News & Views

Developer Banks on Green Spaces

admin — Mon, 06 May 2013 02:00:46 +0000

A major property developer has identified an area in north-western Sydney – on the cusp between Putney and North Ryde – as an emerging hotbed of real estate activity, putting its chips on the area becoming increasingly popular among buyers.

Frasers Property Group Monday unveiled landscaping plans for a master community at Putney Hill, which the company’s marketing material claims will include flowering parks and exotic gardens.

This comes after buyer’s advocacy group Secret Agent recently confirmed in its Secret Agent Report that property within close proximity of parkland generally shows stronger sales prices than properties that are not.

The study reviewed the performance of prices in key suburbs around Melbourne and found that parkland properties outperformed average growth rates – irrespective of whether they had direct parkland views or not.

Frasers’ vision for the Putney area includes a 4,400 square metre, wildlife-friendly bushland park to compliment newly constructed apartments, as well as lush rainforest style gardens with native and exotic flora. There will also be community rooftop gardens with activated spaces where residents can grow vegetables and herbs.

Frasers Property group sales manager Adam Sparkes explained that Putney Hill’s park offering has been motivated by the popularity that parks have shown among buyers.

“Most of the young professionals and families buying homes at Putney Hill lead busy lives, so coming home to an array of lush, green spaces is exactly what they need to relax and unwind,” he said.

The company’s first offering of houses in this development have all been sold, but other off-the-plan opportunities are available for completion in 2014.

Government Aiming too Low for Retirement Needs

admin — Mon, 22 Apr 2013 03:19:34 +0000

Government intentions to revisit new taxes on superannuation payouts for retirees could set up Australia’s retirement infrastructure for a massive failure, says Accounting Group Chan & Naylor.
“During recent weeks of political tax grab barracking the government has successfully managed to stigmatise Australian retirees who have managed to set aside their own monies for independent retirement while simultaneously eroding public confidence in super as a mechanism to plan for the future,” says Ken Raiss, Chan & Naylor director.
Raiss believes the government’s plan to tax super funds with over $1m will create an ‘us and them’ perception likely to lull future retirees into a false sense of security of what constitutes a comfortable retirement.
“$1m in today’s terms is a considerable sum, [but] for a married couple with 30 years of retirement ahead of them… this nest egg begins to look worryingly inadequate especially when inflation erodes your buying power,” Raiss says.
According to Chan & Naylor’s forecast, the equivalent value of a $1m pension fund in today’s currency will need to be at least $2.5m in 30 years.
“Australians are going to need more retirement income and the government of the day is doing surprisingly little to help,” Raiss says.
Raiss further argues that other factors are discouraging Australians from maximising their future retirement income.
“The myriad of ever changing rules and limited concession opportunities, particularly those that are associated with the increasingly popular SMSF sector, means that many people are shunning investing in their super and instead putting their money into more risky investments or simply spending it.”
A group particularly at risk is relatively affluent Australians in the 50 years bracket who have paid off their mortgage and children’s education and are now looking at ways of investing for their retirement.
With disposable income and the high likelihood of inheritance, this group may shy away from investing in their super due to unrealistic contribution caps and severe penalties for breaching arbitrary limits, says Raiss.
He warns that to avoid a crisis where retirees run out of money halfway through their retirements future governments must restore public confidence in super.

The City Investors Forget

admin — Tue, 16 Apr 2013 01:26:58 +0000

Canberra’s property stability is proving a major strength but most investors are unlikely to take notice – and that’s the city’s tragedy.
Much to the chagrin of people who live there, Canberra has developed something of a reputation as a place where, apart from politics, nothing much good or bad happens.
True or not, it’s a sentiment that has found its way into the property market. Prices show that Canberra is the wallflower of Australia’s capital city markets: property values neither plummet or skyrocket, they simply coast along. In good times and bad, Canberra property never makes the headlines.
This is the city’s major tragedy. A quick look at ACT property stats tells us why. Australia’s capital is home to just 360,000 people and is a smaller market than a lot of the major suburbs in bigger cities. The Gold Coast’s Surfers Paradise alone had more unit sales than the whole of the Australian Capital Territory in 2012.
Despite its size, the market is robust. Over 2011, Canberra showed the highest value growth among all capital cities. The official figure was only roughly 0.5% growth, according to Residex, but this was as every other capital city sank backwards. Brisbane , Adelaide and Perth house and unit prices, by comparison, each fell by around 5%.
2012 was a similar story for Canberra. The best performer among capital cities was Darwin houses (8.1%), but apart from that the only other capital cities that saw growth (Sydney and Perth) recorded figures less than 1%. Canberra growth was at 0%. Meanwhile, Australia’s four remaining capital cities all shrank back in median property values.
“Canberra is a very dense housing market,” says APM senior economist Andrew Wilson. “It doesn’t have a real top or bottom end and doesn’t have the same fluctuations that you see in other cities.”
Wilson says that what keeps the Canberra property market ticking is higher-than-average incomes and an ongoing shortage of land. “It does have a shortage of accommodation and there are constraints to the release of new land because of the cost of infrastructure development, among other things,” he says.
Wilson adds that the release of land is further slowed by mechanisms such as ballots, which contribute to the ongoing land shortage. Demand from first homebuyers tends to be good too, keeping the market active. It’s the age-old equation of supply and demand and this is what has kept the Canberra market resilient.
Unemployment and population figures also bode well for the ACT. Estimates by the ABS have the city unemployment rate at 3.9%, among the lowest in the country, while population growth has been above the Australian average at 1.9%.

Housing Becoming Increasingly More Affordable

admin — Sun, 07 Apr 2013 23:49:57 +0000

It may not feel like it, considering the high property prices in some of Australia’s cities, but housing is becoming more affordable on the back of interest rate cuts, a growth in earnings and weak price developments.

The Housing Industry Association (HIA) claims that its HIA-CBA Housing Affordability Index increased 5.5% over the December quarter, representing an 18.4% advance on the same period of 2011.

HIA senior economist Shane Garrett said the figures represent the eighth consecutive quarter of increase, bringing affordability close to levels not seen since the height of the GFC in 2009.

“For regional areas, affordability is at levels last seen during the early 2000’s… Affordability is on the increase in every part of the country. This has been driven by the weakness of price developments as well as the two cash rate reductions effected by the RBA in the final quarter.”

He said continued growth in earnings also contributed to the increase, but noted that “affordability would be even more favourable to householders had recent RBA rate cuts been passed on fully by lenders.”

The HIA-CBA Housing Affordability Report recorded improved affordability in all seven capital city indices as well as improvements in the six indices tracking the non-metro regions of each state (Northern Territory is not included in the analysis).

Melbourne’s West Behind the Rest

admin — Fri, 05 Apr 2013 01:52:59 +0000

With a bright pink two-storey house on its eastern-side, while everywhere the pavement grass looks trim enough to putt on. The intersection of Cinel Crescent and Carandon Drive in Truganina is quirky, but hardly remarkable. At the centre of the roundabout is a small garden, distinctive only because its modest designer made it almost too small to spot.

To the keener observer, however, the view from the roundabout says a lot about what is happening in the western fringes of Melbourne. That’s because no matter which direction you look down Cinel Crescent or Carandon Drive, every house is newly built. It’s the same in the streets that run parallel and perpendicular and it’s the same even further afield in Tarneit and Wyndham Vale, other suburbs on Melbourne’s western fringe.

That’s the problem. With the stellar rate of building that was initiated in Melbourne across 2010, much of the city property market remains heavily oversupplied with new dwellings. Out west is where this is most immediately apparent.

In Truganina, where new houses rule the market, the proportion of all properties up for sale remains just above 6%, according to DSRscore.com.au. In nearby Wyndham Vale and Tarneit, that figure is closer to 4%. To put these numbers into perspective, the average suburb in any Australian city normally has roughly 1% of its properties up for sale at any given time.

The rabbit hole goes deeper

Vacancy rates in western suburbs are ringing their own alarm bells. A vacancy rate of around 3% normally indicates a market in balance – where the supply of rental properties meets the demand for them – but all of the three suburbs above are experiencing vacancies edging close to 5%, according to December DSRscore.com.au numbers.

Michael Yardney, director of Metropole Property Strategists, says this situation is hardly a surprise. “While the overall Melbourne property market is recovering, there are some parts of the market that are oversupplied and likely to fall further in price. With too many vacant house and land packages in the western suburbs, rents and values in these areas are unlikely to rise for some time,” he says.

Yardney believes that the situation on the western fringes of Melbourne is a sharp reminder of how dangerous it is to think of Melbourne as one, single property market. “Recently released figures suggest that the Melbourne property market could have bottomed around May 2012 … but it’s a little like me putting one hand in a bucket of ice water and the other in a bucket of hot water and saying that on average the temperature is fine.”

Emerging opportunities

Empower Wealth director Bryce Holdaway agrees that general comments and statistics about the Melbourne market are not always helpful in showing what is happening on the ground, and this shows why even though 2013 may be a better year than 2012 for much of Melbourne, the city won’t be without areas that struggle.

“Melbourne is made up of hundreds of submarkets,” he says. “It is a large metropolis with a big population base and a wide and varied job market. Different parts of the city have different community needs.”

If the western fringes of Melbourne remain a risky prospect for investing, Holdaway says that, conversely, the best opportunities are probably in the inner city. “Now is a fantastic time to be buying the city’s blue chip real estate,” he says. “You can secure it on terms much more favourable [than in the past] and if you look for property with some kind of scarcity value there’s a greater possibility of getting an outperform result.”

Sky-High Yield Figures Divide Opinion

admin — Wed, 03 Apr 2013 00:18:00 +0000

5, 10 or even 16% rental yield sound tempting. RP Data’s revelation that it is possible to get 16% rental yields in one of Australia’s emerging housing markets has some commentators urging investors to get active, while others are not so sure.

For years, property investing has been the enclave of those with plenty of cash to spare, but some observers believe this is starting to change.
After reviewing suburb statistics commissioned from RP Data, Aussie Home Loans executive chairman John Symond said there are at least half a dozen suburbs in each capital city where rental yields are greater than the cost to repay the mortgage.

“It’s the perfect time for the average Australian to consider a move into property investment if they have some money saved. Both fixed rates and variable rates are the lowest they have been in years, with interest rates below 5%.”

Housing prices in some areas are historically low, according to the research, but are starting to move back up and Symond claims investors can earn rental yields of between 5% and 10% in some areas and as high as a 16% in Bellamack, Darwin.

However, Northern Territories broker franchise principle, Tony Schelling, said he is concerned the data may be slightly skewed.
“Bellamack has had some pretty new homes, so 16.9% -you’d have to have very, very low cost housing. The average house in the area is probably $600,000 and they’re getting about $1,000 per week for rent. I think the figure does seem a little high.”

Schelling said he didn’t want to question RP Data, but said it’s possible for figures to occasionally become ‘adjusted’ by limited sales.
Otherwise, he largely agreed with Symond, adding that local rental yields are high, especially for units.

“Darwin in particular has opportunities for those who have a focus on investment and unlike towns like Gladstone in Queensland, which also have high rental yields… Darwin has a multi-stream economy.”

Sydney’s North-West a “Golden Opportunity”

admin — Tue, 02 Apr 2013 23:49:18 +0000

Sydney’s north-west could be emerging as a new hotbed of commercial activity, prompting predictions of a market primed for growth.

Presenting at a Frasers Property conference Friday, Jason Anderson, senior economist at property advisory MacroPlan Dimasi, said the area is becoming increasingly popular with young professionals.

“Sydney’s North West is experiencing a bit of a boom in office development. Hubs at Macquarie Park, North Ryde and Sydney Olympic Park are becoming increasingly attractive for businesses as they relocate to more affordable sites away from ever increasing commercial rents in the city,” he said.
Anderson added that young professionals are favouring Putney in particular because of its location at the heart of this area and forecasted rental increases of over 6% for the next three years.

“Here [residents] can avoid the long commutes associated with working in the CBD. This is driving up rental prices, creating the perfect scenario for investors.”

Frasers Property group sales manager Adam Sparkes said Putney Hill, a collection of premium houses and apartments on the border of Putney and Ryde, remains a golden opportunity for investors.

“Despite Sydney’s North West becoming [a] new hub for business, the area lacks premium housing to cater to this growing market of professionals and investors. The Putney Hill community is currently the only premium grade development in the area, making it very appealing to investors,” he said.

How to Buy Before a Boom

admin — Tue, 02 Apr 2013 23:42:34 +0000

Market timing, its the most discussed property market strategy but is also still the least understood.

According to Richard Reed, co-author of academic research report Understanding Property Cycles in a Residential Market, there may be good reason for this. He paints a picture of a host of macro and micro economic variables spinning on consecutive and sometimes contradictory cycles and a residential property market plagued by poor information on which to judge them.

“At one point everyone thinks the market is going well but it could have stopped several months ago, so by the time the market information comes through the cycle has well and truly moved on,” Reed says, referring to the time lag for median house price data. “Neither is it across the board; while the market generally can be falling there are some pockets that may continue to rise,” he adds.

Reed suggests investors first look at the market segment in which they are active to determine how susceptible it is to market cycles.

“Premium property is not so affected by cycles, whereas in the mortgage belt, markets can go up and down quite sharply in response to interest rates,” he says, warning that younger investors who have not yet seen a true downturn can tend to overinvest.

Pinpointing the right time to buy

A total cycle tends to last 7–10 years. Reed recommends investors take control of their own long-term forecasting, using infrastructure investments, population shifts, demographic trends and local government planning papers to project the movement of their particular market within a 10–20 year timeframe.
Yet Paul Do, author of I Buy Houses: The Property Investor’s Handbook, says investors can take advantage of growth more quickly by determining the two to four year ‘buying zone’ of each cycle. He uses two basic criteria to determine the buying zone.

The first criteria is based on the share market concept of fundamental analysis and uses rental yields versus interest rates. You buy when yields to interest rates are high compared to historical levels. For example, over a decade the level of rental yields compared to interest rates may swing from 30–60% in a capital city. At 30% the price is expensive and at 60% it is relatively cheap compared to historical levels. For example, in Sydney relative rental yields were at the top of this range for a number of years in the mid-80s and mid-90s and in 2009.

The second criteria relates to the share market analogy of technical analysis and it is supply relative to demand, so it is best when vacancy rates are at historical lows. When there is short supply relative to demand it signals that prices will increase in the next few years. For example, in Sydney vacancy rates were at their historical lows in the mid-80s and mid-90s and from 2007 onwards.

It pays to wait

Do also recommends waiting until those conditions are right. “My advice would be that if prices have been running strong, wait for them to pull back and start to rise again in the next cycle,” he says.

While investors may find it difficult to sit on their hands, Do says money is best invested elsewhere during the ‘buy nothing’ years. Using the example of Perth heating up while Sydney was cooling down in 2003, Do points out capital city markets are often at different phases at different times, creating ongoing opportunities around the country.

5 areas where positive geared properties are easy to find

admin — Fri, 15 Mar 2013 01:32:48 +0000

Looking closely at indicators that will drive rental prices upwards is key when researching an area and its cash flow potential. One is the tenant vacancy rate. If this is below 1% it is ideal, while anywhere below 3% is good. The lower the vacancy rate, the more displaced tenants there will be to fight over your property. Suburbs with a shortage of properties both for sale and for lease will ensure you get value growth and increasing rental return.

Another indicator is if properties are close to capital cities or major regional hubs, which have a range of economic drivers; not just a big project or two that might cease production at any time.

Cash flow positive areas:

Bankstown, NSW

(Median unit price: $316,000) (Rental yield: 6.26%) (Vacancy rate: 0.55%)

Selling points: Bankstown continues to grow in value as Sydney’s inner-west spreads outwards. While houses have pushed upwards to a median of $535,000, units are offering opportunities for investors at $316,000, with healthy yields of over 6% providing an added incentive. The suburb has its own airport, as well as access to numerous schools and campuses of both TAFE and Sydney University. With Sydney’s property supply issue, the west will continue to become denser in future, making Bankstown appear closer to the city and driving its prices and demand.

Convenience and lifestyle: Bankstown is located 17km from the CBD, but is brought closer by access to numerous train stations and main arteries. It is abundant in parks, sporting facilities and features the Centro shopping complex and Hoyts Cinemas in its considerable town centre. The suburb is well-suited to family life, with numerous schools, churches, cafes, restaurants and other local businesses bringing the community together. However, it still has some improving to do.

The numbers:
• Bankstown units are getting snapped up after an impressive average of just 53 days on the market
• Units make up just 0.72% of all properties on the market and the excellent vacancy rate of 0.55% suggests rental returns will continue to experience upwards pressure

Typical deals: Two-bedroom units and three-bedroom townhouses and houses are the dominant listings. The unit listings aim to attract first home buyers and investors, while houses target families and upgraders.

Nightcliff, NT

(Median unit price: $348,000) (Rental yield: 7.46%) (Vacancy rate: 0.43%)

Selling points: One of Darwin’s original seaside suburbs, Nightcliff is well placed to make the most of the Northern Territory capital’s resource-backed property boom. Located 9km north of the CBD, it is situated between a number of geographical drivers, such as the RAAF base, Darwin International Airport and Royal Darwin Hospital. Houses have risen in median price to rest just shy of $700,000 in recent years, despite a slow 2012, and are offering yields of 5%. Units are presenting investors with the best value, with a median of $348,000 and yields at 7.46%.

Convenience and lifestyle: Nightcliff is one of the more sought after coastal suburbs to Darwin’s south. It is a family-friendly locality, with an abundance of sporting and recreational amenities, plus the foreshore precinct within walking distance. The local Nightcliff Shopping Centre provides food and retail facilities, while the area plays host to the popular Nightcliff markets every Saturday morning. A range of schools exist in the area for children of all ages, while the Darwin Water Gardens and nearby Casuarina Square make for attractive day trips. Nightcliff is well-serviced by regular buses.

The numbers:
• Units have been selling at a 100% auction clearance rate, indicating that now is the time to snap up some deals
• Units make up 0.7% of all properties on the market and, with a stunning vacancy rate of 0.43%, rental returns promise to remain strong

Typical deals: An even spread of units and houses are usually listed in Nightcliff. Two-bedroom properties are the most represented for units, while houses tend to range from three, right up to six bedrooms. Older, established properties are available for well under the median, and present the opportunity to renovate and add value.

Andergrove, Qld

(Median house price: $390,000) (Rental yield: 6.73%) (Vacancy rate: 1%)

Selling points: Andergrove is a suburb of the booming Mackay region in Central Queensland. Like many resource-backed postcodes, its rental demand is on the rise and this paves the way for high returns. Houses are providing good opportunities for investors, with a low median of $390,000 being disproportionately affordable, when compared to units ($307,000). Unlike riskier mining areas, the region is strong in its own rights, producing more than a third of Australia’s cane sugar and being situated in a holiday hotspot, just south of the Whitsundays.

Convenience and lifestyle: Andergrove is part of a large regional hub, halfway up the vast Queensland coast. Traditionally it has been a place for sugarcane farmers and their families, but is now catering for Fly In Fly Out resource workers and some professionals in that field. A large number of reserves, sporting facilities and forests make it suitable for outdoors types, while a wide selection of cafes, restaurants and entertainment venues are available in next door Mackay.

The numbers:
• A 71.4% auction clearance rate shows properties in the area are well sought after, by those looking to tap into a healthy 29% of renters in the area
• A vacancy rate of 1% is a good result and should provide steady support to the yields of 6.73% currently up for grabs

Typical deals: Newer three, four and five bedroom houses are selling for upwards of $500,000, while established properties are available for well less than $400,000. Houses with tenants in place are commanding yields of 8-9% in some more affordable properties.

Ottoway, SA

(Median house price: $316,000) (Rental yield: 6.41%) (Vacancy rate: 0.64%)

Selling points: Considering its location, next door to Port Adelaide, Ottoway is offering exceptional value for investors looking to take advantage of a flat current Adelaide market. Just 10km to the north of the Adelaide CBD, Ottoway has water close to the north and west and is well-connected to the city, coast and hills by main arterial roads. A median house price of $316,000 is more than $100,000 cheaper than Port Adelaide, but rents don’t reflect the same divide. For investors, Ottoway is essentially a numbers play, as the suburb itself is quite small and close to more expensive neighbours.

Convenience and lifestyle: Restaurants, supermarkets and basic shopping opportunities are all within walking distance along the main drag, Grand Junction Rd, while further options can be found in Rosewater and Port Adelaide. Educational facilities are extremely accessible, with 10 schools found within a 4km radius; while a number of open space parks and reserves give Ottoway a leafy, family feel. The suburb is well-serviced by buses, while trains to the CBD and elsewhere can be found five minutes away at Alberton.

The numbers:
• Stock on market represents an attractive 1.24% of all properties in the suburb. Vendor discounting of 8% has taken place recently, indicating potential for deals to maximise yield
• An excellent vacancy rate of 0.64% suggests rents will grow further in the near future

Typical deals: The unit market is virtually non-existent, with a spattering of apartments along Grand Junction Rd. Houses characterize the suburb and there are plenty of three-bedrooms available for less than $300,000 and therefore well below median.

Highgate, WA

(Median unit price: $371,250) (Rental yield: 7.13%) (Vacancy rate: 0.44%)

Selling points: Affordable suburbs situated anywhere near the Perth CBD are showing great cash flow promise, due to the large number of head office mining company professionals renting in the area and willing to pay top dollar. Just 2km north of Perth, Highgate fits the bill perfectly, with a $371,250 unit median representing stellar value. Values have grown by around 10% over the past 12 months, but deals are still on the table for savvy investors. A fashionable suburb, known for trendy eateries and superior public transport, Highgate presents all the perks of inner-city suburbs, except with greater returns.

Convenience and lifestyle: Appealing especially to young professionals, Highgate offers a wealth of café and restaurant options, mostly situated on the famous Beaufort St strip. A number of supermarkets service the area and boutique retail shopping can be found nearby in Perth itself. Outdoor spaces are in high supply, with Hyde Park on one side and the Swan River and embankment on the other. Central TAFE and the Mt Lawley Cafe Strip and Northbridge area are close by and add a liveability factor to Highgate says Derek Jones of EOS Property Group. “The suburb has undergone densification and almost 75% of the properties are multi-density. A high number of tenancies in the suburb indicate large numbers of investors active in the suburb,” he says.

Period homes and newer apartments lend plenty of character and village feel to the suburb, which is serviced comprehensively by buses and is also close to East Perth train station.

The numbers:
• Units are very well sought after, reflected by a 100% auction clearance rate
• A vacancy rate of 0.44% is a very good sign and renters make up 59% of the demographic

Typical deals: Two and three-bedroom apartments and townhouses make up the vast majority of affordable listings in the area. Luxury homes going for $1 million plus have a small presence on the market, as well as a few one-bedroom units offering potential yields of 8% and more

Rent a cat as part of the house

admin — Mon, 11 Mar 2013 23:11:42 +0000

Trust the Japanese to think of outlandish concepts. Their latest includes rental properties with a ‘rent a cat’ that comes part of the lease terms.

JapanPropertyCentral.com reports that the idea is being pushed by Tokyo-based non-profit organisation Tokyo Cat Guardian, which is operating a rental apartment complex where tenants can share their rooms with a cat from a shelter.

After going through the organisation’s screening process, tenants can choose a cat of their choice from a shelter, but can give it back when moving out.

Tenants can also swap their cat for another if they feel they are incompatible with their original choice.

Throughout their tenancy, the new pet owners must be responsible for the cat’s food and vet bills, and can also elect to keep the cat forever – if they wish.

Tokyo Cat Guardian have been operating cat-included rental apartments since 2010, approaching landlords to find pet friendly properties. They then advertise them through their website.