or home office. There is usually some "dead" space in a home that can be converted to an office area, such as a built-in wardrobe, cupboard or an area underneath the stairs.


"Polishing an existing timber floor or installing a floating timber floor can also dramatically change the appearance of large areas such as living rooms, kitchens and hallway entrances, to create a wow factor at a comparatively low cost," Hallett says.

Adding a wall of glass folding doors will also open up a small house to the outside – even if it is just to a lightwell or side walkway. This can enlarge your living space to include the outside area when the doors are open.


A shower head over a bath may not be ideal, but it is still better than a bath only with no shower. If you can’t have two bathrooms in a home, at least make one a separate toilet.


Provide plenty of functional outside areas such as off-street car parking, a shed, storage areas, play area and, of course, entertaining and gardening.

WBP’s Greville Pabst says properties with vehicle space, especially in inner-city areas, are highly sought after and add considerable value.

Creating extra parking or a front drive-on area will add tens of thousands of dollars while in most situations it requires little more than removing part of the front fence and the cost of a cross-over permit from the local government authorities.

If there is definitely no space for a car to park, then create an area large enough for a motorbike or bicycles. This will also be an added feature.

Retro retreats: How to renovate an ’80s home

PICTURE your typical "renovator's delight". Now think again.

There is a new kid on the block in the home-renovating world. Generally when you think of a renovator, the mind conjures images of pre-1970s housing stock, fibro cottages, 1950s bungalows untouched by DIY for decades, or city terraces and the urban semi.

So who is this new kid on the block?

It is the 1980s houses. These homes are around 30 years old. Without doubt they are homes built for a different era in taste, style and usually colour scheme – and yet they do display many features we expect in modern homes or fully renovated older homes.

This means these little beauties are generally an easier one to cost for improvements and, overall, are a more manageable project.

So why would you consider the 1980s home as an opportunity?

The pros include:

  • The 1980s housing estates that look tidy and neat now are likely to remain that way.
  • These homes are often well-built brick veneer. As with any home, the structure should be checked out but the likelihood of major issues is smaller.
  • Floorplans in 1980s homes are surprisingly modern and conducive to today’s market.
  • Price. In many markets, especially those where there have been a lot of modern homes built, 1980s homes in their original condition offer some very good buying.

Among the cons are:

  • Let’s face it, 1980s homes can be very uninspiring architecturally, both inside and out.
  • Their ceiling height is generally low.
  • Although relatively modern homes, their wiring systems can be very limited for modern uses.
  • Watch for a lack of insulation and cross ventilation. And often their green credentials are non-existent.

Jodie and Keane Rugless are renovating with Scott Salisbury rather than moving from their 1980s house in Belair. Although almost every surface is getting an update, Mrs Rugless says it’s more cost-effective than moving or rebuilding.

"Our house is double brick and really solid with great foundations and a good layout but it was really dark," Mrs Rugless says.

"It had dark floors, exposed beams and very much ’80s architecture, which is great from a design perspective but not so much from a light perspective.

"Pretty much every wall, ceiling and floor is being replaced . . . but we knew this was the location so we took the bones of the house and made it our own."

Andrew Winter is a real estate consumer champion and the host of Selling Houses Australia on The LifeStyle Channel.

Find a good real estate agent

THERE'S little doubt real estate agents have the gift of the gab.

But are they worth their weight in gold?

Homeowners looking to sell can spend ten of thousands of dollars in an agent’s commission to snap a deal.

Real Estate Institute of Australia president Pamela Bennett said the price of agents varies, however there are few people who opt to do-it-yourself who save on these costs and sell their own home.

"The commission levels in most states are deregulated so it’s what’s the negotiated commission rate depending on the services provided," she said.

"There is still a very small percentage of people that sell their homes themselves, however there has certainly been an increase in them in the last five years."

With more than 80,000 agents and more than 10,000 real estate agencies nationwide, you have a wide range to pick from when finding someone to sell your home.

Some real estate agencies offer fixed rates but Bennett says these type of businesses often have a limited lifespan because "competition is competition" and smaller margins are not sustainable.

Bennett says she used an agent to sell her own property while she was working as an agent herself, because it allowed her to distance herself from direct involvement in the selling process.

"I used another agent because I didn’t want to be involved with my own negotiations, I wanted to be a vendor and someone else do the negotiations," she said.

"I believe you need to step back and someone else negotiate the sale for you.

"People use real estate agents to get the most exposure for their property, to get the best negotiation and the quickest time possible given the economic circumstances which is particularly difficult at the moment."

Australian Real Estate Consulting director Robert Williams says an agent’s commission will vary from state to state but it’s well worth it.

"You can look at agents a little bit like being a buyer’s magnet," he says.

"Buyers go to agents because they know they sell property and if you can get the exposure an agent can get you, you can certainly give it a try (to sell your home yourself) but if you can’t you are going to limit yourselves in terms of potential buyers that come to you."

In most states real estate fees, agent’s fees and real estate commission range from two to four per cent of the balance of the sale price.

Whereas in Queensland the state government sets the fees at a maximum of five per cent of the first $18,000 of the sale and 2.5 per cent of the balance of the sale price, plus 10 per cent GST on the agent’s fee.

Williams says the key to finding a good agent to try and sell your property includes using someone who is active in your price bracket and has good negotiating skills.

"They all know the right things to say to you to win you business," he said.

Never too young to buy property

IT'S a case of walking before they can even crawl for some very young property owners, with parents setting up their children for property ownership almost from the day they are born.

The far-sighted plan is more common in Europe than Australia but the same benefits apply. As Australian prices continue to rise and affordability worsens, child landlords are expected to become increasingly common here too.

Under Australian law, minors (anyone under age 18) can own property in their own name. So there is nothing stopping parents or family pooling their combined birthday and Christmas money for the kids and buying a property for them instead. What better gift than to have a home virtually paid off by the time they move out?

But there are some catches. The first is tax and the second is finding a seller willing to enter a contract with a minor including those so young they can’t read or write.


According to tax expert Adrian Raftery of MrTaxman.com.au, income earned from the property will be taxed at the highest marginal tax rate because it will be classified as "unearned income" by a minor.

The maximum tax rate of 46.5 per cent applies to investment income such as rent received by a child, but this also means a greater potential benefit from negative gearing.

"Of course, the minor is entitled to the usual deductible expenses incurred while owning the property such as rates, strata levies, management fees and repairs," Raftery says.

"If they are able to borrow funds and negatively gear the property, then the interest can be claimed as well," he says.


In most cases, a minor can enter a contract and own a property, but the problem comes for the people on the other side of the contract as they can’t enforce the contract if something goes wrong.

So anyone who enters a contract with a minor runs a greater risk that the child is not going to see it through. Unlike with an adult in a contract, the other party can’t enforce the purchase or keep the deposit of the child.

Law firm Wisewould Mahony partner Julie Barkla says this stems from the principle that minors lack capacity to understand or enter certain arrangements and therefore can’t be bound by them.Despite it being uncommon, children can own property, Barkla says, although there can be a few extra hurdles.

For example, most states require the date of birth to be noted on the certificate of title to show the owner is a minor. This is so future prospective buyers will know they are buying from a child and therefore the same enforcement issues arise with the contract. However, check each state’s requirements.
For example, in Victoria, according to Barkla, a minor first needs to obtain a court order before a property registered to a child can be sold.


A contract for the repayment of money lent to a minor will not be binding on the minor.

"Potential financiers tend to shy away from the prospect of engaging in a legal stoush with a minor to recover money," Barkla says.

There are exceptions to this, she adds, which allow loan contracts with minors when they are members of a building society or co-operatives.

Another option could be a formal but private loan to the child from a family member or parent.


A popular method of buying property for a child is through a trust, says Thomsons Lawyers partner Eu Ming Lim, in which an adult parent or guardian holds the title to the property as trustee for a minor.

"The adult trustee will be able to deal with the property, for example by taking loans against it, but it will still be required to be dealt with and held for the benefit of the minor," Lim says.

However, with some trusts there can be capital gains tax to pay when the trust eventually transfers the property into the name of the child, such as when they leave home.

Another similar method is through a "bare trust".

"As with a discretionary trust, the trustee would purchase the property but the trust deed would state that the trustee holds the land absolutely for the benefit of the nominated child," Barkla says.

"When the property is later legally transferred into the name of the nominated beneficiary, in these circumstances there would usually be no stamp duty or capital gains tax implications for the child or the trust," she says.