May 2013 - Pathway to Recovery
By Rich Harvey, Managing Director propertybuyer
Welcome to your May propertybuyer market update.
In this edition we will look at;
- Pathway to Recovery - Market Update
- Hot Property Alert
- Client stories
- Seminar - Profitable Subdivisions, Wed 22nd May
- Vinnies CEO Sleepout
1. Pathway to Recovery - Market Update
As buyers' agents we have noticed a strong upturn in buyer sentiment with a 25% increase in new clients in our own business. This spans a wide buying range from $250k investors to $10 million+ prestige buyers. We have also seen increased demand for commercial property from investors seeking quality assets deliver over 7% net yields (especially for SMSF) and from developers seeking small to medium size sites for townhouses and units.
The Australian property market is showing positive signs of recovery with mixed results in each capital city. While in 2011 we saw prices drop due to higher interest rates and a sluggish economy, in 2012 house prices began to rise in the recovery phase as rates came down improving affordability. So far in 2013 we have witnessed the economic confidence being restored and the housing market entering the expansion phases. The May rate cut of 0.25% will help stimulate demand for housing but the RBA have indicated there could be more cuts to come if the economy shows any further signs of weakness.
The key to continued house price growth is totally dependent on the “Economy” or more specifically four key drivers:
- Low unemployment and rising wages
- Low interest rates
- Improved consumer and business confidence, and
- Stock market revival
Median house prices for each of the major capital cities over the past 7 years below shows the ebb and flow as impacted by rates and other influences.
The prestige property market in Sydney has seen two significant sales recently with “Altona” at Point Piper selling for around $55 million and another waterfront mansion at Point Piper, the “Bang and Olufsen” house, selling for $33 million (both to Chinese buyers). While the prestige market is primarily driven by stock market activity, the new Significant Investor Visa for migrants and Australia being seen as a safe haven has brought many offshore buyers seeking luxury homes.
The home buyer market is primarily driven by up-graders seeking a better home. In Sydney, auction clearance rates have averaged around 70% since the start of the year and with interest rates at a record low of 2.75% we expect to see rising demand from home buyers. This is good news for vendors as they will have more confidence to list their properties in a rising market. And good news for buyers as more stock should come on the market. Contrary to popular belief, winter is actually a good time to list a property for sale as there are traditionally fewer properties on the market creating increased competition. If vendors wait till spring, the increase in supply will dilute buyer competition.
Investors are also growing in numbers, attracted by lower interest rates, rising yields and the potential for capital growth in the expansion stages of the property cycle. According the latest ABS figures, investors are making up almost 50% of the buying market as outlined in the table below.
We have found some excellent opportunities for our investor and home buyers clients over the last few months. Here are some selected highlights:
- Western Sydney – Brick house renovated $290k, $350pw rent, 2 bed granny flat $100k, rent $290
- Western Sydney – House $245k, 310pw, 1 bed granny flat, $80k, $220 pw rent
- Newcastle region – $445k renovated 5 bed 2 story home with yield of $800 pw
- Hunter Valley – Renovated 3 bed townhouses for $220k, yield $320pw
- Hunter Valley – Near new 3 bed 2 bath modern townhouse Price $380k, rent $450pw
- Hunter 2 bed house plus 2 bed granny flat 350k, total rent $545pw
- Regional QLD – 3 bed townhouse $415k, rent $620pw
- Sydney Inner West – 2 bed apartment $440k price, rent $450pw (very competitive market)
- Camperdown - 2 bed 2 level apartment $720k, one next door sold $5k more 2 weeks later
- Maroubra - 2 bed unit valued at $645k purchased at auction for $625k
- Manly – Home buyer, appraised $1.25m, purchased $1.18m, shortage of stock, off-market
- Cammeray - $710k, saved 30k off appraisal, great views and strong capital growth potential
- Wahroonga – purchased home first week on market, $1.1m, very specific buyer criteria
- Wollstonecraft - 3 bed townhouse, $980k, ground floor & outdoor space close to train
- Commercial buyer - over $3m for new medical / dental surgery in Chatswood
2. Hot Property Alert - Mackay Townhouses 7% Discount to Valuation
In our constant search for high quality property investments we often uncover some outstanding deals for our subscribers. We recently found a developer offering a substantial 7% discount to valuation for some extremely well priced and well position apartments near the CBD of Mackay.
Adorna apartments is virtually in the centre of one of the biggest and diverse growth areas in the country right now. It is comparatively cheaper than similar projects in the vicinity and will be cash flow positive from year 1!
- Priced under $300,000
- Returns approx 9% unfurnished
- Returns in excess of 10% furnished
- Similar properties down the road are up to $100,000 more expensive
- Mackay is not a mining town: It is supported by mining, not dependent
- Mackay is the biggest volume exporter of coal in the world, with expansion set to almost double
- Population 125,000, growing to 200,000 by the year 2025
- One of largest sugar exporters in the world
- Education at University of Central Queensland and James Cook University
- 1km walk to Caneland shopping centre with over 230 stores inc all the big brands like Myer, Coles, Woolies, Jb Hi-Fi etc
- Strata fees only $350 p.q. extremely low!
- On a 90% LVR, the one bedroom units return over $100 pw positive cashflow
To secure a property a $1,000 deposit is required, the 10% deposit is payable at signing of contracts. You would not need to get finance until 3 months out from settlement.
To find out more email your enquiry to firstname.lastname@example.org
3. Client Stories
Here is a selection of feedback from some of our happy clients last month:
"...a short time taken to achieve my goal."
Cathy C, Doctor
Buyer type: Investor
Buyer's brief: 2nd investment purchase
To purchase a good quality investment property in the Inner West with good growth prospects and well located. I was not feeling confident prior to engaging propertybuyer nor was I familiar with the area. I was also time poor and overwhelmed at the prospect of researching and looking myself. If I was to do the search myself I was concerned about the time taken, worried that I may not recognise fair value, overpay or get too emotional regarding the purchase.
Propertybuyer showed different locations, price ranges to familarise me with the area. Very efficient use of time with rapid elimination of unsuitable properties. Afterwards I felt confident that I have a good investment and happy with the short time taken to achieve my goal. Engaging in propertybuyer is a great investment and I wouldn’t do this any other way.
"propertybuyer is a great investment and I wouldn't do this any other way."
Buyers' Advocate, Anna Rorke
Cathy was looking for an investment property in the Inner West, Surry Hills area. As she was unfamiliar with the area, we inspected properties in these areas in different price brackets so Cathy had an understanding of the suburbs and what you get for your money. This enabled Cathy to make an informed decision with our guidance and feel confident in buying. It was a pleasure to help achieve a good result and I enjoyed the time spent.
4. Seminar - Profitable Subdivisions, Wed 22nd May
Only ONE WEEK TO GO till our next multi-speaker seminar 'Profitable Subdivisions'.
Static property investments rely on long term capital growth to generate equity and profit.
Completing a subdivision is a smart way to create profit in a relatively short time that can be used to purchase further property, or to recycle into another venture. Would you like to discover how to make a cool $70,000 in under 12 months?
Finding suitable subdivision sites is difficult work. It requires countless hours of searching, calling agents, talking to council planners, engineering consultants, town planners, market research and negotiation. There are loads of traps for the unwary when it comes to subdivisions. Have you considered subsidence, run off, easements, covenants, sewerage, water and electricity access? Are you familiar with the local DCP and other restrictions on land use? What are the section 94 developer contributions?
Not all locations are equal. It is critical to look at the supply and demand situation to examine whether there are any significant developments about to take place in the area that could affect local market pricing. Profitable subdivisions is all about identifying the right area and then finding sites where the numbers stack up.
As you can see, completing a subdivision is not for the newbie investor. It is for investors that have some level of comfort with risk and are prepared to work with professional consultants to achieve the most profitable outcome. To find out how you can benefit from undertaking a subdivision join me and three other specialists as we share our knowledge.
Date: Wednesday 22nd May 2013
Time: 7.00pm to 9.00 pm (6.30pm for registration)
Venue: Forestville RSL, Melwood Avenue, Forestville NSW
Cost: Single Ticket $29, Double Ticket $39
Parking: On club grounds
Tea/Coffee & notes provided
Telephone enquiries: 02 9975 3311
Seats strictly limited - book your ticket now.
- Designing an overall strategy for your property investments - where do subdivision fit in?
- Real life case studies
- Crunch the numbers BEFORE you buy - realistic feasibility
- What resources do you need to undertake a subdivision
- What are the risks? What can go wrong?
- How much profit is realistic?
- Which consultants must be on your team
- How to structure the right finance
- Tips and traps in getting finance approved quickly
- Tax advice, structures and other important things before you sign a contract
- Exit strategies - sell both blocks, retain all or build some and sell some?
- The subdivision process - how to make it streamlined AND profitable
1. Rich Harvey, Managing Director and founder of propertybuyer
Rich is a buyers' agent, property investor and professional economist with over 18 years experience in the property industry. He is a research expert and highly skilled in investment analysis and negotiation techniques that can deliver real savings for his clients. Rich and his team have purchased over 1200 properties for their clients. As Australia's leading Buyers Agent, Rich has won 20 major awards including the prestigious National Telstra Business award in 2007 and also named the winner "Best Buyers Agent in Australia" by the Real Estate Institute of Australia (REIA).
2 . Shukri Barbara, CPA & Principal Adviser at Property Tax Specialists
Sought by investors for his common sense approach Shukri Barbara specialises in advising people with investments in property. Winner of 'Your Investment Property' Magazine's Readers Choice Award as Best Property Tax Specialist for 2011 and 2012, Shukri Barbara is a CPA & CTA with over 30 years' experience in public practice. As Principal Adviser at Property Tax Specialists, Shukri combines his worldly, business and marketing experience together with his property tax specialty to support property investors with practical as well as technical advice on ownership structures, asset protection, (legally) minimising tax, cash flow analysis and generally guiding them through the journey of creating wealth with property. Shukri's expertise is much sought after and has been interviewed on Sky TV's your Money your Call program with Chris Gray on multiple occasions. He is also tax columnist at Smart Property Investor magazine. He will only be presenting a select number of seminars this year, so book your seat now.
3. Jeremy Allen - Subdivision Specialist at propertybuyer
Being in real estate for 12 years and investing for 7, Jeremy has learnt the strategies involved in all aspects of property investment. Starting out with buy and hold and cashflow strategies, then branching out to subdivision, renovation and other value adding type strategies, Jeremy has customised portfolios for hundreds of people and coached them from rags to riches. He now speaks regularly at property investment events and coaches people from all walks of life to make their dreams come true through property investments.
4. Jason Hayden - Director of Blue Zinc Finance
Jason started his working life as a Chartered Accountant, working for the big four accounting firms in Sydney, Australia. Whilst working with Greenwood Challener, Jason audited Mortgage Choice which stimulated his initial interest in the developing mortgage broking market in Australia. As a Compliance Manager for GIO, Jason took a short break to America where he observed the burgeoning US broking market. Upon his return Jason resigned from GIO, and founded Mortgagemaker Australia. After several years of successful growth in his own mortgage business including listing in the BRW Fast 100, Jason looked for industry software to gain greater business efficiency. With no viable solutions available, Jason developed a proprietary solution and in 2001 created iLend™ which remains the leading independent supplier of mortgage and website solutions for mortgage brokers in Australia and New Zealand.
4. Vinnie's CEO Sleepout
On Thursday 20th June, I am sleeping rough again to raise funds and awareness for people experiencing homelessness. Across Australia some of Australia's top business and community leaders will Rise to the Challenge to support the 2013 Vinnies CEO Sleepout.
All money raised will go towards helping the estimated 105,000 men, women and children experiencing homelessness in Australia. These funds will help them find the warmth, safety and dignity that they desperately deserve.
It only takes a moment to make a different. Please visit www.ceosleepout.org.au to find out more and make a donation.