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Property Investing in NSW Mining towns

Thursday, October 04, 2012

Mudgee leads list of 10 top-performing NSW housing markets with prices up 7.44%: Residex

By Larry Schlesinger
Tuesday, 25 September 2012

The central western NSW town of Mudgee, a hotspot for mining, agriculture and tourism, has been the top-performing NSW housing market over the past year, according to the latest Residex regional market update.

Mudgee district house prices are up 7.44% for the year to August, with a median house price of $272,500 following a gain of less than 1% in the previous 12-month period.

Residex reported a 16% jump in sales in Mudgee over this period, with 548 properties selling.

The median Mudgee rent is up 30% for the year to $410 per week, equating to an average yield of around 7.8%.

Mudgee ranked just above the Hunter Valley, where houses appreciated 7.18% over the year to August with a median price of $324,000.

Other strong performers were Riverina houses (4.27%), Penrith Windsor houses (3.95%) in Sydney’s West, Bathurst Orange Houses (3.43%) and south-west Sydney units (3.47%).

The worst-performing markets was upmarket Neutral Bay/Spit houses (-8.16%  to a median of $2.02 million) followed by north coast houses (Port Macquarie, Coffs Harbour, Foster), with prices down 5.53% to a median of $348,000.

Area

Median price

Annual capital growth to August 2012

Median rent

Yield

Mudgee District houses

$272,500

7.44%

$410

7.8%

Hunter Valley houses

$324,000

7.18%

$405

6.5%

Riverina houses

$236,000

4.27%

$270

6%

Penrith Windsor houses

$391,500

3.95%

$420

5.6%

South West units

$411,500

3.47%

$445

5.6%

Bathurst Orange Houses

$280,000

3.43%

$320

6%

South units

$611,000

3.24%

$645

5.5%

Campbelltown houses

$363,000

3.13%

$420

6%

Newcastle houses

$403,500

3.08%

$415

5.4%

North West units

$444,000

2.89%

$475

5.7%

 The historic country town of Mudgee lies 270 kilometres north-west of Sydney in the fertile Cudgegong River valley and benefits from both agriculture, tourism and nearby mining activity.

Property Investors prefer to Invest in Houses than Units

Thursday, October 04, 2012

Units more affordable, but buyers still attracted to detatched houses

By Cameron Kusher
Wednesday, 03 October 2012

With buyers looking for affordable housing alternatives, it would be expected that the number of transactions for units would be increasing. However, that hasn’t been the case in recent times.

Even with a current national median house price of $415,000 nationally and $390,000 for units, it is clear many buyers will have some difficulty entering into home ownership.

Although today’s RP Data analysis shows that at a national level the median unit price is just $25,000 cheaper than the median house price, across the combined capital cities units are $53,000 more affordable.

Across individual capital city markets, the difference in the selling price for houses and units range from $48,000 in Melbourne to $110,000 in Sydney and Canberra. Given the significant difference in the prices of houses and units in Sydney and Canberra, it is no surprise these cities have recorded the greatest proportion of unit sales over the past year of all capital cities at 42.5% and 42.8% respectively.

The analysis also highlights the difference between median house and unit selling prices at a capital city and national level over time. The data confirms that median unit prices were consistently higher than median house prices from mid-1996 to early 2003 at a capital city level, and up until mid-2004 at a national level.

Click to enlarge

This result is partly a function of the cost of housing being significantly lower at this time but is also because units were more abundant in inner city areas and attracted premiums because of this convenience.

Click to enlarge

Over recent years, the gap between house and unit prices has increased significantly, with the difference reaching as much as $76,000 across the combined capital cities and $35,000 across the nation.

Positive signs for WA Property Investment

Thursday, October 04, 2012

No property market recovery in 2013, but some early positive signs in WA: Peet

By Larry Schlesinger
Tuesday, 02 October 2012

Residential property developer Peet expects “conditions” in the residential property market to remain “volatile and challenging" into 2013 with business and consumer confidence remaining low despite the series of rate cuts in the previous financial year.

However, Peet managing director and CEO Brendan Gore did note in the company’s annual report that “positive signs” have emerged in the Western Australian property market in the first months of the year.

And he said there are also plans to accelerate development of Peet's Vantage master-planned residential community in Gladstone, the mining hotspot 550 kilometres north of Brisbane.

However, the overall tone of the annual report was one of a challenging year ahead for Peet and others operating in the residential development sector.

“The 2012 financial year delivered some of the most challenging conditions experienced in almost 20 years and there is little expectation that markets will improve significantly in the 2013 financial year,” said Gore.

“The series of interest rate cuts in 2012 has not had the desired effect to date and consumer and business confidence remains low."

He did add that the long-term fundamentals of the Australian property market – including population growth, an under-supply of housing and a tight rental market – “remain conducive to an improving market.

“However, the catalyst for household confidence, which will underpin improved demand in the residential property market activity, is yet to be found.”

Gore says Peet would be well prepared to "respond quickly and effectively to any improvement in consumer sentiment and the residential market".

“However, given the ongoing uncertainty in Australia, and until the timing and strength of the expected recovery is confirmed, the directors are unable to provide guidance on 2013 operating earnings with any degree of certainty."

Peet recorded a net operating profit after tax of $20.3 million for the year to June 30 and statutory net profit after tax for the full year of $5.4 million, representing a decrease of 76% compared to the previous corresponding period.

Shareholders did not receive dividend payment.

Peet chairman Tony Lennon said he appreciated this would be disappointing for investors, but said he trusted investors “have confidence in our ongoing dividend payment policy and the validity of the reasoning behind the decision taken”

Lennon said the year ahead would be a period of consolidation for Peet.

“We are operating in exceptional times where, despite the relative wealth of our own nation, we are heavily impacted by the global economy and consumer and business confidence has been low over a sustained period of time.

“This time last year, it was the crisis befalling some European economies and concern about the United States’ debt ceiling issue. This year, the slowing of the Chinese economy and falling commodity prices are also having significant flow-on effects in Australia and consumer and business sentiment remains cautious.

But he said the company was well positioned with “quality assets in good locations around Australia”.

“We have managed through a number of cycles and will continue to maintain the rigour required during the current market conditions, while positioning the company to capitalise on any upturn in consumer sentiment.”

Peet’s biggest residential project is Flagstone City, 45 minutes south-west of Brisbane in Jimboomba, which has a gross development value of $1.87 billion and is due to begin in 2013. It features 1,500 lots and is proceeding as scheduled.

In total Peet has a lot pipeline of 34,600 worth $6.2 billion.

Property Investment and the Mining Boom

Thursday, October 04, 2012

Decrying the end to the mining boom hysteria: Simon Pressley

By Simon Pressley
Friday, 03 August 2012

Widespread media reporting earlier this week suggested that Australia’s mining boom was near its end. Radio broadcasts, tabloids, even Channel 10’s The Project – they all lead with headlines claiming that our mining boom would end in two years.

Had the reporting stemmed from an article written by some random journo I would have given it the usual through-to-the-keeper treatment. To hear that credible economics advisory firm, Deloitte Access Economics, was the apparent source of these statements almost made me choke on my morning coffee. The copious amount of reports and articles that I’ve read over the last few years must be written in a language that I don’t understand.

I’ve been on record describing this not as a “mining boom” but a “resources revolution”. Suddenly, I’m hearing that the large volumes of natural resources which are responsible for powering up so many electricity sockets around the world, not to mention Australia’s own economy, is about to come to a grinding halt. Is someone going to turn the lights off?

From dirt to dollars

A number of the locations which we’ve been buying investment properties in over the last couple of years have benefitted from the economic stimulus from the mining sector. That said, they have all been strategically selected locations with a stable population base, a diverse mix of industries that contribute to the local economy, an abundance of employment opportunities, and demand for accommodation which is not matched by comparable supply.

Suggestions that the mining boom will end in 2014-2015 is misleading. But hey, it makes a good headline so the media will always milk that for what they can.

What is true is that the timeline for completing construction of much of the $240 billion in fully approved major projects is around 2014-2015. What is also true is that there are a number of factors which are deterring large resource companies (especially foreign companies) from investing in additional major projects. I also think policymakers need to be more proactive in developing other buoyant industries.

What has been overlooked by the doomsayers however is what happens when construction of these projects is finished – they are built for a purpose not for practice!

It’s not until key infrastructure such as processing plants, ports, pipelines and railways are constructed that those valuable resources below the dirt can be converted to dollars. That’s when commodities such as coal, gas and iron-ore are processed and exported to the likes of China, India, Japan, South Korea and France. That’s when our governments start to receive billions of dollars in extra revenue each year in the form of royalties. That’s when some of Australia’s biggest companies expect to return bigger profits, which will affect retail superannuation holdings. That’s when consumers will start seeing some of the fortunes promised by Treasurer Wayne Swan – tax cuts, increased superannuation contributions and infrastructure projects. Supply contracts which underwrite these royalties are on terms of up to 20 years.

Suddenly, now that (alleged) end to the mining boom has quite a wag in its tail. Mining doesn’t stop when construction finishes – it starts! The proponents need to get a return on their investment.

To suggest that the mining boom is near an end is admission of shortsightedness. Disregard the doomsayers for a minute and think about this logically. In Australia and around the world, are we likely to continue to breed, thereby resulting in continued population growth? In Australia and around the world, are we likely to continue to manufacture, produce, process and construct? If the answer to both these questions is “yes” then in Australia and around the world we will need more fuel for electricity and steel. If the answer is “no” then we all better stock up on candles.

Australia has some of the biggest reserves in the world of thermal coal and gas (both used in power generation) and iron-ore and coking coal (both used to produce steel). With the world’s pledge to reduce pollution the demand for gas-powered electricity will continue to skyrocket.

A majority of Australia’s natural resources are contained in Western Australia and Queensland. Consequently, the economic fundamentals of these states are the best in the country. And, many of the best property investment opportunities are also in these states.

It’s called the Asian “century” for a reason

Over this last decade the world has become acutely aware of the abundance of natural resources contained within Australian soils. Over the same decade most of Asia (home to 60% of the world’s population) has entered an era of mass urbanisation; an era which is expected to last so long that it is referred to it as “The Asian century” by people, including our very own Prime Minister.

Asia’s demand for natural resources is propelled by its enormous population, its ambition to transverse from an undeveloped to a developed region, and considerable financial capacity to support this.

Forecasts are for Asia’s middle class to explode from approximately 0.5 billion people to 1.7 billion over the next decade. Australia’s total population is only 22 million.

These changes in Asia are structural, they are real, and they will be long lasting. These changes have already altered the landscape for Australian property markets. To explain these changes we have produced a short educational video.

To suggest that the mining boom is near an end is an omission of the important role which Australia will play in “the Asian century”.

There will always be demand for Australia’s resources. In addition to the $240 billion in approved projects there is a similar value in proposed projects. Future project volumes will ebb and flow depending upon the economic and political climate at the time.

The biggest challenges stopping Australia from realising greater potential from additional resource projects include heavy taxes imposed on the mining industry and the lack of confidence/certainty that foreign investors have in our government. The inability of governments to contribute their own funding to some of the infrastructure required (ports, roads, rail lines), the cost and availability of skilled labour, and lost productivity due to industrial relations unrest are also inhibitors.

The opportunities to Australia from “the Asian century” extend well beyond the mining sector. As featured in our video, there are opportunities for agriculture, education, health and tourism.

Glass half full

As a nation, we need to stop moaning and start embracing the opportunities. It’s been four years since the onset of the GFC. Australia’s economy has been strong throughout, yet we persist with paranoia about Europe. Asia continues to boom, yet we continue to worry how long it will last. And the opportunities for our mining sector are enormous, yet we’re trying to predict how long it will last.

Those of us who naturally have aspirations for success look at problems and see solutions. Those of us who are naturally positive people don’t sit idle because of perceived risks; we look to mitigate and maximise opportunities. And those of us looking for confirmation don’t look towards governments or the media; we look at industry leaders and achievers.

For reassurance we should listen to people like Reserve Bank Governor Glenn Stevens who recently said: “Most Australians I encounter who return from overseas remark how good it is to be living and working here. We are indeed ‘lucky’ in so many ways, relative economic stability being only one of them.”

For direction we should follow the doers not the doubters. People like James Packer (entertainment and tourism), Gerry Harvey (retail) and Andrew Forrest (mining).

Leadership from government and business is integral to Australia cashing in on the Asian century. Regrettably, we shouldn’t hold our breath while waiting for this to occur.

Some friendly advice for those of us who are serious about goals and aspirations – focus on the opportunities, tell those around you to stop arguing about how to fix the problems, and remind the doomsayers to stock up on those candles before the lights go out.

Simon Pressley

Economic indicators for Property Investment are strong

Thursday, October 04, 2012

According to RP Data, with the exception of economic conditions, most ‘Spring selling season’ indicators for the residential market are stronger compared to this time last year.

Cameron Kusher, RP Data research analyst, says the lead-up to the residential Spring selling season is looking more positive, when compared to the same time last year.

However, Kusher says, the question is whether or not momentum will continue throughout the traditional selling season.

“In Spring we begin to see uplift in listings activity with more properties available for sale and subsequently an increase in auction activity. Spring also sees an improvement in the number of property sales, especially following winter, which is usually a slow period for the housing market,” Kusher says.

“Spring 2011 delivered somewhat of a disappointing selling season with sales volumes across the combined capital cities down by 3 percent, lower than they were in the Spring of 2010 and with no noticeable improvement from volumes in Autumn. The amount of stock available for sale during this period was continually increasing throughout the period to historic high levels and home values were falling across each capital city market,” he says.

According to RP Data, with the exception of economic conditions, most indicators are stronger compared with this time last year.

“Overall, we’ve seen some positive movements for home values with new stock being added to the market lower and each of the vendor metrics (selling time, vendor discounting and auction clearance rates) all showing an improvement,” Kusher says.

Despite a more positive trend for many indicators, when compared with those of 2011 , a comparison with the longer-term trend shows many of these indicators are moving off a low base.

“Overall, the data indicates that generally the housing market is now in a stronger position than it was 12 months ago. Considering this, the Spring selling season should be stronger this year than it was last year. However, in comparison to recent years we would not expect the housing market to power along through Spring in the manner that it has previously,” Kusher says.

Why Australia's resources boom – and property investment opportunities in resources areas – are nowhere near over

Thursday, October 04, 2012

Why Australia's resources boom – and property investment opportunities in resources areas – are nowhere near over: Terry Ryder

 

By Terry Ryder 
Wednesday, 08 August 2012

Three things are fundamentally wrong with the idea that the resources boom will end soon. 

One is the notion that the party stops when the construction of a mine or processing facility is completed – when, in reality, that’s when it begins. 

Another is the false premise that few new projects will be constructed beyond 2014, a claim that suggests people haven’t done their homework before indulging their addiction to media profile. 

And a third is a misunderstanding of the processes under way in China, India and other nations undergoing industrialisation and urbanisation. 

That misunderstanding has lead many to describe what’s happening in the resources sector as a “boom”. That’s a misnomer because a boom is a short sharp rise followed by rapid decline. 

The demand for Australian resources results from significant structural change in the world economy, inspired in part by the emergence of new economic power nations which are seeking to lift the living standards of very large populations. 

This is not a process to be measured in years. It will extend over decades. Property analyst Simon Pressley, recently named Australia’s Buyers’ Agent of the Year, calls it the “resources revolution”. 

High ongoing demand for our resources will continue beyond my lifetime, notwithstanding the likelihood of a few jitters along the way. Australia is going to play a primary role in servicing global demand for ore, coal and gas. 

The belief that the “boom” ends when construction of new mines and processing plants is completed is just bizarre. As Pressley pointed out in one of his Propertyology reports recently, this in fact is when it begins. 

Australia currently has massive new projects under construction, with iron ore projects, coal mines and gas processing hubs, along with associated infrastructure like export facilities and rail links. But the nation doesn’t earn any export dollars until these projects are completed. 

It’s only when they start shipping ore and coal and liquefied natural gas (LNG) that the dollars start to flow. And all the mega projects have proceeded with all or most of their future production under forward sales contracts. 

The third fault line running through the “the boom is ending” argument is the erroneous notion that nothing will happen in Australia once the current crop of projects is completed. The proponents of this idea need to catch up on their reading – or get out of their offices and visit a few coalfaces. 

Most of the big resources projects around Australia are yet to start construction or are just starting to crank up building work. There is so much more to come. 

There have been dozens of major announcements over the past month or so, coinciding with those silly predictions that it’s all grinding to a halt. Here are just some of those relating to Queensland alone: 

Queensland coal production is expected to more than double in the next eight years. In the same period Australia is expected to become the world's largest gas exporter. A report from the Bureau of Resources and Energy Economics says Australia's LNG exports could grow to 106 million tonnes by 2020. The report's long-term projections also suggest big increases in exports of thermal coal and metallurgical coal. 

The $23 billion Australia Pacific LNG project based in Gladstone is to be expanded. Origin Energy, ConocoPhillips and Sinopec have decided to add a second stage, having secured a 20-year supply contract with Japanese power company Kansai. 

A coal seam gas (CSG) project in central Queensland is a step closer towards production, with the state government issuing terms of reference for an environmental impact statement. Arrow Energy's Bowen Gas Project is one of two CSG developments that will form part of the company's LNG project. Arrow will develop up to 7,000 gas wells over the next 40 years, each with a lifespan of 15 to 20 years. CSG will be transported from the Surat and Bowen basins to be liquefied at an LNG plant at Gladstone.

The $1.1 billion Fisherman's Landing LNG project in central Queensland is going ahead, after Melbourne-based Molopo sold its Queensland CSG assets to PetroChina. The Chinese group will now begin talks with LNG Limited, which is behind an LNG plant at Gladstone, over a tolling agreement for gas from the Molopo acreage to be processed to be in the plant. Fisherman's Landing is the smallest of the five LNG plants under construction or planned for development around Gladstone.

Yarwun 2, the $2.4 billion expansion of Rio Tinto Alcan's Yarwun Alumina refinery, passed a major landmark recently when the first bauxite was fed into the new facility and Yarwun 2 began producing alumina. Eventually the plant will produce 3.4 million tonnes each year, compared with the current capacity of 1.4 million.

Xstrata has agreed to a $110 million pre-commitment for an expansion of the $2.5 billion Wiggins Island Coal Export Terminal at Gladstone, boosting the chances that the expanded port and the associated $1 billion Surat Basin rail project will begin exporting by 2016.

Stanmore Coal will bring 750 jobs to the Toowoomba and Surat Basin regions when it develops a Wandoan mine worth $380 million. Construction will begin in early 2014. The environmental impact statement for the mine says it could be operating and exporting before the end of 2015. 

Mt Isa City Council has started the process to freeing up land for developers to build a new suburb of about 400 homes. The council feels the expansion of the resources sector in the area makes existing housing supply insufficient to meet coming demand. 

We’ve also had major announcement of developments in Western Australia, South Australia, Victoria, New South Wales and the Northern Territory. Space doesn’t allow me to list them all.

2012 Tax Changes - Building Industry Reporting

Saturday, July 28, 2012

Building industry reporting

If you’re a business or entrepreneur operating in the building or construction industries, then you’ll need to start reporting on every payment made to contractors in the New Year.

As for who needs to report – any business primarily operating in the building and construction industries, including businesses making payments to contractors. If more than half of your business activity relates to building and construction, then you need to start reporting.

The details you need to report for each contractor include:

  • ABN
  • Name
  • Address
  • Gross amount paid in the financial year
  • Total GST included in the gross amount paid

You’ll also need to report worksheets and other records, including payment details for work done in relation to any sort of building or structure. That includes construction, demolition, design, destruction, erection, improvements, maintenance and repair.

Contractors who pay other contractors may need to fill in all this information as well.

Businesses will need to make this report by July 21 each year, but don’t fear – the first report isn’t due until July 2013.

2012 Tax Changes - The loss carry back

Saturday, July 28, 2012

The loss carry-back

The loss carry-back scheme is one of the most anticipated tax changes by SMEs – one of few.

At the moment, businesses can only carry losses forward to offset future income and profits. They can’t carry their current loss back and offset it against past profits.

But under the new scheme, businesses will be able to claim losses of up to $1 million against tax paid in the past two years.

To be eligible, a business needs to have made a profit and then a loss from July 1, 2012. So while that provides some relief for SMEs, it doesn’t mean anything for businesses that have made a loss in the past few years.

Of course, there are a few caveats – businesses structured as partnerships, sole traders and trusts are ineligible.

2012 Tax Changes - Carbon Tax for Business

Saturday, July 28, 2012

Carbon tax assistance – business

While there are only 500 companies that will be directly affected by the carbon tax, the indirect effects will come in higher electricity prices, and other costs that will be passed along supply chains.

There are few regulatory issues required of SMEs, then. Some manufacturing businesses will be obliged to report their energy use under the National Greenhouse and Energy Reporting Act – manufacturing businesses should contact the ATO to determine if they’re in this category.

However, there are plenty of assistance programs businesses can tap into. Businesses that use up to $20,000 in electricity every year or have up to 10 employees can get a 50% rebate, and manufacturers will be able to access the $800 million Clean Technology Investment Program.

There’s also the Solar Credits scheme, which small businesses can use, and SMEs in Sydney and Perth which sign up to the CitySwitch Green Office program can get a rebate of $1,000.

But according to Andrew Douglas, principal at M+K Lawyers, looking for assistance isn’t the only thing you should be doing.

“Reducing your exposure; and businesses aren’t doing that. They’re not concentrating on their supply chain, they’re trying to pass through the carbon tax price but every major retailer is rejecting it, so right now it’s a real problem. The other issue is that people aren’t doing an assessment of the true cost,”

2012 Tax Changes - Carbon Tax

Saturday, July 28, 2012

Carbon tax assistance – individuals

This is a huge area of tax change, so we’ll break it down into two categories – individuals, and then businesses.

Most of the assistance is taken care of with the adjusted tax brackets, and they’ll mostly help lower-income earners. But there will be some changes to the way pensions and the Family Tax benefits are handed out.

For instance, pensioner payments have already started arriving, equating to $250 for singles and $380 for couples. After July, pensioners will start receiving supplements worth a 1.7% increase in the maximum pension rate.

Family Tax Benefit A recipients will receive up to $110 extra per child, while those receiving Family Tax Benefit B will get up to $59. Single parents will receive up to $234, as well.


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