November 2016

Nov 22

0

The Block is a warning for renovators

By Hugh Frame | Auction, best investment, Market, News, Property Research, Real Estate, Research | No Comments

The Block is a warning for renovators

It seems to be easy money, buy an old place, renovate and make a fortune but the reality is the Block is a warning for renovators. Most, if not all of the many series of The Block have actually made huge losses but the average viewer is left with the feeling that renovation is a great way to make money!

The worry is these shows give a totally unrealistic expectation to budding renovators.

Washington Brown, Lime’s preferred supplier of depreciation schedules (www.washingtonbrown.com.au) has recently run some numbers on the supposedly successful sales in the recent Port Melbourne series and the numbers do not add up!

(Please contact us at info@limepropertysolutions.com.au for further information or the chance to discuss this and other issues in the comfort of your own home.

The following is from The Washington Brown Report:-

“ From a financial point of view the development, which consisted of transforming a 1920s art deco building into a luxury apartment block, was one of the worst he has ever seen.

While I understand the magic of television, Channel 9 has outdone David Copperfield in creating the illusion of a profit to the public!

Let’s look at the numbers:

According to reports Channel 9 bought the site for around $5 million, which allowed for 6 apartments. Only 5 were sold on TV and for calculation purposes let’s say the acquisition costs is $4.2 million.

The construction cost and depreciation allowances totalled over $11 million, for the 5 apartments alone.

That’s $15.2 million alone in construction and acquisition costs.

It’s worth noting that under the Income Tax Assessment Act 1997 the initial vendor (ie. the developer) has an obligation to pass on the actual costs of construction to the purchaser, where the costs are known.

Let’s not forget there’s then a variety of other costs involved in buying and selling, and undertaking a property development, including:

Stamp duty
GST on the sale
Demolition
Marketing
Agents’ fees
Legal fees
Interest
Rates

Whilst some of these costs may have been avoided due to contra deals, the bulk would have to be outlaid by Channel 9.

I estimate these additional costs to conservatively be $2 million, which brings the total cost to $17.2 million.

The Block’s total sales realised just a little over $12 million, leaving the development in the red by around $5 million, yet it has been indicated that profits of up to $715,000 were made by the contestants.”

Just Google “How much did the block cost channel 9” , probably best to go to page two of your results and read some of these articles. It is unlikely that any of The Block series has actually made money and the The Block is a warning for renovators, not an endorsement to make money!

If you want to know more about the pitfalls of renovation and how to make money from property without the work and hassle contact: info@limepropertysolutions.com.au.

Nov 21

0

What should you be looking for in a new investment property?

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

What should you be looking for in your new investment property?

It makes sense to understand changing demographics because what you buy today as a ‘good’ investment property may not be so good in 10 or 20 years when you decide it’s time to sell, so what should you be looking for in a new investment property?

An investment property that works today may not be as desirable as a home for our population of tomorrow so it’s important to keep track of changing demographics and buy an investment that is most likely to appeal to tomorrow’s owner occupier market.

Just a couple of decades ago, the average Australian household had around five people living in it. Just five or six years ago, the average home had just over 3 persons per household. This has increased slightly as more and more older children decide to stay at home for much longer. The big family for most Australians is a thing of the past, in the 2012 census it was stated that most households within a small radius of the centre of most of our cities had less than two persons per household!

The growing demographics of home owners and renters, the growth group for new households comes from:

Young professionals
Young couples
Empty nesters
Retirees
Single parent families

It would seem that with older children staying at home longer, as well as the above growth demographics, it’s important to consider their needs for a good investment property.

(Please contact us at info@limepropertysolutions.com.au for further information or the chance to discuss this and other issues in the comfort of your own home.

There is a move towards the city centre with these groups and the need for well-designed units and townhouses with a bathroom each is becoming an essential for shared living, whither with a relative or a friend. Good-sized bedrooms are also an essential with room to entertain.

Nearly 60 per cent of those aged 15-29 are still living with their parents across the 35 wealthy member nations of the Organisation for Economic Cooperation and Development. In Italy, Slovenia and Greece more than three quarters of that age cohort have not yet flown the coop. Australia’s proportion has reached 54 per cent. Read more https://goo.gl/B3U0kW

This is a trend that is unlikely to change for some years, particularly as house and unit prices continue to rise. Make sure you buy an investment property that will work for you in the future, do the research now before you buy. So what should you be looking for in a new investment property? Consider the future demographics that may eventually want to purchase your investment property.

(Please contact us at info@limepropertysolutions.com.au for further information and the chance to discuss this and other selection criteria issues in the comfort of your own home.

Nov 15

0

Is a unit a better investment than house and land?

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

Is a unit a better investment than house and land?

Is a unit a better investment than house and land, one of the most common questions we are asked by property investors? It’s amazing the number of Real estate homilies that are so completely inaccurate yet so many people are prepared to believe them.

(Please contact us at info@limepropertysolutions.com.au for further information or the chance to discuss this and other issues in the comfort of your own home.Location will make the difference

Location will make the difference, not building type

One of the common ones is that we should only buy house and land, the old saying being that “land appreciates but buildings depreciate”. I wonder how you would get on trying to convince Hollywood star Russell Crowe of this this one. Russell has opened the doors of his Finger Wharf apartment in Woolloomooloo to select off-market buyers ahead of an official listing early next year.

His price expectations on the landmark harbour front apartment are $30 million, which would break the current national apartment record of $25 million…… And the land content of this apartment is exactly zero as it is built on a wharf above water. The original selling price when bought off the plan in 1998 was $9.8 million. Crowe made the purchase in 2003 setting a Sydney record of $14.35 million. Current neighbours include billionaire Lang Walker and broadcaster John Laws.

Will Donald Trump burst the Australian housing bubble?

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

Will Donald Trump burst the Australian housing bubble?

Speculation is rife on everything financial, with Donald Trump at the wheel of the world’s largest economy; the biggest of these questions for the property investor is will Donald Trump burst the Australian housing bubble? Read more: http://www.smh.com.au/business/the-economy/is-donald-trump-going-to-burst-australias-housing-bubble-20161111-gsnee0

Will Donald Trump affect Australian property prices?

It was written at the weekend, “given his propensity for lying, exaggerating and generally raving, nobody can know what Donald Trump will actually do as president. He probably doesn’t know himself.” The article does not confess to general raving and exaggerating itself in that there is absolutely no evidence of an Australian housing bubble! Australia is the largest island nation in the world, it includes WA and FNQ, Tasmania, SA and everything between. There is a possibility of a ‘housing bubble’ in our two largest cities, but in many other places, prices are less than what they were 10 years ago. This is in Australia and we can’t talk about an Australian bubble, that’s Donald Trump talk!

(Please contact us at info@limepropertysolutions.com.au for further information or the chance to discuss this and other issues in the comfort of your own home.

According to the bond market reaction, Trump may burst the Sydney/Melbourne housing bubble by causing interest rates to rise.

The Trump plan, in its essence, is very simple and markets clearly believe it will work. He is planning a major infrastructure investment and, unlike Australia, he won’t let public servants constantly get in the way of the infrastructure momentum. But he will re-fire the American steel furnaces, because he doesn’t plan to use Chinese steel.

Trump also plans to lower the US tax rate and suck the enormous sums that American corporations are holding overseas back into the US. Along the way he will make it harder for Canadian, Mexican and Chinese exporters to tap the US market. He says that will be done via higher tariffs. The world is going to move from an increasingly globalised one to one where nations will look more inwards. But given today’s communication and transport systems there is a limit to this change.

The more common fear is that he could start a trade war with China that would cause a global recession which would obviously affect Australia. That would not be a good way to achieve lower housing prices. Hopefully there is enough sanity left in Congress to prevent such madness and just consider the more benign interest rate story.

The last Reserve Bank board meeting was forecasting another RBA rate cut or two by the middle of next year. Trump’s policies, if implemented, will cause a period of inflation resulting in RBA increases and that could certainly cool down the Australian housing market.

So will Donald Trump burst the Australian housing bubble? The media are always looking for stories which may deliver this result, time will tell but maybe they are on to something here that will see prices stabilise in Melbourne and Sydney.

If you want to know more about possible ‘property bubble bursts” or discuss buying new property investment, contact: info@limepropertysolutions.com.au.

Nov 10

0

Is it really time to be asking for a rental decrease?

By Hugh Frame | best investment, Economy, Real Estate, rent | No Comments

Is it really time to be asking for a rental decrease?

This attached recent article from Jessica Irvine of sometime ABC fame, is suggesting renters should now be asking for rental decreases but is it really time to be asking for a rental decrease?

I believe that while there is some truth in the story, it is not the time for a huge number of renters to be asking for a decrease.

The data she uses is all sourced from NSW, particularly the NSW Tenant’s Union and of course, this data seems to support the fall in rentals in Perth and the likely fall in rentals in inner Brisbane and Melbourne!

(Please contact us at info@limepropertysolutions.com.au for further information or the chance to discuss this and other issues in the comfort of your own home)

I’d suggest to any renter looking for a new property or a new lease that they use their own common sense when negotiating. In Sydney and Melbourne in particular, yields for landlords (yield being rent paid) are now at their lowest ever. Landlords are not inclined to lower their returns even more. Common sense, in this instance, just means having a look around your area and on real estate web sites for comparable property for rent. If you are looking at a unit, then perhaps in some areas you may find that there are many similar units available for rent. In the knowledge that you can easily find another place if necessary at maybe a lower rental, then you MUST try and negotiate a decrease on your current rent or try for a decrease in the advertised rent. If the landlords are desperate, they will negotiate.

If you are sitting in a nice little townhouse or villa, or even a house and land close to the city or even in the middle suburbs of your city, you may find that you are lucky to have the property you are currently renting. There are many areas with plenty of rental properties, but make sure you are comparing apples to apples. It can still be very difficult in many areas of all our east coast capital cities to find the type of home you wish to rent, particularly if it is not a unit, and if there is a scarcity, be prepared to pay for it. Your landlord will easily find someone else who is prepared to give them what they want if you won’t! Maybe it is not time to be asking for a rental decrease.

If you want to know more about rental yields in certain areas or discuss buying new property investment, contact: info@limepropertysolutions.com.au.

Nov 07

0

Buying your first home is not easy, Bernard Salt

By Hugh Frame | best investment, Economy, Investment, News, property cycle, Real Estate | No Comments

Buying your first home is not easy, Bernard Salt

Buying your first home is not easy, Bernard Salt, some of our younger generations, Gen X and Gen Y, seem to miss the humour of one of our best known demographers, Bernard Salt, who has now written two articles over the last couple of weeks suggesting firstly, that they might like to stop buying expensive avocado lunches and save for a home or even give up their overseas holidays and save instead for a house deposit! Like me, Bernard is a “baby-boomer”, one of the lucky who just drifted through life buying cheap properties and having a ball!

(Please contact us at info@limepropertysolutions.com.au for further information or the chance to discuss this and other issues in the comfort of your own home)

While his recent articles should not be taken too seriously, or rather too literally, I do feel some annoyance at how hard the world is perceived to be to some of the younger generations trying to jump on the first step of the property ladder. It has never been an easy step to take, Buying your first home is not easy, and it can be annoying when we baby-boomers are reminded just how easy it was for us to get started.

Read more Bernard Salt article here: https://goo.gl/wGnqiK

My first home was bought in the UK. I was a 21 year-old teacher and the very small two-bedroom duplex I purchased was around eight times my annual income. I managed the deposit through working for the previous four years, sometimes up to 126 hours per week during all the long university breaks and saving by staying at home. On a couple of occasions, I did take lower paying jobs which offered me free accommodation and free meals in holiday destinations like France and the Channel Islands. While I didn’t save much on these jobs, I at least had the opportunity to explore and enjoy a different culture. Travel expenses were absolutely minimal as I hitch-hiked most of the time.

When I eventually moved in to my first home, I had most of the basics from presents from a large family. I had a bed, lounge suit and necessary kitchen-ware and linen. I made most of the ‘furniture’ from cheap melamine sheets and watched a black and white television gifted to me as most people were switching to colour. I did have an old car that was serviced by me with the help of a friend. I had to take on another evening part-time job to help make ends meet. The only time I could ever afford to eat-out was at family gatherings where usually, my parents were paying. Every couple of weeks, if the budget allowed, we may have had a bottle of wine. Eight years after buying the house, I had my first 10 day trip overseas.

This was a lifestyle very typical to all my friends, it did not seem ‘hard’ and it certainly was not unusual. The older generation thought, quite rightly, that we never had it so good.

In speaking to older Australians, including many European immigrants from the 50’s and 60’s, it seems their life was similar. Many tell stories of building their own first home with the help of friends and sleeping on mats on the floor until they could afford a proper bed.

I’m very glad the world has changed and our standard of living has improved immensely since the 1970’s but I do think Mr Salt, tongue in cheek or not, is putting out a very important message; it is not easy to get on to the property ladder buy it never has been! It does often take some sacrifice in current lifestyle and it does involve living on a tight budget …. and always has!

‘Affordability’ is always an issue after a period of cyclic growth. Buying your first home is not easy and never has been. The same stories emerge after every growth cycle. We had the same discussions in Sydney in 1989 and again in 2003 after the last two major growth cycles. After a few years, income increases, borrowing rates change and things become easier – affordability increases! If we make the necessary sacrifices and budget/lifestyle changes now, then there may be a good chance that advantage can be taken during the next phase of more-affordable housing. It will happen, it always does, just be ready for it and don’t expect to start off with everything that your older neighbours have; it’s taken them all their life to get to where they are!

If you want to know more about this or discuss buying new property investment, a great way to ‘save’ towards your own first home, contact: info@limepropertysolutions.com.au.

Nov 02

0

Banks are destroying your land titles

By Hugh Frame | banking, best investment, Financial, Investment, Mortgage, News, Research | No Comments

Banks are destroying your land titles

Last week we had a couple of days hold up with a refinance matter with one of our clients; the reason was that the banks are destroying your land titles and there may be some hicups in going digital!

It is reported today in the business section of the Sydney Morning Herald –

Why it is important to invest in property

By Hugh Frame | Uncategorized | No Comments

Why it is important to invest in property

A little understanding of how we are supported in our old age by our government should make it clear why it is important to invest in property.

Before Federation, most states had introduced a means tested state pension for older people who could no longer support themselves. By 1910 the new Commonwealth Government introduced the age pension for men over 65 years old and women over 60 years old who had lived in one of our states for more than 25 years. This was probably no big deal as only around 7% of the population lived to be over 65 years of age, and the likelihood is that the majority of these were from relatively well-nourished middle class families who could support themselves. It was not until the late 1930’s early 1940’s the number of over 65’s reached 10% of the population.

(Please contact us at info@limepropertysolutions.com.au for further information or the chance to discuss this and other issues in the comfort of your own home)

The reality is that all working Australians are making some tax contribution to support our older Australians throughout their working lives and have been doing this for over 100 years. The irony of the situation was that only 1 out of every 10 contributors, at most, lived long enough to benefit from the government scheme! Even back in the 1930’s and 40’s, seventy years of age was a very old person, so even those who made it to age 65 usually only had a very few years of state pension before dying.

It was Keating’s government back in 1993 who recognised that as most Australians, (not just 1 out of 10) were living to 65 and 10 or more years beyond, the age pension was no longer affordable to government. The ‘answer’ was compulsory superannuation and then, more recently, rising retirement age to 67 for both men and women. This still means that the average female in Australia today will have around 18 years to live, the average male around 14 years. Without allowing for inflation, at an average Australian income for these 18 years, the average couple now needs around $1.3 million to live an average life in retirement. For most, it is very unlikely that they will achieve this through superannuation alone, but just one $500,000 property investment could deliver another $500,000 for retirement in just around 10 years of ownership. This one property investment could well be the difference between a comfortable 20 years of retirement or 20 years of living below the poverty line in the later years of life. This is why it is important to invest in property. More and more we are becoming a ‘user-pays’ society, we can’t depend on government handouts in our old age.

If you want to know more about how you can prepare for retirement through property investment contact: info@limepropertysolutions.com.au.

The Block is a warning for renovators

What should you be looking for in a new investment property?

Is a unit a better investment than house and land?

Will Donald Trump burst the Australian housing bubble?

Is it really time to be asking for a rental decrease?

Buying your first home is not easy, Bernard Salt

Banks are destroying your land titles

Why it is important to invest in property

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