Record Low Interest Rates Spurs High Levels Of Property Investment
In line with expectations, on Tuesday 4th March the Reserve Bank that announced that it had decided to leave official interest rates on hold. This means that, since August 2013, interest rates have now been held steady at a record low of 2.5%. Analysts believe this decision is based on the current relatively mixed economic conditions which see unemployment levels rising but positive indicators such as higher retail sales and export performance.
According to the Senior Economist for Australian Property Monitors, Dr Andrew Wilson, the outcome of future interest rate decisions will likely depend on clarity around unemployment levels, currently at the highest monthly rate since July 2003.
The Reserve Bank’s interest rate decision this month is again good news for anyone investing in residential property. With record low mortgage rates as well as increased competition between banks, the interest in residential property investment is at an all-time high. In a sign of the times, the National Australia Bank cut its range of fixed home loans to match those of the Commonwealth bank and Westpac earlier this month. This comes after the lender cutting its 4 year mortgage rates to the lowest level in almost 20 years. The increased competition will intensify as demand for fixed rate mortgages continues to grow.
The positive outlook on property investment is also reflected in recent survey by Commbank[i]. The survey asked 1000 home buyers whether they were intending to buy investment property in 2014, with the following results:
Considering the current market an interesting fact from the Commbank survey was that a large majority (over 80%) of those surveyed felt that they would compromise on a number of factors to be able to get into the property investment market. These factors included size, price and location. Most people surveyed were planning to buy investment property in NSW, with Victoria and Queensland close behind.
The General Manager Home Loans at Commonwealth Bank, Clive van Horen believes that strong interest in property investment continues because of the relatively stable nature of property prices in Australia over the last ten years, as well as profits being high when factoring in costs. He also suggests that the key to successful property investment is research as well as getting advice from professionals who understand the investment market and can help investors make the best decision based on their requirements.
Potential residential property investors or those looking to grow their portfolio, with advice from property experts, should consider all the options available to them on the market including new and off-the-plan properties.
Infrastructure: $249 million Perth CBD busport work begins
News Release Transport Minister Dean Nalder
16 April 2014
Infrastructure: $249 million Perth CBD busport work begins
The CBD skyline is undergoing a radical change – the advertising tower on the Perth City Link site is being demolished, resulting in an unobstructed view from Perth to Northbridge for the first time in almost a century.
Transport Minister Dean Nalder said the recognisable structure on the corner of William and Wellington streets was built in 1994, to replace a water tower built on the same site.
“The demolition of this final piece of infrastructure on the Perth City Link site marks the first time in decades the people of Perth will have an unrestricted view from one side of the site to the other,” Mr Nalder said.
When the advertising tower is pulled down it will mark the end of major demolition works on the site and the start of piling to construct the underground walls of the new busport.
“About 4,000m of concrete piles will be laid, and 90,000 cubic metres of earth will be moved to make way for the state-of-the-art Perth Busport. In addition, 22,000 cubic metres of concrete – about nine Olympic-size swimming pools – will be poured during the project,” the Minister said.
Mr Nalder said sinking the Fremantle rail line and now the bus station would fundamentally transform the centre of Perth and connect the city and Northbridge precincts.
The Perth Busport is being funded by the State Government ($237million) and the City of Perth ($12million).
Time to cash in on housing market strength?
News Release Real Estate Institute of South Australia
17 April 2014
Time to cash in on housing market strength?
It can often be difficult to know when to enter the South Australian property market, as buyers tend to wait for an ideal set of circumstances to arise before making their first move.
For example, you might be waiting to build up an ample deposit, prices to go down in your desired area or interest rates to be reduced.
No matter what your perfect situation might be, there will come a time when you simply have to bite the bullet and make those initial steps onto the housing ladder.
Now could well be the time to do just that – interest rates have been at an all-time low for seven months now and if comments from the Reserve Bank of Australia (RBA) are to be believed, property market conditions are improving.
While some people might have been lucky enough to purchase when prices bottomed out, others have been biding their time as other factors fell into place to make it easier for them to buy.
The RBA explained how conditions in the housing market are especially strong at the moment, with house prices increasing 10.5% across the country in the 12 months to March.
Dwelling investment increased in the December quarter, showing many buyers recognised that times were good and conditions in the wider market were working in their favour.
Minutes from the RBA’s meeting on April 1 suggested that the low interest rate environment may stay in place for a while longer, giving would-be buyers the opportunity to secure competitive home loan products.
RBA Governor Glenn Stevens explained how in light of current conditions, “the most prudent course was likely to be a period of stability in interest rates”, potentially giving people the push they need to seek real estate advice.
Brisbane Infrastructure: Construction starts on Gateway Motorway South
News Release Assistant Minister for Public Transport Steve Minnikin
17 April 2014
Brisbane Infrastructure: Construction starts on Gateway Motorway South
Congestion on Brisbane’s busy Gateway Motorway South will soon ease with construction starting on the widening of Mt Gravatt–Capalaba Road across the Gateway Motorway, including improvements to ramps for drivers entering and exiting the highway.
Deputy Prime Minister and Minister for Infrastructure and Regional Development Warren Truss said the project continues the Australian Government’s commitment to removing congestion and improving efficiency on our roads.
“The Gateway Motorway is a major arterial road for Brisbane and this stage of the $140 million project will help get traffic moving on what is often a badly congested road,” Mr Truss said.
“Not only will the widening of Mt Gravatt–Capalaba Road mean motorists get to their destinations more quickly, they will get there safely.
“We’ve just completed the extension of the Gateway Motorway South on-ramp to the Pacific Highway, and this widening continues our commitment to increase efficiencies for road users.”
Federal Member for Bonner Ross Vasta said he was delighted the Australian Government was focussed on improving Brisbane roads.
“This is a much needed upgrade for Brisbane motorists,” Mr Vasta said.
“Along with the $1 billion Gateway Motorway North upgrade, it is fair to say the Australian Government has a clear focus on this important corridor.”
Assistant Minister for Public Transport Steve Minnikin said the project will provide a safer and more efficient connection, to and from the Gateway Motorway benefiting more than 35,000 motorists who travel on this stretch every day.
“In partnership with the Australian Government, this is another example of the Newman Government delivering on its election promise to deliver better infrastructure and better planning for Queenslanders,” Mr Minnikin said.
“I am looking forward to the completion of the project so we can keep Brisbane moving.”
The Australian and Queensland Governments are jointly funding the projects, investing $70 million each into the upgrades.
Tips For Buying An Off The Plan Investment Property
Buying an off the plan property can be a great way for first time investors to get into the real estate market, as well as a fantastic way for existing property investors to build a portfolio for the future. There are so many advantages to considering an off the plan apartment rather than an existing property, however there are a number of factors you need to keep in mind before embarking on such a course of action. Getting timely, professional advice from property experts is a critical component to making the right strategic decisions and avoiding the mistakes that first time investors often find themselves making.
Property experts suggest that there are a number of tips that first time investors should consider when considering purchasing a property. These include:
Be organised about your finances. This means doing your homework in terms of your current financial position and outlook, your borrowing and repayment capacity as well reviewing the different loans from banks and other lenders. When you go to meetings with property investment companies or developers take any relevant financial material along with you so that you will be as prepared as possible.
Conduct research. Becoming an investor, or building an existing property portfolio is not simply a matter of turning up, handing over your deposit and signing on a dotted line. Being a fully informed investor means conducting research and exploring issues such as the type of property you wish to purchase, different suburbs (or cities) that are currently offering value for money and capital growth, and associated vacancy rates and demographics. Once you narrow your search to a few suitable areas, also consider factors such as transport links, shopping and schools. It is also important to do research into any developers that you may be interested in, including the track record and quality of past developments, and relationships between the developer, builder and sales agent. Many good property investment companies such as Ironfish can help point you in the right direction and give you the benefit of years of property investment experience.
Study the contract terms carefully. If you have chosen a developer’s project than the next step is to look at any contract of sale and get professional independent legal advice. Buying an off the plan property will involve a number of terms and concepts that you need to be aware of, including time frames surrounding completion of the project and what are known as “sunset clauses” which may allow buyers and developers to walk away from an original agreement at no cost if the development time runs over the planned schedule. As with all investments, there are a number of risk factors associated with buying an off the plan property including projects not being built and the finished property being different to what you expected. In these cases it is important to understand the original contract and your options.
Buying an off the plan property as an investment can be very exciting, but it can also be a little overwhelming without prior experience or without professional advice and support. One of the best property investment tips is to find a reputable and professional investment company that can give you timely information and take you through the process step by step.
Melbourne apartments hit new high, outstripping family homes
News Release Real Estate Institute of Victoria
16 April 2014
Melbourne apartments hit new high, outstripping family homes
Melburnians are embracing apartment living, with mid-sized apartments attracting a higher rent than three bedroom houses across the city.
The new REIV data show that two-bedroom apartments attract a median weekly rental of $390, an increase of 1.3% on the December quarter. The rental compares to $370 a week for a three-bedroom house.
And the highest rental growth for the quarter was in one-bedroom apartments, with this sector recording 2.7% growth – lifting the weekly median rental for these apartments to $340 a week.
REIV CEO Enzo Raimondo said that the fast expansion in new-build apartments appears to have been a drawcard for renters.
“These apartments continue to attract good rents,” he said. “It appears that this ‘state-of-the-art’ style of living is appealing to, and drawing tenants across Melbourne.”
Mr Raimondo noted that apartments are often in prime, central and inner city locations, while three-bedroom houses are spread across inner, middle and outer Melbourne.
“This locational factor has some bearing on rents for houses and apartments – however the clear difference between the rental price for a two-bedroom apartment in comparison to a family home does highlight the genuine appeal of newer apartments.
“While houses boast large living areas and yards, apartments – with the latest in interior design and impressive shared facilities – are yielding higher rents.”
The REIV produces weekly rentals and vacancy rates across Melbourne on a quarterly basis to inform the investment community and public. The information provides guidance on rental levels and vacancy rates.
Mr Raimondo said vacancy rates had declined slightly over the quarter and remained low. He said the overall Melbourne rental vacancy rate was 2.8%, down from 2.9% in the December quarter and 3.2% in the same quarter last year.
Avoiding Common Mistakes When Investing In Property
People don’t often become investors in property with a plan to lose money, but unfortunately that is a more common occurrence than you might think. Experts suggest that there are a number of common mistakes that particularly first time investors make which can easily be avoided with a little forethought and good advice.
Property experts suggest that one of the biggest mistakes property investors can make is not carrying out proper due diligence on their potential purchases. This can mean not having the necessary checks completed – including a reliable valuation – which can mean that you end up paying too much for an existing property and put yourself behind from the very beginning. If, on the other hand, you are looking at off the plan property to invest in, a good plan is to do your homework and talk to the developers as well as property management experts. By the time you come to buy an off the plan property, you should know the potential value of your property once it is completed, as well as other valuable information such as the potential rental income you might make.
Another costly mistake can be not having a strategic plan in place before you become a property investor or before you think of building your property portfolio. Having a written plan – which includes your goals over the next 3 to 5 years – will help you to keep on track when you’re uncertain or to change your tactics if something unexpected crops up. If you’re buying off the plan property, your investment strategy should also include your strategy for when the property is completed, or even if you plan to sell your property share to another investor before its completion date.
One mistake that first time property investors make more than all the rest is what we’ll call “emotional purchasing”. This means that, despite their best intentions, they will see and fall in love with a property and buy it. This might happen even if the potential capital growth or income from the property does not seem to be ideal, or the property needs substantial renovation. Even if the first time buyers are cool-headed and believe that they are buying a sensible property, they may end up worse off over the long-run because of the ongoing maintenance and repair bills they are likely to be paying well into the future.
One of the best property investment strategies as a first time investor is to avoid the issues associated with existing houses, townhouses and apartments, and look instead at brand new off the plan properties. Doing due diligence on off the plan property means looking at a range of factors including viewing the building plans (and, if possible, viewing a display apartment), design options, looking at the developer’s past builds and reviewing their contractual terms. Off the plan property professionals such as Ironfish provide guidance and help with the type of appropriate due diligence needed for buying new property as well as other practical matters such as choosing the right property in the right suburb that will most likely give you the returns and capital growth you are looking for.
A Guide To Negative Gearing For Property Investors
If you’re looking into property investment for the first time you’ll probably come across the concept of negative gearing. While it can seem complex to begin with, with the right advice and with the right property negative gearing can be a very effective tax investment strategy.
Essentially the concept of negative gearing is when your costs for the property, including loan interest and bank charges, ongoing repairs and maintenance as well as capital depreciation, are more than the income you’re receiving from the property. At first glance, this can seem like a nightmare scenario for an investor, however there can be significant tax benefits from making a loss on your investments. The Australian Tax Office, for example, will allow you to offset these losses against other assessable income you might make. Another benefit of negative gearing is that the associated tax deductions mean that investors can borrow a large proportion of the cost of a property, and rent it out to cover the cost of the loan interest. This is a particularly useful for people who may have only a small deposit when they are looking to purchase a property.
There are, of course, other forms of “gearing” when it comes to assets: with so called “neutral” gearing, for example, the income you’re making is the same as the losses you are incurring, meaning that you’re not making a profit or a loss. Positive gearing means that the interest you are paying on your mortgage is less than the income you are bringing in from the property. Many property investors seek to find a property that helps them to into positive gearing territory – that is, the rent from tenants is higher than the costs associated with the property – however real estate experts often point out that these properties are difficult to buy nowadays.
Negative gearing is often considered a good investment strategy in a rising property market. This is because, despite the losses you may incur and subsequent tax offsets, your investment will be growing as an asset year after year. This can be a sensible outlook as long as the property market remains stable or rises. In a falling market, however, relying on negative gearing and capital growth can be problematic.
Lisa Montgomery, the chief executive of Resi Mortgage Corporation, believes that potential investors may be relying too heavily on the concept of negative gearing to provide them with property security, and instead should be focusing on buying the best, most suitable property for them, thereby creating real equity as an investment. When you’re looking at investment management, strategies such as paying more off the loan in a quicker period of time – thereby reducing the bank loan and interest – can help to increase and build equity over time. This equity can then even be used to purchase other properties as investments[i].
No one wants to go into property investing and lose money. Property investment for beginners should include financial and strategic advice from experts who can provide sensible solutions and ongoing help.
Property Investment – Long Term Or Short Term?
It has certainly been a rocky ride for property investors over the past few years. When you look at most types of investments, including shares, this holds true for all of them. When you’re building and maintaining an asset that provides you with dividends or rental income, watching and fretting over every dip in the market is a waste of time (unless you’re a day trader). Indeed most investment experts believe that looking at creating investment goals over a one or two year period is an unrealistic. Instead, they believe that a five or ten year plan is more in keeping with the nature of investing. They suggest that instead of speculating, investors should treat their investments as a business, with long term strategic goals in mind.
Property as an investment by its very nature is a medium to long term investment thanks to market fluctuations and issues such as capital gains tax. The beauty of holding an investment property is that, even during relatively flat periods (and according to some professionals we should be expecting the next one after 2015) rental prices tend to go up. If appropriate to your situation, you can also look into securing tax advantages through negative gearing, which helps to offset the costs of owning an investment property. Don’t forget also that eventually, if you hold the property long enough, you should reach the point at which the rent is covering or exceeds your mortgage costs and you are no longer making a loss.
Property investment for beginners should mean starting out with a sensible goal in mind – for example, are you interested in long term capital growth or going to rely on short term rental returns? With the help and advice from property experts, deciding such matters will then give you a clear way forward. Creating a proper five or even ten year plan will mean that you will be forced to be patient and become more focused on long term results and less anxious about short term dips in the market.
If you are considering entering the property market it is imperative that you find the right property that will fit with your long term plans. For example, off the plan property can be an ideal choice if you’re looking to take advantage of higher capital growth, stamp duty savings and reasonable prices. Often with an off the plan property if you’re quick you will be able to choose the best apartment in the building, ensuring you’re getting value for money. Other issues to consider include finding the right suburb to invest in – this can take months of research and analysis to find the “up and coming” areas or just to break into an already established suburb with good rental returns. Local amenities are generally the number one priority for renters, and buying an apartment that’s near schools, shopping and transport is a safe bet.
It is always a good idea to speak to an investment professional before buying a property as your first investment or considering building your property portfolio.
Free CBD trams, cheaper trains and buses for Melbourne
News Release Premier Denis Napthine
Tuesday, 26 March 2014
Free CBD trams, cheaper trains and buses for Melbourne
Tram travel in Melbourne’s CBD and Docklands will be free and Zone 1 fares will apply across the entire metropolitan network under major reforms announced by Premier Denis Napthine today.
Dr Napthine said the changes would provide significant cost of living relief for families as a result of commuters being able to travel in Zones 1 and 2 for the price of a Zone 1 fare.
“For a full-fare commuter who currently buys a Zone 1 + 2 daily fare there will be a saving in the order of approximately $5.00 a day,” Dr Napthine said.
“A commuter who pays for a Zone 1 + 2 ticket each day will save around $1,200 each year, or, if using an annual myki pass, will save more than $750.
“Tram travel within the CBD and Docklands will be free in a move that will enhance Melbourne’s reputation as an international city.”
The changes will come into effect from the 1 January 2015 and will make public transport more accessible for commuters and tourists and make it easier to move around Melbourne.
This initiative will cost around $100 million per annum and will be accounted for in the upcoming State Budget.
People who begin and conclude their journey entirely within Zone 2 will continue to pay the current discounted fare.
Minister for Roads and Public Transport Terry Mulder said the free tram reforms build on the success of the City Circle tram which has become a popular tourist attraction.
“Today’s announcement means all commuters, including tourists, will be able to travel anywhere within the CBD free of charge,” Mr Mulder said.
“This is just one of the many ways our Government is fixing Victoria’s public transport system and providing more services, to move more people, more often.”
Since coming to Government the Coalition:
The Property Outlook For Investors in 2014
The current outlook and commentary from various parties on the outlook for the property market this year will be a familiar story to anyone who has been interested in real estate for any length of time. Demand for housing as well as property investment tends to ebb and flow. According to most experts, including the Reserve Bank, we are currently experiencing an injection of confidence in the market and an upswing of rising housing prices. This is good news for anyone considering investing in property over the next year or so.
A leading indicator of the current state of the real estate market, the National Australia Bank’s Q4 residential property survey for 2013 reported an increased demand among both local and foreign property investors. The survey found that local investors, especially in Brisbane, were becoming more active in the market, with an “increase in demand for all types of new property in Q4 with inner city the best location in all states[i]. This is an important point for investors looking for new and off the plan opportunities: investors are finding that value and a return on investment is best served by buying real estate within the inner areas and surrounding suburbs of capital cities rather than rural Australia.
Additionally, according to strong early earnings results from the Australia Real Estate Investment Trusts (“A-REITs”) such as Stockland, the residential property sector is looking positive for well into 2014-2015.
Most in the industry believe that this confidence is being fuelled by a number of factors, including:
Despite a recorded drop off in first home buyers in the market in the past few months, housing prices are still relatively affordable, with the results from both the REIA-Adelaide Bank and the HIA-CommBank indexes indicating that affordability levels are as good as they have been in around 10 years.
Inflation is low, and we are currently experiencing record low interest rates, as well as increased competition on mortgage loans between the banks and other lenders which is beneficial for investors.
Our economy and that of other countries is experiencing a positive economic recovery which is set to continue even despite a higher unemployment rate predicted this year.
We are also experiencing population growth, with most new arrivals wishing to be based within the major capital cities. This is combined with low levels of new property coming onto the market, especially in cities such as Sydney, and is good news for anyone wishing to invest in property to reap rental returns.
Despite a positive outlook, investors still need to be on the ball about where to put their money. Finding new and off the plan property that will provide a stable long-term investment – one that is located in an inner city suburb or in the surrounding areas – will be made easier with research and due diligence, as well as timely advice, help and ongoing support from property experts.
Becoming A Smarter Property Investor Through Technology
Whether you’re new to property investing, or are an old hand looking to build your property portfolio there are a number of free and subscription-based online tools you can use to help you research, analyse and buy property.
Read, Read, Read
The better informed and prepared you are, the better your investment decisions and choices. Most information on the internet these days is free, and one of the best property investment strategies is to become as educated you can while you’re waiting for the right property to appear or before you even begin. Property experts suggest that people thinking about investing in real estate should keep track of a range of “big picture” strategic factors such as government policy and economic growth as well as issues such as property prices and rental income. Finding information in sources such as the Australian Financial Review can be invaluable for building up a general picture of the market and its outlook.
If you use Google News, consider customizing the newsfeed to include articles on property investment or property in general (but don’t forget to ensure the articles are being sourced from local news outlets). One advantage to using online versions of newspapers and property magazines online rather than in printed form is that you can easily search for the exact information you are looking for.
Finally, there are many blogs published every week by property experts that can be subscribed to for free which provide interesting and thought-provoking commentary. Not all will be relevant to your situation, but many provide a good idea of what’s going on in the local market. You can also search online for free webinars conducted by many professionals working in property sales and management. Webinars can be a great introduction to the world of investing all in the comfort of your own home.
There are many great tools online you can use when looking for the right property to invest in. Obvious examples include Domain.com.au and Realestate.com.au. Both sites now also offer a “New Homes” category where you research off the plan property. One of the best uses of these free sites is to build up a picture of the property market over time, giving you an accurate picture of which suburbs are booming and even the type of rental income you may get in a certain area. Another useful site is Next For Sale, which provides information on buying and rental patterns within suburbs.
Online calculators are a great boon for the property investor. You can find a range of free online calculators that will help you answer a range of financial questions such as mortgage costs and loan repayments. Keep in mind that most of the calculators are offered by the banks and other mortgage lenders, so therefore their calculations for various loans and other data will vary.
The internet has been both a blessing and a curse for property investors – on the one hand research and analysis that used to take weeks or even months can now be accessed at home while you finish a cup of coffee. Important trends such as rental income in certain suburbs or apartment price fluctuations can be recorded and analysed now with a click of a button. On the other hand, many property investors complain about “information overload”, with just so much data and associated commentary that sometimes it’s hard to see the wood for the trees. This is where expert opinion can help. Property professionals such as Ironfish can help you clarify your goals and provide expert advice and help on all aspects of finding and buying the right new, off the plan property for you.
Adelaide attracts more investment: Hospitality boost hits the City as new hotels check-in
News Release Premier Jay Weatherill
Friday, 28 March 2014
Adelaide attracts more investment: Hospitality boost hits the City as new hotels check-in
The revitalisation of Adelaide’s Riverbank precinct and the return of football to the City is stimulating more private investment, construction and flow-on hospitality jobs.
Three new city hotels with around 600 rooms are set to open this year, catering for the increased number of football fans and other visitors to Adelaide.
Premier Jay Weatherill, releasing the final time-lapse footage of the Adelaide Oval redevelopment, said that it was exciting to see the Government’s investment in infrastructure projects was enticing private developments. “Tomorrow’s Showdown at Adelaide Oval marks a new era for our city and the benefits will flow into the cash registers of city hotels, restaurants and retail outlets,” he said.
“We have laid the foundation by investing in the Riverbank precinct, the SAHMRI, Royal Adelaide Hospital and greater health precinct on North Terrace and the new Adelaide Oval.
“What we are now seeing is more private development leveraging off of this investment, with three new city hotels in the pipeline this year.
“There are currently 33 privately funded developments with a value of nearly $2.5 billion in various stages of case management in the city.
“Our big build, combined with private sector activity has created around 22,000 jobs in the property development industry.
“This is what a vibrant City agenda is about; investing in our city today so that business is excited about what Adelaide has to offer and more young people stay in South Australia.”
The Adelaide Casino is also planning a major $350 million refurbishment and expansion, starting with a $40 million investment over the next year. The hotels, the 170-room Mayfair Hotel and the 120-room Quest apartments both on King William St, the 311 room Ibis on Grenfell St will open later this year.
General Manager of the Mayfair Hotel, Aaron Oh said Adelaide was changing rapidly. “Demand is driving infrastructure and major developments, especially in and around the Riverbank Precinct which will renew reasons for visitors to travel to Adelaide,” he said. “This has reinforced our confidence in the refurbishment of the iconic heritage listed CML building, transforming it to the new boutique five-star Mayfair Hotel.
“The Mayfair Hotel is in the final stages of construction and we’ll be embarking on a recruitment drive very soon to fill the newly created hospitality and administrative jobs within the hotel.”
Quest general manager Andrew Weisz said major projects, including Rundle Mall, the Adelaide Oval redevelopments and the new Royal Adelaide Hospital, were a key factor in the company’s decision to expand its presence in the state.
General manager of Ibis Adelaide, Nathan Frost said his development was designed to fill an important 3.5 star requirement in the Adelaide city accommodation market for both business and leisure travellers. “Such an infrastructure investment will stimulate demand and increase both international and domestic inbound travel to the city, reaping benefits in other business-tourism areas,” he said.
“From a domestic perspective, this new Ibis Adelaide hotel complements the surrounding precinct development, with the upgraded Adelaide Oval and ongoing redevelopment of Adelaide Convention Centre, which will draw more fans and businesses to the city.”
Property Confidence Increases On Strong Auction Clearance Rates In Sydney And Melbourne
The residential housing sector has kicked off 2014 with a bang. Real estate analysts are seeing a boost in market confidence as high auction rates for both Sydney and Melbourne held steady during the early months of 2014. Most property experts believe this trend will continue well into 2014 before easing off towards the end of the year and into 2015.
Sydney in particular is seeing an impressive 80% auction clearance rate, which points to a further rise in prices during the year. While Melbourne had a slightly flat spot during February, according to the Australian Property Monitors’ Andrew Wilson, overall clearance rates for the beginning of the year were considered to be “solid”[i]. The average price for houses sold at auction in Sydney was just over one million dollars, with the average median price for apartments coming in at $681,005.
Melbourne’s market may be seeing a “catch-up” effect from the relatively subdued levels of auction rates last year. According to the Managing Director of Victorian Property Auction Services, Bernard Lawry, the market was beginning to respond to the ongoing record low interest rates and particularly among those interested in property investment in Melbourne[ii]. This can be seen by the increase of investors coming into the market who are looking for new developments in some of the traditionally high end suburbs including Toorak, South Yarra, Brighton and Balwyn. The influx of overseas buyers, especially from China, is also helping to boost auction rates in both cities.
Bill Evans, Chief Economist at Westpac, also believes that investors are driving the current boom in property, with investment lending figures up by around 35% across Australia, and by almost 55% in Sydney[iii]. Owner occupiers are also increasingly looking to upgrade, and he also believes that overseas investors are “dominating” the market, with investor sentiment unlikely to cool any time soon. This is in contrast to first home buyers who seem to be either priced well out of the market or holding back to wait for a drop in prices.
Along with increased competition among banks, the Reserve Bank’s decision to keep official interest rates on hold at the beginning of March is likely to also provide further stimulus to the market.
While the outlook for the property market remains strong, those considering investing property investment in Sydney or Melbourne are advised to seek expert professional research and advice before taking the plunge. Investors, whether they are first time investors or have an existing property portfolio, need to consider a number of factors including:
As an investor, finding the right property specialists is critical to getting timely and practical information as well as ongoing support. Look for professionals such as Ironfish who have demonstrated experience finding, analysing and selecting quality investment properties.
[i]http://www.smartcompany.com.au/finance/investment/35846-sydney-auction-clearance-rates-continue-to-soar-while-melbourne-flattens.html [ii]http://www.yourinvestmentpropertymag.com.au/news/recordbreaking-clearances-indicate-growing-consumer-confidence-184743.aspx [iii]https://www.finnewsnetwork.com.au/archives/finance_news_network66039.html
SMSF Residential Property Investment On The Rise
According to the most recent report from the SMSF Professionals’ Association of Australia (“SPAA”) called “Intimate With Self-Managed Superannuation”[i], more and more people who have set up their own self-managed super fund (“SMSF”) are investing in residential property. In fact the number of assets held in residential property almost doubled over the period of the report, increasing from 5.6 per cent in 2012 to 9.9 per cent in 2013. This investment in residential property came at the expense of cash and share allocations.
The report, which was released earlier this year, was based on SMSF adviser and trustee research, including a focus group and an online survey. It is designed to provide a “snapshot” of the SMSF industry as seen by superannuants and the professionals that advise them, including financial planners, accountants and practice principals.
Main findings from the report included:
With a steadily rising property market and attractive investment opportunities, the trend for SMSF’s investment in residential property is unlikely to decline any time soon. The key to making decision on SMSF investment, and particularly residential property investment, is to conduct your own extensive research into the topic, but also taking advantage of relevant financial advice. If you are considering investing in property as a nest egg for your retirement, then it is also important to get advice from property investment experts such as Ironfish who can provide sound investment strategies, quality products and ongoing support.
Making Property Investment More Affordable For Couples
Financing your first investment property can be a daunting prospect, especially if you are planning to go it alone without help from family members. If you are in a relationship, however, there is a way you can maximise your borrowing potential by combining your partner’s income with your own when you apply for a loan from a lender. Investment experts believe that this concept of pooling financial resources when starting on the property ladder can help give you that kick-start you need in a rapidly rising and competitive market.
A recent article* in Your Investment Property suggests that applying for a double income or joint loan if you are not married but in a relationship is a smart way to greatly reduce the upfront costs and fees associated with investment loans, as well as increase your borrowing power and your ongoing ability to re-pay the loan. It is also often the case that one person will own more collateral that can be used to secure the loan.
It goes without saying that buying an investment property with your partner can be a huge financial (as well as emotional) commitment. Investment and legal experts agree that people considering a joint or double application loan should contact a solicitor who can draw up relevant contracts – similar to prenuptial documents – or a ‘Binding Financial Agreement’ to ensure each party is legally protected in the event of a relationship breakdown or other change of circumstances. This can be a particularly important step for people who had existing investment property or other major assets before their current relationship began. Taxation expert Eddie Chung, partner and advisor at BDO believes that entering into such a financial partnership with someone means that you are inextricably entwined with them until one or either of you decides to call it quits. Having a legally binding agreement that clearly sets out matters such as buying out the other partner or what happens if one party to the agreement dies is critical to ensuring a fair and equitable outcome for everyone.
Other factors that should be decided or settled before you go ahead with the loan application include:
Having these financial aspects settled before going ahead can provide you with great peace of mind, as well as provide a steady foundation for your relationship going forward. As Homestart finance CEO John Oliver suggests, buying an investment property together can be a big step in for any couple, and can often signal the beginning of a new level of commitment between two people. With this in mind, no one wants unresolved financial issues or questions to adversely affect the nature of the relationship. The more organised you are in terms of managing the financial aspects of an investment loan, the more likely you will be to succeed in building a successful property portfolio together in the future.
Buying Off-the-Plan as an Investment
The number of off-the-plan apartments being sold is on the increase, with developers needing pre-sales to get a project off the ground. However, is buying off-the-plan a good investment?
Property Observer took a look:
For John Carfi, the chief executive officer at Mirvac residential, buying off-the-plan can be a smart move when done correctly. The potential is for great returns, a stable rental income and capital gain tax, as well as tax benefits from depreciation and negative gearing. By buying pre-construction, you can usually secure your apartment at a cheaper rate than once it’s been developed.
Firstly, you must ensure the developer is reputable as you are essentially putting your faith in the developer and builder. As for the returns, that all depends on whether you plan to rent the property or ‘flip’ it for a quick profit.
Flipping is a risky game to play and might not always work out how you hoped it would. To flip is to presume that the market will rise just before settlement, and this is not always the case.
Your best bet is to look for off-the-plan apartments close to amenities, public transport, schools and shops, where you are guaranteed tenants and most likely, a higher rent.
Australian Retirees Speak Up About Investing Early
New research has shown that Australian retirees are more outspoken then their global counterparts when it comes to investing for their future.
While 55% of global retirees believe a long-term approach to retirement saving is needed, 72% of Australian retirees advise long-term investment.
According to the Global Investor Pulse survey, retirees are quite vocal on what they would do differently and one of those things is to start investing early. Other advice includes paying down debt and working with professional financial advisers to ensure you get the best out of your income.
This recommendation comes after it was revealed that just 15% of Australians seek advice from professionals, with most of that bracket being people who earn in access of $150,000 a year.
Based on the survey findings, 15% of Australians own an investment property, compared to an average of 10% in Europe and North America.
The research surveyed 17,600 people and was aimed at getting a clearer look at the attitudes surrounding savings, investments and superannuation.
Should You Invest in Property?
There’s a variety of investment opportunities out there. It can be a tough decision choosing where to put your money to get yourself a good return. Property investment is one such way to help build your wealth.
Davod Koch took a look at some of the pros and cons of property investment:
It’s stable. Property is a solid performer long-term and a mortgage can ensure that you save money.
It’s taxable. Capital Gains tax applies on homes sold for a profit unless it’s a family home. However, tax deductions are available for interest paid on the loan and insurance.
It’s income. Rent received from an investment property must be declared as annual income.
It’s expensive. You’ll be faced with stamp duty, legal fees, taxes and agent fees, not to mention the price of the property.
It’s time-consuming to withdraw. If you need to quickly pull your money out, you must be prepared that a home can take months to sell.
Sydney Property Shortage Makes for a Hard Market
For investors looking to buy in Sydney, they’ll need to be prepared to fight hard towards securing a home. The city has run into a critical roadblock – it’s running out of homes for sale.
According to Your Investment Property Magazine, the number of property listings in Sydney is rapidly decreasing and those being listed are being snapped up quickly. For homes under $1 million, there is very limited stock.
The good news for sellers is that sale prices have been incredibly positive.
The latest report from RP Data showed that Sydney’s property listings are 28% lower this year, but buying activity is 30% greater. This clash is creating an increasingly difficult market for investors looking to find a bargain. Since the beginning of the year, property prices have risen by an astounding 7%.
It’s not just the inner suburbs either, with the strong market causing a ripple effect into neighbouring areas. More buyers are turning to the western suburbs of Sydney in the hope of getting a better deal.
Australian Property Investors Have an Increased Appetite for Risk
Australian property investors have put their fears behind them and are very much active in the property market once again, a recent Colliers International survey revealed.
Last year, 70% of respondents had little or no interest in taking on more risk, whereas this year, just 2% felt they were unlikely to invest further in property.
72% of investors in the Pacific region plan to expand their property portfolios, compared with just 56% the previous year.
The survey questioned chief institutional and private investors in a bid to view the forecast for the coming year, the result being a stronger risk appetite for Pacific region investors.
The Colliers’ survey also revealed that there is likely to be less opportunity for offshore investors wanting core property, with local investors showing a greater interest in acquiring secondary properties.
Colliers believes one of the reasons for the increased confidence in the sector may be the recent easing of monetary policy.
For those looking to invest outside of the Pacific, 39% will start their search in Asia.
Western Australia Leads First Home Buyer Market
More first home buyers are getting onto the property ladder in Western Australia than anywhere else in the country. The number of first home buyers has soared by an astonishing 31% over the past year, a study by Bankwest revealed.
A total of 19, 949 first home buyers entered the market in 2012/13. This is significantly more than the 15, 205 who made a purchase in the previous 12 months.
How to Buy in a Hot Market
In a hot market properties go quick, meaning you need to be ready to make fast decisions when looking to buy. You may not have the luxury of time for multiple inspections, so it’s important to be clear on what you want when looking.
Property experts Rich Harvey and Gavin Hegney shared some tips on how to buy in a hot market.
74% of Aussies Say It Is Time to Buy Property
A staggering 74% of Australians think that now is the right time to buy property. This is slightly less than last year when 80% of respondents responded positively, yet RP Data’s Nine Rewards Survey showed that most Aussies think it is still the right time to buy.
Results varied from state to state with fewer respondents in Sydney believing the time is right. Dwelling values have increased by 12.2% since May in Sydney, but 63% still think that now is a good time to buy.
The Golden Rule of Property Investment
Thinking of getting in to property investment? While there’s plenty of tips and advice out there, there’s one golden rule to stick with.
According to property investment expert Michael Matusik, you have to be in it for the long-term. This is his golden rule and knowing that property is a long-term investment is the first step to building wealth.