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You see the articles day in day out in investment property magazines and online, telling investors where they can buy next to best achieve high growth in property investment. I’ve always been quick to tell people to steer clear of hotspot-spruikers, because the hype surrounding the hotspot usually means that the time to buy has already passed…
Sure, I know that there are times when it’s acceptable to buy property in a certain area if it looks like something of note is going to happen, like an infrastructure boost or industry-related boom (see any mining town property price spike for examples!) and in this case it’s something that investors are usually onto through research and conducting due diligence. Researching areas for growth can be a great way to find property that will experience great returns, but you need to find them by doing the work.
Buying in high growth areas is great – provided you know what you’re looking for and how to do it. What I’m saying is that it isn’t the best strategy to follow hotspot reports in the media and then buy property based on what others are saying, because by the time a ‘hotspot’ hits the media it’s usually been around for a few months and everyone has hopped on that bandwagon already.
What I’d like to share is:
Identifying high-growth areas has become a super-competitive element to property investment. Everyone wants to find the next boom town and buy up big, so here’s a few tips on how to identify possible high-growth areas.
What’s gentrification? Any area where it used to be not so family friendly, but where you’re now seeing more families moving in.
If you’re keen to get into a particular area but think you’ve missed the boat you can get into a surrounding suburb. This approach needs good timing, so you need to know what stage of the property cycle the suburb is in to get maximum results.
Supply and demand is pretty much everything for growth past a certain point. If there’s no more capacity to build you can be pretty certain that prices will continue to rise.
The area might see a spike as workers come to the area for jobs.
So is there a perfect investment market? Well, no. The perfect investment market doesn’t really exist, but great investment properties can be found in any market! Plus, it doesn’t matter how amazing the property might be, or what kind of hot spot it’s in if it’s out of your price range, so always make sure you’re up to date with a portfolio review and updates of your financial situation.
If any of this sounds good to you and you’d like to find out more, get in touch here for your complimentary 1-2-1 session with one of our property investment coaches:
It is no question that Gen-Y are finding it harder and harder to purchase a home, and are instead opting for vacations and shopping, along with other lifestyle choices, rather than saving to get a house deposit. Why? How about the fact that it’s peddled as being a HUGE undertaking that, thanks to commentators and social media articles about the un-affordability of housing, now seems impossible.
The people to blame are those who go around saying just how unmanageable saving for a house deposit really is.
It is no wonder Generation Y don’t think there’s any point. Can anyone blame Gen Y for splurging on shopping and going on trips overseas when the prospect of saving for ten years just to buy one house seems so impossible?
These experts might feel they are sticking up for the poor ol’ Gen Y, but they’re really not doing them any favours. Sure it’s good to know the home truths about home ownership or property investment, but it has to be something that they still strive for, and can realise.
So how do you go about it, if you’re in the lucky bracket of home-ownership-impossibility that is Gen Y? You’ve got to make it important and prioritise your spending if you’d like to own your property. It will probably be more expensive to own your house than to rent in the initial stages, and for a Gen Y person that can be the difference between some lifestyle choices. With the emphasis on buying and owning things in the here-and-now, that can take some discipline, but you’ll be SO much better-off in the long haul.
There was a Melbourne couple recently I spoke to who said that they felt like they’d never afford a house. They had a child and were living in a three-bedroom house, and were paying a pretty high rent for this property. If they took the step of downsizing their rental property from a three bedroom to a two bedroom place, they’d save around $130 a week, or $6240. I guess the bottom line is here, that if you choose to spend your money rather than save some of it, you won’t get very far with home ownership.
The couple I was speaking to were on a single income of more than $80,000, quite a bit higher than average. By getting cheaper rental and implementing a careful budget they could save $300 a week. In five years this would amount to around $80,000 in savings.
Using this amount as a 20 per cent deposit they could buy their first home up to a value of $550,000. However, they would probably be better off buying a cheaper $450,000 home with a more manageable mortgage.
If none of the above appeals and the idea of saving is a big turn off, then you can take the cheaper option of renting and have more money to spend. It’s all about your own choice and there’s plenty of people online who will tell you that it’s the best and only way to do it. But remember if you’re young and want to own your own home, don’t be put off by the naysayers and get out there and DO IT. Home ownership is achievable, but it isn’t easy and hasn’t ever been that way. Mortgages have always been a big financial cost, and it’s better to be a homeowner and property investor than it is to pay off someone else’s mortgage.
If you’re ready to start investing or just want to find out more about property investment and how you can use it build a successful lifestyle and to achieve your goals, then get in touch today to find out more.
Do you want to:
If you look at the statistics, people need help in addition to their existing wage and super to achieve any of these goals. And property investment remains an attractive choice for many people with low interest rates and rising house prices across the country.
There is no guarantee of success in property investment, and if you don’t understand how it works – the chances are you’ll be like 98% of all property investors who never reach their goal.
At Alliance Corp we help you develop a property investment plan that matches your goals.
At Alliance Corp’s upcoming workshop on 16th October in Melbourne we will cover why you should…
There’s nothing worse than going into what is undoubtedly one of the biggest financial decisions you’re ever going to make and feeling like you’re not adequately prepared. There is certainly a whole lot of information to take in about the whole property investment process, so I’ve compiled a list of some of the most important things to take care of when you’re getting ready to start investing.
I hope this helps you. It’s a document that you can keep to refer to, and hopefully will go some way towards making the property investment process easier. It doesn’t matter what stage you’re at in the process of investing: Perhaps you’ve already bought an investment property and want to streamline the process for your next property, or perhaps you’re new to investing and need to make sure you get everyone done right.
Whatever the reason, just keep on reading and getting your head around the whole deal, and remember to consult with a professional for guidance and advice when you need it. We can help, after all, we’ve gone through the property investment journey before (hundreds of times with all of our clients – and for ourselves) and are well equipped to advise, manage and even deal with the whole process for you, leaving you free to focus on what’s really important: family, education and your life.
Register here for your complimentary and obligation free session with one of our property experts to learn more about investing today:
Are you looking to get into property investment as a way to achieve your goals? It helps if you know what your goals are, so that you know what you need to achieve them!
It’s not a huge secret that property investment eventually yields greater wealth through capital growth. And then, even though we all know that money doesn’t buy happiness, greater wealth means more choices. And having choices is generally something that makes people pretty happy. Basically, property investment is an effective way to build your wealth and to enjoy a better quality of life through having greater choice. It’s pretty simple, really. Some common goals for investment that I’ve heard people say over the years include:
It doesn’t have to be some lofty goal either – you might just really want a brand new car, and that’s fine too! No matter what your goals are financially, property investment is a great way to get ahead financially. The strategies that we use are simple, effective and tried and tested.
Of course, it depends on how soon you want to achieve your goals, and how much money you’ll need to make them possible, and as many people have seen in the past, property investment is a great way to grow your wealth over a period of time. If you’re looking to ‘get rich quickly’ then property investment probably isn’t the best and safest way to go about this, because property investment is a ‘get rich slowly if you play your card right’ kind of situation.
Take a look at the next section for some commonly asked questions about property investment.
A. Well, yes and no. If you’re getting into property investment for the first time and looking to buy your very first property then yes, you will need to save a deposit and approach a bank for a loan.
To get to this stage you need to be prepared to save aggressively! That might mean reducing your credit card limits or delaying a move to part time or contract work. If you own your own business you might need to pay yourself a salary to make yourself an attractive prospect for banks. If you’re still looking for your first investment property then you probably need to read our eBook Seven Reasons Why Property Investment Can’t Be Ignored before you read this one. If you’re ready to start investing then great! You should take a look at this information about property investment.
Q. Will I Need To Sacrifice My Lifestyle?
A. Saving up a deposit and then putting it to towards a house is fine for your first property. But what about when you want to buy more houses and create and investment portfolio? What then? Do you need to save as hard, and sacrifice as much every time you want to buy another invetsment property? Surely there must be a better way. You know of course, that I’m going to tell you that there is! The reality is that you can start with as little as 5% of the property purchase price, plus funds to cover your lawyer and stamp duty. How? Equity.
Q. What is Equity?
A. Equity is what makes up the difference between the market value of your home and the balance of your mortgage. If you’ve had your home for a few years and paid off some of the mortgage, that – combined with a rise in value of your house – could mean that you’ve built up some reasonable equity.
Accessing the equity in your home is one of the easiest ways to buy investment properties, and you may already have a property that will allow you to use this technique. Releasing equity from your home in a structured way allows you to keep your savings
in the bank. For investors, the usual situation is that most want to combine the benefits of not using their own savings with tax minimisation advantages when buying an investment property.
If you’re interested in finding out more about releasing the equity in your home or in building a property portfolio then please get in touch and register here for your complimentary and obligation free session with one of our property experts:
It’s the start of a new month, and that means that the RP Data roundup is out. Let’s take a look at what the statistics say, and what it all means for property investment in general. Remember that it’s important to consider all of the information when investing in property, so this is a great source of staying across the whole spread of information available to investors.
We could see from the RP Data report that housing values housing values have made a small start moving into spring, with overall dwelling values reporting a rise of just 0.1%, according to the RP Data CoreLOgic Home Value Index. This was calculated across the month of September. This worked out to be a 2.9% capital gain over the third quarter of 2014 overall. This flat result for September resulted from five of the eight capital cities recording a loss over the month, with only Sydney (0.8%), Brisbane (0.7%) and Adelaide (0.9%) recording increases in dwelling values over the month.
September saw gains in capital city dwelling values by 2.9%, which RP Data research director Tim Lawless said was driven by exceptionally strong conditions across the Sydney and Melbourne markets, where the quarterly capital gain was 4.1% and 3.7% respectively. In addition to this, Adelaide saw a solid increase in values during September, with 3.1% capital gains over the quarter.
Brisbane (0.6%), Darwin (1.4%) and Canberra (1.4%) showed capital gains in dwelling values over the most recent quarter and Perth (-0.6%) and Hobart (-1.0%) were the only capitals to record a decline in dwelling values over the September quarter.
Overall, RP Data’s report has shown that overall, dwelling values are now 9.3% higher over the twelve months to the end of the month of September 2014, with every single capital over this period recording an increase in dwelling values. Sydney is driving the trend, no doubt about it, with a huge increase of 14.3% over the past twelve months. A big gap exists between Sydney and the next best capital city, Melbourne, where values increased by 8.1%. Darwin came in third (7.1%) and Brisbane came after Darwin with 6.4% increase. Adelaide (4.8%), Hobart (4.6%), Perth (3.2%) and Canberra (1.7%) also all recorded gains in dwelling value.
Despite the cooling off over September, signs point to values remaining strong.
Auction clearances kept on pushing past the 70% mark week after week, and the RP Data real estate agent and valuation platforms remained strong, and this is indicative of heightened levels of industry and mortgage market activity.
According to RPData’s research head Tim Lawless, more listings are going to enter the marketplace as the weather warms up. He says that the big test for the housing market is whether the additional stock is going to be taken up by an increase in buyer numbers.
He says: ”The annual rate of appreciation in dwelling values has actually been moderating since reaching a peak in April this year. The fact that the annual trend of capital growth has been trending lower is an important factor to note as it highlights that the rate of capital gain is no longer accelerating. Even though housing market conditions remain very buoyant, we have been seeing the 12 month trend drifting lower since peaking at 11.5per cent in April.”
“The softer September result is also likely to be seen as a positive indicator by the Reserve Bank which has recently raised concerns about the level of value growth and speculative investing in the Sydney and Melbourne housing markets,” Mr Lawless said.
It’s true that the high rate of capital gain has sparked debate around the sustainability of the housing market around Australia, and you can read more about this here, here and here. Mr Lawless does state that most of Australia’s capital cities are showing a sustainable rate of appreciation. Also, he goes on to say that the Reserve Bank has recently singled out Sydney and Melbourne as the markets that require some caution, particularly from investors who are buying into markets at a mature time in the growth cycle, at high price points and where rental yields are very low. It’s quite clear from looking at the consistently high auction clearance rates, and the ongoing increases in dwelling values that demand is high, and properties are going on the market and being met with hungry buyers. This much is true.
What we can learn from the RP Data report is that buying in these areas at such a time is better suited to home buyers, not investors. If you’re looking to buy a property that is going to achieve high growth and good capital gains then it’s important to research other areas that are experience good results, but without the saturated focus that’s currently taking place in Melbourne and Sydney.
Additionally, Mr Lawless noted that when you look back through the cycles of the housing market, the current growth phase isn’t as aggressive as what was recorded over previous cycles.
At their peak, on a rolling annual basis, capital city dwelling values increased at a faster pace over each of the previous three growth cycles in 2009/10, 2007 and 2001/03. The big difference over this cycle is that growth has been very much concentrated within the nation’s two largest capital cities and has increased for a longer period than the previous two growth phases.
Mr Lawless said that what is concerning is that we have now seen the ratio of housing debt to disposable income reach a record level at 137.1 per cent and we are seeing substantial investor concentrations within the two largest capital cities, particularly in inner-city unit markets within these cities.
“The Reserve Bank has recently highlighted the risks that are becoming more evident in the Sydney and Melbourne housing markets and therefore it is no surprise that the Reserve Bank, together with APRA, is now contemplating the likelihood of introducing macroprudential tools to reduce some of the exuberance in the housing market and rebalance investor demand without having to resort to monetary policy,” Mr Lawless said.
So essentially, the RP Data report lets us know a lot of what we already sort of knew: Melbourne and Sydney and recording some huge growth and continued gains, and whether this is being fuelled by foreign interest, home buyers driving up prices or a combination of lots of different factors, it remains that you can always navigate any stage of the market provided you do your research and enlist expert advice.
If you’re ready to get more information about the possibilities for you as an investor, then get in touch with us here.
When should I invest in property?
Friends and clients alike want to know whether they need to wait until they reach a certain level of financial security, or until they can afford to pay a huge deposit before they start to invest. My answer is always the same: Invest as soon as you are able. You will always get a return on your initial investment provided that you follow a plan and are prepared to adopt a ‘get rich slowly’ attitude and hang on the property long enough.
Property investment, despite what you might have read or heard, is not a ‘get rich quick’ game, and you will be disappointed if you enter the investment world expecting quick gains. It’s not to say that some people haven’t gotten lucky with ‘hot spots’ in the past, but I never advocate jumping on the bandwagon and trying to predict trends.
The best way to invest in property is by knowing the market, doing your research, ensuring you have a buffer and investing again and again as soon as you are able to.
It remains though, that the age old ‘when to invest’ question strikes many people down with fear, because undoubtedly there are a lot of things to consider, and sometimes it can get a bit overwhelming. But it just means that it’s all the more important to have a plan! It also remains that there are no simple answers, really, to any of these questions. You need to have a comprehensive approach to property investment as a whole, and to seek advice from professionals when looking to take the steps towards investing. After all, say that you want to get fit and are really serious about it, you’ll read as much as you can about diet, exercise and the best way to approach the whole task before, during and in an ongoing capacity to ensure you stick to your goals. You will probably even consult with dieticians, physicians and personal trainers to ensure that you have the best and most supportive team behind you. You’ll probably also find that you’ll be more geared for success and will have a better plan to follow than if you went it alone.
Investing in property uses pretty much the same tactics. You start by consulting experts in the field, and by reading as much as you can about locations, prices, reports and data before you even think about buying your first investment property. The people that you’ll have to consult with when you’re considering investing in property include solicitors, conveyancers, buyer’s agents, estate agents, property managers and a whole host of other services you might not even have known about. That’s really why I created AllianceCorp, as a one stop service for everything to do with property investment, because I knew that property investment could be a dizzying ride with people to see and things to arrange. As an investor myself I wanted to make the process easier for people who wanted to get into property investment for themselves.
It’s impossible to point to a certain time in history where anyone should or shouldn’t have purchased property. Hindsight is a beautiful thing, and no-one has a crystal ball, so even the people who watch the market as closely as they can won’t be able to predict trends and prices. There are so many factors at play that it’s just important to look at your own personal circumstances and pinpoint when YOU can afford to invest.
Of course you will always get people saying that the best time to buy is when there’s not a lot of competition from buyers, and at this time in the market. And yes, according to economics and any analysis of the markets it’s true on paper, but if you can’t afford to invest at the time when everyone is telling you to invest, then quite simply the time isn’t right for you.
It’s a key factor is that you should enlist professional advice at any stage of the market cycle when you’re considering a purchase to ensure that you’re in the best position and that you have adequate funds to proceed with your investment. The best plan will lay out a long term strategy with constant reviews and updates to ensure that adjustments are made as necessary, and to ensure that you stay on top of your buying capacity. You’ll also have an exit strategy in place at some point. Finally, it is not just about when you buy, but more importantly where and what you buy.
Never try to second-guess what the market will be doing in the future. Base your property investment decisions upon well researched professional advice and be prepared to adapt your strategy to suit changing circumstances including your own as well as what’s happening on the world stage.
If any of this sounds interesting to you, then register below for your obligation-free session with one of our property coaches today!
For a look at the auction clearance results from the weekend have a look at this article. I know that people are watching the housing markets carefully with a lot of talk going on about bubbles and skyrocketing prices, so this is just a bit more information about the auction clearance results from the weekend from RP Data Australia. I can’t stress enough that a good investment strategy can help investors mitigate the peaks and troughs that are inevitable in any investment market.
Homebuyers appear unfazed by warnings from the central bank that Australia’s housing market is too hot, with Sydney recording its strongest September auction weekend on record. The result points to a bumper spring selling period to rival the record 2013.
The Reserve Bank of Australia last Wednesday warned against soaring house prices and an increasing imbalance between soaring lending to investors and weakening occupier finance.
But if consumers have any concerns, they did not show over the weekend, with the national auction clearance rate above 70 per cent for a fifth week according to preliminary figures from RP Data Australia.
Sydney had a month high 927 auctions of which 78.5 per cent sold according to RP Data. Melbourne had 104 auctions, compared to more than 1000 the week before, as sellers sat out the Grand Final.
Andrew Wilson, senior economist at Fairfax Media’s Domain Group, said that while the housing market remained strong, price growth has slowed.
“I cannot understate how strong the market is but it is not as strong in terms of house price rises,” Mr Wilson said.
Yet buyers were prepared to pay up with many homes selling above their quoted reserve prices. A two bedroom home in the Sydney suburb of Surry Hills sold under the hammer on Saturday to local investors for $1.41 million, above the reserve of $1.2 million. This was a 47 per cent increase on what the house sold for in 2013, according to selling agent Con Fotaras of Belle Property.
“This is a strong sale price showing how popular the area is, especially with car access and proximity to Central station,”Mr Fotaras said.
“It was last sold for $960,000 last year and has only had minor cosmetic work and a DA approval for a four bed, three bath property with parking.”
A preliminary weighted average clearance rate of 72 per cent was recorded this week across capital cities compared with 70.8 per cent last week and 73.5 per cent this time last year, according to RP Data Australia.
The most expensive sale reported to Domain Group in Melbourne a $1.6 million block in Glen Waverley. The 1433 square metre block has the potential for a 10-bedroom home. “Most auctions in Melbourne were held in areas strong for Chinese buyers, such as Glen Waverley,” Mr Wilson said.
The most expensive property reported in Sydney was a $5.7 million city apartment at The Residence Hyde Park. The three bedroom apartment, at 68/14-24 College Street, sold prior to auction through Simon Polito of Laing Real Estate.
Investors remain key buyers, Domain’s Dr Wilson said.
At Summer Hill in Sydney’s inner west an investor outbid first home buyers and young families for a post-war cottage. The 19 Smith Street house sold for $900,000, $400,000 more than what it sold in 2013 and following an extensive renovation.
The agent, Richardson & Wrench Pyrmont Glebe, Eileen Carroll, said buyers and sellers were undaunted by the RBA’s warning that the market was too hot. “I think the market is really strong but most buyers and sellers seem comfortable with where prices are at,” Ms Carroll said.
Another Surry Hills property, a one-bedroom apartment at 360 Bourke Street sold for $647,000 at auction – $117,000 over reserve. The buyer was the underbidder on the property when it last sold in 2012 for $478,000, according to selling agent, Belle Property’s Mr Fotaras.
Remember that if you’re already an investor, looking to start investing or wanting to find out more about investment strategies our helpful team are always available to answer any questions you may have about the market, properties or otherwise.
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Originally published as Are Real Estate Prices Too Hot? Buyers Say No.
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Take a look at this commentary from Robert Simeon at the Property Observer. It’s been interesting to watch what’s been happening in the news with the property bubble speculation. Hot topic stuff!
Check it out here:
For some very strange reason property commentators are struggling to differentiate between the investor property market and the household property market.
Treasurer Joe Hockey was right when he commented this week: “It is just an easy mantra for international commentators and for analysts based overseas to say ‘well there’s a housing bubble emerging in Australia’; it is a rather lazy analysis because fundamentally we don’t have enough supply to meet demand.”
I have been saying this for the best part of 12 months now, given the figures provided are a bundle of property sales where the demographic markets are not broken down – simply because they are lazy and you get a meatier headline by using the bundle method.
During the global financial crisis (GFC) we kept hearing the ongoing reference to “green shoots” emerging where today some are attempting to decimate the Australian real estate industry. Many forget that Australia’s property market and the real estate industry is directly one of the largest employers in Australia and there is a very strong argument that it is playing a major role in keeping our economy buoyant.
I don’t really buy the argument about the low interest rates although in five years’ time we in all probability will see distress sales as the cash rate moves up and home buyers come out of their fixed periods – that is inevitable and should not be used as some sort of shock therapy. Many are forgetting that the Australian banks borrow a substantial amount from overseas so when the cost of lending increases it won’t be the Reserve Bank of Australia (RBA) dictating the rates rather the banks will be increasing regardless of the cash rate setting.
With the ‘Big Four’ banks holding 80% of Australia’s mortgage book they won’t be waiting for guidance from the RBA – they’ve done it before and they will do it again. Although mysteriously the commentators have the RBA front and centre whilst constantly missing the big picture. The cash rate might well remain at 2.50%, but we miss the point that the lenders are hedged to their funding costs which are not determined by the RBA.
Another reason as to why Australia’s property market is strong is that rental vacancy rates in the Sydney 0 to 10 kilometre range can’t get above 2% yet we forget that twenty years ago they sat between 3.50% and 4.00%. Back in those days landlords were offering one month’s free rent to entice tenants. It needs to be pointed out that the problem we have is on the supply side, which is why I don’t see the slightest problem with this niche market.
The problem is misinformation and yes some markets have reached unprecedented record prices, which in time as interest rates correct property values adjust accordingly based wholly on demand. The interesting part in this is when the property markets are in decline the purchasers decline too, despite the fact that the markets are what we call a buyers’ market. We are currently in a vendors’ market where the buyers are happy to pay over and above the market value.
Real estate has always been a long-term hold, so for the vast majority what prices do is not really a major concern. There are clear patterns evolving where the majority now are not trading up given from a cost basis analysis it makes more sense to renovate – which is exactly what we are seeing today.
Well! What do you think? If you’re thinking about investing and wondering when the best time is to invest, just remember that you should do your own research and be as well informed as possible when investing. It’s also advisable to remember the adage: it’s not timing the market, it’s time IN the market that makes all the different. So get in touch today and get started on your property investment journey today!
This article was originally published on The Property Observer.