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What’s in store for the property market for the 2016/2017 financial year?

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What’s driving the market at the moment?

At this stage there are several factors affecting each of the big three east coast markets currently.

Melbourne: Melbourne is in a bit of a fluctuating period from the data we see. There is a large amount of supply both in approval and construction phases all the way from Docklands to Werribee. The next three to five years are going to be very suburb specific for growth. Pure Property Investment (PPI) is still looking for established property under the $400,000 market in the north and south-west within 25 kilometres of the city.

Sydney: Similar story, still a large undersupply issue in certain pockets of the greater metropolitan areas and the demand looks set to continue into the next decade. Affordability and wage growth are the major limiting factors we see in general. We do see some value in the established pockets of the middle ring (20 kilometres from the city), however cash flow is not attractive at this stage. We see more value coming to hand in the next three to five years.

Brisbane: Our data suggests that Brisbane will continue to show a nice period of sustained growth into 2020. Its limiting factor in the past has been state government commitment to large-scale infrastructure projects, however, we are starting to see some stronger and more stable jobs figures and in the pockets of Ipswich, Lower Logan/Beenleigh and Moreton Bay. We see (and have seen for the past 24 months) some excellent opportunities to pick up properties around the $300,000 mark in areas which are seeing large scale gentrification and great yields.

Hobart: The east coast’s sleepy cousin is stirring a little and there are some good signs in the short-to-medium term for jobs growth. With the rise of the tourism dollar (specifically China) there is a very tight vacancy rate and demand is building. I see a good couple of years with good cash flow opportunities up to the year 2020.

Adelaide: PPI are a bit bearish in the next two to three years, with some of the large scale manufacturing plants closing over the short term. The announcement of the $50 billion submarine project will provide a great boost with an additional 3,000 or so high paying jobs flowing from this. However this project has a 15-year horizon and as such we don’t see the benefits coming in until around 2019 to 2022.

Perth: Well, it’s a bit of a tale of ‘if you can’t say anything nice, don’t say anything at all’. Perth has some very depressed markets which are getting more depressed by the day. The only saving grace for Perth property investors at this stage are the historically low interest rates. They are not showing any real sign of transitioning their economy from iron ore and gas to mainstream economic drivers. If the state federal government can’t drive jobs growth in the next one to two years before the interests rates start to rise, I do see a blood bath in the short term as investors will not be able to hold their investments once interest rates start to rise. However, the savvy investor will most certainly keep a distinct eye on this market and if we see a turnaround in the days on market, jobs growth and buyer sentiment there will be some distinct bargains to be had.

Darwin: Similar to Perth, we see some distinct challenges in jobs growth and economic diversification. If the new gas project gets off the ground we may see some prolonged price stability, however PPI are bearish on Darwin at this stage.

Canberra: The little engine that could, Canberra continues to deliver investors a solid and stable return. With the Q4 2015/2016 data showing Canberra has delivered the country’s best growth (at over 3 per cent) for the quarter, a stable government and jobs market will continue to provide a safe return for investors. Cash flow is a little slim and entry point is a bit higher (around the $450,000 to $550,000 mark).

So what’s the cash flow situation in general for each state?

Melbourne: Supply on the market and coming to the market is looking very high, and we believe this is going to depress yields for the next three to five years.

Sydney: The more tightly held (non-developable) areas have seen a slightly higher yield albeit a small bump. Sydney is expensive and that is still keeping many Generation Y’s in the rental market as they can’t afford to enter the home buyers/investor market. However the data suggests yields are around the 3 to 4 per cent depending on the area and we don’t see that changing. Creative investors are always looking to add cash flow (granny flats, share accommodation, developing blocks, etc).

Brisbane: One of the better cash flow markets across the country with strong yields and good demand. Stick to the growing areas of Ipswich, Beenleigh/Logan, Moreton Bay where we are buying 6 per cent plus yielding (sub 15-year-old) properties in growth areas. Be sure to understand the vacancy rates and unemployment situations however as they can prove to be very important in these markets.

Hobart: Very tight supply (sub 2 per cent) which is providing great return for cash flow investors. Stick to the middle/outer suburbs (10 to 25 kilometres from city). We are picking up properties which are providing 7 to 8 per cent yields regularly.

Adelaide: Stick to the middle/inner rings. Cash-flow is okay in Adelaide at the moment, and we see that continuing into the next two to three years. Though 5 per cent gross yields are readily achievable, I would steer clear of the outer rings until we see the true fallout of the manufacturing sector.

Perth and Darwin: Cash-flow is okay, but the big caveat is the demand factor. On paper, the properties are achieving 5 per cent gross but the vacancy rates are increasing by the day and this will be a big issue in the long run.

Canberra: With low vacancy rates within the 15 kilometre ring of our capital we see an even keel return of around the 4 to 4.5 per cent gross mark. This is not lighting anyone’s socks on fire, however it’s pretty consistent and looks to remain that way.

So which regions have the most potential for capital growth under $450,000? Which regions have limited potential?

Brisbane: Still our number one pick at the moment, specifically out towards Ipswich, Lower Logan suburbs and Moreton Bay. Price point is still extremely affordable, yields are excellent and demand/jobs creation is building.

Perth and Darwin: In the short term we don’t see any data that is going to help its situation. Perth has seen a doubling of the properties on the market between 2014 and 2016 and they have a long way to go to show signs of growth. It is relatively cheap buying in Perth at the moment but you need to pick the start of the next growth cycle and not just the bottom to ensure you are achieving capital growth.

So that’s our around the grounds for financial year 2016/2017. As you can see, its most certainly not a ‘one market’ approach and where you invest will most certainly dictate your returns in the lucky county.

Original article published at www.smartpropertyinvestment.com.au by Paul Glossop

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Queensland Budget 2018: What it Means for the Property Industry

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Queensland Budget 2018: What it Means for the Property Industry
Queensland Treasurer Jackie Trad handed down the Queensland State Budget on Tuesday, delivering a surprise $1.5 billion surplus and putting an extra $200 million into people’s pockets.

This year’s budget focused on infrastructure, tourism and mining funding.

Property investors will also be met with a 0.5 per cent increase in the land tax rate for aggregated holdings above $10 million, as well as an increase in the additional foreign acquirer duty from 3 per cent to 7 per cent.

The government also announced it will cut back the first home owners’ grant.

So what does the state budget mean for the property industry?

Here is what you need to know.

Additional Foreign Acquirer Duty

Aligning with states nationwide, the Queensland government announced an increased rate for additional foreign acquirer duty.

The AFAD is an additional tax on relevant transactions that are liable for transfer duty, landholder duty or corporate trustee duty which involve a foreign person directly or indirectly acquiring certain types of residential land in Queensland by foreign persons.

The duty will rise from 3 per cent to 7 per cent and is forecasted to result in an increased revenue of $33 million per annum.

Infrastructure Improvements

The state government will dedicate $4.217 billion to transport and roads.

The Sunshine State’s long-awaited duplication of the Sunshine Coast rail line received $161 million.

The Toowoomba Second Range Crossing project received $543.3 million, a route to the north of Toowoomba from Helidon to the Gore Highway.

Brisbane’s Cross River Rail received $733 million to go toward the $5.4 billion project. The federal government failed to pledge any assistance towards the Cross River Rail project earlier this year leaving the state government to foot the bill.

There’s also $487 million over four years for upgrades to the M1 on Brisbane’s south and on the Gold Coast.

Queensland Budget 2018: What it Means for the Property Industry

Proposed Exhibition station on Cross River Rail. Artist’s Impression.Image: Cross River Rail Authority

First Home Buyers Grant Slashed

First home buyers have come to expect a $20,000 starter grant since 2016 will now see it cut to $15,000 if they buy a house from July onwards.

The $5,000 boost had been added to the grant in 2016 by former Treasurer Curtis Pitt, with the measure supposed to be in place for just one year.

It was extended twice in six-months until the end of 2017 and then to June of this year.

Land Tax Increase

Under the new taxes introduced in Tuesday’s budget, foreign landowners with more than $10 million worth of landholdings will now be in line for a 0.5 per cent increased rate of land tax.

Individuals with properties worth more than $10 million will now incur an additional rate of 2.25 per cent (or 2.5% for trusts or companies) for every dollar of taxable value over $10 million.

This is expected to bring in $71 million in revenue in its first year, with a projected 11 per cent increase in 2018-19 land tax revenue.

Source: brisbaneinvestor.com.au

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Foreign investment in Australia’s housing market collapses: FIRB

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Foreign investment in Australia’s housing market collapses: FIRB

The FIRB has revealed a fall in foreign investment in new apartments in Australia.Source:Supplied

FOREIGN investment in Australia’s housing market has fallen, amid waning investor appetite and tighter lending standards.

OFFICIAL data has confirmed a collapse in approvals for foreign investment in Australia’s housing market, amid waning investor appetite, higher charges and tighter lending standards.

The Foreign Investment Review Board’s annual report reveals a 67 per cent fall in residential real estate approvals last financial year — down from 40,149 approvals to 13,198.

The value of FIRB approvals also plunged, from $72.4 billion to $25.2 billion in fiscal 2017.

The report reveals 18 per cent of approvals to foreigners were for residential real estate in Queensland in 2016-17.

Foreign investment in Australia’s housing market collapses: FIRB

Proportion of residential real estate approvals by state and territory in 2016-17. Source: FIRB.Source:Supplied

Victoria and New South Wales remained the favourite destination for investment, accounting for nearly three-quarters of all approvals granted.

The FIRB said a significant factor contributing to the reduction in approvals was the introduction of application fees from December 2015.

“The introduction of fees resulted in investors only applying for properties they intend to purchase,” the report said

Foreign investment in Australia’s housing market collapses: FIRB

FIRB Residential Real Estate Approvals by Year.Source:Supplied

“Prior to the introduction of fees, individuals often made several applications earlier in the process when considering multiple properties, even though they might have only ended up purchasing a single property.

“This suggests that the resulting reduction in approvals may not imply a corresponding a reduction in actual investment in residential real estate. That is, the actual decline is likely to be lower than implied by the data.”

Foreign investment in Australia’s housing market collapses: FIRB

The FIRB has revealed a significant drop in foreign investment approvals for residential real estate in Australia.Source:Supplied

Along with the introduction of state-based taxes on foreign investors, the FIRB said weaker demand from China was another factor behind the decline in approvals granted.

Investment in new apartments from mainland Chinese investors dropped significantly in 2016-17.

AllenWargent Property Buyers chief executive Pete Wargent said the figures would have some significant impacts on the new apartment sector, construction trends, and the broader economy — especially in Sydney.

Foreign investment in Australia’s housing market collapses: FIRB

The FIRB says weaker demand from China impacted the fall in approvals.Source:Getty Images

Mr Wargent said he expected Sydney to experience the greatest number of failed apartment projects, with increasing signs of discounting on new apartments.

“Perhaps this was an inevitable end-game for this cycle, where development has been too much skewed towards apartments for investors, and too little towards the types of medium-density dwellings that people want to reside in,” he wrote in his blog.

But Chinese international real estate website Juwai.com chief executive Carrie Law played down the reported decline in Chinese demand.

Ms Law said that in the second half of 2016, Chinese buyers were investing in Australian real estate at an almost irrational pace.

“It was like money falling from heaven for vendors and developers,” Ms Law said.

“In early 2017, capital controls, financing restrictions, and foreign buyer taxes reduced Chinese investment to more reasonable levels.

“Since November 2017, we seem to have entered a period of more sustainable long-term growth.”

Ms Law said Chinese buying enquiries for Australian property in March were 5.7 per cent higher than the month before and in April they were 22.3 per cent higher.

“Unfortunately, this year’s FIRB data is not directly comparable to that of prior years, due the change in regulations and buyer behavior,” she said.

“The big declines are partly due to lower demand, and mostly due to the changed application fees.”

Source: brisbaneinvestor.com.au

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Which suburbs are seeing high interstate migration?

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Which suburbs are seeing high interstate migration?
Everyone wants a slice of a capital city, but some people just cannot afford it. Instead, people are moving to other affordable areas located in greater capital city areas. Here’s the latest data on interstate migration movements.

Analysed by Propertyology, the interstate migration figures indicate to head of research Simon Pressley that interstate migration is a trend that is likely to continue for years to come as people look for affordable property.

“The Great Australian Dream is alive and well and the latest data proves that people are prepared to uproot and move to make that dream a reality,” Mr Pressley said.

“The big winners are affordable locations within our capital cities with thousands moving either intra- or interstate to get a foot on the property ladder.

“Affordability will continue to be the deciding factor for buyers in the years ahead, which augurs well for many of these outer-ring locations.”

Here’s the movements in some of the biggest markets around the country:

Brisbane

The biggest movements for the greater Brisbane area were Moreton Bay with 5,110 arrivals and a median house price of $455,000, Ipswich with 2,332 arrivals and a median house price of $345,000 and Redlands with 1,237 arrivals and a median house price of $531,000.

Mr Pressley pointed out that the state of Queensland was currently undergoing an interstate migration boom, seeing over 17,000 residents in a single year.

“Greater Brisbane is made up of only five city councils, all of which were beneficiaries of positive internal migration last year,” he said.

“Once again it seems that affordability was a key driver with the more expensive metropolitan Brisbane attracting the smallest portion of interstate migration while Moreton Bay welcomed the lion’s share.

“In fact, its population of about 440,000 people is expected to grow by a staggering 200,000 in the next 20 years — and its affordability is a big part of the reason why.”

Source: brisbaneinvestor.com.au

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