Encountered an ‘Expression of Interest’ during your property hunt?
An ‘expression of interest’ is a method of sale whereby a property, generally purchased off the plan, is offered during a specified timeframe (commonly 2 to 4 weeks) prior to its formal release.
The EOI generally secures the purchaser an appointment at the launch, and typically the purchaser will have an indication on price and availability.
Why are sellers using EOIs?
Developers that choose the EOI method generally want to drive inquiries, and qualify potential buyers on what they’re willing to pay and share that feedback with the seller, says Colliers director of project marketing, Curtis Field.
“EOIs provide a great way for the developer to capture inquiry levels, gauge interest and qualify those inquiries – building a picture of who is committed to buying, and how much the market is willing to pay.”
I’m thinking of responding to an EOI. How does it work?
If you have found a property you wish to buy, you make an EOI to the real estate agent and pay an EOI fee deposit. Deposit sizes vary. They’re generally between 5% and 20% of the property’s purchase price. These funds are placed into the agent’s trust account until settlement.
What’s in it for me?
“You get a level of surety that you have secured a place in the queue for your dream property – especially when time is of the essence,” Field adds.
An expression of interest payment will not secure the property. “The agent or developer isn’t obliged to sell you the property and they may take several deposits on the same property,” Field adds. “They must tell you if other offers are later made on the property, or if it is sold to someone else, and they must refund your deposit in full.”
Get your finances in order
It’s recommended to arrange your home loan pre-approval before you make an offer, and ensure you can pay the deposit. Of course, always do your research and seek legal advice.
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Thinking of building a new home? You may require a construction loan to help fund payments to your builder.
If you are building a home, it’s highly likely your builder will expect payments as construction progresses. With a construction loan, you are able to ‘draw down’, or access the funds over different construction stages (12 months is common). You only pay interest on the portion of the loan that has been drawn down (the amount you have used).
Inspections during construction may be required.
Thinking of building your dream home or investment property? Need a construction loan? Discuss your home loan needs with us.
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The number of unique residential properties advertised for sale across the country over the four weeks to 30 March 2014 was recorded at 243,941. This figure consists of 47,805 newly listed properties over the four weeks and 196,136 re-listed properties. As highlighted by the RP Data listings index, there has been a surge in the number of new properties listed for sale and they are 18.9% higher than they were at the same time a year ago. Although new listings have surged, total properties advertised for sale are -3.8% lower than they were a year ago which is reflective of the rapid rate of sale we are seeing nationally. Although new listings are way up on a year ago, the rate of sale is much faster and total listings are falling. To put it simply, properties are being absorbed by the market faster than they are being listed for sale.
Looking at the different residential property types; new listings for houses are 20.2% higher than they were a year ago however, total house listings are -4.5% lower. New unit listings are also significantly higher, up 22.6% while total unit listings are -5.1% lower. New vacant land listings are -5.4% lower than they were a year ago however, total listings are 2.1% higher.
Looking across the individual capital cities, each region except for Canberra (-12.0%) is recording a higher number of new properties listed for sale than they were a year ago. Sydney and Melbourne, which are also recording the strongest capital growth conditions, have recorded the largest rise in new listings over the year, up 49.7% and 32.0% respectively compared with a year ago. Clearly new properties are coming to the market in both cities however, evidence suggests that most are selling quite shortly after the listing.
Although new capital city property listings are generally higher than they were a year ago, total listings are generally much lower than they were a year ago. Across the combined capital cities total listings are -8.3% lower than they were a year ago and each city except Hobart (3.3%) and Darwin (25.2%) is recording fewer total listings. Although both Sydney and Melbourne are each recording fewer total properties advertised for sale than a year ago, it is interesting to note that total listings in Melbourne (33,144) are significantly higher than in Sydney (22,423).
It is encouraging to see that a greater number of new residential properties are coming to the market than at the same time last year however, it is important to remember that in most regions sales transactions are much higher than they were a year ago. Clearly buyer demand has escalated and quality properties are not staying on the market for a long period of time which is highlighted by the fact that total listings both at a national and capital city level are lower than they were a year ago.
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Anyone doubting the strength of the property market in Australia – and globally – should look to the growing pile of data which provides evidence of that strength.
Most recently came news that global real estate investment turned a corner in 2013, with a 22.6% increase in transactions from 2012, and is predicted to hit further highs this year.
According to the latest International Investment Atlas, from Cushman & Wakefield, the global property investment market delivered US$1.18 trillion of transactions last year. This was the highest total since 2007.
Cushman & Wakefield’s David Hutchings said this high came on the back of greater confidence as recessions ended, business sentiment rallied and increased liquidity affected most global markets.
In 2014, the company was forecasting a 13% increase in global investment to US$1.33 trillion, with the US and Western Europe predicted to drive the uplift in activity, he said.
“Momentum is building further this year with signs of a firmer occupier market as well as greater investment demand and new sources of debt set to drive investment activity and property pricing higher.”
In 2013, it was the Asia-Pacific region that led the way for investment volume with a 25% increase over the year. This was thanks to growth in the markets of China, Japan and Australia.
The improving global economy and rising domestic demand means that Asia-Pacific markets are forecast to see a further steady rise in activity of 7-8%.
David Woolford, from Cushman & Wakefield Australia, said that, record low interest rates and improved access to equity was resulting in substantial increases in acquisition activity from Australian investors.
“At the same time, the strength of the Australian economy in a global sense, as well as the higher yields on offer compared to other advanced economies, has seen demand rise significantly from offshore investors.”
As more stock was expected to come on the local market in the next 12 months, the company expected that investment volumes will continue to rise over the course of 2014.
According to the atlas data, foreign investors grew in significance globally with a 24.3% rise in their activity over the year. The main source of international capital was the Asia-Pacific region, which accounted for nearly 40% of all non-domestic spending.
Hutchings said that property markets were becoming increasingly idiosyncratic and driven by their own individual advantages. This was leading to a more divergent global market with real winners and losers.
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Canberra has been crowned Australia’s most liveable city – knocking Adelaide from the top spot for the first time in four years – in the Property Council of Australia’s annual “liveability” survey.
My City: The People’s Verdict – polled 5,400 residents of the eight capital cities plus Newcastle and Wollongong to capture their views of their city. The survey results reveal some changes in the liveability scores of Australia’s biggest cities.
While the most notable change is Adelaide’s fall to second place behind Canberra, there have also been significant improvements in the scores of Melbourne and Sydney.
Adelaide’s ranking change was driven by the growing pessimism of its residents on the economic and employment front. Residents were also not happy with the state government and the public transport system.
Richard Angrove, from the SA division of the Property Council, said there was an urgent need for active tax reform, jobs growth, population growth and a revised infrastructure strategy.
The survey results were a call to action for both the government and the opposition just weeks out from a state election, he said.
The views of Canberra residents’ on their city were not affected by ongoing uncertainty about the future of the public service. The city’s rise to the top spot was due to continued improvements in areas like safety, cleanliness, education and healthcare.
Catherine Carter, from the ACT division of the Property Council, said that, while it was easy to see why Canberra was the survey winner with an overall liveability score of 65.2, there was still room for improvement.
Housing affordability, infrastructure development, and the property taxation system were all areas that needed to be addressed, she said.
Darwin was once again rated the least liveable city in the survey. This was due to poor performance on affordability measures, education, healthcare and safety.
However, the city still rated most highly on employment and economic opportunities.
Perth was ranked second to last. This was due to its continued lower score in economically related indicators, which is associated with the continued slow-down in the state’s mining sector.
Property Council chief executive Peter Verwer said the message from Australia’s city residents was that, while there have been improvements in some cities, they wanted more federal and state government action to improve liveability and opportunities.
Overwhelmingly, Australians wanted areas like cost of living, housing affordability, job opportunities, congestion and public transport to be addressed, he said.
“The survey makes it clear we need a nation-wide effort to boost the performance of our cities to maximise opportunities arising from population growth, housing choice, infrastructure investment and a strong economy.”
The liveability rankings and scores were as follows:
- Canberra (65.2)
- Adelaide (63.9)
- Hobart (63.5)
- Melbourne (63.4)
- Brisbane (63.3)
- Newcastle (62.9)
- Wollongong (60.9)
- Sydney (60.1)
- Perth (59.7)
- Darwin (54.2)
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Concerns about the impact of foreign investment on Australia’s property market will be addressed by a federal government inquiry.
On March 19, the House Economics Committee announced the terms of reference for an inquiry into foreign residential property investment and the policy governing it.
Committee chair, Liberal MP Kelly O’Dwyer MP, said that the existing policy was intended to channel foreign investment to boost the supply of new housing stock. This, in turn, was meant to create both economic and social benefits.
Foreign investors are limited to buying off-the-plan or newly built properties and can’t generally buy established properties for investment purposes.
However, O’Dwyer said the wider community has raised concerns that foreign investment is causing a distortion in the market and making housing less accessible and affordable.
Much of the speculation has been trained on Chinese investors, but O’Dwyer said the inquiry would not focus on investors from any particular country.
“The committee will take a very broad and holistic approach to examining whether the current policy settings are delivering the best possible outcomes for Australia.”
The Committee has been charged with investigating:
- the economic benefits of foreign investment in residential property;
- whether foreign investment is increasing the supply of new housing and benefitting the local building industry and its suppliers;
- how Australia’s foreign investment framework compares internationally;
- whether there is scope to improve the administration of foreign investment policy in relation to residential property.
Submissions to the inquiry are due by 9 May 2014, and the Committee has to produce its report by 10 October 2014.
Meanwhile, dissenting opinions have been voiced in response to the inquiry announcement.
Dr Stephen Kirchner, from the Centre for Independent Studies, said that it is shoddy tax laws, not foreign investors, which are driving up the prices of new dwellings.
While Australia China Business Council president Duncan Calder said the impact of Chinese property buyers has been overstated and that there are significant benefits from their investment.
This argument is supported by a newly released Colliers International research paper. It concluded that Asian investment in Australian property has been a key factor in the improvement of the domestic retail sector.
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Soaring prices and an influx of overseas buyers are pricing Australians out of the property market as reports show less than 10% of mortgages were processed for first-time buyers.
Of applications recorded, almost every state across Australia showed a month-on-month decline in first home buyer applications.
WA fell to 19.5% last month from 24.2% in January
South Australia fell to 13.1% from 15.5%
Victoria fell to 10.3% from 11.2%
New South Wales remained the lowest in the country on a steady 3.4%
The only state to buck the trend was Queensland rising slightly from 6.5% to 6.9%.
According RP Data research, property values climbed 9.8% in 2013 representing the fastest rate of annual growth since 2010. The direction of property prices has not changed in 2014, with combined capital city growth rising by 1.4% in the year to date.
Part of the problem for first home buyers is finding an affordable principal place for residence in a location that will not disrupt their current working and social lives.
This month, across Australia the lowest median price for any capital city is $410,000 for a house inAdelaide and $261,000 for a unit in Hobart.
March median house prices in Australian capital cities:
-Source RP Data
The recent influx of overseas buyers is also contributing to a rising market, according to a recent report from the Australian Foreign Investment Review Board.
The 2012/13 report showed approved foreign investment in Australian residential property totalled $51.9 billion and exceeded off shore investment in the resources sector, with investment in mineral exploration and development totalling $45.1 billion.
Of these overseas, investors the Chinese were prevalent in the market for property acquisition in Australia, with a report released by investment bank Credit Suisse predicting Australian property purchases by the Chinese will total $44 million over the next seven years.
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Welcome to RP data's update on housing market conditions for March 2014
last month we saw dwelling values track sideways the first time in eight months
we're capital city dwelling values didn't rise on a month to month basis
with interest rates remaining low we are expecting for the value growth
but probably not the same pace is what we saw in the second half of 2013
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Capital city dwelling values post 2.3% jump over the month of March with every capital city recording a month-on-month rise in dwelling values.
After a flat February result, the RP Data–Rismark Home Value Index finished the March quarter in a strong fashion with dwelling values rising 2.3 per cent over the month to post a 3.5 per cent capital gain over the first quarter of the year.
Highlights over the three months to March 2014:
- Best performing capital city: Melbourne, 5.4 per cent
- Weakest performing capital city: Perth, -0.6 per cent
- Highest rental yields: Darwin houses with gross rental yield of 5.9 per cent andDarwin units at 6.2 per cent
- Lowest rental yields: Melbourne houses with gross rental yield of 3.3 per cent andMelbourne units at 4.1 per cent
- Most expensive city: Sydney with a median dwelling price of $630,000
- Most affordable city: Hobart with a median dwelling price of $338,000
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Article by RP Data senior research analyst, Cameron Kusher
Housing finance data released by the Australian Bureau of Statistics showed a slight fall in demand from investment however, their activity remains at historic high levels... but why?
Housing finance data is released by the Australian Bureau of Statistics (ABS) each month and provides valuable insight into residential lending. A key trend recently has been the heightened level of activity by investors. It is important to remember that the data is based on finance commitments by Australian Authorised Deposit-taking Institutions (ADIs). Finance sourced from overseas is not included in the data.
In January 2014, the total value of housing finance commitments for investment purposes was recorded at $10.3 billion. The value of investment finance commitments actually fell by -3.3% over the month however, it is clear that there has been a very strong ramp-up in investment expenditure on housing over the past 18-24 months.
As a proportion of all lending it is clear there has been a significant ramp-up in lending to investors. Although this is the case, owner occupier purchases have also ramped up sharply over the same period. Owner occupier purchases still account for the greatest proportion of housing finance commitments however, the second chart highlights a rising level of prominence of investment lending. In January 2014, investment lending accounted for 38.5% of all lending, down from 39.6% in December 2013. The proportion of activity by investors in the housing market currently is sitting at its highest levels since late 2003. It’s important to remember that late 2003 was the peak in housing market activity at that time and shortly afterwards value growth went flat for a number of years.
Why is investment activity so significant in the market currently?
The combined capital city housing market recorded a low point in May 2012 and since that time values have increased, up 13.2%. Although values have risen broadly, the magnitude of value rises has varied significantly on a city-by-city basis. Since May 2012, home values in Sydney have increased by 18.6%, Melbourne home values are 14.4% higher, Perth home values are up 12.4% and Darwin home values have risen by 8.8%. On the other hand, Adelaide home values are just 1.0% higher, Hobart home values are up by 2.6%, Canberra home values are 4.4% higher and Brisbane home values have increased by a total of just 4.9%. Based on this it is clear that value growth has only been particularly strong within a handful of capital cities, albeit the two largest cities, Sydney and Melbourne, have been the primary drivers of capital gains over the current cycle.
Over the same 22 month period since May 2012, rental growth has significantly underperformed home value growth. Across the combined capital cities, rental rates have increased by a total of 4.9% which is significantly less than half the growth in home values. Darwin (11.7%), Perth (8.4%) and Sydney (5.6%) have recorded the strongest increases in rents however, only Darwin has recorded stronger levels of total rental growth than value growth. Every other city has recorded less than 5% growth in rental rates. Across the remaining cities the rental change has been recorded at: Melbourne (3.4%), Brisbane (4.3%), Adelaide (2.5%), Hobart (0.6%) while Canberra rents are -3.1% lower.
With home value growth generally outperforming rental growth it seems that most of the investment activity in the market is focussed on capital gains rather than rental return. With rental growth underperforming value growth we have also seen diminishing rental returns.
With investors clearly focussed on capital growth in the market the potential pitfall is that when growth slows or falls, what will happen to the investor segment. A portion won’t be overly concerned and will be negatively gearing their investment by design however, some will be left with a low yielding asset coupled with potentially low medium term capital gain prospects as the market moves out of the growth phase. Potentially a portion of these recent investors will look to exit the residential property asset class if and when value growth slows or falls and move into better performing and more liquid asset classes. Given this, banks and regulators should be mindful of investor concentration risk. RP Data infers the type of ownership of every property nationally (owner occupied, investor owned or government owned). This analysis highlights that there are key areas across the country where investors comprise well over half the dwelling stock.
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