The Property Investment Myths!

The Property Investment Myths!

Want to learn the lowdown on property investment and the myths surrounding this tough market? Here are some quick-shot answers! WHY INVEST? Property investment is ideal for extra income, big ticket purchases, children’s education, wealth building and retirement income. UNDERSTANDING YOUR BUDGET IS CRITICAL Here’s how to find out where you stand financially, now and into the future: Calculate your average monthly income. Not only your wage/salary, but also any extra income from part-time work or other investments. Deduct your average* monthly outgoings. Not only essentials such as food, utilities (eg. electricity, gas and water), medical, car and home contents insurance, car or public transport expenses and phone, but also non-essentials like holidays, club memberships, restaurants, sporting events and entertainment. Consider what non essentials are important and if you can down grade any of the essentials. These changes can help you achieve your long term financial future a lot quicker. If you currently pay rent, then don’t include it – you won’t have to pay rent after you move into your home! However include council rates, fixed utility charges (e.g. electricity, gas and water supply), and an allowance for maintenance and repairs that your landlord normally pays. * apportion expenses that you pay quarterly or annually. Keep a ‘rainy day’ cash buffer so that you can continue making your loan repayments even if there’s a temporary downward blip in your income or upward blip in your expenses. PROPERTY INVESTING MYTHS Here are four popular myths about investing in property: MYTH #1: Buy your own home first Owning your home used to be ‘The Great Australian Dream’, but not today....
The big shift coming for the property market

The big shift coming for the property market

Demographics and population drivers can completely transform a property market — so what massive change is on the horizon that you need to prepare for? One of the most significant trends in the Australian property market is the ageing profile of property owners. This will have major implications for property investors and developers over the coming years as it will shape the type of properties most in demand from property buyers. In particular, the ageing profile of property owners has already led a big increase in the number of people seeking to downsize to apartments. The demand for apartment living in Australia will remain strong for the foreseeable future due to the ageing of our population. In the past decade, the number of people in Australia aged 60 and over jumped by 1.2 million people or 35 per cent to 4.8 million people. People aged 60 years and over currently account for around 20 per cent of our entire population or one in four people in Australia. This ageing of our population has seen a growing demand for apartment living in established areas of major capital cities as Baby Boomers want to live in unit developments that are close to their current residences. Property investors have been capitalising on this trend in greater numbers in recent years, especially in Sydney, Melbourne and Brisbane. The generous tax depreciation benefits associated with buying a new apartment has also been encouraging more investors to purchase apartments. While there are many issues concerning the depreciation entitlements on properties, in most cases, strata-style homes such as new apartments provide a higher rate of depreciation...
What’s the risk of oversupply in Sydney? Low.

What’s the risk of oversupply in Sydney? Low.

A senior economist has forecast that there is little risk of oversupply in Sydney’s inner area and suburbs, despite the high-density building boom. Speaking at the BIS Shrapnel Forecasting Conference managing director Robert Mellor noted that although Sydney is experiencing a “high-density building boom”, the risk of oversupply in the city is relatively low. He pointed out that although the high levels of construction occurring in the city at the moment is “not just heavily concentrated in the CBD”, the economic forecaster “cannot see any oversupply developing” either in the inner city area or the suburbs. “In the next four years, we just do not see that occurring,” he said, adding, “That doesn’t mean that there won’t be some overbuilding in particular localities, but we see little risk of oversupply”. For example, he said: “In Melbourne, they’re still building a lot of detached houses on the fringe. I think the numbers in the last year are something like 19,000 or 20,000 lots, so you’re talking about double what Sydney’s getting. Yes, there’s a lot of high-density construction, but overall it’s still very much a owner-occupied driven market.” Stephen...
Are Australian house prices set to cool?!

Are Australian house prices set to cool?!

Fewer foreign buyers and slower population growth will cause Australian house prices to cool as oversupply sets in. But a housing ‘crash’ is unlikely, according to a big four bank. Speaking at an Actuaries Institute seminar in Sydney, NAB global head of research Peter Jolly said Australian residential property prices have appreciated fourfold in the past two decades. Three factors have driven the increase in house prices   The lowest mortgage rates in history An influx of foreign buyers Population growth outstripping the supply of residential dwellings.   While mortgage rates are likely to remain low for the foreseeable future, the second two factors are definitely “waning”. First, the appetite of Chinese buyers for properties on the eastern seaboard is starting to decrease, he said. Second, a supply/demand imbalance in Australia’s property markets is starting to even out. “What’s very clear to us is that what was absolutely true five to six years ago, where population had very much outstripped the supply of housing, that is not true at all now”. “In fact, generally it’s closed up across the nation, and there are certain markets that are heading into some oversupply” Mr Jolly pointed to rising rents across the country as evidence of oversupply. The “most obvious” oversupply is within inner city apartment markets, he said. “NAB’s view on housing is that we’re going to see the housing markets cool appreciably over the next year or two,”. “Standalone house price growth rates will slow quite a bit, and we actually see unit prices declining. “We see much more modest house price gains in most cities, and a bit of...
Household debt likely to stand in the way of interest rate hikes

Household debt likely to stand in the way of interest rate hikes

Cameron Kusher writes a very interesting article about the official interest rate and its propensity to remain at record low levels for a decent time to come. Australia’s property market, especially the booming Sydney and Melbourne markets, are a quintessential factor influencing this movement and halting the RBA drawing rates even lower than their current level. Please read Kusher’s article in full below.   by Cameron Kusher source CoreLogic 06 March 2017 Official interest rates are at historic lows and it seems unlikely that they are going to be increasing in the near future. Furthermore, don’t expect interest rates to return to historic average levels due to record high levels of household debt. The Reserve Bank (RBA) Governor Phil Lowe suggested last week that if it wasn’t for the strength of the housing market, and a fear of inflating it further, official interest rates would be lower.  It was an interesting comment from an RBA Governor, especially when you read what the RBA’s function is: The (RBA) is Australia’s central bank and derives its functions and powers from the Reserve Bank Act 1959. Its duty is to contribute to the stability of the currency, full employment, and the economic prosperity and welfare of the Australian people. It does this by setting the cash rate to meet an agreed medium-term inflation target, working to maintain a strong financial system and efficient payments system, and issuing the nation’s banknotes. Inflation is currently well below the RBAs target range and the country is not at full-employment which would indicate the RBA should be considering interest rate cuts.  Clearly the economic prosperity and welfare of Australian people...
Seven reasons for optimism on the Australian economy

Seven reasons for optimism on the Australian economy

Today we learned via Property Observer that SHANE OLIVER, head of investment strategy and economics and chief economist at AMP Capital, gives an insightful look at the Australian economic outlook. As the media attempts to discourage us from believing there is economic hope, Shane explains the clearly positive realities. Seven reasons for optimism on the Australian economy The mostly gloomy debate around the Australian economy often gives the impression we are in a constant state of crisis. But economic growth is pretty good, the economy has rebalanced without the (“inevitable”) recession, the worst of the mining bust looks to be behind us, public infrastructure spending is ramping up, consumer and business confidence are around long term averages, share market profits have likely bottomed and Australia stacks up well on social considerations. These are all reasons to be reasonably optimistic about the Australian economy and Australian assets. Introduction Ever since the mining boom ended several years ago it seems a sense of gloom has pervaded debate regarding Australia. There is constant talk of recession whether we don’t do something (like control the budget) or even if we do nothing (with reports titled “Australian Recession 2016 – Why it’s unavoidable and the quickest way to protect your wealth”). This sense of gloom makes me wonder whether it could be harming us – by dulling innovation, investment and a “can do” spirit. This note looks at seven reasons for optimism on Australia.   There is always something to worry about To be sure Australia does have its problems. Unemployment at 5.7 percent and labour underutilisation at over 14 percent are too high. Housing is too expensive,...