8 Lane Cove Property Map

The property market has a number of different metrics that are helpful when trying to understand sentiment and property price behaviour.

These include vacancy rates (the proportion of vacant properties), the number of properties currently on the market, trends in gross rental yield (rent divided by property value), and changes in rents paid by tenants (rental growth).

By reviewing these we can gain insight into the dynamics of a particular post code.

For Lane Cove (2066) these metrics can be summarized as follows:

  • Lane Cove has historically had low vacancy rates and stable rental income.
  • Vacancy rates are important as they are key to supporting property prices
  • While property prices may not increase at the rapid pace experienced in the last 12-36 months market fundamentals are still positive.
  • Interest rates are low and the $A is also low inviting overseas buyers in.
  • There are some increasing risks too. Specifically the banks have tightened lending requirements for investment property loans and economic growth is slower.
  • A measure of how expensive property prices are is the rental yield (annual rent divided by property value). As prices increase the yield decreases.
  • Rental yields in Lane Cove (2066) have tightened in the last 12 months due to price rises.

On a bigger picture level we have summarized the trends at a state level at the back of this report. In a snapshot;

  • NSW looks like it will be the strongest state relative to other states due to a continued supply deficit that will keep vacancy rates low.

Looking for an investment property or first home in Lane Cove? Check this out.

Vacancy rate for Lance Cove 2066

1 Lane Cove Vacancy
Source: SQM Research

As the chart shows the vacancy rate for Lane Cove (2066) has largely varied between 1% and 2% since 2011. Currently 1.9%

Key to these firm market fundamentals is the consistent but not overwhelming supply of listings entering the market. Supply has been clearing in an orderly manner and as such prices have remained firm.

Source: SQR Research
Source: SQM Research

3 Lane Cove Total Property Listings

 

 

The yield on Lane Cove has drifted downwards over the last three years suggesting that prices have been quite strong. Yield is the rental divided by property prices. Actually over the last 12 months rentals have actually increased by 17.2% and over 3 years have increased 23.4%.

4 Lane Cove Property Gross Yield

5 Lane Cove Property Weekly Rents 6 Lane Cove Property Weekly RentsThere are still a number of positive fundamentals supporting the residential property market. These include:

 

  • Low interest rates – they could even go lower
  • A lower $A – making Australian property attractive for offshore buyers
  • Attractive tax incentives – negative gearing and SMFS borrowings
  • A deficit of supply in housing stock in some states – NSW in particular
  • Low vacancy rates in the Lane Cove (2066) market (1-3%) 

Front of building

Property Valuation Metrics

There are a number of different valuation metrics that can by employed to understand what properties might be worth. These include:

  1. Land valuation
  2. Rental yield; and
  3. Recent sales

1. Land Valuation 

The chart below is a scatter plot of prices per SQM of sold properties for this postcode. This chart reveals the relationship between sold prices verses land size. A “best fit” curve represents the relative relationship between the sold price and land size. We call this the Price Per SQM Co-Efficient Curve™

Property land size versus property prices

9 Lane Cove Property Land Size V Property Price

A regional comparison is provided by the purple curve. Land size is not relevant for units in term of the valuation process.

 

PP SQM n/a
Property SQM n/a
Implied valuation n/a

2. Rental Yield

What is the rental yield and how does it help us value the property?

 

11 Rental Yield Formula

So the rental yield is like a discount factor we use to calculate the implied property value. The higher the discount factor the lower the implied property value and the lower the discount factor the higher the implied property value.

In the postcode of Lane Cove rental yields have varied from 3% to 4% for units. To add safety to any calculation it is important to use some sort of sensitivity analysis around rental yields as this is like building market sentiment into the valuation process.

In this analysis we have assumed the following:

Rental achievable for a one bedroom unit $520-570 per week
Rental yields in the area 3% to 4%
vacancy rate for the area 1.5% to 3%

If we then take these assumptions we can then calculate a range of property value estimates to give us a feeling for a fair value range.

If we then compare the range of estimated property values with the current rental yield the market is offering we can then assess if the property is being priced at a discount or premium to the current rental yield the market is offering.

Relative Rental Yield Analysis

Conservative estimates
Weekly rent $520
Annual rent $27,040
Less vacancy rate (assumes 3%) $811
Risk adjusted rental $26,229
Range of rental yields Implied values
4.25% $617,148
4.00% $655,720
3.75% $699,435
3.50% $749,394
3.25% $807,040
Current postcode rental yield 3.75%
Implied value of the property $699,435
Low end of the price range $670,000
High end of the price range $730,000
More aggressive estimates
Weekly rent $570
Annual rent $29,640
Less vacancy rate (assumes 1.5%) $445
Risk adjusted rental $29,195
Range of rental yields Implied values
4.25% $686,951
4.00% $729,885
3.75% $778,544
3.50% $834,154
3.25% 898,320
current postcode rental yield 3.75%
implied value of the property $778,544
low end of the price range $670,000
high end of the price range $730,000

Implied Property Values based on assumptions

7 Lane Cove Property Implied Property Values

3. Recent Sales

There are a number of sales of units (1 bed, 1 bath, 1 park) in the last nine months.

The range of the prices realised by sellers in the last 9 months has been very wide.

Maximum price : $675,000

Minimum price : $475,000

The quality of properties varies enormously as does their age.

The higher priced properties have been significantly renovated with new kitchens and bathrooms.

Most of the properties listed are on busy roads.

Size of the properties also varies considerably – 55 SQM to 85 SQM.

Note: a number of the newer off the plan sales (which are likely to show much higher prices) are not included in this sales data as they have not yet settled.

10 Lane Cove Property Comparable Property Price

 

The “Big Picture” looking at NSW and other states

NSW continues to be supported by under supply of housing stock while Victoria has the highest risk of oversupply.

The state of the residential property market is always somewhat unpredictable. Booms usually go for much longer than most expect. However, when it turns it usually turns quickly.

This reminds me of a quote:

The trouble with the future is that it is usually arrives before we are ready for it – Arnold H. Glasgow

This article looks at the fundamentals of supply and demand of residential property and how this affects property prices.

Paul Bloxham, HSBCs Chief Economist recently reviewed the supply and demand of the Australian residential property market. In a nutshell Paul concludes that the national market supply will not meet demand until 2017. But, as with most markets there are markets within markets with significant differences. NSW continues to be supported by under supply of housing stock… CONTINUE READING THIS ARTICLE

Looking for an investment property or first home in Lane Cove? Check this out.

 

DISCLAIMER:

This information is not intended to be taken as financial advice of any kind. Please consult a licensed financial advisor or accountant for advice. The material in this presentation has been prepared by Ozway Realty Pty Ltd ABN 59 145 855 116 (Ozway) and is general background information for buyers as at the date of this report.

This information is given in summary form and does not purport to be complete. Information in this presentation, including forecast financial

information should not be considered as advice or a recommendation to investors or potential investors in relation to holding, purchasing or selling investments like property and does not take into account your

particular investment objectives, financial situation or needs. Before acting on any information you should consider the appropriateness of the information having regard to these matters, any relevant offer document and in particular, you should seek independent financial advice. All investments involve risks, which include (among others) the risk of adverse or unanticipated market, financial or political developments and, in international transactions, currency risk.

This presentation may contain forward looking statements including statements regarding our intent, belief or current expectations with respect to the property market. Readers are cautioned not to place undue reliance on these forward looking statements. While due care has been used in the preparation of forecast information, actual results may vary in a materially positive or negative manner. Forecasts and hypothetical examples are subject to uncertainty and contingencies outside Ozway’s control.

Ozway has relied on various data providers sourced in the report.   Ozway, its agents, instrumentalities, officers and employees make no representations, express or implied, as to the accuracy of the information and data contained on this report.

Past performance is not a reliable indication of future performance.