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Queensland in the Spotlight

Monday, November 04, 2013

Queensland was in the spot light again last week.

 There is some great news covering the QLD investment scene that is valuable for residential investors.

  • Removal of the mining tax has begun
  • The commsec State of the States report found QLD leading in business investment with spending in the June quarter 37% above the decade average
  • 1400 exploration permits were granted in the last week - the red tape is removed so mining companies can get on with business.

Please see these 3 articles for more information:

  1. Queensland "The Big Mover"
  2. Government Releases Draft Legistlation Repealing the Mining Tax
  3. QLD Grants 1400 Exploration Permits in a Week

Investor Focus Should Switch to Queensland

Monday, November 04, 2013

By Terry Ryder:

Changes in sales volumes are usually a forerunner to changes in prices, both when markets are rising and when they are falling.

On that basis, Queensland can expect good price growth. The state has recorded big changes in the number of house sales over the past 12 months or so.

The REIQ’s market report for the June Quarter shows sales activity in the state improving. House sales statewide rose 22% in the June Quarter, compared to the March Quarter, and were 40% higher than the June Quarter of 2012. (We don’t yet have figures for the September Quarter but anecdotal evidence indicates the trend has continued).

“This is the fourth consecutive quarter of positive news,” said REIQ spokesperson Anton Kardash. “The September Quarter last year was a particularly strong one for the Queensland market and that momentum has been sustained in the following three quarters of sales activity.”

The numbers of house sales in Brisbane increased markedly in the June Quarter: up 32% on the March Quarter and up 44% over 12 months. The median house prices in Brisbane City, Logan City, Moreton Region and Redland City all increased in the June Quarter.

In the regions, Toowoomba posted yearly median house price growth of 4.5%, the Gold Coast rose 3.1% and the Sunshine Coast grew 2.3%.

“REIQ estimates of Queensland investor activity also shows that the numbers of investment dwellings financed is tracking at about the historical average,” says Kardash. “No doubt, investors have recognised the strong rental market, including low vacancy rates and are taking the plunge while first home buyers remain relatively absent.”

The Home Value Indexes published by RP Data show that Brisbane’s house price index has risen 1.7% since the start of 2013, lagging some of the other capital cities but nevertheless showing signs of growth. The unit price index has recorded a similar rise.

Most of that rise was in the past three months, confirming the usual pattern whereby prices rises follow increases in sales volumes, but with a lag of 6-9 months.

Brisbane’s market overall declined in 2011 and 2012, in line with the capital city trend, but with the double whammy brought by the 2011 floods. There has also been impact from the State Government’s cost cutting and sacking of large numbers of public servants.

Brisbane is not an auction city so it has not been caught up in the short-term frenzy that periodically afflicts Sydney and Melbourne.

It is, nevertheless, showing signs of a return to price growth – which is inevitable following the significant increases in the number of home sales.

Outside the state capital, we can expect growth in Rockhampton, Townsville and Toowoomba, as well as some of the tourism-based areas that have been poor performers in recent years but are now mounting revivals, headed by Cairns and the Sunshine Coast.

Locations moving in the opposite direction, mostly because of over-supply by developers, include Gladstone, Mackay and Emerald.

New Wealth Drivers: SMSF's and China

Monday, October 14, 2013

By: Jon Giann

 

There were quite a few comments on my last piece that i thought were worth fleshing out a bit.

If you missed it, the argument in a nut shell is that self-managed super funds (SMSFs) are now sitting on a massive pile of cash (bigger than Westpac). They have a fairly small exposure to residential property, and surveys suggest they’d like to increase it. If they did, and took advantage of rules that allow them to leverage, we could see a huge surge into property.

First of all, thanks to Greg M for picking up on a mistake. I said that SMSFs could leverage against assets. As he correctly points out they can’t. SMSFs are allowed to borrow to invest, though the exact rules have changed a few times in recent years.

My reading is that it works the same for SMSF as it does for you and I, with certain deposit and loan to valuation ratios enforced by the banks. This means that SMSFs can leverage, but only off cash holdings.

I got a bit lazy with the distinction between cash and assets there. But it doesn’t change the numbers at all. SMSFs have more than enough cash to cover the kinds of property exposure they’d reportedly like, so those quick back-of-the-envelope calculations I did still hold water.

But thanks Greg for keeping me on my toes. It’s good to know my readers won’t let me get away with intellectual sloppiness.

Second, Amanda was wondering that if there was a demand for 700,000 properties from SMSFs, who would fill them? As she rightly says, “they have to fill those houses with tenants to see a return on investment… 700,000 or so more tenants need to be found in a very short time…”

The answer to Amanda’s question is exactly the dynamic that is going to drive prices higher.

If SMSF demand suddenly caused an increase in supply of 700,000 homes, then that’s right, there would be a glut of rental properties, and rental and property prices would fall.

But that’s never going to happen.

It’s funny. I write around 1,000 words per article and some people get a fixation on one single point like the 700,000 homes. The reason I mention it is to highlight how much money is in SMSF’s and what potentially is possible.

Here’s the reality…

As I said, we build about 70,000 homes a year at the moment, so unless we really start cranking up production, it would take ten years to build that many homes.

And as Amanda says, SMSFs are going to want to see a return on their investment. So the most likely scenario is that the SMSFs will just go after existing properties that are tenanted already.

That means they’re going to start competing for the existing investment properties already out there. Maybe some will build off the plan, but typically investors favour established dwellings.

But there’s only a limited number of those. So that means that all this extra demand is just going to jack up the price.

Remember it’s 700,000 properties at current price levels. As the price level goes up, SMSFs will need fewer actual homes to get the exposure they want. Some other investors will cash-out or get squeezed out of the market, and at some point, the market will find a new equilibrium.

I don’t know exactly what that end point would look like, but the only guarantee in that scenario is that prices will be a heck of a lot higher.

My mate John Fitzgerald pointed me to some back-of-the-envelope calculations he did. Now John is worth squillions, and has over 5,000 property transactions to his name. When he talks, I listen.

John agrees with the basic maths I’ve got. But he compares the SMSF appetite to the value of sales. He says that in Australia we sell around $190 billion in residential property each year.

With gearing, he reckons 30 percent of SMSFs alone could buy every residential property sold in Australia, for the next three years!

As he says, almost 3,000 SMSFs are being set up every month! In his mind, it’s a total game changer.

He reckons this is one of the factors that helps explain one of the property market puzzles of recent times. We’ve seen prices, particularly in Sydney growing strongly (if we annualised September’s growth we get something close to 30 percent!).

But credit is only growing at 4.7 percent. How can that be? How can we have a boom without credit growth? That’s never happened before.

He reckons the answer is that there are new buyers in the market that we’ve never seen before. One is SMSFs.

The other is the Chinese.

And he reckons it’s taken the market by surprise, because 6 years ago, neither buyer existed.

As he says, “I look at China and you can take my numbers on SMSF and quadruple them and still not come near the capacity there. John McGrath told me that one of his Sydney auctions in September had 16 registered bidders – all Chinese origin and all cash buyers.”

“The top two house sales in Australia this year were for $52m and $33m, both to the Chinese and both in cash.”

I’ve been saying this for a while too. I don’t think most people realise the kind of wealth machine that China has become.

Before the GFC, to make the top 50 wealthiest list in China you needed $6 million. Today, you need $3 billion. These days, they’re creating 25 billionaires per month!

China’s top 20 percent had $1.4 trillion in bank savings last year. John notes that just 13 percent of that would buy every house in Australia, in one year.

Thanks John. That’s some serious food for thought.

(And I think this probably answer’s Tom’s question from the last post, right?)

We’ve got a cyclical upswing combining with a massive paradigm shift in the make up of the market, with the twin giants of China and the SMSFs letting their presence be felt.

It’s going to be HUGE!

And thanks everyone for the comments. I don’t often have time to respond but I do follow them closely, and I’m always impressed and humbled by the intelligence and knowledge that’s on display.

As I said, it definitely keeps me on my toes. I can’t slack off with you lot around!

20 Reasons to like Rockhampton

Tuesday, October 08, 2013

by Terry Ryder.

 

Most questions I get asked by Investors concern location. That's unsurprising, because that's my business.

But specific locations tend to dominate. Eighteen months ago many were asking about Moranbah. A year ago there were more questions about Gladstone then anywhere else. Over the past six months Perth has dominated.

You may notice the surge in interest in a particular spot usually comes well after the best time to buy there.

Now the focus is switching again. In Queensland, interest in former favourites Gladstone and Mackay is fading, as consumers get the message that those markets are declining, weighed down by over-supply at a time when resources-related demand has eased.

Rockhampton is now attracting attention and I'm getting more and more questions about it. Do I think it's a good place to invest?

The short answer is yes, and here are my Top 20 reasons why I like it.

  1. It has economic diversity and is less reliant on the resources sector.
  2. It’s the admin capital of Central Queensland.
  3. It gets plenty of oomph from its reputation as “the beef capital of Australia”.
  4. It has a military economy, a power station, a university, plenty of tourism and two big abattoirs.
  5. It’s affordable - considerably cheaper than both Mackay and Gladstone.
  6. Several suburbs have median house prices below $250,000.
  7. It’s not hard to find rental returns above 6.5% on houses.
  8. There are plenty of older Queenslanders for those who like to “add value”.
  9. Sales volumes have been rising since late in 2012, with prices starting to follow.
  10. The long-term growth rates are strong, with most suburbs averaging 10% or more annually for the past decade.
  11. Considerable spending on infrastructure is under way or planned.
  12. $250 million is being spent on expanding the hospital.
  13. Plenty is being invested in property development, including shopping centres and industrial estates.
  14. It has a population above 100,000 and is growing steadily.
  15. It services a region with close to half a million people.
  16. Unemployment rates have improved markedly in recent years.
  17. A $1.2 billion export port is in planning (a second port project of similar size was proposed but Xstrata abandoned its plans in May).
  18. Projects like the $600 million development on Great Keppel Island and the expansion of the Keppel Bay marina will help the tourism industry.
  19. Quest Serviced Apartments, which targets locations with growing business traffic, has just opened a new hotel there.
  20. Resources industry workers are settling in the Rockhampton area and going to work on a fly-in-fly-out basis
And here are a couple of things to be cautious about: dwellings approvals almost doubled in FY2013 so investors should keep and eye on vacancies; and it would pay to check the flood maps for signing a purchase contract.

More Reasons for Property Prices to Rise

Friday, October 04, 2013

Housing supply seems to be falling further and further behind demand.

Each year we build fewer and fewer houses. And over the last ten years, growth in the housing stock failed to keep pace with population growth. This is the first time this has happened since WW2!

This has a few really important implications.

The first is that all this talk of a bubble is completely over-blown. (hey? How’s that for a pun? Put that in a Christmas bon-bon.)

Because unless there’s a glut, then there can’t be a bubble, and unless there’s a bubble, then there can’t be a bust. This is one of the most important differences between the Australian story and what happened in America.

We also know that if supply is falling further and further behind demand, then there must be upward pressure on prices. This is as true of housing as it is of any market.

And so this supply shortfall goes a long way to explaining the trend increase in house prices we’ve seen over the past 50 years or so. Not the full story, but a fair bit of it.

And supply doesn’t look like it’s going to come bouncing back anytime soon. This means we can expect to see continued upward pressure on prices.

And all that is true for a given level of demand. But the truth is that there are major structural and demographic changes happening on the demand side that mean the supply and demand gap is getting even bigger.

Which of course means we’ll see bigger and bigger price increases.

So what’s happening on the demand side?

Well, in a nut shell, we’ve seen a bunch of changes that means we need more houses for the same number of people. That means that actual demand for housing is actually growing even faster than population growth, which itself is already growing faster than supply.

Over the past 50 years there have been significant changes in the way we live. Take average family sizes for example. As fertility rates dropped, average family size has been on a steady downward decline for decades now. That means we need more houses to accommodate the same number of people.

At the same time, family breakdowns have split many families in two, effectively doubling that family’s need for housing.

And what’s more, a steadily ageing population has resulted in more people living alone, again meaning we need more dwellings to house the same number of people.

And according to the 2011 census data, of the homeowners aged 70 and over who live alone, 62 percent have a house with three or more bedrooms. That adds up to 238,078 houses with at least three bedrooms occupied by just one person.

Among houses owned by older couples (with at least one partner aged over 70), 82 percent – or 332,752 houses – have at least three bedrooms.

And the Australian population is only getting older, so we’re going to need more and more housing. Some older people might downsize into something more practical, but people are generally reluctant to leave their communities and the family home.

Together, these structural and demographic factors – smaller families, more split families, more older single-person families – mean that the average number of people per dwelling has been on a long-run downward trend for over a hundred years!

That’s what this chart here shows:

 

What’s interesting here though is notice the small pick up between the 2006 and 2011 census. That’s the first rise in at least 100 years!

How do we explain that? Well, I don’t think there’s been any change in Australian preferences. What I think it reflects is tighter economic conditions through the GFC.

As money became tighter, people started share-housing, kids moved back in with their parents, or delayed starting out on their own.

If that’s true, what it points to is even more pent up demand. As economic conditions continue to solidify around the country, people will look to head back out on their own, and the average household size should return to trend.

And ultimately what the downward trend in household size means is that actual housing demand is growing faster than population growth. So if we know that population growth is growing faster than supply, then we know that actual housing demand is growing even faster than supply.

And this of course means more upward pressure on prices.

Of course, the other important factor here is the expansion of investor demand over the past 30 years or so. I’m planning to write a bit more about that later.

And so looking back at the past 30 years, it’s not hard to see demand for housing to live in, combined with demand for housing to invest in, running far, far ahead of supply.

And so when I look at the prices rises we’ve seen, I just don’t see a bubble. The price rises we’ve seen make perfect sense.

And I see these dynamic continuing to drive the market going forward. Unless there’s a slow down in the rate of population growth (unlikely) or an increase in the average household size (very hard to see where that would come from) OR there is suddenly a lot more supply brought to market (how?), then undersupply and growing prices will be the norm for many years to come.

Add to that the lowest interest rates in 50 years and a cyclical upswing out of a prolonged soft patch, and you’ve got all the ingredients of a boom.

Simple as that.

by: John Giaan

Mackay Property Market on the Rise

Tuesday, October 01, 2013

 

It appears the Mackay property cycle is on the up, with respected property commentator Michael Matusik and independent property valuation and advisory group Herron Todd White recently indicating the Mackay market is in the 'recovery' or 'rising market' phase of the property cycle.

Click here to view the attached article for the stats and figures.

The Future Remains Bright for Mackay, Gladstone and Townsville

Friday, September 13, 2013

There are currently many investors who purchased in regional areas of QLD and have been disappointed by having to accept lower than anticipated rental returns. Negative media about the end of the resources boom have also left these investors thinking that they have made a bad investment choice. However now is not the time to panic.

When you dig deeper into what is actually happening in these regions and look at the longer term the future prospects for cities like Gladstone, Mackay, Emerald, Rockhampton and Townsville remain incredibly strong. We may have passed the peak of the investment stage but we are yet to begin receiving the billions of dollars of income once exporting begins. And we still have some massive projects due to commence that will employ thousands of workers.

Please see the following link to an article from Terry Ryder suggesting that bright days are ahead;

http://m.propertyobserver.com.au/residential/rocky-on-the-rise-as-gladstone-stumbles-terry-ryder-hotspotting-rockhampton-gladstone/2013052261590

The short term over supply of rental properties in Gladstone and Mackay should be absorbed by early next year. It may take awhile for rents to get back to their peak levels but the potential for above average capital growth remains very strong. The Gladstone metropolitan area is fast running out of land that can be developed at an affordable price. Most future development will be around 20 minutes away in Boyne Island/ Tannum Sands or Calliope. While there is more land around Mackay capable of being developed you are no doubt aware of how long it takes for the Mackay council and local developers to bring the land to market. And most land left is either low lying or very hilly, meaning the cost to deliver lots is higher.

We are very confident is the medium to long term prospects for these regions an hope that investors can be patient. If they hang on happy days are ahead.

 

By: Chris Halpin

Who Said Mackay is Over!

Monday, September 09, 2013

 

The train is departing, All aboard!

The Daily Mercury yesterday announced the opening of a BHP Daunia mine and has created over 900 jobs while boosting the economy by $1.4 billion.

Relate this to another story they printed yesterday informing us of another airport upgrade which backs up the recent million dollar refurbishment.

"Mackay's perfectly positioned to be Central Queensland's integrated transport hub, so we're in the sweet spot for the Bowen Basin. Mackay is the capital of the Whitsundays so this is the place that people want to come through."

Now, combine all of this good press with the attached housing boom predicted from the election and we have the perfect storm for buyers to invest in Mackay.

See all three articles here:

  1. Airport Upgrade
  2. Daunia Mine Creates Over 900 Jobs
  3. Abbott will Trigger a Housing Boom

Specific Property Advice - Press Release

Friday, September 06, 2013

Here is a press article link about HNW Planning and an exciting initiative with direct property:

http://www.wealthprofessional.com.au/news/firm-delves-into-property-advice-178917.aspx .

It’s mostly but not entirely accurate. 

There will be education and professional membership standards required before you can start to provide Specific Property Advice. We will publish these details as soon as possible. We are trying to time the publishing of details, re-writing of Controlled Documents and other requirements to a second important initiative that’s being explored. 

Being able to offer Specific Property Advice may be a great way for you to increase your revenue. There are many clients who need specific property advice and there is no real source of that professional advice that is not otherwise limited in what that adviser can say or do OR who actually represent the vendor. Examples may include:

  • How to manage a property in old age (aged care) scenarios
  • Young couple seeking a strategy to enter the property market (buy big now or buy little and upgrade later)
  • Mature investors
  • Up-graders looking for strategies to minimise their personal debts when transacting on properties
  • SMSF property investors.

Significant Opportunities

With two thirds of wealth in property, opportunities are significant. 

And because you'll be able to advise on old and new property you’ll be able to strike up meaningful relationships with suburban real estate agents. 

Note that there are no exclusive arrangements as implied in the article but those mentioned in the article have been of great assistance to the process of gaining the new PI Insurance. 

Remember - Specific Advice can’t be done without training and professional membership. Details to follow as soon as possible. 

Kind regards,

 

David Hamblin

Operations Manager

 

HNW Planning Pty Ltd AFSL 225216

Queensland Lures Property Investors like no other State

Friday, August 09, 2013

Terry Ryder, 30 July 2013
 

Queensland’s status among the economic growth leaders of Australia has slipped in recent years, but its standing in the eyes of property investors remains undiminished.

Western Australia and the Northern Territory lead the country on economic growth, with Queensland a distant third.

The ACT has the nation's lowest unemployment followed by WA, while Queensland, with the exception for the struggle state Tasmania, now has the worst. WA is way out in front on population growth, with ACT second alongside Queensland, with the Northern Territory and Victoria challenging.

But property investors are oblivious or simply don’t care. Queensland has long held a reputation as the place to buy and nothing so far has shaken that conviction.

Overall, Western Australia is the national leader these days based on economic indicators – and Perth is the leader for price and rental growth - but more investors are buying in Queensland than in WA, according to the loan figures from the Australian Bureau of Statistics.

In the 2013 financial year, Queensland was the star of my hotspotting business.

The Top 10 Queensland Hotspots report outsold all our other state/territory reports by a considerable margin. The next most popular state, WA, attracted only half as many customers as Queensland did.

Our Queensland report sold more than NSW, Victoria and South Australia combined.  

When it comes to individual location reports, Queensland again topped the poll. The top five locations for Hotspotting buyers throughout the 2013 financial year were all in Queensland: Gladstone, Surat Basin, Mackay, Townsville and Emerald.  

Nine of our 12 most popular locations were Queensland regional centres.  

And, no, it’s not because we are based in Queensland. Only 20% of our report buyers were Queensland-based in the financial year 2013. We get most of our buyers from NSW and Victoria.  

So why is Queensland so popular?  

I think, in part, it’s because Queensland has an enduring reputation as a centre of growth. It has a track record for rising population and economic prosperity going back decades and investors are taking the long-term view that this will remain so.  

It’s also because Queensland is the most decentralized state or territory in Australia. All other states/territories have the bulk of their populations in their capital cities.  

Queensland is different. The state has stronger, prosperous regional areas than anywhere else in the nation and many of those places have well-established records for growth.

While Brisbane and tourism icons like the Gold Coast, the Whitsundays and Cairns have struggled in recent years, regional centres like Toowoomba, Emerald, Mackay, Gladstone, Roma and the towns of the Western Downs region have all delivered good price growth.  

Queensland offers unique or near-unique features to investors.

Nowhere else in Australia has a Gold Coast (probably not a bad thing, because the Gold Coast is a poor performer on capital growth, with houses and units on average still worth less than five years ago).

Nowhere else in Australia has a Gladstone, the nation’s leading industrial city.

Few other states have a Toowoomba, an inland city with 140,000 residents, a diverse economy and a boom resources province (the Surat Basin) on its doorstep.

Few other states have a Mount Isa, a remote mining town which is also a regional centre of 20,000-plus residents.

Few other states have a Townsville, a regional city with the population, economic diversity and strength of a capital city.  

And, with the exception of WA, no other state has the resources sector oomph of Queensland – a factor that will continue long-term, despite current weakness in the coal sector.  


For these and other reasons, Queensland lures property investors like no other part of Australia. 
Terry Ryder is the founder of hotspotting.com.au 


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