Australian Money Forum

[Miller]

INVESTMENT in residential property is back in favour as data shows record levels of investment during April 2007 as people bet on a stronger property market and capital gains in 2007.

The AFG Mortgage Index shows that last month 33.8 per cent of mortgages were sold to investors rather than owner occupiers in April – an increase on March’s all time high of 32.9 per cent and a significant increase on the figure of 28.3 per cent recorded 12 months ago.

Western Australia and Queensland continue to drive the market for investors, but it is the growing resurgence in New South Wales, Victoria and South Australia which is leading to the dream scenario of healthy, growing markets coast-to-coast.

Despite fears about the WA market coming off the boil, investment there continues at near record levels and the average mortgage size broke through the $350,000 barrier last month.

Positive property outlook
Mark Hewitt, General Manager of Sales and Operations said things were looking positive for the property market.

“It is seldom that we see the indicators for every state looking positive, but right now that’s exactly what’s happening," he said.

"The levelling off in interest rates is just what property markets on the east coast need to build up a momentum. Meanwhile the strength of the resources sector continues to support property markets in WA and Queensland."

"We’ve just been doing our internal business forecasts for the next year and AFG is very positive about the year ahead.”

Mortgage size growing
The average home loan nationally now stands at $307,000, with the highest average loans in NSW ($362,000) and WA ($352,000) followed by Queensland (($288,000), Victoria ($277,000) and South Australia ($231,000).

Paradoxically, loan-valuation-ratios (LVRs), which are the value of a loan expressed as a percentage of the value of a property, are lowest in WA (55.4 per cent) and NSW (67.7 per cent), where the cost of housing is highest. Victoria has the highest LVR in the country of 73.0 per cent.

http://www.news.com.au/business/story/0 ... 37,00.html

[LetsRent]

I

[WFFS]

Cashed up buyers are in a good position, there are a lot of options out there and they are in a good bargaining position.

[Kay70]

With the recent increase in the first home buyer incentives, now is a fantastic time to buy property. The high interest rates have meant that property prices have been relatively high and, with the interest rate peaking about 2 weeks ago, it seems as though the reserve bank is striving to lower interest rates and boost our economy. Phew!

So what does this mean to property investors? It means that if you're starting out in property investment and don't currently own any properties, now is the time to hit the market and buy! The Government will give you $14,000 to help you get started, and $21,000 if you are buying a new property. These first home buyer grants are reduced for properties between $500,000 and $600,000 and are completely removed if the property is more than $600,000. This means that the you should buy in lower to mid-level properties and buy in the best location possible.

What the interest rate peak also means is that the interest rates are on their way down! This means that the prices will slowly start to creep up and repayments will slowly (hopefully) decrease. This process might be slowed by the Reserve Banks attemts to help the financial crisis and guarantee bank loans to the major institutions. So buy now while the market is good.

[wal1956]

In my opinion good property is always valuable no matter if a recession of boom time. Its better than gold. Ive been thru 2 recessions so far and commercial property has always won out. No one can steal it from you (except banks !) If you can afford it go for property ! Id appreciate any comments on my thoughts !

Thanks !

[Kay70]

I definately agree. Property has been and always will be a solid long term investment. If you can afford to hold onto, its value will almost always increase in the long term. The fluctuations in the property market aren't usually as wild as those in other investment markets (such as the share market) and even though prices may rise and fall, there is always a steady increase upwards. Depending on the type of property investment you're looking to get will have different financial consequences.

Investing for capital gain is hard to go wrong in the long term. Investing for high yield on the other hand is a bit more tricky and smart knowledge is needed when looking for the right positive cashflow property. I think your comment about commercial property is an interesting one. Commercial property has generally shown to be quite successful, largely because of the fact that vacancy rates in good commercial property is quite low. This means that there aren't many periods where it is not rented. The pitfall is though, that the capital gain is not usually as high and generally follows the increase in prices of the area.

Let me know what you think.

[wal1956]

Kay70
I would tend to agree with your comments.
Yields in industrial property (warehousing) I find to be roughly about 10%, but thats my yield ! Its probably lower now with land prices going up. Capital gains depend on yield to some degree and location of the property and demand vs supply etc. I consider CG of a secondary nature since if its good property I tend to hold on to it, because also Capital gains tax is not very attractive especially if your writing off the building. So Im in it for the long haul. Volitility is no where near what the sharemarket is like so that returns are more stable and better forecasting is possible.

It has its downside too as all investments do ! Diversification will minimize risk to some degree.
Let me know what you think !

[kadus]

It is very interesting to read about WA sales hitting record highs! That's amazing considering the market has plateaued and it will be interesting to see how it goes over the next 12 months with the copper price coming down hard.
I do believe now is a great opportunity to get into the market and I think it will get harder for investors to obtain high LVR's for their second and third properties over the next year or two.

[aedsys]

Australia offers many diverse living options and is a truly multicultural society. Based on historical trends in the property market and key economic indicators, the Australian property market is considered to be a sound investment opportunity.

http://www.ipbre.com/countryProfile/Australia/Market-Report/

We forecast that the property prices show the strongest growth in house prices over the next three years. Prices are expected to rise by 20.9% over the three years to June 2007.

[wulfgar]

Hmmm! Property sold for more than it's worth? More like we are on the verge of the greatest property crash is Aus since the 1890's. Rents are not going to rise to cover the cost of IP's. The smart property investor will be heading for the exit!

http://business.theage.com.au/business/agents-accused-of-hyping-up-rental-crisis-20090126-7q10.html

Agents accused of 'hyping up' rental crisis
Natalie Craig
January 27, 2009

PROPERTY watchers have attacked the real estate industry for "hyping up" a rental crisis to lure people into buying at the top of the market.

The Real Estate Institute of Victoria said a survey of its members showed that rental vacancies in December were about 1 per cent.

Chief executive Enzo Raimondo said that, despite a painfully tight market, falling interest rates and slower price growth "should make conditions easier for renters who are contemplating the move to buying a home".

But property researcher SQM said its figures showed Melbourne's vacancy rate was 3.9 per cent.

"I do not believe for a moment that vacancy rates have ever reached 1 per cent in Melbourne," said SQM's Louis Christopher, who compared properties on the internet with the total rental stock reported in government statistics.

"The REIV aggressively represents the interests of its own real estate agency members … so there is strong potential for conflict of interest."

Mr Christopher — who led a previous stoush against the REIV when he was head of rival group Australian Property Monitors — said the REIV data was not inclusive because it relied on a survey.

Mr Raimondo countered that the REIV's findings were based on responses from 124 Victorian agencies, across a range of different markets, with 50,000 properties on their books.

He said that those who listed their properties on the internet would not necessarily be included in later government data — meaning SQM was comparing "apples with oranges".

The REIV's previous findings cannot yet be cross-checked against definitive data because it is missing. The Office of Housing was supposed to provide its last rental report a year ago.

Meanwhile, a more unorthodox Melbourne study has attempted to gauge "genuine" vacancies by scouring household water bills.

Social justice group Prosper Australia analysed residential meter readings over six months and found more than 7 per cent of properties used less water than is required for one person to survive.

Study author Tohm Curtis said the findings suggested that many investors could not be bothered with the upkeep and fees associated with owning rental property.

Prosper Australia's Karl Fitzgerald said low auction clearance rates meant the rental market should be easing, and the REIV survey was the "last desperate call to dupe young home buyers into purchasing at the top of the market".

With CHRIS VEDELAGO

[cobran20]

wulfgar,

Any idea what has happened to GHPC? It looks as if they haven't paid their bill!

cobran20

[wulfgar]

Know idea Conbran? Maybe Consa gone on a trip and forgot to pay the bill. I'd assume it was making enough out of advertising, since it was well patronized.

No worries Conbran, this is Millers little Aussie finance site. He's an old hand from the Cracker days and Could use the company. Enjoy!

So far what has been on this board, has pretty level headed. With any luck it might stay that way!

[Miller]

wulfgar,

Any idea what has happened to GHPC? It looks as if they haven't paid their bill!

cobran20

Hi cobran20,

Welcome to the board! Happy to see you here. Now you know where to go if GHPC goes down again

I have been traveling a bit last year. Still in North America. But hopefully will have more time now and will try to kick off this board again. It's a shame we don't have anything like this in Australia. Well we do, but people don't know about it and those who come in don't stay cos not much happening here.
This place is not for ads or money, the main reason it is is that cracker sucked. With a bit of help from the community this will become an interesting place to hang around.

Good luck!

[kingroly]

Kay70
I would tend to agree with your comments.
Yields in industrial property (warehousing) I find to be roughly about 10%, but thats my yield ! Its probably lower now with land prices going up. Capital gains depend on yield to some degree and location of the property and demand vs supply etc. I consider CG of a secondary nature since if its good property I tend to hold on to it, because also Capital gains tax is not very attractive especially if your writing off the building. So Im in it for the long haul. Volitility is no where near what the sharemarket is like so that returns are more stable and better forecasting is possible.

It has its downside too as all investments do ! Diversification will minimize risk to some degree.
Let me know what you think !

yeah your right some are not actually favor with this gains tax ..


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tax problems