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While property market as a whole, taken over a long period of time - such as 20 years - may “always” seem to go up, the picture for any particular house in a particular area, in a particular year can be quite different. And when you are buying an investment property - this is exactly what you’re buying. A particular house. In a particular street. In a particular year. That may or may not be a good year / street / property in terms of capital gains. And with negative gearing, when the house doesn’t increase in price, that means losses.

On contrary to a famous myth of property investing, negative gearing is not something that doesn’t cost you a dime, because everything comes off tax money. Any investor that is holding a negatively geared property is paying out of pocket expenses, which can be less or more, depending on his rental return. The rent that your tenants pay only covers so much of the total expenses, and the rest is for the investor to pay. The expenses on property - interest on the loan, maintenance, etc - are tax-deductible, but it only means that instead of paying the whole expense, you are paying a portion of it.

Without getting into calculations, basic common sense suggests that if you are holding an “asset” that loses you money, you must sell it for much more than its original purchase price to get all you’ve lost over the years back, and make some profit. And this can only happen if that particular house goes up in price. And that is a big IF.

Another scenario many property investors prefer not to think about is - what happens if the government decides to drop these tax incentives? If a day comes and they decide that they would actually like all that tax back? That there are enough rental properties on the market and they don’t need to encourage investors to create more?

And one more last thing to consider - even if everything goes according to the plan and you’ve picked a house with a great capital gains potential, but circumstances force you to sell the property before it had a chance to grow in price, guess what - a loss again.

That’s it from me, now let’s hear from you - what is your experience with negative gearing?

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Basically, negative gearing means that you borrow money to buy a property, and the income from the property doesn’t cover your expenses on that property, so instead of making income it makes a loss.

The next logical question is - why would anyone want to make a loss, isn’t investing all about profits? The answer is “capital gains” - the increase in the house value over time. With negative gearing an investor can only make a profit if the house rises in price more than it has lost money until the moment it was sold.

To make negative gearing more attractive there are tax concessions. An investor gets to deduct the losses made on property from his or her income (which could come from any source, not just property) and that way reduce the taxable income, in a way saving money they would have otherwise paid to the government as a tax.

Time for a history lesson: negative gearing was introduced in Australia way back in the early 1980s to increase the supply of rental properties. This way, if more affordable rental houses were available, the government wouldn’t have to fund public housing with all the administrative and infrastructure costs. When the pool of rental properties is larger, the chance that rents will go up is smaller, therefore higher rents won’t drive the inflation up and the economy will be more stable.

But, of course, it’s not all rosy and negative gearing has its dark sides - which I’ll discuss in my next article “What is negative gearing? Part 2″. Stay tuned.

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Their front page looks very similar to Google, most of it is blank and there is just the search box in the middle. Type the name of the suburb you’re after in it, hit Enter - and there you go, lots of property listings on the left and the map is on the right. Nestoria also displays all the schools, shops, post offices etc on the map - a very handy feature, and of course you have full control over it and the ability to turn it on and off.

I’ve had the pleasure of meeting Kat, the person behind Nestoria blog, and the outcome of this was my interview - read it here. For someone who is mostly focused on the technology, rather than on real estate market, Kat asked me some interesting questions! Take for example this one:

“What would you say are the main problems facing people wanting to buy property in Australia at the moment?”

So if you’re interested to learn some more about Aussie real estate market - and about my take on it - head over to Nestoria blog. Happy reading!

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But sarcastic jokes aside, this new iPhone app by Commonwealth Bank does look promising. It’s based on what they call an “augmented reality technology”, and the way I understand it, it is “augmented” because the app takes the reality - the address of the property you’re standing in front of, when you point and shoot your iPhone camera at it ( via geo-positioning), and then adds to it some information you would need to make your property decision.

That information can be the current property listings in the same area, so you get to see what’s listed for sale, what the price range is and a 5 recently sold houses in the same area, similar to the property you’re standing next to, with sale prices. No longer will your iPhone be a mere camera to take photos at inspections.

It also will have the ability to switch to a bird’s eye view to show all properties matching the search criteria at once, save a house in Favorites, send to a friend and more.

This new app should eliminate the need to open up a website (such as realestate.com.au or domain.com.au), do a search for that specific address, and then begin navigating your way through the other listings in that area. Which basically is a fair bit of work, especially on an iPhone, which (with all due respect) is not as convenient as a computer with a large screen, a mouse and a keyboard. Plus, when you’re inspecting, often you are in a rush to get to the other properties on time and one quick look at the information this app will provide can save you about 5-10 minutes per property - looks like a worthwhile piece of software to check out.

In fact, this app should be just as good as realestate.com.au itself , because Commonwealth partnered with them and with rpdata.com to develop this new digital wonder of technology.

The word from Commonwealth Bank is that this app will become available in June this year, when Apple approves and adds it to the Apple Store - for free download!

And for the iPhone junkies amongst us, who can’t wait, here’s a teaser - click below to watch a short video about this new cool virtual reality iPhone app, or if you’re reading this in your email, click here.

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And here is the undeniable proof: 74% of Australians find inspecting properties stressful! This is according to a survey conducted by Lonergan Research exclusively for realestate.com.au in March 2010.

Wait, this gets even better - realestate.com.au thought the result of this survey was important enough to go and rearrange their whole website, to make it easier to navigate, more intuitive, requiring less thinking and consuming less time, all of that to make the stressed home-buyers happier.

And to tell you the truth, I quite like the outcome. The change wasn’t just made overnight, apparently the whole website was available in BETA since March 2010 and thanks to the beta-testers (real estate agents and consumers) a lot of bugs were fixed and new features were added.

Honestly, the decision to spend just one month in BETA seems kind of brave to me, because every little change takes time to implement and test - but it looks like they made it happen. Inevitably, you will find more stuff that needs fixing, but since we’ve established that realestate.com.au do care about user experience (well, why else would they change the whole website around?), sending your feedback is a worthwhile thing to do.

Let’s make one thing clear - there was no complete makeover, and you will still be able to recognize the website when you log on (so don’t panic!). The website now has a more modern look and feel, search has been given a central position and the ads are less intrusive. In your property search results, apart from the upper banner ad, you won’t meet any more distractions, as the majority of ads sit much lower, closer the bottom of the page. You now have the ability not only to view, but also to compare the properties you’ve selected.

I won’t go into a detailed review of the website now, as I have this planned for later. Let me just say that you have a nice surprise coming, so stay tuned - I am working on it, and your patience will be rewarded soon.

And now, if you have 4 more minutes, have a look at the Breaking News Video, presenting the latest and greatest realestate.com.au and watch a couple of stories of real homebuyers, who used it to their advantage.

Click below to play the video (or go here to watch it on YouTube).

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What am I talking about? Video, of course. You won’t be restricted to still images any more, instead you will be able to view video clips with sound where agents are presenting the properties to you, as if you were there in person.

Domain.com.au has partnered with a company called Visual Domain and together they plan to give the audience a chance of inspecting properties in the privacy of their own home.

Domain Sales Manager, Carolyn Matthews, said: “Video offers agents and vendors the chance to communicate with their clients through vibrant and interesting means. Potential buyers can immerse themselves in your listings, at the same time stimulating your market share and increasing your profile. Domain Video provides businesses the opportunity to be true leaders in your field”.

Of course, video doesn’t come cheap and at this time only the more expensive properties’ vendors are opting for video ads in their listings. However, I do believe that as time goes by, this will be a must-have feature for most vendors, because video is a VERY powerful tool.

But enough said, one picture’s worth a thousand words - and one video’s worth a thousand pictures, so here is a demonstration. Let the new age in house hunting begin!

Click below to play the video.

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RP Data Property Reports

1. Individual Property Report, price: $60
Note: not available in VIC.

2. Street Sales History Report, price: $50.
Download sample - click here.

3. Suburb Sales History Report:
12 months of sales, price: $50.
24 months of sales, price: $60.
Download sample - click here

4. Postcode Sales History Report
12 months of sales, price: $60.
24 months of sales, price: $70.
Download sample - click here

Things I didn’t like about RP Data reports

1) There is no number of bedrooms their reports, so no way for you to differentiate between 3 / 4 / 5 bedroom houses.

2) There is no differentiation between houses and units.

3) The report is delivered in a PDF file and the data can’t be sorted. For instance, if you wanted to sort the report by price and see what areas are the cheapest and what areas are the most expensive, it would be impossible.

APM (Australian Property Monitors) Reports

1. Postcode report
12 months of sales, price: $65.
24 months of sales, price: $75.
Note: Reports for VIC have no street numbers.

2. Property report, price $75.
Download sample - click here

3. Street history report (15 years of data), price: $35.

4. Postcode 3 month subscription
2 years worth of data, price: $75.

Note: this report is not delivered as PDF. Instead you would need to login to APM website and access data through their interface. You will have continuous access to all the new data as it’s released during the 3 month period.

Things I didn’t like about APM reports

1) There is no differentiation between houses and units, except in the subscription product.

2) Reports are delivered in PDF files and don’t allow sorting of data.

Things I did like about APM reports

1) APM do specify the number of bedrooms in their reports, which allows you to understand the difference in price between 2 houses in the same street sold in the same period.

2) The 3-month subscription allows sorting, which is very convenient.

Residex Property Reports

1. Postcode Explorer - $90 houses OR units, 12 months
Download sample - click here
Download Sample - click here (Victoria)

Note:
1) There are no historic sale prices for Victoria - today’s estimates only. Not sure I would trust the estimates, I always prefer real numbers.

2) There is no bedroom data for Victoria.

2. Property Explorer
With past sales for the property - $65
Without past sales for the property - $55

Download sample - click here (Victoria)

Note: unlike RP data and APM, Residex will sell you reports on houses OR units, not both.

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For example Postcode Report for 3196 will include suburbs Bonbeach, Chelsea, Chelsea Heights and Edithvale because they all share the same postcode. But if you were to buy a report for Chelsea, it would not include even the adjacent suburb Chelsea Heights.

I recon that for the $10 difference Postcode report is a better buy, because it will give you a bigger and clearer picture. You might even see that there are better opportunities in another suburb nearby that you didn’t consider before.

What’s inside?

First, there are 2 kinds of Postcode reports - 12 and 24 months of data - and, of course, the price is higher when more data is included.

Property-specific information

You will find a list of all the sales in the last 12 or 24 months, specifying:
- Property address (just a street name, not even a house number in Victoria)
- Type of the house / land (detached, semi-detached, hobby farm, etc)
- Sale price
- Sale date (just month and year for Victoria, not the full date)
- Estimated area (land)

Some providers will include information about the number of bedrooms / bathrooms / parking spaces in each sold house, others won’t. In some reports you will find whether the houses were sold by auction / private sale.

What can I do with this information?

If you are too busy to be to gathering this data on your own, looking through the latest auction results, this report saves you time. Or if there are no auctions in the suburb of your choice, this is your only way of knowing prices of the houses that were sold via private sales. Although some information about private sales is available online for free, it is very limited and won’t give you a clear picture.

Having the list of real sales figures in the suburb/postcode you can work out the gap between the asking price and the sale price, and therefore estimate how much you will REALLY have to spend, as advertised prices can be under-quoted or over-quoted.

You can see what locations / suburbs are more expensive than the others, and direct your search towards areas you can afford. This will save you time, money and your search will be focused (as opposed to you looking for properties all over the place and feeling overwhelmed).

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Property-specific information

For all the sold houses on that particular street you will get the following:
- Property address (just a street name, not even a house number in Victoria)
- Type of the house / land (detached, semi-detached, hobby farm, etc.)
- Sale price
- Sale date (just month and year for Victoria, not the full date).
- Estimated area (size of land).

This section will contain all the recorded sales of houses in this particular street in the last 10 - 15 years. Some providers will include information about the number of bedrooms / bathrooms / parking spaces in each sold house, others won’t. In some reports you will find whether the houses were sold by auction / private sale.

Street-specific information

- Average price of sold properties
- Median price of sold properties
- Highest price (best house?)
- Lowest price (worst house?)

What can I do with this information?

If you are a home buyer and already have your heart set on one particular street, if you are determined to buy a house just there and nowhere else, then you need to know what’s going on in your neighborhood.

Even though you’re buying the property for yourself and not as an investment - you don’t need a house that is a bad investment. You can have both advantages: buy a house that you like and have a decent capital growth in the long term.

Study how prices in this street changed over the years. Compare apples to apples - group similar houses together by the number of bedrooms / bathrooms. If you see some extreme prices (very high or very low compared to the rest) - throw them away, don’t look at them, just to be on the safe side. This little exercise will show you the capital growth that you can expect from your future home.

See where “your house” fits in - judging by the asking price, are you buying the best house or the worst house on the street? If the asking price exceeds most of the sale prices on this street, ask yourself why, and whether it’s worth it, or this is just the greed of the vendors showing. There could be justification for the high price - for example if there’s a park right across the road, or if your house was recently renovated, is sparkling and spotless - as opposed to other houses that are in “original” (read “ancient”) condition.

If you are a home seller - then this report should guide you in setting your expectations. See what your neighbors sold for, compare your house to similar properties in your street, take into account improvements that you’ve made (if any) and then compare the asking price or appraisal suggested by your estate agent to reality.

You will be killing two birds with one stone - the first bird is understanding what your house is worth now, and the second bird is understanding what your estate agent’s word is worth. And while there might not be much you can do about your house, estate agents are plenty to choose from

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So let’s get to it.

Different report providers give the same reports different names. You will find here all the possible names of the reports that are essentially the same, and will be able to easily recognize them on the provider’s website.

Individual Property report (or Property Report)

What’s inside?

Property-specific information

This report includes information about just one property. It may include
- Pictures of the inside / outside (probably taken last time that house was for sale),
- A price estimate and information whether it’s above or below the median price for its suburb,
- A forecast what the house will be worth in one year - based on the estimated growth for the suburb / postcode that property belongs to,
- The amenities that property is close to (schools, shops, etc) and the distance,
- When the house was listed for sale (how long has it been on the market),
- How many times it was advertised and what was the asking price every time,
- How many times it was sold, via private sale or auction, and for how much.
- A list of “comparable” properties that were sold within the same area with prices and dates of sale.

Area-specific information

- How many houses were sold in the last year, the highest price, the lowest price and the median price,
- How many were advertised for sale, the highest asking price, the lowest and the median price and more general information of the same kind.
- Market trends of the suburb / postcode, meaning the movements of the median price during the last 10 years and the percentage of the change.
- Some statistics about the suburb, age of population, nature of occupancy (renters / owners), etc.

For a sample Property Report click here

What can I do with this information?

First, let’s filter away the fluff.

If you’re considering buying or selling a house in a specific area, the number one thing you do is get the free suburb profile online - which covers the median prices, their trends, suburb statistics for age, occupancy and household income, in other words 30% of the information in the report. So these are the pages you don’t need to look at in your report. They are not the reason you bought it in the first place.

Next, let’s move on to the information you didn’t have before.

Frankly, if I was a seller - I would think twice before buying this report. I know what my house looks like from inside and outside and what amenities it’s close to because I’ve lived there for some time. I know what I paid for my house and can calculate the future price in a year on my own, using the projected growth for the suburb, which is available for free in many websites. The only reason for me to still buy this report would be to find out what my neighbors sold their houses for (if their houses are similar to mine).

But if I was a buyer - that’s a different story. Even though I would have probably known about the amenities this location offers and the median prices and trends - the information about the number of times this house was sold in the past years is very useful. If the house was changing hands frequently, then it would suggest that no proper maintenance was done there for a while, therefore I would be expecting expenses.

Knowing what price it was sold last time for, I could calculate the current price (using the known median price growth for the suburb), and from the prices of other similar houses sold in this area I could work out the top and the bottom price limit for my negotiation. From the past asking prices and past selling prices I could work out “the gap” and it would give me an idea how much to offer.

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