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Apartments in Mackay - the next big thing

Wednesday, December 05, 2012

IT'S going to be apartment bonanza in Mackay as several new projects ramp up or are set to get under way.

Honeycombes Property Group has launched its $25 million apartment project in East Mackay after winning their development approval.

Branded Carlyle Apartments, the development is Honeycombes' first project to start in the Mackay region with construction set to begin at the end of November.

Meanwhile there has been a surge in activity at the riverside Lanai Apartments residential resort with six Lanai apartments sold in the September quarter, including two-bedroom and plus-study and three-bedroom designs.

Blacks Real Estate marketing agent Peter Francis said buyers had sensed Mackay's market was on the move and were securing competitively priced receiver stock at a prime point in the property cycle.

"With professional on-site management, Lanai has achieved yields of up to 8.84% net in the last 12 months," Mr Francis said.

"Given the fundaments of Mackay's market, the receivers have always had confidence in Lanai's value, and this surge in activity bears out that view."

Honeycombes director Richard Wallace has shrugged off the doom and gloom shrouding the mining industry and said Mackay was still an investor's hot spot.

He said there the strong demand for short -term accommodation would continue given Mackay was the gateway to the Bowen Basin.

"Mackay is crying out for quality short-term accommodation due to the large number of people who visit the area as a result of the growth and expansion of the mining industry in recent years," Mr Wallace said.

"Carlyle also caters to owner occupiers who are looking for a work and lifestyle balance, which people seem to think they need to sacrifice when basing themselves in a mining town.

"The apartments provide a solid investment opportunity given the resource-fuelled economy which continues to drive the area and attract people to Mackay."

Mr Wallace said there were several benefits to investing in apartment type complexes, as opposed to stand-alone houses.

One of the benefits was the body corporate structure, which gave investors piece of mind, he said.

Lanai Apartments general manager Emma Purtill agreed with this.

"There is someone here all of the time making sure everything runs smoothly."

Ms Purtill said during the week the majority of their clients were business travellers, but she had seen a rise in family tourists in the past few months.

Project snapshot

Carlyle Apartments

  •  Ranging in size from 61sq m to 103sq m,
  •  Modern open-plan apartments
  •  Priced from $330,000 to $505,000.

Lanai Apartments

  •  Range of apartments from two - three bedroom designs - all rooms have private balconies
  •  Prices have ranged from $477,500 to $515,500
  •  Permanent residential, long-term, corporate and holiday rental options

Self-managed super funds urged to be cautious with property investments (ATO)

Friday, November 23, 2012

The ATO today warned trustees of self-managed superannuation funds (SMSFs) to be cautious when investing in property.

Acting Commissioner Bruce Quigley said he is concerned people are using their SMSF to invest in property without fully understanding their obligations under the law or some people are seeking to take advantage of certain types of arrangements.

Mr Quigley acknowledged that investing in property can be a confusing area for some people.

"We have observed that some arrangements are deliberately entered into to get around the law, which can result in the fund's trustees being disqualified, facing civil penalties or even facing criminal charges. Those marketing properties to SMSF trustees as part of such arrangements could be referred to Australian Security and Investment Commission (ASIC)."

"The fine details are important and trustees need to be sure that property is the right investment for their SMSF and that the arrangement is legal,"

"We have also seen instances where holding trusts have not even been established at the time the contracts to acquire are signed. In other instances the title of the property is held in the individual's name rather than the trustee of the holding trust. Another common mistake is gearing in a related unit trust, which is not allowed under the law," Mr Quigley said.

"Some of these arrangements, if structured incorrectly, cannot simply be restructured or rectified. The only option may be to unwind the arrangement which could involve forced sale of assets at an inconvenient time. This could be very expensive for the fund with potential stamp duty and tax consequences."

"I urge trustees to get reliable, independent advice when making investment decisions and to obtain advice from us if they are contemplating entering into these sorts of arrangements. The responsibility for ensuring their SMSF complies with the law rests with them."

The upshot of this advice is to ensure you are getting reliable advice from specialist SMSF Advisors and Accountants who are experieced in assisting clients buy property through an SMSF. www.wfscanberra.com.au can assist.

Housing Price Growth to continue

Wednesday, November 14, 2012

We are returning to moderate housing price growth, but no bubble: Terry Ryder

Talk is cheap because supply exceeds demand.

The cheapest talk comes from economists speaking about real estate, because supply (endless) is hugely in excess of demand (zero). There’s also a low price on the articles of most journalists about property because the demand is for a David Jones product but most of the supply is coming from Gone Bonkers.

So, after two years of price decline or stagnation in our major cities, at the first sign of price recovery they’re out there talking up a bubble.

Yes siree, if you crave a bit of media limelight the shortest route is to contact a lazy journalist and give them a sound byte with the word “bubble” in it.

Data from the various research sources indicates we’ve had three or four months in which the average result across the state and territory capital cities has been a rise in median prices.

I’m not sure how reliable the data is, because organisations like RP Data are so desperate to be first with the news that they’ve been calling the monthly price movement on the last day of the month, something that’s difficult to do credibly. Indeed, this week RP Data declared the October price movement 10 days before the end of the month. Is the need for publicity really that desperate?

Nevertheless, the trend evident in the figures from various research sources is one of big-city prices now starting to trend north, slowly.

Further to that, a number of forecasters are predicting rising prices in the near future. BIS Shrapnel is tipping growth in all eight state and territory capitals in the next three years, with the strongest to be in PerthBrisbaneSydney and Darwin, where the rises are expected to be solid but not spectacular.

National Australia Bank published its survey of Australian property professionals, most of whom are expecting moderate growth in the next 12 months.

So we appear to have a return to price growth, though small, with the prospect of more moderate rises.

But there’s no middle ground with media. It’s either boom or bust. Now it seems even the smallest rise in house prices instantly has the label “bubble” slapped on it. Alternatively, a cut in interest rates gives rise to fears of a bubble.

David Uren, who writes about economics for The Australian, recently tried to link fears of a house price boom in Australia into an incoherent rave about inflation and global financial instability. Some fairly innocuous remarks by business leaders have been portrayed by journalists as fears about a bubble, when the people quoted never used that terminology.

Bubble talk has been around for the past five years. It started when a metropolitan newspaper journalist misquoted RBA governor Glenn Stevens and the mistake was repeated as fact by media outlets around the country. Economists and journalists have been promoting bubble talk ever since, although Stevens never said the words reported. It wasn’t merely a beat-up – it was a lie.

I’m still waiting for someone who subscribes to the bubble theory to actually define it. So far, nobody has. The term implies that something has been over-inflated and will burst.

Despite all those dire predictions about a collapse in our home prices since 2007, mostly from publicity-seekers based overseas, the forecast implosion hasn’t happened.

So why are we talking about a bubble now, when capital city prices have barely budged after two years of mediocrity? Because we’re beset with writers and commentators who are shallow, lazy and like the sound of their own voices.

Terry Ryder

Queensland Booming Property Market

Thursday, October 04, 2012

Retail investment in Queensland contributed the highest share nationally over F2011/12, according to Colliers International.

Colliers International’s National Retail Investment Review 2011/12 says that for transaction activity over $10 million, Queensland recorded 26 sales over the period – three of which were among the top 10 biggest sales nationally.

Major sales included Industry Superannuation Property Trust’s purchase of a 50 percent share in the Myer Centre Brisbane for $366 million, Australian Prime Property Fund Retail’s acquisition of 50 percent stake in the Cairns Central Shopping Centre for $261 million and the sale of Noosa Civic to Queensland Investment Corporation for $200 million.

The 50 percent stake in the Myer Centre Brisbane was the largest retail acquisition in Australia over the period.

Nationally Colliers recorded a total of 83 major retail investment transactions over the period, with a total value of $4.244 billion. This is an increase of 8 percent on the previous financial year.

Queensland, New South Wales and Victoria accounted for around 77 per cent of sales by number, Colliers says.

Stewart Gilchrist, Colliers International National Retail Director said investor demand for quality shopping centres was resilient over the 2011/12 financial year despite volatility in retail trade data.

“Investor demand for quality shopping centres was buoyant, but there was also strong interest in underperforming centres with repositioning potential,” Gilchrist says.

“There has been strong interest in prime regional shopping centre assets from institutional investors from Australia and overseas, with demand continuing to exceed supply.”

Neighbourhood centres led activity with 35 sales over the period, but a historically high number of regional centres were sold, with seven centres comprising 44 per cent of all sales by value.

Fifteen sub-regional centres sold, up from five the previous financial year. The sub-regional category saw the biggest jump in sales volume of all sectors.  Source:Property Ezine

A link to a webinar worth watching if you are serious about property investing

Thursday, October 04, 2012
http://www.propertyobserver.com.au/webinars/free-webinar-why-the-mining-boom-is-far-from-over

Gladstone - strongest queensland property market

Thursday, October 04, 2012

Investor darling mining town Gladstone strongest Queensland regional housing market, while Bundaberg struggles like the Gold Coast

By Cassidy Knowlton
Monday, 09 July 2012

Regional areas have outperformed capital cities in the year to March, according to ANZ, with Gladstone leading the way in Queensland. 

"Despite being lower in annual growth terms, regional house prices have been more stable than capital city house prices, which have seen larger price falls across all major states and territories," notes the Australian Housing Chartbook.

"Across states/territories and regions, house price growth has continued to differ, reflecting varying economic performance across Australian industries."

"Queensland has shown the greatest intra-state variation in regional house prices, reflecting the divergenteconomic performance of regions exposed to the tourism sector (i.e. Cairns, Gold Coast) and mining-relatedservices (Gladstone, Mount Isa)," the report says.

Click to enlarge

 

Source RP Data, Rismark, ANZ

Property Investment Opportunities

Thursday, October 04, 2012

From western Sydney granny flats to East Brisbane workers’ cottages: 15 eclectic investment opportunities under $500,000: HTW

By Larry Schlesinger
Thursday, 19 July 2012

There is a wide range of opportunities for property investors with a “lazy” $500,000 to invest and a creative mindset, according to the July edition of the Herron Todd White Property Market report.

Herron Todd White says the results of this year’s “lazy half million issue” show that “market performance has varied as much as the landscape”.

Investment options range from buying an older house in western Sydney on a large block and adding a granny flat, investing in four-bedroom homes near Newcastle University and converting them into student accommodation or considering a worker’s cottage in East Brisbane.

Here are 15 eclectic investment opportunities for savvy investors with $500,000 to invest:

Build a granny flat in western Sydney (rental returns of between 6.5% and 7%)

Investors should consider purchasing a circa  1960s to 1970s dwelling on 650- to 700-square-metre allotments and erect granny flats on the rear of the allotment, thus creating two separate tenancies. According to HTW, this type of investment has grown from a trickle to a flood and is mainly taking place in the Penrith Council area, although it has started to creep into neighbouring Blacktown Council area as well. Typically the investor is paying somewhere between $280,000 to $330,000 for the existing dwelling and between $60,000 to $80,000 for the granny flat plus spending an extra $25,000 on sprucing up the original dwelling. According to HTW the dual tenancies can generate monthly rent of $600 ($350 for the main house and $250 for the granny flat) with vacancy rates at practically 0%. HTW considers granny flats the “best investment from a rental return basis in the western suburbs”.

Convert a four-bedroom house close to Newcastle University into student digs

Investors should look at the Newcastle suburbs of Birmingham Gardens and Jesmond close to Newcastle University in Callaghan. HTW says investors are buying four-bedroom homes and turning them into six- and eight-bedroom residences and then renting the rooms separately to students. “Although rental returns are higher (as, however are the management costs), it is important to ensure that the right approvals  are in place otherwise you might find a nasty surprise  when the bank comes to value the property and you find its still valued as a four- bedroom home,” warns HTW.

Buy a pre-1980s houses in Port Macquarie and Forster

Investors should look for houses close to either the town centre or beach priced from $270,000 to $340,000 in Port Macquarie and Forster on the NSW mid north coast. HTW says the remaining $160,000 to $230,000 could be used to acquire a pre-1980s two-bedroom unit within the same location parameters. According to HTW, houses in the low to medium price range offer the greater likelihood of lower vacancy rates, higher yields and better potential for capital growth. Investors should avoid modern high-rise units in Forster in the $400,000 plus price range, as the market remains oversupplied.

Buy workers' cottages in East Brisbane

HTW says entry level workers cottages with two-bedroom, one-bathroom configurations can be bought below the $500,000 mark. “The suburb is frighteningly close to the CBD and facilities abound. Renters are readily available so the upside is once again a good thing,” says HTW.  For something a little bit more flash in the same suburb HTW suggests a circa-2000 unit with a two-bedroom, two-bathroom layout for around the $425,000 to $450,000 mark would rent for around $440 per week.

Buy a detached post-war home in Camp Hill or Coorparoo

Investors can pick up a detached post-war three bedder in Camp Hill or Coorparoo on a 600-square-metre block.  The suburbs are about 1o kilometres south east of the Brisbane CBD, with “facilities are around the corner” and “renters keen to be there”. According to HTW, these assets also look good for a long-term future sale.

Buy an older house close to the beach at Wollongong

Investors should consider buying an older house close to the beach at Towradgi, Fairy Meadow and East Corrimal just north of the Wollongong CBD. From an investment perspective good capital gains coupled with high rental returns can be found in Fairy Meadow, with the suburb benefiting from the expansion of the University of Wollongong, Innovation Campus and an improvement of public transport to and from the suburb. It is also close to the F6 freeway to Sydney.

NSW Property hotspots

Thursday, October 04, 2012

Dubbo, Ballarat and Townsville are pumping property hotspots, proving mining's not the only show in town: Terry Ryder

By Terry Ryder
Monday, 13 August 2012

Analysis in any field is meant to be a process of gathering information and drawing objective conclusions from the evidence. 

But that’s so last year. The modern way in Australia is to establish conclusions first and then seek evidence that supports it. Anything that doesn’t fit the pre-determined theory can be quietly ignored. 

Then you apply the old principle that if you repeat a lie often enough, people will eventually accept it as the truth. 

Analysis today often starts with the media sound-byte and works backwards from there. 

This is how we have arrived at the “reality” of a two-speed economy. The idea is trite, infantile, pathetic and plain wrong. 

But it’s there every day in headlines and articles and broadcasts – as an unchallengeable fact. Even though it’s a lie. 

National Australia Bank chief executive Cameron Clyne says talk of “a two-speed economy” is simplistic, incorrect and damaging to confidence. 

“It is not a two-speed economy,” he said, “It has never been a two-speed economy. It is a 10-speed economy. It always has been a 10-speed economy and always will be a 10-speed economy. There are a number of industries which are having very buoyant times – just as there are a number of industries that are struggling.”

When the ABS published data on jobs creation in June, most media coverage focused on the number of jobs created in the mining industry, with more references to the two-speed economy. In doing so they ignored the inconvenient truth that mining ranked only third for jobs creation. 

The leading economic sector in Australia in the past year is the “professional and scientific sector”, which puts mining in the shade on jobs creation. Number two is the health care industry. “Education and training” has also been a positive force in jobs creation recently. 

These sectors have received no publicity, amid the media’s obsession with resources as the only happening thing in our economy. Nor has the agricultural sector been given its due for the series of bumper results for commodities such as wheat and cotton. 

The vitality in multiple economic sectors explains why some of the strongest regional economies in Australia have little or nothing to do with mining. 

Townsville in Queensland is one of the best, because it is strong in multiple sectors, including tourism, government administration, the military, education and manufacturing – with some linkages to the mining industry also. 

Ballarat in Victoria is one of the unheralded stars of economic Australia, a place of bustling activity in many different spheres. This important regional city is strong in education, health and community services, tourism and manufacturing (a sector which is not dead, notwithstanding all the negative headlines). 

Ballarat is growing and plenty of new things are being built. I could make similar comments about nearby Bendigo, too. 

Whenever I mention Dubbo in the same sentence as the word “hotspot”, people are incredulous. For some reason no one expects anything exceptional to happen in places like Dubbo. But this is a vibrant regional city moving forward with increasingly large strides. 

It’s a strong regional centre for the Orana district of New South Wales, with big roles to play in education, medical services, support for agriculture, transport and logistics (it sits at the intersection for major routes road, rail and air transport) and tourism (it has the Western Plains Zoo, among other things). Developers are busy and lots of construction is happening, including work on residential, retail, commercial, wind farm and National Broadband Network projects. 

Centres like Townsville, Ballarat and Dubbo would not be pumping if mining was the only show in town.

Terry Ryder

Property Investment in Mining Towns

Thursday, October 04, 2012

Regional centres provide some of the returns of mining towns – without all the risks: Terry Ryder

By Terry Ryder
Thursday, 16 August 2012

Mining towns present the ultimate risk-return conundrum for property investors. 

They’re so hard for property investors to resist. They have the highest capital growth rates in Australia, and they have the highest rental returns. 

They also are the riskiest options for property investors. Mining towns are single-industry economies – sometimes single-employer economies – and are vulnerable to downturns in the lone industry. 

Over the past 10 years a typical suburb in an Australian city has averaged capital growth around 10% a year (thought certainly not in the past two years). The best suburbs in cities like Brisbane, Melbourne and Perth have averaged 14% or 15% – which is pretty good, because at those growth rates values are doubling every five years. 

But the best of the mining towns have capital growth averages double those growth rates. Both Moranbah and Dysart, coal-mining towns in Queensland, have recorded growth in their median house prices averaging more than 30% a year. So too has Newman, deep in the Pilbara region of Western Australia. The median price for Cloncurry in western Queensland rose 60% in the past 12 months. 

But the lure of the mining towns doesn’t end there. They also offer the highest rental yields in the nation. Many of them have double-digit rental returns. With the current surge in resources projects, particularly in Western Australia and Queensland, some mining towns can provide initial returns above 15%. 

But it’s never plain sailing with mining towns. They lack diversity, so their economic life is a roller coaster. Some also service the surrounding farming economy, but the high levels of prices and rents are based on demand created by the resources sector. 

This makes these locations highly vulnerable to downturns in the mining economy. When the global financial crisis struck in 2008, global demand for Australian resources fell. Miners downsized and in some cases shut down mining operations.

In coal-dependent towns like Dysart and Moura in Queensland, residential vacancies rapidly rose from near-zero to double digits. Gladstone, which has had four years of strong growth in house prices, had a 10% decrease in prices in 2009. 

The small WA communities of Ravensthorpe and Hopetoun were devastated when BHP Billiton shut down a $2 billion nickel mine that had been completed only months earlier – 1,800 people lost their jobs and property values fell. Hopetoun’s price performance since then has been a decline averaging 6% per year. 

More recently, we have seen mining companies refusing to rent properties in Moranbah over concerns about the high levels of house rents and upheaval in nearby Dysart followed the closure of the Norwich Park mine. Neither of these events is terminal to the towns’ investment prospects, but they demonstrate how uncertain property ownership can be in mining towns. 

Ultimately, an individual’s attitude to investing in mining towns, or not, depends on their objectives, risk profile and experience as an investor. 

It’s important for investors to understand their goals and to have a strategy for achieving them (it’s surprising how many don’t). Equally important is understanding their attitude to risk. If they prioritise safety and low risk, mining towns are not for them. 

For anyone starting out as an investor, mining towns are not a good option. They may provide big gains short term, but ultimately values may decrease sharply if a downturn occurs, such as the one that followed the onset of the GFC in 2008. 

On the other hand, experienced investors with substantial property portfolios may be happy to accept those risks within the context of a portfolio that has assets in safer locations.

Generally, investors wishing to safely exploit the rise of the resources sector should look at buying in regional centres that benefit from the mining upturn but are not dependent on it. 

Regional cities and towns such as Toowoomba and Mackay in Queensland, Geraldton in Western Australia, and Muswellbrook in New South Wales have diverse economies but also prosper when the mining sector is rising. These are safer options than mining towns.

Terry Ryder

Investing in Property Hotspots

Thursday, October 04, 2012

Nine pieces of wisdom for finding and investing in property hotspots

By Larry Schlesinger
Thursday, 23 August 2012

Here is a quick list of nine pieces of wisdom to guide your thinking as you seek a property investment. Property Observer has cherry-picked some bright ideas and insights from some long-time property players.

1. Pick gems before they have gotten their shine

John Edwards, the Residex forecaster, says the best investor returns are made when you buy at the right price, in the right place and at the right time.

Edwards stresses investors need to keep in mind that locations that already have a reputation for being a hotspot have most likely passed their invest-by date by the time you actually find out about them in the published hotspots lists. The Residex boss says a current “gem” is just that – current – and the opportunity to maximise returns has passed.

2. Pick investments with an element of scarcity

The WBP Property Group chief Greville Pabst suggests investments ought to have high land value and an element of scarcity. He gives an example of buying an apartment in a period-era block of flats in an established suburb, where there may only be half a dozen apartments built on valuable inner-city land, versus buying an apartment in the high-rise apartment precincts, and obvious building construction hotspots, where you are likely to be the owner of one of 100 similar apartments in the same development.

3. Look for nearby employment opportunities

Investors should look for nearby employment opportunities for tenants and/or owner-occupiers that are easily accessible, says PRDnationwide research director Aaron Maskrey. He says it’s essential for incoming residents to be able to source employment within the local region. Don’t just peruse the property websites, monitor the employment internet sites.

4. Don’t rely too much on population growth data; vacancy rates provide a better guide

An increasing population indicates work opportunities, investment in infrastructure and demand for housing, but according to buyers’ agent Catherine Cashmore, it does not always result in the best long-term capital growth.

Cashmore says it is always important to analyse the reasons behind any surge in population and conduct an assessment on the longevity of the move before committing to a purchase.  The approval of “mooted” residential developments is the first risk that must be evaluated to protect against periods of oversupply of any one type of accommodation, she says. Jobs are transitory and because workers choose only to rent, when the work dries up, the majority don’t hang around.

Cashmore says as a general rule investors should try and seek out those areas where turnover is low, with a good proportion of owner-occupiers to renters and a diverse range of accommodation. The 2011 census gives good insights.

5. Look for locations with good infrastructure

 

Investors should look for locations with good access to public transportation and nearby arterial roads/highways, PRDnationwide research director Aaron Maskrey says. He encourages investors to ask questions like: Is there new or improved transportation infrastructure? Is the area identified for future gentrification by local council? Is there a limited available supply of dwellings to meet current and future demand? What about planned developments in the area?

6. Heavily discounted properties are not always a bargain

At any one time every location across Australia has a significant amount of property stock where the price has been discounted. But just because the price has been reduced doesn’t mean the property is for sale at fair value. The property may still be overpriced.

SQM Research director Louis Christopher says some properties may still be overpriced, even if they have already been discounted by over 30%. Louis Christopher recommends investors disregard asking prices and instead focus on what comparable properties actually sell for to figure out if a property is overpriced, has met the current market or is at under market value.

7. Focus on the property, not the hotspot

You are buying a property, not a whole town or suburb, says Property Observer editor Jonathan Chancellor.

While hotspots provide a guide as to where to look, you should not let them narrow your field of vision. Excellent investment opportunities can appear within markets that are not themselves hotspots, they may even be in decline. The key is to focus on the underlying value of the property itself and its potential for capital growth and rental returns, depending on your investment outlook.

8. Look for signs of the next “Paddington” and trust your intuition

John McGrath, CEO of McGrath Estate Agents, says he does not look too closely at the finer details but instead looks for a feeling or indicators that a suburb is on the move. He looked at Paddington in Sydney many years ago when it was a virtually unwanted location. It proved over a 10 or 15-year period that it was one of the fastest growth suburbs in Australia.

Looking back, McGrath says he saw a suburb close to the city, of medium to high density property, with a lot of people wanting to get in there, from types of buyers that pushed prices up significantly. He recommends looking for the next Paddington in their particular marketplace, which really comes back to having an intuitive sense along with doing your research.

9. Sometimes it’s best to just do nothing

Bear in mind this quote from Warren Buffett: “The trick is when there is nothing to do, do nothing.” Yet many investors get itchy feet and want to do the deal.

There are stages in the property cycle and times in your investment journey when it is best to just sit back and wait for the right opportunities to come along, because wealth is the transfer of money from the impatient to the patient.


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