Sep 19

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.

Aug 31

0

Investment property ‘hotspots’ moving further out

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

Investment property ‘hotspots’ moving further out

As the growth in the last two years in areas Like Oran Park and Schofields have shown, investment property ‘hotspots’ are moving further out from the CBD.

The commuter hubs around our major cities were usually within a 20-50km radius from the centre of the city but as our major cities sprawl, we now have commuters who are regularly travelling up to 150km each day just to get to work.

Even The Gold Coast is prooving popular for Brisbane commuters

House prices and high rentals are forcing Sydney city workers to live as far away as Wollongong or Newcastle. In Melbourne, commuters are travelling into the city from Geelong, Ballarat and Bendigo and in Brisbane; the regular commute is common from the Sunshine Coast and the Gold Coast.

Demographer Bernard Salt says the burgeoning and established commuter hubs are growing, attracting “substantial populations”.

The principle reasons stated by Salt for commuter hubs extending out are improved train travel times and upgrades to road links. These certainly make the daily commute more manageable, but there are other reasons why we are seeing demand and price growth in some of these commuter hub areas.

Many of our new areas are being built as integrated towns or small cities in their own right. They are not just expanding commuter suburbs, but places with their own town centres and industrial estates and office blocks as well as other necessary infrastructure like schools and hospitals. They are becoming employment hubs in their own right, offering new local jobs to the increasing population.

Another factor is the rise of technology. Since the early part of this century, executives and business owners have been taking advantage of electronic communication to base families in life-style areas such as the Gold Coast where businesses can be run with a phone and computer with an occasional commute to Sydney or Brisbane. The idea of living away from the hustle and bustle of city life is very appealing to those seeking a beach or country lifestyle for a growing family.

So it’s not all about commuting and convenience to the jobs in the city. It’s often about lifestyle and affordability that contribute to investment property ‘hotspots’ moving further out. Read more: http://goo.gl/rd5QZs

Aug 15

0

Census meltdown does not help investment property research

By Hugh Frame | best investment, domain, Economy, Market, Property Research, Property Solutions, Research | No Comments

Census meltdown does not help investment property research

Census data is one of the most important sources of information used by property researchers and the census meltdown does not help investment property research. The big question now is just how complete is the new data acquired in the 2016 census going to be in assisting planning over the next 10 or 20 years?

Regardless of the culture described as “Reckless” at the top of the Bureau of Statistics, it is essential that trust between the citizens of this country and the ABS be renewed as quickly as possible in order that the necessary information used for the development of the future of this country is collected fully and accurately with the blessing and trust of every Australian.

Even before the on-line debacle of census night the ABS was not prepared to explain why it now wanted to retain names. It would save millions by posting login codes to most of the population rather than delivering forms. Had it delivered, or even posted, forms it would have had a backup. Instead it gave most of Australia only one way to submit census forms and threatened fines of $180 per day for people who didn’t comply. The result is we have now a group of elected representatives declaring to the masses who vote that they will not comply to filling in the form, even if it means paying a fine. What chance now of having anything like a 95% return on census information?

Lime Property Solutions Property Research, like other property research groups, plays a critical role in finding the best property investment for clients. Much of the research is analysing professional data supplied or purchased from Australia’s most respected property research agencies such as Australian Bureau of Statistics and BIS Shrapnel. Much can also be found by daily scrutiny of quality media such as the Financial Review. This outsourced research involving the growth and development prospects of different regions and locations, is assessed by Lime by visiting areas and increasing our knowledge through meetings with local developers, real estate agents and local Chamber of Commerce representatives. Once our research is satisfied with an area or suburb we seek out suitable property that meets our strict selection criteria. Like all research bodies, full and accurate census information is an essential resource to do this job. The census meltdown does not help investment property research!

Tax minimisation and tax avoidance

By Hugh Frame | best investment, Economy, Financial, Negative Gearing, Uncategorized | No Comments

Tax minimisation and tax avoidance

It’s that time of the year again when we go to see our account and sort out our tax for the previous financial year 2015-2016, it’s important we do all that’s possible to look at tax minimisation while keeping in mind that tax avoidance is a serious offence!

So what’s the difference between tax minimisation and tax avoidance? It’s best this question is answered by a qualified tax agent and it is very highly recommended you speak to your own tax advisor about this, but basically tax minimisation is a perfectly legal way of reducing tax through genuine expenses while tax avoidance is just as the name suggests, finding ways of not paying tax which is legally due to the Australian Tax Office.

I find it very difficult to discuss tax minimisation without mentioning the late Kerry Packer, who famously said,

“I don’t know anybody that doesn’t minimise their tax … Of course I’m minimising my tax. If anybody in this country doesn’t minimise their tax they want their head read. As a government I can tell you you’re not spending it that well that we should be paying extra“.

One of the most efficient ways of minimising tax, of course, is to purchase an investment property. As we mentioned in yesterday’s blog, with the exceptionally low interest rates we now have and the high possibility of finding a relatively high yielding, well located investment property, it is highly likely that your new property investment will be more than fully [paid for by your tenant and the tax you can save through legal tax minimisation strategies such as negative gearing.

Just as a reminder for those who have already bought a property investment, you should have your tax variation completed by now for financial year 2016-17 to ensure that you get the ‘saved’ tax in your fortnightly pay packet now rather than waiting until the end of the tax year to claim it all back.

For more information about the difference between tax minimisation and tax avoidance read: http://www.smh.com.au/money/-gqb4w9.html

Aug 01

1

Baby Boomers to spark rises in regional cities

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

Baby Boomers to spark rises in regional cities

The managing director of a minor national research company, Mr Simon Pressley, is suggesting that we may see some significant growth in interest from baby boomers wanting to sell up in the city and move to one of Australia’s many regional cities.

Mr Pressley has specifically identified 40 country towns that could outshine growth in our capital cities over the next few years.

Baby boomers were responsible for the huge increases in coastal property prices in the very late 1990’s and early 2000’s as the older boomers started to scale down or take early retirement. It was around this time that Bernard Salt, the well-known demographer, introduced us to the terms ‘sea-changers’ and” tree-changers”.

Move to the country and live a very comfortable retirement!

While baby boomers have been officially retiring at age 65 since 2011, Mr Pressley is identifying the group again, particularly those on the edge of retirement, to become part of a surge in buyers seeking affordable homes in regional areas over the next 15 years.

He suggests that “maybe hundreds” of thousands, could leave the capitals as superannuation fails to sustain them into retirement.

The huge increases in property prices in our cities and the fact that many do not have sufficient retirement savings will leave downsizing as a practical and in some cases the only option available to many who wish to maintain their current standard of living.

The most popular places Boomers are likely to move to, are most likely those with good lifestyle drivers as well as excellent health care facilities. In other words, places with a “pseudo-capital city” feel to them. A good spacious home in such a place may cost as little as $400,000 leaving the average home-seller in Sydney with a profit of more than $500,000 on which they can live!

Some of the top places in each state are identified as Wagga Wagga (NSW), Geelong (Vic), Albany (WA), Devonport (Tas), Alice Springs (NT), Port Lincoln (SA) and Cairns or Townsville in Queensland. Full list and story can be found here: http://goo.gl/r9FgHB

Aug 01

1

What a fantastic time it is to buy an investment property!

By Hugh Frame | banking, best investment, Economy, finance, Investment | No Comments

What a fantastic time it is to buy an investment property!

Tomorrow is the first Tuesday of the new month of August and we must all appreciate what a fantastic time it is to buy an investment property. So why should it be such a fantastic time to buy an investment property? Well, it looks like interest rates will drop again buy even if they don’t drop this time, many of the major lenders have already dropped their fixed rates in preparation for an expected cut this month with probably another before Christmas.

High Yields and very low mortgage costs result in positively geared investment property.

Many banks slashed interest rates for the most popular type of fixed-rate home loan in July, as markets bet the Reserve Bank will act to stimulate the economy this Tuesday. New figures from the comparison website RateCity show as many as 18 lenders cut three-year fixed rates in July, across 112 loan products. Fixed mortgage rates are influenced by financial market expectations for official interest rates, and there is a widespread view the RBA will soon take the cash rate to a new record low.

The average reduction in three-year fixed rates during July was 0.19 percentage points, with lenders including National Australia Bank, ANZ Bank, ING Direct, HSBC and Suncorp among those to have cut. The cuts were occurring in anticipation of the RBA dropping the cash rate from 1.75 per cent to a new record low of 1.5 per cent.

The ANZ Bank slashed 0.44 percentage points off its three-year rate for owner-occupiers to 3.85 per cent; NAB cut its three-year rate to 3.89 per cent while the lowest rate on offer was 3.67 per cent from Mortgage House.

With fixed rates of under 4% on offer and property yields of over 5% still possible in the right market place, it is almost certain that most property investors would be looking at positively geared property after tax, meaning that most potential investors can now buy a new investment property which would be costing their normal weekly cash flow absolutely nothing!

It is a fantastic time it is to be buying an investment property, give Lime a call to find out more! Read more: http://goo.gl/g6f9oa

Jul 11

0

Property prices still continue to rise

By Hugh Frame | best investment, Economy, Investment, Negative Gearing, News | No Comments

Property prices still continue to rise

If you have been keeping an eye on the value of your property investment portfolio over the last quarter then you’d be quite happy to note that unlike the first quarter of this year, property prices still continue to rise!

It appears that a very long general election, cold and wet weather and the effects of ‘brexit’ were not enough to stop property prices continue to rise over most of our capital cities.

CoreLogic’s monthly house price index indicates that most of the loss that we witnessed in Sydney over the first quarter has been gained again with house price growth of 6.8% in Sydney and about half that in Melbourne.

The further interest in what are already unaffordable markets is being attributed to the interest rate cut in May which gave owner occupiers and property investors a little more encouragement to spend more again on property. Another factor that supposedly increased property investment activity was the pre-election fear of losing out on negative gearing if Mr Shorten had ended up forming our new Government.

Domain Group chief economist Andrew Wilson said the Sydney and Melbourne results were not surprising, particularly after a month of strong auction clearance rates,

“Auction clearance rates increased in every capital city [in June] except for Melbourne, which was flat,” Wilson said.

“We would expect to see house price growth following these results.”

Sydney’s auction clearance rate increased to 71.7 per cent over June, compared with 69.2 per cent in May, Domain Group data shows. One year ago, the auction clearance rate was above 80 per cent.

It is probably worth considering if auction clearance rates in the high 60’s and low 70’s are particularly good, especially when we are looking at a hugely reduced number of auctions in the first place, so maybe these results are a little more surprising than we expected?

Economy

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?

Investment property ‘hotspots’ moving further out

Census meltdown does not help investment property research

Tax minimisation and tax avoidance

Tax minimisation and tax avoidance

For more information about the difference between tax minimisation and tax avoidance read: http://www.smh.com.au/money/-gqb4w9.html

Baby Boomers to spark rises in regional cities

What a fantastic time it is to buy an investment property!

Property prices still continue to rise

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