Wednesday, September 19, 2018

A ticking time bomb for property investors. Prices will fall 40%. Is 60 Minutes right?

Are property prices in Melbourne and Sydney really going to fall by 40 percent?

Well if you believe Channel Nine’s 60 Minutes show last weekend we’re really in for trouble.

Here’s how reporter Tom Steinfort opened the segment:  property market

It’s no secret that Australia is experiencing a downturn in the property market. But for Aussies who own their own home or have a mortgage, there’s worse news. Many believe calling it a downturn is foolishly optimistic – the slump we are in is more like falling off a cliff.

“Real estate and finance experts you’re about to meet predict the value of your house could slide by as much as 40 percent in the next year. Yes…two fifth of your home’s worth wiped out in the next 12 months…”

Now that’s scary stuff!

It triggered a flurry of emails, Facebook posts and tweets to me as well as a desperate phone call from my sister who has just purchased a house and was in a panic, fearful that she had made a terrible mistake.

My response to one concerned tweeter was that I found it curious how Channel 9 ran two fantasies shows one after the other pretending they were reality shows – The Block followed by 60 Minutes.

It’s Groundhog Day.

Every few months, the media finds someone who’s willing to stick their necks out and offer a property market doomsday scenario, predicting the end of the world for property owners in Australia.

This happens in spite of the fact that such predictions have been proven wrong time and time again… 

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It’s the property version of the Women’s Magazines telling us Jennifer Anniston is pregnant again or Prince Harry and Megan are having a baby. It’s amazing the click bait they get and how many magazines they sell using the same headlines that prove to be wrong over and over again.

It’s not the first time we’ve had apocalyptic property market predictions in the media, and it won’t be the last…

Earlier this year I interviewed US author Harry Dent on my Podcast.

He was on a tour of Australia once again to promote his latest book predicting a coming Global Crisis worse than the GFC or even the Great Depression.

In my interview with him he said, “I think this time your real estate will come back 20, 30, 40, 50 per cent.”

Of course, he was wrong, just like he was when he came to Australia and made similar predictions in 2014 and the time before that. And interestingly the time before that too!

And there have been others that 60 Minutes is given too much airtime to:

  • In 2016 they featured previously unknown US “macroeconomic researcher” Johnathan Tepper who predicted that Australian property prices would crash by 30% to 50%. But after that dire prediction our largest housing markets – Sydney and Melbourne – actually boomed.
  • In 2010 Australian controversial economist Steve Keen told anyone who was prepared to listen to him that house prices would fall 40% in a year. In fact, based on his concerns he sold his house in Sydney only to see the market boom and values double. At the time Keen lost a public bet he made with Rory Robertson, a Macquarie Bank analyst, and had to walk 15 km from Parliament House in Canberra to Mount Kosciuszko wearing a t-shirt that read “I was hopelessly wrong on house prices – ask me how”.

But is the sky really going to fall this time?

The simple answer is no.

Sure, we’re in the slow down phase of the property cycle, but that’s how the property markets work. Booms don’t last forever.

They’re just one stage of the property cycle and eventually lead to the next stage the downturn phase.

But prices are not about to crash, we are experiencing a soft landing.

I’ll explain why in a moment but first…

It’s worth mentioning that two of the commentators featured in the 60 Minutes program publicly defended themselves afterwards saying that significant portions of their arguments had been omitted from the show.

Louis Christopher from SQM Research tweeted that the program did not cover his comments about “the safety valves that are still present in the market. E.g. strong local economies, strong population growth, banks very unlikely to fail, etc. The program covered my comments on the risks and the overvaluation only…”  Housing Market Bubble Burst

Similarly Martin North of Digital Finance Analytics explained that the segment did not discuss his central (most likely) scenario, and only portrayed a scenario that he rated as a 20 percent chance.

I also spoke with another prominent property commentator who had been interviewed for the program, but his more conservative ideas were not aired.

I found this interesting considering the good long-term track record of his forecasts.

Here’s why I think it’s highly unlikely our property market will crash

For a property market crash, and that’s different to price growth slowing or the normal cyclically correction, you need desperate sellers willing to give away their properties at fire sale prices and no one willing to buy them.

This means for a collapse of 40 percent or so, therefore we need one or more of the following things to occur:

  • A major depression (not just a recession.) Neither the RBA nor any credible economist is suggesting this will occur in Australia.
  • Massive unemployment with people not able to keep paying their mortgages. Instead we’re creating more jobs than ever
  • Exceedingly high interest rates so that home owners won’t be able to keep up their mortgage payments. Again, this isn’t on the horizon.
  • An excessive oversupply of properties and no one wanting to buy them. Other than in a few spots this is not occurring in Australia.

The positive factors underpinning our property markets include:

  • We have a healthy economy that is the most developed nations.

The mining downturn has come and gone and now the mining sector is a positively influencing our economy

  • Our strong population growth underpins our economy and housing markets.

Interestingly most of these new Australians want to live in our 4 big capital cities and in many cases in many of the same suburbs.

And this won’t change in the near future.

Australia has a “business plan” to growth 40 million residents in the next 3 decades.

Australia National House States

This means we will be adding the equivalent of a city the size of Canberra each year for the next 30 years.

I took over 200 years to reach 25 million people, but now it will take only 3 decades to reach that milestone to 40 million.

  • We’re creating more jobs than we have for a long time.

The Australian Bureau of Statistics recently noted that “Over the past year, trend employment increased by around 300,000 persons or 2.5%, which was above the average year-on-year growth over the past 20 years (2.0%)”

  • Our banking system is sound, lending standards are tough and mortgage arrears are low.

Yes, some investors took on too much debt and became speculators, taking out interest only loans with very small deposits, hoping (speculating) that capital growth would occur.

This worked out well for some who bought the right properties, but others who over paid for off the plan apartments or who bought properties in regional or mining towns learned that properties values don’t only go up as today’s hot spot can quickly become tomorrow’s not spot and property values fall.

But, in general, over the last few years lending to investors has been more responsible.

Anyone who borrowed in the last few years was “stress tested” – they could only borrow if they were mot be able to repay their interest if interest rates rose and if they paid principal and interest.

  • Our household wealth is the highest it ever has been, and most household budgets are in good shape.
  • Inflation is contained, interest rates are low and likely to remain so for a while
  • Other than in a few specific markets (especially Brisbane high rise apartments) we do not have an oversupply of property.

But aren’t we drowning in household debt?

If you follow the mainstream media you would think we should be worried about the rising level of Australian household debt. Financial Debt 300x200

They keep reminding us that household debt in Australia has risen substantially relative to income over the past few decades and is now at a high level relative to other countries.

Then they ask what’s going to happen to all those property investors who took out interest only loans and may now have to convert to Principle and Interest?

Sure all these raise potential vulnerabilities but a recent speech by Michele Bullock Assistant Governor of the RBA , suggested while these issues are worth watching the situation is not as dire as some commentators would have us believe.

In particular much of Australia’s household debt is in the hands of those who can afford it – our wealthiest household sector and strong employment prospects and a relatively steady ratio of repayments to income have meant arrears rates on housing loans remain very low.

The facts are that although debt has risen with houses prices, the proportion of household income required to service higher debt has fallen over recent years despite low incomes growth and low real wages

What is likely to happen to property values this year?

Firstly, it is important that there is not one property market in Australia, and each state is at its own stage and its own property cycle. 17034015_l

What will happen moving forwards will depend a lot on local factors such as economic growth, jobs growth, consumer confidence and supply and demand.

Overall, the Sydney and Melbourne property markets are likely to fall another 3 to 5% over the next 12 months but digging into the latest figures from Corelogic there are some locations were property values are holding up and a number of suburbs where property prices are increasing.

And remember, you are not buying the market.

You’ll be buying an individual property within that market, at a price you couldn’t have purchased the property for a year ago, and one that you’ll be happy you paid today when you look back in five years’ time.

One more thing…

For as long as I’ve been investing in property, and that’s over 40 years now, there have been doomsayers and “chicken little’s” warning the sky is falling.

And the media has lapped up their stories.

In the meantime, while smart investors and homebuyers were out buying the right type of property, others who were more cautious were sitting on the sidelines waiting to see how things pan out.

While this may seem safe to them, they are likely to miss out on some great opportunities.

WHAT CAN YOU DO TO STAY AHEAD?

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As signs point to softer growth conditions for Australian property over the coming months, independent professional advice and careful consideration will be as important as ever in navigating Australia’s varied market conditions.

If you’re looking for independent advice, no one can help you quite like the independent property investment strategists at Metropole.

Remember the multi award winning team of property investment strategists at Metropole have no properties to sell, so their advice is unbiased.

Whether you are a beginner or a seasoned property investor, we would love to help you formulate an investment strategy or do a review of your existing portfolio, and help you take your property investment to the next level.

Please click here to organise a time for a chat. Or call us on 1300 20 30 30.



from Property UpdateProperty Update https://propertyupdate.com.au/a-ticking-time-bomb-for-property-investors-prices-will-fall-40-is-60-minutes-right/

Investing for cash flow | Common Investor Mistakes [Video]

The more you know about the most common mistakes that investors make, the better your likelihood of building lasting wealth. 

Each week in this series of short videos, we discuss the common mistakes we’ve seen investors make.

Today we discuss the choice between investing for Cash Flow vs. Capital Growth.

Which way is right?

Points we discuss:

  • Most invetsors think they need cashflow – residential real estate is a high growth relatively low yield investment Money 2696228 1920
  • You can’t save your way to wealth
  • Cash flow keeps you in the game, but capital growth gets you out of the rat race
  • You need to build a substantial asset base – to give you choices.
  • Most of your assets on retirement will be capital growth
  • Need to build assets first then transition to the cash flow stage
  • You need the capital growth to save your next deposit and the rising rents will help pay for your mortgage

NOW WATCH: PROPERTIES DOUBLE IN VALUE EVERY 7 TO 10 YEARS|COMMON INVESTOR MISTAKES [VIDEO]

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from Property UpdateProperty Update https://propertyupdate.com.au/investing-for-cash-flow-common-investor-mistakes-video/

CoreLogic Pain and Gain report | Houses vs Units

Across the nation, a higher proportion of houses are resold at a profit than units.

This trend is also evident across the combined capital city and combined regional markets. Housevunit2 300x2001

In Melbourne, units were higher than 9 times more likely to resell at a loss than houses while in Brisbane units were 7 times as likely to resell for a loss as houses and in Canberra units were 12 times more likely to resell at a loss than houses.

For the capital cities, the proportion of houses reselling at a gross profit was lower over the quarter in all capital cities except for Canberra.

For capital city units, the share of resales at a profit was lower over the quarter in all cities except for Brisbane.

For the regional housing markets, the proportion of houses reselling for a profit increased over the quarter in Regional NSW, Regional Vic, Regional Tas and Regional NT.

For units, profit-making resales increased over the quarter in Regional Vic and Regional Tas.

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How are the regions with a relatively high proportion of unit resales performing?

Although many regions are seeing a heightened proportion of units reselling at a loss, this is unlikely to spill-over to create weakness in the broader housing market. 

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Over the second quarter of 2018, 27.7% of all dwellings resold were units indicating that the overall stock of detached houses is much greater than that of units.

Nevertheless there are many regions around the country where units are the dominant type of dwelling that sells.

Some of these regions have recorded a relatively high proportion of loss while others are seeing minimal loss making unit sales.

Sydney’s City and Inner South saw units comprise 71.3% of all resales over the second quarter of 2018 and 3.1% of these resales were at a loss, up from a lower 1.8% of resales a year earlier.

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Of the top 25 SA4 regions listed, 12 SA4 regions that had a greater turnover of units than houses over the second quarter of 2018.

This doesn’t necessarily indicate that unit stock outweighs housing stock in these areas but it does indicate that units are turning-over with more regularity relative to established housing stock.

Sales Increased FebruaryOf these 25 SA4 regions listed, 18 have recorded an increase in the proportion of units reselling at a loss over the past year and 11 of these regions recorded more than half of all resales over the quarter for units as opposed to houses.

13 of the 25 regions listed recorded double-digit proportions of units reselling at a loss over the June 2018 quarter.

Importantly, a number of these regions are seeing historically high levels of new unit construction; as these regions see new stock additions completed it could contribute to further weakness in resales of established housing stock.

This will be an important trend to monitor over the coming quarters particularly in those regions where losses on resales of units are already heightened relative to 12 months ago.

Investor vs Owner Occupier Resales

Investors continued to be more likely to resell their properties at a loss than owner occupiers during the second quarter of 2018.

Over the quarter, 9.8% of owner occupied properties sold at a loss compared to the 10.1% of investor owned properties.

Sydney, Regional NSW and Hobart were the only major regions of the country in which a higher proportion of investors resold their property at a loss than owner occupiers. 91.5% of capital city properties resold by owner occupiers transacted at a profit over the June 2018 quarter compared to 90.8% of investor owned properties.

Throughout all capital cities the gap in profit making-resales between owner occupiers and investors was not that large however, across individual cities the results were much more varied.

MelbourneMelbourne investors were 3 times as likely to resell a property at a loss as an owner occupier and in Canberra they were 3.4 times as likely to sell for a loss.

Across the regional areas of the country, investors were slightly more likely to resell a property for a loss (11.9%) than owner occupiers (11.7%).

While in each region owner occupiers were more likely than investors to resell for a profit, the gap between the two vendor type performances was nowhere near as great in regional areas as what was recorded in some capital city markets.

Clearly, any property owner will aim to make a profit from the sale of their property.

In a falling market owner occupiers may be more prepared to sell at a loss if they are purchasing their next home at an equivalent or greater discount.

Conversely, investors, because of taxation rules, would seemingly be more prepared to incur a loss because they (unlike owner occupiers) can offset those loses against future capital gains.

If home values fall, investors (which have until recently been increasingly active in the housing market) may be more inclined to sell at a loss and offset those losses which in turn could result in much more supply becoming available for purchase at a time in which demand for housing falls because values are declining.

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Hold Periods

Over the June 2018 quarter houses which resold at a loss had typically been owned for 6.6 years while those resold at a profit had been owner for 9.2 years.

Real Estate Sale, Home SavingsAcross the unit market, those properties that resold for a loss had typically been owned for 6.9 years while those resold for a profit had been owned for 7.8 years.

Throughout the combined capital cities, loss-making resales of houses had typically been held for 5.3 years compared to 5.9 years for loss-making resales of units.

Those capital city houses resold for a profit had typically been held for 9.4 years compared to 7.8 years for units.

Houses sold at a loss in Sydney and Melbourne typically had a much shorter hold period than other capital cities while units resold at a loss in Sydney had a much shorter hold period than those in the other capital cities.

These trends reflect the much stronger value growth performances in these cities over recent years.

In terms of profit-making resales, the median hold periods for houses were substantially longer in Perth and Darwin than they were elsewhere.

For units, Perth and Darwin had much longer median hold periods than elsewhere.

These trends indicate weaker housing market performance in these markets over recent years.

House SalesmanIn regional Australia, houses resold for a loss were typically held for 7.7 years compared to 8.9 years for those sold at a profit.

For regional unit markets, the average hold period for resales at a loss (8.9 years) was actually longer than for those resold at a profit (8.0 years).

For houses resold at a loss, the typical hold period was shortest in regional NSW and regional Vic and longest in Regional Qld and Regional WA.

For lossmaking unit resales hold periods were much shorter in regional Vic than elsewhere and much longer in regional Qld and regional SA.

For houses reselling at a profit, typical hold periods were much greater than elsewhere in Regional WA.

For units selling at a profit, hold periods were longest in Regional WA but much lower in Regional NSW.

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You may also want read:

CORELOGIC PAIN AND GAIN REPORT | NATIONAL OVERVIEW

CORELOGIC PAIN AND GAIN REPORT | HOUSES VS UNITS

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from Property UpdateProperty Update https://propertyupdate.com.au/corelogic-pain-and-gain-report-houses-vs-units/

What’s ahead for Brisbane’s property market?

Is it the right time to follow the sun and move into the Brisbane property market? Brisbane property market

That’s a question now being asked by more and more property investors who have been priced out of Australia’s two big capital cities.

While currently property values are falling in many locations, the Brisbane property market seems to be steadily gaining pace.

This means more investors are now looking for opportunities in Brisbane where properties are more affordable, rental yields are relatively higher and future prospects for the market look bright.

Are they right?

Is the Brisbane property market a good place to invest?

Like most things in real estate the answer is – it depends.

It’s true that Brisbane is likely to be the best performing property market over the next few years, however while some locations in Brisbane have strong growth potential, and the right properties in these locations will make great long term investments, certain submarkets should be avoided like the plague.

To help you make an informed decision, I’m going to examine what’s going on in the Sunshine State in detail in this blog.

But be warned…it’s a little longer than normal, so if you’re looking for a particular element of the Brisbane property market, use these links to skip down the page. 

Fast Facts About The brisbane property MarketFast facts about the Brisbane property market
What’s Special About brisbaneWhat’s special about Brisbane
What brisbane areas Are Worth Investing InWhat Brisbane areas are worth investing in?
How Do I Choose a Strong investment property In brisbaneHow do I choose a strong investment property in Brisbane?
How Can I Stay On Top Of Current InformationHow can I stay on top of current information?

Clearly Brisbane isn’t “one” property market

There are multiple markets in this diverse sprawling city; divided by geographic location, price point and property type.

Currently some markets are hot, while others are not.

And just to make things clear…

I’m talking about the property market Brisbane – not the Queensland property market.

If you’ve been following my property investment strategy, you’ll know I only invest in capital cities and that’s why I avoid the Sunshine Coast, the Gold Coast and Queensland’s regional markets which have very different (and fewer) growth drivers than Brisbane and are therefore more volatile

Fast facts about the Brisbane property market

1. Brisbane Property Market Prices

Dwelling values were virtually unchanged for the Brisbane Property Market  with 0.1% growth over the past three months and they are up three tenths of a percent over the first eight months of the year.

Having said that many of the properties purchased for clients of Metropole’s Brisbane office showed double digit capital growth over the past 12 months –  that’s how averages work isn’t it? Some properties over perform while others underperform.

The general slowdown in capital gain comes despite population growth ramping up and the Queensland jobs market showing a marked improvement relative to previous years.

The Brisbane apartment market has been the focus of much negative attention due to excessive supply levels, however recently Brisbane unit values have started to edge a bit higher, which may be a signal this sector of the market has bottomed out.

Unit construction peaked in late 2016, so supply concerns are starting to become less pressing.

brisbane property market update

brisbane property market update

 

Source:- Corelogic

 

2. Brisbane’s Property Market Trends  

The Brisbane LGA annual median house price grew 3.1 per cent to a new record of $670,000 in the March 2018 quarter, according to the the REIQ  -this is the median house price – units pulled down the median dwelling (combined) price growth.

Against a backdrop of cooling southern markets and falling listings volumes, the Brisbane house sales market demonstrated admirable resilience, buoyed by steady population growth driving demand and underpinned by good economic fundamentals.

Speaking of the Brisbane property market REIQ Media and Communications Manager Felicity Moore said anyone thinking of selling was going to find willing buyers in good supply.

“In this market we could potentially see a rise in off-market sales as eager buyers pressure sales agents to see property before it hits the market,” she said.

Ms Moore said that the unit market was at the tail end of an unprecedented level of supply.

graphic-brisb-new

Rising demand would undoubtedly absorb excess stock, the only question remaining was just how long that would take.

“Queensland has become the number-one destination for internal migration, taking over from Victoria in the latest ABS Census data, and our overseas migration is at its highest level in years, which means demand for accommodation will continue,” she said.

As always, the market will remain fragmented.

In the last year alone some areas underperformed, 68 suburbs far exceeded the average level of growth and almost a dozen Brisbane suburbs had double digit price growth over the last year.

3. Brisbane’s Average Rental Yield

The good news for property investors is that rents are slowly on the way up in Queensland.

The rental market is operating in the healthy range, with vacancies at 3.1 per cent for the March 2018 quarter and rising demand levels easily absorbed almost 3200 new rental properties hitting the rental pool this quarter according to SQM Research


Brisbane rental yield

According to the SQM, Brisbane’s gross rental yield for houses was around 4 per cent and for units was closer to 5 per cent.

4. Brisbane’s Average Capital Growth 

While Brisbane property prices are considerably more affordable than the other 2 east coast capital cities, Corelogic forecasts that one in 10 houses sold in Brisbane will fetch more than $1 million within 2 years.

The Brisbane property market is likely to record positive grow in the order of 3% to 5% this year as the underlying market drivers are now strengthening.

BIS Oxford’s 3 year forecasts to 2021 suggest that Brisbane will see the strongest growth of any property market over the next three years, jumping 13 per cent to a median of $620,000.

They expect Brisbane’s property market to continue to perform well at a time when many other markets are languishing.

The affordability factor, with Brisbane’s median house price now far lower than Sydney and Melbourne, as well as higher rental returns, is likely to drive more interstate investment into the city.

Local affordability and the lifestyle advantages has resulted in strong interstate migration (+17,426 last year) up 50.5% from previous year.

At the same time 12.7 percent of our overseas migrants are settling in Queensland and interest from foreign investors is rising.

Houses in Brisbane’s inner and middle ring suburbs offer the best prospects of long term capital growth.

What’s special about Brisbane?

5. Brisbane’s demographics

According to the Australian Bureau of Statistics 2016 Census the population of Greater Brisbane which encompasses the local government areas of Brisbane, Logan, Ipswich, Redcliffe and Moreton Bay is 2,270,000.

This is less than half the population of it’s southern east coast cousins – Sydney and Melbourne.

Brisbane Census

 

According to the 2015 Intergenerational Report the population of Australia is expected to almost double by 2055, with Queensland also becoming home to more than seven million people over the next 40 years.

Given its sub-tropical climate, the region is well known for its laidback lifestyle and enviable weather.

Greater Brisbane also has far more affordable property than the southern cities of Melbourne and Sydney.

6. Brisbane’s layout

Brisbane,  is a sprawling city with outlying suburbs up to one hour drive from the city centre.

Sprawling along the Moreton Bay floodplain, Brisbane stretches from Caboolture in the north, to Beenleigh in the south, and as far as Ipswich in the west.

Winding around the Brisbane River the city is rather hilly, with prominent rises including Mt Coot-tha, Enoggera Hill, Mount Gravatt, Toohey Mountain and Highgate Hill to name a few.

The Central Business District  itself is fairly well laid out but it can be tricky to navigate through with all the one way.

If you ever get confused a golden rule for the CBD is that the streets with female names (Margaret, Ann, Queen etc.) run parallel to each other and the streets with male names (Edward, George etc.) also run parallel to each other.

The CBD is still in the original settlement location in a curve of the river about 23 kilometres upstream from Moreton Bay.

The river acts as a natural divide with the city colloquially broken into two sections, namely “north of the river” and “south of the river”.

The inner-ring of suburbs of Brisbane are classed as between zero and five kilometres from the CBD, the middle-ring from five kilometres to about 12 kilometres and the outer-ring from the point to the start of the borders of its Greater Brisbane’s regional councils.

In spite of the hilly areas of Brisbane, much of the city exists on the low-lying flood plains, with several suburban creeks throughout the suburbs joining the Brisbane River.

These low-lying areas on the water’s edge increase the risk of flooding.

7. Brisbane’s infrastructure

There are many multi-million dollar projects happening in and around Brisbane at the moment, that are starting to create jobs and more importantly get the economy rolling again.

One of the biggest would have to be the addition of a second runway to the Brisbane Airport and you would hope so too, at a total cost of around $1.3billion.

The project is due for completion in 2020 and after 8 years in the making, will become Australia’s largest aviation construction project.

It has already provided hundreds of construction jobs and by 2035, it is expected to generate up to 8,000 new jobs and generate an additional $5billion dollars to the Brisbane Economy.

To put that into perspective that is almost half the economic output of a Regional town like Toowoomba or more than a third of the output of the Sunshine Coast economy.

The huge project will increase Aircraft capacity to around a staggering 110,000 movements per hour and Brisbane is set to become the gateway to the rest of the country, in particular Asia.

Capitalising on opportunities from the Asian Century, there are many major tourism projects with a combined value of $30 billion scattered up and down Queensland’s coastline.

New resorts – and upgrades of existing resorts – are slated for Brisbane, Ipswich, the Gold and Sunshine coasts, Rockhampton, Mackay and Cairns.

While new infrastructure is an important element for investors to consider, it doesn’t necessarily lead to property price increases and sometimes can be detrimental to an area through increased traffic, noise or pollution.

8. Brisbane’s economy

While all the economic key pointers are heading in the right direction, it is the Queensland Economy that needs to kick into action.

Many local experts have been commenting recently that without the higher economic growth our house prices cannot reach anywhere near the heights of a Sydney or a Melbourne.

Brisbane is Queensland’s economic engine room – a growth city with a strong history of economic performance and significant infrastructure investment.

According to the Brisbane City Council economic fact sheet Q2 2014, Greater Brisbane’s economy has rapidly expanded to be worth $135 billion, representing 47.1 per cent of Queensland’s economic output in 2012-13.

Despite global uncertainty, the economy is predicted to be worth more than $217 billion by 2031, according to the Brisbane City Council Economic Development Plan 2012-2031.

The Queensland economy has consistently demonstrated above-average growth, growing at an average annual rate of five per cent over the past decade, which is one per cent above the Australian average

Queensland Treasury and Trade believe the State is perfectly positioned to capitalise on this and consequently its economy is expected to grow by six per cent in 2015-16.

According to the Queensland Government’s Mid Year Review 2015-16, the economy is growing by four per cent and jobs growth has also rebounded, albeit more slowly than projected. 

9. Brisbane’s growth

The population of Greater Brisbane is expected to experience solid growth over the coming 10 years according to a report by Place Advisory.

The Australian Bureau of Statistics has predicted strong population growth at an average of 62,410 people in Brisbane per year over this period.

In 2018, the growth rate is projected to be 2.3% decreasing to 2.1% in 2026 and remaining steady.

Greater Brisbane Population Projections

Population Projections Greater BrisbanePopulation Projections Greater Brisbane

SOURCE: AUSTRALIAN BUREAU OF STATISTICS. PREPARED BY PLACE ADVISORY

Whilst, family households are expected to see the largest increase over the next 10 years, the Australian Bureau of statistics projects that lone person households will have the highest growth rate leading into 2028, averaging a 2.4% increase per annum.

This is followed by family households which have a projected average growth rate of 1.8% per annum over the same time frame. Group households are set to see the smallest growth rate at an average of 1.4% per year.

Greater Brisbane Household Projections

House Hold Projections Greater BrisbaneHouse Hold Projections Greater Brisbane

AUSTRALIAN BUREAU OF STATISTICS. PREPARED BY PLACE ADVISORY

 

10. Brisbane’s culture

Given its sub-tropical climate, Brisbane is well-known for its outdoor lifestyle, especially the plethora of dining options along the Brisbane River in residential and restaurant precincts such as Teneriffe, Bulimba, New Farm and West End.

Brisbane is no longer a “big country town” in fact it’s a veritable hotbed of cultural and creative offerings, festivals and events, according to experts.

Exclusive blockbuster exhibitions and inspiring theatre productions sit alongside independent and emerging local performances, outdoor cinema, street art and intimate gallery and performance spaces.

Lovers of comedy, musicals, live theatre and dance head to the Brisbane Powerhouse and QPAC.

The Queensland Museum and QAGOMA offer free entry to permanent exhibitions.

Fortitude Valley and West End are go-to destinations for local live music gigs and DJs, while international acts visit the Brisbane Entertainment Centre or Suncorp Stadium.

And while Brisbane is Australia’s third largest city, tenants don’t necessarily want the same features as renters in Sydney and Melbourne.

What Brisbane areas are worth investing in?

So where should an investor start looking?

Like everywhere else in Australia, the Brisbane property market will be driven by demographics – where people want to live, how they want to live and how much they can afford.

That’s why I only invest in areas where the locals’ income is growing faster than the national averages.

Think about it… in these locations locals will have higher disposable incomes and be able to and should be prepared to pay a premium to live in these locations.

Many of these locations in Brisbane are the inner and middle ring suburbs which are gentrifying as these wealthier cohorts move in.

There are great investment opportunities in these suburbs in houses and townhouses.

You know how they say “the best indicator of future performance is past performance.”Suburbs

Now that’s not always correct, but obviously the longer a suburb has outperformed the more likely it will continue to at least perform well and at best remain a star performer.

In Aussie’s 25 year property trend report CoreLogic has identified the best performing suburbs for price growth over the past twenty five years, based on change in median prices between 1993 and 2018.

While the Brisbane property market has been generally subdued compared to the other east coast capitals,  of course there is not one Brisbane property market and as you can see from the table below, these top 20 Brisbane suburbs all grew at an average of  more than 7% per annum which meant property values more than doubled every 10 years – if you bought in the right suburb – and then of course you had to own the right property in that suburb.

This forms part of the research data we use at Metropole to help our clients find investment grade properties, or A grade homes for owner occupation.

If you’d like to get the independent, award winning team at Metropole on your side to help you through the maze of mixed messages about the Brisbane property market, please click here and leave us you details or call us on 1300 20 30 30

Overall the various suburbs in Queensland show a dramatic range in performance, highlighting both the diversity in housing stock around the State, and no doubt that next twenty five years will show an equally diverse result.

Top 20 Brisbane suburbs for capital growth

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Consider school zonesSchool Zones

There’s no doubt that proximity to popular education catchments influences property prices in Brisbane.

This is true of both primary and secondary school catchment zones, which have in general outperformed the market and are likely to continue to do so.

Education is a long-term consideration and, whether you are planning a family, have children already enrolled in school, or are an investor looking to attract long term, quality tenants, it may be beneficial to consider school catchment zones when you are determining suburbs of interest.

Some advice for new Brisbane investors?

11. Look for Brisbane’s best properties in the inner- and middle-ring suburbs.

Research shows that those suburbs close to the city centre generally perform better than all others over the long-term.

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Our research at Metropole shows that (in general) properties closer to the CBD and closer to water increased in value faster than those further from the CBD and further from water.

And this general trend has again been confirmed by a paper by the Australian Housing and Urban Research Institute, which found that both in percentage terms and in absolute terms over the long haul suburbs located reasonably close to the CBD, where demand is high, close to employment and where the most people want to live and where there’s no land available for release, outperformed the outer suburbs.

One of the significant changes to occur in Australian cities over the past 50 years, and which has pushed up inner- and middle-ring suburb property values, is gentrification.

Interestingly this wasn’t caused by deliberate planning policy, but resulted from a set of demographic changes that have occurred in most major capital cities around the world.

The exodus of industry, migrants and many workers made way for gentrification of our inner suburbs where initially house prices and rents were cheaper than in the suburbs.

Later, our changing demographics with declining household size, in part because we were getting married later and having fewer children, meant that small inner suburban dwellings or apartments provided ideal accommodation for the expanding cohort of professionals who worked in or close to the CBD.

Gentrifiers were initially drawn to these inner suburbs by the diversity of jobs, educational opportunities and lifestyle and this trend continues today as more and more Australians are swapping their back yard for

You may also want to watch this video: 5 Important Things Interstate Investors Need To Know Before Investing In Brisbane.

12. Be mindful of a Brisbane property market oversupply

Brisbane property market oversupply

There has been a large increase in the number of off-the-plan units built in Brisbane over recent years.

With the supply of new and off the plan apartments in Brisbane’s CBD and inner ring outstripping demand, and estimates of another 15,000 apartments flooding the Brisbane market in the next year, there is little prospect of capital growth or rental growth in Brisbane’s apartment market in the near future.

There are about 19,800 apartments that are either under construction or being marketed within the inner-city precincts of Brisbane.

I can see the situation where some off the plan purchasers will have to wait up to a decade for capital and rental growth.

Here’s a big mistake made by interstate property investors buying into Brisbane

Currently the Brisbane property market is being infiltrated by Sydney investors ‘buying blind’.

With Sydney property prices having risen strongly over the last few years and now that the market has slowed down from it’s frenetic pace, these high prices plus tighter banking regulations limiting investor’s budgets has caused many Sydneysiders to follow the sun north and look for property investment opportunities in Queensland but many are making a big mistake.

According to an article in Domain Sydney investors are increasingly buying properties in Brisbane solely on photographs and skipping inspections.

And they’re buying the wrong properties in the wrong location based on price.

Agents quoted in Domain say these southern investors are buying up in Brisbane suburbs considered “unfavourable” by locals and boosting house prices

One agent was quoted as saying:

“…blind-buying Sydney investors had flooded into the Logan market.

“Out of every 10 sales, five will be investors, and two will not have viewed the home, and that is a modest estimate.

“Often it seems as the investors have no idea about the area’s reputation.”

Domain quoted another agent as saying:

“We are seeing about 70 per cent of Sydney investors buying without seeing the homes,”

The lesson – don’t buy sight unseen:

It’s incredible what you can achieve, and the unsightly features you can avoid showcasing, when you’re using a good camera and exploit the right camera angles.

I’ve heard horror stories of people who have bought sight unseen thinking their investment property had an incredible view (it did – but only from the toilet) or who didn’t realise huge powerlines dominated the streetscape, because they relied on agent photos only.

The moral of the story is don’t risk purchasing site unseen unless you have a trusted representative review the property on your behalf.

How do I choose a strong investment property in Brisbane?

13. Buy a property for below its intrinsic value

Buy a property for below its intrinsic value

I’m a big believer in buying property for below its intrinsic value – that’s why I avoid new and off the plan properties, which generally attract a premium price tag.

Remember, though, that you’re not looking for a ”cheap” property (there will always be cheap properties around in secondary locations).

You’re looking for the right property at a good price.

Properties to consider may be ones that are a little ugly or untidy but have good “bones” and are in good or superior locations.

Some of Brisbane’s middle-ring suburbs may be worthwhile considering given they often have solid homes on land sizes ranging from 405 to 600 square metres.

14. Buy a property that outperforms the averages

Look for an area that has a long, proven history of strong capital growth and is one that is likely to continue to outperform the averages.

This is largely because of the demographics in the area.

These suburbs tend to be those where a large number of owner occupiers desire to live in the area, because of lifestyle choices of offer.

I look for suburbs where wages (and therefore disposable income) is increasing above average.

This translates to being an area where locals are able to and prepared to pay a premium price to live there, putting a financial floor under your investment property.

This is also considered to be gentrification.

So what we’re seeing is high-income people moving into particular locations, which perhaps used to be considered blue-collar, and spending their money there in new cafes and on renovating their homes.

In Brisbane, for example, there are a number of inner-city suburbs where there is occurring such as Annerley and Woolloongabba on the south side.

15. Buy a property with a twist

An investment must have something unique, or special, or different or scarce – some ‘X factor’ that makes it stand out from its neighbours – in order to land on my shortlist.

So when your looking at the Brisbane property market, consider properties that are “special” because of their design, e.g. perhaps Queenslanders or art deco apartments or properties in desirable locations.

Although you must keep in mind that sometimes these unique properties are more expensive to buy and to maintain, but history shows us they usually have stronger capital growth

Remember that more demand than supply always means higher prices.because of that scarcity factor.

16. Buy a property where you can manufacture capital growth

An ideal investment is one in which you can manufacture capital growth through refurbishment, renovations or redevelopment.

Buy a property where you can manufacture capital growth

For example, there are tens of thousands of properties out there that could all have their values increased through simple renovations.

While I don’t believe that investors should subscribe to the “buy, renovate, sell” philosophy, because the opportunity to profit is not great, what works really well, if done correctly, is a buy renovate and hold your investment property.

Here you buy a property with renovation potential, renovate and then keep it as a long-term investment having added value.

This added value will give you improved rentability – your property will be more attractive to a wide range of tenants – as well as achieving a higher rent and you will have “manufactured” some equity.

So what does all this mean?

To me, the picture is clear.

Brisbane’s property market is ripe for investment – it’s economy is improving, population is growing, infrastructure is being added and property remains affordable.

Your biggest challenge is to find the right property to buy, but that’s what the Brisbane team at Metropole specialise in.

Why not click here now and have a chat with us and discuss your options.

How can I stay on top of current information?

17. Get news, updates and advice by email

Are you interested in keeping up to date with the latest Brisbane property market news?

There is so much information available about various Housing Market Trends, strategies and market information that it can be overwhelming knowing where (or how) to get started.

Join the 105,000-plus Australians who subscribe to Michael Yardney’s Property Update or better still get a daily dose of insightful commentary in your inbox each morning.

Join here; this is free and different to our newsletter subscription.

18. Take advantage of investment advice

Whether you are new to property investing or a seasoned landlord with many years of experience in the trenches, the team at Metropole would love to help you formulate an investment strategy or review of your existing portfolio, with a shared goal of helping you acquire your next A-grade investment property.

We can help you take advantage of opportunities currently available in the property market, by offering independent, unbiased advice.

Contact us for a complimentary, obligation-free session with one of our property strategist’s today.

 



from Property UpdateProperty Update https://propertyupdate.com.au/whats-ahead-brisbanes-property-market/

Tuesday, September 18, 2018

Even More Inspirational Quotes From Jim Rohn

Jim Rohn’s philosophy was an important influence on me, so here’s even more of his quotes for some inspiration:

1. If you don’t like how things are, change it! You’re not a tree.

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3. Affirmation without discipline is the beginning of delusion.

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5. Either you run the day or the day runs you.

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7. Get around people who have something of value to share with you. Their impact will continue to have a significant effect on your life long they have departed.

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9. You cannot change your destination overnight, but you can change your direction overnight.

10. Learn how to separate the majors and the minors. A lot of people don’t do well simply because they major in minor things.

And this weeks bonus quote:

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from Property UpdateProperty Update https://propertyupdate.com.au/even-more-inspirational-quotes-from-jim-rohn/

What can tennis teach us about succeeding in the property markets?

Dr. Simon Ramo, a legendary American engineer wrote a book in 1970 about, of all things, tennis, titled Extraordinary Tennis for the Ordinary Player.

The engineer in him noticed that the game of tennis involves two games – one is played at the professional level and the other is played at the weekend warrior level.

Now, that’s not particularly brilliant, but the conclusion he reached from his observation is.  tennis

After extensive analysis, Ramo concluded that professional tennis players win points while amateur players lose points.

In other words, for professionals, most points are won by the pro hitting a spectacular winning shot that is just out of reach of their opponent (a “winner’s game”), while amateurs typically lose points by making an unforced error (a “loser’s game”).

Writing in a famous 1975 Financial Analysts Journal article, noted investment analyst Charles Ellis extended Ramo’s tennis concept to the investment business.

Ellis said investing had flipped from being a winner’s game to a loser’s game.

He meant that to succeed at investing you need to focus on making fewer avoidable errors as opposed to making spectacular winning investments.

Now making fewer avoidable errors is a worthy goal at any time, but it is critical in today’s changing markets.

What has all this got to do with property? 

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The best way to explain this is that during property booms it’s easy to look smart.

Rising values cover up many mistakes.

But today the property markets around Australia are very fragmented with property values falling in some locations, flat in others and rising in yet other locations, but overall it is unlikely our markets will  exhibit the same levels of growth in the next few years as they did over the last few years.

That reminds me of 2 of Warren Buffet’s famous sayings:

  1. “A rising tide lifts all ships” and…
  2. “When the tide is out you can see who is swimming naked.”

Yet some investors are doing very well

While some investors are floundering, at the same time other, more strategic  investors, those who understand the importance of correct timing, proper asset selection and smart financing using financial buffers, are heading towards financial independence through smart property investing.

These successful investors are not trying to get rich quick.

Instead they focus on making fewer avoidable errors by using proven trusted property investment systems.

On the other hand at the same stage of the cycle other, more strategic, investors, those who understand the importance of correct timing, proper asset selection and smart financing using financial buffers to see them through the lean years, are still heading towards financial independence through smart property investing.

The 4 types of knowledge you need to seize control of your financial future:

To make the most of our current schizophrenic economic and property markets strategic property investors will need:

  1. Unbiased economic insights
  2. Education based on proven property investing principles and strategies
  3. Guidance from expert investors who have been there, done that
  4. Insider information so you can spot market trends that are “hidden” from the average investor

That is why it is critical to learn from experienced and successful property investors, from someone who has already achieved what you want to achieve and has retained their wealth in the long term. idea save coin l

I also see it as a great time to not just wait for the market to do its thing, but to actively “manufacture growth” by getting involved in property renovations and development and then holding on to your properties in the long term and enjoying the capital growth.

And that’s precisely the topics we’ll be teaching at my annual Property Renovations and Development workshop on October 20th and 21st.

NOW I’M NOT SAYING I HAVE ALL THE ANSWERS

In fact I don’t even know all the questions, but I have gathered the best faculty of experts I could – yes people who pass my definition of experts above and I’ve put them all in the same room for 2 days to teach you advanced property strategies at my 2 day training in October  – my annual Property Renovations & Development Workshop.

Get all the details and reserve one of the early bird spots because its only a few weeks away.

By the way – we’ve never offered this annual seminar at a cheaper investment.

It’s likely that it will cost you a lot, lot less that you expect even though it’s a training –  NOT a sales event.

Click here for more details

WHEN YOU ATTEND, YOU WILL LEARN:

  • What is really going on in the world economy and what this means to you as a property investor.
  • How to select the right type of properties to renovate for substantial profits.
  • How I makes significant returns on my money by developing residential property including an extended session on how you could become a property developer. You will receive my A- Z Manual of Property Development including Metropole’s internal checklists and worksheets. This manual is not available anywhere else.property investment graph
  • How to find property that won’t tie you down with negative cash flow.
  • What exactly drives property prices — why, over the next few years, some properties will perform so much better than others and how to find these properties.
  • How to buy real estate well below its replacement value.
  • How to select the suburbs that are likely to provide strong capital growth over the next few years (many suburbs will not).
  • How to use the lessons from previous property cycles to take advantage of the opportunities that lie ahead. Most investors will miss out!
  • The best way to buy property including at auction and private sale and what research you need to do before you buy.
  • The negotiation tricks used by the pros to ensure they get a great deal every time.10718072_l
  • You’ll love it when we show you how to beat the banks and get better finance. You will learn how to get the banks to treat you like a sophisticated investor.
  • The tax strategies of the wealthy will be presented by Australia’s top property accountant. Almost everybody wants to know about tax and how to minimise it legally. Most people earn money, pay tax and live off what is left. When we show you how to invest and live off your income before tax, you could have twice as much money at your disposal to invest.
  • Bullet proof tax structures and asset protection strategies from one of the best solicitors in Australia as well as a discussion about joint ventures and how these could work for property development.
  • How to conduct yourself at auctions and how to use an auction’s unique dynamics to your advantage.
  • The software tools the professionals use to analyse their deals, manage their portfolios and obtain finance.
  • How to direct and lead your valuer to get the best valuation.

Click here for more details

If you really want to develop financial independence I suggest you invest 2 powerful days and learn renovation and development strategies that experienced property experts are using around Australia to “manufacture” capital growth and generate strong rental returns, so that they can win in today’s challenging property markets

Take your property investing to a whole new level by joining me in October at my Property Renovations & Development Workshop.

Maybe now it’s time you stepped up and played in the big league by getting started in property renovations or development.

This is the course where other “experts” who are now teaching got their education. Click here  find out more and reserve your place.

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from Property UpdateProperty Update https://propertyupdate.com.au/what-can-tennis-teach-us-about-succeeding-in-the-property-markets/

How many properties does Michael Yardney own?

If I had a dollar for every time in my capacity as a property strategist I’ve been asked How Many Properties does Michael Yardney own, I’d be almost as wealthy as Michael.

Well before I put you out of your misery and answer the question I thought we could have some fun first.

How about a multiple-choice question?

House Model Amidst Coins At TableTry and answer the following question correctly first.

How many properties do you need to retire?

a) 3
b) 4
c) 5
d) 6
e) 8

If you answered ‘a’ or ‘b’ then you are incorrect.

If you answered ‘d’ or ‘e’ then you are incorrect.

However, if you answered ‘c’ then congratulations…..you are also incorrect.

That was fun, wasn’t it? (I can almost see you shaking your head as I write this)

If you realized it’s a trick question, then you are already ahead of the game

It’s important to always remember that it’s not about the number of properties you own, it’s about the size and value of your asset base, and the quality of assets within your portfolio.

Let me put it this way, whenever we see the illustrious Forbes Rich List or the BRW Rich List there is rarely any mention of the number of assets the individual owns.

What is however always mentioned, is what is important, the individuals net worth.

And net worth is the value of all assets minus the total of all liabilities.

There’s that word again…….‘value’.

That being said, let me ask you another question 

1-percent

What would you prefer?

30 residential investment properties or 1 Westfield shopping centre?

Don’t worry it’s a rhetorical question, no need to answer it.

But I gather you get my point.

Forget number of properties and think value of properties.

Ok so now that I’ve set the tone…..on to the question you’ve all been waiting for.

The 6-million-dollar question

In fact, it’s worth significantly more than that.

And yes, you guessed it, it’s another multiple choice.

Here we go…

15563628_l1How many properties does Michael Yardney own?

a) 17 properties
b) 24 properties
c) 32 properties
d) 56 properties
e) 75 properties
Drum roll please…

and THE ANSWER IS…

oops I forgot to include option ‘f’.

Option ‘f’ being… IT DOESN’T MATTER.

(I’m sorry for yelling)

Yes, I know it’s a bit of an anti-climax and if you haven’t thrown your phone across the room or punched the computer screen then please continue reading.

The truth is that I don’t know.

Not only do I not know but it’s actually none of my business.

Nobody knows how many properties Michael owns, other than the man himself.

What I do know however about Michael’s portfolio, in fact what I can guarantee are the following 8 things:

  1. House HuntingEach property would be in a well located residential suburb in the inner middle rings of our capital cities.
  2. Each property would be a quality investment grade asset with a strong focus on growth that outperforms the averages.
  3. Each property would have owner occupier appeal.
  4. Each property would have been purchased at or below its intrinsic value.
  5. Each property would have a large land to asset value ratio.
  6. Each property would have had the potential to add value via a renovation or development.
  7. Each property would have some level of scarcity value. That is, it would have something unique about it relative to the level of demand.
  8. Each property would have been the highest and best use of his funds.

So, there you have it

We are no closer to answering the mysterious question however we have learnt there is a much more accurate and powerful question to ask a property investor to determine their success or wealth.

And that is……‘What is the value of your asset base?’

That being said, if you ever find out how many properties Michael owns or the value of his asset base then feel free to get in touch (I would still like to know).

If you would like to discuss how to grow the value of your asset base with quality investment grade assets that outperform the averages in growth, then reach out to the independent team at Metropole property strategists.

You may also wish to read:

MICHAEL YARDNEY’S NET WORTH – THE TRUTH ABOUT BUILDING WEALTH THROUGH PROPERTY

Metropole Property Home Buyers Enquiry


from Property UpdateProperty Update https://propertyupdate.com.au/how-many-properties-does-michael-yardney-own/