Market Archives - Lime Property Solutions

Nov 22

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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 14

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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.

Sep 26

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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 13

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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!

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 30

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Understanding the property cycle with the proof

By Hugh Frame | Auction, best investment, Investment, Market, property cycle, Real Estate | No Comments

Understanding the property cycle with the proof

Wouldn’t it be fantastic to find that all the information we are given by the real estate industry is totally true and utterly dependable? We do our best to assist clients in understanding the property cycle with the proof of what is actually happening in our markets.

This can be a very difficult task sometimes as one of the most powerful lobby groups in Australia, The Real Estate Industry, supply information to the media in such a way that it totally clouds the reality of what is happening in the actual market place.

Auction clearance rates are very high, but selling two properties out of 2 for auction is a 100% clearance rate!

It would be fantastic to see a property market that increased all the time by a nice 7%-8% on average each year. This would see property prices double every nine or ten years and would provide the property investor with the certainty so many seek. There is no doubt that good well-positioned property in the Sydney market has achieved growth of just under 8% for at least the last 40 years and after the last 5 years I believe that half the population of this great city now believe that property prices will just continue to grow year after year.

The same was true at the end of the last Sydney property growth cycle in 2003. The shock and surprise of many who bought off- plan investment property in particular, in 2002 and 2003, to settle in a market that was around 6% and more lower than its 2003 peak on completion in 2005/6 not only shocked but saw many lose tens of thousands of dollars in deposits on property they could no longer obtain a bank loan for as it was not worth the contracted purchase price.

Of course, we had a little ‘shock’ in Sydney when prices clearly went backwards in the first quarter of this year – an expected small correction at the end of a quite amazing growth period of almost 5 years. Since then we read every week of the fabulous clearance rates and the strength of the markets both in Sydney and Melbourne. This weekend’s headlines are very similar to the last 2 or 3 months Dr Andrew Wilson | Aug 28, 2016 1:48 pm Sydney spring auction market opens with more strong results for property sellers or maybe have a look at Melbourne Dr Andrew Wilson | Aug 28, 2016 12:49 pm Top start for Melbourne spring auction property market.

So all is looking fantastic for everlasting growth in these headlines. The reality is perhaps clearer to see in this little article published this weekend, http://goo.gl/cHfcMz. Receipts from residential stamp duty in July were 12 per cent lower than the same month last year, analysis by investment bank RBC Capital Markets shows. Year-on-year changes in monthly NSW stamp duty receipts were at the lowest mark in nearly five years.

Understanding the property cycle with the proof

So clearance rates may be high but we should understand that if only 2 properties are listed for auction and two properties sell by auction, then we have a 100% clearance rate. While current clearance rates are high, they are being calculated on around half the number of homes for auction than we had 12 months ago. The market is obviously significantly quieter when the State is seeing the lowest revenue on stamp duty in the last 5 years. This is nothing to worry about, it’s just another sign that the growth in the Sydney property market has almost certainly peaked and its maybe time to look towards another market that is more likely to be in its growth phase of the cycle.

Aug 22

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Why buy an apartment Property investment?

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

Why buy an apartment Property investment?

Why buy an apartment Property investment? Isn’t it the case that house and land makes a better investment with greater capital growth potential?

There are many reasons why a good apartment will make a better investment than a house and land. The first has to do with the old real estate adage, location, location, location. Most investors have a limited figure in dollars as to what they are willing to spend on an investment property and most are sensible enough to realise that demand on property, and therefore potential capital growth, tends to be much higher closer to the CBD’s of our major cities. In Sydney, you are now unlikely to [purchase a knock-down in the inner west for much less than $1.5 million, this is still plenty to buy a well-positioned two bedroom unit in a desirable inner fringe suburb.

Cost is of course, only one aspect. We must also be sure of our exit strategy on our ‘new’ property investment so we must be confident that there is a demand for the type of property we are purchasing, particularly in the future, when the time comes to sell.

The huge demand for rental of city apartments is two-fold and increasing. The current highest demand is coming from our younger Gen X and Gen Y demographic. If they can afford to buy, the first choice is a near-to-city apartment, close to all amenities and the largest employment hub in the state. If they can’t afford to buy, sharing with a friend in a rental property can not only be so much more convenient, but be substantially ‘subsidised’ by the huge savings in transport (now deemed to be around $22,000 per year) for an average family living in our west. (See: http://www.smh.com.au/nsw/-4jlfx.html)

Equally important is the large numbers of empty nesters moving out of large family homes to buy luxury apartments in boutique-sized blocks who are now making up a sizeable swathe of the prestige market. The e

Empty Nesters are moving to larger units with a sense of community

mpty nesters are looking for spacious open-plan living, with good views and close to water or park side in suburbs where they can walk to cafes, restaurants and shops; they’re also demanding excellence in design, security and comfort.

They are looking for quality apartments with a ‘sense of community’ which usually means gardens, pools and good shared areas where they can get to know and mix with their neighbours. The preference is usually for the smaller boutique buildings of less than 50 units although inner-city prestige units in the larger developments that are now a standard in our most expensive areas, can also be popular because of the location and community services provided.

This trend is happening around the country from Melbourne to Brisbane, not just in Sydney.

Often, the more affordable new house and land can take many years to see the growth of a good city apartment. As first home buyers move to an area of new land release, it is usually a lot less expensive for them to purchase a house and land package than purchase a second hand property due to the grants and stamp duty savings only available to brand new housing. A new home also allows the first home buyer to make some decisions in the build to give them a more bespoke home of their choosing. This can ultimately lower the capital gains potential of a new release area. So, why buy an apartment property investment? Better location leading to better possible capital growth; better tenancy demand, and an increasing demand for the right type of owner-occupier unit at the time of resale are just a few reasons.

What the experts say: “Empty nesters are looking for apartments in good locations and of a good size in those smaller blocks.” Andrew Scriven, Colliers International

What’s on trend: “They like smaller buildings with a sense of community, they like communal terraces or landscaping or pools and gyms.” James Coombe, Architects EAT

What to look for: “They certainly prefer small and intimate … that tends to be more personal so everyone knows each other.” William Smart, Smart Design Studio

Aug 15

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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!

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

Jun 15

0

Median Price Sydney investment property to cost $80,137 in stamp duty

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

Median Price Sydney investment property to cost $80,137 in stamp duty!

NSW Treasurer Gladys Berejiklian says a stamp duty and land tax surcharge for foreign property investors will not hurt the local market Photo: Louie Douvis

A Median Price Sydney investment property to cost investors $80,137 in stamp duty after NSW June 21st budget. That’s around $40,000 more than you might expect to pay for the same property today….. and once you have purchased your new Sydney investment property, expect to pay an extra 0.75 per cent land tax from 2017. The stamp duty surcharge will apply from the June 21 state budget, while the land tax surcharge will take effect from January 1, 2017.

Don’t Panic! This will only apply to foreign buyers of investment properties and will not apply to will not apply to Australian citizens, permanent residents of Australia or New Zealanders who have stayed in Australia at least 200 days in the last 12 months.

NSW Treasurer Gladys Berejiklian has announced that the NSW Budget 2016 has announced that Foreign property buyers in NSW will be hit with stamp duty and land tax hikes brining the State more line with the new rules in Victoria.

Based on a Sydney median house price of $995,804, the stamp duty bill for a foreign investor will increase by almost $40,000 – from $40,305 to $80,137. A Sydney median price investment property unit at $656,000 will cost an additional $26,240 in stamp duty.

Tim Pallas, the Victorian State Treasurer, increased its existing stamp duty surcharge from 3 per cent to 7 per cent and a land tax surcharge for “absentee owners” from 0.5 per cent to 1.5 per cent.

The NSW stamp duty and land tax measures are expected to raise $1 billion for the government over the next four years as the new measures are not expected to deter foreign investors. The measures are introduced with the expectation that they will improve housing affordability but it has already been shown in Victoria that the even higher increases have done little to deter foreign buyers so it is unlikely the measures will have an effect on affordability.
Read more: http://goo.gl/iaMVW3

Market

The Block is a warning for renovators

Will Donald Trump burst the Australian housing bubble?

Parents who help to buy investment property at no cost!

Is there an oversupply and should property investors be concerned?

Investment property ‘hotspots’ moving further out

Understanding the property cycle with the proof

Why buy an apartment Property investment?

Census meltdown does not help investment property research

Baby Boomers to spark rises in regional cities

Median Price Sydney investment property to cost $80,137 in stamp duty

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