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Real Estate - July 2006

Be Cautious With Market Booms

July 31st 2006 00:37
Western Australia has exhibited a boom in the property market in recent years. Property investors have flocked to the western capital as a means of escaping the inflated eastern city prices. This has caused a knee jerk reaction in the eastern cities of Melbourne and Sydney where property prices fell as investors lost interest in the local market. Currently prices in Sydney are still on the decline and prices in Melbourne have flattened to stable value. There is certainly a temptation to move to the greener pastures of the Perth property market where values have netted great returns for early investors. However, it must be remembered that a boom can’t survive forever. Typically the more radical the growth, the more disastrous the decline. This is not to say that the Perth property market is set for a catastrophic implosion anytime soon, but east coast investors should be cautious before jumping into the Western Australian market.


The factors that have driven the property boom in Western Australia have been a steep rise in the local commodities market. When the commodity market run starts to run dry, it can be expected that property prices will begin to lose value. The other stimuli for reduced prices could be the same reason why market prices in Sydney and Melbourne have suffered a correction in recent years. If property prices increase beyond the scope of affordability, a threshold is reached and property values are forced to reduce inline with a value that the average punter can afford.
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ABS 2006 Census

July 28th 2006 00:16
Just a reminder that on 8th August, the Australian Bureau of Statistics will be conducting the national Census.

The national Census is conducted once every five years and gives a snapshot of the social, economic and housing characteristics across Australia. The Census is the largest statistical collection undertaken by the Australian Bureau of Statistics (ABS) and one of the most important. There are two broad objectives that underpin the Census. The first of these is to accurately measure the number and key characteristics of people in Australia on Census Night and the dwellings in which they live. The second is to provide timely, high quality and relevant data for small geographic areas and small population groups, to complement the rich but broad level data provided by ABS surveys.

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Rental Investment Returns

July 27th 2006 00:19


This chart is another way of looking at the market data I provided yesterday. It gives a different perspective of the Australian property market throughout Australia’s major cities.
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How Does Your City Stack Up?

July 26th 2006 00:03
I’ve consolidated some of the real estate market data that I’ve gather for the past year’s market analysis results. Now it’s time to do some real analysis to see which markets are performing the best on a national scale. I’ve set up two data tables, one for residential homes and the other for residential units.

In the first column, I list the average price of a home for a specific city. In the next column I give the average yearly rental return you’d expect for a residential property in that given city. The final column calculates this yearly rental return with respect to the average cost of buying a property.
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Canberra and Cairns Property Markets

July 25th 2006 00:24
The final city real estate performance match up, a battle between two of Australia’s smaller cities – Canberra versus Cairns.


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Sydney Vs Melbourne Real Estate Performance

July 24th 2006 00:07
In today’s city real estate death match, it’s the battle of the east coast megacities, Sydney versus Melbourne. Both cities are well established, popular places which are in a continual tug of war over which is the superior hub of Australian metropolitan culture. Melbourne is known as a cultural hub with a strong position in the arts, shopping and multicultural fields. Sydney is known for its temperate weather, beaches, beautiful harbour and casual lifestyle. How do they square off in the real estate market based on the past 12 months of real estate statistics?


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Adelaide & Gold Coast Property Market Statistics

July 21st 2006 00:30
Today I’m going to let Adelaide and the Gold Coast battle it out. Adelaide is another Australian city that has recently gotten a bit of a real estate boost. This is largely due to the increased number of activities and cultural events that are starting up in Adelaide and attracting new people to the area. The Gold Coast in on Australia’s eastern tropical coast. It remains a popular tourism and retirement destination. The Gold Coast was one of the northern Australian areas coin with the phrase, “beautiful one day, perfect the next.” During the 90’s there was a property surge in the area and many people from the southern states were moving to the area for a warmer environment and sea change. The boom passed and there were a few negative reports with inflated property development sales and a lack of employment and civil services for the sudden surge of people moving north.


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Australia’s Major Cities Property Statistics - First Quarter 2006

July 20th 2006 00:53

Over the next few days I’m going to present a summary of the main real estate market data for all the major cities in Australia and do a bit of a market battle off by hedging different cities against eachother. I’ll compare the market results for the last quarter and also year to help readers see where the latest trends and surges in the Australian property market have been based. The data is all based on a quarterly report released by the Real Estate Institute of Australia. The figures are for the last full quarter’s analysis covering December 2005 to March 2006.

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Shopping Around for a Mortgage

July 19th 2006 00:59
How does one actually go about getting a mortgage? Once upon a time there were few options, you rock up to your bank and apply for a loan and cross your fingers that they’d offer you a loan and interest rates would stay reasonable over the coming years. Now, things have changed and there are a plethora of mortgage lenders ranging from banks, building societies and specific mortgage lending organizations. The market place for mortgage customers has become far more competitive which means that banks and financial institutions are continually competing with new packages, specials, rates and offers to entice new customers. Whilst this means that there are far more attractive loan options for the home purchaser, there is also a lot more homework that needs to be done to determine which home loan is right for your financial situation and which will offer the best deal in the long term. This is where using a mortgage broker can help do some of the leg work for you. Mortgage brokers can help you find out about suitable loans and arrange special deals. Of course, you should still check up on the deals that they find for your long term security. Always remember that most brokers offer only a limited range of loans. They get paid a commission and some may receive other benefits from the lender as well. Mortgage brokers are not financial advisers, and are not obliged to find you the best possible deal unless they specifically agree to do so.

The other option is to use the power of the internet. CANNEX is a website that is dedicated to help people decipher the nitty-gritty of what loans are currently on offer from a range of popular Australian financial lenders. CANNEX lets you search for loans according to the type you need, and find the cheapest one. This site is free, independent and used by the industry professionals because its research is widely considered to be thorough and up to date. CANNEX also offers links, where available, direct to the lender so you can read the fine print.
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Disadvantages of Interest Only Mortgages

July 18th 2006 00:30
Yesterday I looked at the two stellar advantages of the interest only loan and briefly got into the risks associated with this type of loan. Today, I’ll discuss the disadvantages of an interest only loan a little more.

As I touched upon yesterday, one of the worst aspects of an interest only loan is that if it is poorly managed it can be a very big risk and leave you in a lot of financial strife at a time of your life when you are supposed to be kicking back and enjoying retirement. Trust me, if you screw up the money management side of an interest only loan, don’t be expecting to be retiring with all your pals. The thing that you have to remember is that at the end of the loan period, you are going to have one hefty bill and you’ve got to have a strategy for paying that off. Before you sign up for an interest only loan, think about how comfortable you are going to be with a bank knocking on your door and asking for the full amount that you are borrowing today to be repaid. Before you get into this type of mortgage the first thing you want to have very clear is how you are going to fund that one off big bill. If you are borrowing $300,000, you have to have a strategy for how you are going to come up with $300,000 of spare cash within a 20 to 30 year time period.
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Advantages of Interest Only Loans

July 17th 2006 00:27
I introduced the idea of an interest only loan on Friday’s post. Today, as promised I’m going to continue the discussion and look at some of the pros and cons of taking out an interest only loan. Since real estate has become so expensive in the densely populated areas of Australia, it is becoming harder for the younger generation to get into the real estate market. The cost of repaying a traditional mortgage will take out a fair chunk of the weekly pay check and once taxes and upkeeping costs are budgeted into the annual cost of keeping the property, the appreciation in your real estate investment is relatively modest in the short term. An interest only loan offers a way of reducing the mortgage bite from the weekly pay check. The theory is that it frees up more money to be invested in shorter term, higher earning investments. Thus you can let your property appreciate in value at its slow and steady rate and in the meantime invest in short term more volatile investment options with higher returns. In a nutshell, the interest only mortgage is going to be a success if you can turn a greater profit from channeling spare money into other investments. Conversely, if you don’t yield a higher rate of return from your other investments or worse still use the lower mortgage repayments to live a life of holidays and easy living, be prepared to be financially crippled in thirty years when your loan expires.

The advantages of an interest only loan are;
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Mortgages - Interest Only Loan

July 14th 2006 00:14
I think it’s high time I started looking at some financing aspects of real estate considering few of us have the capital to buy any sort of real estate without some sort of financial loan. There are a bunch of mortgage and financing option out there. Today I’m going to look at the interest only loan which seems to be the latest craze when it comes to financing a property purchase and dealing with the resulting mortgage. First lets look at what an interest only loan is.

An interest only loan is a lending scheme where by you borrow a certain sum of money from a lender. This is often referred to as the principle. Traditionally when you pay off a loan, the bank charges an interest rate to the loan amount which is remains owed to the lender. The amount that you have to repay is calculated to gradually chip away at the loan amount and interest payable so that after a period of time, say 20 years, you’ll have totally paid the initial borrowed amount plus all the interest that has accumulated over the loan term. After say 20 years, you will be completely debt free and have rightfully paid for your property.
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Fixing Rising Damp

July 13th 2006 01:55
If you’re damp course is ineffective or non-existant, be prepared for a costly renovation. The good news is that many rising damp problems can be fixed by some simple home DIY maintenance. You should give these ideas a go before you start ring around for professional damp course help.

1. Clear around and under the house. This will mean grabbing a torch and crawling in that void that exists between your house and the ground. Remove any soil, rubbish or debris which impedes the flow of air or which bridges the damp-proof course. All of this rubbish and debris may be causing a link for the ground moisture to rise up and penetrate through your floor and into the upper walls. Get out into the garden and give any vegetation planted close to the walls a good trim back. Heavy, thick vegetation encourage moisture to rise from the ground and up towards your house. Give the adjacent vegetation will also allow damp that has collected under your house to dry out.
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Rising Damp

July 12th 2006 00:52
Have you noticed some of any of these problems around your house?

1. Paint won’t adhere to the walls and old paint starts to flake off.
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Housing Styles – Early Modern

July 11th 2006 00:19
The early modern style of housing became popular after the Great Depression of the 1930s and was a housing style that prevailed until the 1940s. Early modern style house were generally single storey detached houses, set well back from the street on fairly large blocks. The exterior and interior styling exhibit a simplicity of style that represent the economic stringency and the move towards modernism. Building forms are simple and fairly austere with limited embellishment, although the influence of a number of decorative styles such as Spanish Mission, Georgian Revival and Art Deco are apparent. They were a very modern looking style for the time and inspired by a German movement known called Bauhaus. According to Wikipedia Bauhaus architecture was founded on the fundamentals of functional and clinical design. Early modern housing is most common in Victoria and regional Melbourne areas.

Image from Wikipedia

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Perth Protperty Market Booming

July 10th 2006 00:52
This is a news report backing the booming in the Perth real estate market. The news report was produced in March this year and highlights the growing demand for residential real estate in the country's western city.

According to the report there is a lag in the number of available properties on the market and the huge demand of buyers. The property demand has been sparked by an increase of immigration to the area from eastern Australian cities, India and the UK. The report lists the top five performing suburbs in terms of growth and investment return.
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Property Investment in the USA

July 7th 2006 00:17
The USA is currently looking like another hot area to be investing some money into. Actually, I really like the idea of investing in the States right now as I think there is a critical window of opportunity for foreign investors. Globally, the hot new shit on the block is in Asia. China and India are becoming economic superpowers by the day. The two problems are that firstly, everyone already knows about it. Then secondly, if you are a foreigner getting a slice of the Chinese pie is very difficult. It is extremely hard to directly get involved in investing in the Chinese economy. The best way is to buy shares in a company that is heavily involved in China’s industry and is therefore reaping the benefits of the economic boom. As for buying a property, if you don’t have citizenship, forget it.

I still think that there is investment potential in Asia and some reasonable returns to be made, but let’s just say the cat is already out of the bag. The hysteria over the economic boom in the area has already started which means a savvy investor should have been looking at investing long ago. The hardest, yet smartest thing to do when it comes to choosing investments is to not follow the crowd. If you do get the opportunity to invest in Asia I believe there is greater potential in the smaller growth markets rather than the big league Chinese and Indian markets.
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Why Invest Overseas

July 6th 2006 00:46
It may strike some people as odd as to why you would want to put yourself in the difficult situation of managing an overseas property. It is true that there is a bit more effort that has to go into purchasing property overseas. You have to investigate different areas. Find local advisors and do checks to make sure their advice is credible. Finding a financier can be a bit more difficult and you have to do a very good check of the local laws with regard to taxes and ownership requirements. Then after all of that is done, it comes time to weigh up if the costs associated with purchasing the property are outweighed by the probably returns. It all seems like a lot of hard work when the much easier option is to purchase something local.

Purchasing local might be the easier option now, but the reason why you would go to the trouble of investing overseas are for greater financial rewards. Right now, the Australian economy is riding high in terms of a global perspective. We’ve jumped on the boat with the Asian economy and our industries have cemented some very good contracts in the global market place particularly Asia and the USA. Right now, experts believe that the Australian sharemarket is overvalued. They are warning Australian investors that a correction is imminent and the easy money that has been accumulated in top performing stocks over the past 12 months is due to get hit by a squeeze.
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Investing in New Zealand Property

July 5th 2006 00:54
Following from yesterday’s post, today I’ll look at some of the more practical aspects of investing in property in New Zealand.

Financing:
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Investing Overseas - Thinking Out Side the Boarders

July 4th 2006 00:52
Bob Carr’s onto it and considering the tax rates that Australian property investors are subjected to, thinking outside the boarders can open up a whole new market of effective property investment options. Like any financial investment there are risks involved. These risks include those of purchasing any property and if you don’t do your homework there can be the additional danger of funneling funds into a market you don’t know much about or have little information about. On the other hand, if you take the time to do some thorough research the benefits of investing overseas can mean a far better return than those available from the current Australian market.

So what has drawn the likes of Bob Carr and John Laws to investing in New Zealand? Firstly, New Zealand is a viable market that isn’t too far away from us superior cousins. Investors like to be relatively close to their investments and if the need should ever arise popping over to New Zealand to check on the property is not going to be anywhere near as big a deal as hauling ass to Europe, Asia or America. The time zones difference aren’t ridiculous, thus communicating with your property manager is not going to be a 3am affair. It can even double as a convenient holiday home or property when time off springs around.
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Capital Gains Tax for Company Titled Property

July 3rd 2006 00:45
Jon asked:

“How is the capital gains tax of a property affected by placing it within a company structure?”
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