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Catherine's Chat

Wholistic Financial Solutions provides information and updates regarding the property investment industry. Learn more from Catherine's chat here.

RBA cash rate cut needed in February

Friday, December 28, 2012

The Reserve Bank needs to cut the cash rate by a large amount in one big hit to stimulate a recovery in the housing market, according to Residex chief executive John Edwards.

On the back of November Residex housing market data, which shows many markets in negative territory or treading water, Edwards says the Reserve Bank should look to cut the cash rate by 75 basis points in February.

“Should the RBA continue along the road of small reductions, there is a real risk that it will need to reduce the cash rate to 2% or less.

“However, should it move to a much more significant reduction in February (of around 0.75 percentage points), this would probably achieve its objectives and bring the cycle of small rate adjustments to an end.

“The outcome would be the removal of constant press about the likely poor outcome as the resources boom comes to an end.

“Importantly, it would be probably sufficient to stimulate consumer spending and encourage small business investment. In all probability, this outcome would lead to a much improved level of consumer sentiment,” he says.

Edwards says housing markets had done better in 2012 compared to the previous year, but had failed to keep pace with inflation.

“The majority of cities have produced negative real rates of growth (after taking inflation into account). In fact, the real growth was a -2.8% in housing while for units it was -1.23%,” says Edwards.

Despite the poor performance of the market in 2012 in real terms, Edwards says he expects all adjustments in house prices since the GFC to be “recovered in the medium term, and prices are anticipated to be equal to or better than before the GFC”.

'Pit-to-port project' announced for Abbot Point

Wednesday, December 05, 2012

BILLIONS of dollars from India are inundating Queensland's mining industry as hopeful proposals to develop the Galilee Basin to the west of Rockhampton, Mackay and Gladstone evolved into solid projects.

Deputy Premier Jeff Seeney was keen to spruik what these dollars and the mining revenue the projects would create, in a week where news on astonishly large mines now appears commonplace.

On Wednesday, Indian giant GVK announced it had signed a construction deal to build the multi-billion dollar third terminal at Abbot Point, near Bowen.

It came just one day after a $4.2 billion plan for an ACMI mine in the same area released its environmental statement, a crucial step on its path to construction.

Prime Minister Julia Gillard watched the pen hit the dotted line on the GVK deal in Delhi, but was unable to answer questions on her returning flight on Thursday.

Mr Seeney may not have been in the room when GVK boss Dr Gunapati Venkata Krishna Reddy signed the deal with Brisbane builders Smithfield and Korean steelmakers Samsung C&T, but he knew what was coming.

He said there were still management plans for GVK to put together but the "game stoppers" were now out of the way.

"I'm very pleased to see the progress," he told APN on Thursday evening.

"These major projects will provide the next generation of Queenslanders with jobs and the state with income for schools and hospitals."

Mr Seeney said he was keen to encourage the investment of not just GVK but other Indian mine developers Adani and ACMI.

And he emphasised that all applicants were treated exactly the same, whatever their origin.

The LNP government is currently facing allegations from mining magnate Clive Palmer that Indian investors had been given favourable treatment ahead of other developers.

The deal rounds off GVK's trio of massive Queensland investments including the Alpha Mine, plus 500km of railway connecting the mine to a GVK port capable of handling 70 million tonnes of coal each year through its two ship berths.

The Alpha Mine and GVK's neighbouring project Kevin's Corner will both produce roughly 30 million tonnes of coal per year, making them two of the largest energy coal mines in the world.

Alpha is due to start mining in 2015, with Kevin's Corner to follow suit 12 months later.

The port will need to be ready to handle the first Alpha coal deliveries.

The Abbot Point expansion is expected to cost between $2 billion and $4 billion with early estimates pointing to a total cost of $10 billion for the mine, rail and port package.

It will create 650 jobs during construction with another 100 needed to operate the port full time.

GVK's Mr Reddy described the deal for his company as a "key strategic development".

"This is the first major step towards finalising the construction contracts and completing the financing for the project which is well under way," he said.

Full steam ahead for mining in Qld

Wednesday, December 05, 2012

ALMOST $13 billion in coal projects are being built in Central Queensland, even as the world's multi-national mining firms release trickles of information on cost-cutting and job losses.

Hit by a global fall in coal prices and the increasing cost of doing business in Queensland, coal giants have sliced contractors and staff from projects.

But the region is far from surrendering to the tumbleweeds.

Three new mines, two extensions and one giant port expansion in the Bowen Basin have Rio Tinto, Anglo American and BHP Billiton Mitsubishi Alliance shelling out billions in an apparently difficult time.

These six illustrate how the industry is powering on.

Rio's Kestrel Mine expansion was announced in 2007, but it was still an astonishing project by the numbers.

From first sod to completion in 2013, the $2 billion Kestrel will have provided jobs for more than 1100 workers between the still-operating mine and its expansion work.

A Rio spokeswoman said the extension alone had taken "4.2 million man hours so far and more than 3000 tonnes of steel had been used".

Anglo American's $1.7 billion Grosvenor project only started building in June with first coal to be mined by late next year. However, underground mining would not start until 2016.

Grosvenor will supply more than 1000 jobs during construction and operation.

It will need 3000 tonnes of structural and reinforcing steel, 13,000cu m of concrete and take estimated four million man hours to build.

BMA has perhaps the most ambitious schedule with expansions of Hay Point Coal Terminal and Broadmeadow Mine worth a combined $3.4 billion.

Add that to the building of its two new mines - $4.2 billion on Caval Ridge and the $1.6 billion for Daunia - and it amounts to more than $9.2 billion worth of construction.

BHP Billiton chips in half of the funds for its projects, with the rest funded by alliance partner Mitsubishi.

Earlier this year, BMA shuttered its Norwich Park and Gregory mines when they stopped making money.

However, the giant was clearly looking beyond the horizon when it green-lit this fleet of emerging projects during the boom times.

Daunia will employ about 1000 during construction and 450 when running in 2013.

Hay Point's expansion will have used 1000 workers by the time it is finished in 2014

Caval Ridge will need 2000 to build and another 500 to operate when it starts in 2014.

 

ON THE GO

Rio Tinto

Value: $2b

Jobs: 1100 (construction and operation)

To open: 2013

Grosvenor (new)

Anglo American

Value: $1.7b

Jobs: 1000 (construction/operation)

To open: 2013/2016

Daunia (new)

BMA

Value: $1.6b

Jobs: 1000 (construction), 450 (operating)

To open: 2013

Caval Ridge (new)

BMA

Value: $4.2b

Jobs: 2000 (construction), 500 (operating)

To open: 2014

Broadmeadow (expansion)

BMA

Value: $900m

Jobs: TBA

To open: 2013

Hay Point (port expansion)

BMA

Value: $2.5b

Jobs: 1000 (construction)

To open: 2014

TOTAL VALUE: 12.9b

Mackay leading property revival in September quarter

Wednesday, December 05, 2012

THE Mackay property market was regional Queensland's top performer during the September quarter, contributing Queensland recording its strongest house sales numbers in nearly two years.

According to the Real Estate Institute of Queensland (REIQ) September quarter median house price report, the number of house sales throughout Queensland increased significantly over the quarter.

"The mining areas of Queensland appear to have come off the boil a little, perhaps due to sharp property price increases over the past 12 months in Gladstone and Mackay in particular; however, sales in these regions remain strong," REIQ chief executive officer Anton Kardash said.

The top performer of all major regions was Mackay, which posted a median house price increase of 4.7% to $445,000. Over the year its median house price increased 4.9%.

REIQ Mackay zone chairwoman Sally Richards said numerous factors contributed to Mackay's continued steady market conditions and, despite changing local employment conditions, the prospect of growth for the following quarter and beyond was positive.

"We have found more recently that there has been increased interest in the higher priced homes such as the $400,000 to $600,000 price range.

"These people are upgrading or moving to Mackay," Ms Richards said.

"There is a significant amount of increased development and building activity in the region, resulting in strong demand for new home and land developments."

An absence of first home buyers due to the removal of the $7000 First Home Owner Grant was expected to end following the introduction of the new $15,000 First Home Owner Construction Grant, she said.

Strong Performer

 West Mackay: 9.3% increase in median house price to $427,000 and 7.1% increase in growth over 12 months.

Newcastle fringe suburbs attracting first-home buyers and investors with many options under $300,000: HTW

Wednesday, December 05, 2012

 

Towns and rural villages within an hour’s drive of Newcastle present first-home buyers and investors with many opportunities to acquire property priced under $300,000, though in some cases, employment, shopping and transport options may be limited.

Valuers Herron Todd White pick Cessnock, the fringe suburbs of Lake Macquarie and range of small rural towns to the north, south and west of Newcastle, where houses can be picked up below this benchmark.

“At Cessnock in the west, very basic and dated housing can be acquired for $150,000 to $200,000 as well as in fringe villages like Aberdare and Millfield.

“Further west in the town of Singleton, the coal mining boom is impacting on housing, seeing basic prices again rising to the $250,000 to $300,000 range.

“Singleton can further expect to benefit from the M15 expressway due to open in September 2013 making the region more accessible,” says HTW.

Outer-suburb buyers are being spurred on due to a tight rental market in Newcastle with the Real Estate Institute of NSW reported a 1.6% vacancy rate in October.

The median price of a Newcastle house is $655,000 and $430,000 for units, according to RP Data with BIS Shrapnel tipping strong capital growth of around 6% per annum over the next two years.

Apart from being Australia’s sixth biggest city with a population of 550,000, Newcastle is also a beneficiary of coal mining investment activity and is well connected to Sydney plane, train and by car via the Newcastle Freeway and the Pacific Highway.

Herron Todd White notes that affordable houses are “typically in areas with limited employment opportunities, shopping, education, and public transport.

“The typical purchaser of affordable housing is quite varied and includes a wide range of owner-occupiers, first home buyers and investors.

“In the current economic climate we are finding the most remote of locations experiencing greater sales periods than their more centralised counterparts.

South of Newcastle, first-home buyer and investor opportunities can be found on the southern fringes of Lake Macquarie, with cheaper housing is priced from around $250,000 to $300,000 in areas such as Doyalson and Wyee.

“Similar pricing occurs in the small villages near the Pacific Highway like Morisset, Dora Creek and Awaba.

Buyers with a penchant for rural living might consider the more remote areas of the upper north and north-west, around towns such Dungog, Stroud, Gloucester and  Buladelah, suggests HTW, with houses priced from as low as $150,000 to $200,000, but where “services and facilities are more limited”.

“Finally in the coastal areas of the north-east, lower end property around Hawks Nest and Tea Gardens can be acquired for around $250,000 to $300,000.

“Just to the south around Nelson Bay, older houses can sell for as low as $300,000.

“Over the last few years these coastal areas have experienced a significantly weakened market with the typical purchaser – an investor or holiday house purchaser having departed the market and sales periods have noticeably increased,” says HTW.

By Larry Schlesinger

By Larry Schlesinger
Monday, 03 December 2012

Capital City mediun prices remain flat - though Brisbane shows promise

Wednesday, December 05, 2012

The prices of Brisbane apartments increased by 2.3% over November to a median of $360,000, in contrast to a flat capital city housing market, according to the latest monthly update by RP Data-Rismark.

The gain over November means that Brisbane unit prices are now down just 0.8% year-on-year, delivering investors a total year-on-year return of 4.9%.

Brisbane unit investors are getting the second best rental return (alongside investors in Canberra units) across the eight capital cities, with a yield of 5.5%, with only Darwin higher at 6.6%.

The RP Data-Rismark November index shows the eight capital city dwelling prices unchanged at a median of $472,500 – following 1% decline in October – with Canberra (1.3%), Darwin (1.1%) and Darwin (1%) the only capital city markets to record dwelling prices rises of 1% or more.

 

The largest capital gains were found in Darwin (3.1%), Perth (3.0%), Brisbane (0.8%) and Sydney (0.6%).

The only cities where values were down over the three months ending November were Canberra and Melbourne (both -0.7%) and Hobart (-4.5%). 

Melbourne was the weakest capital city housing market over the month and the only to register a decline in its median prices, which fell 1% to a median of $486,000 while dwelling prices were unchanged in Sydney at $555,000.

Click to enlarge

Year-on-year, dwelling prices are virtually unchanged, indicating a housing market that continues to tread water, but with notable diversion in performance at an individual city level.

Darwin has been the strongest performer with total returns (capital growth plus rental returns) of 20%, followed by Perth (8%), Sydney (5.9%), Brisbane (5.1%) and Canberra (4.9%).

Gladstone's affordability

Wednesday, December 05, 2012

Gladstone's comparable affordability -

Gladstone's $455,000 median price put the reional Queensland coastal town among the more affordable of mining town investment options, according to Ray White Real Estate director Andrew Allen.

"Compared to the cost of housing in other mining and industry towns, such as Moranbah which is about $700,000-$800,000 for a home, it is certainly more affordable than that," Mr Allen suggested.

Andrew Allen told the Gladstone Observer there was an income gap within the district.

House prices in the Queensland’s mining town of Gladstone fell 4.2% over the September quarter, but are not indicative of a softening in the market, according to the Real Estate Institute of Queensland.

The 4.2% drop to a median $455,000 was recorded from just 19 sales.

Data for 12 months of sales show the median house price has risen by 13.1% to $475,000.

New projects include residential developer Devine Limited launching a new $1.4 billion master-planned community - Riverstone Rise - in Gladstone in April, which is expected to have 2,900 homes upon completion.

Gladstone is located 100 kilometres south of Rockhampton and has a vast number of liquefied natural gas (LNG) and coal projects in development.

The residential area of Gladstone is made up of nine suburbs: Clinton, Glen Eden, Kin Kora, New Auckland, South Gladstone, Sun Valley, Telina, Toolooa and West Gladstone.

RBA Rate cut

Wednesday, December 05, 2012
The RBA has given homeowners more good news – with the RBA announcing today that they will reduce the cash rate by 0.25 points to an overall rate of 3.00%. This equals the lowest level ever for Australian homeowners and has come about due to a multitude of factors which highlight that not only Australian growth but global growth is also slowing. The Organisation for Economic Co-operation and Development (OECD) predicts that Australian growth will slow by 0.7% next year compared with figures this year.

Regional towns a budget property investment option but avoid one-industry mining towns

Friday, November 23, 2012

Property investors with small budgets should consider investing in larger regional towns where prices are more affordable, but “avoid one-industry conurbations such as mining or resort towns” according to investment advisor Monique Sasson Wakelin.

In her latest blog post, Monique Sasson Wakelin says a regional town investment may be an option for prospective investors whose budgets don’t stretch to the $350,000 threshold that will buy “an entry level investment grade one bedroom apartment in an inner suburb of most of our capital cities, with a little more required in Melbourne and a fair amount more in Sydney”.

She says investors should consider regional cities that have a larger population and a diverse range of economic activity.

Sasson Wakelin says good regional options for budget-conscious investors are Newcastle and Wollongong in NSW and Geelong, Ballarat, and Bendigo in Victoria.

However, there are risks with investing in regional towns while the returns may not match those attainable in the bigger capital city markets.

“Be aware that due to the compromise in location, you are unlikely to attain the capital growth in a regional city that you can expect from the capital,” says Sasson Wakelin.

“The aim should therefore be to pay off debt quickly. With the acquired equity, you can then use this first property as a stepping stone into a capital city market.”

Investors should focus on property close to the town’s CBD, often within 1 kilometre of centre.

“A word of warning. It is much easier to pick a quality asset in a capital city than in a regional centre.

“Follow the fundamentals for inner suburban investment and the risk is low. An investment in a regional town is far more problematic,” she says.

 

Larry Schlesinger

How can you tell if a property deal is dodgy

Wednesday, November 14, 2012
How can you tell if a deal is dodgy? You can’t, but here are some clues:

 

  • If there is a middleman between you and the supplier (excluding standard real estate sales), then there is going to be big commissions built in. While the property may be OK, the commissions usually run from around $15,000 up to $40,000. You won’t know about it, as it’s often provided as an after-sales “kick-back” and it doesn’t have to be disclosed – there is no law around property investment advice, and so no disclosure requirement. Such a big commission will, in this subdued environment, take years to recoup and put a dampener on leveraging ability.
  • If the property exists in a state other than where it is being marketed, there has to be a reason why the locals haven’t snapped up the deal.
  • If the person advising you to buy the property is also representing the seller then it is not possible for their advice to be independent – it is biased, and the deal is likely better for the marketer than it is for you.
  • If the company selling the property waxes lyrically about how you are their first concern, it’s likely to be dodgy. It’s fine to sell property as a middleman but not fine to claim that your interests are with the buyer.
  • If there is any kind of incentive scheme, such as a rent guarantee or bonus, something is likely to be up. Property that makes a viable investment can sell itself.

Now is the time to take extra care. If you’d like to invest in property, you can do so safely, but you have to have your eyes open and take responsibility for your own successes and failures. Protect yourself with the following guidelines:

  • Beware of property being marketed by a seminar or telemarketer – such campaigns are expensive, and these people are paid big commissions that are hard to recoup through capital appreciation. Don’t believe claims that commissions aren’t built into the price – this is simply not possible.
  • Never sign a deal on the day you see it. If an extra incentive is offered to do so, be doubly wary!
  • Always confirm the value of a property through recent sales. Only recent sales can determine the actual value.
  • Be aware that forecasts on income are based on historical figures and do not consider future supply.
  • Be extra careful of off-the-plan – especially tax advantaged ones. They are often part of a huge development which will affect future supply and impact on your yields.

Most importantly, become educated before you become an investor. Too many people decide to invest and then go looking for a property, and this is why they are so vulnerable. Get that education under your belt first and then you will know how to spot a dodgy deal at 10 paces.

Margaret Lomas


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