Your Investment Property (YIP) magazine Issue 30 November 2009 by Key Media

hidden truths

about Interest Only loans

Rental market

what’s hot and what’s not

your ultimate property guide Over 5,600 suburbs listed! House & Unit data

November 2009

TO$7 OVE In B 0 , R c 0 a E sh W 0 a O 0 n d N p ! r iz e s

$9.95 (GST incl.)

Where to buy NOW!

106

areas set to boom

find

renovate

sell! maximise

your $$$ by getting it right

Top Tips to get the most out of your tradie

Migration

explosion

Cash in on Australia’s record population growth

Property

syndicates

• start one • join one • make it work

Claiming tax deductions on your overseas property

November 2009

34 Rental market: it’s hot, and it’s not

We examine the residential rental markets in the eastern states to find out what’s hot and what’s not

Spotting opportunities in a rising market Recent strong growth achieved by Australia’s residential property market has spurred investors into action. We look at the best investment opportunities emerging as the market heats up

38 Navigating the changing lending markets

Australia’s lending market has changed significantly since the onset of the credit crisis in 2007. We look at these changes in lending practices and what it means for investors

44 Do prices go where the people go?

An in-depth analysis on the correlation between migration growth and house prices

52 Property syndicates

Are two (or more) heads better than one when it comes to property investing? We get advice on running a successful property syndicate

56 Protect your interest

Hidden truth about interest only loans revealed

November 2009

Features

78 To repair or not too repair – that is the question!!

What’s considered a repair and what’s not in terms of claiming depreciation allowance

80 Claiming expenses for overseas investment properties

All you need to know about claiming expenses on your properties abroad

Profiles

50 Driven by compassion Geoff Westlake’s low income didn’t deter him from diving into property investment and build more than a million dollar portfolio in the process

Regulars 6

Editorial

News All the latest news from Australia’s property markets

Australia’s topperforming suburbs

Ask the experts

Tax Q&A

Legal Q&A

State roundup State market analysis highlighting the top-performing suburbs

99 Property price guide Discover how your suburb is performing with Australia’s most comprehensive property guide

128 My investment property

48 Investing in NRAS properties

How does it work and how can small investors buy these properties?

52 Structuring joint

ventures in property development Key issues to consider when structuring a property development joint venture

60 Part 2 – Walking

through the stages of property development and obtaining finance

In the second instalment of a six part series on property development, we tackle funding issues for your project

70 Top 10 things you

should know about before you start your renovations

We reveal the 10 most important considerations you need to take into account before embarking on a renovation project

76 Trade secrets

Secrets to communicating effectively with tradies to get the best renovation results

editorial

November 2009 EDITORIAL – editor@yipmag.com.au

Cool heads, hot profits

t’s great to see a return of confidence among market players. Real estate agents from all corners of the country are reporting surging activity from first homebuyers, home upgraders and investors. Unfortunately, the recent feverish market activity has gotten some experts concerned that over exuberance is once again rearing its ugly head. This is particularly dangerous at this point of the cycle. Experts worry that the inflated prices will drive buyers to take on larger loans, which would make them particularly vulnerable for the inevitable rate hikes. It’s hard not to get excited when you see numbers continue to improve, but it’s important for investors to remain calm, careful and consistent in their property strategies. To help keep investment decisions rational, this month we investigate the best property locations to carry you into and through the next big boom cycle. On page 82, our experts provide their picks for the safest property markets with strong yields and growth potential. Many people believe that following migration trends is a good way to pick the next property boom hotspot. On page 44, we examine migration patterns to find out if house prices really do correlate with them, and we discover that there is more to this issue than there appears at first glance. We also carefully review what’s hot and what’s not in the rental market on page 34. The alternative to buying new investment properties is to upgrade existing investments. Improving a property can provide significantly improved capital gain ratios compared to speculating on an upcoming property price boom. To help, on page 70 our experts have compiled a list of 10 crucial steps to take before renovating; and on page 76 we reveal 12 tips to get the most out of your tradies. Even though the property market looks as if it is once again moving into positive territory, it is the investors with cool heads who will reap the hottest profits over the long term.

Nila Sweeney

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Your Investment Property is published by Key Media Pty Ltd. Freelance submissions are welcome but please contact us first. All text, photographs and illustrations must be accompanied by a selfaddressed return envelope stamped to the appropriate value if you want them returned. Key Media takes no responsibility for damage to or loss of material submitted for publication. Your Investment Property is fully protected by copyright and nothing may be reprinted wholly or in part without permission from the publisher. © 2009 Key Media ISSN 1834-5832 In compiling this publication, the Publisher relies upon information supplied by a number of external sources. The publication is supplied on the basis that while the Publisher believes all the information in it will be correct at the time of printing, it does not warrant its accuracy or completeness and to the full extent allowed by law excludes liability for any loss or damage sustained by readers arising from or in connection with the supply or use of information in this publication through any cause. Care should be taken when using comparison rates contained in this publication. Differences between contracts and variations permitted during the period of a contract can detract from their usefulness or even lead to a false impression.

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News

Melbourne trumps Sydney’s growth M elbourne properties staged a stunning performance during the first seven months of the year, with median prices jumping by a whopping 8.5% to $454,524, according to RP Data-Rismark International’s Home Value Index. Sydney properties also grew solidly, albeit slower than Melbourne. Median price climbed by 6.64% during the same period. “Melbourne’s median value is 19% – or $112,000 – lower than Sydney house values, reflecting a significant value differential. This may be one of the reasons why Melbourne’s housing performance has been so strong,” the report said. Darwin continued to outperform the rest of Australia, racking up 10.8% growth in value over the first seven months of 2009. Darwin also recorded the highest gross rental yield – 6.4% for houses and 6.2% for units – followed by Canberra, with houses up by 4.9% and units by 5.6%. Sydney’s house prices remain the highest of the capital cities, averaging

$537,396, while Perth ranked second at $481,493 and Canberra third, at $477,627. The weakest performing house prices were found in Adelaide, with values up only 1.9% in 2009. Melbourne recorded the lowest house rental yields at 4.1% and matched Perth’s 4.6% increase in unit yields.

Interest hike expected

he RBA may have left the cash rate at 3% for the last five months, but it could rise as soon as October following new figures that the economy grew 0.6% in the last quarter – the second quarter of positive growth this year. According to Macquarie interest rate strategist Rory Robertson, the “October rate-hike bandwagon” is “rolling fast” and the RBA is likely to raise the cash rate sooner than the market expected. The futures market is pricing an increase of 2% in the official cash rate over the next 18 months – although indicating a November rate rise rather than October – with the recent futures market yield curve from RP Data showing it could reach 5.23% by February 2011. Since the average variable home loan sits at 5.75%, such a hike could mean the interest rates pushing back up to November 2006 until July 2007 levels, when rates hit 8.05%. If the predictions come true, those most affected would be first homebuyers in the ACT and non-first homebuyers in NSW, where the average home loan tops $294,100 and $284,400 respectively – the highest in the country.

ACT tops the most affordable list D

espite having its reputation as having some of the most expensive properties in Australia, the ACT is still the most affordable state or territory to buy a home, according to the Real Estate Institute

of Australia’s Deposit Power report. Over the June quarter, the proportion of income needed to meet mortgage repayments was 17.3% compared with the national average of 24.8%. New South Wales is the most expensive state to own property in, with an income to loan repayment ratio of 31.3%. Tasmania showed the greatest improvement in housing affordability, with the income to loan repayment amount decreasing 0.6% to 27.2% since the March quarter. Meanwhile, Queensland recorded the least improvement, rising 0.6% to 29.8%. Due to median rents increasing at a lower rate than the increase in family income, the proportion of family income to meet rental payments

has dropped by 0.3% on the same quarter last year. Again, the ACT is the most affordable state with just 16.8% of income dedicated to rental payments, while in Tasmania, 30.4% of income goes towards rental – the highest in the country. The report also showed a dramatic increase in the number of first homebuyers in the last 12 months, surging by a massive 94.3%, thanks to low mortgage rates and the government’s First Home Owner Boost. The report also found that in the June quarter this year, first homebuyers increased by 19.4% to 54,924, compared with just 28,262 in the same period last year. www.yipmag.com.au

News

Home sales volumes surge across Australia

he number of properties sold all over Australia jumped by a hefty 32% for the 12 months ending June, thanks to strong activity from first homebuyers and investors, according to rpdata.com. Perth notched up the strongest recovery, with residential home sales soaring by almost 60% compared to a year ago. “This future is looking brighter for Perth, with the resources sector once again picking up and a modest degree of capital growth returning to the market,” said Tim Lawless, rpdata.com national research director. “However, it’s important to remember that the market is coming from a low base. In June last year, sales volumes were almost 70% lower than the five-year average, and values have declined more than any capital city.” Sydney recorded the second highest improvement in residential sales volumes, rising by 38% from last year. Brisbane sales were up 35%, Hobart rose 34%, Darwin sales climbed 32% and Melbourne was up 30%. Adelaide achieved the lowest sales volumes at just 9% increase over the same period. “Adelaide’s recovery is taking a longer time. The June quarter sale volumes lifted by almost 20% as the Adelaide market falls into line with the movements in other capital cities,” said Lawless.

Investors step in to fill the first homebuyer gap

he number mortgages for owner occupied homes fell for the first time in 10 months in July, dropping by 2%, but the total value of investment housing commitments (trend) rose 1.0% compared with June 2009 according to the Australian Bureau of Statistics (ABS). The rise in July was due to increases in commitments for the purchase of dwellings by individuals for rent or resale (up $60m, 1.2%) and the purchase of dwellings by others for rent or resale (up $7m, 1.4%) The number loans taken by first homebuyers dropped by 6.7% while the number of first homebuyer commitments as a percentage of total owner occupied housing finance commitments fell to 25.7% in July from 27.1% in June. “This is an indicator of what can be expected between now and the end of the year, as First Home Owner Boost is phased out,” said REIA CEO Neil Fisher. “The gap in the market left by the first homebuyers is being taken up by the increased investment interest. The value of investment housing commitments was up by 1% in value terms. This is the sixth consecutive month that purchases of dwellings for investment have increased.” Mortgage Choice senior corporate affairs manager, Kristy Sheppard noted: “Winter is usually a slower season, while spring usually sees a large increase in market activity. When compared to last year’s figures, this result is still a positive one. Industry observers should not be concerned but should keep a close eye on the monthly figures,” she said.

www.yipmag.com.au

Fix your sights on investment loan options

roperty investors and home owners alike are currently enjoying the lowest interest rates in more than 50 years. However, these rates have emerged from ‘emergency’ measures to stave off the fear of a deep recession as a result of the Global Financial Crisis (GFC). They were never going to be the long-term norm. With widespread predictions, and growing signals from the RBA itself, that interest rates will start to rise in the coming months, this raises the question for property investors of whether or not to fix. Over the past 20 years, fixed rates have usually been higher than variable rates and this is currently the case. There is about a 1.5% gap between the basic variable rate and the 3 year fixed rate, and a gap of more than 2% between the variable rate and the 5 year fixed rate. For property investors who are focused on managing their costs in order to maximise their returns, a fixed rate provides certainty regarding cash flow and investment yields. However, there are some drawbacks with fixed loans, apart from the rate being higher than variable rates at present. One of the biggest issues is the break costs associated with pulling out of a fixed loan if you decide to sell the property or no longer want that loan, which can total many thousands of dollars. For those nervous about talk of significant rate rises who would still like some element of flexibility, a good option may be a split loan. You can choose which proportion of your loan you would like at a fixed rate, and which you would like at a variable rate. You benefit from the lower rates and flexibility of a variable loan, but also give yourself some protection against potential rate increases. The most important thing is do not treat your finance on an investment property as “set and forget”. Rates and product options are changing constantly, never more so than in recent months, so it pays to perform a bit of maintenance on your finance every year by talking to an adviser, and getting some smart advice. All these options mean some smart advice on the most appropriate course of action for your individual circumstances is more important than ever.

For more information or to talk to a Smartline Adviser call 1800 020 066 or visit www.smartline.com.au Advice from Jayson Billings, Smartline Personal Mortgage Advisers

Property | top suburbs

Australia’s

SNAPSH OT

top-performing suburbs Australian house prices have returned a number of quarters of positive growth, and have recovered most of the 2008 losses. Some Australian suburbs have achieved stellar results for growth and yield. Here are the nation’s top five

’s top 5 Nation

State

Property type

NTH FREMANTLE

UNIT

$517,500

35%

-21%

19%

$418

KUNDA PARK

QLD

UNIT

$347,500

35%

-9%

15%

n.a

WOLLSTONECRAFT

NSW

HOUSE

$1,305,000

34%

28%

$775

SADDLEWORTH

HOUSE

$145,000

33%

n.a

19%

n.a

BERRIEDALE

TAS

UNIT

$152,500

33%

n.a

20%

n.a

arly Top ye owth gr Property type

Unit

Median price

Quarterly growth

3-month growth

$400,000

Advertised Gross rent rental yield

$320

he southern Sydney suburb of Kingsgrove is inhabited by a mix of strong migrant communities, young families and renters. With a population of around 10,000, the main hub of the area is the busy Kingsgrove Road, running through the heart of the town. However, the real draw is the low prices combined with great access to the airport, CBD and motorway. “It attracts a lot of people from the inner west of Sydney who can’t afford to buy there but still want to be near the city,” says Con Klironomos of LJ Hooker. Settled after World War II, the suburb has a low turnover with many residents staying long term. The area is low density, with a high proportion of detached homes on large parcels of land starting at $400,000 and rising to as much as $1m. While there has been some development of duplexes in the last two years, the stock is mainly old, with most occupiers choosing to renovate and develop their existing home. “Undersupply and a lack of new build, has kept the market strong in the last 12 months,” says Klironomos. “It has come back a bit the last two months, due to more renters coming into the market and first homebuyers making the most of the First Home Owner Boost.”

Avg annual growth

erly Quart wth gro

New South Wales kingsgrove

Median price

12-month growth

Property type

Unit

Weekly median advertised rent

Gross rental yield

Western Australia North fremantle

Median price

3-month growth

$517,000

35%

Advertised Gross rental rent yield

$417

ohemian Fremantle may be only 19km from Perth but it is a million miles away in personality. The main rental market here consists of professionals and wealthy retirees, thanks to the train station – unusual for car-reliant Perth – and high calibre stock. Occupying the narrowest stretch of land between the Swan River and the sea, property here is a mix of luxury apartments with sea views, waterfront houses and late 19th century limestone cottages. According to Hayden Groves of Dethridge Groves, North Fremantle’s quality property and desirable location makes the future of the suburb bright. “The commercial areas have undergone somewhat of a renaissance, with new bars and cafes opening along Queen Victoria Street,” he says. “There’s a mix of rented and owner-occupied property. However, it is generally out of reach for most homebuyers.” Groves says the area around Leighton Beach has seen the most land sales recently. A long stretch of beach, with pristine views, it is in high demand and it is not unusual for a two-bedroom modern apartment to sell for $1.5m. “Mostly, the suburb is being developed as an enclave for the wealthy,” says Groves. “Once the sales of the Leighton Beach properties appear on the records, the median price for North Fremantle is likely to sky rocket.” www.yipmag.com.au

Property | top suburbs

t Highesields y

State

Property type

Median price

Quarterly growth

12-month growth

$165,000 $410,000 $415,000 $495,000 $240,000

-16%

-35%

15%

23%

n.a

17%

n.a

10%

23%

14%

-33%

DOLPHIN HEADS

QLD

UNIT

DYSART

QLD

HOUSE

MORANBAH

QLD

HOUSE

SOUTH HEDLAND

HOUSE

ULTIMO

NSW

UNIT

t Highesields y Property type

House

$495,000

Quarterly growth

10%

Weekly median advertised rent

Gross rental yield

$420 $980 $950 $1,100 $450

13% 12% 12% 12% 10%

For data o n suburbs, over 5,600 go to p99 ! Top 30 locations in Australia at the moment by 12-month growth

Hot 30

Western Australia South hedland Median price

Avg annual growth

Advertised rent

$1,100

Gross rental yield

12%

ituated 15km from Port Hedland in northwest Australia, the satellite town of South Hedland has long been capturing the homebuyers and tenants that spill over from the mining towns on the coast. Recently, the demographic has begun to change, with more buyers heading straight for South Hedland’s cheaper prices and higher levels of stock. In June, median house prices in Port Hedland topped $819,000, compared with $517,500 in South Hedland, despite the same median weekly rent of $1,110. Figures like these have encouraged many investors to look at South Hedland over the more obvious mining towns. Infrastructure in the town, while not on par with an area like Karratha, is charging ahead. There is a shopping centre, school, college and sport centre, and the hospital at Port Hedland is being relocated to South Hedland – a sure boost for the local economy. “During the recession, prices went down but rents didn’t,” says Peter Dunning of Ray White. “Investors came in droves and there was a period last month when we sold a huge amount of stock overnight, so now there is undersupply in the market.” Dunning forecasts that confidence will increase after Christmas and prices will start to creep back up in the New Year. “The rental returns are currently sitting somewhere between 10–11%,” he says. “When you consider that most people’s mortgage repayments are around 5–6%, that’s a great position to be in.”

Location STRAHAN SADADEEN KINGSGROVE HILLWOOD HENLEY BEACH BARRABA GREENWICH AUGATHELLA EUSTON JOSLIN LOCKHART ST ANDREWS TRINITY PARK WANDOAN NOBLE PARK NTH BEXLEY NORTH DURAL PEPPERMINT GRV LONGWARRY RAWORTH THE GARDENS PROSERPINE SEDDON TENNYSON AGNES WATER HOBART PORT VICTORIA BURWOOD BIRCHGROVE ALBION

State Type TAS NT NSW TAS SA NSW NSW QLD NSW SA NSW VIC QLD QLD VIC NSW NSW WA VIC NSW NT QLD VIC SA QLD TAS SA VIC NSW VIC

HOUSE

UNIT UNIT HOUSE

UNIT HOUSE

UNIT HOUSE HOUSE HOUSE HOUSE HOUSE

UNIT HOUSE

UNIT UNIT UNIT HOUSE HOUSE HOUSE

UNIT UNIT UNIT HOUSE

UNIT UNIT HOUSE

UNIT UNIT UNIT

Growth 50% 48% 48% 47% 46% 45% 44% 44% 44% 42% 42% 42% 41% 41% 41% 41% 41% 40% 40% 40% 39% 38% 38% 38% 37% 37% 37% 36% 36% 36%

All information from RP Data, July 2009

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Property | Q&A

Ask

the experts

Our panel of experts give advice about when the best time to invest is, capital gains tax issues when converting a principal place of residence to a rental, and investing in Melbourne Best time to invest

My husband and I would like to invest, but are not sure about the timing. We are about a year away from paying off our mortgage for our own home. Should we wait until we have paid off our mortgage? Or should we buy an investment property now since interest rates are so low? Could you also please

The experts Margaret Lomas

is director of Destiny Financial Solutions, a qualified financial advisor, and author of a number of books about property investing. She is also the host of Your Money Your Call and Property Success with Margaret Lomas, airing on SkyNews Business at 8:30 p.m. Sunday nights. Visit www.destiny.net.au

Michael Yardney

is director of Metropole Property Investment Strategists and author of a new book Thriving, not Just Surviving, in Changing Times. Visit www.metropole.com.au

Eddie Chung

is a property partner at BDO Kendalls, focusing on tax planning strategies for property portfolios and specialises in providing business and taxation advisory services to a wide range of clients. He can be contacted on (07) 3237 5999 or via email eddie.chung@ bdo.com.au

Rob Farmer

is CEO of Australia’s largest Property Management Group, RUN Property. Rob is passionate about investing in property and bringing Property Management into the 21st Century. www.run.com.au

let us know what you think of Defence Housing as investment?

Deciding when to invest is a personal matter, and there are many factors you need to consider. Firstly, your present financial circumstances must be taken into account – are you managing on your current budget? Can you manage any interest rate rises without stress? Do you feel financially able to commit some funds to an investment plan? The next thing to think about is your own risk profile. All investments carry risk – some more than others. You need to decide what your own attitude to risk is. This also helps you once you get to the property selection stage, if you do decide to go ahead. All property types have different levels of risk, and you must be aware of what they are so that you can match a property to your own personal needs for safety, income and growth. If you feel you are financially stable, you know your risk profile, and you also have a suitable amount of equity in your own home (and it sounds like you do) then now is really a very opportune time to buy. Waiting may not achieve anything for you except delay your exposure to additional growth assets by a year. But please don’t fall into the trap of believing that now is a good time to buy because the interest rates are low – they can easily increase (and rapidly too), something you must be prepared for. The reason that now is a good time is because supply is short, demand is strong and rental returns in some areas are very good. These factors make the prospect of buying today and receiving both rental and values growth in the short-term highly possible. As for Defence Force property, please remember that a rent guarantee should not be the motivating factor for a purchase. Underneath that guarantee

is still a property, and that property must satisfy the important criteria which makes up a viable investment. Once you have chosen a property which possesses all of the criteria to make it a good investment, then a rent guarantee is simply icing on the cake. Be careful that you do not let marketing tools such as rent guarantees make you overlook the hard work you have to do to select the right property. – Margaret Lomas

First-time investor

I’m 26 and want to buy an investment property, as I live with my boyfriend who owns his own home I and want to enter the property market myself. I am on a salary of $60K plus super, have $10K in savings and no debts. If I purchase a property with a 90% loan, rent it out and take advantage of negative gearing, is this a good investment for the long term? Also, I intend on having children in the next five years, so I would probably be on maternity leave for one year. Is there any way I can halt repayments during this time?

Firstly, let me congratulate you on wanting to take action. One of the biggest problems people make when investing is that they don’t do it! It is so easy to find ways to delay. In my experience, it is somewhere between your current age and early 30s that people reach the ‘courage’ or ‘deposit’ stage of investing and look to take action. Property has been proven to be a stable, long-term investment and asset class over and over again – in comparison with many other investments. The key to successful property investing is the careful balance between cash flow and capital growth – particularly in regard to your plan of having children in the next five years. Implementing a well thought out plan is of the upmost importance, and I would encourage you to give thought to the following points: • What does your cash flow look like with a change of circumstances, including interest rate hikes or www.yipmag.com.au

Property | Q&A

starting a family? Be clear on the risks and have a plan for them should they arise. • What agreement do you have with your boyfriend around asset protection and what is your understanding of how defacto/marital law affects your investments? • What finance structure will best support your investment, both now and into the future? • What resources will you use to determine the best location and type of property to invest in to achieve your capital growth and cash flow requirements? • How are you going to decide where and what to buy, and how can you make sure you don’t make an emotional or ill-informed decision? By doing thorough research and understanding how cycles move, there are some great investment property opportunities you could take advantage of right now. I would strongly encourage you to find an

Property has been proven to be a stable, long-term investment and asset class over and over again – in comparison with many other investments expert group or adviser that will support you with your cash flow, identify where the hot spots are and what the best course of action for you is. In regard to halting payments while you are on maternity leave, there are a range of options. A lot has changed

in recent times with financing, and I would strongly encourage you to speak with a good mortgage broker who can help work through your specific circumstances and give you a better feel for what you can achieve. Happy investing! – Rob Farmer

This page cannot be re-produced electronically

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Property | Q&A

CGT when moving from PPOR to IP

I am considering selling my principal place of residence – which is capital gains tax free – and moving into my investment property. This property has been owned and negatively geared for about 10 years. Can I live in the property for a period of time and avoid capital gains tax when I sell in the future, or will the time be assessed on a pro-rata basis?

In this circumstance, the eventual sale of the property will attract pro rata capital gains tax (CGT) based on the period during which the property was available for rent relative to its entire ownership period. In other words, the longer you live in the property before it is sold, the lower the CGT payable. By way of an example, let’s assume the property is eventually sold for a price that creates a capital gain of say $500,000. If the property has been rented out for 10 years, and you move into it and live there for another five years, the apportioned taxable capital gain will be calculated as $500,000 × 10/15 years = $333,333. Assuming that you are eligible for the 50% CGT discount, and pay tax at the marginal tax rate of 30%, the tax payable will be $333,333 × 50% × 30% = $50,000. However, if you live in the property for 15 years before the property is sold, the apportioned taxable capital gain will be $500,000 × 10/25 years = $200,000. Again, assuming that the 50% CGT discount applies and a marginal tax rate of 30%, the tax payable will be $200,000 × 50% × 30% = $30,000. In calculating the CGT, people are often not aware that the holding expenses incurred and attributable to the property (eg, rates, interest, insurance, repairs and maintenance, etc) that have not previously been claimed as a tax deduction may be added to the cost base of the property. This is provided the property was originally purchased after 20 August 1991, which may also help in reducing the CGT bill. The capital gain is generally calculated as the eventual sale price less the cost base of the property. – Eddie Chung

There is no doubt that Melbourne property values have risen recently. A five-month surge in house prices has undone the damage caused by the GFC Investing in Melbourne now

I’ve just read that property values are rising in Melbourne. Have I missed the boat? I’ve been very reluctant to get in because I’m waiting for the First Home Owner Grant to wind up. Looks like it has cost me some good deals, based on the latest data. Where can I get a reasonable deal? I’m looking for a two-bedroom unit close to the city. Thanks, Chris

Thanks for your question. There is no doubt that Melbourne property values have risen recently. A five-month surge in house prices has undone the damage caused by the global financial crisis. So far this year, Melbourne prices have soared the fastest in the nation, jumping 6.1% in the first five months of the year. This was in part caused by first homebuyers, but more recently investors and established homebuyers have come back into the market. Your idea of buying a near-city

two-bedroom apartment sounds good. They make great investments, and even though values have risen recently don’t let that deter you. Prices will continue to rise due to our rising population, improving economy, low vacancy rates, low interest rates, increased affordability and shortage of stock. You ask where you can get a “reasonable deal.” Sure, you make your profits when buying a property, but it’s not necessarily by getting a good deal or by buying cheaply. You make your profits by buying the right property in the right location. One with some scarcity value that will ensure it is in continuous strong demand by both owner occupiers and investors. While price is important, buying the right property is more important. – Michael Yardney Got a property question you need answered? E-mail your questions to editor@yipmag.com.au www.yipmag.com.au

Invest | advice

The importance of getting personalised advice Andy Gale, secretary of Property Investment Professionals of Australia’s (PIPA) explains what to look out for when seeking property investment advice

f you are a property investor, you will probably be presented with a range of products, services, and information. Those who choose to market this to you will comprise of a variety of people – from the media, real estate agents and property marketers through to property investment companies and advisers. The tricky part for you is deciding whether you are receiving bona fide advice, or simply propaganda from those wishing to sell you property. While the property investment industry remains unregulated, you can protecting yourself by understanding where in the Corporations Act the advice you are receiving might fit (if regulation were to become law). In essence there are two main categories:

General advice General advice doesn’t take into account your personal circumstances. Items considered to be in this category would include media, both print and digital, brochures and other items which market a product, and some forms of education. The information is usually directed at a broad audience. This type of advice is generally accompanied by a disclaimer known as a ‘general advice warning’. This warning

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may also be used when industry experts are answering questions via media outlets. General advice will be important to you, as it can allow you to obtain property investing knowledge and market information without committing to an actual product or service. To utilise such knowledge you will need to establish your own position, risk profile and investment goals – which will in turn create the basis to develop your own property investment plan. We strongly suggest that you use a suitably qualified person or organisation, such as a PIPA member, to do this.

Personal advice Personal advice considers your personal situation and makes recommendations which take these details into consideration. Financial planners, property investment advisers, property mentor/ educators, property marketers and even buyers’ agents who make recommendations after considering your position and goals are providing personal advice. PIPA’s code of conduct requires its members to deliver property advice in a manner consistent with that of

regulated products such as insurance, superannuation and shares. This involves: • establishing your financial position • completing a risk profile • establishing your financial goals • providing a written statement of advice • confirming your understanding of the advice document As such seeking advice from PIPA members will ensure that you are obtaining advice which has your personal interests at heart. In order to protect yourself, you should: • Seek out a suitably qualified professional to assist you establish your own financial position, risk profile and investment goals. • Establish the credentials and qualifications of the individual providing the information or advice. • Evaluate the context of the information. Is it general or personal advice? Is this the sale of a product or service, is it opinion expressed by an individual, or is it a statement of fact or is it professional advice? Knowing how to distinguish general advice from personal advice will help you to evaluate how relevant the information is to you. PIPA is an independent industry association for property investment professionals where members adhere to a strict code of conduct which ensures best practice. Visit www.pipa.asn.au and click on ‘consumer information’ for further details on how to be protected when making a property investment decision.

Tax | Q&A

Your tax questions answered Our resident tax experts Chan & Naylor Accountants are on hand to answer any tax queries you have regarding your property investments and wealth creation strategies. Email your taxing questions to editor@yipmag.com.au Tax deduction on borrowed deposit

I’m considering purchasing an off-the-plan investment property soon with a settlement period of approximately 15 months (October 2010). I plan to borrow the 10% deposit money from my bank. It is my intention to have the property available for renting out once it is completed, however, I have no control over the actual completion date. The sunset clause in the contract is in force for 3.5 years from contract signature. Do you believe the interest on the borrowed deposit money can be claimed as a tax deduction even though the property will not produce any income in this 2008/09 financial year? My understanding is that the ability to claim a tax deduction relates to the purpose for which the money is borrowed, which in this case would be for an investment property. Your advice would be appreciated. Regards, Gerry

You are correct in stating that the purpose of the loan determines the deductibility of the loan and that the type of security you provide to the bank is irrelevant. However, in your case it’s actually the ‘intent’ that will determine the deductibility of the interest. If your ‘intention’ was always to rent the property out to a tenant when complete, than the interest is tax deductible. Yes, but how does one prove ‘intent’?

The tax experts

Ed Chan, David Naylor and Ken Raiss

Chan & Naylor is an accountancy firm that specialises in the areas of asset protection, wealth creation through property investing, estate planning and tax planning. The company ranks in BRW’s top 100 accountancy firms in Australia. For more information, phone (02) 9391 5400 or visit www.chan-naylor.com.au

Naturally, if a tenant has taken residence at completion then there is no debate and the interest for the whole period whilst the property was being built is then tax deductible. The deduction can be claimed each year whilst the property is being built even though there is no rent being received. It only complicates matters if you change your mind and decide to sell the property before it got rented out. This makes the task of proving that your ‘intent’ was to rent out the property upon its completion much more difficult. Also, should you sell the property after a period of not being able to secure a tenant, then the task of proving that your ‘intent’ was always to lease out the property is made that much more difficult also. In this case, signing a residential lease agreement with the agent to lease out the property or placing advertisements in the paper for a tenant would go a long way to proving ‘intent’. If you cannot prove ‘intent’ then the interest is ‘capitalised’, meaning it’s added to the cost of the building and upon sale, and it forms part of the cost base of the property. This reduces the capital gain made and reduces your capital gains tax also.

Renting out PPOR and living in IP

My partner and I are purchasing a property in Queensland with the intention of using it as an investment property. However, our circumstances have since changed and we are now planning on renting out our PPOR and living in our investment property for 1–2 years. Will we still be able to claim all the tax benefits on the PPOR? Will we be exempt from CGT on the investment property? If, eventually, we rent out the investment property, are we able to claim any tax benefits? Kind regards, Reagan

Generally speaking, the main residence tax exemption only applies if you sell the dwelling, having lived in it for the whole period you owned it. You may however choose to treat the property as your continuing main residence for tax purposes for a period of up to six years if you move out and rent it. You can only treat one property as your main residence for tax – you choose which one. Therefore, if you move out of your PPOR and move into the investment property (IP) you choose which one you will treat as your main residence for tax purposes. If you choose to retain your PPOR as the main residence while living in the IP, then after two years if you move back in the PPOR and sell later then the whole profit will still be exempt. If you sell the IP, the whole profit will be taxable and because you owned the IP for more than 12 months you would be entitled to the 50% general CGT discount. While living in the IP, you lose the benefit of claiming any expenses as a tax deduction (any expenses associated with the PPOR are deductible while it is rented) and when you move out of the IP, the expenses become deductible again. If you choose the IP as your main residence while living in it, then on sale the proportional period will be exempt from tax on sale, but for that same period you would lose part of the exemption on your PPOR when you sold it. www.yipmag.com.au

Tax | Q&A

Claiming tax on interest

My husband and I jointly own several IPs and split all income and expenses for these units equally between us for tax. We’re looking to buy another property, but it will be in my name only. The idea is that this new property will be cash-flow positive and therefore help me to absorb my share of the negative equity on some of the other properties which is currently being wasted (I’m not working and therefore have very low net income for tax). Our lender agrees to the property being purchased in my name only, but on condition that the loan is in joint names. Would the Taxation Office have a problem with me claiming 100% of the interest on this loan on my tax return while the loan itself will be in joint names. Regards, Keisha

The contract of sale must be in your sole individual name. If the bank insists that you borrow in both names for security, then the ATO in practice allows you to still claim 100% of the interest. We would normally also get our clients to complete an on loan agreement which formalises the arrangement between you and your husband where you are paying 100% of the interest. This document does not go to the bank and they are not normally advised of it as the bank still has, for security and guarantee purposes, both you and your husband.

Renovations

Can I get a tax break for improving/renovating my rental property? I’m planning to renovate the kitchen and bathroom but am unsure what I can or cannot claim. Please advise, Emma

If you’re just replacing a small part, ie painting doors or replacing a set of taps, then this would be seen as replacing like with like and expensed in the year. If, however, you’re completely (or primarily) replacing the kitchen/bathroom then this would be a capital improvement and subject to depreciation over its life. A quantity surveyor produces the depreciation schedule to show the amount that can be claimed per year. It may also be beneficial for the quantity surveyor to prepare a scrapping schedule which would identify the written down value of what you are ripping out, and you can then expense this value in that year. The scrapping schedule needs to be completed before you commence demolition. If you need to borrow funds for the work, then the interest expense would be deductible with the borrowing expenses also deductible over five years for either a repair or a complete renovation. Costs of the scrapping and depreciation schedules are also expensed. If you have a tax question for Chan & Naylor Accountants, e-mail it to: editor@yipmag.com.au The advice contained in this report is general in nature and its preparation has not taken any individual circumstances, objectives and financial needs into account. Readers are advised to seek appropriate advice from licensed professionals before embarking on any investments.

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Tax Legal | Q&A| Q&A

Legal Q&A Your legal questions answered Our property lawyers and conveyancers answer questions on releasing deposits, compensation from road works and how to deal with the neighbour’s property When to release deposit to vendor I’ve finally found my dream property. The vendor has accepted my offer and I have finance approval. My lawyer now says that the vendor wants to use my deposit. Should I release my deposit to the vendor for them to use?

Often in contracts in NSW there is a clause in the contract that states that the deposit, or part of the deposit, is to be released so the vendor can use those funds either: • as a deposit on their purchase • to pay stamp duty on their purchase • (in the past, the clause may have stated the deposit can be used to pay vendor duty, however vendor duty is now abolished in NSW) • or for all of the above reasons The vendor has asked you to agree to release (part of) the deposit. The contract says that the money will be used to pay (part of) the deposit on the purchase of another property by the vendor or stamp duty. You are not obliged to agree. Generally, it is advisable not to release your hard earned deposit for these reasons: David Singh 1. Your money in the is a solicitor and director of hands of the vendor Conveyancing & is an interest-free Property Lawyers Pty Ltd, a Sydney-based loan, secured only firm of solicitors. to the extent that the He also lectures in property law at The money released is a Property School and is charge against the a director of Quick and Easy Home Loans Pty Ltd. property under the He may be contacted on (02) 9232 0050. For contract. further information on the process of buying and selling property, go to www.conveylaw. 2. If, for any reason, com.au or e-mail info@conveylaw.com.au. the purchase does not go ahead (even where contracts Geri Forsaith Geri Forsaith is a are exchanged) you licensed conveyancer may have serious with Sydney Property Conveyancing. For difficulty getting more information visit your money back – www.sydneyproperty conveyancing.com.au. especially where the vendor has spent it or committed the 18

money elsewhere as a deposit. You may even need to take expensive legal action to recover your money. 3. There are usually other sources of finance available to a vendor (eg, a bank loan, bank guarantee, or a deposit guarantee bond). You should fully assess the risks before agreeing to release the deposit. It is not a decision to be taken lightly. As a rule of thumb, I always recommend not to release the deposit. In fairness, I must say that in rare cases where the deposit has been released, my clients have not had a problem and their purchase matter has settled on the date due for completion under the contract. That said, there is always a risk of difficulty that is best avoided. At a particular point in time after you have acquired your investment property, you may wish to sell that property. One additional point is, if the sale is subject to GST, which usually applies to the sale of commercial properties, it would be worthwhile obtaining taxation advice before the deposit is released. This is because in some instances where the deposit is released, the GST, which is an amount that is usually 10% of the price and the full amount of the deposit, is payable to the ATO as GST, even if the sale hasn’t settled. Here is an example where the vendor may find themselves in difficulty. In some cases, the vendor and purchaser agree to a deposit of 5%. If the 5% deposit is released to the vendor, and GST is payable, then the vendor may find that they have only 5% of the value of the property available yet their GST liability is of a sum at least equal to or greater than 10% of the value of the property being sold. Usually in the sale of second hand residential premises, GST does not apply, however you should seek specific advice in relation to your situation before you exchange contracts and before the deposit is released. – David Singh

Claiming compensation from government road works I live right along the area where the construction of the massive roadworks to accommodate the new bus way and the proposed new metro and a host of other projects in the area. Can I claim any compensation if my property is damaged as a result of these constructions?

The relevant authority (Roads & Traffic Authority or City Rail, etc) will advise you prior to commencement of works and will request your permission to conduct a property inspection known as a condition report of your property if it is within a certain distance of proposed works. Your property will be photographed detailing any existing defects. If evidence is provided that your property has been damaged as a result of the works you can make a claim for compensation. Who should I direct my claims to? Your claim should be directed to the relevant authority responsible for the works, ie, the Roads & Traffic Authority, City Rail, etc. Your claim should include details of owner, effected property address, date of works carried out and details of resultant damage. www.yipmag.com.au

Legal | Q&A

What else can I do to protect myself? It may be difficult to prove that the construction works have damaged your property, so it is wise to keep a file including property inspection report, correspondence from related authorities, dates of work commencement, photos and dates of changes to your property during works and any communications you may have with construction authorities. This information will be imperative if you require the services of a solicitor to assist you if a legal dispute arises. Do I need to get some sort of a building report? A property inspection report should be carried out by the relevant authority conducting the works but you can arrange an independent report before commencement of the construction works with a licensed inspection company, such as BRC Property Consultants. The report will present any current defects, either structural or cosmetic on your property and will serve as a ‘before and after’ check if there are any effects as a result from the works. – Geri Forsaith

Protecting neighbour’s property when subdividing I’m planning to subdivide my property and build two townhouses on it. What are my rights and obligations in terms of protecting the neighbour’s property? What are the potential boundary disputes and how can I get around them?

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Before subdividing your property you are required to lodge a Development Application (DA) to your local council for their approval. As part of council process, they will advise the owners of neighbouring properties of the proposed DA who have a specified timeframe during which they are able to lodge their objection (if any) with council. You may need access to your neighbour’s property in order to carry out your works. If an amicable agreement cannot be reached between the parties, you are able to apply through the local court for an access order allowing you to enter the neighbour’s land to carry out works. Make sure that all the people you engage to undertake any part of your building project have the necessary insurances in place and that the certificates are current, in particular, Contractors All Risk Insurance Policy which covers risk to adjoining property and land. Potential boundary disputes may arise due to incorrect placement of fencing or walls. An Identification Survey will clarify the boundaries and dimensions of your land which can be obtained from a registered surveyor. This will also identify any easements or rights of way on the property and also comment on major discrepancies in dimensions and on encroachments by or upon the land. – Geri Forsaith Disclaimer: No magazine article can consider your individual circumstances or personal needs in relation to your sale or purchase transaction. You should seek advice for your particular circumstances before entering into any transaction. www.yipmag.com.au

Invest | rising market

Spotting opportunities in a

rising market Recent strong growth achieved by Australia’s residential property market has spurred investors into action. Your Investment Property looks at the best opportunities emerging as the market heats up

he stunning growth in residential property values across all capital cities was an unexpected but welcome end to what has been one of the toughest years for property in decades. The residential market has once again proven that it’s far more resilient than the naysayers would have us believe. “Some people, who aren’t property specialists and don’t really have any feel for real estate, have been talking about a 40% drop in values. That hasn’t happened. It was never going to 22

happen,” says Terry Ryder, author and founder of hotspotting.com.au. The federal and state governments’ First Home Owner Grant Boost has provided strong support for the lower end of the market. Low interest rates have resulted in major affordability improvements, fuelling property growth coming out of the slump. “There are fears that once the grant ends, this market is going to go backwards,” says Jason Anderson, senior economist, BIS Shrapnel. “I think what people are starting to understand is

that the grant is one part of it, but the interest rates are actually by far and away the dominant element.” While interest rates remain at 40-year lows, investors are benefiting from lower holding costs and increased buying power to take advantage of lower prices across the country. Auctions clearance rates around the country have returned to normal levels and transaction numbers are rising. “The competition and confidence seems to have come back to the market. I think confidence is probably the key from the buyers’ side,” says Pauline Goodyer, principal of Sydney agency goodyerDonnelley. Ryder agrees that confidence is returning, but he warns that the recovery will be slow. “During the last 10 years, it was common for areas www.yipmag.com.au

Invest | rising market

Population projections

4,334.0

5,358.2

Melbourne

3,805.8

4,861.7

Brisbane

1,857.0

2,465.6

Adelaide

1,158.0

1,391.8

Perth

1,554.1

2,112.1

Hobart

207.4

228.2

Darwin

117.4

142.4

ABS House Price Indices – 8 Capital Cities

ABS House Price Index Value

250.0

Sydney Melbourne

200.0

Brisbane 150.0

Adelaide Perth

100.0

Hobart 50.0 Darwin Canberra

ar 20 0 M

ar 20 0

ar 20 07

ar 20 0

ar 20 05

ar 20 0

ar 20 03

ar 20 02

0.0

Total return from housing vs other assets $1,638,400

Value of $100 invested in 1926

$409,600 $102,400

Aust residential property (11.55% pa) Aust bonds (7.0% pa)

$25,600 $6,400

Source: ABS, REIA, Global Finance Data, AMP Capital Investors

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Sydney

Source: ABS

Despite a softer outlook in general, there are good investments to be found in the recovering market. However, finding these pockets of growth means investors need to adopt a tight investment strategy and diligently research specific areas. “The whole notion of investment is based on well documented and very stable principles. You get the location right first. The second thing to look at is the style of the building,” says Wakelin. Wakelin targets properties in inner urban areas in major capital cities or major regional centres, with established buildings from the 1880s through to the 1960s/70s. George Kantafaris, director with Metropole Property Strategists, also prefers inner city locations and avoids metro outer rings and regional centres. ”I’m not saying that’s wrong, it’s just our philosophy. We stick to the tested inner CBD areas,” says Kafantaris. For Ryder, it’s all about affordability. “I think the simple formula is an affordable area with rail connections to the centre of the city, and with a ‘big kicker’,” says Ryder. By ‘big kicker’, Ryder means: fundamental changes in private investment; government spending on infrastructure; and population demographics that are dominant enough to change an area for the better, and drive capital growth in the process. “My strategy at the moment is to look for cheap areas to buy where the income will take care of all the costs, so it is cash flow neutral. But it must also be in areas where there are identifiable reasons for property to grow,” says Ryder.

30 June 2026 (1,000s)

Source: ABS

Digging for gems

30 June 2007 (1,000s)

Capital cities

to grow at an average of 12% to 15% capital growth. I don’t think we are going to see those sorts of growth rates in the next five years.” Ryder adds that in a normal property cycle, recovery usually starts at the top and filters down. “This time it has done it in reverse because of low interest rates, softer prices and some government stimulus. It really has been very active at the lower end and it’s going to filter up from there,” he says.

Aust shares (11.5% pa)

$1,600 $400

Aust shares (5.4% pa)

$100 1926

1936

1946

1956

1966

1976

1986

1996

2006

Invest | rising market

 Sydney

1. CBD investing With Australia’s population heavily skewed to major metropolitan areas, some experts say the CBD offers the best buying for investors. “Our view is the best opportunities are those close to infrastructure, as close to the CBD as you can get, close to railway lines and near good schools. Also look for houses that have got the potential to be renovated,” says Cameron Kusher, senior research analyst at RP Data. Because of major housing supply shortages in CBDs and recent uncertainty in the economy, CBDs are seen as the economic anchor for investors. “The inner city areas around Australia’s capital cities tend to be great long-term investments for the simple fact that they have a very finite level of supply,” says Tim Lawless, national research director with RP Data. “Virtually all the land is already developed, making the land component of the properties all the more valuable. What’s more, as population growth continues to power ahead, the inner city metro areas become even more desirable because of their relatively short commuting time and wide range of transport and social options," he adds.

Median unit price

12 month growth

Average annual growth

Gross rental yield

$560,000

Source: RPData

hough Sydney median house prices grew by around 6.74% per annum last decade, there are signs that growth is picking up again with the latest data showing median house values climbing by 6.56% during the July quarter. Sydney has a population of 4.33 million, and that’s set to grow by 25% to 5.35 million by 2026, according to the Australian Bureau of Statistics. Sydney currently has the highest dwelling undersupply of all capitals with an estimated lag of two years worth of building. Though Sydney is expanding into outer suburb regions, the lack of government infrastructure and transport spending means strong demand pressure in the middle and inner rings continue to support price growth. Over the coming five to 10 years investors will see medium to high density property opportunities as planners rezone close to transport nodes with a long-term housing demand overhang. BIS Shrapnel is forecasting the median house price in Sydney to climb by 19% over the three years to June 2012. “NSW will lose its 'basket case' tag. Near term, the financial shock is hitting finance and business services. The weakness of investment this decade – the primary cause of NSW’s dismal growth performance – will be reversed with a strong pick up in residential construction and infrastructure spending in the process,” it says in a report.

h Area to watc Pyrmont

Pyrmont sits opposite the Sydney CBD and enjoys harbour views on three sides of the peninsula. Pyrmont was previously dominated by wharves and warehouses before substantial urban renewal commenced in 1994, according to Cameron Kusher of RP Data. “The result of this urban renewal has been strong growth in population and median prices; it has become an area recognised as a desirable place for residents,” he says. Kusher’s research shows that between 1994 and 2008, the median unit price within Pyrmont has grown by 7% annually – with prices increasing by a total of $373,000. “During this period, there have only been three years when the median unit price has fallen. Over this same period, there have been 622 annual unit sales. Again, it’s not just prices which have recorded strong growth. Over the 11 years to June 2007, the population of Sydney’s inner west (of which Pyrmont is a part) has grown by 17,130 persons or by 5% annually. This strong growth has not just resulted in significant residential development, but has also been accompanied by significant retail, social, and dining amenity – along with a light rail train service and a number of commercial office developments which have followed the increased residential community in the area,” says Kusher. www.yipmag.com.au

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Melbourne

elbourne’s healthy growth over the last decade has seen prices rise annually by 9.83%. But during the past year it has slowed to just 3.69%. Like Sydney, Melbourne has strong corporate head office representation. However, Melbourne also has a large manufacturing sector – as well as Australia’s largest port. Melbourne also has a significant undersupply, estimated at around six months of building. Melbourne’s population is currently 3.8 million, but is expected to grow by 32% in the next 20 years. As with Sydney, solid population growth will ensure property prices are fully supported.

h Area to watc North Melbourne Median unit price

12 month growth

Average annual growth

$385,000

10%

Gross rental yield 5%

Located less than three kilometres from the CBD, North Melbourne sits right at the doorstep of the CBD and is just next to prestige suburb, Carlton. Carlton is the trendy suburb where everybody wants to live, because of its cultural features. North Melbourne has many similar qualities in terms of streetscapes and historic terraces (and tucked away streets) but it doesn’t have the same high prices of Carlton. North Melbourne has the hospital and is near a major university precinct. There are a lot of factors driving demand for

Perth

erth's population is set to grow by 46% in the next 20 years. Its current population is 1.6 million. While the city's economy took a battering during the past two years as a result of the global financial crisis, Perth remains Australia’s resources capital and home to major mining company head offices. Among metal markets, the world demand for iron ore in the next 20 years will support Perth’s economy. In addition, the LNG projects currently underway are seen as a major catalyst for another housing boom to sweep the WA market. BIS Shrapnel forecasts Perth house prices will rise by 12% over the next three years to June 2012.

North Melbourne is enjoying a regentrification as younger people are being drawn into the suburb due to the area’s relative affordability BIS Shrapnel is forecasting that Melbourne’s median house price will grow by 19% over the next three years to June 2012. “The Victoria economy has been strong, but it has been hit by the downturn in Australian demand. Once the impact of the financial shock has passed, Victoria will resume its solid economic growth performance,” BIS Shrapnel says. 26

accommodation, but North Melbourne tends to get overlooked so it is still not as expensive as its neighbours. North Melbourne is enjoying a regentrification as younger people are being drawn into the suburb due to the area’s relative affordability. Shopping strips such as Errol Street have become upmarket and feature trendy cafes and retail outlets. www.yipmag.com.au

Invest | rising market

Brisbane

risbaneâ&#x20AC;&#x2122;s population over the next 20 years is expected to surge by 44% from current levels of 1.9 million, which means housing supply will become even tighter. Brisbane dwellings are significantly undersupplied, with a lag of nine building months. The expected housing demand brought by strong population growth will continue to drive prices upwards, but Brisbane will see significant amounts of surrounding land rezoned to housing to accommodate this need. In the last decade Brisbane recorded 11.69% average annual growth. This year prices grew only by 1.04%. However, BIS Shrapnel is forecasting the median house price in Brisbane to rise by a total of 16% over the three years to June 2012.

the older apartment stocks in the area havenâ&#x20AC;&#x2122;t been able to keep up with the new residential development in and around the city. In addition, Spring Hill cannot offer river frontage or nearriver locations which are available in some of the other inner-city unit precincts. Units in Spring Hill have been fetching around $360,000 and rent on average for $440, according to RP Data. This provides a typical return of 6% compared with the Brisbane average of about 4.15%. Good demand from the student market and from short-term corporate renters supports the rental market in the suburb.

h Area to watc Spring Hill Median unit price

12 month growth

Average annual growth

Gross rental yield

$360,000

-5%

Situated within the two-kilometre radius from Brisbane CBD, units in Spring Hill remain affordable because www.yipmag.com.au

Most affordable suburbs within the inner city (five kilometres from CBD) Distance from city centre (km) 4.8 3.6 2.9 4.5 17

39 35 51 22 12

$475,000 $505,000 $550,000 $573,000 $627,500

Change in median price (12 mths) 1.10% -2.90% -3.90% 6.10% 9.41%

3.8 4.7 3.5 3.9 3.9

41 16 26 40 101

$542,050 $560,000 $687,000 $689,000 $696,000

-22.60% 0.90% -2.80% 1.30% 14.10%

6.30% 8.30% 6.40% 7.00% 9.10%

$640 $495 $635 $580 $600

NT NT NT NT NT

3.3 1.9 3.3 3.1 2.2

19 26 28 11 10

$585,000 $642,500 $656,000 $700,000 $867,500

n.a 19.10% 8.90% -0.70% 8.30%

n.a 9.40% 11.60% 16.70% 12.90%

n.a $510 $650 n.a n.a

Brisbane Brisbane Brisbane Brisbane Brisbane

QLD QLD QLD QLD QLD

4.9 5 4.5 4.7 4.5

130 32 79 117 184

$504,500 $525,000 $532,000 $540,000 $570,500

-9.90% -9.50% 0.90% -1.50% -6.50%

14.50% 13.40% 13.10% 13.50% 13.40%

$395 $425 $390 $370 $395

WEST RICHMOND RICHMOND RENOWN PARK DEVON PARK COWANDILLA

West Torrens West Torrens Charles Sturt Charles Sturt West Torrens

SA SA SA SA SA

3.7 3.7 4.1 4.3 3.9

46 46 13 13 13

$380,000 $380,000 $382,000 $385,000 $385,000

-1.60% -1.60% 7.90% 13.20% 10.00%

12.60% 12.60% 13.80% 10.00% 12.90%

$335 $335 $310 $290 $320

MOONAH LUTANA NORTH HOBART BELLERIVE SOUTH HOBART

Glenorchy Glenorchy Hobart Clarence Hobart

TAS TAS TAS TAS TAS

4.6 4.9 1.4 4.1 3.5

97 42 39 51 68

$251,000 $270,000 $335,000 $350,000 $358,000

2.40% 8.70% 3.00% -4.10% -6.00%

14.70% 15.70% 14.30% 12.00% 14.10%

$280 $275 $350 $355 $310

FLEMINGTON KENSINGTON COLLINGWOOD ABBOTSFORD NTH MELBOURNE

Moonee Valley Moonee Valley Yarra Yarra Melbourne

VIC VIC VIC VIC VIC

4.6 3.8 3.1 4.3 2.4

51 133 51 45 60

$530,000 $530,000 $570,000 $571,000 $593,350

-3.50% -2.00% 1.60% -10.40% -4.80%

9.70% 9.30% 12.40% 9.40% 11.20%

$380 $400 $450 $460 $450

LATHLAIN WEST PERTH VICTORIA PARK MAYLANDS KENSINGTON

Victoria Park Perth Victoria Park Bayswater South Perth

WA WA WA WA WA

4.9 1.8 4.1 4.3 4.4

33 13 31 52 47

$553,000 $580,000 $640,000 $655,000 $705,000

-10.20% -24.20% 2.40% -2.60% -7.70%

12.50% 14.40% 14.60% 15.40% 11.70%

$370 n.a $405 $400 $420

Suburb

Council area

DOWNER DICKSON AINSLIE LYNEHAM BRADDON

Canberra Canberra Canberra Canberra Canberra

ACT ACT ACT ACT ACT

State

DARLINGTON WATERLOO FOREST LODGE CAMPERDOWN REDFERN

Sydney Sydney Sydney Sydney Sydney

NSW NSW NSW NSW NSW

WOOLNER STUART PARK PARAP BAYVIEW LARRAKEYAH

Darwin Darwin Darwin Darwin Darwin

MORNINGSIDE SEVEN HILLS GREENSLOPES ANNERLEY COORPAROO

No. of sales

Median price

Change in median price (10 years) 12.80% 12.90% 11.40% 14.20% 11.40%

Median rental rate $445 $435 $470 $435 $500

Regional markets showing the most rapid growth $366,250 $397,500 $417,500 $395,000 $410,000

Change in median price (12 mths) 1.50% 8.20% -2.90% 6.80% -6.60%

1,288.9 26 26.4 876.3 1,286.7

51 22 20 58 58

$379,000 $507,500 $468,750 $130,000 $285,250

16.60% 9.10% 18.70% 36.80% 6.40%

18.00% 16.70% 12.00% 11.70% 10.90%

$420 n.a n.a n.a n.a

QLD QLD QLD QLD QLD

453.6 932.1 229.6 518.7 114.3

38 21 23 27 24

$262,000 $251,500 $415,000 $187,000 $288,750

-6.40% 17.00% 28.10% -6.50% 20.30%

33.10% 25.70% 21.70% 21.50% 20.80%

$410 $320 $220 $225 n.a

Light Peterborough Unincorporated Alexandrina Coober Pedy

SA SA SA SA SA

56.4 218.5 276.7 65.1 760

36 54 25 61 46

$248,500 $99,250 $270,000 $340,000 $85,000

10.90% 6.70% 9.60% 9.70% 24.10%

19.30% 18.40% 17.00% 16.90% 16.40%

n.a $125 n.a $250 n.a

ZEEHAN SHOREWELL PARK MAYFIELD GEEVESTON QUEENSTOWN

West Coast Burnie Launceston Huon Valley West Coast

TAS TAS TAS TAS TAS

196.8 234.5 166.9 48.1 171.2

20 21 26 34 59

$153,000 $165,000 $151,000 $224,000 $90,000

2.20% 11.50% 5.60% 25.10% 13.20%

28.50% 21.50% 20.60% 19.00% 18.30%

$160 n.a $183 $240 $130

YINNAR OUYEN SAN REMO DENNINGTON TERANG

Latrobe Mildura Bass Coast Warrnambool Corangamite

VIC VIC VIC VIC VIC

133.4 390.2 88.5 229.1 187.7

22 25 30 26 29

$184,250 $100,000 $325,000 $302,450 $150,000

2.60% 11.10% -16.10% 6.10% -14.30%

20.40% 19.10% 17.30% 16.90% 16.50%

n.a $125 $240 n.a n.a

LOCKYER DALYELLUP WANNANUP SOUTH HEDLAND MOORA

Albany Bunbury Mandurah Port Hedland Moora

WA WA WA WA WA

386.8 163.7 74.9 1,312.7 149.7

22 109 45 58 23

$294,500 $425,000 $522,000 $495,000 $175,000

0.70% 1.90% -7.40% 15.10% 8.50%

30.60% 29.10% 23.40% 23.10% 20.70%

n.a $350 $315 $1,175 n.a

LATHLAIN WEST PERTH VICTORIA PARK MAYLANDS KENSINGTON

Victoria Park Perth Victoria Park Bayswater South Perth

WA WA WA WA WA

4.9 1.8 4.1 4.3 4.4

33 13 31 52 47

$553,000 $580,000 $640,000 $655,000 $705,000

-10.20% -24.20% 2.40% -2.60% -7.70%

12.50% 14.40% 14.60% 15.40% 11.70%

$370 n.a $405 $400 $420

Council area

ABERGLASSLYN LLANARTH FLETCHER CAMERON PARK EAST BOWRAL

Maitland Bathurst Regnl Newcastle Lake Macquarie Wingecarribee

NSW NSW NSW NSW NSW

State

ARALUEN MCMINNS LAGOON BEES CREEK TENNANT CREEK LARAPINTA

Alice Springs Unincorporated Unincorporated Tennant Creek Alice Springs

NT NT NT NT NT

MOURA COLLINSVILLE RIVER HEADS DEPOT HILL IMBIL

Banana Whitsunday Fraser Coast Rockhampton Gympie

FREELING PETERBOROUGH STIRLING NORTH PORT ELLIOT COOBER PEDY

No. of sales

Median price

Change in median price (10 years) 34.10% 31.40% 29.20% 28.70% 28.00%

Median rental rate $340 n.a $420 $400 n.a

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Source: RPData

Distance from city centre (km) 133 161.4 116.9 113 98.7

52 32 42 99 21

Suburb

Invest | rising market

Pilbara

he Pilbara region is expected to see housing activity ramp up dramatically as the Gorgon LNG project gets underway. The $50bn joint venture between Gorgon and PetroChina is expected to create jobs for 6,000 workers during the peak construction phase of the project. “With such a large injection of capital and human resources, the demand on the local housing market is going to be intense,” says Tim Lawless, national research director, RP Data. Lawless expects half the workers will probably be housed in purpose-built accommodation on Barrow Island. “That means an additional 3,000 workers (not to mention additional demand from the peripheral service industries) are likely to require housing within the communities around the project. Much of this housing is likely to be located in the major townships along the Pilbara coastline – Karratha and Dampier, or even the smaller township of Onslow which is closer to Barrow Island,” says Lawless. The Gorgon LNG project will not be the only one to spur the Pilbara coastal property market, according to Lawless. Woodside Petroleum also has plans to triple the size of its Pluto LNG plant that operates out of Karratha. And Chevron is developing the Wheatstone LNG project at Ashburton which is also on the Pilbara coastline between Karratha and Exmouth. Lawless warns that housing prices in the

2. Outer-ring and regional gems

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The figures from RP Data showed that the regional markets that are showing the highest growth over the long term are generally below $300,000 in price. They are located in areas that are either close to the water (where demand is driven by lifestyle and tourism) or they are in rural locations (which are driven by the resources or agriculture sectors).

Sales cycle, Central Pilbara Coast (primarily Karratha, Dampier, and Roebourne townships) 140 120

Number of sales (rolling 12 months)

$900,000

Median house price

$800,000

100

$700,000

$600,000 $500,000

$400,000 $300,000

Median house price

$1,000,000

$200,000

$100,000

0 Jul 09

Sep 08

Nov 07

Jan 07

Mar 06

May 05

Jul 04

Sep 03

Nov 02

Jan 02

Mar 01

May 00

$0 Jul 99

any investors dismiss the possibility of making money out of outer-fringe suburbs and regional centres, purely based on their locations. The general perception is that areas outside the capital cities do not offer the same level of demand compared to their inner city counterparts. However, Kusher’s research shows that 36% of Australians are now living outside the capital cities, where he believes there are still plenty of opportunities for quality and affordable housing. “The second largest cities offer more affordable properties, and have the benefit of ‘big city’ amenity. This means that they are likely to grow in appeal as linkages with the capital cities continue to improve,” he says. Besides being cheaper, regional centres also have strong working nodes which support a strong rental market. However, investors need to check out the population growth, the diversity and depth of the economy as well as the transport links with the capital city. “I think that in the long term the best growth is in the cheaper areas – that’s what my research shows. But I know it contradicts what a lot of industry professionals say,” says Ryder. Many regional Australian cities are also currently experiencing strong economic growth in the resources, energy and primary industries. “Investors tend to overlook the regional centres. There are a lot of places with very good prospects that tend not to get on the radar screen that have a lot going for them,” says Ryder.

Volume of sales (12 months)

Source: RPData

Invest | rising market

region are high, with the median house price at Karratha and Dampier sitting around $835,000. However, rental rates are even higher at over $1,000 per week for a house. This equates to rental yields that are well above average – often exceeding 10%. Over the five years to the end of 2009, property prices on the Central Pilbara Coast surged by 230%. “These latest agreements could provide the spark that reignites investor interest in Australia’s resource driven-property markets,” he says. For investors, timing is crucial. Lawless points out that buying into a resource driven market early is the key to strong capital gains – and getting out at the right time is also critical. “For those investors who get it right, there are some spectacular gains to be had by investing in resource-driven areas,” he says.

h Area to watc Orange, NSW Median house price

12 month growth

Average annual growth

$275,000

Gross rental yield 5% Source: RPData

Housing activity is also expected to pick up in Orange once the government approves the Newcrest Mining Cadia East project. Located just outside of Orange in NSW, the project will be Australia’s largest underground mine. If approved, the Newcrest Mining Cadia East project will be the state’s largest infrastructure project, injecting $2.2bn into the local economy and requiring 1,300 workers for the construction phase. It will create almost 2,000 direct and indirect permanent jobs, according to Tim Lawless of RP Data. Newcrest Mining’s Cadia Valley Operations already runs two gold and copper mines – the open cut Cadia Hill, and the underground Ridgeway mines. According to the Orange Council website, the Ridgeway Gold Mine is adjacent to Cadia Hill and is recognised in the minerals industry as one of the most efficient underground gold mines in the world today. It has the potential to produce 240,000 ounces of gold and 24,000 tonnes of copper per year over its projected 14year lifespan. “For the conservative investor, these resource driven markets are likely to have a risk profile that falls outside their investment strategy. However, for many 30

investors these markets are likely to be very attractive and should provide above average returns while the resources sector remains buoyant,” Lawless says.

h Area to watc Roxby Downs, SA Median house price

12 month growth

Average annual growth

$410,000

16%

Gross rental yield 6% Source: RPData

The recent financial crisis has taken its toll on Roxby Downs, with investors abandoning the area. However, Flynn De Freitas, principal of Omega Investments, a boutique firm specialising in residential property investment in mining towns, believes the market is poised for a strong rebound once the economy gets back on track. “The fundamentals remain very strong for Roxby Downs,” he says. “A $6bn expansion of the nearby Olympic Dam is planned in the next five years, which will double the town’s population to 10,000. Investors are now returning, sniffing out bargains, and will return in force once evidence of the commodities boom resurfaces.” The expansion project has recently seen an environmental impact statement released that is being considered by the federal, South Australian and Northern Territory governments.

h Area to watc Frankston, Vic Median house price

12 month growth

Average annual growth

$295,000

-2%

10%

Gross rental yield 5% Source: RPData

Ryder believes Frankston in Melbourne has the ‘big kicker’ to drive growth. “Frankston is affordable, is bay-side, and has good rail and road connections to Melbourne. It is also a recipient of a lot of state government and private enterprise money, including a new marina project on the bay. It’s an outer, cheaper area with all the credentials to show growth,” says Ryder. Frankston has a median house price of $295,000, according to RP Data, and average annual growth of 10% for the last 10 years. Gross yield is 5%.

h Area to watc Latrobe Valley, Vic Median house price

12 month growth

Average annual growth

$138,000

11%

Gross rental yield 6% Source: RPData

The Latrobe Valley in regional Victoria is an area Ryder describes as cheap but exciting, especially Morwell and Traralgon, the energy and commercial centres of Gippsland. Morwell is a regional hub with thriving employment in the mining, energy and service sectors, driving demand for housing. Morwell has a population of around 22,000. It is the centre of Victoria’s brown coal mining and electricity production industries. It has three open cut coal mines and a power station. Within a few hours' drive from Melbourne, Morwell is Gippsland’s major cultural centre with the Latrobe Regional Gallery and the fouracre Centenary Rose Garden. Traralgon is Gippsland’s commercial, services, shopping and agricultural centre. It is close to Morwell, and is 160km from Melbourne. It has a population of 26,000. Morwell and Traralgon are about 10km apart and form a strong commercial heartland in Victoria’s energy centre. www.yipmag.com.au

Invest | rising market

h Area to watc Wagga Wagga, NSW Median house price

12 month growth

Average annual growth

$295,000

Gross rental yield 5% Source: RPData

The housing market in Wagga Wagga has performed consistently well over the past few years, which is why Ryder thinks it’s a safe haven. “If you look at price growth for Wagga Wagga it never has a year of price decline. It is a stayer. It just keeps on rising – not spectacularly, but if you are the type of investor who likes safety it’s the sort of place you should consider,” he says. Wagga Wagga’s median house price is $295,000 and it has grown 9% pa for a decade. Gross yield is 5%. “Wagga Wagga is quite a big city, and it’s a regional centre for a very wide area. People go to Wagga Wagga for their education as it has a TAFE and university campuses." "People who live in a 200-kilometre radius retire there because it has very good medical facilities. It has got a multifaceted economy and some of the big impetus comes from the military, the RAAF base – there is an army base outside of Wagga Wagga that is expanding. Those expansions generate economic activity, jobs and demand for housing,” he says.

h Area to watc Junee, NSW Median unit price

12 month growth

Average annual growth

Gross rental yield

$137,000

-2%

12%

For investors who are looking for cheaper properties with potential, the smaller

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Geelong has a strong and diverse economy, being mainly supported by the manufacturing sector villages and towns surrounding Wagga Wagga such as Junee, Uranquinty, Collingullie and The Rock may be a better bet, according to a Herron Todd White report. “At present the mid-range house prices in these areas range from $150,000 to $220,000, and purchasers are able to secure larger blocks with relatively comfortable dwellings." "Recent years have seen an improvement in infrastructure in these towns (ie, new hospital and medical centre in Junee), public transport links to schools are good, and commuting distances to Wagga are easy along well maintained highways. These areas have traditionally been secondary to Wagga. but as prices have continually increased in Wagga, more purchasers are looking further afield and broadening their search area. We anticipate this trend to become even stronger in the nearto medium-term,” the Herron Todd White report concludes.

h Area to watc Geelong, Vic Median house price

12 month growth

Average annual growth

$369,950

11%

Gross rental yield 4% Source: RPData

Geelong is Victoria’s second largest city, located 75km southwest of Melbourne. The area is undergoing strong population growth, increasing by 1.3% or 2,640 new residents over the year ending June 2006. The area also has a strong and diverse economy, being mainly supported by the manufacturing sector – including the Ford Motor Company, Alcoa and Shell Refinery. The region is also the home of Deakin University. The property market in Geelong has gone from strength to strength, with median house prices rising by 24% over the last five years. The median house price at $369,950 represents an affordable market. The median rental rate for a three-bedroom house is at $320 per week, equating to an average gross rental yield of 4%.

Invest | rising market

3. Top end discounts

or investors who can afford to hold large properties in their portfolios, the upper to luxury end offers some of the best buying in the current economic environment. Kusher recommends that if people have the financial capacity to purchase at the top end, now is a good time to break into this market, since high quality properties can still be purchased at competitive prices. “The prestige market has suffered due to few active buyers and a higher than normal amount of stock on the market. This has led to price falls and reductions in the asking price of many homes that are being advertised for sale,” he says. However, there are signs that these bargains may not last for long. According to the latest data from RP Data, the most affordable 20% of properties, the middle of the market and the top 20% of properties are now all recording increases in value. “After a lacklustre performance in the March quarter of 2009, we are seeing resurgence in activity at the top end which is encouraging,” Kusher says. “The median value of Australia’s premium property market is currently 8.1% below the March 2008 peak, but evidence from the recent home value indices suggests that the top end is following the broader market into a recovery.”

Top end bargains No. of sales

Change in median price (12 mths)

Change in median price (10 years)

Median rental rate

ACT

3.7

$2,037,500

-7.4%

13.3%

n.a

Woollahra

NSW

4.3

Woollahra

NSW

5.4

$1,787,500

-35.6%

9.5%

$1,150

$2,472,500

-28.3%

5.5%

$1,500

FORREST

Pittwater

NSW

30.4

$1,862,500

-27.0%

13.5%

$650

MERMAID BEACH

Gold Coast

SURFERS PDISE

Gold Coast

QLD

75.7

$1,100,000

-18.5%

14.9%

$400

QLD

70.3

$1,284,000

-14.1%

13.4%

$370

NEWSTEAD

Brisbane

QLD

2.8

$1,224,000

-5.8%

16.5%

$1,188

MEDINDIE

Walkerville

2.9

$1,112,500

-22.3%

13.7%

n.a

LEABROOK

Burnside

5.3

$912,750

-2.9%

18.1%

n.a

UNLEY PARK

Unley

4.4

$1,360,000

7.7%

15.5%

$625

BRIGHTON

Bayside

VIC

10.6

248

$1,350,000

-21.9%

9.8%

$850

EAST MELBOURNE

Melbourne

VIC

2.1

$1,280,000

-20.0%

10.8%

$895

MIDDLE PARK

Port Phillip

VIC

3.8

$1,227,500

-19.8%

10.1%

$700

DALKEITH

Nedlands

7.4

$2,435,000

-19.9%

14.4%

$900

SWANBOURNE

Claremont

9.0

$1,205,000

-19.7%

11.0%

$625

NEDLANDS

Nedlands

6.0

$1,500,000

-16.0%

13.1%

$725

Council area

FORREST

Canberra

DOUBLE BAY BELLEVUE HILL

State

Median price

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Source: RPData

32 32

Distance from city centre (km)

Suburb

Invest | rising market

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Invest | rental market

Rental market: it’s hot,

and it’s not Rob Farmer examines the residential rental markets in the eastern states to find out what’s hot and what’s not

ith historically low residential vacancy rates putting upward pressure on rents in Australia’s eastern states, property is currently providing attractive returns for investors. The residential rental market is exceptionally strong and the vast majority of landlords are enjoying excellent returns. However, the high end of the market continues to be sound but is not emulating the stellar performance of properties priced under $1,000 per week. The rental scenario is almost a carbon copy of the residential sales market, where top-end properties have been slower to move than lower priced homes for some time now. Melbourne, Sydney and Brisbane all have vacancy rates well below 2%, but there are two distinct markets in each city: one which is over performing the other under performing. Market statistics are very general and often amount to averages of averages. This can distort the true position and lead the casual observer to think every landlord is in the same boat. Overall, vacancy rates are slightly over 1% across the eastern state capital cities, but what the published statistics don’t reveal is the percentage of vacant properties in different categories. One market sector can have a vacancy rate of almost zero while another could be around the 4% mark. In Melbourne, Sydney and Brisbane the position is the same: well located lower-end to medium-priced properties that are presented well are in heavy 34

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Invest | rental market

Area

What’s HOT

What’s NOT

Sydney Eastern suburbs, NSW

Two- to three-bedroom terraces or units $650–$800 pw and one bedroom units around $450 pw.

Properties in poor condition or with external laundries. Properties over $2,000 per week.

Melbourne Inner North, VIC

Three- to four-bedroom houses under $500 pw.

Properties with no parking or in poor condition. Properties over $650 week slower to move.

Melbourne City ring, VIC

One-bedroom units under $350 pw.

Properties over $900 per week or with no parking/transport.

Sydney Bondi and Beaches, NSW

Anything with parking and a view, pet & family friendly gardens a bonus! $400–$500 pw very popular.

Properties over $1,500 week are more difficult to rent. Winter traditionally more difficult than spring.

Melbourne Inner East/South East, VIC

Units under $350 pw, close to shops and transport.

Demand for properties over $650 week has eased. Properties located far from shops and public transport are not attractive to tenants.

All areas, QLD

Two-bedroom, two-bathroom units and houses with parking under $400 pw close to transport and facilities, especially universities.

Properties over $700 week, demand has eased. Properties without parking spaces and far from amenities, transport and shops have poor demand.

demand, are providing excellent returns and are being let quickly. But this is not necessarily the case at the other end of the scale. The economic downturn has dealt a blow to the top-end of the market, and properties in this category are taking longer to attract tenants – especially if the rent is out of kilter with the marketplace. There is ample anecdotal evidence of significantly reduced salaries and loss of employment in the upper echelons of the corporate world. This is considered to be affecting highly-priced executive rental properties in exclusive suburbs, which had previously been a goldmine for landlords. Despite the limited supply of rental accommodation across www.yipmag.com.au

all eastern state capitals, tenants are choosy. A modern kitchen, bathroom and internal laundry rate highly with tenants who are prepared to make concessions with location in return for these amenities. Dwellings located on main roads are not flavour of the month with tenants unless they are cheap or modern, and properties in poor condition are attracting little attention regardless of price. Our experience shows that tenants would prefer to spend a bit more on rent provided they can see they are getting something for their money. Reducing the asking rent by as little as $15 a week can have a profound effect on demand – it can go from zero interest to 10 groups inspecting the property overnight.

We’ve noticed that the big turn-ons for tenants at the moment are proximity to public transport and efficient heating and cooling systems. Secluded outdoor living areas and balconies are also very popular.

Two markets in Melbourne Stephen Erickson, manager of RUN Property’s Carlton office, says it’s very much a tale of two markets in Melbourne. “The under $600 sector is particularly strong, with anything half-decent in this range being snapped up by eager tenants. But it’s an entirely different kettle of fish with high-end properties, which are not attracting a great deal of interest and can take a while to let even if they’re competitively 35

Invest | rental market

ways to get the best return from your property investment

Good presentation is the key to maximising return on investment. A well presented property attracts interest and creates increased competition among prospective tenants, enhancing the prospects of a higher rental return.

First impressions are critical. A fresh, clean and cheery property arouses interest and creates the conditions for the best rent.

When a rental property becomes vacant it pays dividends to look at it through the eyes of a tenant and note anything that requires attention. Nothing turns prospective tenants off a property more quickly than scuffed or dirty paintwork, stained carpets or a door hanging by one hinge.

It is important to make sure appliances, electrical fittings and hot water services are safe and functioning efficiently. Dripping taps, broken doors, loose window locks and cracked glass must be repaired. The outside shouldn’t be overlooked either, since that’s what the prospective tenant sees first.

If improvements such as new carpets or painting are considered necessary, it’s preferable to use neutral colours that will fit with most people’s taste rather than bold fashion statements that may be off-putting to some would-be tenants.

It isn’t necessary to spend thousands of dollars to make a rental property attractive. An internal laundry is a relatively simple and inexpensive improvement for landlords to make, and it can pay significant dividends in terms of higher rental revenue. It will make the property more appealing to prospective tenants.

Before spending a substantial amount of money on renovations, it is advisable to seek professional advice about the likely benefit, both in terms of increased rental and the property’s potential to provide greater capital growth in the future.

It also makes good sense to maintain properties in tip-top condition throughout a tenancy in order to retain good tenants. This will optimise the likelihood of success with rent reviews and lessen the chances of having to outlay large sums of money to bring the premises up to scratch when it is vacated.

Above all, investors need to be realistic about rents and understand exactly where their property fits into the marketplace. Just as vendors often have an inflated idea of the worth of their home, landlords can have unrealistic expectations that can sour the property investment experience for them.

 Vacancy

rates in RUN rental areas

STATE

Below $280pw

VIC NSW QLD

0.6% 0.9% 1.2%

$281 to $390pw $391 to $500pw 0.9% 2.4% 2.4%

priced,” says Erickson. To illustrate the strong demand that exists for affordable property, Erickson cites the example of a four-bedroom house in Brunswick (a northern suburb located about six kilometres from the CBD) which the owner plans to redevelop at some stage in the future and does not want to spend money on now. Located close to transport and other popular facilities, the house had previously been occupied by the same tenant for five years and requires a lot of work. “Although the house is quite tired and in need of painting and new carpet, the kitchen and bathroom are in reasonably good order,” says Erickson. According to Erickson, 100 groups attended the first – and only – open for inspection and 10 applications were received on the spot. Within two days, a further 10 tenants applied for the $380per-week property. But while tenants are attending open inspections of sub-$600 properties in droves, agents across Melbourne are not finding it as easy to generate interest in properties offered at higher rents – and they frequently remain vacant for some time. A large terrace house in Fitzroy North which had been leased in 2007 for $1,100 a week was put back on the market in May this year and, although extensively marketed, it took a number of weeks to find a suitable tenant at a reduced rental of $1,000.

0.9% 2.4% 1.8%

Over $500pw 1.2% 2.8% 3.9%

“Landlords of more expensive properties see reports of historically low vacancy rates and escalating rents, and automatically think there will be a ready market for their property. In reality, vacancy rates for dearer properties are probably closer to 3% or 4% in this part of Melbourne at the moment,” says Erickson.

Rent: the key in the Sunshine state According to Rozelle Walker, manager of RUN Property Brisbane office, properties in Queensland with rents of less than of $400 are red hot – while anything higher than this attracts fewer applicants and requires more marketing. Properties in multi-apartment developments located in out of the way locations with little street appeal and few, if any, amenities within the complex or close by are not attracting a great deal of interest from tenants, even if extensively marketed. “Rent remains an important consideration in the Brisbane market. It’s a matter of striking the right balance,” Walker says. “A good case in point is a multi-apartment complex in Sherwood which was initially advertised in the low $400s and failed to attract much interest. But when it was reduced to reflect the marketplace it was different story. Applicants appeared, and two apartments were quickly leased and an application received for another.” www.yipmag.com.au

Invest | rental market

High flyers AWOL in the Harbour City

In Sydney the hot market sectors are two-bedroom apartments priced between $400 and $500, and renovated garden apartments up to $800 in the triangle bounded by Bondi Beach, the airport and the CBD edge. “The latter category is attracting a lot of interest from couples with young families who want an outdoor area for kids, and expectant couples wanting to get into something larger before the birth of their first child,” RUN Property’s Bondi office manager Scott Morrissey says. Many tenants are opting for garden apartments over houses in these suburbs because of the price difference which is usually over $200 per week. “If we were able find more two and three-bedroom properties with large living areas and pristine kitchens and bathrooms in the $400 to $600 range around the Leichardt area, prospective tenants would be beating a path to our door,” says Morrisey. “Tenants are not as free with their money now that things have tightened up and are more selective, opting for a lower rent in case their financial situation changes because of the economic downturn.” “Understandably owners want the maximum return on their investment, but it’s often preferable for them to forgo or moderate rental increases when times are tougher for the sake of tenant continuity,” says Morrisey. The circumstances surrounding the recent leasing of an executive two-

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bedroom apartment in Bondi Beach clearly demonstrate how crucial it is for landlords to respond to prevailing market conditions. The property became vacant and was offered at $1,100 – the amount the previous tenant paid – but although it was inspected by a number of groups, no applications were received over a seven-week period. The rent was lowered to $1,000 but still no suitable applicant surfaced until, on the property manager’s advice, the landlord decreased the rent to $900 and a highly qualified tenant was signed up in days. We believe there can be times when it is preferable for owners to adhere to a strategy of holding on to tenants rather than risk them moving out for cheaper accommodation. Rents are dependent to a great extent on supply and demand. When the market’s tight, a landlord can ask, and will probably get, premium rental for a well presented property in a highly sought-after area.

Where is the vacancy rate heading? There’s no doubt that the changing fabric of Australian society is affecting housing. The rising rate of divorce and separations has resulted in many families living in two homes, Australia’s population is increasing through immigration and there is growing acceptance of a multidwelling lifestyle. All of these factors are putting additional stress on an already inadequate supply of rental accommodation at a time when building approvals are subdued.

There are other factors which are likely to shape the destiny of the rental market over the next few years. Building approvals are – and have been for a long time – at a low ebb and there is degree of reluctance in the part of investors to get into the market. First homebuyers have been enticed into the market by government assistance and have purchased much of the previous rental stock. However, when the package ceases in 2010 there will be fewer sales in this category. With fewer first homebuyers around, it is expected that competition for available rental accommodation will intensify. Australia’s real estate institutes consider the rental market to be balanced when the vacancy rate is around the 3% mark. That is a figure that has not been recorded in the capital cities for several years. I can see no end in sight to Australia’s current housing crisis. The shortage of stock and increasing demand for rental property is likely to keep vacancy rates around the 1% mark and maintain the pressure on rents for the foreseeable future. Rob Farmer is CEO of Australia’s largest Property Management Group, RUN Property. RUN manages over $10 billion of property assets, in excess of 40,000 customers. For more information visit www.run.com.au

Finance | lending market update

Navigating the changing lending markets Australia’s lending market has changed significantly since the onset of the credit crisis in 2007. Malcolm Reid analyses the changes in lending practices, and what they mean for investors

he residential lending property market is still buoyant in terms of the overall numbers. But this masks some worrying trends, as the ‘Big Four’ banks continues to exercise greater control over the mortgage market. To put this in context, total lending commitments to owner-occupied and investment housing has increased from $2.47bn in May 1989 to $22.68bn in May 2009. This is a compound annual growth rate in excess of 11.5% pa over that 20-year period. However, two banks (the CBA and Westpac) account for well over 50% of all mortgages written – and the Big Four put together account for well over 90%. As their influence over the market has increased, their attempt to control the independent mortgage broker market has become anti-competitive. They set minimum loan applications per month on an individual broker basis, rather than on an aggregator basis; and they seek to establish employment rights over independent brokers because they have contracts in place with aggregators. If recent the UK experience following regulation and licensing of mortgage brokers is repeated in Australia, we are likely to see a halving in the number of brokers operating here – a with further erosion of competition and choice for customers.

Lending volumes Recently, both lending to persons for owner-occupied housing and lending to  Lending

investors for housing have been rising every month (on a seasonally adjusted basis) to continually set new records. Lending for owner-occupied housing reached $570.9m in May 2009. This was a 275% increase over May 1999 and a 19.5% increase over May 2008. Lending to investors for housing reached a record $259.5m in May 2009 – a 337% increase over May 1999, and an increase of 12.7% over May 2008. Many mortgage brokers achieved their highest ever level of settlements in July. The average new mortgage lodged in Australia rose to $354,000 in July— the highest figure on record. AFG’s Mortgage Index shows that average mortgage sizes have been rising since May 2009, after falling to a low of $339,000 in January. This is a sign of returning confidence. One worrying feature of residential lending markets is that lending to owner occupiers for new construction has fallen from 18.8% of total lending commitments in May 1989 to 9.1% over 20 years. Lending to investors for construction has fallen even more markedly, from 34.8% in May 1989 to 11.1% twenty years later. As a nation, we are not building enough residential accommodation for the population we have, and the inability of developers to raise sufficient development loans from the banks because of the global financial crisis is simply exacerbating this long-term

for housing ($ millions) To owner occupiers

January 1975 May 1979 May 1989 May 1999 May 2009 38

4 9.5 49.3 152.1 570.9

To investors N/A N/A N/A 59.4 259.5

*Source: Reserve Bank of Australia

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Finance | lending market update

 Lending

commitments: all lenders ($ millions) To owner occupiers

Construction May 1989

330

Existing

Refinance

1,426

N/A

To investors Total

Construction

Existing

Total

1,755

250

468

718

May 1999

808

4,935

860

5,742

303

2008

2310

May 2009

1,550

15,496

4146

17,045

628

5004

5633

*Source: Reserve Bank of Australia

problem. But this trend is good for existing property owners and property investors, and for future investors.

Structuring your finance To maximise your wealth often means maximising your ability to successfully borrow at critical times to acquire property. Not all would-be investors understand the critical role of being able to arrange their finance when they want it. Banks and lending institutions lend to borrowers based on the lower of the Loan to Value Ratio (LVR) and the Debt Serviceability Ratio (DSR) applying to a client’s application. Banks will not lend if the amount to be lent is a greater percentage of the value of the security available than that lender is comfortable lending. For example, if a lender is comfortable lending, say, 90% of the value of an owner-occupied home (as determined by a sworn valuation), the maximum amount it will lend is 90% (LVR=90%). Another lender may only feel comfortable lending, say, 80% on such a security. Obviously it is difficult for the general public to know which lenders will lend what proportion of the value of each type of security being offered, and the exact terms and conditions that the lender will place on such a loan. But borrowers need to know this to work out how much they can obtain from a lender (and, therefore, the overall size of the property portfolio the borrower can amass). Similarly, lenders will not lend beyond what they assess to be that customer’s capacity to meet the repayments on the amount being borrowed (the DSR that the bank applies). Selecting a lender who is willing to recognise a particular type of income for serviceability purposes (eg, different types of social security payments) or willing to accept a greater proportion of different types of income (eg, rental income from investment properties) can greatly increase the www.yipmag.com.au

amount that can be borrowed. Obviously, if the client simply goes directly to their own bank, they may (inadvertently) significantly reduce the amount that they will be able to borrow. This is because no bank is seriously going to recommend a competitor with better terms. Often this is the difference between being granted the borrowing needed to secure a property and being refused.

Getting funding If a borrower does not already have a home, then he/she will be expected to have a deposit to cover that proportion of the cost of acquiring the property that the lender is not comfortable taking the risk on (including such additional costs as Stamp Duty and legal and other fees). For example, to acquire a home worth $400,000 in Victoria through a bank using a 90% LVR, the borrower would be expected to have a deposit of approximately $61,160. The purchase price of $400,000 plus costs of $19,660 in Stamp Duty and, say, $1,500 in legal and bank fees, less a 90% loan of $360,000. The First Home Owner Grant could form part of this deposit if the borrower is eligible. Gifts can also form part of the deposit, depending on the lending policies of the specific lender. For property investors, they normally have some existing equity or ownership in their home which lenders are prepared to recognise as their deposit when acquiring their investment property. For example, if a would-be investor owns a home worth, say, $450,000, and has an existing mortgage of, say, $230,000, a bank that lends up to an 80% LVR will lend up to $548,000 ($520,000 plus costs) on a suitable investment property and will not exceed its LVR of 80%. If the existing mortgage provider on the home is also approached for the investment loan, the two properties will almost certainly be crosscollateralised by the mortgagee (ie, the

Investing off the plan One way of taking advantage of a market that one thinks is about to rise strongly is to buy off the plan (OTP). There are some detractors for off the plan and, with such widespread use of OTP sales, there are bound to be anecdotal examples where unscrupulous operators have not done the right thing by their investors. However, OTP is an essential and inevitable part of the property development and investment scene. Few developers have the millions of dollars it takes to build a multi-unit project using only their own money, hoping to sell them at the end. As soon as they need bank finance, approval will only be given on condition of 80% –100% pre sales. That means OTP sales are inevitable, and indeed the only way most new investment properties can be acquired. The advantage of OTP sales is that they can be an excellent way to grow a property portfolio more quickly and efficiently. Particularly in Victoria, buying OTP can save many thousands of dollars in Stamp Duty (approximately $22,000 on a $500,000 investment property). Also, the purchase price is fixed at the point of putting down the 10% deposit – no matter how much the market rises before settlement on that property (which may be two to four years later in the property cycle). The 10% deposit can normally be put up in either cash, a bank guarantee or a prime deposit bond. It is frequently possible for an investor to purchase an existing property (which will provide immediate tax benefits) and a property OTP at about the same time – rather than having to wait for their existing properties to grow in value and accessing the equity in them. 39

Some increase in rates will happen, but I believe the increases will be small, applied cautiously and spread over a long period lender involved). One implication of this (notwithstanding legal precedent emanating from the recent Nolan v MBF Investments case in the High Court) is that the lender can dispose of either property (or both) to recover any monies owing, in the event of a default by the borrower. However, if the properties had not been crosscollateralised (ie, if there were two different lenders for the two properties in question) the borrower would not have risked losing their home. Partly for this reason, I have always favoured separating each property with a different lender. The most common way to do this has been via a ‘line of credit’. In the above example, I would have started by researching and selecting the most favourable terms to purchase the investment property. Then I would approach the client’s existing home lender for a line of credit facility (in addition to their existing mortgage). Thus, with a home worth $450,000 and with an 80% LVR, the bank should be willing to lend up to $360,000 (ie, a line of credit facility of up to $130,000 on top of the existing mortgage of $230,000). Armed with the $130,000 line of credit as a deposit, I would make a loan application to the identified second lender, borrowing up to 80% of asset value and thereby achieving the lowest overall cost and avoiding the risk of cross-collateralisation. By keeping both loans under an 80% lend, the borrower also avoids the unnecessary cost of Loan Mortgage Insurance (LMI). 40

Changing lender policies, especially on cash-outs Up to about 1985, when financial deregulation came to Australia, banks tended to keep private and business borrowings fairly well segregated. Since that time, with liberal lending policies (and with the banks seeking to maintain or grow market share) loans started to blur this distinction (starting with products like Mortgage Power). Lenders generally did not set conditions specifying how borrowers could use their additional borrowings. However, with onset of the global financial crisis and the Federal Government’s attempts to ensure that home lending would not dry up, this has caused a capital shortage for many businesses. In order to prevent ‘leakage’ from funds borrowed for private/ housing purposes into much needed funding for business purposes, there has been a clear shift in the banks’ attitude to cash-outs. St.George Bank will now permit no cash-out to low-doc borrowers, and from full-doc borrowers it requires a full explanation of how their funds will be used. ANZ Bank has just implemented a policy requiring a statutory declaration from the borrower as to how the borrowed funds will be used. CBA now require a letter from the client about the purpose of borrowing, and will only release ‘investment purpose’ funds against a contract of sale (even though they already have security over the originally secured property and will not

be taking a mortgage over the ‘new’ property). To date, lines of credit (which have been put in place earlier to ensure that deposit monies are available when property or other investment opportunities arise) have been able to be drawn down later without question. Recent changes by, for example, ANZ appear to allow the bank to cancel existing lines of credit and call up any borrowing thereunder (without any breach on the part of the borrower). This is an extremely worrying development. I can still remember banks in the late 80s and early 90s calling up long-held overdrafts (which had always been operated within the bank’s guidelines) and thereby bankrupting numerous businesses. I fully anticipate that many lenders will insert clauses in their line of credit lending documentation that, if a credit facility has not been accessed within, say, six months of being set-up, it can be closed automatically by the lender. It does matter who you borrow from. Fortunately, we are entering a period where I believe that investment should be considered sooner rather than later, so line of credit facilities may be able to be drawn down before they risk being cancelled by lenders.

Should I consider a fixed rate loan? At their board meeting on 4 August 2009, the RBA held interest rates steady at 3.00%, the lowest level in 49 years. But a key change was made in the statement explaining the decision. In particular, the central bank removed its “easing bias”. It no longer stated that there is “scope for further easing” as it did in July. Rather, the RBA merely noted that, “the present accommodative setting of monetary policy is appropriate”. This has been concluded by economists to mean that the next move in interest rates would be up rather than down, perhaps starting in the March quarter, rather than the June quarter, of 2010. While some increase in rates will happen, I believe the increases will be small, applied cautiously and spread over a long period. My reason for saying this is the recent ongoing increase in the strength of the A$, as our economy and the outlook for world minerals demand improves faster than sceptics forecast. Australia’s rates are already higher than www.yipmag.com.au

Finance | lending market update

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Finance | lending market update

most advanced economies and are attracting overseas funds. Any increase in our rates will push the A$ higher and severely handicap exporters. Given all these factors, I expect only a gradual increase in rates over the foreseeable 2½–3 years, insufficient to justify fixing mortgage rates because they are generally 2–3% higher than current

advantage in fixing. Many borrowers who have attempted to outwit the banks by fixing their rates have come badly unstuck, with either very heavy break fees or the pain of being locked in for a long time at a rate that no longer appears so attractive. The greatest risk for borrowers is that the banks will spontaneously increase

Sentiment among second and third homebuyers is becoming much more positive and investors are scrambling back into the market in a coordinated way variable rates. The AFG Mortgage Index shows a further decline in the popularity of fixed rate mortgages, which fell from 8.3% of all mortgages lodged in June, to only 5% in July. Financial comparison company RateCity confirmed that it is cheaper for borrowers to remain with a variable home rate for the next five years than to switch to a fixed rate. The company estimated that borrowers on a variable mortgage would still save thousands of dollars, even if the Reserve Bank raised the cash rate by as much as two percentage points over the next 12 months. RateCity expects it to take at least five years for standard variable rates to reach 2% above their present level. Many times in the last 35 years of property investing when I have had to choose a fixed or variable rate, I have written down the then-available fixed and variable rates and (later) gone back to test my decision. In every case I selected variable rate and found this to have been the cheaper alternative as circumstances turned out. In my experience, I have found only one or two short periods in the last 20 years when fixed rates were clearly a good bet compared with the corresponding variable rates then applying. Most recently, about two years ago, fixed rates dipped to be only 0.8%–1.0% above the standard variable rate and applications for fixed rate loans started to take off. However, this opportunity quickly evaporated as the banks adjusted their fixed rates upwards to eliminate any 42

their lending rates independently of the Reserve Bank, in order to restore profitability after reducing a number of their unconscionable fees.

Where to from here? In the last few months there has been a subtle shift in the RBA’s assessment of the outlook for the world and Australian economy. It has shifted from describing conditions as “not been as weak as expected” to “stronger than expected”. It has also acknowledged that “the risk of a severe contraction in the Australian economy has abated” and “growth is likely to firm in 2010”. Globally, the bank notes that economic conditions are stabilising and that growth in China (Australia’s number one trading partner) has been very strong in recent months. Since the end of the March quarter, the residential property markets in every Australian capital city have enjoyed strong growth. Melbourne prices increased by 5.2%, Sydney 4.9%, Canberra 3.6%, Adelaide 3.4%, Perth 2.7%, Brisbane and Hobart 2.5%, and Darwin 2.4%, giving an average 4.2% for Australia. I continue to believe that Melbourne represents the best supply/demand fundamentals for any capital city, and that the latest annualised growth rate of over 20% for Melbourne will be maintained. To any student of past residential property cycles, this should not come as any surprise. As I have noted previously in this magazine, the upturn phase of the cycle is always the fastest. Typically, in the first stages of the new cycle,

prices rise at 20+% for approximately two years, before moderating to a more sustainable 5%–8% pa for the rest of the 7–10 year cycle. What I have seen is that investors began returning to the residential property market in increasing numbers throughout the June quarter, and any residual properties for sale that had been languishing have been picked up by investors at, or very close to, the vendors’ asking prices. Interestingly, but not surprisingly, this has not led to an increase in offerings of properties for sale. The market sentiment that “now is not a good time to buy” has well and truly passed. Auction clearance rates have settled at 80+% and private sales are taking only two to four weeks on average to achieve. I am confident that the removal of the First Home Owner Boost (leaving the original First Home Owner Grant in place at $7,000 for existing and $14,000 for newly built homes) will not have anything like the price-dampening effects suggested by some market observers, even in the price range under $500,000. Meanwhile, sentiment among second and third homebuyers is becoming much more positive and investors are scrambling back into the market in a coordinated way that I have not seen for over five years. If you are contemplating (further) property investment, this is the time to get your finance strategy in place quickly to take advantage of future market movements. Malcolm Reid is a property developer, licensed real estate agent and accredited mortgage broker. He is a former economist for the Reserve Bank and the Australian Post Office and was the first treasurer of what is now Telstra. E-mail: malcolmreid@optusnet.com.au DISCLAIMER: All comments made in this article are of a general nature and should not be construed as investment advice. Each reader’s financial situation is different and specialised independent accounting , legal and mortgage broking advice should be sought. www.yipmag.com.au

Finance | lending market update

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Strategy | migration and housing demand

Do prices go where the people go? Malcolm Aikman looks at whether growth in migrations corresponds with house price increases

dentifying high-yielding investment opportunities is attractive to most of us. Maslow loosely places it on the second rung of his hierarchy of needs, under ‘Financial Security’ (along with other ‘Safety Needs’). Ideas about how to identify these opportunities are highly valued and widely canvassed. The current economic climate is a new experience to the younger generation of investors, and it is understandable that a high level of uncertainty exists about individual investment strategies. Residential property hasn’t been a particularly attractive investment class over the past year, but this appears to be slowly changing. After 13 straight months of declining investment in housing, a turnaround occurred in February this year and a gradual upward trend is underway. (Australian Bureau of Statistics, Housing Finance, 1975–2009).

So how do we pick where the best residential locations to invest are?

There are a number of drivers underpinning growth in house prices. At the core is the balance between demand and supply. The General Theory of Equilibrium says that price and quantity move to equalise demand and supply (something you learn in Economics 101, for those who missed it). Forward indicators of supply in the residential housing market are rather difficult to determine. Somewhat more accessible is information on future demand. Demand for residential dwellings is influenced by a number of 44

factors, but fundamentally it is driven by household growth. Household growth is a factor of population growth and demographic changes in household sizes. This article aims to investigate the relationship between population growth and increases in house prices. Another area of interest is

Statistical Division). Notably, but perhaps unsurprising, over this period the fastest growing regions were all in Queensland and Western Australia. This coincided with the resources boom and strong employment growth in these states. We note that employment growth is

The current economic climate is a new experience to the younger generation of investors, and it is understandable that a high level of uncertainty exists the relationship between migration and house price growth. The starting point for this analysis was identifying what have been the fastest growing regions over a selected period. We chose the 2001–06 Census period, as it allowed the inclusion of migration data in the analysis. We undertook this analysis at a regional level (the equivalent to a Census

a strong driver of population growth (so we also look at where the jobs are being created). The top four areas were all in Queensland with Hervey Bay (5.1% pa population growth) leading the way. Mandurah (3.5% pa) headed the WA push while Brisbane (191,267 persons) and Gold Coast (90,503 persons) had the greatest increase in absolute terms www.yipmag.com.au

Strategy | migration and housing demand

Population growth and house price growth

The big question though is what is the relationship between areas of high population growth and house price growth? We haven’t concocted a high brow empirical regression model to try to ascertain whether this relationship exists, as it is still debatable whether this is a ‘science’ or a ‘dark art’. We have used the old fashioned ‘graph the two measures on an index’ approach and assess whether there is an apparent relationship. Chart 1 (see right) presents these results, though this needs some interpretation. The light blue bars represent the average annual house price growth for the identified region. The dark blue bars reflect the average annual population growth for the equivalent region. The red line reflects the average annual house price growth for Australia’s eight capital cities over

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Chart 1: Estimated residential population growth v median house price growth (Australia) 25% 20% 15% 10%

Population

House prices

the same period. The key points to note from this chart are: • All the high population growth areas experienced house price growth above the capital city average with the exception of Gladstone. • Some of the highest population growth areas, such as Sunshine Coast and Gold Coast/Tweed did not rate as highly in terms of house price growth (though still achieved attractive returns). • Conversely, some of the highest house price growth areas, such as Bunbury and Toowoomba, were not as high up the population growth list. • Our major conclusion from this analysis is that there is a general correlation between high population growth areas and high house price growth. However it is important to note that this is not a direct correlation and will not occur in all

Gladstone (Qld)

Rockhampton (Qld)

Bundaberg

Cairns (Qld)

Brisbane

Gold Coast /Tweed (Qld/NSW)

Townsville (Qld)

Toowoomba (Qld)

Sunshine Coast (Qld)

Bunbury (WA)

Hervey Bay (Qld)

Mackay (Qld)

Mandurah (WA)

House price/population growth

(on the list of fastest growing regions). The relationship between high population growth and migration growth appears strong, with 10 of the top 13 population growth areas featuring on the list of areas with the highest levels of migration. Notably the two largest growth areas in our fast growth list, Brisbane and Gold Coast, have the highest levels of migration by quite some margin. The Sunshine Coast follows next, and is also the second fastest region in overall population growth. There is then a significant drop to the other regions, with Newcastle featuring as a region with high migration but not making the population fast growth list. Our conclusion from this is that there is a strong relationship between high migration levels and fast growing population regions. However, this does not hold in all cases.

Capital city weighted average growth

instances. Further we note that high levels of migration contribute to high population growth and subsequently this has an indirect relationship with house price growth. So why is this relationship not a direct correlation? Well firstly because population growth is one component of household growth and the demand for housing. The other important factor is changing household size which results from demographic changes such as an ageing population and increasing rates of divorce and separation. The second important factor is the other side of the equilibrium equation – the supply side. All of these housing markets will be influenced by the overall level of supply in their market area. Markets where supply has been high will see smaller price increases as growing demand is met

Strategy | migration and housing demand

Internal Migration Indicators Major Population Regions 2001–2006 Net Internal Migration

Markets where supply has been high will see smaller price increases as growing demand is met by existing supply. by existing supply. This is interesting from a regional perspective, but it doesn’t give you much insight about where to invest within your region. In general, the high proportion of housing investment occurs in the investor’s own region. Basically the same principles apply. Where demand exceeds supply, house prices will rise. It is harder to determine the levels of demand and supply for smaller areas, especially if you don’t have access to the statistical information. As with all investments, if you don’t have a good tip from a respected source then you need to stick to the fundamentals of investment strategy.

For residential property these are: • Buy when the market is low, sell when it is high (when those points occur is a whole different article). • Buy good quality, in terms of the built product, level of maintenance required, services to the property. • Buy around activity generators. Transport and employment are best. • Look for where there are gaps in demand, in terms of quantity of product and market segments (townhouses are good value at the moment, and units are undersupplied in many markets) • Adopt a portfolio approach to your investment, don’t put all

Estimated residential population - Major Regions (a) 2001 Hervey Bay (Qld) Sunshine Coast (Qld) Mackay (Qld) Gold Coast - Tweed (Qld/NSW)

2006

2001–06 absolute growth

2001–06 avg annual growth

39,599

50,825

11,226

5.10%

186,144

224,127

37,983

3.80%

64,767

77,544

12,777

3.70%

474,753

565,256

90,503

3.60%

Mandurah (WA)

59,752

71,011

11,259

3.50%

Gladstone (Qld)

39,100

45,678

6,578

3.20%

112,932

131,564

18,632

3.10%

50,008

57,744

7,736

2.90%

134,073

152,954

18,881

2.70%

1,629,133

1,820,400

191,267

2.20%

109,449

121,894

12,445

2.20%

Bundaberg

56,806

63,262

6,456

2.20%

Rockhampton (Qld)

67,369

73,333

5,964

1.70%

Cairns (Qld) Bunbury (WA) Townsville (Qld) Brisbane Toowoomba (Qld)

1. Note: Figures taken from Statistical District (SD), 2. (a) Based on 2006 Australian Standard Geographical Classifacation boundaries. 3. (b) Average annual growth rate

Brisbane (QLD)

39,703

Gold Coast/Tweed QLD/NSW)

34,535

Sunshine Coast (QLD)

17,486

Newcastle (NSW)

8,514

Hervey Bay (QLD)

7,226

Townsville (QLD)

6,451

Mandurah (WA)

6,150

Cairns (QLD)

5,040

Toowoomba (QLD)

4,180

Mackay (QLD)

3,874

Bunbury (WA)

3,275

Perth (WA)

3,002

Bendigo (VIC)

2,966

Ballarat (VIC)

2,532

Macquarie (NSW)

2,467

Gladstone (QLD)

1,280

Rockhampton (QLD)

561

your eggs in the one basket. Make comparisons with other investment classes (equities look good). • Finally, remember that housing investment is for the long term. Quick wins are rare. Happy investing! Malcolm Aikman is a Director of Property Economics at Urbis, a consulting firm providing services in urban planning and design, property economics, and social planning and research. A widely experienced property economist, Malcolm is a trusted forecaster of property demand. He is a known and preferred industry advisor. Also a management consultant, with an MBA in Entrepreneurship, Malcolm brings alternative insights to projects, mixing numbers with commercial strategy to boost the bottom line. Daniel O’Driscoll and Sam Wood also contributed to this article. www.yipmag.com.au

Strategy | migration and housing demand

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Invest | NRAS

Investing in

NRAS properties The market is currently abuzz with the recent addition to the Australian property investment menu: the National Rental Affordability Scheme or NRAS. Margaret Lomas explains how it works

available on the identified block and section 5. The property must comply with state, territory and local government, planning building codes.

Eligible tenants are considered to be families on low and moderate incomes, individuals who are looking to rent a property for the first time, and singles in private or public rental accommodation, including people working or undertaking study or training, who are also on a low or medium income. Itâ&#x20AC;&#x2122;s important to note that the NRAS involves the allocation of a national rental incentive to participating organisations, to encourage large-scale investment in, and innovative delivery of, affordable housing. It has not been developed to allow smaller investors the opportunity to access additional tax benefits when they build or buy a property. Whether the tax offsets can be passed on to smaller investors once the property has been built is unclear. Smaller investors may, however invest in a participating investor, such as a property investment trust or a superannuation fund, and enjoy the usual flow-on effect of tax benefits.

he national rental affordability scheme has been designed to ensure that low and middle income earners are able to access a rental property which is 20% below market rate. To achieve this, the federal government will provide $622.6m over four years to encourage the development of 50,000 affordable rental properties across Australia. For those developers who choose to build complying housing, an annual incentive of $6,000 per property for up to ten years can be claimed, via a refundable tax offset, and by direct grants from the Department of Families, Housing, Community Services and Indigenous Affairs. This scheme has been developed for institutional investors such as superannuation funds, and larger developers, with a minimum development size of 100 dwellings required to comply and access the incentives. In addition to the $6,000 in tax offsets or grants which are available, state and territory governments have agreed to provide annual support of at least $2,000 pa, per property, for up to 10 years. This contribution will be provided in the form of either cash grants, concessions on stamp duty or the provision of discounted land. 48

How does it work?

The scheme is designed to encourage investors to build either: â&#x20AC;˘ a large scale project which consists of at least 100 rental dwellings â&#x20AC;˘ a project of not less than 20 rental dwellings for those with especially high rental stress, or which deliver innovative and affordable rental housing solutions to low and middle income earners. To be eligible to receive the incentive, there are some mandatory requirements, and applications to access the incentives must address five assessment criteria: 1. The property has to be rented to an eligible tenant 2. The property must be rented as an affordable housing dwelling for a period of 10 years 3. The rent charged must be at least 20% below the market rate 4. The property must either: a. not have previously been occupied; or b. not have been previously zoned for residential purposes; or c. have been made fit for occupancy where it was otherwise uninhabitable; or d. have been subdivided to produce more dwellings than were previously

Benefits of the scheme to investors There are a number of benefits to investors who are prepared to build affordable residential rental properties: 1. Improved rental yields Although the properties are rented out at 20% below the market rate, the minimum annual $8,000 national rental incentive www.yipmag.com.au

Invest | NRAS

for each approved rental dwelling adds to the cash flow and can improve rental yields over conventional residential investment properties in certain markets. The incentive itself is income taxfree, indexed to the rental component of the Consumer Price Index (CPI), and is complemented by existing taxation arrangements, including depreciation. 2. Reduced risk profile With rents set at 20% below market value, and a large pool of eligible tenants, investors can expect a reduced vacancy risk. In addition, the scheme offers investors certainty of contributions from the government over a period of 10 years. The National Rental Incentive will be indexed to the rental component of the CPI. 3. A new asset class The Australian government will allocate 50,000 incentives through the scheme over four financial years. A further 50,000 incentives will be allocated from July 2012 if demand from investors and tenants remains strong. It is believed that this incentive aims to stimulate the creation of a new, ongoing asset class and a development of industry specialising in affordable rental housing. 4. Large and diverse pool of potential tenants Up to 1.5 million individuals and families on low and moderate incomes will be eligible to be tenants in approved NRAS dwellings. Income eligibility levels for prospective tenants include key workers and their families, vital to Australia’s continuing economic stability.

How does a project comply? Investors cannot just build any property and then apply for the incentives. The project must comply with a range of requirements, including:

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1. There must be a demonstrated need for the proposal in specific locations and how this need has been identified. Eg, proposals may point to high levels of unmet rental demand in project areas, lower than average vacancy rates, or the number of households in rental stress. 2. Proposals must address the Priority Areas of Interest identified by the state government. Each state government will have different priority areas for such projects. 3. The proposal must deliver accessibility and sustainability outcomes. The government is looking to ensure that tenants are not isolated and that these dwellings are built in areas where tenants are most likely to want to live, and must: • be close to transport, schools, shops, health services and employment opportunities • facilitate a balanced social mix • have building and design features that may reduce energy and water costs and which are above regulated minimum standards • use universal design principles or other low cost measures that make properties more accessible to the ageing or those who live with disabilities 4. The investor must have demonstrated capacity and experience. New developers are less likely to be approved as they must demonstrate the capacity to deliver the project, including: • experience in property acquisition and development • experience in property and tenancy management and details of how these will be delivered • proposed processes for tenant selection and rent setting • proposed governance and

management arrangements • financial capacity including details of capacity to contribute equity to a project • details on how the developer intends to raise any debt financing required to fund project capital requirements

Buying an NRAS property If you are currently interested in participating in this scheme, then you can only do so by either investing in a larger investment company who is undertaking development of a complying dwelling, or by forming a consortium of your own. Under these circumstances someone within the consortium would need the relevant experience, as this is a vital component of any proposal you make to access the incentives. Some companies seem to be marketing the ability for smaller investors to take part in this scheme, but the validity of these offers cannot be confirmed. Possibly your participation would be by way of a member of a syndicate, and under these circumstances your investment is into the syndicate, not the actual property itself, so be careful and ensure you are completely familiar with the structure and what you actually take ownership of before going ahead. Margaret Lomas is director of Destiny Financial Solutions, a qualified financial advisor, and author of a number of books about property investing. She is also the host of ‘Your Money Your Call’ and ‘Property Success with Margaret Lomas’, airing on SkyNews Business at 8:30pm Sunday nights. Visit www.destiny.net.au

Invest | NRAS

Case study

Driven by

compassion Geoff Westlake’s low income didn’t deter him from diving into property investment and build a portfolio worth more than a million dollars in the process

eoff Westlake is not your ordinary investor. Not only has he debunked the commonly held myth that you need large amounts of cash to start investing, he has also proven that you can build your wealth by sharing out your good fortune with others. “We don’t earn so much money in the job that we do. I work as a director of a Christian outreach organisation involved with voluntary work, so I don’t get paid that much. We need to provide some sort of ballast for our income.” Geoff’s salary back in 2000 when he started his foray into the property market was just $35,000. “Now I’m earning a princely sum of $45,000 a year,” he chuckles.

Where it all began Geoff bought his first property in 2000 near the Bradbury area for $150,000. He intended to house his then family of five in it, however as luck would have it, he was offered another assignment elsewhere so he decided to turn it into a rental property, renting it out during the following five years. “We rented for about five years but at that time we bought another rental property and then another, and then we were able to sell the first one and pay off the house we are living in now.” They bought the second rental property in Banksia Grove for $144,000. This property is now worth $300,000 and currently rents out at $310 a week. Then they decided to build their own home. To fund this, Geoff sold their first rental property and made a whopping $200,000 profit. “We bought it just before the boom and sold it as the market was heating up in WA. The money we made enabled us to pay for the third property which became our home,” he says. Buoyed by his earlier success, Geoff continued to look for a suitable investment and in 2005, bought his fourth property in Tapping, a house worth $280,000. This property’s value has since risen to $350,000 and renting for $380 per week. Three years later, in 2008, he bought his fifth property in the same suburb. He paid $420,000. Its value has since fallen to $350,000 but rents remain strong at $410 per week. 50

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Invest | NRAS

Property timeline Year

Type

Suburb

Purchase price

Current value

Current rent (per week)

2000

House

Bradbury

$150,000

$350,000

sold

2002

House

Banksia Grove

$144,000

$300,000

$310

2005

House

Tapping

$280,000

$350,000

$380

2008

House

Tapping

$420,000

$350,000

$410

2009

Unit (NRAS)

Armidale

$300,000

$244

$1,294,000

$1,650,000

$1,344

Total

Investing in NRAS property

After his fifth property, Geoff hit the serviceability wall but he was still keen on expanding his portfolio, so when his bank manager suggested they should look at NRAS properties, he became interested. “When we found that it meant low rent for tenants, we were particularly interested in that. So we started to inquire and we discovered that we could do it so that it was slightly cash flow positive. We didn’t have the serviceability to get another property unless it was cash flow positive. Obviously we got the equity but fell short on serviceability. With NRAS, we get a $8,500 rebate which helps with the cash flow calculation. “The bank manager put us in touch with an agent which had a property that was being built and qualified under the scheme; we had conversations with them. He explained to us what the NRAS scheme is all about, and we asked him our weary questions to which he gave us all the right answers, so we went ahead with the purchase,” Geoff explains. That property was in Coralie Court in Armadale – the first NRAS dwellings delivered in Western Australia. Nathan Want, director of Ray White WMP Group who sold the NRAS homes in Coralie Court, says similarly eligible properties continue to generate great interest from homebuyers and investors alike. “NRAS properties offer the investor a reduced risk investment option. With support from local and federal government, this initiative enables clients to increase their property portfolio knowing they have the security of the NRAS scheme,” he says. NRAS tenants have to meet the means testing requirement set up by the government. www.yipmag.com.au

“The Foundation Housing, who are the group responsible for NRAS in Western Australia, handles all the management issues and decides who the tenants should be and also the strata agreements of the unit as well, so all that headache is taken away. If I want to I can put in tenants on my own.” Geoff’s $300,000 unit investment through NRAS is currently renting at $244 per week. The additional $8,500 non-taxable rebate from the government each year pushes this property comfortably across the cash flow positive zone. “The positive cash flow provides a way for low income earners to invest in property, where servicing the loan would otherwise be a problem. NRAS is one of the few remaining ways you’re able to get into cash flow positive properties, provided the banks can factor in that government reimbursement,” he says.

What to watch out for Investors looking to invest in NRAS properties should make sure that the bank takes into account the tax incentives from the government, according to Geoff. “Some banks are blind to this, so make sure they factor this non-taxable rebate in their calculations, especially if you have a serviceability issue. This happened at the first bank we approached, and was knocked back so when we went to the second bank, we worked with them. It’s a new concept for the bank and if they don’t know how to factor it in, they don’t,” he says.

Investment strategy “I choose the suburbs I invest in very carefully. It has to have good prospects for capital growth, proximity to public transport, schools and shops, and we also looked for features not many

 Geoff’s NRAS property: Structure: • freehold, same way as any unit • subject to the conditions of the strata title agreements • The Foundation Housing group co-ordinates the strata group and manages the properties, but the owner has veto over who tenants may be • capital growth potential: 5% pa • tax rebate: $8,500 pa houses have. We always try to find properties that are very close to cash flow neutral,” says Geoff. Geoff also decided to manage all his properties himself and has been pleased with the outcome. “We make it a priority to be good landlords so we bought air conditioners, we’ve added pergolas and dishwashers and things like that – without hesitation – as tenants require them. We believe that if we find good tenants then this makes it a lot easier to manage them. All tenants have been loyal except for a couple who had defaulted in their rents and had to move out. We lost $5,000 on one and $4,000 on the other, but so far there have been no major defaults.” 51

Strategy| Syndication

Property syndicates Are two heads better than one when it comes to property investing? Anastasia Holt gets first-hand advice on running a successful property syndicate

roperty syndication is either the ultimate mutual-gain investment strategy or the shadiest, most frustrating aspect of the market – it depends who you ask. We’ve all seen the fallout of public trusts gone wrong, or small-time spruikers who have simply disappeared with the profits. Yet on paper it seems so flawless: shared risk, shared expertise and shared rewards –and a small investment in a big project with big potential for profit. The truth is, it can go both ways. But if you’re considering a foray into syndicated property investments and want more rewards and less fallout, the first thing you should do is listen to a few stories from those who’ve made it work before.

The theory Essentially, it is all about people power, according to property syndication veteran of 35 years John Shadforth. “I came from a small country town, and it was only through people getting together and cooperating effectively that we were able to have a grocery store,” he says. “When we saw opportunities in the property market, we recognised that we needed to build up our buying power. We started out with my brother, myself and one other person, but then as other projects came up we had to expand the number of people.” Shadforth has mainly focused on housing subdivisions. However, he’s been involved in unit, motel, shopping centre and industrial land development via syndications and currently holds a share of almost $20m in syndicated 52

property – ranging from leased inner city office space to a 400-lot regional subdivision. In every project he has organised, he has invested between $5000 and $100,000. And although that doesn’t sound like much, he pointed out that values have changed dramatically. For instance, one of his most successful syndications was a 143 lot subdivision purchased for $1.1m – which equates to $7700 a lot. “The benefits of a syndicate is that you can share the rewards while offsetting the risks. Often, they are rewards that you couldn’t have realised on your own

doesn’t necessarily mean spending big in property syndication. “One investor in this project was thinking of building a ‘spec’ home. He would have to spend $450,000 and basically put all his eggs in one basket, whereas with this development he can put $200,000 there and then put the rest somewhere else and spread the risk,” O’Connor says. Diversifying risk was one of the attractions for Andrew Oscari of Aus Property Syndicates, a real estate agent who has invested privately for years before falling in love with syndications eight years ago. “Being involved in property syndications has enabled

“You get the benefits of experienced property developers and you can get out of the ‘Mum and Dad’ market and get into a multi-million dollar property” because you didn’t have enough money or expertise to find a property and do the necessary work,” Shadforth explains. “It allows you to invest in larger projects and reap the rewards on a larger scale,” agrees Neil O’Connor of Nexus Property Group, who has recently organised the syndicated purchase of a $5m office building in Brisbane. “You get the benefits of experienced property developers and you can get out of the ‘Mum and Dad’ market and get into a multi-million dollar property,” he says. However, he points out that buying big

me and other likeminded investors to share the risk of property development. Property syndication allows me to be involved in developments as small as two properties, or even 30 to 40 properties – the amount is endless,” he says. “The beautiful thing is not having to pay the developer’s costs. Basically, it means you are getting it at cost price. Property syndication to me is a vehicle which has allowed me to own real estate without paying retail prices from other developers.” Shadforth says the access to well priced deals is definitely www.yipmag.com.au

Strategy| Syndication

another of syndication’s benefits, because the right group can offer acquisition skills, networks and supply channels greater than those that you could access on your own. Furthermore, O’Connor believes it is an ideal time to take advantage of such skills. “So many of the corporate investors are broke, so there are better deals available in the high end at the moment,” he says. “The more expensive you go, the harder it is to raise capital and get debt financing. Since there are fewer players in the market, it a very good time to buy.”

The strategy To truly take advantage of such benefits, however, you need to find a syndication strategy that suits you – whether that means throwing some spare cash into a long-term, low-maintenance syndicate with family and friends or joining a professional group seeking fast-return wealth generation. The options are almost endless, but most syndicates have specific goals – so finding a match there is a good place to start. O’Connor’s recent acquisition, for instance, aimed to generate an immediate return of 8% with the possibility of strata-titling and selling in less than three years for strong capital gains. “Approximately 70% of the investors had a similar sort of risk profile. They wanted something that washed its face and offered an opportunity for you to get some extra money out of it if you did something smart along the way,” he says. In this case, inputs varied on an individual basis with some investors putting in between $50,000 and $500,000 with returns calculated on capital invested. In contrast, Oscari structures his syndicates so each investor puts an equal share in a unit development project, with returns accessible only after construction. “We just had a project in which all the investors are going to make $80,000 to $100,000 on their initial investment. In that project, each person invested $120,000 and it was about two years from the purchase the land until it was finished. I try to buy land with plans and permits, and it is at least 12 months for the build,” he says. He creates joint venture agreements for each project with every investor’s name on title and bank documents. Each investor chooses which unit they’d like www.yipmag.com.au

at the beginning of the project, with the investment cost calculated on the price of the land, the construction and Oscari’s project management fee. Upon completion, investors choose to sell their unit or refinance it into their own name to live in it or rent it out. “We try to achieve a 40–50% return on the equity put in. We can’t guarantee returns, of course, but that is what we aim for,” he says. While very different, both O’Connor’s and Oscari’s projects appeal to a range of people – from the novice retail investor to the cashed up professional – who want to be involved in a large scale investment project without doing so much of the work. Generally, most of them don’t know any of the other investors outside the syndicate organisers. With smaller syndicates, strategies tend to be less adventurous and more long term. Krister Waern purchased two permanent-let units for $70,000 and $75,000 respectively as part of a ‘buy and hold’ strategy with his parents and older brother four years ago. “It was Mum and Dad’s idea originally, because they had seen their own family do nothing more than buy the family home, pay it off and live in it. They suggested that in order to create additional wealth for the family we set up a family property trust and my brother and I thought it sounded good,” Waern explains. “The four of us are all directors and we all have an equal share.” Similarly, Ben Frisby, 32 purchased a property with a couple last year with the vague plan of building another dwelling on the oversized block. However as the market changed so did the strategy – highlighting that flexibility is an advantage family-and-friend style syndicates have over their larger, more professional counterparts. “I am happy to just sit and wait, it doesn’t worry me. It only cost me $150,000 to go in with them,” he says.

The risks Like all property investments, there are risks involved in syndications. But unlike all property investments, many of the risks are associated with the people – not just the projects involved. Property investment is not a liquid market. While some syndicates may attempt to get you out if you fall into trouble or want to invest in another opportunity, it is not always possible to get your money back

Top tips to make property syndication work • Find suitable partners who share similar goal. • Define your strategy. • Structure the syndicate to suit your own as well as the common objective. • The contract should clearly outline investors’ roles and obligations. • Ensure you include a full array of exit strategies in the syndication contract. • Conduct extensive due diligence on both partners and proposed project. • Appoint a leader or members to handle key tasks for the syndicate. before the project’s completion, as doing so could lead to bad repercussions for other investors. As a result, property solicitor Ken Waddington says it’s crucial that all parties are aware of exactly what the syndicate’s goal is and how it aims to achieve it. “Obviously the main reason people get into property syndications is so they can do something bigger than they can do on their own. But they have to be clear about the reasons for doing something bigger, because with several people involved there is the potential for competing interests,” he says. “Undertaking a private syndication with partners involves all of the same sorts of issues that we advise clients about when they enter into any partnership agreement – to ensure that everyone has common intentions and that no one gets a nasty surprise.” Although Frisby is happy to hold his syndicated investment for the time being, their agreement was relaxed and unforseen circumstances may create problems. “We were going to put up a duplex or something, but then the market changed and we haven’t really been bothered. Then [the couple] broke up, which made things interesting. She is talking about getting out of it now and wants us to move on it a bit quicker,” he says. “At the time we figured it was worth about $300 per week in rent and [the couple] were living in it, so dividing the rent by three, they were paying $100 to me ($50 each). But now that she has moved out he has to pay rent to both of us, $100 to me and $100 to her, plus 53

Strategy| Syndication

Downsides • It’s hard to get your money out of the syndicate. • Competing interests make it difficult to define a common goal. • Partners may decide to exit earlier than planned. • The project maybe aborted. • There may be funding difficulties.

Upsides • The ability to diversify investments to bigger projects and into commercial sectors. • The ability to spread your risk. • The ability to buy or invest into areas that you’re unable to afford on your own. • Potentially bigger profits.

whatever he is paying on his mortgage.” To trouble-shoot potential issues like this, Waddington says syndication contract documentation should clearly outline investor’s roles and obligations and provide for a full array of exit strategies. Companies, joint ventures, partnerships or unit trusts are the usual legal vehicles for property syndicates, and Waddington says each has respective legal and financial benefits depending on the investor’s goals – so the right format should be deliberated and decided on. He also strongly recommends investors conduct their own due diligence, not only of the project but also of the people involved. Checks on financial history, experience and viability are essential; and paperwork on independent valuations, property inspections and professional estimates (of factors like regular maintenance, development options and rent values) should be available to investors on request or sourced individually. Shadforth also recommends derisking projects by reducing debt. “We always tried to own it in cash. If you hit tough times and you’ve borrowed you just fall into a slump but if you own it you can hold it in strength,” he says. “You’ve always got to try to preserve the capital.” 54

“Once a project is settled on and people put their money in, there needs to be someone managing things like council approvals and accounting” The group The best risk management tool, however, could be the synergy of the property syndication group. “Both trust and capacity are vital. One without the other can be dangerous,” Waddington muses. Capacity could be the easiest component to control. For instance, Oscari gets the full amount from each investor upfront, because if one investor is late with a secondary payment construction can be held up – reducing profits for all involved. A syndicate of any size could follow a similar formula. Trust, on the other hand, is a little more complicated. In larger syndications it may simply mean conducting all necessary due diligence. But in smaller operations starting out with people you trust implicitly is a big part of making a syndicate successful. Waern says that is one of the biggest benefits of his family trust. “One of us can just say ‘you need to put in an extra $2000’ and there are no questions asked,” he says. It also means you can speak your mind without fear of recrimination, resulting in a faster decision-making processes. “It is a constant negotiation, and with a family member you can simply tell them they are being an idiot,” Waern says bluntly. Disagreements can always arise, however, which is why Shadforth recommends appointing a leader or assigning group members key tasks. “One of the first things we learnt in a syndication of (eight people) was not to have a committee because nothing would ever get done. You need to have delegated, responsible directors making the decisions – which, after all, is how the larger property trusts do it,” he says. “Often in some syndicates people throw money in together but no one is incentivised to take the reigns – but I don’t believe that is sustainable. Any property syndicate needs to provide a central organisation to put confidence in so that the network stayed alive.” Waern agrees this is important, even in family

groups. “Someone really has to make the decisions, look for new opportunities. I’d prefer to go surfing and hang out with my kids to be honest, so I have taken a back seat. I have been really lucky to land in a bit of money.” The Waern family trust has turned out to be a profitable venture, with one unit currently on the market for $220,000. They plan to reinvest that money and keep the second unit, basically as profit. However everybody is aware that is mostly due to the efforts of one person. “My brother is much more motivated and constantly searching for new things. It is good to have someone like that in the trust to move it forward but at the same time I think he gets frustrated with us sometimes. A while ago a third unit came up in the complex and we put up a deposit of about $4000. But then we didn’t get financial approval because Dad couldn’t get his information together in time, which is still a bone of contention for my brother.” This may be brushed aside with family, but Shadforth warns similar scenarios can create big problems in other groups and recommends remunerating the person responsible for driving the syndicate. “Once a project is settled on and people put their money in, there needs to be someone managing things like council approvals and accounting. You need to incentivise them so they can put the necessary effort into,” he says. It is also a good idea to create groups with complementary skills. Shadforth recommends that everyone should have a passion for property, but beyond that people with accounting abilities, construction, engineering or design backgrounds, sales experience, legal know-how or conflict resolution skills all make excellent syndicate partners. Wider networks with real estate agents, architects, townplanners and conveyancers should also be retained. If a property syndication can be considered as a proper business, it is important not to forget the PR. www.yipmag.com.au

Strategy| Syndication

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Finance | payment methods

Protect your interest Michael Lee reveals the hidden truths about Interest Only loans

ention investment property to a lender or mortgage broker and quite a few of them will want to talk with you about taking an Interest Only loan (IO). The concept they promote seems simple. Save money on Principal and Interest (P&I) repayments and put that money to better use elsewhere. Although there tends to be an emphasis on the ‘savings’ part, paying IO always costs extra. The key to whether IO is the right choice for you rests with how effectively you will implement the second part of the concept. Will you indeed ‘put that money to better use elsewhere’? If the answer is yes, then great, that’s perfect. You should think about taking some kind of IO option once you’ve weighed up the costs and benefits. After all, charged investment interest is a tax deduction and we can all do with paying less tax, right? The problem is that most people don’t pause long enough to work out exactly what a ‘better use’ actually means to them, their lifestyle or their wealth. More to the point, very few people take the time to work out exactly what the cost of taking IO really is. But let’s get serious, it’s just maths. So let’s take a moment to discover the costs and benefits of paying IO.

Back to basics When it comes to payment types, you only have

two options for most mortgages – P&I or IO (more on this in a moment). Interest is the ‘rent’ that your lender charges you for using their money. Principal is the money that you have borrowed – your debt. It’s the less exciting bit that reduces your equity in that property and your net worth. Debt also diminishes the control you have over that asset and creates potentially negative cash flow in the meantime. It should be obvious that the larger your debt, the more deeply your cash flow is affected by interest rate movements. Even if you take a fixed rate, you’ll probably have to re-fix at a different rate or go variable at some point. So a P&I loan means you pay rent on the money you owe in addition to repaying the debt today. With IO you only pay the rent on borrowed money today, and presumably you will find some other way to repay the debt in the future. When taking a Line of Credit, you must take IO. You simply have no choice. Even though some people will be very quick to point out that you can make extra payments, you don’t have to – so in many cases, it just doesn’t happen. One of the other ‘benefits’ people who are keen to sell you debt will point out about a Line of Credit is that

the limit is ‘evergreen’. This means you can go on paying IO for the full life of the loan, constantly redrawing any extra payments (if you ever make them). Debt might be a tool in your investment strategy, but it would be a bit crazy to make keeping that debt as large as possible an objective. Approach this ‘benefit’ with caution. Although you may have heard you can save money with IO, it’s a con if you don’t ‘put that money to better use elsewhere’. Five things are likely to happen when you take an IO payment. 1. You pay more interest. 2. You have more disposable income. 3. Your lender and/or broker makes more money from you. 4. You remain exposed to more investment risk for longer. 5. You rely solely on capital gain to increase your equity. Let’s take a quick peek at each of these so you can decide whether IO makes sense for you.

Interest Only at the same rate: Does it really cost more?

Yes. Paying IO will always cost you more than paying P&I. Just how much more is affected by your interest rate, the term you take IO for and, of course, the amount that you borrow. On a $450,000 loan, paying IO could cost you an extra $286,000. This might seem extreme, but that is how the math works out. Of course this is also based on taking

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Finance | payment methods

IO for 25 years on a Line of Credit, so let’s tone it down to a more common, five-year IO period and head off at least a few of the complaints about scaremongering. Just five years of IO still increases your cost for this loan by a whopping $40,790 compared to the same loan paid off for five years with P&I. These calculations are based on an interest rate of 7.10%, which is an average of pretty competitive variable rate products over the last 15 years. In today’s money, these competitive variable rate products are sitting at around 5.10% pa.

How much more disposable income?

There are two ways IO increases your disposable income. The first is that you do not have to pay principal on your mortgage. Sticking with the same example, you will pay $3,209 a month on a P&I loan, and an average of $2,663 a month for IO. So you have more money in our pocket each month because of the lower minimum payment. You also have more debt. Your disposable income is also boosted because you end up paying less tax, since your deductible interest expense is higher. Just how much tax you will save is affected by too many variables to consider in this article. These variables include, among other things, your tax structure, investment vehicle, and marginal tax rates. However before you get too excited about these ‘savings’, it is important to remember you will pay almost $41,000 extra, over just the first five years. You will also owe almost $40,000 more than if paying P&I. In simple terms, you are behind by more than $80,000 in five years on this loan, so you really need to make sure you ‘put that money to better use elsewhere’. Otherwise, you are simply wiping $80,000 off your net worth in just five years. Ouch, that’s got to hurt!

Can you trust your lender? When it comes to advising you on this and quite a few other features, your lender and most brokers have a conflict of interest as they are faced with giving you advice that could cost or earn them extra money. How much? Again, on the same $450,000 mortgage, your www.yipmag.com.au

 Who’s

really gaining?

Even a short period of Interest Only has a significant impact on your interest costs. This example is based on a $450,000 at a rate of 7.10% pa over 25 years. Sample Principal and Interest Loan Interest cost to you Broker trail or Bonus Lender Profit

$ 512,777 $ 10,776

Same loan taking five years Interest Only Interest cost to you

$ 553,567

$ 40,790

Broker trail or Bonus Lender Profit

$ 11,638

$ 862

Extra Interest Cost Extra Broker Commission

Same loan taking 25 years Interest Only (Line of Credit) Interest cost to you

$ 798,750

$ 285,973

Broker trail or Bonus Lender Profit

$ 16,875

$ 6,099

Extra Interest Cost Extra Broker Commission

Debt might be a tool in your investment strategy, but it would be a bit crazy to make keeping that debt as large as possible an objective lender will charge you an extra $41,000 in interest. Now that’s a conflict. As for your mortgage broker, the conflict will also vary based on which lender they use. Under IO, your debt stays larger for longer, so brokers also make more money if they are receiving a trailing commission. Just how much varies between lenders. It’s also important to remember that if you don’t use a broker, the lender keeps this commission as profit, so it’s lose-lose. So back to how much. Lenders’ trailing commission rates are all over the shop; but as a guide, your broker can increase their commission on that $450,000 loan by about $900 for a fiveyear IO term. Turbo charge that to more than $6,000 extra if they can get you to pay IO on a Line of Credit. These figures are calculated using a commission rate

that is standard across lenders such as St.George, Westpac and RAMS. However this is at the bottom end of the scale. Lenders such as ANZ, CBA, ING and most others, pay significantly higher commission. In fact both BankWest (owned by CBA) and also Homeside (owned by National) pay up to twice the rate used in the example.

Tip! You should eliminate personal or non-deductible debt as a priority over investment debt. This is because interest is paid with net income on personal debt, and with gross income on investment debt. Personal debt is also usually smaller, enabling it to be eliminated faster. Taking Interest Only on investment debt and applying the money ‘saved’ from the principal component to your personal debt is smart and will save you thousands. Talk with your accountant about the best approach for your situation. 57

Finance | payment methods

Risk exposure is higher and longer

A final thought

It’s a no-brainer that the more debt you have, the more risk you have as well. The risk is heightened because you have virtually no control over variable interest rates, momentary control over fixed rates and limited control over the fees, charges and contract variations your lender may impose. Using IO for any period extends the risk to your financial health. The longer the term, the larger the debt, the more seriously you should weigh up the decision.

It is inevitable that paying IO carries more risk and is more costly than taking the same loan as P&I, which brings us back to the original question. Why do it? Well, the answer is really quite simple. Paying IO on any finance facility will always cost you more on that facility. It will only ever save you money if you put the cash flow saving to ‘better use’ elsewhere. In the example used in this article, that better use needs to be worth more to you than $80,000 across five years,

 $250,000

Loan paying Principal and Interest

Interest cost to you....................................................................................$284,879 Broker trail or Bonus Lender Profit.............................................................$5,986 Same loan taking five years Interest Only Interest cost to you Broker trail or Bonus Lender Profit

$307,535 $6,465

$22,656 Extra Interest Cost $479 Extra Broker Commission

Same loan taking 25 years Interest Only (Line of Credit) Interest cost to you Broker trail or Bonus Lender Profit

$443,748 $9,375

$158,869 Extra Interest Cost $3,389 Extra Broker Commission

$450,000 Loan paying Principal and Interest Interest cost to you Broker trail or Bonus Lender Profit

$512,777 $10,776

Same loan taking five years Interest Only Interest cost to you Broker trail or Bonus Lender Profit

$553,567 $11,638

$40,790 Extra Interest Cost $862 Extra Broker Commission

Same loan taking 25 years Interest Only (Line of Credit) Interest cost to you Broker trail or Bonus Lender Profit

$798,750 $16,875

$285,973 Extra Interest Cost $6,099 Extra Broker Commission

$650,000 Loan paying Principal and Interest Interest cost to you Broker trail or Bonus Lender Profit

$740,681 $15,565

Warning! If you are making Interest Only repayments because you are finding it difficult to manage your debt, you are in over your head and should seek help from a credit advice line operated by your State or Territory Government. Keep communication open with your lender or mortgage broker, but take independent advice before you make any changes to your loan structure or lender. or about $735,00 if you were to run it over 25 years. As an investor, you already realise the value in taking active steps today to build your wealth tomorrow. You have probably compromised some of your current lifestyle wants to enable you to live more easily in the future. Taking IO for a lifestyle choice today has the potential to undo some or all of this good work in the future, so proceed with caution if this is aspect is influencing you. Although lenders and mortgage brokers may appear well intentioned when discussing IO, you should crunch the numbers yourself or get independent help if you are not sure how. Lenders and mortgage brokers have a significant conflict of interest when advising on any of the features that have a direct impact on how profitable they, or the people they work for, will be. Used wisely, IO can be beneficial. However, like all aspects of your investment, you should take the time to properly establish the costs and benefit in your personal situation. After all, everyone is different, but it’s your money. Make sure you protect your interest.

Same loan taking five years Interest Only Interest cost to you Broker trail or Bonus Lender Profit

$799,596 $16,810

$58,915 Extra Interest Cost $1,245 Extra Broker Commission

Same loan taking 25 years Interest Only (Line of Credit) Interest cost to you Broker trail or Bonus Lender Profit

1,153,749 $24,375

$413,068 Extra Interest Cost $8,810 Extra Broker Commission

Michael Lee is the spokesperson for Mortgage Keyfacts. For more information, email Michael at Michael. lee@keyfacts.com.au or visit website: www. keyfacts.com.au www.yipmag.com.au

Finance | payment methods

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Strategy | property development

In the second instalment of his six part series on property development, Gavin Taylor walks readers through each step of the development journey and explains in detail how to secure funding for your project

Walking through the stages of property development and obtaining finance B ecoming a property developer, or even dabbling in the idea of development, is not as simple as it seems. New builds require extensive legwork and preparation, and that’s even before the first clump of soil is turned on-site. Less than 50% of a project’s duration is the visible construction period. The majority of time is spent in planning, approvals, documentation and financing. As a hands-on developer, or even as an armchair developer who employs project managers and an extensive consult team, you must embrace various roles and responsibilities in order to get the job done, and done right. Understanding these roles begins with understanding every stage that’s involved in the development process itself, from conception to completion. In this second part of our series on what it takes to become a successful property developer, I will explain the

sequence of steps you need to follow when tackling a development project and, critical to any development’s survival, how to obtain that allimportant funding.

The stages of property development

Although there are a distinct set of complementary steps that every property developer must follow in order to achieve the best possible outcome, the process is rarely completely linear. It is important for the developer to remain flexible and have the capacity to problem solve and think on their feet at all times, as at any point plans can go awry. The process may vary slightly from project to project, but in essence all property developments must go through the following stages: • pre-purchase • concept stage

• purchase • town planning • working drawing and documentation • pre-construction • construction • completion and post construction

The nature and magnitude of a property development often compels the constant repositioning of one or more aspects of the concept in a developer’s mind; and/or renegotiation between the developer and other participants in the process. With large sums of money at stake, and considering the extensive time frames over which a development evolves, all aspects need to be managed carefully as the cost of making a mistake can be extraordinarily high. It is therefore important to recognise that a successful developer must be able to handle intense pressure and thrive amid uncertainty. With this www.yipmag.com.au

Strategy | property development

disclaimer in mind, let’s take a closer look at these eight important stages of a property development project.

Pre-purchase Pre-purchase is a fairly obvious first step in the development process. As the name suggests, it involves seeking out a block of land. It may also be an established house site that has sufficient potential. You may want to refurbish the existing property, or obtain development approval to construct multiple dwellings. At this stage it is important to already have your finance in place, or at least have an understanding of your borrowing capacity so that you know your limits and what you should be looking out for. After all, there’s no point deciding to demolish an old house and knock up five townhouses in its wake if you could not possibly obtain the necessary funding to do so. You may also consider enlisting experts to help to ensure the project’s viability. This might be a development manager who can coordinate the entire process, or a team of industry professionals. The team might include a solicitor, an architect, a surveyor, a town planner, and finally a estate agent who could give their honest assessment of end values and the marketability of the completed product.

Concept stage Once you’ve found a potential site, the next step is to come up with a concept. What can you put on the site? How many units? How big? What restrictions are there? To ascertain what can be constructed on your chosen allotment, you must first assess the local council’s development and planning policies. Often these documents are freely accessible by logging onto the local council’s website. Alternatively, you can visit their offices and ask to see a hard copy at reception. At this time you should carefully gauge the market demand in your chosen area. In other words, what type of dwelling would sell or lease well? Let’s face it, you want to design and build a project that has optimal marketability. You must also undertake a detailed analysis of the neighbourhood www.yipmag.com.au

character, as maintaining the traditional nature of an area is an important consideration for the local council and their town planning requirements and regulations. It’s also a good idea to consider any neighbours to your site and potential objections they might have to the project. Taking all these factors on board and attempting to address them before you get too far down the development process can save valuable time, frustration and money down the track. Finally, you need to put pen to paper and do some sketches of your proposed development allowing for setbacks, driveways, private open space (as required by council), garages, parking spaces and room for turning circles so that residents can drive out in a forward motion. By undertaking this exercise you will be able to determine how many units and of what size can fit on the remaining land. Ultimately, the final decision to buy or not to buy your proposed site will come down to the number crunching of a pre-purchase feasibility assessment. I will discuss the prepurchase feasibility in further detail in Part Three of this series, but as a general rule this critical assessment should include time lines, all costs including consultants and construction as well as likely end sale values and the profit margin you desire. This will enable you to work out what the land is worth to you. Of

course if the development is financially viable, it is then time to consider putting an offer in and going for it.

Purchase Obviously, this stage involves buying the land at a price that will allow you to make the necessary commercial profit that deems the project viable. Again, I will take you through this phase in greater depth in Part Three of this series and explain how to negotiate the best possible deal.

Town planning, or the Development Approval stage Your architect will be required to draw up plans that fit in with the relevant state planning codes as well as the local council’s development guidelines. As a result of the increasing complexity of the development process and associated rules and regulations, a town planner is often involved at this stage. A land surveyor is required to plot out the site dimensions, levels and important features (service pits, position of adjacent dwellings, etc). Then be prepared for a wait, as it may take up to 12 months before you actually get your hands on that all important development approval permit – during which time you may have to negotiate changes with the council or with objectors. Flexibility, and a clear understanding of your end goals are important in this. 61

Strategy | property development

Working drawing and documentation Once you have finally received the permit for your development to proceed, you have only received your local authority’s approval. It’s now time for your architect and engineer to document the working drawings. These will serve two main purposes. They will be part of a) the instructions to your builder on what to build, and b) the documentation submitted for a building permit or Construction Certificate. While the architect and engineers are completing their work, you can advance things by finalising the selection of fixtures and fittings, and working with the consultants to complete the specifications.

Pre-construction During the pre-construction stage you will be busy acquiring quotes from prospective builders and, of course, finalising bank approval for the development loan. You will have to talk to your broker or financier about their documentation and process requirements, and co-ordinate your timing so when you are completing the building contract you will be confident that the finance will be available.

Construction Finally you get on-site to build your project, paying the builder progressively at the completion of each stage using draw downs from your bank loan. Although this stage can last anywhere between six and 12 months, depending on the size of the project, it’s the most exciting aspect of 62

the development as you see all of your hard work come to fruition. During construction you should be obtaining subdivision approval from the local council. You would have checked at the concept stage (step two) that this was permissible in terms of council policies.

Completion Upon completion, your project is either leased or sold. This is usually when you finalise the plan of subdivision and separate titles for each unit. While many developers sell their project, I believe that retaining your development as an addition to your high growth portfolio and borrowing against its end value to progress to bigger and better investments and/or development projects is undeniably the best way to grow your portfolio and wealth over the long term.

Financing a property development

Before you commence any development project, it is obviously crucial to first establish how much you can borrow and how you will be able to manage all associated costs of the development. As a property developer you will have to understand finance and what the banks look for when lending for development projects, as this is very different to funding a ‘buy and hold’ property investment. Banks don’t simply lend for a development based on the security of the project; they also want to establish the track record of the people behind the

development and the development’s financial viability. Until you establish a good reputation with the bank and a sound track record in property development, lenders will also assess your development team as well as the professionalism of your finance presentation to them. It is therefore important to submit your loan request in a professional manner, including a detailed feasibility study to show that you have allowed for all contingencies. Generally, your development loan will be structured so the lender provides 70%–80% of the cost of the project (rather than its end value) and they will expect you as the developer, or your equity partners, to provide some funding. The amount you can borrow is known as the Loan to Value Ratio (LVR). Many lenders class two- or threeunit projects as residential developments and use less stringent lending criteria, whereas with larger developments they usually require a greater percentage contribution of equity or a level of presales. Typically, you will need to provide 20% of the funds for a twodwelling project and 30% for larger projects, which lenders class as commercial loans (even though they are not commercial building projects). In other words, you will be able to obtain a development loan at 80%–70% LVR, depending on the size and nature of the project. This means if your development cost is $1.5m, your financier will expect you to contribute $300,000–$450,000 of your own equity into the project – towards the ‘hard costs’ (land and building contract). Financiers generally do not lend towards the ‘soft costs’ – stamp duty, consultants fees, rates and taxes etc. That will normally come out of your own funds. Not unlike a regular residential new build loan, development loans offer staged payments to be finalised at the end of each regular building stage: • the deposit • base stage • frame stage • lock up stage • fixing stage • balance of development funds supplied on completion www.yipmag.com.au

Strategy | property development

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Strategy | property development

Pre-sales For larger projects, most lenders require a certain level of presales to minimise their risk. The percentage of the project they require to be presold before they are prepared to hand over development finance varies, but can be around 50%.

Project updates

If you intend to retain your finished project, you would pay out the development loan by refinancing the property and taking out a long-term investment loan. If you intend to sell the units in your development, you will have to understand your cash flow very well as you can only receive payment at settlement of the sale. Only then will you be able to pay back your borrowings – and you will have to be able to hold the development until that time (ie, service the interest). However at no stage will the banks allow your loan to go above the agreed maximum percentage eg, 80%. You therefore need to show your lending institution that you will be able to service the loan, including the interest repayments. You may require different types of lending for the various stages of a project, including: • An acquisition or development loan to cover the purchase, development application and pre-construction costs. • A construction loan to cover the building of a project. • An investment loan if you are retaining your project as a long -term investment.

Your loan application To ensure you have the best possible chance of obtaining the development finance you require, you will need to put together a professional finance submission – a sort of ‘business plan’ for your development project. This should demonstrate to the lender that you can construct a viable project with numbers that ‘stack up’ to make a financially successful development. 64

Loans for development finance require a detailed application, beginning with an executive summary that should point out the viability of the project and the design features of the development being considered. Then each of the following points should be explored in detail: • site description • zoning • design concepts • résumé of your property manager and major consultants • costings • feasibility study

Most lenders will require formal proof of budgetary and cash controls, both before and during the course of your development project. This reassures them that you have done your homework and allowed for any budget blow outs or contingencies that may arise. Before approving your loan, a lender may request one or both of the following elements: • a fixed priced building contract • detailed construction costings from your builder or a quantity surveyor’s report If necessary, evidence of pre-sales in the form of deposits that are required to be held in trust. These deposits are generally cash to the value of 10% of

When assessing the feasibility of any potential development project, it is important to keep the lender’s criteria and expectations in mind • projected sales figures • net result • timelines

Sources of funding Banks remain the major source of funding for developers, and while most banks are keen to lend to experienced developers, the truth is that the recent global financial crisis has seen many of the major players really tighten up their lending criteria. As a result, private funders and joint venture funders are becoming a popular alternative for some developers. Quality mortgage brokers with the right expertise and knowledge can assist you when it comes to obtaining development funding.

the purchase price, held in trust. As the project progresses you will need to keep your financier updated with: • progress claims made by the builder • reports from your project manager or a quantity surveyor • cash flows and revised financial projections • any delays in the project • any changes to the feasibility study • any sales that may have occurred Before making progressive payments to the builder, the bank will require assurance that the particular stage of construction they are paying for is completed. Sometimes they even www.yipmag.com.au

Strategy | property development

require proof that the builder has paid all of his suppliers and trades so no claim can come back to the lender. To ensure that the building stage has been completed, the bank may send out its own valuer or request certification from a project manager or a quantity surveyor.

What lenders look for When assessing your development, project lenders look carefully and critically at the quality of the security you are offering; that is, the end product of the development. Their primary considerations in doing do so are: • The fire sale price of the security. What would they achieve if they had to take possession as mortgagee and sell it? • The end value of the dwellings you are building. If they are higher than the median price in your area, they will be seen as lower quality because they may be more difficult to sell. • The zoning of your security. Residentially zoned land is the most

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highly regarded as it is the easiest to sell. Rural properties would be seen as less secure and hence the banks will lend a lower proportion on these. • The size of the property. If your apartment is less than 45 square metres the lenders will not be keen to lend on your project. • The postcode in which your development is situated. Lenders prefer to lend against properties in areas that have a long history of strong capital growth and in large population centres. • The usage of the security. Banks prefer to lend against the security of residential real estate compared to holiday resorts or places like serviced apartments. When assessing the feasibility of any potential development project, it is important to keep the lender’s criteria and expectations in mind. After all, a development can look wonderful on paper, but unless it ticks all of the right boxes with the banks, it will never get off the ground.

Special offer exclusively to YIP readers! Register at www.AskThePropertyExperts.com.au. and get: • a sample feasibility study • a special report on “How To Get Started in Property Development” • a free 60-minute webcast replay with four property development experts “How To Get Started in Property Renovations and Development

In Part Three of our small development series, Gavin will consider how to source and secure the best potential development site at the right price, and how to deal with the problems that can plague any development. Gavin Taylor is a director of Metropole Projects, which is currently managing over 70 development projects for clients. An architect by profession, Gavin has been involved in property development for over 20 years. Visit www. metropole.com.au

Tax | property development joint ventures

Structuring joint ventures in property development Eddie Chung looks at key issues that investors need to address when structuring a property development joint venture

quarantining the projects in separate entities to ensure that the more risky projects will not cross taint the less risky ones.

Return

rom time to time, property investors may be presented with the opportunity to develop their property. More often than not, the investor will contribute land while a property developer will be engaged to run the property development project in return for a share of the development profit. There are many ways in which a development may be structured but there are also many commercial and taxation issues to consider to ensure that the structure adopted provides the most efficient and appropriate outcome for all parties concerned.

Risk This is probably the single most important issue to consider. Every project has inherent risks. Therefore, the structure used to undertake the development project should minimise the exposure of the joint venture parties’ assets to potential claims where possible. Obviously, this will be a 66

critical issue for the land owner, given the relative value at stake. It would not make any sense to embark on a project with the goal of creating wealth if you are risking the hard earned wealth you have already accumulated. For instance, if the property to be developed is currently owned by a discretionary family trust and the trust also owns other valuable assets, you should look at strategies to protect the other assets and ensure that the development vehicle is a separate entity, eg, a limited liability company. Also, if an individual owns significant assets, it may not be prudent to appoint the individual as a director of the development company as a breach of directors’ duties under the Corporations Act, for example, may expose the director’s personal assets to potential claims. If you are undertaking several development projects at the same time and the projects have materially varying risk profiles, you should consider

Risk and return go hand in hand. As we all know, the higher the risk, the higher the return. Therefore, you need to negotiate with the developer to ensure that the return you expect from the project will be commensurate with the risks you are assuming. For instance, if the borrowings are to be in your name and the developer is essentially being ‘free carried’, your return should reflect the extra risk you assume by carrying the debt. Also, as you own the property, there will be inherent risks associated with your ownership, which should also be factored into the profit and risk sharing arrangement. To determine whether you, as the land owner, will derive an acceptable return from the project, financial projections should be prepared as part of the feasibility report, which should take into account the projected revenue and expected costs of the undertaking, including taxation liabilities and obligations. The financial model should also take into account the timing of cash inflows and outflows to ensure that your projections cover all aspects of your financial commitments. For instance, if your projection indicates a funding gap where substantial costs are expected to be incurred, but the loan proceeds will only become available at a later time, you will need to consider bridging finance. The cost of the bridging finance will then need to be factored into the model, which will directly affect your bottom line. In more sophisticated models, ‘what-if’ scenarios may be incorporated to enable you to conduct sensitivity analysis to anticipate the change to your www.yipmag.com.au

Tax | property development joint ventures

return should a variable surrounding the project materially change.

operational aspect of the project, such as decision making.

Funding

Structure

Most property development projects require you to borrow and the gearing level is usually significant. There are many questions that should be asked when you are putting together the financing structure behind the project. For example, the manner in which funds are borrowed may affect the taxdeductibility of the interest incurred on the loan. If you use the loan funds to initially pay down the loan on your private residence and then redraw the funds from the home loan to fund the development expenses as they are incurred, the interest on both the development loan and home loan will need to be apportioned, which will create unnecessary complications as a portion of both loans is no longer tax-deductible. Due to the global financial crisis, it may be an idea to understand your financing options in the early stages of the development as funds are getting harder to come by – be they debt or equity. Banks have been tightening their lending criteria, eg, reducing their acceptable loan-to-value ratio (LVR), widening their security coverage, restricting access to non-recourse loans, increasing interest rates, etc. As the bank is usually the primary secured creditor behind the project, it will be important to limit its recourse against your personal assets as much as is practicable. For instance, if your valuable assets are held in your spouse’s name, it may not be advisable to appoint them as a director of the property development company and have them provide a director’s guarantee to the bank. If appointing your spouse as a director is inevitable in your circumstance, steps should perhaps be taken to de-risk your spouse (eg, divest their assets to a safer entity) before the director’s guarantee is provided. On the equity side of the equation, you may consider procuring other equity investors in the market, which is not always easy. In any event, you may want to limit the number of investors, who will all share in a ‘cut’ of your development profit and may prove to add another level of complexity to the www.yipmag.com.au

Very often, the language used by property developers may create some confusion as to what kind of structure you are actually dealing with for legal and taxation purposes. One of the most common areas of confusion relates to the term ‘joint venture’. A joint venture means different things to different people. Commercially, people tend to use the term ‘joint venture’ loosely to mean an arrangement under which several parties come together to undertake a particular project. However, from a legal perspective, a joint venture may, in some cases, constitute a common law partnership if the parties to the joint venture are substantively carrying on a business in common with a view to profit. This

parties to the joint venture are receiving income jointly. The most basic example is a single rental property co-owned by two individuals. Even though the property is strictly a one-off investment, the co-owners will be taken to have formed a tax partnership (because they are deriving income jointly), but not a common law partnership (because they are not carrying on business together). In general terms, when a tax partnership exists, the tax law deals with the partnership as if it is an entity in its own right and the respective partners are required to include it in their assessable income. Obviously, there are entities that may be used to undertake the development project. These entities are akin to lego blocks, which can be swapped and changed to build the most appropriate structure as dictated by the circumstances in question.

Negotiate with the developer to ensure that the return you expect from the project will be commensurate with the risks you are assuming legal distinction is very important because partners of a common law partnership are jointly and severally liable for acts done by each partner on behalf of the partnership. In contrast, parties to an unincorporated joint venture are generally only liable to acts done by themselves. Therefore, if you do not wish to be liable to the acts done by the developer, you will need to ensure that you and the developer are not parties to a common law partnership. To complicate things further, the absence of a common law partnership does not necessarily mean that there is no partnership for taxation purposes. In fact, the income tax and GST law specifically broaden the definition of a ‘tax partnership’ to include arrangements where parties are jointly in receipt of income. This means that even if the parties to the joint venture are not carrying on business in common, a tax partnership may still exist for taxation purposes if the

To that end, you should also aim to build a flexible structure to provide for future contingencies, eg, the admission of a new equity partner in a tax effective manner.

Ownership As part of the structuring of the project, an important consideration pertains to the ownership of the underlying property, which may also dictate who has control of the development. For example, if a partnership is established and you are the land owner, you will need to be careful that the formation of the partnership does not inadvertently cause you to dispose of some of your interest in the property to the other partners in the partnership. If so, the arrangement may give rise to unintended consequences. In most cases, however, it may be prudent to steer away from the disposal of any property when the joint venture is entered into due to the hefty costs associated with the transfer of 67

Tax | property development joint ventures

ownership, eg, stamp duty, income tax, etc. In which case, an unincorporated joint venture would perhaps be considered more appropriate. Under an unincorporated joint venture, you as the land owner may continue to own the property in your name and enter into a joint venture agreement with the developer. Rather than having a direct interest in the property, the developer will merely be rendering property development services to you in return for a bundle of fees. Obviously, the fees payable may be calculated mathematically with reference to the parties’ respective share of profit from the sale of the development, but the amount payable will be legally and, for taxation purposes, characterised as fees. In this regard, the documentation of the joint venture agreement must be carefully drafted to ensure that it clearly reflects this relationship. Otherwise, it may give rise to problematic results, eg, the fees may be treated as assessable income to the developer, but not tax-deductible to you if they are contractually characterised as a distribution of partnership profit instead.

Taxation We have already touched on some of the taxation issues that may arise due to the particular joint venture structure adopted. It is important for you and the developer to understand the true nature of your arrangement, so that you can fully appreciate how transactions within that arrangement are treated for taxation purposes. For instance, if the property developer borrows money in their own name to fund the development project, you as the land owner will not be able to directly claim a tax deduction on the interest, even though your ‘share of profit’ from the project, which may be represented by the sale proceeds of the developed property less the bundle of fees payable to the developer, may take into account such interest. Other taxation aspects to consider include GST, which could be a minefield in its own right. In particular, the parties need to be aware of the GST costs of the development, including potential strategies that may be adopted to minimise any GST leakage, eg, 68

Would the land owning entity qualify for the ‘margin scheme’ when the developed property is sold? The GST costs will need to be incorporated in the feasibility to ensure that it provides a true picture of the economic position of the project. The tax costs of a project may also be affected by the type of entities used in the structure. For instance, if a unit trust is used to undertake the development project, the unit holder should perhaps be a discretionary trust, which has the flexibility of distributing any income from the unit trust to a corporate beneficiary. The corporate beneficiary will in turn pay tax at the corporate tax rate, which is far less than the current highest marginal tax rate applicable to individuals. On the other hand, if a unit trust is used, any nonassessable amount distributed to the unit holders may trigger a capital gains tax event in the unit holders’ hands. Further, the timing of income and expenses of the project will need to be managed. Many projects will give rise to a tax loss during the development phase because there will not be any material income derived, but certain expenses incurred are immediately taxdeductible. Therefore, you will need to ascertain if the tax losses incurred may be carried forward to recoup future income as the tax law contains different rules for loss recoupment for different types of entities. In addition, you will need to ensure that a tax deduction does not become available after the income year in which the income from the project is assessable, which happens in many instances for one reason or another. Otherwise, the tax deduction will be wasted and you will be paying more tax than necessary. Notwithstanding the above, taxation should only be one of the issues that will need to be addressed in structuring a property development project. It should never be the primary driver behind the structure to adopt.

Exit strategy There is no such thing as a perfect project. Despite the best of intentions, people and circumstances may change in the future, so it is important to provide an exit strategy so that the parties may bring the arrangement to an

end without bringing about unintended commercial and taxation outcomes.

Last words…

The above represents only some of the many issues you will need to think about if you wish to partner with a property developer to undertake a property development joint venture. There are no hard and fast rules in structuring, as the most suitable structure will need to meet the varying needs of all the parties, as well as the circumstances surrounding the particular development. In addition, the structure that provides the best outcome may not always be practical to implement from a cost benefit perspective. For instance, if the structure is complex, the cost of establishing and maintaining it may outweigh the benefit it provides. Therefore, the solution needs to be pragmatic and commercially justifiable. As you can see, many of the issues I have identified are highly technical in nature. Therefore, it will be advisable that your legal and taxation advisors are well versed in property development and transactions. Eddie Chung is a partner with BDO Kendalls’ Private & Entrepreneurial Client Services. Call him on (07) 3237 5999 or e-mail eddie.chung@ bdo.com.au. Important disclaimer: No person should rely on the contents of this publication without first obtaining advice from a qualified professional person. This article is provided on the terms and understanding that the author and BDO Kendalls are not responsible for the results of any actions taken on the basis of information in this article, nor for any error in or omission from this article. The article is provided for general information only and the author and BDO Kendalls are not engaged to render professional advice or services through this article. The author and BDO Kendalls expressly disclaim all and any liability and responsibility to any person in respect of anything, and of the consequences of anything, done or omitted to be done by any such person in reliance, whether wholly or partially, upon the whole or any part of the contents of this article. www.yipmag.com.au

The ABC of investing

Claiming tax deductions Each month Ian Hosking Richards shares a fundamental tip or two to help budding investors build the best investment property portfolio they can

n the August issue I touched on the tax advantages enjoyed by property investors, particularly with respect to new or near-new properties. Although one should never consider an investment purely to reduce one’s tax liability, it can make a good investment even more attractive. Not only that, but if you are a PAYG income earner the ATO will also allow you to receive any anticipated tax rebate on a per-pay period basis, rather than having to wait until the end of the financial year. For example, if you are anticipating a $5,000 tax rebate at the end of the financial year, and are paid weekly, you would receive an extra $100 per week in your pay packet. The form that you need is a 1515 PAYG ITWV (Pay As You Go Income Tax Withholding Variation). In order to receive your rebate on a per period basis you need to fill in the form, estimating your annual income as an employee, plus anticipated rental income and expenses for your investment property and add back any depreciation allowances that apply to the property. In order to ascertain your depreciation allowances you need to obtain a depreciation schedule from a quantity surveyor. It is always prudent www.yipmag.com.au

to be conservative when you are selfassessing, because if you inadvertently over-claim you may be subject to a fine and be prevented from submitting a variation in the future. Forms can be submitted prior to July 1st, and additional forms can be submitted throughout the year up until May 15th if income or expenses change materially. For example, many investors who submitted their forms at the beginning of financial year 2008–2009 would not have anticipated the dramatic interest rate drops that occurred during that year, and if they were on a variable interest rate they would probably have needed to

submit an updated form. Otherwise they would have been in danger of overestimating their interest expense – and therefore their potential tax rebate. On top of all the tax benefits of investing in property, we also get the advantage of leverage – that is of using OPM (Other People’s Money) to create wealth. Consider this: if you purchase a property for $300,000 that you can reasonably expect to give you a capital gain of 10% on average over time, you will make $30,000 per year. If you initially put in a 10% deposit and then borrow the remaining 90%, you have effectively doubled your initial investment in one year. Of course most of us will be thrilled if we achieve 10% capital growth on our properties in the next 12 months, but the example nevertheless serves to give a simple illustration of the power of leverage. I know of some investors who prefer to put in a 20% deposit in order to avoid Lender’s Mortgage Insurance, but I have always been happy to pay the premium, as it has allowed me to put in a smaller deposit and therefore buy more properties with my available funds. To download a 1515 form and instructions on how to fill it out, go to www.ato.gov.au. Next, type in NAT2036 into the search function. If your investment property is already a few years old it may still have some depreciation benefits, so contact a quantity surveyor to find out whether it is worth getting a depreciation schedule done.

Ian Hosking Richards Ian Hosking Richards is a successful property investor with a portfolio of over 30 properties and is the CEO and founder of Rocket Property Group, a leading independent real estate agency that helps hundreds of people a year enter the property market or grow their existing portfolios. For further information or assistance, please visit www.rocketpropertygroup.com.au or call 02 9965 7218.

Strategy | renovation

Top 10

things you should know before you start your renovations Debbie Williams looks at some of the most important considerations you need to take into account before embarking on a renovation project

urn on the television almost any night of the week and you’ll find a show about renovating. These shows are definitely entertaining, but they can give a false impression of what renovation is all about. We sometimes forget that these shows are carefully edited, have unlimited resources and are set up to entertain, not educate. Not only are they making the whole process look easy, but they fail to mention the reality of council approvals, real time, real costs and the real emotions that are part of the package. People undertake property renovations all the time – some small, some medium and some large. What makes some more successful than others? There are many reasons for renovating a property. If you are looking at joining the masses and renovating for profit, like I do, then you need to do lots of research prior to commencing your renovation.

Why are you doing a renovation?

The kind of renovation you are going to do is dependent on many things. Getting a grasp of these will help you avoid costly mistakes. A property that is being kept as a rental is going to be treated differently to one that is going to be sold. Also, a property that is vacant while being renovated is a massively different project than an occupied property. I believe there is only one reason someone would renovate and disregard profit, and that is if they are renovating for personal enjoyment – which usually involves a family home. This makes the cost versus the potential profit less important. If you are planning to live and enjoy the property for many years to come, then renovation for profit will be less important. But many people will still renovate to increase the value of their property, and then use the funds to invest in other opportunities. I usually renovate properties when they’re empty. That way, I don’t have to worry about my personal belongings being damaged or work out how to make the property secure. I want to be able to live in my home while carrying out my business, without compromising basic comforts such as food and hygiene. 70

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Strategy | renovation

Rentals I do more cost-effective renovations based on increasing rental returns. When I renovate for increased rental yield, I usually do so because the property is a bit tired and needs to be freshened up. The decision is strategic: often the property may be a future development opportunity, or is in a great location and is likely to experience massive capital growth. But if the plan was to sell the property at the outset, then I would sell no matter what. Selling I will spend more money on a renovation if I am selling. I take into consideration current trends, colours and the current condition of the market. Also, the layout of the property and access to outdoor entertaining areas become important in the planning. Understanding the difference between rental and ‘for sale’ properties will put thousands of dollars in your pocket – instead of someone else’s. For example, I consider the durability of a product I am putting into a rental property, but I put more of the ‘wow’ factor into a property for sale. Take the kitchen. I prefer to put twopack cupboards in a property that will be sold, but good quality laminate in a property I am keeping – purely because the two-pack looks better but chips easier, and the laminate can be bought in great finishes and is more durable.

Do you have enough knowledge to achieve the desired outcome?

If renovating is so easy, then why do so many people get it so wrong? I think this is because the shows we see on television make it look too easy. Even when we see the mistakes they make, we don’t put ourselves in their shoes making the decisions and living with the emotions. Then when we have lived the television show from our armchairs, we think ‘it’s not that hard’. But in reality, there’s a lot to consider when renovating. You need to know when council approval is appropriate, what qualifications you require, scheduling, managing tradespeople, and where to start and where to finish. A lot of learning happens on-site, and a good builder can help teach you the process and lead you through the www.yipmag.com.au

planning. They can work with you to teach you the basics that will help you in the future. I suggest that you undertake a course on renovation and spend time with people who renovate. These people are not necessarily builders or developers. Instead, they are everyday people who can put a renovation project together. Some will be ‘hands-on’, and some will be ‘hands-off’. My first renovation was at the beach. It was a two-bedroom unit in original 1950s condition, and it had a very poor layout. I was fortunate that the owners of the unit next door decided to renovate at the same time, and their builder happened to be an uncle of theirs. I was able to piggy back off them. I used the same tradespeople and yet remained onsite for most of the time.

Understanding the difference between rental and ‘for sale’ properties will put thousands of dollars in your pocket – instead of someone else’s They were very patient, I made lots of mistakes, did things in the wrong order and yet still managed to turn a neat profit. The profit was equal to my previous six years’ wages, as I only worked part time. But I was able to gain enough from that (and a from a property investment course I had done) to do another renovation, and then another. Each one was better than the last. Needless to say, it wasn’t long before the day job ceased to exist.

How much time do you have, and how much time you are planning to take?

When I did my first renovation, I was working part time and had time during the day to be on site – and it still took me eight months! I now schedule around 10 weeks for a major renovation, and three weeks for a minor one. Many of my clients come to me wanting to get started with property renovations, but they work 60–70 hours a week. I’m not saying it’s impossible to do a renovation under these circumstances – but something has to give. I like to think property as a

long-term best friend helping me gain financial freedom, not a demanding job that is set to take away my leisure time. Property should be a pleasurable experience – especially if your working life isn’t. Reality dictates that someone has to be on-site to direct the activity and deal with the issues that come up. If you are not able to get away from work, or you can’t be on-site regularly, then I suggest you appoint someone who knows what they are doing. Project management can add 10–15% on top of the renovation cost, but can be a very cost-effective way of handling the renovation if you don’t have the time or expertise. A good project manager will end up costing you nothing if they can negotiate good prices on materials and on good tradespeople. They also have credibility within the industry, and can keep a job moving along when you don’t have time. Just as planning the scope of works is important, having a schedule is just as important. At times you will need tradespeople, and they will need to be booked. If time doesn’t matter to you, then none of this is an issue – but if you 71

Strategy | renovation

Real life

are looking at making a profit, I believe timing is crucial. If you are looking to turn over property, then timing is just as important as setting a budget for the renovation. Opportunity cost can be seen as the extra time a job takes, resulting in the inability to be able to secure and start the next. For someone like me who makes a living in property, scheduling and having a quick turnover can be the difference between the business being profitable or not.

How to find profitable renovation properties

You may hear seminar presenters telling people of the need to build relationships with real estate agents, because they will then contact you. Not true. I find the best way of getting properties is setting up alerts on www.realestate.com.au in the areas you are looking, and checking them daily. Another way is to phone and ask agents what they have on their books and what they have coming up. Set a target area. My target area is no further than a 15 minutes’ drive from where I live or work (for those who will be managing their renovation from work). By doing this, it already cuts out a huge amount of online searching. Then I get to know my target area really well. That includes researching recent sales, trends, highest sale price and lowest sale price. I want to know the infrastructure, amenities, good streets and bad streets of an area. So in fact I become an area expert. When I am the expert, I will recognise a bargain – and I am certainly looking for bargains! A key point: once you recognise a good deal, secure it with a contract. This means making a commitment. I also aim to sell the property for 50%–100% more than I paid. This is my margin for renovation and profit. So if a property is purchased for $300,000 I am looking at a finished value of between $450,000 and $600,000. If comparable sales of other properties in the area don’t support this increased value, look for somewhere that does. I also look for properties that can only be renovated. This includes units, semi-detached properties and houses on small blocks of land. I have seen many people renovate properties only to have the purchaser bulldoze it as it is 72

bought one property in Bowden SA recently. My purchase price was $241,000. Based on my research, the minimum sale price I will achieve will be between $380,000 and $400,000. One similar property has come on the market in the same area for $450,000–$470,000! I am budgeting $80,000 on the renovation (including all costs). So my margin for profit is large enough for me to do a good renovation and take a decent profit. At this budget price range I am looking for a minimum of $50,000 profit, on the more expensive ones $100,000. The profit should be relative to the risk.

a prime development site. This is where your sums come in. Do them on lots of different scenarios and then decide how to make your money. It may not be by renovating.

How to find good tradespeople

There are many ways to find good tradespeople, but first you need to decide what makes a good tradesperson. I look for a combination of many attributes. Good quality work may be one, but availability and cost comes in too. I don’t want a tradesperson who is too fussy and takes too long to do the job. I look for middle of the road. When renovating property, I need to know the work is going to last – but I don’t want to pay a fortune for perfection either. I find a great number of tradespeople at Bunnings! Here I find people who often don’t want to work in their trade full time, but are sick of being contractors. They want the steady income of a regular job, but like to keep their hand in with the trade they have trained in. Other sources include: • Asking friends and family for referrals. • Stopping at work sites and getting business cards or phone numbers. • Driving through Housing Commission areas and talking to tradies who are working there. • Asking tradies to refer others. When you carry out these steps, you develop a network of people who are used to working with each other and are of a similar standard.

Who is doing the work?

Financing the renovation and the purchase (if purchasing)

Traditionally renovators have been people who have a certain amount of skill and are great with their hands. They have often been the renovator of their own property (like my dad). Trouble is it takes so long to get around the house that when you have finished it’s time to start again. We lived in the middle of an ongoing renovation for as long as I can remember. DIY warning: if you decided to learn a skill so you can renovate, the job is usually finished before you get proficient. Then the job can look like it’s been done by an amateur. And it will have taken twice as long as it would have if done by a professional. I prefer to manage the job. That way I don’t tire of renovating and I get a professional job done in a timely manner. And, I can just tell others what to do! A good renovator is basically a good project manager. You don’t need any great skill in any of the required jobs, just an understanding of what needs to be done. Then you plan the schedule and manage the people.

The first activity I conduct with my clients is to get the finances in order. This is crucial when renovating. I suggest you maximise your position and use existing capital to renovate. If you have had the property for a while you may be able to borrow against the existing equity in the property, or you may be required to provide a building contract to the financier. If you are www.yipmag.com.au

Strategy | renovation

project managing, this will be difficult unless you are a builder. There are many different finance options available, but don’t fall into the trap of assuming that someone will take care of everything for you. You need to get intimate with finance, and understand your portfolio. Appreciate how each loan relates to each property. Don’t have properties cross-collateralised unless you have planned it that way, and understand why you have done it. And have loans with different lenders – this spreads your risk and theirs. I am not a financier, but I take a keen interest in my accounts and often direct the banks and brokers to the loan I am looking for (rather than having them direct me). Even though I take a hand in the loans, I still take advice from the lenders – as the products and rules surrounding them tend to change very quickly. In the past, I financed renovations with a credit card and account payments, especially when funds from banks were not an option. Private lenders

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are becoming popular to assist with the completion of renovations and developments. The cost of these funds is quite high, but since they are for a short time and a relatively small amount of money it is a good option. Another option for funding renovations can be joint ventures. Be prepared to share your profits though, and make sure the risk is not one sided.

How to stick to a budget and time frame

Your initial renovations are the testing ground for developing an understanding of costing and timing. Depending on the amount of time available to you, both of these items will vary. The important thing is to be realistic, review both costs and scheduling regularly, and alter them as required. With costs, I set a budget which includes about a 10% contingency, and I cannot go over that. The price that can be achieved from the property is usually set by the other property values in the area. Remember that every dollar you

spend to achieve your desired outcome is a dollar that doesn’t get into your pocket. In saying that I have integrity and like to deliver a good product, so I believe there is a ‘sweet spot’. That is, a balance between the spending and the return. If I overspend in one area, I need to toughen the budget better in another area. Time frames are much harder to stick to as the variables often relate to availability of tradespeople and small (or not so small) disasters that come up along the way. Time frames affect the costs. Don’t forget that every month a property is held, another loan payment is required and needs to be factored into the final sums. When scheduling jobs, write all the tasks down on sticky notes. Place them in the order you think they should happen, then do a time line. Make sure you do not overload people on the job. I have been to jobs where so many workers are on site they have to move aside and wait until there is room for them to work. The effect is the same as waiting for one tradesperson

Strategy | renovation

I make sure I have checked the agent out at other open inspections and phoned them for an out-of-hours show through to make sure they are proactive to finish before phoning the next one. Tradespeople are often flexible, and will have you booked in even if it isn’t for a specific date. Reviewing is the key to making this work. This should be done weekly.

How to sell the property

From the purchase you should know if the property you are renovating is going to be sold. In a booming market I like to give people a sneak-peek and give them the opportunity to get in before it is listed. The timing here is very important. Show the property too soon during the renovation and you can lose them. So make sure you show it late enough to create a desire to pay above the going rate. In a slower market I like to furnish the property and have my own display furniture. If I was to hire the furniture it would cost in excess of $3,000 each time I listed a property. But if you are turning over properties regularly, $3,000 can buy a lot of furniture – especially from Ikea! The purchaser can even have the furniture negotiated into the package, so the purchaser moves into a fully furnished house. This way furniture can be updated on a regular basis as well as being a tax deduction. I often get asked if I sell my own property or give it to an agent. I love selling. I also love to hear the ‘oohs’ and ‘aahs’ that come when purchasers go though the property. But really it depends on how much time you have available and how accessible the internet is to you. The internet is the most used source for people to find property now, and the number of advertisements in newspapers is dropping. If you can’t be there to show people through, and if you cannot listen to criticism of the property and turn it around to your advantage, then I suggest you give the property to a local agent. I prefer an agent that is local, as they can be on-site to show prospective 74

purchasers through at any time. I make sure I have checked the agent out at other open inspections and phoned them for an out-of-hours show through to make sure they are proactive. Remember to always ask the agent to show you other properties that may be suitable for renovation, as a relationship can be developed (but not relied upon). I prefer an agent who doesn’t do underhanded deals with me. Remember that it is during this time that the agent is demonstrating their ethics. These are the same ethics that will be used when selling your property. At this time I say “go with your gut instinct”.

What happens if you don’t achieve your desired outcome?

It can be a real dilemma when you have done all your hard work and the market has moved against you and you cannot achieve the price you were anticipating. This is one of the main reasons we factor in a large profit. Your profit is also a way to mitigate your risk. Long settlements and slow renovations can work against you, especially in the current market. My preferred market is a flat one. It is easy to work out figures and profits. If there happens to be a price move up that is good, but only as an added bonus. Upward trends should not be relied on to give you profits. If your price is not achieved, a hard decision needs to be made. Do I sell for less – maybe even a loss – or do I hold? Firstly I decide if the property is one I would like to keep for capital growth. The property at Bowden that I mentioned earlier is within five kilometres of the city centre. The area is going through major redevelopment and is becoming quite desirable so it is possible that I will keep it. In fact, I’m almost hoping it doesn’t sell! If it is not in a great capital growth area the decision is easy. To free up my capital and move forward I will always

choose to sell. I have sold properties and only made $4,000 profit, and that was not including my pay. I sell them to free myself up. Not only does it free up equity, but it also solves the cash flow problems that follow – along with the tenanting issues. If I cannot get all of my equity and costs out, I will sell no matter where the property is. My business is to develop cash flow from property. I have a reasonably large portfolio for capital growth already. It is not possible for me to consider running my business at a loss. This is where some tricky sums come in. These are broad sums and provide an idea – not a full breakdown.

Purchase Price.................. $241,000 Settling Costs.......................$12,500 Renovating costs.................$66,500 TOTAL COSTS.................... $320,000 I could get the property revalued and borrow on the new valuation. Bank Valuation................. $400,000 80% loan from bank........ $320,000 All my costs are returned to me but I have no profit. Or, I could sell…. Sell for 10% less than target price of $400,000 = $360,000

Remember there are selling costs to take out, but I should still walk away with around $30,000. This would be my absolute worst case scenario and is unlikely as there have been sales in the area for unrenovated property selling for more. But we don’t know what will happen with the market in the future. There are no guarantees with renovating. But educating yourself is the best way to protect your capital and your return. Remember, if you are looking for nice safe and secure, you can always get a job! Debbie Williams from Equity Finder P/L has been renovating property since 2002. Debbie lectures at TAFE (Adelaide) and The Property School (Sydney) on Renovating for Profit, is a keen investor and Property Coach. www.yipmag.com.au

Strategy | renovation

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s t e r c e s e d Tra

Invest | dealing with tradies

any pattern or design layouts and the quantity required (eg: 10m², 5m²) – because the cost associated with doing this job may well differ depending on the type and size of tiles being laid. Porcelain tiles are often more expensive to lay than ceramic, and the larger the tile size the more difficult they are to lay, so you may need to pay more! Similarly if you are having the tiles in an intricate pattern or there are several different styles of tiles to lay (eg, border tiles and feature tiles), this will cost more. If you don’t have all of this information when you are obtaining the quote, ask if the price will differ according to the type and size of tiles that are to be laid.

Perfection Be explicit about the quality of work you want done before you engage a tradie – and provide the tradesperson with a clear understanding of what you mean when you say “I want it perfect” or “I just want a high quality job”. This is because your idea of ‘perfection’ or ‘high quality’ is likely to be different to the tradies idea of ‘perfection’ or ‘high quality’.

3 Tradies can make or break your renovation projects. Rosalie Griffiths reveals secrets to communicating effectively with tradies to get the best renovation results

ou have done all the background work, sorted out what you want done, have it all costed and you are ready to roll! You have a smile on your face because you are about to embark upon (another) property renovation. Now it’s time to call in the tradespeople to help you create your vision. First though, take a moment to reflect on how you are going to communicate with your tradespeople, as this could be the difference between a relatively smooth renovation and daily headaches. People often engage tradespeople without sufficient knowledge about what that tradesperson is actually going to do. Often, the person engaging them has made assumptions about 76

what they think the tradesperson is going to do, but they haven’t taken the time to specify what their assumptions are in the first place – which can result in all parties being unhappy!

Top tips on how to communicate effectively with tradies When obtaining quotes from tradies, make sure you get the following information:

Be specific about what it is that you want done For example, if replacing tiles in a bathroom, know what type of tiles you are going to use first (eg, porcelain or ceramic), the size of the tiles (eg, 200mm×200mm, 300mm×200mm),

Ask them which specific tasks they will do For example, some tilers will simply come in and do the tiling itself. Others will and can do all the preparation first, as well as laying the tiles. So check whether or not they are doing all the preparation work for the tiling (such as ensuring that the walls/floors are straight, level and firm) or are they simply coming in to lay the tiles? If they are not doing the preparation work themselves, you will need to ensure you have allocated someone else to do this and have allowed sufficient time for it to be done before the tiler arrives.

Ask about what items they will provide and what you will provide There are no hard and fast rules for this. Some tilers will supply everything, including getting the tiles for you. Just make sure you know this before the job is done and so you can compare apples with apples. www.yipmag.com.au

Invest | dealing with tradies

Check how they are being paid For example, are they charging an hourly rate, a per-square-metre rate or a fixed rate for the job? Do they require a deposit (and how much) and how and when are progress payments to be made?

Dealing with tradies While most of us have a budget to keep to when doing a renovation, it is important to not award the job purely based on price. You do need to communicate with the people you have engaged, so make sure that you use people who you can have a conversation with before agreeing to employ them for the job. Remember that generally speaking, you are employing a tradesperson to do a particular job because they are qualified and are therefore an expert in doing that task and you aren’t – otherwise you would be doing it yourself, right? If this is the case, you need to allow them to do the task without micro-managing them or

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12 ways to get the most out of your tradie: 1. Treat them with respect – they are the expert.

7. Meet them on-site when they first start work.

2. Share your processes and timelines with them (have a copy on-site).

8. Show them what you want done and provide a list of tasks.

3. Listen to their comments.

9. Do not micro-manage them.

4. Provide them with an in-depth project brief.

10. Do not quibble on price – particularly if you have changed the list of tasks that they need to do.

5. Provide fair time frames for them to complete works – if you don’t know how long it will take, ask! 6. Sequence the work so they do not have to come back multiple times.

checking that they aren’t ripping you off every hour or day that they are there. Most tradespeople I know take pride in their work and set out to do the best job that they possibly can. If you believe and trust in your tradesperson before they start, you are likely to have a better outcome than if you are constantly checking on them.

11. Pay them promptly. 12. Thank them when they have finished the job!

This article was written by Rosalie Griffiths, founder of Urban Sensations. Rosalie is an experienced project manager, registered building practitioner (DBL27499), Master Builder and a successful property investor. E-mail: admin@ urbansensations.com.au Website: www.urbansensations.com.au

Tax | depreciation

To repair, or not to repair:

that is the question! Tyron Hyde explains what is considered a repair and what is not when it comes to claiming depreciation allowance

ast year more than a million property investors claimed over $25bn worth of rental deductions. Quite staggering, isn’t it? No wonder the Australian Taxation Office (ATO) seems to target property investors every year! For as long as I can remember, every year around June the ATO releases a statement warning property investors to be careful about what they claim. And every year they warn that if you are claiming repairs to your property, make sure they are legitimate and not capital improvements. There is a good reason that the ATO focuses on this topic: it’s a grey area, and according to the investors we speak with, causes great confusion. Part of the reason is that the word ‘repair’ is not actually defined within the tax legislation. Therefore, it takes its ordinary meaning - which is “the restoration of

a thing to a condition it formerly had without changing its character” (W Thomas & Co v.FC of T (1965) 115 CLR 58). Tax ruling TR 97/23 is The Bible when it comes to defining what constitutes a repair and what doesn’t. But it’s quite long and complex, so I’ll summarise the questions you need to ask yourself before you claim the work as an outright deduction, or whether you need to depreciate the work over time. There are four basic tests that need to be satisfied before you can claim work as an outright deduction: • The work you do needs to relate to the wear and tear of the property while it is an income-producing asset for you. • Repairs carried out when you initially buy a property are defined as “initial repairs” and cannot be claimed as an outright deduction. • If you replace the whole item it is not a repair. • If you improve the material when carrying out the work, it is considered a capital improvement, not a repair – and is to be depreciated.

How it works The best way to highlight what constitutes a repair is through of a series of examples: Example#1 Jack and Jill buy a run down 1930s weatherboard property that needs some work in order to bring the property up to a rentable state. Five cracked roof tiles have caused leakage that’s damaged the carpet in one of the bedrooms. They immediately replace the carpet and replace the cracked tiles. They also get a plumber out to fix the faulty hot water heater. This work clearly sounds like repairs, but unfortunately it is not, because the damage was done before the acquisition of the property. The ATO has defined this as “initial repairs” and these costs are considered to be capital expenses and depreciated over time. Example #2 Jack and Jill buy a run down 1930s weatherboard property that’s already housing a tenant. The tenant remains in the property for nine months and then moves out. With the tenant gone, the owners discover five cracked roof tiles that caused the roof to leak and damage the carpet in the bedroom. They immediately replace the carpet and cracked tiles. They also get a plumber out to fix the faulty hot water heater. Guess what? This is the same work, but in this case Jack and Jill can claim the work as an outright deduction – because they believe the damage was caused after they had bought the property. Example #3 Jack and Jill buy a run down 1930s weatherboard property with a tenant. The tenant moves out after nine months.

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Tax | depreciation

With the tenant gone, the owners discover five cracked roof tiles that caused the roof to leak which led to carpet damage in the bedroom. They immediately replace all the carpet and the whole roof. They also get a plumber out to replace the faulty hot water heater. In this case, since Jack and Jill decided to replace the whole item, the work they carried out will need to be depreciated at 2.5% per annum over 40 years, and not claimed as an outright deduction. This is true even though the roof was leaking, the hot water heater needed to be fixed and the carpet was water damaged! If Jack and Jill had only repaired the hot water heater a mixture of outright deductions and depreciable items would have been allowed (as long as they are clearly separated). Example #4 Jack and Jill own a 1930s weatherboard property for several years before deciding to fix the dilapidated fence.

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The ATO focuses on this topic because it’s a grey area, and according to the investors we speak with, causes great confusion The old fence was made out of timber palings. Cash-strapped, Jack and Jill decide to fix the front fence only, leaving the rear and sides alone. They decided a nice new brick fence would be more suitable and will add value to the property. In this example, although Jack and Jill owned the property for a while and only fixed part of the problem, they can still only claim this work over 40 years as opposed to an outright deduction. This is because the material they used was an improvement to the existing product or an upgrade.

In summary This is quite a complex area, and has always targeted by the ATO – because, even though logically the work you are

doing would seem to be a repair, in the eyes of the ATO it might be of a capital nature. So if you think you can buy an old property, renovate it straight away and get a massive deduction in one hit, think again. At the end of the day, all these repairs can be claimed against your taxable income – some quicker than others. Tyron Hyde is director of quantity surveying firm Washington Brown. For more information visit www. washingtonbrown.com. au where you can estimate the likely tax depreciation deductions on your property before you buy it

Tax | overseas expenses

Claiming expenses for overseas investment properties Michael Quinn explains how you can claim expenses on your properties abroad

Australian-based rental properties, you can usually claim a deduction for some of the expenses that are incurred for the period that your overseas property is rented or is available for rent. If the overseas property is not available for rent for the full year, you may need to apportion some of the expenses on a time basis, as is done with Australian rental properties.

What can you claim

hen looking to purchase an investment property, most Australian taxpayers do not usually consider the option of an overseas property. There are obviously pros and cons for both scenarios, and of course it is also a matter of individual preferences, financial goals and requirements. But with the right research and advice, foreign investment has the potential to be just as, or even more, rewarding than some local purchases. Some of the main issues to be aware of, in regards to all things tax based when investigating or undertaking the purchase of overseas properties, include: The Exchange Rate Before you calculate your net income or loss, all foreign income, deductions and foreign tax paid must be converted to Australian dollars. Foreign Rental Income Income from investments in overseas property is generally classed as ‘foreign source income’. If you have earned any income from an overseas property that is included in your assessable income, you must declare it in your Australian income tax return. If you have paid 80

foreign tax in another country on that income, you may be entitled to an Australian foreign income tax offset, which provides relief from double taxation. But again, you must still declare all income and tax that has been paid on that income. Keeping records By law, the ATO requires you to keep records for five years after they are prepared, obtained or the transactions are completed (whichever occurs later). The records are also required to be in English or in a form that tax officers can access and understand in order to determine your tax liability. This applies to all tax records, but is particularly applicable when it comes to dealing with ‘foreign source income’ and overseas rental income. You should keep records for a longer period if you use information from those records in a later tax return (eg, claiming a loss carried forward from a business activity in an earlier year). The records should be kept until the end of any period of review for that later return. Deductions Similarly to claiming deductions for expenses that are incurred in relation to

Examples of expenses that you can claim as a deduction include: • advertising for tenants • bank charges • body corporate fees • cleaning • council rates • electricity and gas • gardening and lawn mowing • in-house audio/video service charges • insurance (building, contents and public liability) • interest on loans • land tax • legal expenses • lease document expenses (preparation, registration and stamp duty) • mortgage discharge expenses • pest control • property agent fees and commission • quantity surveyor’s fees • repairs and maintenance • secretarial and bookkeeping fees • security patrol fees • servicing costs – such as servicing a water heater • stationery and postage • telephone calls and rental • tax-related expenses • travel and car expenses (rent collection, inspection and maintenance of property) and water charges. Borrowing expenses, the decline in value of depreciating assets (previously known as depreciation) and capital works (special building write-off) deductions may be allowable www.yipmag.com.au

Tax | overseas expenses

as deductions over a number of income years. It should also be noted that if you combine travel to inspect or maintain your rental property with travel for private purposes, you may need to apportion your claim for travel expenses accordingly. As with Australian-based properties, not all expenses are deductible. You are not able to claim a deduction for expenses that are incurred on overseas properties for: acquisition and disposal costs such as the purchase cost of the property; conveyancing costs and advertising expenses and stamp duty on the transfer of the property; expenses that not actually incurred by you, such as water or electricity charges borne by your tenants; and expenses that are not related to the rental of a property, such as expenses connected to your own usage of a holiday home that you rent out for part of the year. Capital Gains Australian residents are generally taxed on any capital gains that are made on overseas properties, and as a result they are required to declare any gains in their Australian income tax return. The new foreign income tax offset rules replace the former foreign tax credits and foreign losses regimes that applied for the 2007–08 and previous income years. From 2008-09 new foreign income tax offset and foreign loss rules apply to income years starting on or after 1 July 2008. For most taxpayers, that means it will apply to their 2008–09 income year onwards. Under the new rules, Australian taxpayers who are currently negatively gearing for an overseas rental property, can deduct foreign losses from all of their assessable income in their Australian tax return. However, unclaimed foreign losses from income years before 2008–09 must be claimed over five years from the 2008–09 to 2012–13 income years. Your unclaimed foreign loss for an income year is the total of your overall foreign loss for each class of assessable foreign income for that income year, less any amount of that loss that you have used to reduce your assessable foreign income of that particular class in any income year before 2008–09. www.yipmag.com.au

Working through the following steps can help to provide you with an indication of how the new foreign income tax offset rules may be applied to your circumstances. • For each income year from 2001–02 to 2007–08, determine all of your unclaimed foreign losses. • For each income year from 1998–99 to 2000–01, determine all of your unclaimed foreign losses and halve the amount of each unclaimed foreign loss. • Combine the total for the two periods. Example 1: Working out your starting convertible foreign loss. Alex has the following unclaimed foreign losses: 2005–06: $500 2002–03: $2,000 1998–99: $600 Therefore, Alex’s starting convertible foreign loss amount will be: Step 1 $500 + $2,000 = $2,500 Step 2 $600 x ½ = $300 Step 3 $2,500+ $300 = $2,800 Is your starting convertible foreign loss more than $10,000? You also need to consider if your convertible foreign loss is more than $10,000. If this is the case you have two options: You can choose to reduce your starting convertible foreign loss to a total of $10,000. If you choose to do this, the excess over $10,000 will never be deductible. Your starting convertible foreign loss is deductible over the income years 2008–9 to 2012–13. For 2008-09, you are entitled to a deduction of up to 20% of your starting convertible foreign loss. Example for option 2: Working out a deduction amount for 2008–09. Julia has a starting convertible foreign loss of $20,000 and chooses not reduce it to $10,000. Julia’s deduction limit for 2008–09 is 20% of her starting convertible foreign loss of $20,000 – that is, $4,000. The amount she claims as a deduction must not exceed $4,000.

The pros and the cons of overseas property investment

As demonstrated from the issues outlined above, particularly with respect

to the new foreign income tax offset rules, overseas property investment can certainly be seen as a viable option for Australian-based investors as there are a number of rulings in place to assist the income and tax declaration and reporting process. However, while tax is one considerable component of the investment process, other things you should consider include: Advantages Foreign markets can often provide cheaper or more ‘value-for-money’ investment solutions. Also, the purchase of an investment property and reasons for doing so are not always necessarily purely for the rental income or the capital gain at the end. An overseas property may contribute to your current or future lifestyle choices. Disadvantages Perhaps the thing that makes owning an overseas rental property the most difficult is the distance. Whether it is a neighbouring country or half way across the globe, everything can be a lot more difficult. As with all major financial decisions, it is important to seek independent professional advice before committing to anything. Each individual situation is different, and the ideal investment structure for one person will almost certainly not be the best for someone else. Just as what poses a problem for one party may be exactly what the other is looking for. Additionally, getting the right advice when it comes to claiming tax deductions, particularly on your overseas rental property, can see you significantly (and legally) improve the figures on your tax return at the end of the year. Michael Quinn, Director of The Quinn Group, is an experienced lawyer, accountant and educator. If you would like further information or assistance, Michael and the team of legal and accounting professionals at The Quinn Group can be contacted by calling 1300 QUINNS or visiting the website www.quinns.com.au 81

NS W QLD VIC WA SA TAS NT Act

NSW

property

Sydney houses

Median value $593,000 Growth over 12 months 4.25% Growth three months to Jul 09 6.56% Rent return 4.40% Rent amount Jul 09 $500/week

Sydney units

Median value $423,000 Growth over 12 months 6.51% Growth three months to Jul 09 4.14% Rent return 5.18% Rent amount Jul 09 $420/week Source: Residex, Jul 09

Houses top, but apartments and luxury homes best buys Government incentives during 2009 have driven up activity in the lower market sectors meaning investors have to look elsewhere for opportunity. Andrew Johnstone reports

ydney houses grew by 6.56% in the three months to July 2009, beating all other states. Units grew by 4.14% in the same period, but inner ring apartments were offering investors a strong mix of growth and yield. First homebuyer activity in 2009 overstimulated the lower end of the market, inflating prices, says Sandra Peachey, valuer for Herron Todd White. “Investors have been pushed out of those cheaper outer suburbs,” says Peachey. “I would say the stable middle ring suburbs would be attractive to investors.” However as first homebuyer activity falls, there are renewed investment opportunities at the lower end of the market.

Affordable apartments in big demand Apartments in well-tenanted suburbs and luxury properties are the best buys, says

Peachey. She names the burgeoning south Sydney area, Potts Point and Manly as her picks in the Sydney market. Green Square, Waterloo, Surry Hills and Alexandria are undergoing a revitalisation with traditional warehouse and industrial sites being transformed to modern inner city housing. “What was an oversupply in south Sydney has been absorbed, so that has stabilised that market,” says Peachey. “South Sydney is reasonably affordable and is still showing a really good return.” Green Square has a railway station to the city and the airport, and is the hub around which most of this development is happening. It has become the unofficial centre of south Sydney’s new inner city bustle. The area is attractive thanks to its superior location. It is near golf courses and parks, and is about four kilometres from the CBD with easy access to the beach. The local rental market in south Sydney shows strong demand for new apartments, and the bells and whistles they can offer compared to older dwellings. Because of wholesale zoning changes in south Sydney, Peachey warns that there are a lot of projects in the pipeline. She says investors should be discerning about where www.yipmag.com.au

NSW State roundup and what they pick. “Quality of development is the important thing. There has been some construction in the past few years that has been substandard,” she says. But there are a number of quality developers building good stock that will stand the test of time. With the 50% discount on NSW stamp duty, there is a further incentive for investors to look at quality new apartment stock in south Sydney. Peachey also likes Manly. She says that although most of the unit stock is older, it is well tenanted and relatively affordable considering it is located in a beachside suburb. Potts Point sits harbourside of Kings Cross and is in walking distance to the Sydney CBD. Potts Point enjoys strong tenancy from city professionals and has a ‘New York’ feel to its streets. Apart from some good value buying in Sydney’s inner west, Peachey sees units as a more affordable investment that can yield more than traditional houses in this market.

Luxury market sparkles with opportunity At the luxury end of the Sydney market, properties have fallen from 2008 highs by up to 20%. In this market, cashed up investors who can afford to hold property are well positioned to earn strong capital returns as the market recovers. “At the top end of the market there’s very good opportunity at the moment, because so many of those suburbs have seen prices fall,” says Cameron Kusher, senior research analyst at RP Data. Kusher says that people’s inability to access this level in the market means it is a buyer’s market for cashed up investors. Research by Savills shows strong international demand from investors across Asia, including Hong Kong, China, Malaysia and Singapore. “There is increased interest from Asian buyers because Australia is seen as a safe haven,” says Belinda Nowland, divisional director research, Savills. “Our banking system is solid, and our title system is quite good.” In addition to overseas investors, expatriates are returning for investment opportunities in the upper-end of the market, says Nowland. www.yipmag.com.au

Auburn

Houses

uburn is situated 15km west of the Sydney CBD, near Parramatta. It is just south of the Great Western Highway and Parramatta Road. The suburb has a strong international feel. Turkish, Chinese, Vietnamese, Sri Lankan, Lebanese, and Iraqi groups are strongly represented. According to Vinesh Goundar, sales consultant at Starr Partners Auburn, this brings an ambience in terms of international cuisine and restaurant culture which is attracting buyers. “I sold a townhouse to a young couple who got off the train at Auburn to visit a friend. They were from Randwick. I asked them why they had come so far. He said ‘I can eat out here seven days a week’,” says Goundar. Goundar says Auburn has undergone strong population growth through migration, which has seen demand for rental housing far exceed supply.

Mascot Median price $437,500

(Three months to Jul 09)

(12 months to Jul 09)

Capital growth

Median rental rate

5.91%

10.83%

5.20%

Capital growth

Source: Residex, July 2009

(Three months to Jul 09)

(12 months to Jul 09)

Capital growth

Median rental rate

7.45%

7.92%

4.75%

Capital growth

Units

Median price $452,000

ascot is home to Sydney Airport, but it also has pristine blocks of traditional early period homes and apartments just seven kilometres from the Sydney CBD. “Mascot is an undervalued area,” says Michael Michos, sales manager at Rosebery Real Estate. “The introduction of the Mascot train station has attracted a lot of people, together with the major developments around the station.” Unit developments in O’Riordan Street and Bourke Street, along with Mascot’s proximity to the popular Green Square, have brought significant investor interest. Michos believes investors account for about 60% of new unit sales. “Mascot has a good mix of people and industries, it’s close to the airport and the CBD, you are in the eastern

Source: Residex July 2009

The suburb has experienced significant activity from first homebuyers, but Goundar believes investors will step back in as it slows – especially with Auburn’s tight rental market. Auburns’s position boosts its appeal as an affordable investment area. Commuters have rail access to nearby Parramatta and the Sydney CBD. Goundar says both houses and apartments are attractive investment options in Auburn, but apartments particularly are in undersupply. Proximity to Sydney Olympic Park, Bicentennial Park, ANZ Stadium and the Acer Arena means residents of Auburn have walking access to Sydney’s largest entertainment and sporting events. suburbs, it’s a safe area, there are lots of established families, it’s close to shopping centres and the beaches, and it’s affordable,” says Michos. Mascot neighbours the blue-ribbon suburb of Kingsford, where properties trade for up to twice the value of properties in Mascot. Michos suggests the difference between the two suburbs is in name only. Investors should look at the northern end of Mascot, especially between Coward Street and Gardners Road. Areas around the entry to General Holmes Drive tend to suffer more from aircraft noise. Older style units around $300,000 to $350,000 show steady annual growth, but Michos says investors should look at houses or semi-detached homes for the simple fact that capital growth will be stronger over time. Since it was bought by Macquarie Airports, Sydney Airport and Mascot surrounds have undergone major development and landscaping – increasing the visual appeal and amenity. Mascot has long been the home of many airline and support staff. The nearby Australian Golf Course and Eastlakes Golf Course provide excellent lifestyle options in a suburb that is undergoing renewal. 83

QLD Section | strapline

VIC WA SA TAS NT Act

QLD

property

Brisbane houses

Median value $452,500 Growth over 12 months 1.04% Growth three months to Jul 09 2.17% Rent return 4.15% Rent amount Jul 09 $360/week

Brisbane units

Median value $361,000 Growth over 12 months 1.83% Growth three months to Jul 09 5.62% Rent return 4.77% Rent amount Jul 09 $330/week Source: Residex, Jul 09

Queensland: from patchy to resurgent Brisbane growth slowed in the three months to July, with resource markets affecting sentiment. But with that sector recovering, along with the new SEQ regional plan, investors have a lot to be excited about. Andrew Johnstone investigates

ver the last ten years, Brisbane has significantly outperformed the other major eastern capitals, posting growth of 11.6% pa for houses and 10.67% pa for units. But the July quarter saw growth slow to 2.17%, less than half that of Sydney and Melbourne. “In general terms ‘patchy’ is the word I keep using,” says Julian Harrison-Tubb, state manager Queensland, WBP Property Group. “There are parts of the market that are coming along nicely, but there are also parts of the market that are really suffering.” According to Cameron Kusher, senior research analyst at RP Data, Brisbane has lagged behind national home price growth, but it is starting to recover now – and investors are coming back into the market. Brisbane had been harder hit by the downturn in the mining sector because it has a higher exposure to mining related jobs than most cities. However, this is a short-term event,

says Harrison-Tubb. “That market has turned upwards, so that will have a good positive effect on the Brisbane market,” he says. “There have not been many better times than now for investors, with strong residential rental demand and low interest rates.” The underlying shortage in number of dwellings has not gone away, and Harrison-Tubb maintains a positive view of the Brisbane market. “There are opportunities everywhere,” says Kusher. “In our view, the best value is in the second hand market.” Building and land costs mean that at current values developers are struggling to compete with the prices of existing stock. Kusher likes apartments in some of the nontraditional unit markets in areas like Nundah, Annerley and Moorooka. For houses, Kusher says the best opportunities are anywhere you can get within 10km of the city, close to good transport hubs. Examples are suburbs like Salisbury, Rocklea, Keperra, Zillmere and Banyo. There are also opportunities in the upper end of the market for cashed up investors in Brisbane, the Sunshine Coast and Gold Coast markets.

SEQ regional opportunities The Queensland government recently launched the South East Queensland Regional Plan 20092031 (SEQ Plan) focused on maximising new major urban development areas and regional activity centres. www.yipmag.com.au

QLD State roundup Harrison-Tub likes areas near major transport hubs where the government is investing in infrastructure and changing land use rules to allow for medium/high density mixeduse living. Of the 156,000 new dwellings required for the Brisbane area, at least 138,000 will be provided through redevelopment, infill and mixeduse development. In total, South East Queensland needs 754,000 new dwellings by 2031. Brisbane’s four major regional activity centres outside the CBD are Toombul, Mitchelton, Wynnum Central and Toowong. Principal centres identified are Chermside, Indooroopilly, Carindale and Upper Mt Gravatt. Harrison-Tubb says that Wynnum is one of the identified hubs in the SEQ Plan, and is one of Brisbane’s oldest suburbs with historic ‘timber and tin’ architecture. The SEQ Plan protects these traditional buildings and the ‘feel’ of the area, but strategically allows for middle to high density mixed use development immediately around the major transport hubs. Kawana Waters and Maroochydore on the Sunshine Coast are now emerging as regional powerhouses. Kawana Waters is located just south of the employment centre (Maroochydore) and is a new suburb with a large shopping and industrial complex. It is also close to Caloundra. “The best region within the Sunshine Coast would have to be Kawana Waters,” says Mark Unkel, principal, PRDnationwide Maroochydore and Kawana Waters. On the western side there is the new development of Kawana Island, and on the eastern beachside new houses range between $400,000 and $600,000. Unkel says that for properties east of the M1, there is generally limited availability – which is driving investor interest. The Maroochydore region will need 98,000 new dwellings by 2031. Other Sunshine Coast centres that investors should look at, says Unkel, are: Minyama Waters (offering highend properties with deep ocean access), Mooloolaba with its north facing beach, and areas like Buderim that offer lifestyle acreage close to the coast and employment centres. www.yipmag.com.au

Wishart Houses

Median price $528,500

(Three months to Jul 09)

(12 months to Jul 09)

Capital growth

Median rental rate

5.79%

1.06%

3.94%

Capital growth

Source: Residex July 2009

ishart is a well located middle to outer ring suburb 12km southeast of the Brisbane CBD. Over 63% of households have children, with freestanding homes accounting for over 80% of dwelling stock. Harrison-Tubb says Wishart has generally sat just above the first homebuyers’ market. “It is well placed to do quite well because in the last six months there has been a lot of first homebuyer activity, and people who have sold out of that

market will need to buy somewhere else,” he says. It is this next level of buyer for which Wishart is looking very attractive. Wishart mainly consists of 1960–70s period housing with high-set brick and tile – something that has been relatively unpopular in the past but is coming back into vogue, says Harrison-Tubb. There is significant scope for investors seeking renovation properties in Wishart, given the age of housing stock and the affordability of freestanding homes. Parts of Wishart are located close to the freeway and noisy arterial roads. Investors should look for quieter streets (away from traffic noise) that are close to Mt Gravatt shopping centre and have bus transport to the CBD. Wishart is close to Griffith University. It is also nearby local schools and two TAFEs.

There is significant scope for investors seeking renovation properties in Wishart, given the age of housing stock and the affordability of freestanding homes

Woodridge Units

Median price $214,000

(Three months to Jul 09)

(12 months to Jul 09)

Capital growth

Median rental rate

6.75%

10.51%

6.40%

Capital growth

Source: Residex July 2009

oodridge is a suburb of Logan City located in the Brisbane metropolitan area and has a population of 12,000. Logan City is a 20 minute-drive from Brisbane, and 30 minutes from the Gold Coast and Ipswich. It has easy access to buses and freeways. Mellissa Robertson, valuer at WBP Property Group, says Springwood, (which neighbours Woodridge) is becoming a major retail centre with a new Ikea and other major homemaking centres.

Logan City, including Woodridge, has a long-term shortage of rental property, so vacancy is low. Robertson says for some time the market has been expecting Woodridge to grow. Robertson prefers properties towards the north side of Woodridge near Underwood, Springwood and Slacks Creek. This is because of their proximity to retail centres as well as bus routes to the Brisbane CBD. The southern end of Woodridge is relatively low lying. Median prices for Underwood and Springwood are higher than Woodridge, so proximity to this end of the suburb is expected to have a positive upward affect on prices over time. About 11% of all dwellings in Woodridge are apartments. The remaining dwellings are either freestanding or semi-detached houses. Housing stock dates from the 1980s to the 1990s. 85

Section | strapline

VIC WA SA TAS NT ACT

VIC

PROPERTY

Melbourne houses Median value $498,000 Growth over 12 months 3.69% Growth three months to Jul 09 5.05% Rent return 3.88% Rent amount Jul 09 $370/week

Melbourne units Median value $392,000 Growth over 12 months 6.51% Growth three months to Jul 09 4.62% Rent return 4.66% Rent amount Jul 09 $350/week Source: Residex, Jul 09

Rental shortage to push yields higher For the past three years Melbourne’s vacancy rates have been under 2%. Rents are on the rise, and with a major dwelling supply shortage, Victoria is seeing opportunities in the recovery. Andrew Johnstone reports

ental vacancies are at historic lows in Melbourne and, like other capitals, the city is facing a sustained dwelling shortage. Melbourne vacancies for the last three years were: 1.4% (2009), 1% (2008) and 1.4% (2007). “Melbourne is still in the midst of what is probably the greatest shortage of rental property we’ve seen in a long time,” says Robert Larocca, spokesperson for the Real Estate Institute of Victoria (REIV). Low vacancy is forcing up rents, with the rental market expected to be tight at least until developers recover and start bringing new stock to market. According to Residex, prices for houses and units in Melbourne rose by 5.05% and 4.62% in the July quarter. In the last 10 years, prices for houses and units in Melbourne have risen 9.83% and 9.97% annually. “A spike like this is what you might see as confidence builds in the marketplace – which is what we have been seeing,” says Larocca. According to REIV, recovery in the July quarter was led by the upper end of the market. Before this, it was the affordable segment that was supporting the market.

“The fact that the upper end of the market is coming back quite strongly will probably ensure a healthy spring – as long as the overall economic circumstances remain the same,” says Larocca. Following the First Home Owner Grant Boost, Larocca sees two key drivers fuelling growth in the coming quarter: population growth and affordability (because of low interest rates). “Melbourne is seeing an increase in population of 1,800 people per week. That is a boost on the demand side of the equation, and it’s not being matched on the supply side,” he says.

Apartments growing faster than houses REIV reports apartment growth has outstripped growth in houses. In the five years to June 2009, apartments grew by an impressive 34% compared to 20% for houses. In Footscray, the median for a unit increased by 60.2% from $240,000 to $384,375. This is nearly double what was recorded in Coburg, which increased by 36% from $331,000 to $450,000 over the same period. Units in Footscray, Coburg, Fitzroy, Carnige and Springvale have also shown strong growth. Strong unit growth reflects a growing appetite for apartments over the past decade, according to the REIV, because of the desire for proximity to the CBD, lifestyle options, transport hubs and the benefits of new accommodation. Increasing affordability thanks to low interest rates has also made units more attractive. And at their recent lower prices, they have higher rental yields for investors.

Regional Victoria outperforms Some of regional Victoria’s cities are showing strong growth alternatives for investors willing www.yipmag.com.au

VIC State roundup to research and explore these markets. Larocca says the Greater Bendigo and Greater Geelong regions achieved the best quarterly growth with median prices growing 4.2% and 3.5% respectively. Melbourne has only just recovered the price falls of 2008, but the Victoria regional cities of Ballarat, Bendigo and Geelong have been steadily rising throughout the year. According to Larocca, Victoria’s regions were subject to specific economic employment circumstances, which must be understood. “But a smart investor who finds the right property in a regional centre can realise some reasonable returns,” he says. According to the REIV, there is low vacancy across regional Victoria, supporting house and unit prices. In the last quarter, the rental vacancy rate for the 69,000 rental homes in regional Victoria shifted from 1.9% to 1.4%. There have been some very significant contractions in vacancy in the Geelong and Barwon regions, where vacancy rates dropped from 2.6% to 1.1%. In the Bendigo and Loddon region the vacancy rates dropped from 1% to 0.8%, and in the Ballarat region vacancy rates are at 1.5%.

Werribee Houses

Median price $261,000

(Three months to Jul 09)

(12 months to Jul 09)

Capital growth

Median rental rate

7.67%

10.73%

5.29%

Capital growth

Source: Residex July 2009

erribee is located halfway between Melbourne and Geelong, near Port Phillip Bay and close to Altona. It is only 30km from Melbourne, and is connected by rail to the CBD. Brendan Smith, valuations manager Victoria at WBP Property Group, says Werribee is well positioned to benefit from both Melbourne and Geelong. It is located in Melbourne’s outer rim but is still only about half an hour by train from the centre of both cities. The City of Wyndham region is experiencing population growth of over 7% annually, or around 8,600 new people moving to the area. Werribee, the main town in Wyndham, draws on a population of 143,000. Werribee has a lot of new housing estates, and Smith says they represent an opportunity for buyers to purchase land – something that does not exist

North Melbourne Units

Median price $404,000

(3 months to Jul 09)

(12 months to Jul 09)

Capital growth

Median rental rate

6.21%

8.84%

4.8%

Capital growth

Source: Residex July 2009

orth Melbourne, one of Melbourne’s most culturally diverse and dynamic suburbs, is located three kilometres from the CBD and has a population of 9,600. Its immediate proximity to the CBD and potential for renovation and improvement is making North Melbourne attractive to investors. “It’s just so close to the CBD – you can walk there,” says Brendan Smith, valuations manager Victoria for WBP www.yipmag.com.au

Property Group. “Ease of convenience is really good. It’s close to Melbourne University and the Vic Markets, City Link and Docklands.” Smith says when compared to other suburbs in the area like Port Melbourne, North Melbourne is a lot cheaper. Smith believes the area is well known by investors and generally well priced, but he says over the medium to long term investors will do well by investing so close to the city. North Melbourne has posted an annual growth rate of 10.59% over 10 years, and 12.22% over the last three years. Over the coming five years North Melbourne’s proximity to Docklands

in Melbourne’s middle to inner ring. Werribee has attracted a lot of first homebuyers, but still represents good value for investors seeking houses in Melbourne’s outer rim, Smith says. Home sales have surged, with 206 houses sold in July 2009 alone. In the last 10 years, houses in Werribee have grown an impressive 8.79% per annum. Smith says a number of quality housing developers are represented in Werribee, providing choice for buyers. The suburb also has existing houses. Investors should seek good new or existing blocks with proximity to transport links, as residents are likely to commute to either Melbourne or Geelong for work. Werribee has a strong industrial and technology base supporting the town’s economy, including the CSIRO food processing and dairy research centre which employs 120 people. Werribee South is one of the most significant market garden areas in Victoria, and there are two major shopping precincts serving the greater Wyndham region. Tourism and lifestyle facilities include: Werribee Park Mansion, Victoria’s Open Range Zoo, the State Equestrian Centre, the Point Cook Homestead and the Point Cook RAAF Museum. will increase the waterside lifestyle options for residents – particularly as it is only a 15-minute walk away. North Melbourne is notable for its mix of Victorian architecture, warehouse conversions, retail shopfronts and factories. Around 57% of dwellings are residential apartments, and 63% of all dwellings are rented. The suburb is quite small. Smith likes areas around Errol and Chapman Streets because of their restaurants and cafes, but he says investors can’t go wrong with most streets in the suburb. There are also nice pockets of Victorian terraces. Cultural diversity brings an international feel to North Melbourne. The most spoken languages other than English are Mandarin and Somali, with 40% of residents having been born outside Australia. 87

Section | strapline

WA SA TAS NT ACT

property

Upbeat buyers storm into the Perth market The Perth market is defying the sceptics and appears to be on its way to sustained recovery

Perth houses

Median value $469,000 Growth over 12 months -5.37% Growth three months to Jul 09 -1.36% Rent return 4.06% Rent amount Jul 09 $365/week

Perth units

Median value $380,000 Growth over 12 months -2.14% Growth three months to Jul 09 3.02% Rent return 4.81% Rent amount Jul 09 $350/week Source: Residex, Jul 09

he shift in sentiment is palpable in WA. The median house price rose by 3.5%, according to the initial data from the Real Estate Institute of Western Australia (REIWA). This was a welcome news for the market participants. And although Residex showed that house prices fell by more than 1% to $469,000 in the July quarter, the median unit price climbed by 3.02% to $380,000 over the same period. “Up until about six months ago, the Perth market was wallowing in low confidence,” says Mark Sinclair, CEO, Raine & Horne WA. “Some vendors realised that the market had changed so they brought their selling prices down. However, starting March this year, a general confidence in the market has returned across the board,” he says. Katie Lucas, state manager with Century 21 WA, says their offices in Perth are reporting a large number of buyers coming through open house inspections, with a number of homes selling immediately. “The time it takes to sell a property has reduced to 31 days for houses and 23 days for units. Primarily this has been driven with sales in the lower price brackets, with first homebuyers’ taking advantage of government grants. However, we are seeing an increase in sales in the second and third time homebuyers market. We are already recording a number of investors coming into the Perth market. They are taking advantage of the softer prices, and a lot of them

are turning back to bricks and mortar as a safer investment than the stock market.” The surge in demand has left many agents scrambling to find stock. The total number of properties on the market had dropped to 12,800 by the end of June. This figure was down 15% when compared to March and 26% lower when compared with June 2008. “We’re definitely experiencing an undersupply situation. It’s not severe yet, but we’ve seen over the last two months that at the lower end of the marketplace, stocks have been absorbed quickly,” says Sinclair.

The Gorgon effect The market is abuzz with the recent approval of the Gorgon LNG project located 130km off the WA coast. The $50bn project is expected to create around 6,000 jobs during its construction phase alone, and around 3,500 thereafter. The gas project will become the biggest resources project for Australia and is forecast to lift WA’s gross product by 4%. The Gorgon Project is operated by the Australian subsidiary of Chevron (50%) in a joint venture with the Australian arm of ExxonMobil (25%) and Shell (25%). The Gorgon joint venture has also recently signed a major, 20-year LNG sales deal with India’s Petronet LNG. The Woodside-led North Shelf Pluto LNG Development, worth $12bn, is now under construction. www.yipmag.com.au

WA State roundup “These types of projects will bring people from the east coast and overseas for employment opportunities, putting substantial pressure on housing stocks,” says Sinclair. Outside of the gas sector, there are new projects on the horizon in Perth, including the Ocean Reef Marina which is set to revitalise the northern coastline, says Brendan Aylmore, managing director WBP Property Group WA. “The plan is to create a multi-functional residential and commercial precinct that combines both low and medium rise buildings, restaurants and worldclass boating facilities. The area has been designed as a ‘family friendly’ area providing ample open space and parklands,” he says. “The city is also in desperate need of additional boat pens, with rental rates soaring for the well positioned marinas. Perth is still seen as an establishing city and it is important to spend money on new infrastructure that will draw people to the northern suburbs – especially newly established suburbs on the Perth peripherals,” Sinclair adds. Western Australia has been recorded as the fastest growing state for the calendar year of 2008, with population growth recorded at 3.1%, according to the latest data from the Australian Bureau of Statistics.

All eyes to the September data

Aylmore says these initial data suggest that the worst of the global financial crisis is behind us. However, he says that results after the September quarter are likely to illustrate a clearer picture of the current market situation as unemployment rises and the First Home Owner Grant Boost is removed from the equation. LJ Hooker state manager Phil Smith agrees, and says that the first homebuyers are still driving the market – but he thinks that will change after September. “It’s difficult to predict exactly what effect the end of the $21,000 grant will have. I think there will be a lull for a few weeks as buyers try to scope out the market, then I think investors will start making their move and by January, hopefully, will have filled the gap left by first homebuyers. Higher tiered properties are also beginning to improve. They are slowly starting to sell again, which is really positive,” he says. www.yipmag.com.au

Bayswater Units

Median price $296,000

(Three months to Jul 09)

(12 months to Jul 09)

Capital growth

Median rental rate

4.47%

5.35%

5.34%

Capital growth

Source: Residex July 2009

ayswater is situated seven kilometres northeast of the Perth CBD, and is only 20 minutes travelling time to Perth International Airport. “Its proximity to the city is one of its main advantages,” says Gerald Wetherall, principal of Elders Wetherall Real Estate, Bayswater. “Part of Bayswater actually fronts the Swan River, so that is a main attraction for people that like water sports. Ascot is just over the river for anybody who enjoys the racing scene.” Bayswater has a population of over 12,150. There are over 5,000 dwellings of which around 30% are rental properties. Wetherall says dwellings in Bayswater are considerably more

Huntingdale Houses

Median price $374,500

(Three months to Jul 09)

(12 months to Jul 09)

Capital growth

Median rental rate

3.73%

-1.88%

5.54%

Capital growth

Source: Residex July 2009

untingdale is situated 20km south of the Perth CBD. The suburb has a population of over 8,100 people and 2,708 dwellings of which around 18% are rented. “There is a lot of upside for investors purchasing properties in Huntingdale and throughout the southern corridor areas of Perth,” says Paul Devine, property consultant at Raine & Horne, Thornlie. “The vacancy rates are still quite low and the rental returns are very strong,” he says. Devine says that while Huntingdale’s growth has been fuelled by first homebuyers, it does present attractive investment opportunities for investors. “A lot of property on the market from

affordable than its neighbouring suburbs. “Bayswater has a lot of commuters to the CBD, but also has many workers who fly in and out for shifts in mines across regional Western Australia. This is because of Bayswater’s proximity to the airport,” says Wetherall. Most stock is houses, however there are a number of high density olderstyle unit blocks within 500 metres of the train station. Wetherall says many blocks are large and attractive to investors because they have the potential for subdivision, subject to approval. Bayswater is a large suburb. It has excellent rail and bus transport located in the middle of the suburb, and for this reason Wetherall says anywhere in Bayswater is good for investment. Recent activity has been from first homebuyers and people upgrading to a larger home. However, Wetherall says there is a lot more confidence in the community at the moment, with interest rates low and job losses not as high as anticipated. an investment point of view will cost you next to nothing, as it is positively or very close to neutrally geared,” he says. Low vacancy, demand for property in the area and low interest rates means houses are more affordable than larger neighbouring suburbs. Devine says a house that might cost an investor $340,000 will earn around $350 a week in rental, making it almost neutral in terms of gearing. “If you are trying to acquire properties and not sell them, there is a lot of potential to invest in the Huntingdale area,” says Devine. Huntingdale has a young population and is close to public transport and major shopping facilities. It is near both the Thornlie and Maddington railway stations. A lot of the population works locally in the trades, services and retail businesses. According to Devine, Huntingdale has a quiet ambience as a suburb, and has a good number of cafes and restaurants. An older community lives at the southern end, while the northern end has more young families and couples. 89

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SA TAS NT ACT

property

Adelaide houses

Median value $382,500 Growth over 12 months 1.99% Growth three months to Jul 09 1.30% Rent return 4.37% Rent amount Jul 09 $320/week

Adelaide units

Median value $299,000 Growth over 12 months 3.16% Growth three months to Jun 09 0.67% Rent return 4.63% Rent amount Jul 09 $265/week Source: Residex, Jul 09

Investor activity gathers pace as first homebuyers drop off As first homebuyers slowly withdraw from the market, investors and upgraders are eagerly stepping up to the plate

roperty value growth in Adelaide appears to have cooled in the July quarter, with median house price gaining just 1.3% to $382,500. Unit median values also slowed during the same period, adding just 0.67% to $299,000. Despite this slower growth as a whole, the market has not experienced the price falls seen in other capital cities. “The Adelaide residential market is performing quite well considering the uncertain economic conditions. Low interest rates have also helped to plug any holes that emerged post-GFC, leading to a general stabilisation of the marketplace,” explains Bart Quinn, state manager of WBP Adelaide. Unit prices have faired well in comparison to more expensive homes, due to strong demand from first homebuyers, adds Quinn. “Leading up to the 2009–10 budget we saw a record number of valuation requests for properties at the lower end of the market (sub-$300,000) as first homebuyers competed for a limited number of affordable properties – particularly units or flats in inner suburbs. However, following the announced extension of the grants, a great deal of the urgency appeared to slowly subside.” The flow-on effect from these conditions resulted in an increase in sales volumes of 27% and 13% for homes and units respectively over the June quarter, says Quinn. Auction clearance rates in inner suburbs have also improved in recent weeks, and are presently sitting at 60–75% which is up significantly from below 50% earlier in the year. Kevin Magee, CEO Raine & Horne SA, adds that these upbeat data only serve to boost confidence further. “This year, our written sales are the same as last year. Although it shows no growth, in a tough market it shows buoyant consumer confidence – thanks to first homebuyers and renewed investor confidence.”

Investor activity ramps up

Andrew Koukourou, Century 21 Central and Aldinga Beach offices, says there are 90

strong indications that investors are back in force. “Investors are now replacing the first homebuyers in terms of the level of inquiry. Those who were holding off when the first homebuyers were active are now slowly making their way back into the market. “We’re seeing a lot of buyers, at the same time vendors have packed themselves up from the market so there’s less stock to buy. We’re seeing supply shortage of properties around the $300,000 range,” he says. Magee adds that the market is likely to see the last of the first homebuyers chasing the remaining stocks. But, like Koukourou, he’s also seeing investors rushing to get back into the market. “Investors are getting back in at an exponential rate and locking in properties before interest rates go up again next year,” he says.

Key projects to watch At present there are several major infrastructure projects in progress, particularly in the transport sector, says Quinn. The Northern Expressway is expected to be completed by the end of 2010, and will provide improved city access to several outer northern suburbs – particularly Angle Vale and Gawler. Further to this, the proposed tram extension to the Adelaide Entertainment Centre and beyond will improve city access for a number of city fringe suburbs to the northwest of the CBD. These projects are likely to positively affect property values in their respective regions. Magee adds that the Destroyer contract and submarine maintenance contract is set to revitalise the Port Adelaide area, and puts it back on the map as a busy manufacturing town. “This will attract lots of business and people into that area not just locally but interstate and overseas.” He adds that there is also a battalion coming from Darwin that needs housing. “Holden had a new lease of life with its new model Cruze, which has brought confidence into that area on a micro level,” adds Magee.

Looking ahead

“As we move towards 2010 we anticipate that house prices will generally remain stable throughout Adelaide’s metropolitan area. In particular, the prestige market will continue to fare well, in comparison to the eastern states where some significant write-downs have occurred. Although we do expect that activity www.yipmag.com.au

SA State roundup at the lower end will reduce as First Home Owner Grants are scaled back,” says Quinn.Investors who are waiting for prices to drop will be waiting in vain says Magee. “There’s a view that late 2010 is looking exceptional for property prices, purely because of anticipated population growth and massive projects coming on line. The mining sector is again picking up steam. This renewed business confidence will herald an economic boom in this age,” he says. For investors looking to invest in Adelaide, Magee recommends looking anywhere in the Port Adelaide corridor. “I’d look at the coastal areas as well, because there’s a lot of undervalued coastal suburbs such as Port Nurluanga South, Christies Beach and Semaphore,” he says. For Quinn, the first homebuyer market is a ‘no go’ area. “I would stay away from properties that appeal to first homebuyers until the grants expire in January 2010, particularly flats and units in the inner to middle suburbs. If you are still holding these properties, now may be a good time to sell,” he says.

Whyalla Stuart Houses

Median price $184,500

(Three months to Jul 09)

(12 months to Jul 09)

Capital growth

Median rental rate

4.15%

11.25%

6.05%

Capital growth

Source: Residex July 2009

hyalla Stuart is a suburb at the western edge of Whyalla, and is situated on the Spencer Gulf in South Australia. The suburb is one of SA’s largest regional cities with a population of 23,000. “Whyalla has always been a good investment market and the rental market has always been strong here,” says Peter Callis, principal, Peter Callis First National Real Estate in Whyalla. In the 1990s, the town experienced some uncertainty when BHP split steel making into a new business called One Steel. At the time, BHP deliberated on whether to retain operations in Whyalla or Newcastle. They settled on Whyalla, and Newcastle was shut down. “Since the late 1990s when BHP decided to retain One Steel operations

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West Beach

est Beach is situated on the sea directly west of Adelaide, 20 minutes from the CBD and 10 minutes from Adelaide’s international airport. There are around 1,700 houses and 500 units. “Beachside living has become more and more desirable, and facilities around the area are excellent,” says Rod Trengove, senior property consultant, Brock Harcourt Henley Beach. West Beach offers investors the full gamut of options from buy and hold strategies, buy hold and sell, renovation flip, subdivision and development. “The whole of the beachfront is undergoing constant rebuilding and the houses that are going up tend to be in the higher range of $700,000 to

$900,000,” says Trengove. “You can buy a 1950s home – which are basically selling at land value – sit on it, rent it, then take the capital growth on the land. You can even look at a potential subdivision down the track.” West Beach is actually split between two different councils. The beachside areas come under the City of Charles Sturt. The areas towards the city come under the City of West Torrens. While both council areas allow for subdivision, the beachside City of Charles Sturt tends to allow for smaller blocks to be subdivided. With an average block size of between 700 and 800 square metres, subdivided plots of between 350 and 400 square metres can sell for between $700,000 and $1m. Absolute beachfronts sell from $1.4m upwards. “Beachside living always rents very well,” says Trengove. “It’s not difficult finding tenants for rental properties in beachside suburbs.” Investors tend to dominate the market for units in West Beach. Units in the area tend to trade between $220,000 and $380,000 and rent easily.

in Whyalla and sell their Newcastle operations, Whyalla has seen renewed growth,” says Callis. Investor interest in Whyalla between 2004 and 2007 saw property double and in some areas triple in value. “People would come in and pay $70,000 or $80,000 for a neat little maisonette and get a 9% to 10% return on their money,” says Callis. When the prices rose, yields fell to levels of around 3% to 4% for existing houses. Callis warns that some of these existing prices may come back as the market corrects itself from the boom. Lower yields on existing properties have driven investors towards new housing estates like Whyalla Jenkins. Whyalla Jenkins, which borders Whyalla Stuart, has received significant interest from investors primarily because yields for new properties are higher at around 6%, says Callis. Buyers in Whyalla Jenkins are split, with 80% owner occupiers, and 20% investors buying to build and sell or lease. Callis says investors should be looking at the new estates where land is priced between $85,000 for 400 square metres, and $165,000 for 4,000 square

metres. With a new house, prices range from $220,000 to $480,000. Whyalla Stuart mainly consists of trust rental housing, or excess trust rental houses sold to owner occupiers and investors. Whyalla has become a major service hub in the region for the Alice Springs to Darwin railway, the Port Augusta power station and the giant Olympic Dam copper/uranium mine. There is a major pig iron processing project and One Steel continues to produce around 1.2 million tonnes of steel per year. The Santos processing plant in nearby Port Bonython processes liquid hydrocarbons into crude oil, concentrate, propane, ethane and butane. Whyalla also has the world’s largest producer of beta carotene (a source of vitamin A), two major yellowtail kingfish aquaculture exporters and a fishing and marine tourism industry. Though Whyalla has a range of industries, the resource sector is the single largest employer, says Callis. One Steel sends a 300,000 tonne cape class bulk carrier to China once a week loaded with iron ore.

Units

Median price $284,000

(Three months to Jul 09)

(12 months to Jul 09)

Capital growth

Median rental rate

3.21%

9.00%

4.65%

Capital growth

Source: Residex July 2009

TAS NT ACT

TAS

property

Hobart houses

Median value $352,500 Growth over 12 months 0.68% Growth three months to Jul 09 0.25% Rent return 4.74% Rent amount Jul 09 $320/week

Hobart units

Median value $264,000 Growth over 12 months 6.13% Growth three months to Jul 09 6.02% Rent return 4.94% Rent amount Jul 09 $250/week Source: Residex, Jul 09

Unit prices surge as buyers hunt affordable properties As supply begins to dry up in Tasmania, investors are returning to the lower and medium price ranges of the property market

trong buying activity in the unit sector pushed median unit values by a stunning 6.02% to $264,000 in the June quarter, easily outperforming all other capital cities in Australia. Over the 12 months to June, median unit values grew by 6.13%. Houses managed a modest 0.68% growth in median value to $352,500. “The Tasmania market is really robust, it’s been very active,” says Tony Collidge, sales manager with PRDnationwide. “The markets across the state have just been going gangbusters throughout the March quarter. The biggest problem we have is the lack of stock. It’s getting to the stage where it is very severe.” Collidge says his company used to carry 200 properties, but is now down to 110. “We’ve been making 50 odd sales a month during the last two months. We’re on target to do it again this month. But the lack of stock is the real issue.” First homebuyers are still active in the market in areas like Launceston. There is strong buyer activity in the medium price ranges as people get ready to move to better homes, according to David Harris, franchise manager for Victoria and Tasmania with LJ Hooker Operations. “Investors have been returning in significant numbers, driven by low interest rates and the good rental returns available in most Tasmanian cities or towns and the very reasonable pricing of entry level properties,” he says.

Sound fundamentals One of the factors that continues to support prices in Tasmania is the steady growth in population resulting in housing undersupply. “We don’t have the tradespeople to build the houses that we need, so there’s always going to be a lag. We only have 1,600 net growth to the population per annum, so that’s 400 extra homes we need – but because we don’t have enough people to put up 400 homes over six months, supply will be unable to keep pace with demand,” says Collidge. Another key factor for the property market remaining strong is Tasmania’s unemployment rate – at 4.8% in July, slightly down on June,

it is the lowest of all states and more than 1% below the national rate. “In fact, the Tasmanian Chamber of Commerce says the unemployment rate for skilled labour, for example, is almost zero,” notes Harris. Collidge adds that Tasmania’s healthy job market is mainly due to the fact that the major employer is the government, which employs 20% of the state’s working population. “We don’t have the large industries here. You don’t have the large mining companies that are putting people off. Having the government as the main employer creates a lot of stability,” he says. The improved ‘connectivity’ to other cities across Australia is also helping. “We have good airports in the cities of Wynyard, Launceston, Devonport and Hobart which enable professionals to own a stunning acreage home in a delightful village but still be a short flight away from Melbourne or Sydney. Air fares are very competitive, and on a recent flight to Tasmania I saw how many people – from writers, artists to business people – make the commute easily,” says Harris. Harris also points to the construction of the Tasmanian leg of the national broadband network, a $780 million project, now slated to begin in October, according to Federal Communications Minister Stephen Conroy. “This will connect 90% of the population to the internet at speeds of 100 megabits per second,” says Harris.

Best bets Investors should seek out quality properties in popular locations, near facilities, in either larger towns or cities, says Harris. But he warns investors not to focus on the current rental return alone. “You need to understand that capital growth rates in these areas, which are still coming off a comparatively low base, will be good. Also consider commercial properties in the CBD and warehousing properties. You need to do your research very well and seek areas where steady returns can be achieved now and where resale values are on the upward trend,” he says. “As with any property, ensure your investment suits the typical tenant in the area. You may love the townhouse with no garden, but if families are your target you cannot go past four bedrooms and a glorious kitchen. Also ensure you have access to amenities and good transport infrastructure – this is key when it comes to capital growth,” adds Harris. www.yipmag.com.au

The Tasmania state roundup proudly brought to you by www.mypropertyhunter.com.au

Invermay Houses Median price $215,500

(Three months to Jul 09)

(12 months to Jul 09)

Capital growth

Median rental rate

4.92%

-0.94%

5.64%

Capital growth

Source: Residex July 2009

nvermay is a suburb of Launceston (Tasmania’s second largest city) with a total population in excess of 100,000 people. It is located on the Tamar River, one kilometre north of the city centre. Invermay is only five to 10-minute walk from the city, 25 minutes from the furthest end of the suburb. “Invermay was old and no one wanted to live there 20 years ago,” says Richard Bailey, property consultant at Bushby First National Real Estate, Launceston. “All of a sudden it’s gotten to the stage where most of the houses are done up. Now they have been renovated, the suburb has been flying.”

Smithton Houses Median price $221,500

(Three months to Jul 09)

(12 months to Jul 09)

Capital growth

Median rental rate

4.60%

8.82%

4.04%

Capital growth

Source: Residex July 2009

mithton lies on the coast of far north Tasmania, 135 kilometres from Devonport. It has a population of about 3,350 people and is the major commercial and administrative centre for the Circular Head region. “It is a very pretty area, a land of milk and honey,” says Duncan Spinks, principal of PRDnationwide, Smithton. “But we punch above our weight for our population.” Spinks is talking about the diverse economic base in Smithton that makes this picturesque town a regional economic powerhouse. “For a small area we have lots of employment. It’s almost like a micro-economy,” says Spinks.

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Most dwellings are 1880–1920s cottages and Victorian houses. Invermay has become one of the sought-after suburbs of Launceston. Bailey says the suburb is quite trendy. Around the river are long walking tracks in the Heritage Forest, and Aurora Stadium where Hawthorn plays four AFL games a year is close. The historic rail yards have been converted by the University as the art and architecture department and the museum has moved there. Bailey says in 2000–01 you could have bought most of the houses for $50,000 to $70,000. Most of those are now worth around $230,000, and if they are done up they are worth up to $350,000. There are two investment areas in Invermay, says Bailey. The first is just over the river from the CBD. Investors may want to buy something that does not need much work, or a renovation project. These houses will be rented to young city professionals and university workers. The second area for investment is a bit further away from the city on the eastern side of Invermay Road, where the suburb’s best houses are. The economy of Smithton is primarily agriculture, beef and dairy farming, forestry and timber production, oyster farming, aquaculture, crayfish and abalone, iron ore pelletising at Port Latta and a thriving coastal and bushland tourism industry. Smithton is home to a McCain food processing plant, a UHT dairy processing facility, export abattoirs, a Gunns timber mill, and the nearby Woolnorth Wind Farm which generates around 12% of Tasmania’s residential energy needs. “People have secure employment, which probably has more effect on the real estate market here than interest rates and the First Home Owner Grant,” says Spinks. The fundamental strength of the Smithton economy has attracted significant investor interest Australia wide. Spinks says up to 30% of property owners are from interstate. Savvy investors have discovered Smithton’s strong property performance through the internet, then made a purchase. “You can still buy a $160,000 house in Smithton that you would rent for a $170-a-week return,” says Spinks. “While the sales price is a lot lower than most of Australia, the return is on par, if not better, when you consider capital growth.”

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NT ACT

property Darwin houses

Prices cool in Darwin Darwin recorded less than stellar performance in the July quarter, prompting many to ask the question: is Darwin losing steam?

Median value $475,000 Growth over 12 months 13.36%

No worries about oversupply

Growth three months to Jul 09 3.35% Rent return 5.49% Rent amount Jul 09 $500/week

Darwin units

Median value $373,500 Growth over 12 months 15.52% Growth three months to Jul 09 4.99% Rent return 5.59% Rent amount Jul 09 $400/week Source: Residex, Jul 09

has sustained itself. And now that things are improving, it’s starting to relive that. I absolutely believe the boom will continue,” he says. However, Darwin’s success is a double-edged sword, says Terry Roth, state manager with Herron Todd White Property Valuers (NT). It encourages more homebuyers to get into the market, but it’s keeping many investors at bay. “Investors are still cautious with the big increases in capital growth, which has pushed yields lower,” he says.

hose who have long predicted an end to Darwin’s boom may be feeling a bit vindicated after the latest data from Residex showed median house values increased by just 3.35% to $475,000 over the July quarter. This is still a good number, but it fell well short of the growth recorded in Sydney and Melbourne. During the month of July, median house values actually fell by 0.41% while the median unit value rose by 2.22%. However, local agents are quick to dismiss suggestions that the boom in the Darwin market is finally coming to an end. “We’ve experienced our best ever sales month in July, up 60% from our previous best. I think the reason the Residex data showed a slowing market is because June was a terribly slow month. But July was flat out and August started out very well,” explains Glenn Grantham, GM Raine & Horne Darwin. “It’s hard to work these trends out. June is traditionally either exceptionally good or really bad. It could be due to the end of financial year.” Grantham points out that Darwin was very strong even during the economic downturn. “Darwin has its own micro economy that

One of the issues that continued to dog the Darwin market is the fear of oversupply situation. But Grantham says this is unlikely to occur. “I don’t think there’s any looming oversupply situation. What you’re looking at here is an undersupply of property and a constantly growing population. The government is not releasing enough available land so where do you go? Of course you go up. So there could be a risk in the higher density housing sector, because that’s where the concentration of the new supply is. If the government is planning on releasing just 500 blocks of land (not 5,000) it means we’re restricted to the existing property plus a few new ones every year. But as the population grows, we need to build new housing. To sustain this we have to go somewhere, and high rises are the only way to do that.”

Outlook remains positive

Both Grantham and Roth dismiss talk of price drops similar to that of Perth during the 2007– 2008 bust. “I don’t see Darwin following the same trajectory as Perth – not in the foreseeable future,” says Grantham. “We’ve got so many industries appearing in the horizon. Inpex is a good example. It’s a $60bn project that will inject work that would employ up to 10,000 people. That’s just one project. There’s so much expansion in that oil and gas sector. There’s also the fact that Darwin is supported both by the government employees as well as Defence which sustain a vast proportion of the population, along with the subsidiary companies that come out of that. So as you can see, Darwin is very well placed to be insulated against any outside influence.” Roth agrees: “We’ve got good prospects for growth here with Impex. Business confidence is strong, and we’ve got a solid demand for housing. I don’t see a slump in prices. Possibly levelling out and at worst a small fall, but definitely not a crash.” www.yipmag.com.au

NT State roundup

Woodroffe Houses Median price $449,500

(Three months to Jul 09)

(12 months to Jul 09)

Capital growth

Median rental rate

5.39%

14.20%

5.42%

Capital growth

Source: Residex July 2009

oodroffe is a suburb in Palmerston city, established as a satellite town of Darwin in 1981. It is located approximately 20 kilometres from the centre of Darwin, close to the Darwin airport. As a suburb of Palmerston, and greater Darwin, Woodroffe is in the midst of a major housing shortage. “We’ve got more demand here than we’ve got property,” says Gennie Cox, senior salesperson at Elders Real Estate, Darwin and Palmerston. “There is not enough land in Darwin.” Darwin house prices have been rising on the back of a strong economy, coupled with a major lag in the release of residential land by the Northern Territory government. “We have a desperate shortage of rental properties. The rents here are probably the highest in Australia,” says Cox. A four-bedroom house with two bathrooms can get between $500 and $600 per week in rental, says Cox. This has attracted investors from across Australia.

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There is even more pressure from people who have sold their properties to first homebuyers and are now looking for new houses in the bracket above. Cox says there is simply not enough supply for this pentup demand. Palmerston has two major shopping centres and the Charles Darwin University campus is located in Palmerston, but Woodroffe’s population mainly works outside of Palmerston city. Many drive to Darwin for work. There are many who commute to mining industry jobs well out of town, and there is a major contingent of Defence Force personnel needing rental accommodation. Defence personnel are located at the RAAF base in Darwin, HMAS Coonawarra and Darwin Naval Base, and the Robertson and Larrakeyah Barracks. Because of the significant dwelling shortage, Cox says prices will continue to grow, because the demand is there. Cox says the median price is a little misleading because there is virtually nothing available for under $400,000. Cox recently sold a two-bedroom unit for $370,000. Woodroffe is a family suburb. There are two markets, with more expensive houses located around Transit Circuit and Vernier Drive, and cheaper houses at the southern end of the suburb that are more in the first homebuyers’ range.

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ACT

act

property Canberra houses Median value $477,000 Growth over 12 months 2.40% Growth three months to Jul 09 3.93% Rent return 4.59% Rent amount Jul 09 $420/week

Canberra units Median value $382,500 Growth over 12 months 3.49% Growth three months to Jul 09 2.11% Rent return 5.25% Rent amount Jul 09 $385/week Source: Residex, Jul 09

Strong and undersupplied The Australian Capital Territory and Canberra itself has an ongoing dwelling shortage. Relatively unaffected by the global financial crisis, strong demand is set to push ACT prices even higher. Andrew Johnstone reports

he ACT has grown 10.94% annually for 10 years, at almost twice the pace of either Sydney or Melbourne. Even during the GFC, Canberra has proven resistant to falls because of the major shortage in houses and apartments. The ACT and federal governments are dominant employers for the local workforce, so Canberra has been insulated from the declines experienced in other cities. “There is a shortage of property for sale and that is holding prices pretty firm,” says Brian Nancarrow, principal, Century 21 City Walk Canberra. “There has been no fall in prices, just a plateau – and prices are starting to rise again.” Tight rental markets, high yields and strong price growth has attracted interest from investors. “The best place to buy is close to the city centre,” says Cameron Kusher, senior research analyst, RP Data. “Canberra does not have a lot of diversity in stock. It comes down to amenity and location.” Kusher says Canberra’s median prices for the lower markets are closer to those of the upper markets in other Australian capitals. Median prices range from $350,000 at the low end to $1m at the top end. For this reason, location and amenity are paramount. Investors should look for strong rental yields and tenancy in well located units and houses, particularly in the North Canberra and Belconnen districts, says Kusher. “Rents are rising, and they will continue to rise,” says Nancarrow. There are two factors at play in Canberra, says Nancarrow. Firstly, demand outstrips supply across the market. Secondly, this is compounded by the lag in development of new housing and apartment stock, because of planning issues and developers’ inability to obtain finance. “Great supply came to the market, then it stopped, then demand charged on and amplified the shortage,” says Nancarrow.

In addition, the First Home Owner Grant drove up the price of apartments from a median of around $350,000 to $400,000 in the first half of the year. First homebuyers have been competing with investors for the same stock. The next band between $500,000 and $700,000 was dead six months ago, says Nancarrow. But that’s the price range where the most value is and probably the one that is going to take off. But Nancarrow points out that for the over $500,000 segment, while investors might not necessarily find a bargain, they will find a sound investment. Further out of Canberra, along the northern approaches to the city there are more affordable options for investors, says Nancarrow. In Gungahlin you can get a 3-bedroom house on a good block for around $400,000. New developments in Barton are also offering investors the rare opportunity to buy apartments close to the city and Parliament House. At the top end, prices did come back by around 20% says Nancarrow, but this market has shown some big sales in the last few months, particularly from international buyers. Looking ahead, ACT properties are expected to perform solidly.

Bruce Houses

Median price $629,000

Capital growth

(Three months to Jul 09)

(12 months to Jul 09)

Median rental rate

5.37%

12.19%

4.36%

Source: Residex Jul 09

he suburb of Bruce is located just northwest of the Canberra city centre in the Belconnen district. It is well located for commuters to the Canberra CBD and Capital Hill with its surrounding public service buildings. “Bruce is probably Canberra’s best precinct,” says Brian Nancarrow, principal, Century 21 City Walk Canberra. The Bruce market is strong in terms of growth, activity and rents. The Australian Institute of Sport, Canberra University, the Department of Immigration, parts of the Australian Taxation Office, and Canberra Stadium (home to the ACT Brumbies and the Canberra Raiders) are all in Bruce. “We manage a lot of properties there and they are always full,” says Nancarrow. The strength in the Bruce market comes from diversity of employment and its proximity to the CBD. Anything over $500,000 in Bruce is still available, so there is some opportunity for savvy investors. But Nancarrow believes the best buys for investors may be in the lower brackets. www.yipmag.com.au

Glossary

The definitions in the following glossary do not cover all terms used in this publication. You will, however, come across most of them at some stage while reading through a contract of sale for a property, a letter of offer for a loan, or the mortgage documents from the lender’s solicitor. If you are unclear on any term, seek a satisfactory explanation from the relevant experts or authorities

Acquisition cost – Cost of acquiring an asset, including stamp duty payable and any other expenses incurred by the purchaser. All-in-one loan – Allows you to deposit all of your income into the loan account and then withdraw money from that account for day-to-day transactions. The longer that spare funds stay in the account, the greater the interest savings. Amortisation period – The period of time over which a loan is calculated (and repaid). Appreciation – An increase in the value of a property due to changes in market conditions or other causes. Assessed value – The valuation placed on a property for the purposes of taxation by an authority. Asset – Anything of monetary value that is owned by a person, eg personal property, real property, bank accounts. Average Annualised Percentage Rate (AAPR) – Sometimes referred to as the Compulsory Comparison Rate, this figure takes into account the other costs associated with the loan, and expresses them as an average interest rate to create a level field with which to compare similar loan product interest rates. Basic variable – A variable home loan at a reduced rate with fewer features than a standard variable. Body corporate – An administrative body made up of all the owners within a group of units or apartments of a strata building. The owners elect a committee which handles administration and upkeep of the site. Break costs – Incurred when a loan is paid off before the end of its term. Bridging finance – Enables you to cover the purchase of a new property when you are yet to sell your existing property. Buyer’s agent – Person who acts on behalf of a buyer in finding and negotiating on properties the buyer wishes to purchase. Buyer’s market – When the demand for property is less than supply; the advantages shift to the buyer. Capital expenditure – The cost of an improvement made to extend the useful life of a property or to add to its value. Capital gain – The gain on the sale of a capital asset. Capital improvement – Any structure or addition to a property erected as a permanent improvement that adds to its value and useful life. Capped loan – A loan where the interest rate is not allowed to exceed a set level for a period of time, but is allowed to drop. Cash flow – A measure of cash inflow and outflow from a business. Positive cash flow means more money is coming into the business than is leaving it. Negative cash flow is the converse. Collateral – An asset (such as a car or a home) that guarantees the repayment of a loan. The borrower risks losing the asset if the loan is not repaid according to the terms of the loan contract. Commercial property – Property intended for use by all types of retail and wholesale stores, office buildings, hotels and service establishments. Common property – Land, amenities or areas of a building within a strata title property that are shared by all owners, eg a driveway. Contract of Sale – An agreement in writing setting out the terms and conditions relating to the sale or purchase of a property. It is the purchase document signed at auction. Conveyancing – The legal process for transferring ownership of real estate.

Default – Failure to meet debt payment on a due date. Deferred establishment fee – Is charged when you pay out your loan within a short period of taking it out, such as three years. Deposit bond – Guarantees that the purchaser of a property will pay the full deposit by the due date. Depreciation – A decline in the value of a property due to changes in market conditions or other causes. Disbursements – Solicitor’s incidental costs involved when dealing with a client on behalf of the lender, eg searches, certificates, pest reports, etc. Dual occupancy – A block of land which is zoned so that two distinct dwellings are permitted to be constructed. Easements – A right, such as a right of way, afforded a person to make limited use of another’s real property. Equity – The amount of an asset actually owned. Equity is the difference between the market value of the property and the amount still owed on its mortgage. Gearing – Total borrowings divided by total tangible assets of the Trust. Fixed rate mortgage – A mortgage in which the interest rate does not change during the term of the loan. Freehold – An estate in real property which continues for an indefinite period of time. Freehold estates may be inheritable or non-inheritable. Interest-only loans – A loan where the principal is paid back at the end of the term and only interest is paid during the term. These loans are usually for a short period of time, typically one to five years. Internal rate of return (IRR) – The total rate of return generated by an investment over its life or a given timescale, taking into account sale and purchase prices and all cash flows associated with the holding. Introductory loan – A loan offered at a reduced rate for an introductory period (usually no longer than 15 months and often called the ‘honeymoon period’) to new borrowers. Investment property – A property that is not occupied by the owner but leased to produce income. Joint tenancy – A form of co-ownership that gives each tenant equal shares and rights in the property, including the right of survivorship. Lenders mortgage insurance (LMI) – This is insurance taken out by the lender – but paid for by the borrower – to cover themselves if the borrower defaults on the loan, and property sale proceeds do not cover the outstanding amount. Liquid asset – An asset, cash or otherwise, that can be converted into cash. Loan application fee – Also called the establishment fee. This is a fee paid to a lender for processing a loan. Loan to value ratio (LVR) – The ratio of the amount lent to the value of the property. Low-doc loan – A loan where limited documents are needed to prove an applicant’s income. Market rent – The rental that would apply to a property if space were offered on the open market. Market value – The price at which a seller is happy to sell and a buyer is willing to buy. This assumes that there is sufficient activity in the marketplace to generate enough buyers and sellers so that neither party controls the price. Establishing the market value is the objective of an appraisal. Mortgage protection insurance – Different from lenders mortgage insurance, this covers borrowers’ loan repayments in the event that they are not able to meet them, eg through illness or redundancy.

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Negative gearing – Where the return on an investment is not sufficient to cover the costs on the investment, eg property maintenance and interest on the loan. Net income – Income after taxes are deducted. Net worth – The value of a person’s assets minus liabilities. Offset account – A savings account linked to your mortgage in such a way that the interest earned on your savings is applied to reduce the interest payable on your mortgage. Off the plan – To purchase a property before it is completed, having only seen the plans. Portability – Where a new property can be used as security for an existing loan, ie when the loan is transferred to a new security property without needing to repay the loan, reapply or restructure. Principal – The capital sum borrowed on which interest is paid during the term of the loan. Principal & interest loan (P&I) – A loan in which both the principal and the interest are paid during the term of the loan. Private treaty sale – A property sale where the buyer negotiates directly with the seller, as opposed to an auction sale. Redraw – Borrower is able to draw on pre-paid funds, over and above minimum repayments. Refinance – The process of paying off one loan with the proceeds from a new loan using the same property as security. REIA – Real Estate Institute of Australia. National representative body of real estate agents. Restrictive covenants – A legal obligation in a deed by the seller upon the buyer of real estate to do or not do something. Seller’s market – When demand for property is greater than supply. The result is greater opportunities for owners who may find purchasers willing to offer the asking price or even a figure greater than the asking price. Semi-detached – Also called a duplex. A type of construction where two buildings are attached together by a common wall. Stamp duty – A state tax on conveyance or transfer of real property calculated on the total value of the property (including chattels). This calculation varies from state to state. Standard variable – A variable rate home loan with comprehensive features. This is often the variable rate that fixed rate loans roll to at the end of the fixed term. Strata title – A title to a unit or lot on a plan of subdivision associated with townhouses, units and blocks of flats and based on the horizontal and vertical subdivision of air space. Owners have a certificate of title, are absolute owners of a freehold unit or townhouse, and have an undivided share of the common property. Subdivision – A tract of land divided into individual lots for a housing development. Title deed – Registration showing the ownership of property. Valuation – A written analysis of the estimated value of a property prepared by a qualified valuer. Vendor – The seller. Yield – The interest earned by or returned to an investor from an investment, stated as a percentage of the amount invested. Zoning – Local authority guidelines for the permitted use of land.

ACT HOUSES

Property price guide Property Price Guide provides comprehensive and in-depth statistical information for over 5,600 suburbs, covering both houses and units. Designed to keep property investors up to speed on the current market conditions, Property Price Guide is compiled by RP Data and Your Investment Property

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HARRISON HAWKER HIGGINS HOLDER HOLT HUGHES ISABELLA PLAINS KALEEN KAMBAH LATHAM LYNEHAM LYONS MACARTHUR MACGREGOR MACQUARIE MAWSON MCKELLAR MELBA MONASH NARRABUNDAH NGUNNAWAL NICHOLLS O'CONNOR OXLEY PAGE PALMERSTON PEARCE RED HILL REID RICHARDSON RIVETT SCULLIN SPENCE STIRLING THEODORE TORRENS TURNER WANNIASSA

Number Sold

3-year growth (%)

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5-year growth (%)

pages 116 117

Days on market

Weekly median advertised rent ($)

Gross rental yield (%)

pages 113 116

Median price ($)

12-month growth (%)

Avg annual growth (%)

pages 112 113 Quarterly growth (%)

pages 109 112

5-year growth (%)

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Weekly median advertised rent ($)

Days on market

pages 105 109 Gross rental yield (%)

page 105

Median price ($)

12-month growth (%)

ACT

AINSLIE AMAROO ARANDA BANKS BONYTHON BRADDON BRUCE CALWELL CAMPBELL CHAPMAN CHARNWOOD CHIFLEY CHISHOLM CONDER COOK CURTIN DEAKIN DICKSON DOWNER DUFFY DUNLOP EVATT FADDEN FARRER FISHER FLOREY FLYNN FORDE FRANKLIN FRASER GARRAN GILMORE GIRALANG GORDON GOWRIE GRIFFITH GUNGAHLIN HACKETT

Avg annual growth (%)

pages 100 105 Quarterly growth (%)

pages 99 100

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Source: RP Data www.rpdata.com Jul 09

Time on market: Median number of days between the initial listing date and sale date 5-year growth: Median price percentage change over the past five years to July 2009

5-year growth

Median price Jul 09

Gross rental yield

Average annual growth: Average percentage change over the past 10 years expressed as a per annum figure

Gross rental yield: Estimated rental return, based on advertised rent and median price

Weekly median

12-month growth: Median price percentage change between the 12 months to July 2009 and the 12 months to July 2008

Weekly median advertised rent: Median price of rental listings for the 12 months to July 2009

Top 5 areas nationwide for annual capital growth: houses

50%

13%

195,000

n.a

37%

47%

23%

390,000

n.a

83%

45%

19%

116,000

n.a

127%

4: AUGATHELLA

44%

n.a

85,000

n.a

143%

NSW 5: EUSTON

44%

n.a

180,000

n.a

40%

TAS 1: STRAHAN

Average annual growth

Quarterly growth: Median price percentage change on an annualised basis between the 12 months to July 2009 and the 12 months to April 2008

Median price: Median price for the 12 months to July 2009

12-month growth

How it’s calculated

TAS 2: HILLWOOD NSW 3: BARRABA QLD

Note: No information has been deleted. An n.a. has instead been inserted so all information for a particular suburb is not lost. The following filters have been applied: 1. Rent – anything with a rent >$2,000/week. 2. Qtr Growth – anything >35. 3. Yr growth – anything >50. 4. Avg annual growth – anything >35. 5. Days on market – anything >100 days. 6. Filter out rental data for suburbs with less than 10 rental records during the period.

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WARAMANGA WATSON WEETANGERA WESTON YARRALUMLA

NSW

ABBOTSBURY ABBOTSFORD ABERCROMBIE ABERDARE ABERDEEN ABERGLASSLYN ABERMAIN ACACIA GARDENS ADAMSTOWN ADAMSTOWN HEIGHTS ADELONG ALBION PARK ALBION PARK RAIL ALBURY ALEXANDRIA ALFORDS POINT ALLAMBIE HEIGHTS ALLAWAH ALSTONVILLE AMBARVALE ANNA BAY ANNANDALE ARCADIA VALE ARDLETHAN ARGENTON ARMIDALE ARNCLIFFE ARTARMON ASHBURY ASHCROFT ASHFIELD ASHMONT ASHTONFIELD ASQUITH AUBURN AUSTINMER AVALON AVOCA BEACH BALCOLYN BALGOWLAH BALGOWLAH HEIGHTS BALGOWNIE BALLINA BALMAIN BALMAIN EAST BALRANALD BANGALOW BANGOR BANKSIA BANKSTOWN BANORA POINT BARDEN RIDGE BARDWELL PARK BARDWELL VALLEY BARGO BARHAM BARNSLEY BARRABA BARRACK HEIGHTS BASIN VIEW BASS HILL BATEAU BAY BATEHAVEN BATEMANS BAY BATHURST BATLOW BAULKHAM HILLS BAWLEY POINT BAYVIEW BEACON HILL BEAUMONT HILLS BEECROFT BEGA BELFIELD BELLA VISTA BELLAMBI BELLBIRD HEIGHTS BELLEVUE HILL BELLINGEN BELMONT BELMONT NORTH BELMONT SOUTH BELMORE BELROSE BENSVILLE BERALA BERESFIELD BERKELEY BERKELEY VALE BERMAGUI BEROWRA BEROWRA HEIGHTS BERRIDALE BERRIGAN BERRY BEVERLEY PARK BEVERLY HILLS

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BEXLEY BEXLEY NORTH BIDWILL BILAMBIL HEIGHTS BILGOLA BINGARA BIRCHGROVE BIRMINGHAM GARDENS BIRRONG BLACKALLS PARK BLACKBUTT BLACKETT BLACKHEATH BLACKSMITHS BLACKTOWN BLAIR ATHOL BLAKEHURST BLAXLAND BLAYNEY BLIGH PARK BLUE BAY BLUE HAVEN BOAMBEE EAST BOAT HARBOUR BOGANGAR BOGGABRI BOLWARRA HEIGHTS BOMADERRY BOMBALA BONDI BONDI BEACH BONDI JUNCTION BONNELLS BAY BONNET BAY BONNY HILLS BONNYRIGG BONNYRIGG HEIGHTS BONVILLE BOOKER BAY BOOLAROO BOORAGUL BOOROWA BOSSLEY PARK BOTANY BOURKE BOURKELANDS BOW BOWING BOWEN MOUNTAIN BOWENFELS BOWRAL BRADBURY BRAIDWOOD BRANXTON BREAKFAST POINT BREWARRINA BRIGHTON-LE-SANDS BRIGHTWATERS BROADMEADOW BROKEN HILL BRONTE BROOKVALE BROULEE BRUNSWICK HEADS BUDGEWOI BUFF POINT BULAHDELAH BULLABURRA BULLI BUNDANOON BUNDEENA BUNGENDORE BURONGA BURRANEER BURRILL LAKE BURWOOD BUSBY BUXTON BYRON BAY CABARITA CABRAMATTA CABRAMATTA WEST CALALA CALLALA BAY CALLALA BEACH CAMBEWARRA VILLAGE CAMBRIDGE GARDENS CAMBRIDGE PARK CAMDEN CAMDEN PARK CAMDEN SOUTH CAMERON PARK CAMMERAY CAMPBELLTOWN CAMPERDOWN CAMPSIE CANADA BAY CANLEY HEIGHTS CANLEY VALE CANOWINDRA CANTERBURY CANTON BEACH CAPTAINS FLAT CARDIFF CARDIFF HEIGHTS CARDIFF SOUTH CARINGBAH

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5-year growth (%)

3-year growth (%)

Number Sold

Days on market

Gross rental yield (%)

Weekly median advertised rent ($)

Median price ($)

Avg annual growth (%)

12-month growth (%)

Quarterly growth (%)

5-year growth (%)

3-year growth (%)

Number Sold

Days on market

Gross rental yield (%)

Weekly median advertised rent ($)

Median price ($)

Quarterly growth (%)

12-month growth (%)

Avg annual growth (%)

ACT NSW HOUSES

Source: RP Data www.rpdata.com Jul 09

100

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DOVER HEIGHTS DRUMMOYNE DUBBO DUDLEY DULWICH HILL DUNBOGAN DUNDAS DUNDAS VALLEY DUNGOG DURAL EAGLE VALE EARLWOOD EAST ALBURY EAST BALLINA EAST BOWRAL EAST BRANXTON EAST CORRIMAL EAST GOSFORD EAST HILLS EAST KEMPSEY EAST KILLARA EAST LINDFIELD EAST LISMORE EAST MAITLAND EAST RYDE EAST TAMWORTH EASTERN CREEK EASTLAKES EASTWOOD EDEN EDENSOR PARK EDGECLIFF EDGEWORTH EGLINTON ELANORA HEIGHTS ELDERSLIE ELEEBANA ELERMORE VALE ELLALONG EMERALD BEACH EMERTON EMPIRE BAY EMU HEIGHTS EMU PLAINS ENFIELD ENGADINE ENMORE EPPING ERINA ERINA HEIGHTS ERMINGTON EROWAL BAY ERSKINE PARK ERSKINEVILLE ESCHOL PARK ESTELLA ETTALONG BEACH EULOMOGO EUSTON EVANS HEAD FAIRFIELD FAIRFIELD EAST FAIRFIELD HEIGHTS FAIRFIELD WEST FAIRLIGHT FAIRY MEADOW FARMBOROUGH HEIGHTS FAULCONBRIDGE FENNELL BAY FERN BAY FIGTREE FINGAL BAY FINLEY FISHERMANS PARADISE FISHING POINT FIVE DOCK FLETCHER FLINDERS FLORAVILLE FORBES FOREST HILL FOREST LODGE FORESTVILLE FORRESTERS BEACH FORSTER FRENCHS FOREST FRESHWATER GALSTON GARDEN SUBURB GATESHEAD GENEVA GEORGES HALL GEORGETOWN GERRINGONG GILGANDRA GIRARDS HILL GIRRAWEEN GLADESVILLE GLADSTONE GLEBE GLEN ALPINE GLEN AYR GLEN INNES GLENBROOK GLENDALE GLENDENNING

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5-year growth (%)

3-year growth (%)

Number Sold

Days on market

Gross rental yield (%)

Weekly median advertised rent ($)

Median price ($)

Avg annual growth (%)

12-month growth (%)

Quarterly growth (%)

5-year growth (%)

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Number Sold

Days on market

Gross rental yield (%)

Weekly median advertised rent ($)

Median price ($)

12-month growth (%)

Quarterly growth (%) CARLINGFORD CARLTON CARRAMAR CARRINGTON CARSS PARK CARTWRIGHT CASINO CASTLE COVE CASTLE HILL CASTLECRAG CASUARINA CASULA CATALINA CAVES BEACH CECIL HILLS CESSNOCK CHAIN VALLEY BAY CHARLESTOWN CHARMHAVEN CHATSWOOD CHATSWOOD WEST CHELTENHAM CHERRYBROOK CHESTER HILL CHIPPENDALE CHIPPING NORTON CHITTAWAY BAY CHITTAWAY POINT CLAREMONT MEADOWS CLEMTON PARK CLONTARF CLOVELLY COAL POINT COBAR COFFS HARBOUR COLEDALE COLLAROY COLLAROY PLATEAU COLO VALE COLYTON COMO CONCORD CONCORD WEST CONDELL PARK CONDOBOLIN CONISTON CONNELLS POINT CONSTITUTION HILL COOGEE COOKS HILL COOLAMON COOMA COOMBA PARK COONABARABRAN COONAMBLE COORANBONG COOTAMUNDRA COPACABANA CORAKI CORDEAUX HEIGHTS CORINDI BEACH CORLETTE COROWA CORRIMAL COUTTS CROSSING COWAN COWRA CRANEBROOK CREMORNE CRESCENT HEAD CRESTWOOD CRINGILA CROMER CRONULLA CROOKWELL CROSSLANDS CROUDACE BAY CROWS NEST CROYDON CROYDON PARK CULBURRA BEACH CURL CURL CURRANS HILL CURRARONG DALEYS POINT DALMENY DAPTO DARLINGHURST DARLINGTON DARLINGTON POINT DAVIDSON DAVISTOWN DEAN PARK DEE WHY DENHAMS BEACH DENILIQUIN DENISTONE DENISTONE EAST DENISTONE WEST DENMAN DHARRUK DOLANS BAY DOONSIDE DORA CREEK DORRIGO DOUBLE BAY

Avg annual growth (%)

NSW HOUSES

Source: RP Data www.rpdata.com Jul 09

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KEARNS KEARSLEY KELLYVILLE KELLYVILLE RIDGE KELSO KENSINGTON KIAMA KIAMA DOWNS KIAMA HEIGHTS KIANGA KILABEN BAY KILLARA KILLARNEY HEIGHTS KILLARNEY VALE KILLCARE KINCUMBER KINGS LANGLEY KINGS PARK KINGS POINT KINGSCLIFF KINGSFORD KINGSGROVE KINGSWOOD KIRRAWEE KOGARAH KOGARAH BAY KOOLEWONG KOONAWARRA KOORINGAL KORORA KOTARA KOTARA SOUTH KURNELL KURRI KURRI KYEEMAGH KYLE BAY KYOGLE LAKE ALBERT LAKE CARGELLIGO LAKE CATHIE LAKE CONJOLA LAKE HAVEN LAKE HEIGHTS LAKE ILLAWARRA LAKE MUNMORAH LAKE TABOURIE LAKELANDS LAKEMBA LAKEWOOD LALOR PARK LAMBTON LANE COVE LANE COVE NORTH LANE COVE WEST LANSVALE LAPSTONE LARGS LAURIETON LAVINGTON LAWRENCE LAWSON LEETON LEICHHARDT LEMON TREE PASSAGE LENNOX HEAD LEONAY LETCHWORTH LETHBRIDGE PARK LEUMEAH LEURA LEWISHAM LIBERTY GROVE LIDCOMBE LIGHTNING RIDGE LILLI PILLI LILYFIELD LINDFIELD LISAROW LISMORE LISMORE HEIGHTS LITHGOW LITTLE BAY LITTLETON LIVERPOOL LLANARTH LOCKHART LOFTUS LONG BEACH LONG JETTY LONGUEVILLE LORN LUGARNO LURNEA MACKSVILLE MACLEAN MACMASTERS BEACH MACQUARIE FIELDS MACQUARIE HILLS MACQUARIE LINKS MAITLAND MALABAR MALLABULA MALONEYS BEACH MALUA BAY MANGERTON MANILLA

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3-year growth (%)

Number Sold

Days on market

Gross rental yield (%)

Weekly median advertised rent ($)

Median price ($)

Avg annual growth (%)

12-month growth (%)

Quarterly growth (%)

5-year growth (%)

3-year growth (%)

Number Sold

Days on market

Gross rental yield (%)

Weekly median advertised rent ($)

Median price ($)

12-month growth (%)

Quarterly growth (%) GLENFIELD GLENFIELD PARK GLENHAVEN GLENMORE PARK GLENNING VALLEY GLENORIE GLENROY GLENWOOD GLOSSODIA GLOUCESTER GOL GOL GOONELLABAH GORDON GOROKAN GOSFORD GOULBURN GRAFTON GRANVILLE GRAYS POINT GREEN POINT GREEN POINT GREEN VALLEY GREENACRE GREENFIELD PARK GREENWELL POINT GREENWICH GRETA GREYSTANES GRIFFITH GUILDFORD GUILDFORD WEST GULGONG GUNDAGAI GUNNEDAH GUYRA GWANDALAN GWYNNEVILLE GYMEA GYMEA BAY HABERFIELD HAMILTON HAMILTON NORTH HAMILTON SOUTH HAMLYN TERRACE HAMMONDVILLE HARDEN HARRINGTON HARRINGTON PARK HARRIS PARK HASSALL GROVE HAT HEAD HAWKS NEST HAYWARDS BAY HAZELBROOK HEATHCOTE HEBERSHAM HECKENBERG HEDDON GRETA HELENSBURGH HIGHFIELDS HILL TOP HILLSTON HILLVUE HINCHINBROOK HOBARTVILLE HOLMESVILLE HOLSWORTHY HOMEBUSH HOMEBUSH WEST HORNINGSEA PARK HORNSBY HORNSBY HEIGHTS HORSLEY HOWLONG HOXTON PARK HUNTERS HILL HUNTERVIEW HURLSTONE PARK HURSTVILLE HURSTVILLE GROVE HUSKISSON HYAMS BEACH HYLAND PARK ILLAWONG ILUKA INGLEBURN INVERELL ISLINGTON JAMISONTOWN JANNALI JERILDERIE JESMOND JEWELLS JINDABYNE JINDERA JUNCTION HILL JUNEE KAHIBAH KANAHOOKA KANDOS KANGAROO POINT KANWAL KARABAR KAREELA KARIONG KATOOMBA

Avg annual growth (%)

NSW HOUSES

Source: RP Data www.rpdata.com Jul 09

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MANLY MANLY VALE MANNERING PARK MANYANA MARAYONG MARDI MARKS POINT MAROUBRA MARRICKVILLE MARSFIELD MARULAN MARYLAND MARYVILLE MASCOT MATRAVILLE MAYFIELD MAYFIELD EAST MAYFIELD WEST MAYS HILL MCGRATHS HILL MCMAHONS POINT MEDOWIE MELROSE PARK MENAI MEREWETHER MEREWETHER HEIGHTS MERIMBULA

NARELLAN NARELLAN VALE NAREMBURN NAROOMA NARRABEEN NARRABRI NARRANDERA NARRAWALLEE NARRAWEENA NARROMINE NARWEE NELSON BAY NEUTRAL BAY NEW BERRIMA NEW LAMBTON NEW LAMBTON HEIGHTS NEWINGTON NEWPORT NEWTOWN NIAGARA PARK NORAVILLE NORMANHURST NORTH ALBURY NORTH AVOCA NORTH BALGOWLAH NORTH BONDI NORTH CURL CURL

MEROO MEADOW MERRIWA MERRYLANDS MERRYLANDS MERRYLANDS WEST METFORD MIDDLE COVE MILLER MILLFIELD MILLTHORPE MILPERRA MINCHINBURY MINMI MINTO MIRANDA MIRRABOOKA MITTAGONG MOAMA MOLONG MONA VALE MONTEREY MOOREBANK MOREE MORISSET MORPETH MORTDALE MORUYA MORUYA HEADS MOSMAN MOSS VALE MOUNT ANNAN MOUNT AUSTIN MOUNT COLAH MOUNT DRUITT MOUNT HUTTON MOUNT KEIRA MOUNT KURING-GAI MOUNT LEWIS MOUNT OUSLEY MOUNT PLEASANT MOUNT PRITCHARD MOUNT RIVERVIEW MOUNT SAINT THOMAS MOUNT VICTORIA MOUNT WARRIGAL MUDGEE MULGOA MULLAWAY MULLUMBIMBY MULWALA MURRURUNDI MURWILLUMBAH MUSWELLBROOK NABIAC NAMBUCCA HEADS NARARA

NORTH EPPING NORTH GOSFORD NORTH HAVEN NORTH LAMBTON NORTH MANLY NORTH NARRABEEN NORTH PARRAMATTA NORTH RICHMOND NORTH ROCKS NORTH RYDE NORTH ST MARYS NORTH STRATHFIELD NORTH SYDNEY NORTH TAMWORTH NORTHBRIDGE NORTHMEAD NORTHWOOD NOWRA NOWRA NORTH NYNGAN OAK FLATS OAKDALE OAKHURST OAKY PARK OATLANDS OATLEY OBERON OCEAN SHORES OLD BAR OLD EROWAL BAY OLD GUILDFORD OLD TOONGABBIE ORANGE OURIMBAH OXLEY PARK OXLEY VALE OYSTER BAY PADDINGTON PADSTOW PADSTOW HEIGHTS PALM BEACH PAMBULA BEACH PANANIA PARKES PARKLEA PARRAMATTA PAXTON PEAK HILL PEAKHURST PEAKHURST HEIGHTS PEARL BEACH PELAW MAIN PELICAN PEMULWUY PENDLE HILL PENNANT HILLS

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5-year growth (%)

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Number Sold

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Weekly median advertised rent ($)

Median price ($)

Avg annual growth (%)

12-month growth (%)

Quarterly growth (%)

5-year growth (%)

3-year growth (%)

Number Sold

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Weekly median advertised rent ($)

Median price ($)

Quarterly growth (%)

12-month growth (%)

Avg annual growth (%)

NSW HOUSES

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SOUTH TURRAMURRA SOUTH WENTWORTHVILLE SOUTH WEST ROCKS SOUTH WINDSOR SPEERS POINT SPRING FARM SPRINGDALE HEIGHTS SPRINGFIELD SPRINGWOOD ST ANDREWS ST CLAIR ST GEORGES BASIN ST HELENS PARK ST HUBERTS ISLAND ST IVES ST IVES CHASE ST JOHNS PARK ST MARYS ST PETERS STANHOPE GARDENS STANMORE STANWELL PARK STOCKTON STRATHFIELD STRATHFIELD SOUTH SUFFOLK PARK SUMMER HILL SUMMERLAND POINT SUNSHINE BAY SURF BEACH SURFSIDE SURRY HILLS SUSSEX INLET SUTHERLAND SWANSEA SYDENHAM SYLVANIA SYLVANIA WATERS TAHMOOR TALBINGO TAMARAMA TANILBA BAY TAREE TAREN POINT TARRAWANNA TARRO TASCOTT TATHRA TATTON TEA GARDENS TELARAH TELOPEA TEMORA TEMPE TENAMBIT TENNYSON POINT TENTERFIELD TERALBA TERRANORA TERREY HILLS TERRIGAL THE ENTRANCE THE ENTRANCE NORTH THE HILL THE JUNCTION THE OAKS THE ROCK THIRLMERE THIRROUL THORNLEIGH THORNTON THURGOONA TIGHES HILL TINGIRA HEIGHTS TINONEE TOCUMWAL TOLLAND TOMAKIN TOONGABBIE TOORMINA TORONTO TOUKLEY TOWNSEND TOWRADGI TRANGIE TREGEAR TUGGERAH TUGGERAWONG TUMBARUMBA TUMBI UMBI TUMUT TUNCURRY TURA BEACH TUROSS HEAD TURRAMURRA TURRELLA TURVEY PARK TWEED HEADS TWEED HEADS SOUTH TWEED HEADS WEST ULLADULLA ULTIMO UMINA BEACH UNANDERRA URALLA URUNGA

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5-year growth (%)

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Days on market

Gross rental yield (%)

Weekly median advertised rent ($)

Median price ($)

Avg annual growth (%)

12-month growth (%)

Quarterly growth (%)

5-year growth (%)

3-year growth (%)

Number Sold

Days on market

Gross rental yield (%)

Weekly median advertised rent ($)

Median price ($)

12-month growth (%)

Quarterly growth (%) PENRITH PENROSE PENSHURST PETERSHAM PHEGANS BAY PICNIC POINT PICTON PITT TOWN PLUMPTON POINT CLARE POINT FREDERICK PORT KEMBLA PORT MACQUARIE PORTLAND POTTSVILLE PRAIRIEWOOD PRESTONS PRIMBEE PROSPECT PUNCHBOWL PUTNEY PYMBLE PYRMONT QUAKERS HILL QUEANBEYAN QUEENS PARK QUEENSCLIFF QUIRINDI RABY RAMSGATE RAMSGATE BEACH RANDWICK RANKIN PARK RATHMINES RAVENSWOOD RAYMOND TERRACE REDFERN REDHEAD REGENTS PARK REGENTVILLE REVESBY REVESBY HEIGHTS RICHMOND RIVERSTONE RIVERVIEW RIVERWOOD ROBERTSON ROCKDALE RODD POINT ROOTY HILL ROPES CROSSING ROSE BAY ROSEBERY ROSELANDS ROSEMEADOW ROSEVILLE ROSEVILLE CHASE ROUSE HILL ROZELLE RUSE RUSSELL LEA RUSSELL VALE RUTHERFORD RYDALMERE RYDE SADLEIR SALAMANDER BAY SAN REMO SANCTUARY POINT SANDRINGHAM SANS SOUCI SAPPHIRE BEACH SARATOGA SAWTELL SCHOFIELDS SCONE SCOTTS HEAD SEAFORTH SEFTON SEVEN HILLS SHALVEY SHELL COVE SHELLHARBOUR SHELLY BEACH SHOAL BAY SHOALHAVEN HEADS SHORTLAND SILVERDALE SILVERWATER SINGLETON SINGLETON HEIGHTS SMITHFIELD SMITHS LAKE SMITHTOWN SOLDIERS POINT SOUTH ALBURY SOUTH BATHURST SOUTH COOGEE SOUTH DURRAS SOUTH GOLDEN BEACH SOUTH GRAFTON SOUTH HURSTVILLE SOUTH KEMPSEY SOUTH NOWRA SOUTH PENRITH SOUTH TAMWORTH

Avg annual growth (%)

NSW HOUSES

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Days on market

Gross rental yield (%)

Weekly median advertised rent ($)

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Avg annual growth (%)

12-month growth (%)

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5-year growth (%)

3-year growth (%)

Number Sold

Days on market

Gross rental yield (%)

Weekly median advertised rent ($)

Median price ($)

12-month growth (%)

Quarterly growth (%) VALE OF CLWYDD VALENTINE VALLA BEACH VALLEY HEIGHTS VAUCLUSE VILLAWOOD VINCENTIA VOYAGER POINT WADALBA WAGGA WAGGA WAHROONGA WAITARA WAKELEY WALCHA WALGETT WALLACIA WALLERAWANG WALLSEND WAMBERAL WANGI WANGI WARABROOK WARATAH WARATAH WEST WAREEMBA WARIALDA WARILLA WARNERS BAY WARNERVALE WARRAGAMBA WATANOBBI WATERLOO WATSONS BAY WATTLE GROVE WAUCHOPE WAVERLEY WAVERTON WEE WAA WELLINGTON WENTWORTH WENTWORTH FALLS WENTWORTHVILLE WERRINGTON WERRINGTON COUNTY WERRINGTON DOWNS WERRIS CREEK WEST ALBURY WEST BALLINA WEST BATHURST WEST GOSFORD WEST HAVEN WEST HOXTON WEST KEMPSEY WEST NOWRA WEST PENNANT HILLS WEST PYMBLE WEST RYDE WEST TAMWORTH WEST WALLSEND WEST WOLLONGONG WEST WYALONG WESTDALE WESTLEIGH WESTMEAD WESTON WETHERILL PARK WHALAN WHEELER HEIGHTS WHITEBRIDGE WICKHAM WILBERFORCE WILCANNIA WILEY PARK WILLMOT WILLOUGHBY WILLOUGHBY EAST WILTON WINDALE WINDANG WINDERMERE PARK WINDRADYNE WINDSOR WINGHAM WINMALEE WINSTON HILLS WOLLONGBAR WOLLONGONG WOLLSTONECRAFT WOMBARRA WOODBERRY WOODBINE WOODBURN WOODCROFT WOODENBONG WOODFORD WOODPARK WOODRISING WOOLGOOLGA WOOLI WOOLLAHRA WOOLLOOMOOLOO WOOLOOWARE WOONGARRAH WOONONA WORONORA WORONORA HEIGHTS WORRIGEE

Avg annual growth (%)

NSW NT Qld HOUSES

WOY WOY WYEE WYONG WYONGAH YAGOONA YAMBA YARRAWARRAH YASS YATTALUNGA YELLOW ROCK YENNORA YERRINBOOL YOUNG YOWIE BAY ZETLAND

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ALAWA ANULA ARALUEN BAKEWELL BATCHELOR BAYVIEW BEES CREEK BRAITLING COCONUT GROVE DRIVER DURACK EAST SIDE FANNIE BAY FARRAR GILLEN GIRRAWEEN GRAY GUNN HOWARD SPRINGS HUMPTY DOO JINGILI KARAMA KATHERINE LARAPINTA LARRAKEYAH LEANYER LUDMILLA MALAK MARLOW LAGOON MARRARA MCMINNS LAGOON MILLNER MOIL MOULDEN NAKARA NIGHTCLIFF PARAP RAPID CREEK ROSEBERY STUART PARK TENNANT CREEK THE GAP WAGAMAN WANGURI WOODROFFE WULAGI

QLD

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ACACIA RIDGE AEROGLEN AGNES WATER AITKENVALE ALBANY CREEK ALBION ALDERLEY ALDERSHOT ALEXANDRA HEADLAND ALEXANDRA HILLS ALGESTER ALICE RIVER ALLENSTOWN ALLIGATOR CREEK ALLORA ALTON DOWNS ANDERGROVE ANNANDALE ANNERLEY ANSTEAD APPLE TREE CREEK ARALUEN ARANA HILLS ARCHERFIELD ARMSTRONG BEACH AROONA ARUNDEL ASCOT ASHFIELD ASHGROVE ASHMORE ASPLEY ATHERTON AUCHENFLOWER AUGATHELLA AUGUSTINE HEIGHTS AVENELL HEIGHTS AVOCA AVONDALE Source: RP Data www.rpdata.com Jul 09

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CALAMVALE CALLIOPE CALOUNDRA CALOUNDRA WEST CALVERT CAMBOOYA CAMIRA CAMP HILL CAMP MOUNTAIN CANNON HILL CANNONVALE CANUNGRA CAPALABA CAPELLA CARAVONICA CARDWELL CARINA CARINA HEIGHTS CARINDALE CAROLE PARK CARRARA CARSELDINE CASHMERE CEDAR GROVE CEDAR VALE CENTENARY HEIGHTS CHAMBERS FLAT CHANDLER CHAPEL HILL CHARLEVILLE CHATSWORTH CHELMER CHERMSIDE CHERMSIDE WEST CHILDERS CHINCHILLA CHURCHILL CHUWAR CLAYFIELD CLEAR ISLAND WATERS CLERMONT CLEVELAND CLIFTON CLIFTON BEACH CLINTON CLONTARF COALFALLS COES CREEK COLLINGWOOD PARK COLLINSVILLE CONDON COOCHIEMUDLO ISLAND COOEE BAY COOKTOWN COOLANGATTA COOLOOLA COVE COOLUM BEACH COOMBABAH COOMERA COOMINYA COOPERS PLAINS COORAN COOROY COORPAROO COOTHARABA CORAL COVE CORDALBA CORINDA CORNUBIA COTSWOLD HILLS CRAIGLIE CRAIGNISH CRANBROOK CRESTMEAD CROWS NEST CUNNAMULLA CURRA CURRAJONG CURRIMUNDI CURRUMBIN CURRUMBIN VALLEY CURRUMBIN WATERS DAISY HILL DALBY DARLING HEIGHTS DARRA DAYBORO DEAGON DECEPTION BAY DEEBING HEIGHTS DEERAGUN DICKY BEACH DIDDILLIBAH DIRRANBANDI DONNYBROOK DOOLANDELLA DOONAN DOUGLAS DRAYTON DREWVALE DUGANDAN DUNDOWRAN DUNDOWRAN BEACH DURACK DUTTON PARK DYSART

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Number Sold

Days on market

Gross rental yield (%)

Weekly median advertised rent ($)

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Avg annual growth (%)

12-month growth (%)

Quarterly growth (%)

5-year growth (%)

3-year growth (%)

Number Sold

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Gross rental yield (%)

Weekly median advertised rent ($)

Median price ($)

12-month growth (%)

Quarterly growth (%) AYR BABINDA BAHRS SCRUB BALD HILLS BALMORAL BANKSIA BEACH BANYO BARCALDINE BARDON BARELLAN POINT BARGARA BARMARYEE BARNEY POINT BASIN POCKET BATTERY HILL BAUPLE BAYVIEW HEIGHTS BEACHMERE BEACONSFIELD BEAUDESERT BEENLEIGH BEERBURRUM BEERWAH BELGIAN GARDENS BELL BELLARA BELLBIRD PARK BELLBOWRIE BELLI PARK BELLMERE BELMONT BELVEDERE BENARABY BENARKIN NORTH BENOWA BENTLEY PARK BERRINBA BERSERKER BETHANIA BIGGENDEN BIGGERA WATERS BILOELA BINGIL BAY BIRKDALE BLACK MOUNTAIN BLACK RIVER BLACKALL BLACKBUTT BLACKS BEACH BLACKSTONE BLACKWATER BLI BLI BLUE MOUNTAIN HEIGHTS BLUEWATER PARK BOHLE PLAINS BOKARINA BONGAREE BONOGIN BOOIE BOONAH BOONDALL BOORAL BOOVAL BORONIA HEIGHTS BOULDERCOMBE BOWEN BOYNE ISLAND BRACKEN RIDGE BRANDON BRANYAN BRASSALL BRAY PARK BRIDGEMAN DOWNS BRIGHTON BRIGHTVIEW BRINSMEAD BRISBANE CITY BROADBEACH WATERS BROOKFIELD BROWNS PLAINS BUCASIA BUCCA BUCCAN BUDDINA BUDERIM BULIMBA BUNDABERG EAST BUNDABERG NORTH BUNDABERG SOUTH BUNDABERG WEST BUNDALL BUNDAMBA BUNGALOW BUNYA BURDELL BURLEIGH HEADS BURLEIGH WATERS BURNETT HEADS BURNSIDE BURPENGARY BURRUM HEADS BUSHLAND BEACH CABARLAH CABOOLTURE CABOOLTURE SOUTH CAIRNS NORTH

Avg annual growth (%)

Qld HOUSES

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HOPE ISLAND HORSE CAMP HORSESHOE BAY HOWARD HUGHENDEN HUNCHY HYDE PARK IDALIA IMBIL INALA INDOOROOPILLY INGHAM INNES PARK INNISFAIL ESTATE JACOBS WELL JAMBOREE HEIGHTS JANDOWAE JENSEN JIMBOOMBA JINDALEE JONES HILL JOYNER JUBILEE POCKET KALBAR KALKIE KALLANGUR KANDANGA KANGAROO POINT KANIMBLA KARALEE KARANA DOWNS KAWANA KAWUNGAN KEARNEYS SPRING KEDRON KELSO KELVIN GROVE KENMORE KENMORE HILLS KENSINGTON GROVE KEPERRA KEPNOCK KEWARRA BEACH KILCOY KILKIVAN KILLARNEY KIN KIN KIN KORA KINGAROY KINGS BEACH KINGSTHORPE KINGSTON KINKA BEACH KIPPA-RING KIRWAN KOONGAL KOORALBYN KOUMALA KULUIN KURABY KURANDA KUREELPA KURRIMINE BEACH KURWONGBAH LABRADOR LAIDLEY LAIDLEY HEIGHTS LAKES CREEK LAMB ISLAND LAMMERMOOR LANDSBOROUGH LAWNTON LEICHHARDT LISSNER LITTLE MOUNTAIN LOCKROSE LOGAN CENTRAL LOGAN RESERVE LOGAN VILLAGE LOGANHOLME LOGANLEA LONGREACH LOTA LOWER BEECHMONT LOWOOD LUTWYCHE MACGREGOR MACHANS BEACH MACKAY MACKENZIE MACLEAY ISLAND MALANDA MALENY MANGO HILL MANLY MANLY WEST MANOORA MANSFIELD MANUNDA MAPLETON MARBURG MARCOOLA MARCUS BEACH MAREEBA MARGATE MARIAN MAROOCHY RIVER

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Days on market

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12-month growth (%)

Quarterly growth (%) EAGLEBY EARLVILLE EAST BRISBANE EAST INNISFAIL EAST IPSWICH EAST MACKAY EAST TOOWOOMBA EASTERN HEIGHTS EATONS HILL EBBW VALE EDENS LANDING EDGE HILL EDMONTON EIGHT MILE PLAINS EIMEO ELANORA ELI WATERS ELIMBAH ELLIOTT HEADS EMERALD EMU PARK ENOGGERA EVERTON HILLS EVERTON PARK FAIRFIELD FARLEIGH FERNVALE FERNY GROVE FERNY HILLS FIG TREE POCKET FITZGIBBON FLAXTON FLINDERS VIEW FOREST LAKE FORESTDALE FORREST BEACH FRENCHVILLE GAILES GARBUTT GATTON GAYTHORNE GEEBUNG GILSTON GLADSTONE CITY GLASS HOUSE MOUNTAINS GLEN APLIN GLEN EDEN GLENEAGLE GLENELLA GLENLEE GLENORE GROVE GLENVALE GLENVIEW GLENWOOD GODWIN BEACH GOLDEN BEACH GOOBURRUM GOODNA GOOMBUNGEE GOOMERI GOONDIWINDI GORDON PARK GORDONVALE GOWRIE JUNCTION GRACEMERE GRACEVILLE GRANDCHESTER GRANGE GRANTHAM GRANVILLE GRASSTREE BEACH GREENBANK GREENMOUNT GREENSLOPES GRIFFIN GUANABA GULLIVER GUMDALE GYMPIE HAMILTON HARLAXTON HARRISTOWN HATTON VALE HAWTHORNE HAY POINT HEALY HEATHWOOD HEATLEY HELENSVALE HEMMANT HENDRA HERITAGE PARK HERMIT PARK HERSTON HIGHFIELDS HIGHGATE HILL HIGHLAND PARK HIGHVALE HIGHWORTH HILLCREST HODGSON VALE HOLLAND PARK HOLLAND PARK WEST HOLLOWAYS BEACH HOLLYWELL HOLMVIEW HOME HILL

Avg annual growth (%)

Qld HOUSES

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NUNDAH OAKEY OCEAN VIEW ONE MILE OONOONBA OORALEA ORMEAU ORMEAU HILLS ORMISTON OXENFORD OXLEY PACIFIC HEIGHTS PACIFIC PARADISE PACIFIC PINES PADDINGTON PAGET PALLARENDA PALM BEACH PALM COVE PALMVIEW PALMWOODS PARADISE POINT PARK AVENUE PARK RIDGE PARK RIDGE SOUTH PARKHURST PARKINSON PARKSIDE PARKWOOD PARRAMATTA PARK PARREARRA PEACHESTER PELICAN WATERS PEREGIAN BEACH PEREGIAN SPRINGS PETRIE PIALBA PIMLICO PIMPAMA PINE MOUNTAIN PINKENBA PIONEER PITTSWORTH PLACID HILLS PLAINLAND POINT VERNON POMONA PORT DOUGLAS PROSERPINE PULLENVALE QUEENTON QUILPIE QUNABA RACEVIEW RAILWAY ESTATE RANGEVILLE RANGEWOOD RASMUSSEN RAVENSHOE RED HILL REDBANK REDBANK PLAINS REDCLIFFE REDLAND BAY REDLYNCH REDRIDGE REEDY CREEK REGENCY DOWNS REGENTS PARK RICHLANDS RICHMOND RICHMOND HILL RIPLEY RIVER HEADS RIVERHILLS RIVERVIEW ROBERTSON ROBINA ROCHEDALE ROCHEDALE SOUTH ROCKHAMPTON CITY ROCKLEA ROCKVILLE ROCKYVIEW ROMA ROSEMOUNT ROSENTHAL HEIGHTS ROSEWOOD ROSSLEA ROTHWELL RUBYVALE RUNAWAY BAY RUNCORN RURAL VIEW RUSSELL ISLAND SADLIERS CROSSING SALISBURY SAMFORD VALLEY SAMFORD VILLAGE SANDGATE SANDSTONE POINT SAPPHIRE SARINA SARINA BEACH SCARBOROUGH SCARNESS

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Days on market

Gross rental yield (%)

Weekly median advertised rent ($)

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Avg annual growth (%)

12-month growth (%)

Quarterly growth (%)

5-year growth (%)

3-year growth (%)

Number Sold

Days on market

Gross rental yield (%)

Weekly median advertised rent ($)

Median price ($)

12-month growth (%)

Quarterly growth (%) MAROOCHYDORE MARSDEN MARYBOROUGH MAUDSLAND MCDOWALL MEADOWBROOK MENZIES MERIDAN PLAINS MERINGANDAN WEST MERMAID BEACH MERMAID WATERS MERRIMAC MIAMI MIDDLE PARK MIDDLE RIDGE MILES MILES END MILLBANK MILLMERRAN MILLSTREAM MILTON MINDEN MINYAMA MIRANI MIRIAM VALE MIRIWINNI MITCHELL MITCHELTON MOFFAT BEACH MOGGILL MOLENDINAR MONKLAND MONS MONTO MONTVILLE MOOLBOOLAMAN MOOLOOLABA MOOLOOLAH VALLEY MOORE PARK BEACH MOORES POCKET MOOROOBOOL MOOROOKA MORANBAH MORAYFIELD MORNINGSIDE MORNINGTON MOSSMAN MOUNT COOLUM MOUNT COTTON MOUNT CROSBY MOUNT GRAVATT MOUNT GRAVATT EAST MOUNT LOFTY MOUNT LOUISA MOUNT LOW MOUNT MORGAN MOUNT NATHAN MOUNT OMMANEY MOUNT PLEASANT MOUNT SHERIDAN MOUNT WARREN PARK MOUNTAIN CREEK MOURA MUDGEERABA MUDJIMBA MUNDINGBURRA MUNDOOLUN MUNDUBBERA MUNRUBEN MURARRIE MURGON MURRUMBA DOWNS NAMBOUR NANANGO NARANGBA NATHAN NEBO NELLY BAY NERANG NEW AUCKLAND NEW BEITH NEW FARM NEWMARKET NEWPORT NEWSTEAD NEWTOWN NEWTOWN NIKENBAH NINDERRY NINGI NOME NOOSA HEADS NOOSAVILLE NORMAN GARDENS NORMAN PARK NORTH BOOVAL NORTH IPSWICH NORTH LAKES NORTH MACKAY NORTH MACLEAN NORTH MALENY NORTH TOOWOOMBA NORTH WARD NORTHGATE NORVILLE NUDGEE

Avg annual growth (%)

Qld HOUSES

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UPPER COOMERA UPPER KEDRON UPPER LOCKYER UPPER MOUNT GRAVATT URANGAN URRAWEEN VARSITY LAKES VERRIERDALE VETERAN VICTORIA POINT VINCENT VIRGINIA WACOL WAKERLEY WALKERSTON WALKERVALE WALLOON WAMURAN WANDAL WANDOAN WANGAN WARANA WARWICK WATERFORD WATERFORD WEST WATTLE CAMP WAVELL HEIGHTS WELLINGTON POINT WESTLAKE WHITE ROCK WHITFIELD WIGHTS MOUNTAIN WILLOWBANK WILSONTON WILSONTON HEIGHTS WILSTON WINDAROO WINDSOR WINSTON WINTON WISHART WITHCOTT WITTA WONDAI WONDUNNA WONGA WONGAWALLAN WOODEND WOODFORD WOODGATE WOODRIDGE WOODY POINT WOOLLOONGABBA WOOLOOWIN WOOMBYE WOORIM WULKURAKA WURTULLA WYNNUM WYNNUM WEST WYREEMA YAMANTO YANDINA YAROOMBA YARRAMAN YATALA YEERONGPILLY YEPPOON YERONGA YORKEYS KNOB YUNGABURRA ZILLMERE ZILZIE

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3-year growth (%)

Number Sold

Days on market

Gross rental yield (%)

Weekly median advertised rent ($)

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Avg annual growth (%)

12-month growth (%)

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5-year growth (%)

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Weekly median advertised rent ($)

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12-month growth (%)

Quarterly growth (%) SEVEN HILLS SEVENTEEN MILE ROCKS SHAILER PARK SHARON SHELDON SHELLY BEACH SHERWOOD SHOAL POINT SHORNCLIFFE SILKSTONE SINNAMON PARK SIPPY DOWNS SLACKS CREEK SLADE POINT SMITHFIELD SOLDIERS HILL SOUTH BINGERA SOUTH GLADSTONE SOUTH KOLAN SOUTH MACKAY SOUTH NANANGO SOUTH TOOWOOMBA SOUTH TOWNSVILLE SOUTHERN CROSS SOUTHPORT SOUTHSIDE SPRING HILL SPRINGBROOK SPRINGFIELD SPRINGFIELD LAKES SPRINGSURE SPRINGWOOD ST GEORGE ST LUCIA STAFFORD STAFFORD HEIGHTS STANTHORPE STEIGLITZ STRATFORD STRATHPINE STRETTON STUART SUMNER SUN VALLEY SUNNYBANK SUNNYBANK HILLS SUNRISE BEACH SUNSET SUNSHINE ACRES SUNSHINE BEACH SURFERS PARADISE SVENSSON HEIGHTS TAABINGA TAIGUM TAKURA TALLAI TALLEBUDGERA TALLEBUDGERA VALLEY TAMBORINE TAMBORINE MOUNTAIN TANAH MERAH TANNUM SANDS TARA TARANGANBA TARINGA TAROOMBALL TARRAGINDI TELINA TENNYSON TEWANTIN TEXAS THABEBAN THAGOONA THANGOOL THE GAP THE GAP THE PALMS THE RANGE THORNESIDE THORNLANDS THURINGOWA CENTRAL TIARO TIN CAN BAY TINANA TINBEERWAH TINGALPA TIVOLI TOLGA TOLL TOOGOOLAWAH TOOGOOM TOOLOOA TOORBUL TOOWONG TOOWOOMBA CITY TORQUAY TORRINGTON TOWNVIEW TRINITY BEACH TRINITY PARK TRUNDING TUGUN TULLY TWIN WATERS UNDERWOOD UPPER CABOOLTURE

Avg annual growth (%)

Qld SA HOUSES

ABERFOYLE PARK ADELAIDE ALBERT PARK ALBERTON ALDGATE ALDINGA BEACH ALLENBY GARDENS ALLENDALE EAST ANDREWS FARM ANGASTON ANGLE PARK ANGLE VALE ARDROSSAN ASCOT PARK ATHELSTONE ATHOL PARK AUBURN BALAKLAVA BALHANNAH BANKSIA PARK BARMERA BEAUMONT BEDFORD PARK BELAIR BELLEVUE HEIGHTS BERRI BEULAH PARK BEVERLEY BIRDWOOD BIRKENHEAD Source: RP Data www.rpdata.com Jul 09

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GOOLWA GOOLWA BEACH GOOLWA NORTH GOOLWA SOUTH GRANGE GREENACRES GREENHILL GREENOCK GREENWITH GULFVIEW HEIGHTS GUMERACHA HACKHAM HACKHAM WEST HAHNDORF HALLETT COVE HAMLEY BRIDGE HAMPSTEAD GARDENS HAPPY VALLEY HAWTHORN HAWTHORNDENE HAYBOROUGH HAZELWOOD PARK HEATHFIELD HEATHPOOL HECTORVILLE HENDON HENLEY BEACH HENLEY BEACH SOUTH HEWETT HIGHBURY HIGHGATE HILLBANK HILLCREST HILTON HINDMARSH ISLAND HOLDEN HILL HOPE VALLEY HOVE HUNTFIELD HEIGHTS HYDE PARK INGLE FARM JAMESTOWN JOSLIN KADINA KALANGADOO KANMANTOO KAPUNDA KEITH KENSINGTON KENSINGTON GARDENS KENSINGTON PARK KERSBROOK KIDMAN PARK KILBURN KILKENNY KIMBA KINGSCOTE KINGSTON S.E. KINGSWOOD KLEMZIG KURRALTA PARK LAMEROO LARGS BAY LARGS NORTH LAURA LINDEN PARK LITTLEHAMPTON LOBETHAL LOCK LOCKLEYS LOWER MITCHAM LOXTON LYNDOCH MACCLESFIELD MAGILL MAITLAND MALLALA MALVERN MANNINGHAM MANNUM MANSFIELD PARK MARDEN MARINO MARION MARLESTON MASLIN BEACH MAWSON LAKES MAYLANDS MCCRACKEN MCLAREN FLAT MCLAREN VALE MEADOWS MEDINDIE MELROSE PARK MENINGIE MIDDLETON MILANG MILE END MILLICENT MILLSWOOD MINLATON MITCHAM MITCHELL PARK MOANA MODBURY MODBURY HEIGHTS

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3-year growth (%)

Number Sold

Days on market

Gross rental yield (%)

Weekly median advertised rent ($)

Median price ($)

Avg annual growth (%)

12-month growth (%)

Quarterly growth (%)

5-year growth (%)

3-year growth (%)

Number Sold

Days on market

Gross rental yield (%)

Weekly median advertised rent ($)

Median price ($)

12-month growth (%)

Quarterly growth (%) BLACK FOREST BLACKWOOD BLAIR ATHOL BLAKEVIEW BLANCHETOWN BORDERTOWN BRAHMA LODGE BRIDGEWATER BRIGHTON BROADVIEW BROMPTON BROOKLYN PARK BURNSIDE BURRA BURTON CALLINGTON CAMDEN PARK CAMPBELLTOWN CARRICKALINGA CEDUNA CHELTENHAM CHRISTIE DOWNS CHRISTIES BEACH CLAPHAM CLARE CLARENCE GARDENS CLARENCE PARK CLEARVIEW CLEVE CLINTON CLOVELLY PARK COFFIN BAY COLONEL LIGHT GARDENS COOBER PEDY COONALPYN COROMANDEL VALLEY CRAFERS CRAFERS WEST CRAIGBURN FARM CRAIGMORE CROYDON PARK CRYSTAL BROOK CUMBERLAND PARK CUMMINS DARLINGTON DAVOREN PARK DAW PARK DERNANCOURT DEVON PARK DOVER GARDENS DULWICH EASTWOOD ECHUNGA EDEN HILLS EDITHBURGH EDWARDSTOWN ELIZABETH DOWNS ELIZABETH EAST ELIZABETH GROVE ELIZABETH NORTH ELIZABETH PARK ELIZABETH SOUTH ELIZABETH VALE ENCOUNTER BAY ENFIELD ERINDALE ETHELTON EUDUNDA EVANDALE EVANSTON EVANSTON GARDENS EVANSTON PARK EXETER FAIRVIEW PARK FELIXSTOW FERRYDEN PARK FINDON FIRLE FLAGSTAFF HILL FLINDERS PARK FORESTVILLE FREELING FREWVILLE FULHAM FULHAM GARDENS FULLARTON GAWLER GAWLER EAST GAWLER SOUTH GAWLER WEST GILBERTON GILLES PLAINS GLANDORE GLANVILLE GLEN OSMOND GLENALTA GLENELG GLENELG EAST GLENELG NORTH GLENELG SOUTH GLENGOWRIE GLENSIDE GLENUNGA GLYNDE GOLDEN GROVE GOODWOOD

Avg annual growth (%)

SA HOUSES

Source: RP Data www.rpdata.com Jul 09

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MODBURY NORTH MOONTA MOONTA BAY MORGAN MORPHETT VALE MORPHETTVILLE MOUNT BARKER MOUNT COMPASS MOUNT GAMBIER MOUNT PLEASANT MOUNT TORRENS MUNNO PARA MUNNO PARA WEST MURRAY BRIDGE MURRAY BRIDGE EAST MYRTLE BANK NAILSWORTH NAIRNE NANGWARRY NAPPERBY NARACOORTE NETHERBY NETLEY NEW TOWN NEWTON NOARLUNGA DOWNS NORMANVILLE

PORT PIRIE WEST PORT VICTORIA PORT VINCENT PORT WILLUNGA PROSPECT QUEENSTOWN QUORN REDWOOD PARK RENMARK RENOWN PARK REYNELLA REYNELLA EAST RICHMOND RIDGEHAVEN RIDLEYTON RISDON PARK RISDON PARK SOUTH RIVERGLADES RIVERTON ROBE ROSE PARK ROSEWATER ROSSLYN PARK ROSTREVOR ROXBY DOWNS ROYAL PARK ROYSTON PARK

NORTH ADELAIDE NORTH BEACH NORTH BRIGHTON NORTH HAVEN NORTH PLYMPTON NORTHFIELD NORTHGATE NORWOOD NOVAR GARDENS NURIOOTPA OAKDEN OAKLANDS PARK O'HALLORAN HILL OLD NOARLUNGA OLD REYNELLA ONE TREE HILL ONKAPARINGA HILLS ORROROO OSBORNE O'SULLIVAN BEACH OTTOWAY OWEN PANORAMA PARA HILLS PARA HILLS WEST PARA VISTA PARADISE PARAFIELD GARDENS PARALOWIE PARHAM PARINGA PARK HOLME PARKSIDE PASADENA PAYNEHAM PAYNEHAM SOUTH PENNESHAW PENNINGTON PENOLA PETERBOROUGH PETERHEAD PINNAROO PLYMPTON PLYMPTON PARK POORAKA PORT ADELAIDE PORT AUGUSTA PORT AUGUSTA WEST PORT BROUGHTON PORT ELLIOT PORT HUGHES PORT LINCOLN PORT MACDONNELL PORT NOARLUNGA PORT NOARLUNGA SOUTH PORT PIRIE SOUTH

SADDLEWORTH SAINT AGNES SAINT GEORGES SAINT MARYS SAINT MORRIS SAINT PETERS SALISBURY SALISBURY DOWNS SALISBURY EAST SALISBURY HEIGHTS SALISBURY NORTH SALISBURY PARK SALISBURY PLAIN SEACLIFF SEACLIFF PARK SEACOMBE GARDENS SEACOMBE HEIGHTS SEAFORD SEAFORD MEADOWS SEAFORD RISE SEATON SEAVIEW DOWNS SEFTON PARK SELLICKS BEACH SEMAPHORE SEMAPHORE PARK SEMAPHORE SOUTH SHEIDOW PARK SMITHFIELD SMITHFIELD PLAINS SNOWTOWN SOLOMONTOWN SOMERTON PARK SOUTH BRIGHTON SOUTH PLYMPTON SPRINGTON STANSBURY STEPNEY STIRLING STIRLING NORTH STONYFELL STRATHALBYN STREAKY BAY STURT SURREY DOWNS TAILEM BEND TANTANOOLA TANUNDA TAPEROO TARPEENA TEA TREE GULLY TENNYSON TERINGIE TEROWIE THEBARTON THOMPSON BEACH

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Gross rental yield (%)

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Avg annual growth (%)

12-month growth (%)

Quarterly growth (%)

5-year growth (%)

3-year growth (%)

Number Sold

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Weekly median advertised rent ($)

Median price ($)

Quarterly growth (%)

12-month growth (%)

Avg annual growth (%)

SA HOUSES

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TIDDY WIDDY BEACH TINTINARA TOORAK GARDENS TORRENS PARK TORRENSVILLE TRANMERE TROTT PARK TUMBY BAY TUSMORE TWO WELLS UNDERDALE UNLEY UNLEY PARK UPPER STURT URRBRAE VALE PARK VALLEY VIEW VICTOR HARBOR VISTA WAIKERIE WALKERVILLE WALKLEY HEIGHTS WALLAROO WALLAROO MINES WARRADALE WASLEYS WATTLE PARK WAYVILLE WELLAND WEST BEACH WEST CROYDON WEST HINDMARSH WEST LAKES WEST LAKES SHORE WEST RICHMOND WESTBOURNE PARK WHYALLA WHYALLA NORRIE WHYALLA PLAYFORD WHYALLA STUART WILLASTON WILLIAMSTOWN WILLUNGA WINDSOR GARDENS WOODCROFT WOODSIDE WOODVILLE WOODVILLE GARDENS WOODVILLE PARK WOODVILLE SOUTH WYNN VALE YANKALILLA YORKETOWN

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GREENS BEACH GRINDELWALD HADSPEN HILLWOOD HOBART HOWRAH HUONVILLE INVERMAY KINGS MEADOWS KINGSTON KINGSTON BEACH LACHLAN LATROBE LAUDERDALE LAUNCESTON LEGANA LENAH VALLEY LEWISHAM LINDISFARNE LONGFORD LUTANA MAGRA MARGATE MAYFIELD MIANDETTA MIDWAY POINT MIENA MOLESWORTH MONTAGU BAY MONTELLO MONTROSE MOONAH MORNINGTON MOUNTAIN RIVER MOWBRAY NEW NORFOLK NEW TOWN NEWNHAM NEWSTEAD NORTH HOBART NORWOOD OAKDOWNS OLD BEACH OPOSSUM BAY ORFORD PARK GROVE PARKLANDS PENGUIN PERTH PONTVILLE PORT HUON PORT SORELL PRIMROSE SANDS PROSPECT PROSPECT VALE PUNCHBOWL QUEENSTOWN QUOIBA RANELAGH RAVENSWOOD RIDGLEY RISDON VALE RIVERSIDE ROCHERLEA ROKEBY ROMAINE ROSE BAY ROSEBERY ROSETTA ROSNY ROSS SANDY BAY SCOTTSDALE SEVEN MILE BEACH SHEARWATER SHEFFIELD SHOREWELL PARK SIDMOUTH SISTERS BEACH SMITHTON SNUG SOMERSET SORELL SOUTH ARM SOUTH BURNIE SOUTH HOBART SOUTH LAUNCESTON SPREYTON ST HELENS ST LEONARDS ST MARYS STANLEY STIEGLITZ STRAHAN SUMMERHILL TAROONA TRANMERE TREVALLYN TRIABUNNA TULLAH ULVERSTONE UPPER BURNIE WARRANE WAVERLEY WHITE BEACH WYNYARD

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12-month growth (%)

Quarterly growth (%)

5-year growth (%)

3-year growth (%)

Number Sold

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Gross rental yield (%)

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ACACIA HILLS ACTON ACTON PARK AMBLESIDE ANSONS BAY AUSTINS FERRY BAGDAD BATTERY POINT BEAUTY POINT BELLERIVE BERRIEDALE BINALONG BAY BLACKMANS BAY BLACKSTONE HEIGHTS BRACKNELL BRIDGEWATER BRIDPORT BRIGHTON BURNIE CAMBRIDGE CAMPANIA CAMPBELL TOWN CARLTON CARRICK CHIGWELL CLAREMONT CLARENDON VALE COLEBROOK DEVONPORT DODGES FERRY DOVER DROMEDARY DYNNYRNE EAST DEVONPORT EAST LAUNCESTON EVANDALE EXETER FERN TREE FORCETT FOREST FRANKLIN GAGEBROOK GEEVESTON GEILSTON BAY GEORGE TOWN GLEBE GLEN HUON GLENORCHY GRANTON GRAVELLY BEACH

Weekly median advertised rent ($)

Median price ($)

Quarterly growth (%)

12-month growth (%)

Avg annual growth (%)

SA HOUSES

Source: RP Data www.rpdata.com Jul 09

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YOUNGTOWN ZEEHAN

VIC

ABBOTSFORD ABERFELDIE AIREYS INLET AIRPORT WEST ALBANVALE ALBERT PARK ALBION ALEXANDRA ALFREDTON ALLANSFORD ALPHINGTON ALTONA ALTONA MEADOWS ALTONA NORTH ANGLESEA APOLLO BAY ARARAT ARDEER ARMADALE ASCOT ASCOT VALE ASHBURTON ASHWOOD ASPENDALE ASPENDALE GARDENS ATTWOOD AVENEL AVOCA AVONDALE HEIGHTS AVONSLEIGH BACCHUS MARSH BAIRNSDALE BALACLAVA BALLAN BALLARAT BALLARAT EAST BALLARAT NORTH BALNARRING BALWYN BALWYN NORTH BANNOCKBURN BARANDUDA BARWON HEADS BAXTER BAYSWATER BAYSWATER NORTH BEACONSFIELD BEACONSFIELD UPPER BEAUFORT BEAUMARIS BEECHWORTH BELGRAVE BELGRAVE HEIGHTS BELGRAVE SOUTH BELL PARK BELL POST HILL BELLFIELD BELMONT BENALLA BENDIGO BENTLEIGH BENTLEIGH EAST BERWICK BIRCHIP BITTERN BLACK HILL BLACK ROCK BLACKBURN BLACKBURN NORTH BLACKBURN SOUTH BLAIRGOWRIE BLIND BIGHT BONBEACH BOOLARRA BOORT BORONIA BOX HILL BOX HILL NORTH BOX HILL SOUTH BRAYBROOK BREAKWATER BRIAR HILL BRIGHT BRIGHTON BRIGHTON EAST BROADFORD BROADMEADOWS BROOKFIELD BROOKLYN BROWN HILL BRUNSWICK BRUNSWICK EAST BRUNSWICK WEST BRUTHEN BULLEEN BUNDALONG BUNDOORA BUNINYONG BUNYIP BURNLEY BURNSIDE

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BURNSIDE HEIGHTS BURWOOD BURWOOD EAST CAIRNLEA CALIFORNIA GULLY CAMBERWELL CAMPBELLFIELD CAMPBELLS CREEK CAMPERDOWN CANADIAN CANNONS CREEK CANTERBURY CAPE PATERSON CAPE SCHANCK CAPE WOOLAMAI CARDROSS CARISBROOK CARLTON CARLTON NORTH CARNEGIE CAROLINE SPRINGS CARRUM CARRUM DOWNS CASTERTON CASTLEMAINE CAULFIELD CAULFIELD NORTH CAULFIELD SOUTH CHADSTONE CHARLTON CHELSEA CHELSEA HEIGHTS CHELTENHAM CHEWTON CHILTERN CHIRNSIDE PARK CHURCHILL CLARINDA CLAYTON CLAYTON SOUTH CLEMATIS CLIFTON HILL CLIFTON SPRINGS CLUNES COBDEN COBRAM COBURG COBURG NORTH COCKATOO COHUNA COLAC COLDSTREAM COLERAINE COLLINGWOOD COOLAROO CORINELLA CORIO CORONET BAY CORRYONG COWES CRAIGIEBURN CRANBOURNE CREMORNE CRESWICK CRIB POINT CROYDON CROYDON HILLS CROYDON NORTH CROYDON SOUTH DALLAS DANDENONG DARLEY DAYLESFORD DEER PARK DELACOMBE DELAHEY DENNINGTON DERRIMUT DEVON MEADOWS DIAMOND CREEK DIGGERS REST DIMBOOLA DINGLEY VILLAGE DONALD DONCASTER DONCASTER EAST DONVALE DOREEN DOVETON DROMANA DROUIN DRYSDALE DUNOLLY EAGLE POINT EAGLEHAWK EAGLEMONT EAST MELBOURNE EAST WARBURTON ECHUCA EDENHOPE EDITHVALE EILDON ELLIMINYT ELMORE ELSTERNWICK ELTHAM

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3-year growth (%)

Number Sold

Days on market

Gross rental yield (%)

Weekly median advertised rent ($)

Median price ($)

Avg annual growth (%)

12-month growth (%)

Quarterly growth (%)

5-year growth (%)

3-year growth (%)

Number Sold

Days on market

Gross rental yield (%)

Weekly median advertised rent ($)

Median price ($)

Quarterly growth (%)

12-month growth (%)

Avg annual growth (%)

Tas Vic HOUSES

Source: RP Data www.rpdata.com Jul 09

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KEYSBOROUGH KIALLA KILCUNDA KILMORE KILSYTH KILSYTH SOUTH KINGLAKE KINGLAKE WEST KINGS PARK KINGSBURY KINGSVILLE KNOXFIELD KOO WEE RUP KOOYONG KOROIT KORUMBURRA KURUNJANG KYABRAM KYNETON LAKE BOGA LAKE GARDENS LAKE TYERS BEACH LAKE WENDOUREE LAKES ENTRANCE LALOR LANCEFIELD LANG LANG LANGWARRIN LARA LAUNCHING PLACE LAVERTON LEONGATHA LEOPOLD LILYDALE LINDENOW LISMORE LOCH SPORT LOCKWOOD SOUTH LONG GULLY LONGFORD LONGWARRY LOVELY BANKS LOWER PLENTY LUCKNOW LYNBROOK LYNDHURST LYSTERFIELD MACEDON MACLEOD MADDINGLEY MAFFRA MAIDEN GULLY MAIDSTONE MALDON MALLACOOTA MALMSBURY MALVERN MALVERN EAST MANIFOLD HEIGHTS MANSFIELD MARIBYRNONG MARLO MARSHALL MARYBOROUGH MARYSVILLE MCCRAE MCKINNON MEADOW HEIGHTS MELTON MELTON SOUTH MELTON WEST MENTONE MERBEIN MERNDA METUNG MICKLEHAM MIDDLE PARK MILDURA MILL PARK MILLGROVE MINERS REST MIRBOO NORTH MITCHAM MITCHELL PARK MOE MONBULK MONT ALBERT MONT ALBERT NORTH MONTMORENCY MONTROSE MOOLAP MOONEE PONDS MOORABBIN MOOROOLBARK MOOROOPNA MORDIALLOC MORIAC MORNINGTON MORTLAKE MORWELL MOUNT BEAUTY MOUNT CLEAR MOUNT DANDENONG MOUNT ELIZA MOUNT EVELYN MOUNT HELEN

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Days on market

Gross rental yield (%)

Weekly median advertised rent ($)

Median price ($)

Avg annual growth (%)

12-month growth (%)

Quarterly growth (%)

5-year growth (%)

3-year growth (%)

Number Sold

Days on market

Gross rental yield (%)

Weekly median advertised rent ($)

Median price ($)

12-month growth (%)

Quarterly growth (%) ELTHAM NORTH ELWOOD EMERALD ENDEAVOUR HILLS ENFIELD EPPING EPSOM ESSENDON ESSENDON NORTH ESSENDON WEST EUMEMMERRING EUROA FAIRFIELD FAIRHAVEN FAWKNER FERNTREE GULLY FERNY CREEK FITZROY FITZROY NORTH FLEMINGTON FLINDERS FLORA HILL FOOTSCRAY FOREST HILL FOSTER FRANKSTON FRANKSTON NORTH FRANKSTON SOUTH GARDENVALE GARFIELD GEELONG GEELONG WEST GEMBROOK GISBORNE GLADSTONE PARK GLEN HUNTLY GLEN IRIS GLEN WAVERLEY GLENGARRY GLENROWAN GLENROY GOLDEN BEACH GOLDEN POINT GOLDEN SQUARE GOWANBRAE GRANTVILLE GREENSBOROUGH GREENVALE GROVEDALE HADFIELD HALLAM HALLS GAP HAMILTON HAMLYN HEIGHTS HAMPTON HAMPTON EAST HAMPTON PARK HARKAWAY HASTINGS HAWTHORN HAWTHORN EAST HEALESVILLE HEATHCOTE HEATHERTON HEATHMONT HEIDELBERG HEIDELBERG HEIGHTS HEIDELBERG WEST HEPBURN SPRINGS HERNE HILL HEYFIELD HIGHETT HIGHTON HILLSIDE HOPETOUN HOPPERS CROSSING HORSHAM HUGHESDALE HUNTINGDALE HUNTLY HURSTBRIDGE INDENTED HEAD INVERLOCH IRYMPLE IVANHOE IVANHOE EAST JACANA JAN JUC JEPARIT JUNCTION VILLAGE KALIMNA KALLISTA KALORAMA KANGAROO FLAT KATUNGA KEALBA KEILOR KEILOR DOWNS KEILOR EAST KEILOR LODGE KEILOR PARK KENNINGTON KENSINGTON KERANG KEW KEW EAST

Avg annual growth (%)

Vic HOUSES

Source: RP Data www.rpdata.com Jul 09

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SCORESBY SEA LAKE SEABROOK SEAFORD SEBASTOPOL SEDDON SELBY SEVILLE SEVILLE EAST SEYMOUR SHEPPARTON SHOREHAM SKENES CREEK SKYE SMITHS BEACH SMYTHESDALE SNAKE VALLEY SOLDIERS HILL SOMERS SOMERVILLE SORRENTO SOUTH DUDLEY SOUTH GEELONG SOUTH MELBOURNE SOUTH MORANG SOUTH YARRA SPOTSWOOD SPRING GULLY SPRINGVALE SPRINGVALE SOUTH ST ALBANS ST ALBANS PARK ST ANDREWS ST ANDREWS BEACH ST ARNAUD ST KILDA ST KILDA EAST ST LEONARDS STANHOPE STAWELL STRATFORD STRATHDALE STRATHFIELDSAYE STRATHMORE STRATHMORE HEIGHTS SUNBURY SUNDERLAND BAY SUNSET STRIP SUNSHINE SUNSHINE NORTH SUNSHINE WEST SURF BEACH SURREY HILLS SWAN HILL SYDENHAM TALLANGATTA TARNEIT TATURA TAWONGA SOUTH TAYLORS HILL TAYLORS LAKES TECOMA TEESDALE TEMPLESTOWE TEMPLESTOWE LOWER TERANG THE BASIN THE PATCH THOMASTOWN THOMSON THORNBURY TIMBOON TONGALA TOONGABBIE TOORA TOORADIN TOORAK TOOTGAROOK TORQUAY TRAFALGAR TRARALGON TRARALGON EAST TRENTHAM TRUGANINA TULLAMARINE TYABB UPPER FERNTREE GULLY UPWEY VENTNOR VENUS BAY VERMONT VERMONT SOUTH VIEWBANK VIOLET TOWN WAHGUNYAH WALLAN WANDANA HEIGHTS WANDIN NORTH WANGARATTA WANTIRNA WANTIRNA SOUTH WARBURTON WARNEET WARRACKNABEAL WARRAGUL WARRANDYTE

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5-year growth (%)

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Gross rental yield (%)

Weekly median advertised rent ($)

Median price ($)

12-month growth (%)

Quarterly growth (%) MOUNT MACEDON MOUNT MARTHA MOUNT PLEASANT MOUNT WAVERLEY MULGRAVE MURCHISON MURRUMBEENA MURTOA MYRTLEFORD NAGAMBIE NARRE WARREN NARRE WARREN NORTH NARRE WARREN SOUTH NATHALIA NEERIM SOUTH NERRINA NEW GISBORNE NEWBOROUGH NEWCOMB NEWINGTON NEWLANDS ARM NEWPORT NEWSTEAD NEWTOWN NHILL NIDDRIE NOBLE PARK NOBLE PARK NORTH NORLANE NORTH BENDIGO NORTH GEELONG NORTH MELBOURNE NORTH SHORE NORTH WARRANDYTE NORTHCOTE NOTTING HILL NUMURKAH NUNAWADING NYAH NYORA OAK PARK OAKLEIGH OAKLEIGH EAST OAKLEIGH SOUTH OCEAN GROVE OFFICER OLINDA ORBOST ORMOND OUYEN PAKENHAM PARADISE BEACH PARK ORCHARDS PARKDALE PARKVILLE PASCOE VALE PASCOE VALE SOUTH PATTERSON LAKES PAYNESVILLE PEARCEDALE PIONEER BAY PLENTY POINT COOK POINT LONSDALE POREPUNKAH PORT ALBERT PORT FAIRY PORT MELBOURNE PORT WELSHPOOL PORTARLINGTON PORTLAND PORTSEA PRAHRAN PRESTON QUARRY HILL QUEENSCLIFF RAINBOW RAYMOND ISLAND RED CLIFFS REDAN RESEARCH RESERVOIR RHYLL RICHMOND RIDDELLS CREEK RINGWOOD RINGWOOD EAST RINGWOOD NORTH ROBINVALE ROCHESTER ROCKBANK ROMSEY ROSANNA ROSEBUD ROSEBUD WEST ROWVILLE ROXBURGH PARK RUPANYUP RYE SAFETY BEACH SALE SAN REMO SANDHURST SANDRINGHAM SANDY POINT SASSAFRAS

Avg annual growth (%)

Vic HOUSES

Source: RP Data www.rpdata.com Jul 09

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WARRANWOOD WARRNAMBOOL WATERWAYS WATSONIA WATSONIA NORTH WATTLE GLEN WAURN PONDS WENDOUREE WERRIBEE WESBURN WEST FOOTSCRAY WEST WODONGA WESTMEADOWS WHEELERS HILL WHITE HILLS WHITTINGTON WHITTLESEA WILLIAMS LANDING WILLIAMSTOWN WILLIAMSTOWN NORTH WIMBLEDON HEIGHTS WINCHELSEA WINDSOR WODONGA WONGA PARK WONTHAGGI WOODEND WOORI YALLOCK YARRA JUNCTION YARRAGON YARRAM YARRAVILLE YARRAWONGA YEA YINNAR

ABBEY ALEXANDER HEIGHTS ALFRED COVE APPLECROSS ARDROSS ARMADALE ASCOT ASHBY ASHFIELD ATTADALE ATWELL AUGUSTA AUSTRALIND BALCATTA BALDIVIS BALGA BALLAJURA BANKSIA GROVE BASSENDEAN BATEMAN BAYNTON BAYONET HEAD BAYSWATER BEACONSFIELD BECKENHAM BEDFORD BEDFORDALE BEECHBORO BEELIAR BELDON BELLEVUE BELMONT BENTLEY BERESFORD BERTRAM BIBRA LAKE BICTON BINNINGUP BLUFF POINT BODDINGTON BOORAGOON BOULDER BOYA BOYUP BROOK BRIDGETOWN BROADWATER BROADWOOD BROCKMAN BROOKDALE BROOME BULL CREEK BULLSBROOK BUNBURY BUSSELTON BUTLER BYFORD CABLE BEACH CAMILLO CANNING VALE CANNINGTON CAPEL CAREY PARK CARINE CARLISLE CARRAMAR CASTLETOWN CAVERSHAM CHIDLOW

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CHURCHLANDS CITY BEACH CLAREMONT CLARKSON CLOVERDALE COLLEGE GROVE COLLIE COMO CONNOLLY COODANUP COOGEE COOLBELLUP COOLOONGUP COTTESLOE CRAIGIE CURRAMBINE DALKEITH DALYELLUP DAMPIER DARCH DARLINGTON DENMARK DERBY DIANELLA DJUGUN DONGARA DONNYBROOK DOUBLEVIEW DRUMMOND COVE DUDLEY PARK DUNCRAIG DUNSBOROUGH EAST BUNBURY EAST CANNINGTON EAST FREMANTLE EAST VICTORIA PARK EATON EDEN HILL EDGEWATER EMBLETON ERSKINE ESPERANCE FALCON FERNDALE FLOREAT FORRESTDALE FORRESTFIELD FREMANTLE GELORUP GEOGRAPHE GERALDTON GIRRAWHEEN GLEN FORREST GLEN IRIS GOLDEN BAY GOOSEBERRY HILL GOSNELLS GREENFIELDS GREENMOUNT GREENWOOD GUILDFORD GWELUP HALLS HEAD HAMERSLEY HAMILTON HILL HAMMOND PARK HARVEY HEATHRIDGE HELENA VALLEY HIGH WYCOMBE HILLARYS HILLMAN HILTON HOCKING HOPETOUN HUNTINGDALE ILUKA INGLEWOOD INNALOO JANDAKOT JANE BROOK JINDALEE JOONDALUP KALAMUNDA KALGOORLIE KALLAROO KARAWARA KARDINYA KARRINYUP KATANNING KELMSCOTT KENSINGTON KENWICK KEWDALE KIARA KINGSLEY KINROSS KOJONUP KOONDOOLA KOONGAMIA LANDSDALE LANGFORD LATHLAIN LEDA LEEDERVILLE LEEMING

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3-year growth (%)

Number Sold

Days on market

Gross rental yield (%)

Weekly median advertised rent ($)

Median price ($)

Avg annual growth (%)

12-month growth (%)

Quarterly growth (%)

5-year growth (%)

3-year growth (%)

Number Sold

Days on market

Gross rental yield (%)

Weekly median advertised rent ($)

Median price ($)

Quarterly growth (%)

12-month growth (%)

Avg annual growth (%)

Vic WA HOUSES

Source: RP Data www.rpdata.com Jul 09

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LESMURDIE LITTLE GROVE LOCKRIDGE LOCKYER LOWER KING LYNWOOD MADDINGTON MADELEY MADORA BAY MAHOGANY CREEK MAIDA VALE MANDURAH MANJIMUP MANNING MARANGAROO MARGARET RIVER MARMION MAYLANDS MCKAIL MELVILLE MENORA MERREDIN MERRIWA MIDDLE SWAN MIDLAND MIDVALE MINDARIE

ROSSMOYNE SAFETY BAY SAINT JAMES SALTER POINT SAMSON SAN REMO SAWYERS VALLEY SCARBOROUGH SECRET HARBOUR SERPENTINE SEVILLE GROVE SHELLEY SHENTON PARK SHOALWATER SILVER SANDS SINAGRA SINCLAIR SINGLETON SOMERVILLE SORRENTO SOUTH BUNBURY SOUTH FREMANTLE SOUTH GUILDFORD SOUTH HEDLAND SOUTH KALGOORLIE SOUTH LAKE SOUTH PERTH

MIRA MAR MIRRABOOKA MOORA MORGANTOWN MORLEY MOSMAN PARK MOUNT BARKER MOUNT CLAREMONT MOUNT HAWTHORN MOUNT HELENA MOUNT LAWLEY MOUNT MELVILLE MOUNT NASURA MOUNT PLEASANT MOUNT RICHON MOUNT TARCOOLA MULLALOO MUNDIJONG MUNSTER MURDOCH MYAREE NAREMBEEN NARROGIN NEDLANDS NOLLAMARA NORANDA NORTH BEACH NORTH FREMANTLE NORTH LAKE NORTH PERTH NORTHAM NULSEN OAKFORD OCEAN REEF ORANA ORELIA PADBURY PALMYRA PARKERVILLE PARKWOOD PARMELIA PEARSALL PEPPERMINT GROVE PERTH PICCADILLY PINJARRA PORT DENISON PORT KENNEDY QUEENS PARK QUINNS ROCKS REDCLIFFE RIDGEWOOD RIVERTON RIVERVALE ROCKINGHAM ROLEYSTONE

SOUTH YUNDERUP SOUTHERN RIVER SPALDING SPEARWOOD SPENCER PARK STIRLING STONEVILLE STRATHALBYN STRATTON SUBIACO SUCCESS SUNSET BEACH SWAN VIEW SWANBOURNE TAPPING TARCOOLA BEACH THORNLIE TOODYAY TRIGG TUART HILL USHER VICTORIA PARK WAIKIKI WANDINA WANNANUP WANNEROO WARNBRO WAROONA WARWICK WATERFORD WATTLE GROVE WELLARD WEMBLEY WEMBLEY DOWNS WEST BEACH WEST BUSSELTON WEST LAMINGTON WEST LEEDERVILLE WESTMINSTER WHITE GUM VALLEY WILLAGEE WILLETTON WILSON WINTHROP WITHERS WONTHELLA WOODBRIDGE WOODLANDS WOODVALE YAKAMIA YANCHEP YANGEBUP YARLOOP YOKINE YORK

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5-year growth (%)

3-year growth (%)

Number Sold

Days on market

Gross rental yield (%)

Weekly median advertised rent ($)

Median price ($)

Avg annual growth (%)

12-month growth (%)

Quarterly growth (%)

5-year growth (%)

3-year growth (%)

Number Sold

Days on market

Gross rental yield (%)

Weekly median advertised rent ($)

Median price ($)

Quarterly growth (%)

12-month growth (%)

Avg annual growth (%)

WA HOUSES

END OF HOUSES SECTION Source: RP Data www.rpdata.com Jul 09

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Number Sold

3-year growth

5-year growth

page 126

Days on market

Gross rental yield

Median price ($)

12-month growth

KINGSTON LATHAM LYNEHAM LYONS MACQUARIE MAWSON MELBA NGUNNAWAL NICHOLLS O'CONNOR PAGE PALMERSTON PEARCE PHILLIP REID THEODORE TURNER WANNIASSA WATSON WESTON

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ABBOTSFORD ADAMSTOWN ALBION PARK ALBION PARK RAIL ALBURY ALEXANDRIA ALLAWAH ALSTONVILLE AMBARVALE ANNA BAY ANNANDALE ARMIDALE ARNCLIFFE ARTARMON ASHFIELD

Weekly median advertised rent ($)

pages 124 126

Avg annual growth

page 124

Quarterly growth

Number Sold

3-year growth

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5-year growth

pages 121 123

Days on market

Gross rental yield

Weekly median advertised rent ($)

page 121

Median price ($)

12-month growth

ACT units

AINSLIE AMAROO BANKS BARTON BELCONNEN BONYTHON BRADDON BRUCE CALWELL CAMPBELL CHIFLEY CHISHOLM CITY CONDER COOK CURTIN DEAKIN DICKSON DOWNER DUNLOP EVATT FARRER FLOREY FORREST GARRAN GORDON GREENWAY GRIFFITH GUNGAHLIN HACKETT HARRISON HAWKER HOLDER HOLT HUGHES ISAACS ISABELLA PLAINS KAMBAH

Avg annual growth

pages 118 121

Quarterly growth

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Source: RP Data www.rpdata.com Jul 09

Gross rental yield

5-year growth

Weekly median

Average annual growth: Average percentage change over the past 10 years expressed as a per annum figure

Median price Jul 09

12-month growth: Median price percentage change between the 12 months to July 2009 and the 12 months to July 2008

Top 5 areas nationwide for annual capital growth: units

48%

12%

250,000

250

117%

2: KINGSGROVE

48%

15%

400,000

320

43%

Time on market: Median number of days between the initial listing date and sale date

SA 3: HENLEY BEACH

46%

19%

427,500

250

101%

5-year growth: Median price percentage change over the past five years to July 2009

4: GREENWICH

44%

483,000

450

12%

41%

24%

348,500

n.a

Weekly median advertised rent: Median price of rental listings for the 12 months to July 2009 Gross rental yield: Estimated rental return, based on advertised rent and median price

NT 1: SADADEEN

Average annual growth

Quarterly growth: Median price percentage change on an annualised basis between the 12 months to July 2009 and the 12 months to April 2008

Median price: Median price for the 12 months to July 2009

12-month growth

How it’s calculated

NSW

QLD 5: TRINITY PARK

Note: No information has been deleted. An n.a. has instead been inserted so all information for a particular suburb is not lost. The following filters have been applied: 1. Rent – anything with a rent >$2,000/week. 2. Qtr Growth – anything >35%. 3. Yr growth – anything >50%. 4. Avg annual growth – anything >35%. 5. Days on market – anything >100 days. 6. Filter out rental data for suburbs with less than 10 rental records during the period.

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CORLETTE COROWA CORRIMAL CORRIMAL EAST CRANEBROOK CREMORNE CREMORNE POINT CRESTWOOD CROMER CRONULLA CROWS NEST CROYDON CROYDON PARK CURL CURL DAPTO DARLING POINT DARLINGHURST DAVISTOWN DAWES POINT DEE WHY DENILIQUIN DOLLS POINT DOONSIDE DOUBLE BAY DRUMMOYNE DUBBO DULWICH HILL DUNDAS DUNDAS VALLEY DURAL EARLWOOD EAST ALBURY EAST BALLINA EAST GOSFORD EAST LISMORE EAST MAITLAND EAST TAMWORTH EASTLAKES EASTWOOD EDEN EDENSOR PARK EDGECLIFF ELERMORE VALE ELIZABETH BAY EMU PLAINS ENFIELD ENGADINE ENMORE EPPING ERMINGTON ERSKINEVILLE ETTALONG BEACH EVANS HEAD EVELEIGH FAIRFIELD FAIRFIELD HEIGHTS FAIRLIGHT FAIRY MEADOW FIGTREE FINGAL BAY FIVE DOCK FLINDERS FOREST LODGE FORESTVILLE FORSTER FRESHWATER GEORGES HALL GIRRAWEEN GLADESVILLE GLEBE GLENFIELD GLENFIELD PARK GLENMORE PARK GOONELLABAH GORDON GOROKAN GOSFORD GOULBURN GRAFTON GRANVILLE GREEN POINT GREENACRE GREENFIELD PARK GREENWICH GREYSTANES GRIFFITH GUILDFORD GWYNNEVILLE GYMEA GYMEA BAY HABERFIELD HAMILTON HAMMONDVILLE HARRINGTON HARRIS PARK HAWKS NEST HAYMARKET HEATHCOTE HELENSBURGH HILLSDALE HOLROYD HOMEBUSH HOMEBUSH BAY HOMEBUSH WEST HORNSBY HORSLEY HUNTERS HILL

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5-year growth

3-year growth

Number Sold

Days on market

Gross rental yield

Weekly median advertised rent ($)

Median price ($)

Avg annual growth

12-month growth

Quarterly growth

5-year growth

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3-year growth

Number Sold

Days on market

Gross rental yield

Weekly median advertised rent ($)

Median price ($)

12-month growth

Quarterly growth ASHMONT ASQUITH AUBURN AVALON AVOCA BEACH BALGOWLAH BALGOWNIE BALLINA BALMAIN BALMAIN EAST BANGOR BANKSIA BANKSTOWN BANORA POINT BARDEN RIDGE BARDWELL PARK BASS HILL BATEAU BAY BATEHAVEN BATEMANS BAY BATHURST BAULKHAM HILLS BEACONSFIELD BEECROFT BELFIELD BELLA VISTA BELLAMBI BELLEVUE HILL BELMONT BELMONT NORTH BELMORE BELROSE BERALA BERESFIELD BERKELEY VALE BERMAGUI BERRY BEVERLY HILLS BEXLEY BEXLEY NORTH BLACKALLS PARK BLACKBUTT BLACKTOWN BLACKWALL BLAKEHURST BLAXLAND BLIGH PARK BLUE BAY BOAMBEE EAST BOGANGAR BOMADERRY BONDI BONDI BEACH BONDI JUNCTION BONNYRIGG BOOKER BAY BOSSLEY PARK BOTANY BOWRAL BREAKFAST POINT BRIGHTON-LE-SANDS BRONTE BROOKVALE BULLI BURWOOD BYRON BAY CABARITA CABRAMATTA CAMBRIDGE PARK CAMDEN CAMMERAY CAMPBELLTOWN CAMPERDOWN CAMPSIE CANADA BAY CANLEY VALE CANTERBURY CARINGBAH CARLINGFORD CARLTON CARRAMAR CASINO CASTLE HILL CASUARINA CASULA CENTENNIAL PARK CESSNOCK CHARLESTOWN CHATSWOOD CHERRYBROOK CHESTER HILL CHIPPENDALE CHIPPING NORTON CHISWICK CLOVELLY COFFS HARBOUR COLLAROY COMO CONCORD CONCORD WEST CONDELL PARK CONISTON CONNELLS POINT CONSTITUTION HILL COOGEE COOKS HILL COOLAMON

Avg annual growth

NSW UNITS

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NEWCASTLE WEST NEWINGTON NEWPORT NEWTOWN NORTH ALBURY NORTH BATEMANS BAY NORTH BONDI NORTH EPPING NORTH GOSFORD NORTH PARRAMATTA NORTH RICHMOND NORTH ROCKS NORTH STRATHFIELD NORTH SYDNEY NORTHBRIDGE NORTHMEAD NOWRA OAK FLATS OATLANDS OATLEY OCEAN SHORES OLD BAR OLD TOONGABBIE ORANGE OURIMBAH OXLEY PARK PADDINGTON PADSTOW PADSTOW HEIGHTS PAMBULA PANANIA PARKLEA PARRAMATTA PEAKHURST PEMULWUY PENDLE HILL PENNANT HILLS PENRITH PENROSE PENSHURST PETERSHAM PICNIC POINT PICTON POINT CLARE POINT FREDERICK POINT PIPER PORT KEMBLA PORT MACQUARIE POTTS POINT POTTSVILLE PRESTONS PUNCHBOWL PYMBLE PYRMONT QUEANBEYAN EAST QUEANBEYAN WEST QUEENS PARK QUEENSCLIFF RAMSGATE RAMSGATE BEACH RANDWICK REDFERN REGENTS PARK REVESBY RHODES RICHMOND RIVERWOOD ROCKDALE ROOTY HILL ROSE BAY ROSEBERY ROSEHILL ROSELANDS ROSEMEADOW ROSEVILLE ROUSE HILL ROZELLE RUSHCUTTERS BAY RUSSELL LEA RUSSELL VALE RUTHERFORD RYDALMERE RYDE SALAMANDER BAY SANS SOUCI SAWTELL SCONE SEAFORTH SEFTON SEVEN HILLS SHELLHARBOUR SHOAL BAY SHOALHAVEN HEADS SILVERWATER SINGLETON SINGLETON HEIGHTS SMITHFIELD SOUTH ALBURY SOUTH GRANVILLE SOUTH HURSTVILLE SOUTH TAMWORTH SOUTH WENTWORTHVILLE SOUTH WINDSOR ST IVES ST LEONARDS ST MARYS ST PETERS

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5-year growth

3-year growth

Number Sold

Days on market

Gross rental yield

Weekly median advertised rent ($)

Median price ($)

Avg annual growth

12-month growth

Quarterly growth

5-year growth

3-year growth

Number Sold

Days on market

Gross rental yield

Weekly median advertised rent ($)

Median price ($)

12-month growth

Quarterly growth HUNTERVIEW HUNTLEYS COVE HURLSTONE PARK HURSTVILLE ILLAWONG ILUKA INGLEBURN ISLINGTON JAMISONTOWN JANNALI JESMOND JINDABYNE KAHIBAH KANAHOOKA KARABAR KARIONG KATOOMBA KELLYVILLE KELLYVILLE RIDGE KELSO KENSINGTON KIAMA KIAMA DOWNS KILLARA KINCUMBER KINGS PARK KINGSCLIFF KINGSFORD KINGSGROVE KINGSWOOD KIRRAWEE KIRRIBILLI KOGARAH KOORINGAL KORORA KURRI KURRI LAKE CATHIE LAKE ILLAWARRA LAKEMBA LAMBTON LANE COVE LANE COVE NORTH LAURIETON LAVENDER BAY LAVINGTON LEICHHARDT LENNOX HEAD LETCHWORTH LEUMEAH LEWISHAM LIBERTY GROVE LIDCOMBE LILYFIELD LITTLE BAY LIVERPOOL LOFTUS LONG JETTY LURNEA MACQUARIE FIELDS MACQUARIE PARK MANGERTON MANLY MANLY VALE MARAYONG MARDI MARKS POINT MAROUBRA MARRICKVILLE MARSFIELD MARYVILLE MASCOT MATRAVILLE MAYFIELD MCMAHONS POINT MEADOWBANK MENAI MEREWETHER MERIMBULA MERRYLANDS MERRYLANDS WEST MILLERS POINT MILSONS POINT MINTO MIRANDA MOAMA MOLLYMOOK BEACH MONA VALE MONTEREY MOOREBANK MORTDALE MORTLAKE MOSMAN MOUNT DRUITT MOUNT HUTTON MUDGEE MULWALA MUSWELLBROOK NARARA NAREMBURN NAROOMA NARRABEEN NARWEE NELSON BAY NEUTRAL BAY NEW LAMBTON NEWCASTLE NEWCASTLE EAST

Avg annual growth

NSW UNITS

Source: RP Data www.rpdata.com Jul 09

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STANMORE STRATHFIELD STRATHFIELD SOUTH SUFFOLK PARK SUMMER HILL SURF BEACH SURRY HILLS SUTHERLAND SWANSEA SYDNEY SYLVANIA SYLVANIA WATERS TAMARAMA TAREE TELOPEA TERRIGAL THE HILL THE ROCKS THIRROUL THORNLEIGH THORNTON TOONGABBIE TOORMINA TORONTO TOUKLEY TUMUT TUNCURRY

COCONUT GROVE DESERT SPRINGS DRIVER FANNIE BAY GILLEN GRAY KARAMA LUDMILLA MALAK MARRARA MILLNER MOULDEN NIGHTCLIFF PARAP RAPID CREEK ROSEBERY SADADEEN STUART PARK THE GAP THE GARDENS WOOLNER

TURA BEACH TUROSS HEAD TURRAMURRA TWEED HEADS ULTIMO UMINA BEACH UNANDERRA VALENTINE VAUCLUSE WAGGA WAGGA WAHROONGA WAITARA WAKELEY WALLSEND WAMBERAL WARATAH WAREEMBA WARILLA WARNERS BAY WARRIEWOOD WARWICK FARM WATERLOO WAVERLEY WAVERTON WEST RYDE WEST WOLLONGONG WESTMEAD WETHERILL PARK WILEY PARK WILLOUGHBY WINGHAM WINSTON HILLS WOLLI CREEK WOLLONGBAR WOLLONGONG WOLLSTONECRAFT WOOLLAHRA WOOLLOOMOOLOO WOOLOOWARE WOONONA WOY WOY WYOMING WYONG YAGOONA YAMBA YASS YOUNG ZETLAND

AITKENVALE ALBANY CREEK ALBION ALDERLEY ALEXANDRA HEADLAND ALEXANDRA HILLS ANDERGROVE ANNERLEY ARANA HILLS ARUNDEL ASCOT ASHGROVE ASHMORE ASPLEY ATHERTON AUCHENFLOWER AVENELL HEIGHTS AYR BALMORAL BANKSIA BEACH BARDON BARGARA BATTERY HILL BEENLEIGH BEERWAH BELGIAN GARDENS BELLARA BELLBIRD PARK BENOWA BENTLEY PARK BERSERKER BETHANIA BIGGERA WATERS BILINGA BIRKDALE BIRTINYA BLACKS BEACH BLI BLI BONGAREE BOONDALL BOOVAL BORONIA HEIGHTS BOWEN BOWEN HILLS BRACKEN RIDGE BRASSALL BRENDALE BRIDGEMAN DOWNS BRISBANE CITY BROADBEACH BROADBEACH WATERS BROOKWATER BROWNS PLAINS BUDDINA BUDERIM BULIMBA BUNDABERG EAST

5-year growth

3-year growth

Number Sold

Days on market

Gross rental yield

Weekly median advertised rent ($)

Median price ($)

Avg annual growth

12-month growth

Quarterly growth

5-year growth

3-year growth

Number Sold

Days on market

Gross rental yield

Weekly median advertised rent ($)

Median price ($)

Quarterly growth

12-month growth

Avg annual growth

NSW NT QLD UNITS

Qld units ACACIA RIDGE AGNES WATER AIRLIE BEACH

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ALAWA ARALUEN BAKEWELL BAYVIEW BRAITLING BRINKIN

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KELVIN GROVE KENMORE KEWARRA BEACH KINGAROY KINGS BEACH KINGSTON KIPPA-RING KIRWAN KOORALBYN KULUIN KUNDA PARK LABRADOR LAMMERMOOR LAWNTON LITTLE MOUNTAIN LOGAN CENTRAL LOGANHOLME LOGANLEA LUTWYCHE MACGREGOR MACKAY MACKAY HARBOUR MAIN BEACH MALENY MANLY MANLY WEST MANOORA MANSFIELD MANUNDA MARCOOLA MARGATE MAROOCHYDORE MARYBOROUGH MCDOWALL MEADOWBROOK MERMAID BEACH MERMAID WATERS MERRIMAC MIAMI MILLBANK MINYAMA MITCHELTON MOFFAT BEACH MOLENDINAR MOOLOOLABA MOOROOBOOL MOOROOKA MORAYFIELD MORNINGSIDE MOUNT COOLUM MOUNT GRAVATT EAST MOUNT LOFTY MOUNT OMMANEY MOUNT WARREN PARK MUDGEERABA MUDJIMBA MULAMBIN MURARRIE MURRUMBA DOWNS NAMBOUR NELLY BAY NERANG NEW FARM NEWMARKET NEWSTEAD NEWTOWN NOOSA HEADS NOOSAVILLE NORMAN GARDENS NORMAN PARK NORVILLE NUNDAH ORMEAU ORMISTON OXENFORD OXLEY PACIFIC PARADISE PACIFIC PINES PADDINGTON PAGET PALM BEACH PALM COVE PARADISE POINT PARKINSON PARKWOOD PARRAMATTA PARK PARREARRA PEREGIAN BEACH PEREGIAN SPRINGS PIALBA PIMLICO PIMPAMA PINKENBA POINT LOOKOUT PORT DOUGLAS RAILWAY ESTATE RAINBOW BEACH RANGEVILLE RED HILL REDCLIFFE REDLYNCH REEDY CREEK RIVERHILLS ROBERTSON ROBINA ROCHEDALE SOUTH ROCKLEA

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5-year growth

3-year growth

Number Sold

Days on market

Gross rental yield

Weekly median advertised rent ($)

Median price ($)

Avg annual growth

12-month growth

Quarterly growth

5-year growth

3-year growth

Number Sold

Days on market

Gross rental yield

Weekly median advertised rent ($)

Median price ($)

12-month growth

Quarterly growth BUNDABERG NORTH BUNDABERG SOUTH BUNDABERG WEST BUNDALL BUNGALOW BURLEIGH HEADS BURLEIGH WATERS BURPENGARY CABOOLTURE CAIRNS CITY CAIRNS NORTH CALAMVALE CALOUNDRA CAMP HILL CANNONVALE CAPALABA CARINA CARINA HEIGHTS CARINDALE CARRARA CARSELDINE CENTENARY HEIGHTS CHERMSIDE CLAYFIELD CLEAR ISLAND WATERS CLEVELAND CLIFTON BEACH CLONTARF COOLANGATTA COOLUM BEACH COOMBABAH COOMERA COOPERS PLAINS COORPAROO CORINDA CORNUBIA CRAIGLIE CURRAJONG CURRIMUNDI CURRUMBIN CURRUMBIN VALLEY CURRUMBIN WATERS DAISY HILL DALBY DARLING HEIGHTS DARRA DECEPTION BAY DOLPHIN HEADS DOUGLAS EAGLEBY EARLVILLE EAST BRISBANE EAST TOOWOOMBA EATONS HILL EDENS LANDING EDGE HILL EDMONTON EIGHT MILE PLAINS EIMEO ELANORA ELI WATERS EMERALD ENOGGERA EVERTON PARK FAIRFIELD FERNY GROVE FITZGIBBON FRESHWATER GARBUTT GATTON GAYTHORNE GEEBUNG GLADSTONE CITY GOLDEN BEACH GOODNA GOONDIWINDI GORDON PARK GRANGE GREENSLOPES GYMPIE HAMILTON HARLAXTON HARRISTOWN HAWTHORNE HELENSVALE HEMMANT HENDRA HERMIT PARK HERSTON HIGHFIELDS HIGHGATE HILL HIGHLAND PARK HILLCREST HOLLAND PARK WEST HOLLOWAYS BEACH HOLLYWELL HOPE ISLAND HYDE PARK IDALIA INDOOROOPILLY JUBILEE POCKET KALLANGUR KAMERUNGA KANGAROO POINT KEARNEYS SPRING KEDRON KELSO

Avg annual growth

QLD UNITS

Source: RP Data www.rpdata.com Jul 09

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ABERFOYLE PARK ADELAIDE ALBERTON ALDINGA BEACH ANGLE PARK ASCOT PARK ASHFORD ATHELSTONE BEDFORD PARK BLACK FOREST BLAIR ATHOL BRIGHTON BROADVIEW BROMPTON BROOKLYN PARK BURNSIDE CAMDEN PARK CAMPBELLTOWN CHRISTIES BEACH CLARENCE PARK CLEARVIEW CLOVELLY PARK COLLINSWOOD

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CUMBERLAND PARK DAVOREN PARK DAW PARK DEVON PARK DOVER GARDENS DULWICH EASTWOOD EDWARDSTOWN ELIZABETH DOWNS ELIZABETH EAST ELIZABETH GROVE ELIZABETH NORTH ELIZABETH PARK ELIZABETH SOUTH ELIZABETH VALE ENFIELD ETHELTON EVANDALE EVANSTON EVERARD PARK FELIXSTOW FERRYDEN PARK FINDON FORESTVILLE FULHAM GARDENS FULLARTON GAWLER EAST GAWLER SOUTH GILLES PLAINS GLANDORE GLENELG GLENELG EAST GLENELG NORTH GLENELG SOUTH GLENGOWRIE GLENSIDE GLENUNGA GOLDEN GROVE GOODWOOD GRANGE HACKHAM HALLETT COVE HAMPSTEAD GARDENS HAWTHORN HAZELWOOD PARK HECTORVILLE HENLEY BEACH HENLEY BEACH SOUTH HOLDEN HILL HOPE VALLEY HOVE HYDE PARK KENSINGTON KENSINGTON GARDENS KENSINGTON PARK KENT TOWN KESWICK KILBURN KINGSWOOD KLEMZIG KURRALTA PARK LARGS BAY LARGS NORTH LEABROOK LINDEN PARK LOCKLEYS LOWER MITCHAM MAGILL MALVERN MANSFIELD PARK MARDEN MARION MARLESTON MAWSON LAKES MAYLANDS MILE END MILLICENT MITCHAM MITCHELL PARK MODBURY MODBURY HEIGHTS MORPHETT VALE MORPHETTVILLE MOUNT BARKER MOUNT GAMBIER MURRAY BRIDGE MYRTLE BANK NAILSWORTH NAIRNE NEW PORT NEWTON NORTH ADELAIDE NORTH BRIGHTON NORTH HAVEN NORTH PLYMPTON NORWOOD OAKLANDS PARK PARA HILLS WEST PARADISE PARAFIELD GARDENS PARALOWIE PARK HOLME PARKSIDE PASADENA PAYNEHAM PAYNEHAM SOUTH PENNINGTON

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5-year growth

3-year growth

Number Sold

Days on market

Gross rental yield

Weekly median advertised rent ($)

Median price ($)

Avg annual growth

12-month growth

Quarterly growth

5-year growth

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3-year growth

Number Sold

Days on market

Gross rental yield

Weekly median advertised rent ($)

Median price ($)

12-month growth

Quarterly growth ROCKVILLE ROSSLEA RUNAWAY BAY RUNCORN SANDSTONE POINT SCARBOROUGH SCARNESS SHAILER PARK SHERWOOD SINNAMON PARK SLACKS CREEK SMITHFIELD SOUTH BRISBANE SOUTH GLADSTONE SOUTH MACKAY SOUTH STRADBROKE SOUTH TOOWOOMBA SOUTH TOWNSVILLE SOUTHPORT SPRING HILL SPRINGWOOD ST LUCIA STAFFORD STANTHORPE STAPYLTON STRATHPINE SUMNER SUNNYBANK SUNNYBANK HILLS SUNRISE BEACH SUNSHINE BEACH SURFERS PARADISE TAIGUM TAMBORINE MOUNTAIN TANAH MERAH TARINGA TARRAGINDI TEWANTIN THE GAP THORNESIDE TINGALPA TOOWONG TOOWOOMBA CITY TORQUAY TOWNSVILLE CITY TRINITY BEACH TRINITY PARK TRUNDING TUGUN TWIN WATERS UNDERWOOD WARNER WATERFORD WEST WAVELL HEIGHTS WEST END WEST END WEST GLADSTONE WEST MACKAY WESTCOURT WHITE ROCK WHITFIELD WILSONTON WILSTON WINDAROO WINDSOR WISHART WOODRIDGE WOODY POINT WOOLLOONGABBA WOOLOOWIN WOORIM WOREE WULGURU WURTULLA WYNNUM WYNNUM WEST YAROOMBA YATALA YERONGA YORKEYS KNOB ZILLMERE

Avg annual growth

QLD SA UNITS

Source: RP Data www.rpdata.com Jul 09

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5-year growth

3-year growth

Number Sold

Days on market

Gross rental yield

Weekly median advertised rent ($)

Median price ($)

Avg annual growth

12-month growth

Quarterly growth

5-year growth

3-year growth

Number Sold

Days on market

Gross rental yield

Weekly median advertised rent ($)

RIVERSIDE ROKEBY ROSETTA SANDY BAY SHEARWATER ST HELENS SUMMERHILL TREVALLYN ULVERSTONE UPPER BURNIE WARRANE WYNYARD YOUNGTOWN

Vic units

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AUSTINS FERRY BATTERY POINT BELLERIVE BERRIEDALE BLACKMANS BAY BRIGHTON BURNIE CLAREMONT DEVONPORT EAST DEVONPORT GEILSTON BAY GLENORCHY HADSPEN HOBART HOWRAH HUONVILLE KINGS MEADOWS KINGSTON KINGSTON BEACH LATROBE LAUNCESTON LENAH VALLEY LINDISFARNE LONGFORD LUTANA MARGATE MONTROSE MOONAH MOUNT NELSON MOUNT STUART NEW TOWN NEWNHAM NEWSTEAD NORTH HOBART NORWOOD OAKDOWNS PROSPECT PROSPECT VALE

Median price ($)

12-month growth

Quarterly growth PETERHEAD PLYMPTON PLYMPTON PARK POORAKA PORT LINCOLN PROSPECT QUEENSTOWN RENOWN PARK REYNELLA RICHMOND RIDGEHAVEN RISDON PARK ROSE PARK ROSEWATER ROSTREVOR ROYAL PARK SAINT AGNES SAINT MARYS SAINT MORRIS SAINT PETERS SALISBURY SALISBURY EAST SALISBURY NORTH SEACLIFF SEACOMBE GARDENS SEAFORD RISE SEATON SEFTON PARK SEMAPHORE SEMAPHORE PARK SEMAPHORE SOUTH SMITHFIELD PLAINS SOMERTON PARK SOUTH BRIGHTON SOUTH PLYMPTON STURT TAPEROO TENNYSON THEBARTON TOORAK GARDENS TORRENS PARK TORRENSVILLE TRANMERE TUMBY BAY TUSMORE UNDERDALE UNLEY VALLEY VIEW VICTOR HARBOR WALKERVILLE WALLAROO WARRADALE WAYVILLE WEST BEACH WEST CROYDON WEST LAKES WEST LAKES SHORE WESTBOURNE PARK WHYALLA WHYALLA NORRIE WHYALLA PLAYFORD WHYALLA STUART WINDSOR GARDENS WOODVILLE WOODVILLE GARDENS WYNN VALE

Avg annual growth

SA TAS VIC UNITS

ABBOTSFORD AIRPORT WEST ALBERT PARK ALBION ALFREDTON ALPHINGTON ALTONA ALTONA MEADOWS ALTONA NORTH APOLLO BAY ARARAT ARDEER ARMADALE ASCOT VALE ASHBURTON ASHWOOD ASPENDALE AVONDALE HEIGHTS BACCHUS MARSH BAIRNSDALE BALACLAVA BALLARAT BALWYN BALWYN NORTH BARWON HEADS BAYSWATER BAYSWATER NORTH BEACONSFIELD BEAUMARIS BELL PARK BELMONT BENALLA BENDIGO BENTLEIGH BENTLEIGH EAST BERWICK BLACK ROCK BLACKBURN BONBEACH BORONIA BOX HILL BRAESIDE BRAYBROOK BRIGHT BRIGHTON BRIGHTON EAST BROADMEADOWS BROOKLYN BRUNSWICK BULLEEN BUNDOORA BUNINYONG BURNLEY BURWOOD BURWOOD EAST CALIFORNIA GULLY CAMBERWELL CAMPBELLFIELD CANADIAN CANTERBURY CARLTON CARLTON NORTH CARNEGIE CAROLINE SPRINGS CARRUM CARRUM DOWNS CASTLEMAINE CAULFIELD CAULFIELD NORTH CAULFIELD SOUTH CHADSTONE CHELSEA CHELTENHAM CHIRNSIDE PARK CLARINDA CLAYTON CLAYTON SOUTH CLIFTON HILL COBRAM COBURG COBURG NORTH COLAC COLLINGWOOD CORIO COWES CRAIGIEBURN CRANBOURNE CRANBOURNE EAST CRANBOURNE SOUTH CRANBOURNE WEST CREMORNE

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Source: RP Data www.rpdata.com Jul 09

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CRIB POINT CROYDON CROYDON NORTH CROYDON SOUTH DALLAS DANDENONG DANDENONG NORTH DANDENONG SOUTH DAYLESFORD DEER PARK DIAMOND CREEK DINGLEY VILLAGE DOCKLANDS DONCASTER DONCASTER EAST DONVALE DOVETON DROMANA DROUIN DRYSDALE EAGLEHAWK EAST MELBOURNE ECHUCA EDITHVALE ELSTERNWICK ELTHAM ELWOOD

KENNINGTON KENSINGTON KERANG KEW KEW EAST KEYSBOROUGH KILMORE KILSYTH KINGSBURY KINGSVILLE KNOXFIELD KURUNJANG KYABRAM KYNETON LAKES ENTRANCE LALOR LANGWARRIN LEOPOLD LILYDALE LORNE LOWER PLENTY MACLEOD MAIDSTONE MALVERN MALVERN EAST MANIFOLD HEIGHTS MANSFIELD

ENDEAVOUR HILLS EPPING ESSENDON ESSENDON NORTH EUMEMMERRING FAIRFIELD FAWKNER FERNTREE GULLY FITZROY FITZROY NORTH FLEMINGTON FLORA HILL FOOTSCRAY FOREST HILL FRANKSTON FRANKSTON SOUTH GARDENVALE GEELONG GEELONG WEST GISBORNE GLEN HUNTLY GLEN IRIS GLEN WAVERLEY GLENROY GOLDEN SQUARE GREENSBOROUGH GROVEDALE HADFIELD HALLAM HAMILTON HAMLYN HEIGHTS HAMPTON HAMPTON EAST HAMPTON PARK HASTINGS HAWTHORN HAWTHORN EAST HEALESVILLE HEATHMONT HEIDELBERG HEIDELBERG HEIGHTS HEIDELBERG WEST HERNE HILL HIGHETT HIGHTON HILLSIDE HOPPERS CROSSING HORSHAM HUGHESDALE HUNTINGDALE INVERLOCH IVANHOE KANGAROO FLAT KEILOR KEILOR DOWNS KEILOR EAST KEILOR PARK

MARIBYRNONG MARYBOROUGH MCKINNON MEADOW HEIGHTS MELBOURNE MELTON MELTON SOUTH MELTON WEST MENTONE MIDDLE PARK MILDURA MILL PARK MITCHAM MOE MONT ALBERT MONT ALBERT NORTH MONTMORENCY MOONEE PONDS MOORABBIN MOOROOLBARK MOOROOPNA MORDIALLOC MORNINGTON MORWELL MOUNT CLEAR MOUNT ELIZA MURRUMBEENA NARRE WARREN NARRE WARREN SOUTH NEWBOROUGH NEWCOMB NEWPORT NEWTOWN NIDDRIE NOBLE PARK NOBLE PARK NORTH NORLANE NORTH MELBOURNE NORTHCOTE NOTTING HILL NUMURKAH NUNAWADING OAK PARK OAKLEIGH OAKLEIGH EAST OAKLEIGH SOUTH OCEAN GROVE ORMOND PAKENHAM PARKDALE PARKVILLE PASCOE VALE PASCOE VALE SOUTH PATTERSON LAKES PAYNESVILLE POINT COOK POINT LONSDALE

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5-year growth

3-year growth

Number Sold

Days on market

Gross rental yield

Weekly median advertised rent ($)

Median price ($)

Avg annual growth

12-month growth

Quarterly growth

5-year growth

3-year growth

Number Sold

Days on market

Gross rental yield

Weekly median advertised rent ($)

Median price ($)

Quarterly growth

12-month growth

Avg annual growth

VIC UNITS

Source: RP Data www.rpdata.com Jul 09

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WA units

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BULL CREEK BUNBURY BURSWOOD CANNINGTON CARLISLE CENTENNIAL PARK CHURCHLANDS CLAREMONT CLOVERDALE COMO COOGEE COOLBELLUP COOLOONGUP COTTESLOE CRAWLEY DIANELLA DOUBLEVIEW DUNCRAIG EAST VICTORIA PARK EATON EMBLETON FERNDALE FORRESTFIELD FREMANTLE GERALDTON GLENDALOUGH GOSNELLS GREENFIELDS GREENWOOD GUILDFORD HALLS HEAD HAMERSLEY HAMILTON HILL HAMMOND PARK HANNANS HEATHRIDGE HIGH WYCOMBE HILLARYS HILTON INGLEWOOD KALAMUNDA KALBARRI KALGOORLIE KARDINYA KARRINYUP KELMSCOTT KENWICK KEWDALE LAMINGTON LANGFORD LATHLAIN LEEDERVILLE LEEMING MADELEY MANDURAH MANJIMUP MANNING MARGARET RIVER MAYLANDS MELVILLE MIDLAND MIDVALE MIRA MAR MORLEY MOSMAN PARK NORTH FREMANTLE OSBORNE PARK PALMYRA PARKWOOD PERTH PICCADILLY QUEENS PARK REDCLIFFE RIVERTON RIVERVALE ROCKINGHAM SAFETY BAY SAINT JAMES SCARBOROUGH SHELLEY SHOALWATER SORRENTO SOUTH BUNBURY SOUTH HEDLAND SOUTH KALGOORLIE SOUTH LAKE SOUTH PERTH SPEARWOOD STIRLING SUBIACO SUCCESS THORNLIE TUART HILL VICTORIA PARK WANNEROO WEMBLEY WEMBLEY DOWNS WEST BUSSELTON WEST LEEDERVILLE WEST PERTH WESTMINSTER WHITE GUM VALLEY WILSON WOODLANDS YANGEBUP YOKINE

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5-year growth

3-year growth

Number Sold

Days on market

Gross rental yield

Weekly median advertised rent ($)

Median price ($)

Avg annual growth

12-month growth

Quarterly growth

5-year growth

3-year growth

Number Sold

Days on market

Gross rental yield

Weekly median advertised rent ($)

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ALFRED COVE ARDROSS ARMADALE ATTADALE AUSTRALIND BALCATTA BALGA BASSENDEAN BATEMAN BAYSWATER BEACONSFIELD BEDFORD BELMONT BENTLEY BERESFORD BIBRA LAKE BICTON BLUFF POINT BOORAGOON BOULDER BRENTWOOD

Median price ($)

12-month growth

Quarterly growth PORT MELBOURNE PORTARLINGTON PORTLAND PRAHRAN PRESTON RESERVOIR RICHMOND RINGWOOD RINGWOOD EAST RINGWOOD NORTH RIPPONLEA ROSANNA ROSEBUD ROSEBUD WEST ROWVILLE RYE SAFETY BEACH SALE SANDRINGHAM SEAFORD SEBASTOPOL SEDDON SEYMOUR SHEPPARTON SOMERVILLE SOUTH MELBOURNE SOUTH MORANG SOUTH YARRA SOUTHBANK SPOTSWOOD SPRING GULLY SPRINGVALE SPRINGVALE SOUTH ST ALBANS ST KILDA STRATHDALE STRATHMORE SUNBURY SUNSHINE SUNSHINE NORTH SUNSHINE WEST SURREY HILLS SWAN HILL SYDENHAM TARNEIT TATURA TAYLORS HILL TEMPLESTOWE TEMPLESTOWE LOWER THOMASTOWN THORNBURY TOORAK TORQUAY TRARALGON TRAVANCORE TRUGANINA TULLAMARINE TYABB VERMONT VERMONT SOUTH WANGARATTA WANTIRNA WANTIRNA SOUTH WARRAGUL WARRNAMBOOL WATSONIA WENDOUREE WERRIBEE WEST FOOTSCRAY WEST MELBOURNE WESTMEADOWS WHEELERS HILL WHITTINGTON WHITTLESEA WILLIAMSTOWN WILLIAMSTOWN NORTH WINDSOR WODONGA WONTHAGGI WYNDHAM VALE YARRAM YARRAVILLE YARRAWONGA

Avg annual growth

VIC WA UNITS

END OF UNITS SECTION Source: RP Data www.rpdata.com Jul 09

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127

My investment property

Expert helps rescue faltering deal Vivienne MacCarthy discovers that when it comes to property investing, it pays to enlist the experts for help. Gabrielle Baxter reports

“I

had the ‘head down, work hard and pay off your house’ mindset– and then you’ve got superannuation later,” says Vivienne McCarthy, a general manager in finance with Cadbury in Melbourne. “That was my life ethos.” But like most people in the last few years when planning for the future, she and her husband no longer regarded ‘super’ – and the sharemarket it is based on – as either a viable or safe investment for their later years. So they looked at investing in property. The couple bought their first investment property about 18 months ago, and they now have three altogether – including the family home. “It was my brother’s suggestion.” Vivienne relates. “He was doing well with his, so we went into a deal with him.” Her brother lives in Western Australia, and Vivienne and her husband are based in Victoria. “But I’m from WA originally,” she adds, “and, in the long run, when I do leave Cadbury’s, we intend to go back because our children are there, and my parents too.” As somewhat of a high flyer in finance herself, one would assume that investing would be a walk in the park for Vivienne. “Well, no!” she laughs. “I have no knowledge in the area, so I wouldn’t have had the confidence to go forward and do this if I didn’t have the appropriate technical skills around me. “It’s like being a specialist doctor I think,” she explains, “and getting into different areas of medicine. Mine is very much systems and processes – another field entirely. Throw me an investment and I falter!”

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What her background did give her, however, was a keen appreciation of the pitfalls involved in property investment, so having her brother successfully test the water, so to speak, was the kind of impetus Vivienne needed to give it a go herself. He was already working through Andrew Sawyer at Mortgage Choice WA and proposed they consult him again. “I guess having that training, I do realise the knowledge that I am lacking,” Vivienne states. “I am also aware of the depth of Andrew’s expertise in this area and I have a healthy respect for it – as well as his commercial acumen – so I’m very comfortable having him onside.”

But unfortunately, in the case of one place they selected, the entire sale agreement looked as if it would falter because the bank valuation was lower than expected. “Then, what amazed me,” says Vivienne, “was that, instead of us walking away disappointed, Andrew was able to produce an innovative solution.” Indeed, he not only secured the finance but also, by engaging with the stakeholders on their behalf, he actually saved them money.

“It’s a different way of looking at things, I can tell you. But it has given me the opportunity to increase my wealth before retirement – well and truly” Sawyer had just the knowledge and experience they needed for the complex financial situation in which they found themselves, due to the fact that they were now involved in an investment with other parties. “He was able to demonstrate clearly just how that could work well or how it might be a risk,” Vivienne explains. “He was very articulate about exactly how it would play out.” He also guided them with regard to the probable value of property they could aim at. “Consequently, we knew where in the market we should be searching,” she goes on.

“He was able to bring about a ‘winwin’ situation for everyone involved,” Vivienne exclaims. “And this shows how, when we clearly lacked the skill to see that opportunity, he was able to first identify it and then step in on our behalf to negotiate.” Vivienne is wholeheartedly embracing this ‘new direction’ and says it proves the old adage ‘seek and ye shall find’. “It’s a different way of looking at things, I can tell you,” she admits, “but it has afforded me the opportunity to increase my wealth before retirement – well and truly.” www.yipmag.com.au

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