Thursday, October 29 2015
(Source: Propery Observer)
Most Australian investors believe Brisbane is a more affordable alternative to Sydney and Melbourne, according to a new survey by Property Investment Professionals of Australia (PIPA).
Chair Ben Kingsley said investors were increasingly looking outside the two largest capital cities for assets.
“Investors are seeing Melbourne and Sydney performing very well and they’re looking for alternative markets that they think they can get in before the market starts to move,” Mr Kingsley told wire service AAP.
“Sydney’s market has started to slow and Melbourne is approaching the peak of the cycle.”
“Probably over the last six months there has been some speculation in the Sydney market, and the Melbourne market is enjoying a good Spring but I suspect that will slow down into 2016,” Mr Kingsley said.
Of the investors surveyed by PIPA, 58 per cent identified Brisbane as the capital city offering the best investment prospects, well ahead of the 17 per cent that chose Melbourne.
Just 11 per cent named Sydney, while six per cent chose Perth and five per cent selected Adelaide.
About 20 per cent of investors said they had put their investment plans on hold because of concerns about a property bubble.
Tighter lending conditions were the key worry for investors, as regulators sought to slow the growth of investor lending.
Price corrections, the removal of negative gearing, long periods of vacancy and oversupply of property are concerns.
Thursday, October 22 2015
Chinese buyers nearly doubled their investment in Queensland property to almost $1 billion in 2014-15, according to The Australian.
The newspaper said Queensland’s Foreign Ownership of Land Register revealed investors from China spent $872.5 million buying land and property while Hong Kong investors spent $112 million.
The total of $984.5 million is more than double the $463 million spent by Chinese investors in Queensland the previous year.
China has been the top source of foreign investment in Queensland real estate for the past three years.
The Australian reported that Chinese buyers own 3585 parcels of land covering 237,490 hectares, while British investors own 5904 properties covering 2.2 million hectares.
Singapore has overtaken the US as the second-biggest source of foreign investment in real estate in Queensland. Singaporean investors spent $421m last financial year — nearly three times more than the year before.
Analyst Michael Matusik told The Australian that Chinese buyers were buying more than half the new apartments being sold off the plan in Brisbane and the Gold Coast.
Wednesday, October 21 2015
Most borrowers have already or will be shortly seeing the rates on their home loan and investment lending increase. But why is the happening when the RBA has been cutting rates? There are some key factors:
- APRA is seeking to curb investment lending growth
- ASIC wants banks to apply tighter restrictions on lenders to make it harder for people to borrow money, particularly interest only and investment lending
- APRA wants the banks to hold greater levels of capital
Investment and interest only lending
APRA and ASIC are seeking to cool growth in investment lending which has primarily built up in the Sydney market. But rather than take a targeted approach to the Sydney market APRA in particular has a adopted a broad brush approach applying pressure on the banks to slow their lending growth. So banks at this point have responded by changing pricing and/or policy for investment lending. The changes we have seen so far include:
- A number of lenders including AMP have pulled out of investment lending altogether
- A reduction in LVRs for investment lending - 90% is now generally the maximum - down from 95%
- Some lender will only finance up to 80% for investment property
- Lenders increasing interest rates for investment and interest only lending
- Increased restrictions for SMSF lending
- Increase restrictions to overseas and foreign investors
- Increased restrictions on development funding
The restrictions have however seen more competitive pricing emerge for owner occupied principle and interest lending below 80% and have also seen more competitive investment lending emerge outside of the major banks.
So now the pricing landscape in terms of rates is extremely varied - there is not one rate and pricing will be specific to your situation and requirements and in most cases there will be different pricing on different loans.
The lowest priced interest rates will typically be for principle & interest owner- occupied lending below 70% LVR. The highest priced lending will be for Interest On;t investment lending above 90% LVR.
Increases in home and investment lending rates due to Capital Adequacy Requirements
Westpac has already raised it's home lending rates by 0.2% and NAB, CBA, ANZ and Macquarie will most likely raise rates in the coming weeks. But that's not the end of it - there is still more to come.
The rate increase has come as a result of Westpac's need to hold more capital to protect deposit holder funds. Former CBA chief David Murray's enquiry into the financial services sectors highlighted that the major banks and MacQuarie were holding a significantly lower percentage of capital relative to the their loan book compared to the remainder of deposit taking institutions. The average risk weighting of the majors loan books sits at around 16% while the remainder of the market sits around 30-35%. APRA wants to see that risk weighting increase to 25%.
APRA has been steadily applying pressure to banks to increase their capital holdings to strengthen their balance sheet to market shocks. Westpac and other banks have had to go to market to raise more capital which has diluted the banks return on equity.
Westpac chief executive Brian Hartzer said Westpac would be maintaining its return on equity target of 15 per cent. Which means further capital raisings will mean further rate hikes. This is likely as Westpac and other banks would need to raise more capital in response to pressures from global regulatory changes known as Basel IV.
So we can expect to see more rate hikes out of the majors.
This certainly creates opportunity for smaller lenders in the market who are already meeting their capital requirements and already have competitive offerings - some with rates below 4%.
With all the changes in the market now is an ideal time to talk to us to review your lending. Contact us today.
Thursday, October 15 2015
Westpac yesterday raised it's home lending rates by 0.2% and NAB, CBA, ANZ and Macquarie will most likely raise rates in the coming weeks. But that's not the end of it - there is still more to come.
The rate increase has come as a result of Westpac's need to hold more capital to protect deposit holder funds. Former CBA chief David Murray's enquiry into the financial services sectors highlighted that the major banks and MacQuarie were holding a significantly lower percentage of capital relative to the their loan book compared to the remainder of deposit taking institutions. The average risk weighting of the majors loan books sits at around 16% while the remainder of the market sits around 30-35%. APRA wants to see that risk weighting increase to 25%.
APRA has been steadily applying pressure to banks to increase their capital holdings to strengthen their balance sheet to market shocks. Westpac and other banks have had to go to market to raise more capital which has diluted the banks return on equity.
Westpac chief executive Brian Hartzer said Westpac would be maintaining its return on equity target of 15 per cent. Which means further capital raisings will mean further rate hikes. This is likely as Westpac and other banks would need to raise more capital in response to pressures from global regulatory changes known as Basel IV.
So we can expect to see more rate hikes out of the majors.
This certainly creates opportunity for smaller lenders in the market who are already meeting their capital requirements and already have competitive offerings - some with rates below 4%.
With all the changes in the market now is an ideal time to talk to us to review your lending. Contact us today.
Friday, October 09 2015
As I have been indentifying for some time there have been significant over supply risks building in Brisbane inner city units. The latset HTW property clock (pictured) puts Brisbane units at the top of the market.
One major lender has already tightened it's guidelines for Brisbane inner city units in response to the increase risk levels. No doubt other lenders will follow.
Tuesday, October 06 2015
The perennial issue of land supply and the escalating costs facing new homebuyers is not going to be solved anytime soon but there is movement at the station in regards to addressing this key bugbear in urban development.
Contributing issues to the undersupply in housing stock include a general inadequate investment in infrastructure, slow planning and approvals processes, high taxes and charges in the provision of housing, and in the case of a city like Sydney, the lack of undeveloped land due to geographical factors.
The Housing Industry Association had previously reported in its HIA-CoreLogic RP Data Residential Land Report, during the March 2015 quarter, the residential land price in Australia increased by 4.1 per cent compared with the previous quarter. This represented an increase of 8.2 per cent compared to the same quarter of last year. During the March 2015 quarter, residential land transactions fell by 5.2 per cent compared with the previous quarter to be 17.6 per cent lower than the same period 12 months earlier. The March 2015 quarter represented the third consecutive decline in land transactions in Australia.
The low sales rates combined with the increase in prices suggests that low supply is the cause of this price growth instead of a slowdown in demand.
The HIA’s senior economist Shane Garrett examines the underlying trend: “Land is the big driver of price increases in some areas. If you look at the figures nearly all of the increases in dwelling prices are explained by increases in the price of land whereas building cost increases actually in some parts haven’t gone up by much in relation to general price levels, so land is a big driver.
“The data shows that the land supply situation has tightened in recent years and manifested itself in higher prices and fewer actual lot transactions in the biggest markets.”
Garrett reflects on New South Wales where Sydney has the biggest demands as far as housing is concerned — the population is increasing, interest rates are low and there is a lot of new home building going on with detached dwellings and units.
“On a national basis land is the single biggest input to new home building and it’s something that the HIA has campaigned on for quite some time,” he says.
Bret Fleming, director of planning and design with consulting firm Urbis, says that as Australia’s population reaches 40 million in 30-40 years time, there is a requirement to make sure that supply and demand don’t get too far apart. He also asks are we in fact building the right type of dwellings in the right locations?
“Developers need to provide a variety of dwelling types, buyers can then climb up the housing ladder – give people the opportunity to buy in and trade up in the same area as their needs change. We’re now seeing more two bedroom product available in developments.”
So what more can be done to increase land supply and tackle affordability?
Fleming says, “We’d like to see more political will around the issue of housing demand and greater accountability that would go right down to a local government level whereby councils are obliged to provide a certain amount of land to accommodate certain population growth, but ultimately it comes down to political will and change is a sensitive issue in terms of introducing apartments into the middle ring or taking out farmland on the periphery of the city, so some sensible debate around that is needed. I think the recent changes in the federal government will help that as well. They seem to be emphasising the importance of our cities more than they have, which is nice considering they house 90% of our population.”
The HIA’s Shane Garrett says, “What we would like to see improved is the infrastructure funding mechanisms, (the introduction of) some sort of user pays scheme where buyers would pay back the infrastructure charges to some sort of local government authority for delivering these services over a period of say five, 10 or 15 years.
“And we would like to see the taxation burden relieved – the residential building sector is the second most taxed industrial sector of the economy.
On the new appointment of Jamie Briggs as Minister for Sustainable Cities and the Built Environment by new Prime Minister Malcolm Turnbull both Fleming and Garrett were favourable in the creation of this ministerial portfolio.
Urbis’s Bret Fleming: “It’s very much a step in the right direction. The federal government are actually tuning their mind to this and hopefully we will start to see some policies which will flow through to the state level and we will start to get some consistency and certainly Malcolm Turnbull is making the right noises in regards to infrastructure investment. It’s not just around roads any more but around public transport as well.”
HIA’s Shane Garrett says, “We welcome a dedicated government minister. It will be interesting to see if it translates into much action on the ground but the fact it has happened in the first place is a step in the right direction and something that we would welcome and are hopeful it will deal with some of the supply bottlenecks.”
It will be intriguing to see the results of future Land Reports from CoreLogic RP Data to see if there is a greater equilibrium between supply and demand, but in the meantime, first homebuyers are continuing to look at alternative options and locations in purchasing their first property and it’s likely developers will continue to respond with a variety of dwelling types.
Monday, September 28 2015
Conditions in the national housing market shifted slightly in favour of sellers over the quarter, but overall the market is balanced, according to CBA's our latest Home Buyer Index (HBI).
The number of properties for sale across Australia is roughly in line with the number of housing loans being committed to by our customers. In other words, supply and demand are about equal.
Conditions vary when we look in more detail at housing markets by state, city and region.
Understanding whether you’re in a buyer’s or seller’s market can give you an idea of how long properties might be on the market before they sell, what the level of buyers’ interest might be, and whether the buyer or seller is more likely to have an advantage when it comes to price negotiations.
Around the capitals
Market conditions in the capital cities generally favour sellers more than they do in regional areas. Conditions vary from city to city.
Sydney is rated 5, an extreme seller’s market. This is up from 4 in the previous HBI report, with market conditions shifting further towards sellers over the quarter, and large numbers of buyers creating competition for property.
Melbourne is also rated 5, an extreme seller’s market. Conditions have shifted in favour of sellers over the past year and the past quarter.
Brisbane, rated 3, is a balanced market. This is up from a 2 in the previous HBI report, showing that selling conditions have improved. Sellers who set reasonable prices should find buyer interest.
Adelaide is rated 4, has shifted further in favour of sellers over the past quarter. Sellers are likely to have a slightly stronger negotiating position than buyers.
Perth is rated 3, a balanced market, up from 2 last quarter. Conditions have been balanced for most of the year.
Hobart is rated 2, a buyer’s market, up from 1 last quarter. Supply continues to exceed demand, giving buyers the advantage.
Darwin is still rated 2, a buyer’s market. Selling conditions have remained weak over the past year.
Canberra is rated 4, a seller’s market, up from 3. There are more people actively looking to buy than there are sellers.
Monday, September 28 2015
ABS figures released today show that Australia’s population reached 23,714,272 persons at the end of the March 2015 quarter, 1.4 per cent larger than 12 months previously, said the Housing Industry Association (HIA).
“Today’s figures show that nearly 316,000 people were added to Australia’s population during the 12 months to March 2015,” said HIA economist, Diwa Hopkins.
“This rate of growth, while slower than in previous quarters, is still historically strong.”
“During the 1980s, 1990s and the first half of the 2000s, Australia’s population grew very steadily, with around 225,000 persons added to the population per year throughout that period.”
“Since that time, the number of people being added to the population has exceeded 300,000 persons per year, and this continued to be the case in the year to March 2015.”
“This continued high-volume population increase underlines the importance of delivering a commensurate supply of new dwellings in an affordable way.”
In the year to March 2015, the net overseas migration inflow of 173,054 persons accounted for more than half of the total growth in Australia’s population, while natural increase accounted for the remaining 142,898 persons added to the population during this period.
Across the states and territories, population growth in the year to March 2015 was varied, with the two major population centres, Victoria and New South Wales, recording the strongest growth rates; 1.7 per cent and 1.4 per cent, respectively. Western Australia’s population also grew at 1.4 per cent, while Queensland’s population grew by 1.3 per cent, the Australian Capital Territory’s by 1.3 per cent, South Australia’s by 0.8 per cent, Tasmania’s by 0.3 per cent and the Northern Territory’s by 0.2 per cent.
Wednesday, September 09 2015
Brisbane price growth while modest compared to Sydney has been growing on average at 5% a year since late 2012. This means if you had bought the right type of property in 2012 for $400,000 it is likely to have increased to $463,000 in value.
If you have done nothing over the last few years then you could say the cost of your procrastination is $21,000 a year.
In the last 6 months we have seen a number of areas increase by 8%. If that trend continued that would be 16% per annum.
I've certainly seen my fair share of procrastinators over the last few years. In the end they become pretty easy to spot. They typically have unrealistic expectations of what they can get for their budget so nothing will ever be good enough. They ask a 101 questions, seeking answers to every possible scenario like "what happens if we are invaded by aliens?". They go in circles jumping from property to property, every time their brief is met they look for reasons not to proceed. They make decision based on personal beliefs, myths or emotions rather than facts and data. They react to every snippet of information they hear from family, friends or work colleagues and come back with a new list of questions on some newly discovered topic that generally doesn't relate to their situation.
You generally see these people spin their wheels year after year still looking for the perfect, risk free property that is well outside their budget. Or they end up buying something that is completely unsuitable and under performing.
Contrast this to the clients I have worked with over the last few years, people who have taken action. They seek professional advice, they want to learn and they do ask questions, but only those relevant to their own situation that will allow them to make an informed decision. They have a clear plan on where they are going and want to put that plan into action without delay. They understand that creating wealth is a long term exercise and that wasting time is costing them money. They have realistic expectations of what they can achieve. They accept that investment has risk and doesn't come with guarantees, but they also know that risk can be managed. They are interested in the numbers and performance, not on myths or personal beliefs. And critically they take action.
Friday, September 04 2015
The following article confirms what I have been saying for some time about the Brisbane market. Unless you are in the market trying to buy you would have no idea of how much prices have moved.
If you are thinking about property I would be talking to us sooner rather than later. Contact us today
Brisbane Property Prices going into overdrive as investor demand surges
(Source - Australian Financial Review 2 September 2015)
Investors from near and far have shifted Brisbane property prices up a gear, as the number of suburbs gaining double-digit growth in the Queensland capital has nearly doubled over the past six months.
McDowall in the city's north (16 per cent growth in unit prices), Durack in the south (13.6 per cent growth in houses) and Murarrie in the east (where apartments have jumped 18.1 per cent over the past 12 months), have had their rate of price growth speed up sharply since the start of the first half of the year, real estate agency PRD Nationwide says.
In some cases, the turnaround is dramatic. Six months ago, units in the inner south eastern suburb of Coorparoo were falling at a rate of 6 per cent. Now they are growing at a rate of 10.7 per cent. Six months ago, only 18 of Brisbane's 195 suburbs were experiencing price growth in double-digit figures. That has increased to 35, PRD Nationwide's latest Brisbane Hotspots report shows. It was a big change for a city in which annual price growth had normally been between 3 per cent and 5 per cent, "and maybe 7 per cent if you're lucky", PRD Nationwide's national research manager Asti Mardiasmo, said.
"Whether it's inner western, eastern, what have you, there are now suddenly all these suburbs that have double digit growth that they've never seen before," Dr Mardiasmo said. "It's kind of going nuts."The Real Estate Institute of Queensland on Wednesday said the median Brisbane house price had jumped to $610,000 in the June quarter, after hovering around the$600,000-level for some quarters.
Brisbane house-price growth has lagged behind increases seen in Sydney and Melbourne and buyers in the two large southern cities are increasingly looking northwards. Some of these are owner-occupiers, like Debbie and Larry Koeford, who sold their four-bedroom house in Rosemeadow, 50 kilometres south-west of Sydney,and bought a five-bedroom house in Moreton Bay for $250,000. But a growing number are investors. Brisbane rental yields on houses (4.4 per cent) and apartments (5.4 per cent) at the end of August were the highest of any of the five mainland capitals tracked by data provider CoreLogic.
Growth was not limited to any one pocket and was evenly spread across the Brisbane area, Dr Mardiasmo said."There are actually hotspots and high-growth suburbs in each part of Brisbane," she said. It was difficult to break down investment between local and foreign sources of capital, Dr Mardiasmo said. Brisbane estate agents have a strong selling season in January,when holidaying Sydneysiders and Melbournians come looking for property, but the city was also seeing a higher level of buyers from overseas than before, she said.
Contact us to discuss your plans.
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