By Martin Bell
Recent figures from RPData inspired me to hit the keyboard again.
The capital growth figures for last year (median prices up to November 2009) show that Australia wide units showed better growth over the 12 months than houses.
Yes that’s right… in 2009, based on median prices, houses with the big land content did not grow in value as much as units with minimal land content.
I actually wrote today’s main newsletter article late last week; I called it “Truth About Housing Affordability”. Coincidently, this very topic has had much media debate this week and after reading Christopher Joye’s online blog yesterday, Is Australian Housing Expensive, and listening to a segment on Lateline where Steve Bracks and Bob Carr discuss population growth, I couldn’t refrain from writing a follow up to my first article. I have called this; “mrd’s Property Selection Bias”.
Many have read my earlier contributions to the housing affordability debate; which are at odds with the populist view that ‘Australian housing is very expensive by international standards’. Christopher Joye is the managing director of Rismark and the arguments he puts forward in his article ‘Is Australian Housing Expensive’ are quite compelling, in my opinion.
About this time last year many Australians were at the height of hysteria and panic. Fuelled by pessimistic and often irresponsible journalism, it looked to many as though the global economy would slip into the abyss and take Australia with it.
Lehmann Brothers, a large US investment bank had just collapsed, stock markets were plunging and the numerous ‘prophets of doom’ were being interviewed on primetime TV, scaring Australians into believing that their homes were about to plummet in value by 40%.
It now seems that the Rudd Government’s fiscal stimulus package was an overreaction. Certainly the Reserve Bank of Australia (RBA) began their massive monetary stimulus by slashing interest rates to 50 year record lows.
In amongst all this, we did our best to remain sober in our assessment of the economy and the property market. What we said then is still on the record now, via blogs and recorded webinars. In a nutshell we said that there were great buying opportunities for those that were informed and felt they could tough out the negatives. We said that Australia’s house prices would stall and perhaps soften due to a lack of household and investor confidence… but they would not fall by anywhere near 40% (except perhaps those executive homes at the top-end where demand is limited). We said that by mid to end 2009 we would see the market actually take off again and that 2010 would be a great year for those who hold an investment property portfolio. Might I add that we picked every interest rate cut ahead of time (with the exception of suggesting the RBA would go one more .25% down, which they didn’t).
I say all this not to ‘blow my own trumpet’ but rather to reinforce the seriousness with which we take what we do. We are not merely selling real estate but rather mentoring people to safely and responsibly navigate a wealth creation journey towards the realisation of whatever it is that is important to them and their family.
There have been some unexpected speed bumps along the way. I was not expecting the rental market to be so affected by the Rudd government’s boost to the first home owners scheme. I did not see rents softening as much as they have and I did not see the prolonged rental vacancies that have occurred; albeit just for a minority of our clients.
Do you love surprises? I don’t as a rule because they often come packaged up as problems!
The best thing we can do with a problem is rename it! It’s not a problem, it’s a “challenge”… and with every challenge comes an opportunity to grow!
When Katrina and I settled our last property purchase we were without a tenant for almost 4 weeks! Given the housing shortage, we were very surprised.
So why did it take that long for us to secure a tenant?
Australia is experiencing a Sea Change. Large numbers of people are moving to be closer to the coast. Referred to as “The Great Southern Exodus”, just how does this impact on property values?
Family and friends from Sydney used to tell me that one day they would sell their Sydney home and with their profit move to the Gold Coast and pay cash for their dream home. The problem with that theory is that the value of real estate (like bananas and oil) is determined by supply and demand. Where there is no available land to develop new residential estates, such as is the case on the Gold Coast, and you have an ever growing population… property prices rise quickly!
THE hordes of interstate migrants flocking to the Gold Coast could turn the city into Australia’s de facto fifth ‘capital’ behind Sydney, Melbourne, Brisbane and Perth.
The local population is predicted to double by 2050 to 1.2 million thanks to record interstate migration, unprecedented births and the nation’s lowest death rate.
Social demographer Mark McCrindle said Australia would reach 22 million people by December, with cities like the Gold Coast leading the way.
Mr McCrindle said the Coast, with 630,000 people could eventually overtake Adelaide, which has 1.2 million people.
The Coast is already much bigger than Canberra/ACT (350,000), Hobart (215,000) and Darwin (124,000).
Mr McCrindle’s population snapshot of the nation released yesterday shows a country exceeding earlier predictions of growth and population.
>>> Gold Coast ‘capital’ growth – Local News – Gold Coast, QLD, Australia.
Australia has about 1.6 million individual residential property investors, according to the Australian Taxation Office – and most of them would be pretty happy.
A drivers license and a car are good to have. They offer convenience and choice. But when a person throws caution to the wind, driving becomes hazardous!
The following “Horror Finance Stories” took their victims by as much surprise as the person who had someone pull out in front of their car and cause an accident.
At the peak of the interest rate cycle the standard variable of the big 4 banks was 9.57%. Assuming you took up the offer of a professional package with the banks and qualified for the full 0.7% discount your interest rate would have been 8.87%. For a peak rate, that isn’t too bad considering long term history. I recall buying my first home in 1994 when the rates had come down to a low 10.5%. They then dropped to 9.5% and I was dancing with joy at how much money I was saving and how cheap interest rates were.
How times have changed.
To demonstrate how the changes in interest rates affect your holding costs I will use the properties at Endeavour Gardens as an example…
One of the secrets of property investing is not to buy into up-market or highly expensive developments. Medium priced projects offer much greater potential for stable tenancies and percentage capital gains.
Our stocklist includes some fine examples in Queensland, Brisbane and the Gold Coast.
We believe the Gold Coast has exceptional potential and still looks cheap, but some clients find the Gold Coast a little above budget, so we have spent time sourcing some wonderful opportunities further north.
We have unearthed some fantastic opportunities in Northern Queensland – Cairns, Townsville and Hervey Bay – all with affordable prices, generous rental yields and the potential for serious capital growth.
The first step to financial independence is determining how much you can borrow! This all important first step is provided free of charge after you complete our brand new, simplified, secure online form.
