Property price versus employment

At the end of last week, the RBA released a previously confidential report from November that showed the consequences of reducing the cash rate by 100 basis points. The document pointed to a potential 30% increase in property prices over the next three years should borrowers see the low rate as being permanent, and a price increase of 10% should they see it as temporary. While this would help drive the economy through increased wealth and household spending, it could also induce borrowers to bite off more than they can comfortably chew in credit. 

Property price versus employment

According to the internal RBA communication, an increase in asset prices is likely on the cards as lower financing costs work to support the supply of credit and contribute to a lower exchange rate. The report said rising asset prices, including those of property, would create an increase in wealth which would invariably lead to an increase in household spending – while an increase in collateral would boost the borrowing capacity of households and businesses.

But according to Edge, this could come at the detriment of first-home buyers.

“I don’t believe that either scenario can point to precisely what increase we will get in house prices but there will be a sustained increase as a result of a permanent rate cut,” he said. “It will continue to push housing prices higher and out of reach for first home buyers, so we will be revisiting the same issues.”

Mitchell agreed that property prices would likely increase as a result of sustained low interest rates, but referenced a recent increase in loan commitments within the first home buyer segment.

“Lower rates are going to mean that property prices will probably increase,” she said. “I guess the question is, what’s the most important thing? Is it allowing some of those property prices to increase but actually stimulating the economy and getting more people employed? I think they’ve (the RBA) decided that employment’s more important.”

On the question of how this would affect housing affordability, Mitchell pointed to record high loan commitments from November, adding that moderation would be key when it came to balancing rising asset prices.

“If it doesn’t get out of control that’s great, and if first home buyers are now able to come into the market when they haven’t really had that opportunity in the past that’s great too,” she said. “It’s really all in moderation that we can let some of the asset prices go up a bit.”

The risk of taking on too much debt

One of the risks attached to rising asset prices in the RBA report was that “borrowers might be induced to take on too much credit if accompanied by looser lending standards and/or optimistic assessments of risk.” When coupled with the treasurer’s proposed relaxation of responsible lending obligations, and an increase in new LVR lending above 85%, Edge believes price increases are likely.

“However, we do run the risk of households getting into more debt and financial trouble due to the looser lending requirements,” he added. “I see banks tightening their own internal systems and checks to avoid having borrowers who cannot afford the loans they want.”

“It’s important to understand that when the treasurer says he wants to pull back on some of the parts of responsible lending, he’s not trying to get rid of oversight of the lending process,” said Mitchell. “APRA still has oversight of the lending process and more than that they’ll also bring the non-banks into that same oversight.

“I still believe that APRA will have a tight rein on the different institutions and I also believe that the banks themselves will look very, very much at their credit and what may happen with some of these asset values, and they will take that into consideration because they want a safe portfolio as well.”

She said that while we won’t know exactly what the reimagined responsible lending obligations will look like until March, one thing is clear.

“It’s getting more and more complicated,” she said. “It’s unprecedented times and I just want our brokers to think very carefully and make sure that they are focusing on all the change happening out there.”

She said it is important for borrowers to reach out for guidance given the complexity of the lending environment – making it all the more crucial that brokers understand each change that happens while understanding how the changes will affect each individual client that comes to them.

Edge said that rising house prices would lead to more work for brokers, adding that “compliance will be more important than ever.”

Related stories:

What does 2021 hold for property market?

With Australia’s housing market recording respectable growth in 2020 despite the COVID-19 pandemic, the Real Estate Institute of Australia is predicting further price increases in 2021.

REIA President Adrian Kelly said the winding down of the JobKeeper and JobSeeker programs may cause temporary issues for tenants in some capital cities, but the trend of relocation to regional areas is likely to pick up steam.

“Traditionally there is a reduction in the number of house sales over the holiday period due to buyers going away for the festive period, but due to the current restrictions, people are taking advantage of market conditions whilst they are unable to travel and looking to buy while they can,” Kelly said.

Kelly also said that the property sector has been critical to Australia’s economic performance.

“Government stimulus measures and continued low interest rates have been in part responsible for the resilient demand for residential property,” he said. “Even though growth in new dwelling investment is unlikely in the 2020-21 financial year, given the lags between building approvals and construction activity, the forecast for dwelling investment has been revised from -4% in the Preelection Economic and Fiscal Outlook to -3.5% in MYEFO.”

Kelly said that with the possibility of a federal election being called as early as August, policy makers should make commitments about property policy for all stakeholders in the real estate industry – from first-home buyers to investors.

“In May just prior to the 2019 election, house sales were the lowest in two decades across Australia, which was largely attributed to election commitments from the federal opposition to abolish negative gearing and capital gains tax (CGT) in their current form,” Kelly said. “Given the major role investors played and continued to play in providing housing over the pandemic, it is critical that in the run-in to the election that policies from all sides of politics work for all players in real estate.”

On the whole, Kelly expressed optimism about the year’s possibilities for the housing market.

“Overall, the real estate industry looks forward to a positive year for the Australian property market, with the promise of an Australian COVID-19 vaccination program allowing life to resume to a new normal,” he said. “For customers, whatever your objective is for this year, whether you’re downsizing, investing or making a lifestyle move, talk to your local agent about your options for 2021.”

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Housing’s puzzling strength

Australian housing finance approvals beat expectations again in November, the number of approvals for owner occupiers up 2.1% vs expectations of a flat result. Approvals ex refi rose 2.4%mth to be up 9.2%yr.

The value of housing finance approvals to investors also posted a rise, up 1.5% but is down –8.3%yr.

The Nov detail showed continued strength in first home buyer loans (+4.5%mth, 36%yr) concentrated in NSW and Vic where state government stamp duty concessions are giving a big boost and activity is coming from a very low starting point.

Construction-related approvals were up 2%mth, 7.6%yr.

By state, gains in NSW (+1.9%mth), Qld (+4.3%mth) and SA (+2.1%mth) offset falls in Vic (–0.3%mth) and WA (–2.7%mth). Annual growth remains strongest in Vic (+16.8%) and NSW (+10.9%) bearing in mind that this is owner occupier approvals only (ex refi) and that the slowdown in investor activity has had a more material impact in these two states, NSW in particular.

Overall, the total value of finance approvals ex owner occupier refi was up 2.1%mth, and 1.7%yr. That compares to turnover, down around 16%yr, auction clearance rates, down over 13ppts, and an abrupt slowdown in price growth, down from a double digit pace mid-year to a sub-5% annual pace currently.

While the pull back in investor finance approvals is broadly consistent with macro-prudential tightening measures impacting this segment, the continued strength in owner-occupier activity has been surprising, particularly given material slowdown in wider housing market activity evident in other measures. Overall, the total value of loan approvals including investor loans and ex refi has firmed over the last year, up 1.7%yr.

The comparison with the previous macro-prudential tightening episode in 2015 is also intriguing. This resulted in a similar slowdown in wider market measures and a sizeable 10%+ decline in the total value of finance approvals.

The differences are puzzling but may be an indication that weaker foreign buyer demand – evident in the wider housing market performance but not captured by finance approvals – may have had a greater hand in the 2017 slowdown.

Matthew Hassan is senior economist with westpac

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Is it now possible to imagine Australia having a national affordable housing strategy, backed by funding, by the end of 2016.

At the National Housing Conference last week, there was considerable optimism about the newly appointed federal minister for cities, Jamie Briggs, whose infrastructure mandate includes housing. New energy is coming from the states with the largest affordable housing deficits – a social housing initiative from the New South Wales government and a “refreshed” metropolitan planning strategy in Melbourne with a stronger emphasis on affordable housing.

It is now possible to imagine Australia having a national affordable housing strategy, backed by funding, by the end of 2016.

Australia certainly needs such a strategy. The population is projected to reach 38 million in the next 35 years. Sydney and Melbourne are each expected to grow by at least three million people. The proportion of older people will be higher, with a lower proportion in the paid workforce.

This means we need at least six million new housing units in the next three decades. There is increasing impetus to locate these dwellings close to public transport, employment clusters and health and social services.

Cost pressures are intensifying

Rising housing demand and prices affect everyone, but low-income renters have fared worst in recent years. Capital city rents rose by twice the level of inflation from 2005 to 2010. By 2011, the shortage of suitable rental properties exceeded 500,000.

As a result, even most households that receive Commonwealth Rent Assistance (projected to cost A$6.6 billion in 2015-16) pay well over the recommended maximum rent. Some 55% of the A$7.7 billion annual cost to the government of capital gains exemptions and negative gearing goes to the top 10% of income earners. Only 4% goes to the bottom 20% of households by income.

Existing programs are not accomplishing policy aims. The Abbott government discontinued two small national programs, the Social Housing Initiative co-funding construction of non-profit housing and the National Rental Affordability Scheme subsidising below-market rental housing. No national strategy or infrastructure funding program has replaced those small but important initiatives.

Key steps towards affordability

What would be the basic elements of a national affordable housing strategy? Economist David Rosen led a review of the US$7 trillion spent in the US on federal finance, tax, lending, spending and regulatory programs and policies. According to Rosen, the place to start is a standard definition of “affordable housing”.

Malcolm Turnbull’s appointment of a cities minister, Jamie Briggs, has raised hopes of action on developing a national affordable housing strategy. AAP/Lukas Coch

The next step would be to calculate current and projected need for affordable housing by subtracting housing need from the available stock. There are local efforts to calculate this in cities like Melbourne, but it would need to be done in a consistent way across the country.

The cost of owning or renting a home includes rent or mortgage payments, property taxes and unit maintenance. A household can also incur onerous transport costs, if living far from employment and good public transport. Internationally, affordability is usually defined as housing that costs no more than 30-35% of household income, adjusted for household size.

For households earning less than 30% of their area’s median income, private market housing will almost certainly be out of reach without some form of subsidy.

In metropolitan Melbourne, for instance, the average weekly income is A$1333. A little over 11% of households in the city (159,000 households) earn less than A$400 a week, which is 30% of the median income. These households could only afford to pay a maximum of A$133 a week on the rent or mortgage. Less than 1% of rentals in Melbourne are available at those prices.

Social housing constitutes less than 3% of total housing stock. Most of it is occupied by these low-income households. So, at the most basic level, affordable housing would seek to fill that shortfall of more than 150,000 units in one major city alone, as well as building for future affordable housing needs.

How do we fund affordable housing?

After calculating need, the next requirement for a national affordable housing strategy would be to identify all potential revenue sources to fund it. These could be direct funding from national, state and local governments, but also indirect funding through tax rebates, low- or no-cost land, or mechanisms like reduced parking requirements or expedited planning approvals (which cuts land-holding costs and uncertainties).

A plethora of mechanisms used in other countries could be adopted here. For instance, in the US the Low Income Housing Tax Credit has, since 1986, allowed private investors to obtain tax credits in return for a ten-year investment in constructing or rehabilitating low-income rental housing. The stable and bipartisan program injects about US$6 billion a year in capital into affordable housing.

If a small proportion of the negative gearing tax credit were re-allocated towards investment in social housing, a similarly scaled program could be instituted in Australia. Similarly, if the Commonwealth guaranteed a 6% return on social housing investment, how much of the A$2 trillionheld in superannuation funds could be unlocked?

For the past two years, the Transforming Housing project has brought together state and local government, private developers, community housing providers and commercial and philanthropic investors to identify barriers to scaling up affordable housing in metropolitan Melbourne and how to overcome them.

Much of the emphasis has been on mechanisms at a state and local level, ranging from value capture financing to innovative design and construction. However, there is growing consensus that a Commonwealth affordable housing strategy is essential to enable integrated action by other levels of government and the private and charitable sectors.

With a clear sense of the numbers around affordable housing need and a stable financing and renewal model, the Turnbull government could reap multiple co-benefits. A national strategy could make cities more liveable, stimulate the property and construction sector, and reduce healthcare costs. The private and charitable sectors are waiting to swing into action.

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This article was co-authored by: Dr David Rosen, principal of DRA Associates and an advisor on development, finance and policy; Rob Pradolin, general manager of business development for Frasers Property Australia; Catherine Brown, CEO of the Lord Mayor’s Charitable Foundation; and Dr Heather Holst, deputy CEO and director of services and housing for Launch Housing.

Five of the major regions throughout Queensland are experiencing steady improvements in median house values.

The Sunshine State is establishing its growth potential according to data released by the Real Estate Institute of Queensland (REIQ).

“This report supports the REIQ’s long-held view that those areas of Queensland that have been doing well are continuing to do well,” according to Antonia Mercorella, CEO of the REIQ.

Brisbane is the fastest-selling area in the state with average days on market at 57 – a drop of eight days compared to a year ago.

Brisbane median house values have also risen 1.6 per cent over the March quarter, which along with Toowoomba reflects the state’s the highest quarterly increase.

The capital city’s proportion of profit-making sales increased three per cent in the year to reflect 96 per cent.

Toowoomba holds the state’s record, however, with 98 per cent of all houses sold recording a profit for the vendor.

Mercorella says Queensland is in the grip of steady, sustainable growth, although some regionals are in a recovery phase.

“Those areas that are struggling to recover from the resources downturn are still trying to stabilize,” she says.

“But what we don’t have is the start of another boom and bust cycle, which as we all know by now, doesn’t really benefit anyone in the long-term.”

Five of the major regions throughout Queensland are experiencing steady improvements in median house values.

Brisbane, the Gold and Sunshine coasts, Toowoomba and Cairns, all showed rising annual median house values of approximately 1.5 to 1.9 per cent on average each quarter over the past year.

Gladstone’s median house values rose by 0.8 per cent, which is the city’s first positive move in five quarters.

The rate of decline in Mackay’s median values appears to be slowing with a drop of one per cent to its annual median value in the March quarter.

In addition, Townsville’s median house values rose 0.7 per cent, and its proportion of profit-making sales has remained stable at 74 per cent since August last year.

SEE ALSO RENTAL MARKET EXCERPT FW: http://wp.me/p2zAfd-2l8

Why banks reject finance

May 27, 2015

The rate cuts Australia’s currently experiencing are having a huge effect on what people are able to borrow. It’s especially good for first homebuyers and investors who may be able to buy properties now that they couldn’t afford six months ago with higher interest rates.

BY RYAN CRAWFORD

However, just because you can borrow more doesn’t necessarily mean the bank will approve your loan application.

There are many reasons your loan may be refused. A lender may turn down a loan application even if the financial side of the loan stacks up.

Here are the main reasons I see loans being refused and my tips on improving your chances of being accepted:

* You have credit report defaults or a low credit score
Missed or late bills and repayments will show on your credit file and these can adversely affect your chances of getting a home loan. Ensure your bills are paid on time and resolve past disputes quickly. You can also check your credit file using services such as Veda Advantage.

* The lender may believe you won’t be able to afford repayments based on your financials
Lenders examine your income, living expenses, and other financial commitments to evaluate how much they think you can afford to borrow. Work out how much you think you can afford and create a budget to see how much of your income is available to meet home loan repayments. There are some great tools and calculators online to assist with this.

* You don’t have adequate savings in your bank accounts
You might have your deposit covered as well as enough income to meet your monthly repayments, but the lender might still say no based on your savings history. Demonstrate to the lender that you’re capable of managing your finances and meeting commitments with a savings plan.

* You don’t have an adequate deposit or equity
Lenders have minimum deposit requirements and depending on the property and application you may be required to have more. Ask your lender what size deposit they’re looking for before you apply for the loan. This will help with your savings and identify the type and cost of property you can afford.

* The property itself, for various reasons, is deemed too high-risk
Property criteria can affect your application, such as the area the property is located (for example, some banks won’t lend in certain regional areas) or small building size apartments. Check with your lender that the property you’re interested in is acceptable for a loan.

The bottom line is, when applying for a loan you need to have all your financial information up to date. Apply once you’re prepared and be clear about your investment goals and projections for the next three to five years. Show the lender that you’ve given a lot of thought to purchasing your next investment property and how you intend to manage it.

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New property investors paying too much – Money magazine

It’s a case of “buyer beware” for investors thinking of getting into the Sydney, Melbourne or Brisbane residential markets. With Sydney prices overvalued by 25%, according to one leading expert, and further rises expected in Sydney, Melbourne and Brisbane this year, new investors in these markets could be in danger of paying over the odds.

They are likely to also get low rental returns, making them dependent on ever-rising values to earn decent long-term returns on their assets.

Capital city house and apartment values have been rising at more than three times the pace of weekly rents, says Tim Lawless, head of research for CoreLogic RP Data. “The byproduct of such strong capital gains and relatively weak rental growth is that rental yields are being forced lower and lower.” Across the capital city markets gross rental yields have fallen from an average of 4.3% to 3.7% in the year to February 2015, Lawless says.

House price rises of between 7% and 15% this year for the three eastern state capitals are on the cards, according to respected property analyst Louis Christopher, who heads SQM Research. He says that while there is no national housing boom now, if his forecasts are correct east coast capitals will show very robust price growth. The Sydney market is about 25% overvalued. When it reached about 35% in 1989 there was a price correction, Christopher says.

Weaker jobs growth, low wage rises and an economy lacking in confidence are unlikely to spark higher rentals.

Investors entering the market now, especially in Sydney and to a lesser degree Melbourne and Brisbane, need to be very confident that the good times will continue to roll. They are banking on no interest rate rises, no changes to the negative gearing or capital gains tax rules and no inclusion of the family home in the asset test for the age pension, all of which have the potential to send prices down.

Interest rates will rise at some stage, although most economists are predicting at least one more cut before that happens. Christopher says a 0.25% rate increase would stop any housing market boom. “But when are we going to get a rate rise?”

Politicians of all persuasions fear the repercussions of changing the tax rules for property investors but there is a growing band of experts advocating changes, partly to lessen the burden these tax breaks place on strained government coffers and also to help first-home buyers get into the market.

“Negative gearing survives because of persistent myths that it improves housing availability and reduces rents,” says John Daley, head of the Grattan Institute, in an article in The Sydney Morning Herald. “It survives because 1.2 million taxpayers – most voters – use it to minimise their tax. But negative gearing is expensive, inefficient, inequitable, and it reduces home ownership. For governments under severe budgetary pressure it should be near the top of the reform list.”

Whenever possible changes to negative gearing are raised, the real estate lobby points to 1985, when it was abolished for a short period, claiming it harmed tenants because rents rose sharply and the supply of rental accommodation fell. But Bank of America Merrill Lynch chief economist Saul Eslake disputes this, saying rents rose only in Sydney and Perth. And these rises were sparked by tight supply with vacancy rates less than 2%, not the abolition of negative gearing.

If negative gearing is modified or abolished and investors dump their properties, it’s likely many will be bought by first-home owners, so while there will be a drop in the supply of rental property there will also be a fall in demand, Eslake says.

Pam Walkley, founding editor of Money and former property editor with The Australian Financial Review, has hands-on experience of buying, building, renovating, subdividing and selling property.

New property investors paying too much – Money magazine.

Too many property investors are missing out on important cash flow by neglecting depreciation

Many property investors are missing out on beneficial depreciation tax claims. The annoying thing is how often this happens, when it really doesn’t need to happen at all!

Tax depreciation is often an overlooked method of obtaining tax deductions on investment properties. It is a big help in enabling investors to minimise their tax liability and improve their cash flow. Sadly though, we often see situations where depreciation either isn’t maximised to its fullest potential, or worse yet, overlooked entirely.

The Australian Taxation Office (ATO) recognises that the value of capital assets reduces over time as they approach the end of their effective life. These assets can be written off as a tax deduction ie. ‘depreciation’.

What depreciation should I be considering?
If you own an investment property (new or old, large or small), two areas of depreciation are available:

1. plant and equipment
2. capital works on the building

Different items within a rental property have different rates of depreciation based on the effective life of the item. These items are identified by certified quantity surveyors, who inspect the property assets and then calculate its depreciation through their expertise and knowledge of which items are depreciable and how savings can be achieved.

To claim maximum tax benefits on an investment property the ATO encourages property investors to obtain a fully compliant tax depreciation report prepared by a certified quantity surveyor. You or your accountant will use this report when preparing your income tax return.

Further, some property investors may not realise that they don’t have to wait all year to benefit from the depreciation deductions available to them. Instead, they can improve their cash flow throughout the year simply by nominating to use a Pay As You Go (PAYG) withholding variation.

A PAYG withholding variation allows individuals to vary the amount of tax withheld by their employer in each pay to anticipate their tax liabilities. This means that they can take advantage of the deductions available to them regularly, rather than waiting until the end of a financial year for their tax refund. You should speak to your accountant about this.

When to obtain a property depreciation report

Ideally, a depreciation report should be obtained soon after the purchase of an investment property. This enables a quantity surveyor to separate the items included in the purchase price, from the expenses that will be incurred by the new owner in the future. This detailed analysis ensures the maximum investment property depreciation allowances can be claimed.

A depreciation report is critical documentary evidence required by the ATO to support any tax deductions for components of an investment property that are decreasing in value. All investment properties are eligible to have their assets depreciated where, generally speaking, construction costs are incurred after 18 July 1985 and structural improvements are incurred after 27 February 1992. This applies even if the previous owner paid for the construction. In the event that the original construction cost data is no longer available, the ATO stipulates that a quantity surveyor must assess this figure.

Where to start – immediate tax depreciation write-offs and the low value pool

Obtaining independent, professional property advice ensures investment property owners stay up to date with the intricacies of tax legislation and can make well-informed decisions that enhance cash flow. For instance, waiting until just before the close of the financial year to buy an asset for an investment property may entitle you to claim the full cost on your tax return for that year. For example, plant and equipment assets valued at $300 or less are generally able to be written off at 100 per cent in the financial year of acquisition.

Moreover, under the Low Value Pool Regulations, certain items can be depreciated more quickly. Items that enter the pool are depreciated at a set rate or 18.75 per cent in the first year but in subsequent years, the percentage rate of depreciation jumps up to 37.5 per cent on the diminishing total.

What can effective property depreciation save you?

In typical situations – say a commercial property investment of around $1,000,000 – using a quantity surveyor and well-prepared depreciation report can result in clear benefits. Potential tax deductions under a well-planned depreciation schedule could total in excess of $27,000 in the first year of claim and over $100,000 for a 10-year period following the purchase of the property. For an individual taxpayer on the top marginal tax rate of 49.5 per cent (2014/2015 individual tax rate), the tax saving would be $13,365 on a $27,000 tax claim.

Of course, depreciation is only one component of owning an investment property and the associated tax deductions. Other deductions could include:

• fees to property management agencies (SEE WHAT WE CHARGE VRS WHAT OTHERS CHARGE http://wp.me/p1qS3N-7YJ
• repairs and maintenance to the property and its fixtures (IMPORTANT INFORMATION TO NOTE:-

AT A GLANCE

• Property Management & the Sales of Properties with tenants in place
• Individual solutions to fit our client’s needs
• Body corporate management
• Competitive Commission Rates (CONTACT US FOR DETAILS)
• LET FEE FOR REFERRALS, We are a business built on 20 years of Referrals.
• NO Lease Renewal & Comparable Market Analysis’ Fees/Charges
• PHOTOS TAKEN ON ENTRY, tenants are shown about safety switches and water mains etc.  We meet all tenants on site.

                Hands on approach to all Property Investment Management Matters
• interest payments on mortgages over the property
• council and water rates
• property insurances  * smoke alarm compliance *Terri Scheer Landlords Insurance

The total deductions can be considerable and go a very long way to improving your tax bill at the end of the financial year and throughout your years of investment in the property.

Clearly, there’s a real advantage in obtaining a depreciation report on your investment property. Our recommendation is to make sure you have a good depreciation strategy, but consult your accountant and other advisers before you finalise this!

0409 995 578 (Linda)
http://www.ljgrealestate.com.au/index.php?lan=ch Chinese website
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Mirvac To Develop $850m Eagle Farm Residential Project

Leading property group Mirvac has been selected as Brisbane Racing Club’s preferred partner for the development of its $850 million Eagle Farm Residential Precinct.

Mirvac were chosen from a shortlist of three contenders to partner with the Club on this quality project.

The Eagle Farm Residential Precinct will be built alongside the Eagle Farm Racecourse and as one of Brisbane’s most exciting lifestyle developments to date, the tender drew attention from local, interstate and offshore developers. The 10-year project forms part of the Eagle Farm Master Plan and will see the delivery of over 1,000 trackside apartments alongside an exciting food, beverage and retail destination.

Located in Ascot, just 6 kilometres from the Brisbane CBD, the 54,000 square metre site offers a premium, large-scale development opportunity in a thriving part of the city’s north east. A range of retail, commercial, hospitality and entertainment facilities are planned for the adjacent land.

Mirvac’s Group Executive Residential John Carfi said the business was thrilled to have been selected as the Brisbane Racing Club’s development partner at such an iconic Brisbane location.

“This location provides Mirvac with an excellent opportunity to deliver quality residential apartments in the heart of Brisbane’s popular racing precinct,” he said.

“Mirvac will draw on its expertise and strong track record of delivering major residential and mixed-use developments and we look forward to working closely with the Brisbane Racing Club on the next phase of this exciting project.”

BRC’s Chairman Neville Bell said Mirvac had been chosen after a vigorous selection process based on its experience in large-scale, mixed-use development projects.

“The redevelopment of the Eagle Farm Racing Precinct is an exciting step for us as part of our 10 year Master Plan,” he said.

“Mirvac’s extensive experience in similar projects aligns with our objectives for the future of the club.

“We are delighted to have a major developer of Mirvac’s calibre onboard as we work through this significant redevelopment.”

The announcement for Mirvac follows successful sales results at its Waterfront, Newstead development which has delivered more than $150 million in sales.

THE MASTER PLAN

Situated six kilometres to the Brisbane CBD, the 5.431 hectare site is approved for residential apartment towers up to 15 storeys.

The site, known as Precinct 5B of the Eagle Farm Master Plan area, provides a rare opportunity to partner with the Brisbane Racing Club to develop its large residential development site.

Brisbane Racing Club’s General Manager – Property & Asset Management, Mr Jeff Kahler said the Club was seeking a joint venture partner for what will be one of Brisbane’s most exciting developments.

“Brisbane Racing Club has obtained planning approval for the master planned development of Eagle Farm and Doomben Racecourses and is seeking a joint venture partner for this iconic Brisbane residential opportunity which will appeal to large developers who want to be involved in a premium, large scale development,” said Mr Kahler.

Knight Frank’s Director of Commercial Sales, Mr Morrison said that the master planned development of the non-core land of Eagle Farm and Doomben Racecourses is a rare opportunity for a local or offshore developer.

“This approval is one the largest and most exciting lifestyle projects in Brisbane’s history and one we’re extremely confident will be well received by the developer community,” continued Mr Morrison.

“The Eagle Farm Residential Precinct is located alongside the Eagle Farm Racecourse and is designated as a high density residential area. This site is capable of sustaining in excess of 1,000 apartments and is situated immediately next to a proposed mixed-use development which may include a range of uses comprising retail, commercial, hospitality and entertainment facilities.

“The site is located in a popular lifestyle precinct, well serviced by public transport with rail, bus and Citycat all close by and easily accessible from all parts of Brisbane and beyond via Inner City Bypass,” added Mr Morrison.

Knight Frank’s Managing Director of Commercial Sales, Mr Paul Henley said that Brisbane residential site sales have gone through considerable growth the past 12 months.

“The Brisbane Apartment market has entered a new property cycle. Sales rates have now remained above long term averages for a full 12 month period. Sale prices have stabilised and stock transacting is a good mix of investment and owner occupier product which signals a suitable diversity of purchasers in the marketplace, as the development of Eagle Farm Residential Precinct is likely to offer.

“In addition to traditional markets Melbourne and Sydney, we have sensed a considerable shift in favour of Brisbane also in our recent visits to Malaysia and Singapore as a preferred Australian location for investment This positive sentiment in favour of Brisbane is in our opinion going to grow in the short to medium term,” added Mr Henley.

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ACT Excerpt From The 2015 April Market Report – Article by Your Investment Property 27-4-2015

Hand break slowly easing on housing market

Despite a dreary few years in the housing market over the past few years, Canberra could be ready to make a comeback. Alastair Lynn reports

In a state held under duress by activity in the public services, Canberra’s housing market is looking to negotiate its release. Significant fiscal consolidation, job shedding, cutbacks in services and concern over job security has impacted the local economy over the last three years. Fortunately in the early stages of 2015, there are signs indicating that this subdued market may be on the mend.

The latest CoreLogic RP Data Home Value Index shows Canberra’s housing and unit values increased by 0.9% and 3.68% respectively last month. While overall dwellings are down 0.34% on this time the previous year, experts are confident that the indicators for growth are present.

“Certainly early signs have shown improvements in activity in the Canberra market, says Andrew Wilson, senior economist at Domain Group.

“The prospects are becoming more positive that the volatility in house price growth, particularly buyer activity, will end and we’ll see a more consistent outcome from the market that I think will be driven by lower interest rates.”

Data released over the last three months has certainly presented a reason for optimism.

Domain Group’s house price report for the December quarter showed the median house price grew 1.4% while units saw a 1.1% increase.

Wilson says that strong auction numbers at the end of 2014 and numbers tracking higher this year indicate that buyer activity is increasing. “There are early signs that confidence is gradually returning to the Canberra market and starting to filter back into prices growth,” he says.

With the CoreLogic RP Data Home Value Index showing the median house price at $580,000 and $410,000 for units, property in Canberra is not cheap.

However, Wilson pointed to buyer activity being generated more prominently in the middle and upper price range suburbs.

“There’s some positive signs for the Canberra market, however, it will always be hostage to what happens in terms of spending in the public services, so we need to be mindful of that.”

It’s not all doom and gloom
While Canberra has felt some impacts from the federal government’s plans to cut the public service, it does not spell the demise of the capital’s workforce.

“As is typical, when time passes by during the first term of a federal government, it finds it more difficult to implement cuts than intended,” says Linda Phillips, economist for Propell.

With unemployment levels at 4.5%, this does show a rise of 0.8% from 2014. However, ACT still holds the second lowest unemployment rate in the country, second only to NT.

Phillips says that as the situation is returning to normal, some growth in 2015 should be expected.

“Canberra in general has better prospects for investment in the next year, though newer properties, or those with redevelopment potential, will do better than average.”

SUBURB TO WATCH
Harrison: Developing infrastructure drives growth

Cinemas, Olympic swimming pools and excellent sports fields are just some of the developing infrastructure in the up and coming suburb of Harrison. While some suburbs in Canberra have been struggling due to the federal government’s cuts to the public service, Harrison has been going from strength to strength with a 12-month growth of 8%.

Situated just 2km east of the Gungahlin Town Centre, everything a couple or family could need is easily accessible. Primary schools, shopping centres, parks, medical centres and restaurants are all within a stone’s throw of virtually anywhere in the suburb. With the Canberra CBD only 10km away, the drive into town via the Federal Highway takes as little as 14 minutes.

The Land Development Agency has put a lot of time and effort over the last several years to Harrison and the surrounding suburbs. This in turn is driving interest in the area. Gungahlin Town Centre is now one of Canberra’s fastest growing hubs. Along with amenities like clubs, department stores and libraries, significant effort has been put into transport. A network of cycle ways and pedestrian paths now criss-cross the suburb. Together with well serviced bus routes, Harrison is well connected with the city and neighbouring suburbs.

Harrison is also a lot less expensive than nearby Nicholls ($500,000) and Forde ($522,000). Closer proximity to shopping centres and the CBD makes the area more appealing to both young or established couples.
With interest rates at their lowest for more than 50 years, there are some great rates available.

Source Your Investment Property 27-4-2015

Brisbane Rental Market Article of Interest

Once you give an investor a rental return amount quite early on in the development and purchase phase, they are expecting that return upon completion and settlement and this poses an issue.

There is estimated to be approximately 30,000 new apartments and units being built in Brisbane for completion in 2015 and a large percentage of these new builds are marketed to Chinese and international buyers.

In my opinion, the issue I think we are going to face from a property management point of view, is that as a percentage of these new developments are being bought by foreign investors, there could potentially be a “rental guarantee” which is being offered and I see that this as having a negative impact on the rental market. Once you give an investor a rental return amount quite early on in the development and purchase phase, they are expecting that return upon completion and settlement and this poses an issue.

With interest rates being at a record low, I have seen an increase in tenants not renewing their tenancies and in some cases, breaking their lease to purchase a home and to take advantage of the low interest rates. This has therefore, had an impact on the vacancy rates in Brisbane’s Inner City. Although there are still a large number of renters on the market, their expectations of features within their rental property has also increased. They are coming to open homes with a mental checklist and are hesitant to apply for a property if the property does not meet their needs- why would they when there is a lot of properties for them to choose from?

Having these thousands of properties become available in 2015 and with the low interest rates, the expectations of rental returns need to be realistic in order to ensure minimum vacancy periods. I am finding that rental prices are being reduced now more than ever to accommodate the market and to minimise vacancy periods in order to ensure the landlords have an income stream from their investment.

Investors also need to keep in mind that inner city living will not appeal to everyone therefore may only attract tenants such as professional couples, students or the single executive and with an expected increase of the stock levels in 2015 how many of these “attractive” tenants are out there?

Sydney, Melbourne and the other states are not experiencing the flat rental market issue which we are facing here in Brisbane. In these other states, you hear about a line of prospective tenants at open homes eager to rent properties- something I haven’t seen in Brisbane since December 2014. Maybe it’s because it is a lot harder to purchase your first home or similar in Sydney and Melbourne than it is in Brisbane

Source R Patel is a Director at Urban Property Agents in Brisbane.

Best Regards
Linda & Carlos Debello
“Your Local Property Sales & Management Specialist”
LJ Gilland Real Estate Pty Ltd
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