Auction prices continue to surge; RBA says rent, don't buy

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Price rebound continues in auction market
Values have been surging in the last month, with this weekend’s results no exception. Despite relatively low volumes – about 500 fewer this week than the comparable week last year – prices rose in the mainland state capitals by 0.8 per cent in the week to Sunday according to RP Data, up by 11.1 per cent from a year ago and by 4.9 per cent for 2014 so far. That puts prices on a faster growth pace this year than last, particularly so for Melbourne, where prices have risen by 11.4 per cent over the year and by 7.0 per cent in the past month alone. Sydney is on pace for 16 per cent price appreciation for the year. Auction clearances averaged 68.7 per cent for the week. Read the full story here.
RBA tells Australia renting beats owning in this market
The Reserve Bank of Australia published a research paper looking at the own-or-rent calculation for people in the market, and concluded that for most people who don’t own a home now, it makes more sense to rent. Rates would have to keep rising at a constant rate of 2.5 per cent for six decades to make the risk pay off, once accounting for the ancillary costs of council fees and other expenses. The study is silent on property investment, however, because the tax incentives associated with negative gearing change the calculus. It also makes no note of risks associated with fundamental changes in the structure of the housing market like big alterations to foreign investment rules, the use of SMSF funds for property investment or changes to how the government counts home value in pension calculations. There’s some evidence of late that buyers are already quite aware of the rent-buy trade-off, given the falloff in first-time homeowner purchases. Read the full story here.
Should you buy a holiday home? The pros and cons
One out of 12 Australian households own a vacation home as a second property – about 700,000 properties nationwide. The rationale appears clear: if you like visiting the place, others might as well, which would defray the cost of ownership. It makes planning a trip to the beach somewhat less involved; provides a benefit to friends and family and may become a second home or a place to retire, assuming an owner doesn’t simply rent it out most of the year. But the cost of marketing a vacation rental isn’t negligible. Nor are the vagaries of the vacation real estate market, or considerations like negative gearing, theft and property damage, and vacations limited as a practical matter to the one getaway. Read the full story here.
Adelaide zoning changes spurred about 100 new CBD developments
Developers have made applications for 65 projects worth about $3 billion since the Adelaide city government rewrote its zoning code to allow for more buildings with 30 storeys or more in some parts of the CBD. The highlight of the list is the $100 million Vue on King William by Starfish Developments and the Asian Pacific Group, with 135 apartment, and is part of a development trend pushing suburban amenities into Adelaide’s core. The city has approved 32 projects worth $1 billion with nine are already underway, worth $182 million. This development comes despite disused buildings around the city, which cost too much to simply renovate. Read the full story here.
One thing that can take the shine of a home’s value: murder
A house that is the scene of a murder loses value. The stigma is so commonly understood that state laws force real estate agents to own up to the history in disclosures. Researchers at University of Technology, Sydney have taken it a step further, however, to show nearby properties also fall in value. Media sensationalism matters less than proximity: house prices fall by 3.9 per cent for homes within 320 metres of a murder in a year, with less of a drop in the second year after a murder. Buyers will back out in later years, but prices do not appear to be affected. And rents aren’t affected at all. Read the full story here.

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