September 2016

Sep 30

0

What Sydney Housing Bubble?

By Hugh Frame | best investment, Economy, Investment, mortgage rates, News, Properties, Real Estate | No Comments

What Sydney Housing Bubble?

Another international story about “The Bubble” – what Sydney housing bubble? Should be he title! It seems that every month or so we read of overseas ‘experts’ (and very occasionally some local ‘expert economist”) telling us here in Sydney that doom is on the horizon for house prices in Sydney. Instead of peering over price growth charts in their far-away offices on the other side of the world, maybe they should just try finding a property to buy or rent in our great city before predicting yet another housing price crash!

Highlights from the recent UBS Global Real Estate Index Report place Sydney as the fourth-biggest housing bubble in the world. A bubble is something that is about to burst so this suggests that our young in Sydney actually will have no problem at all in entering the housing market as prices tumble when the bubble bursts. How many people do you know who actually believe this is close to coming true?

Bubbles burst when a city ends up with a major over-supply, populations decline and/or when loan repayments become impossible. With all the warnings of bubbles bursting in Sydney over the lifetime of anyone reading this article, it has never happened! Sure, towards the end of a boom period, we have seen prices correct by a few percentage points but no-one alive can ever tell you about the time the Sydney Real Estate market bubble burst.

If you actually believe this overseas take on the Sydney market, then you must also believe the following is about to occur:-

Sydney’s building boom is about to leave us with a massive oversupply of new stock
Sydney’s population boom is about to come to a screeching halt
Sydney is about to be hit with a very large unemploymnet problem
Interest rates are about to increase dramatically leaving home owners unable to pay their mortage

If you are concerned about interest rate hikes, read this: http://dailym.ai/2dno9k3 – they are likely to remain low for decades! As for the likelyhood of the other factors – forget it!

It would be great for our younger generation trying to make their first step on the housing ladder if there was the slightest element of hope in our non-existant bubble bursting- what Sydney Housing Bubble – and maybe the topic makes for a little light banter around the BBQ but I’m convinced anyone who knows this great city also knows the story of the bubble bursting is just pie in the sky.

Parents who help to buy investment property at no cost!

By Hugh Frame | best investment, Financial, Home Loans, Market, Mortgage, Property Research | No Comments

Parents who help to buy investment property at no cost!

More and more we are coming across parents who help to buy investment property at no cost. If it’s not a first property investment, then sometimes it is a first home buyer getting that extra assistance from mum and dad – and it costs the parents nothing!

The big risk the parents do take is that the children are not trustworthy or that something happens in the children’s work and they are unable to support a mortgage with a lower income. However, most risk can be covered by insurance.

So how does this all work? Simply, the parents become the guarantor for the loan. A guarantor undertakes to pay another person’s loan should they be unable to. Most lenders give home-buyers who do not have a big enough deposit the option to have someone guarantee the loan. With some available loans, the deposit for a new property is held against the value of the guarantor’s home meaning that NO cash deposit is necessary and NO mortgage insurance is payable as the new property is secured against the parent’s home.

If advice was sought before entering into such a contract, it would probably be suggested that the borrowers ensure full risk coverage through appropriate insurances. Today, this could even cover the risk of a borrower being made redundant. Exposure for the guarantor can also be limited and in many cases after $50,000- $60,000 is paid-off the mortgage, or the property grows by that value, the guarantors can be removed by the lender as the guarantor of the loan.

The guarantors (mum and dad) are putting their home at some risk for the sake of their children. What they are giving their children is absolute trust in that they will do the right thing and stick to the terms and conditions of their loan. Mum and dad are not actually putting their hands in their pockets and giving funds to help the children up on to the first rung of the property ladder. It’s a great way for parents who help to buy investment property at no cost to them. Lime Property Solutions can place you with brokers who can fully assist in the loan process. Read more: http://www.smh.com.au/money/-grlrgz.html

Sep 21

0

Melbourne needs an oversupply

By Hugh Frame | Uncategorized | No Comments

Melbourne needs an oversupply

SQM Research managing director Louis Christopher claims that Melbourne needs an oversupply of apartments as vacancy rates tighten throughout the city.

There is little doubt that Melbourne did have an oversupply of residential units but it now appears that vacancy rates in Melbourne are going ‘against the trend’ and more housing developments are needed.

22,000 new homes needed for Victoria over the next year

There are certainly small pockets of the inner city where there are still more units than required and it is still the case that Melbourne needs more diversity of housing types and dedicated investment in affordable and social housing. The middle ring and outer suburbs, in most cases, still have very low vacancy rates and house prices have continued to increase since 2012.

The concern of most property investors has been the oversupply of units in the CBD area but now, according to SQM, even the unit market is tightening and yields throughout the city for landlords are on the rise.

BIS Shrapnel has warned of a “huge apartment hangover” due to oversupply in the Melbourne’s apartment markets but the huge increases in population in Australia’s fastest growing city may prove this forecast to be false.

It is now estimated there will be 22,200 more homes than necessary in Victoria by 2018. Also, it is estimated that in n Victoria almost 40 per cent of tenants are paying over a third of their income in rent.

Many property investors have been very concerned about the quantity, size and quality of many of the apartments built in the CBD area of Melbourne over the last few years but the more astute investor has realised that Melbourne needs more than small inner-city units to satisfy the continuing demands of a growing population.

Even if SQM have it wrong here, there is still opportunity for price growth in the middle and outer suburbs as Melbourne sees a tightening supply and some needed yield growth.

Choosing an investment property and understanding demographics

By Hugh Frame | best investment, Economy, Investment, Properties, Property Research, Real Estate, rent | No Comments

Choosing a good investment property and understanding the demographics

Choosing an investment property and understanding demographics of a neighbourhood go hand in hand.

When we are looking at an area or suburb for investment, it is essential to have a look at the demographics of the neighbourhood to understand the age groups attracted to the area and the likely incomes and type of housing that will be the most attractive for the majority of people wanting to rent and wanting to buy as owner-occupiers in the area.

It makes sense to be buying a modern two-bedroom apartment close to the city for your investment if you know that a large percentage of the population in the area are young professional renters with a reasonably high disposable income who can afford to pay the rental your investment should achieve.

Report found Cardiff as the most segregated city in England and Wales

Likewise, in areas where we see large numbers of retirees moving to smaller single level villa developments, wanting the added security of a gated community, then perhaps that type of property may make the best investment in that type of area.

A recent report from the UK may be of some interest to Australian planners also as we see the median age of residents in our cities fall considerably as young Gen x and Gen Y renters move closer to our city centres. The article entitled “Housing crisis ‘is driving young and old apart as different generations are being forced to live apart‘ , highlights the fact that age segregation is now an planning issue in many UK cities.

The study found that:

Under-30s are stuck renting in Britain’s regenerated city centres
In a rise in ‘age segregation’ the middle-aged dominate the coastal regions
The lack of affordable housing in many areas has damaged society, says a report by the Intergenerational Foundation

Recognise any of these issues for our Australian cities? Older people congregating in smaller towns and outer suburbs has implications on where to place health services and other planning issues as well as some of the more obvious problems ‘age segregation’ may cause.

Choosing an investment property and understanding the demographics of a neighbourhood is essential in understanding the type of property likely to work best for you both for finding renters immediately and for future capital growth in having the type of property most likely to appeal to future owner-occupiers. Read more: https://goo.gl/CbaxP7

Sep 14

0

Are holiday homes still a good investment?

By Hugh Frame | best investment, Economy, Investment, Properties, Property Solutions, Research | No Comments

Are holiday homes still a good investment?

There is an article in domain.com.au today which asks the question, are holiday homes a good investment? The author seems to support the notion that, on the whole, money can still be made from a second ‘holiday home’ but I do not think this statement actually answers the question. It is almost a certainty that any property will make you money over a period of time, this fact in itself does not make a good investment.

Gold Coast is prooving popular for Brisbane commuters

Holiday Homes do not always make a good investment.

I have the experience of a holiday home in Cairns, purchased new back in 2002. The complex was new and was awarded all sorts of awards as “the Best” in this and “The Best”. I could use it whenever I chose and at other times in was in the complex holiday rental pool; a very typical set-up for a holiday unit almost anywhere in Australia. The total cost, including a furniture package and stamp duty was around $300,000. As an investment, it held its own for the first few years and it gained from the large growth cycle witnessed in Cairns between 2002 and 2008, probably reaching a price point of around $420,000…… then came the GFC! The Australian dollar went through the roof, tourism disappeared, body corporate in far north Queensland almost doubled overnight due to insurance policies and Cairns city council rates became some of the highest in Australia.

Even with the higher 4% depreciation that can be claimed on this type of ‘commercial’ property, the out of pocket after tax holding costs were quite substantial. The Cairns housing market also collapsed by up to a staggering 50% in some cases. Fourteen years after the purchase, I can still say I love visiting this unit (each time now seems to involve a fridge replacement or a lounge suit replacement or something else), it almost looks after itself and, if I chose to sell, I’d probably just get around the $300K I originally paid for it.

Had I purchased a unit on the gold coast around the same time for the same purpose, the history would just be about the same, maybe slightly better.

For a good investment, stick to areas where you can minimise your risk and maximise your return. Stick to the major capital cities of Melbourne, Sydney and Brisbane and do not try and kill two birds with the one stone; if you want a good investment property, buy a good investment property: if you want a good well-located holiday home then that is what you buy – but don’t look for this being a great investment!

Sep 13

0

Is there an oversupply and should property investors be concerned?

By Hugh Frame | best investment, Economy, Investment, Market, News, Properties, Property Research | No Comments

Is there an oversupply and should property investors be concerned?

In the last few blogs, we have been discussing the game-changing projects now being undertaken in the heart of Brisbane and the Big Australia policy all pointing to the need for more property and opportunity for property investors, so is there an oversupply and should property investors be concerned?

There is little doubt that there are some pockets of short-term concern in our major cities. Fringe suburbs in Sydney are seeing small corrections in some unit prices, inner Melbourne has seen substantial falls in some unit developments and Brisbane units are seeing slight falls in yields in some areas. It’s all very temporary, we have been in much worse temporary over-supply situations before and again the over-supply is in relatively tight pockets where just too much of inappropriate property development has taken place. I use the word ‘inappropriate’ because the vacancy rates are highest in small cheaply-built units that really depend on one and one only selling point – relatively good location. This type of apartment may be popular for students and young professionals leaving home for the first time but they do not attract the owner-occupier or the longer-term tenants wanting a larger space to call ‘home’. When other ‘better’ options are available in a market place, it tends to be the inferior properties that suffer from long vacancy which in turn drives down rental yield as landlords strive to attract fewer renters.

It’s all temporary anyway, and the recent report on Sydney’s population boom makes this abundantly clear; we need more homes for an exploding population. Sydney is now growing faster than predicted putting more pressure on the city’s housing needs.

Rob Stokes, NSW Planning Minister, describes this population boom as a “symptom of Sydney’s success”. Sydney’s population is expected to leap by more than 2.1 million people in the next 20 years – about 170,000 more than predicted only two years ago. In 2014 Sydney was projected to have a population of 6.25 million within 20 years, up from 4.29 million in 2011. The updated projections anticipate a 6.42 million population in 20 years.

It’s planned that 1/3 of this new population will be housed in new high density corridors along major transport routes, one third will be in higher density existing areas and the remaining one third will be housed in our expanding growth corridors, particularly in the west and south-west. In the Camden area in the south-west, the population is expected to rise from 58,000 in 2011 to 224,000 in 2036. In Parramatta the population is expected to double from about 200,000 in 2011 to 416,000 in 2036. The City of Sydney population is expected to increase at a similar rate – from 183,000 in 2011 to 315,000 in 2036. Stark rates of growth are anticipated in the Hills, Botany Bay, Liverpool, and Blacktown.

Over-supply? ….. Maybe in small pockets but for a very short time!

Do you want a Big Australia?

By Hugh Frame | best investment, Economy, Investment, News, Properties, Real Estate, Research | No Comments

Do you want a Big Australia?

Both of our major political parties are in favour of a big Australia. Of course a big Australia means many more people, at present we are seeing an additional one million people being added to Australia’s population around every three years. The city of Sydney now has a population of over five million with another 1.5 million to be added to Sydney alone within the next 16 years.

The many arguments for a big Australia state that more population means more economic growth; another argument is that new migrants are of working age which helps off-sets the problem of the very large number of Australians reaching retirement age. Our future as an aging nation is not nearly as bleak as some of our Asian and European friends.

There are many dissenters to the Big Australia policy and their arguments are discussed in today’s news article (see http://www.smh.com.au/comment/is-there-room-for-big-australia-20160901-gr6atz ).

Wilton Junction. The newest of our New Towns – 70Km from the CBD

The implications of this massive growth in population should make the property investor stop and think. In Sydney, for example, using an average of 3 persons per household, we actually need an additional 500,000 homes over the next 16 years. It is only these numbers that can make some sense of the massive new developments happening in our North West and South West in particular. No longer are we seeing massive new ‘commuter suburbs’ being built on our city fringes but instead whole new towns with their own job-creating infrastructure.

The priority new town development area has been announced and will commence next year at Wilton Junction – (http://talkwiltonjunction.com.au/) – a new community to cater initially for 12,000 new homes and 35,000 new residents. Wilton Junction is just over 70Km from the CBD. If you have a trip to this new town, at around the 50km mark from the CBD just off the M5 bordering Narellan is the new town of Oran Park – (http://www.oranparktown.com.au/) – and its surrounding suburbs. Oran Park has transformed from the old Oran Park race track and surrounding paddocks to a hub of hundreds of homes surrounded by new commercial development with an eventual target of hosting a population of 25,000 people and maybe the same again in the surrounding area. It all looks very grand and we may wonder where all these ‘new’ people may come from?

We have two massive new developments here, one well-underway and another due to start shortly and between them they will offer a home in a new town to around no more than 90,000 people! Where will we house the remaining 1.4 million? Are we really building too many units in Sydney?

There is still great opportunity here for the astute property investment.

Sep 06

4

Great reasons to consider Brisbane for your next property investment

By Hugh Frame | best investment, Investment, News, Property Research, Research, Uncategorized | No Comments

Great reasons to consider Brisbane for your next property investment

There are a few YouTube links to this blog which highlight at least six Great reasons to consider Brisbane for your next property investment. Before you read any more, consider the position Sydney (and NSW generally) was in around 2008? The country was doing exceptionally well, unemployment was low, GDP was high, we just had a new Prime Minister, the country had no debt at all but our State Government and our state was being described as a ‘basket case’! Our health system was in a mess because hospitals didn’t have enough to pay for food (Liverpool) or laundry (Camden) and unemployment in NSW was around the 7.8% mark. We were under the guidance of politicians like Mr Obeid, Mr Trapodi, Mr Robertson, et al! Happy Days.

By early 2010, things had improved considerably in NSW, unemployment was way down below 5% and the State seemed to be out of its ‘technical recession”. By 2011, our government had changed and we entered an era of massive employment and construction with jobs for all who wanted to work! The huge spend on infrastructure has been paralleled by a massive growth in house prices, exactly following the old PIE formula for house price growth – Population growth, Infrastructure growth with Economic growth.

For those who identify more with Melbourne think of the position the city and State was in before the Crown Casino development and all that has transpired since! Like it or hate it, the huge international Casino was seen as a ‘game changer’ for the city’s economy.

How will you even recognise the skyline of Brisbane in 6 years time? Massive growth in Brisbane’s CBD, brought on by major developments across the city, is set to almost completely transform the Queensland capital by 2022.

Major projects alone will amount to a multi-billion dollar expenditure which has just started, tens of thousands of jobs will be created in the infrastructure build and even more jobs will be the completed legacy. The only real surprise about all of this is the lack of knowledge about these projects outside of Brisbane itself!

So what I am talking about? The largest of these are as follows – real game-changer projects that are set to transform our ne “Brisvagas”!

Queens Wharf – Casino and Entertainment precinct ($3 Billion)

https://www.youtube.com/watch?v=SRyBK9Y3WnA

The Queens Wharf project is set to be a world – class integrated resort development.

– 5 new hotels

– 50 bars and restaurants

– 1500 seat theatre

– Conventions uses

– 3 residential towers

– Major casino

– Estimated to create 10,000 jobs while under construction

The Howard Smith Wharves ($800 Million)

https://www.youtube.com/watch?v=fPAIQOCotMY

Howard Smith Wharves redeveloped as a vibrant waterside destination under Brisbane’s Storey Bridge

– Boutique five-star hotel

– Exhibition space

– Premier restaurants

– Retail

– Community facilities

– Parklands

Brisbane Live Precinct – Roma Street Parklands ($2 billion ‘Brisbane Live’ ultra-entertainment precinct) https://www.youtube.com/watch?v=5gxSLTdLatY

Similar to Madison Square Gardenin New York City, or Melbourne’s Federation Square
The ability to transport thousands of spectators in and out of the precinct within just minutes
the centrepiece of the Brisbane Live plan is a new 17,000 seat world class arena which will showcase international superstar concerts and performances as well as world sporting events
4000-capacity rock club
surrounded by multiplex cinemas
restaurants and bars
Giant screen and amphitheatre catering for around 15,000 people

Other notable upcoming projects:

– The $800 million Brisbane Quarter to the west. The Brisbane Quarter will consist of an 82-storey residential tower, a 39-storey office building and the 32-storey W Brisbane Hotel.

– Brisbane Airport’s new $1.3 billion parallel runway

– The $1.54 billion Brisbane Metro rapid transit system

– A new $100 million cruise ship facility at Luggage Point.

The above is a snippet of the exciting infrastructure developments in the Brisbane CBD and Brisbane Airport and surrounds. These will see a massive growth in employment over the next 6 years during the construction phase followed by a legacy of massive employment when these projects are fully operational. All great reasons to consider Brisbane for your next property investment.

Read more: http://goo.gl/cXnPky

What Sydney Housing Bubble?

Parents who help to buy investment property at no cost!

Melbourne needs an oversupply

Choosing an investment property and understanding demographics

Are holiday homes still a good investment?

Is there an oversupply and should property investors be concerned?

Do you want a Big Australia?

Great reasons to consider Brisbane for your next property investment

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