» Propertyology

How to double the power of your deposit

Simon Pressley — Wed, 27 Jun 2018 04:31:43 +0000

In modern Australia, the housing affordability musings attract more newspaper column inches than a royal wedding. For most, the biggest challenge isn’t being able to afford the mortgage repayments – it’s putting together a deposit for the purchase. Let’s face it, if you’re trying to save a ten to twenty per cent deposit to buy a median-priced house ($1,033,892) or apartment ($878,325) in Sydney, you’ve got your work cut out for you. But for those who reside beyond the Harbour City or for those prepared to explore the increasingly popular rentvesting strategy, the opportunity to purchase a piece of Oz is there for those with an open mind. Property Investment Professionals of Australia (PIPA) recently pointed out that a detailed study of mortgages and incomes shows the average loan is more easily serviced now than it was thirty years ago. The problem isn’t affordability per se – Australia is littered with locations offering affordable housing – but rather accessibility, because the hurdle is putting together a deposit rather than paying back the lender. There’s a narrow, inaccurate and slightly offensive assumption by the broader media and political landscape that “the Australian property market” is a proxy term for Sydney real estate. Last time I checked, Sydney was a city, not a country! If you’re willing to break free of that misnomer, I can show you how to double the power of your deposit. Mindset The first important step in understanding the solution is to remember Australia consists of 10 million dwellings that are spread across 550 local councils, and the vast majority provide affordable real estate options to potential buyers. With our realistic view of Australia’s whole market now firmly front of mind, let’s run the figures and see how you can power up your savings and get into a property. According to the Australian Bureau of Statistics (ABS), Australia’s capital city average median dwelling price was $686,700 as at December 2017. A buyer would therefore need $68,700 for a 10 per cent deposit. Adopting the national median rent of $435 per week, the annual holding cost (after rent) on a typical property worth $686,700 with a 10 per cent deposit would be $13,100 per year – that’s before taxation or negative gearing benefits. This cash flow calculation assumes receipt of rental income for forty-eight weeks of the year, interest expenses calculated at 4.5 per cent, and other standard holding costs (property management fees, council rates, insurance, and $500 for general maintenance). The solution to double your deposit The simplest way to double your deposit is to buy a property that’s priced at half the capital city average dwelling price. That’s right – instead of laying down $70,000 as a deposit for a purchase of almost $700,000, try broadening your mind and seeking areas where a house price closer to $350,000 is the norm. Remember – the phrases ‘more expensive property’ and ‘capital city location’ don’t automatically translate into ‘better capital growth potential’. If you doubt this, ask yourself why property markets in Sydney and Melbourne both declining right now while Hobart is booming and parts of regional Australia are strengthening nicely. Buying an investment property worth $343,500 (half the capital city average house price) using your $68,700 deposit means you’ve fronted up 20 per cent straight away. The annual holding costs will now be significantly less at $850 per year, because you’re only borrowing 80 per cent from the lender. If saving up a deposit of $68,700 is too steep, how about halving your goal to $34,350 and using it as a 10 per cent deposit on a $343,500 purchase? The annual holding costs would be a very manageable $2,400. And, if you’ve purchased in a location with all the fundamentals in place for great long-term growth, the asset is working for you straight away. This means you’re in the market and enjoying the benefits sooner. The key takeaway from all this is that you shouldn’t stand back and struggle waiting to save up a deposit for an expensive property that will be more difficult to service and has no more, if not less, potential for capital gains than some non-Sydney investments. Instead, lower your buy in, look for smart locations and start reaping rewards sooner.

The post How to double the power of your deposit appeared first on .

Population records broken all over Australia

Simon Pressley — Wed, 01 Feb 2017 03:17:05 +0000

Western Australia creates a Grand Canyon while Victoria gives birth to Mackay While we were all tucking in to our Christmas ham, the latest series of population data was released by the Australian Bureau of Statistics (ABS) revealing a few new records broken by Victoria, Western Australia, South Australia, Northern Territory and New South Wales. Demand for housing remains incredibly high with Australia’s population growing by an average of 863 people per day during the quarter ending June 2016. The annual increase of 337,821 has been quite consistent over the last four years. 54 per cent of Australia’s population growth for the year came from overseas migration. Of the 78,600 total population increase for the quarter, an all-time record 47,247 came from natural increase (births minus deaths). The 86,700 births during the June quarter well and truly exceeds the previous record of 78,100 in the March 2012 quarter. The mixed fortunes at a state-by-state level are indicative of the recent performance of capital city property markets. Victoria’s population is breaking all sorts of record highs while, on the other hand, Western Australia appears to be falling in a hole deeper than the Grand Canyon; both South Australia and Northern Territory have set new interstate migration records for the wrong reasons. After more than a decade of nation-leading population growth, Western Australia’s 1.05 per cent growth for the year ending June 2016 is well below the national average of 1.42 per cent. Forty three consecutive quarters of positive growth of interstate migration during the boom years has been followed by nine straight quarters negative growth. The 2,805 people that migrated away from Western Australia in the June 2016 quarter is an all-time record and the 996 net increase in overseas migration during the quarter pales in to insignificance when compared to the 13,165 comparative figure from four years earlier. This concerning population trend in Western Australia is a dampener for housing demand at a time when Perth has been producing record volumes of new homes. It is absolutely no coincidence that Western Australia’s population shift follows the path of falling iron ore prices. As shown in this graphic, the parallel of these two metrics is incredible. Western Australia has a lot going for it, however its economy is the least diversified of all Australian states. It needs to (quickly) develop other sectors of its economy. Namely, tourism, agriculture, and the international student market. The biggest success story from population data continues to be Victoria. The 123,131 total population increase for the year to June 2016 surpassed the record previously held by Queensland (115,561 in 2008). 65,007 (53 per cent) was from overseas migration. Victoria’s total population growth last year is comparable in size to the total population of Australia’s nineteenth biggest city, Mackay. Victoria’s records don’t stop there. The 14,903 natural increase for the June quarter is a state record as is the 4,947 quarterly increase in interstate migration. It’s now been three consecutive quarters that interstate migration in Victoria has been more than 4,000 (last achieved way back in 1995). While we know that Victoria’s construction industry has had no problem building enough dwellings to cater for the demand, the biggest challenge will be whether the state can continue to create enough jobs. It may be a couple of years before we all know the full impact on Melbourne’s economy from car manufacturing closures. New South Wales’s population grew by 105,585 over the year to June 2016 and is on track for a fourth consecutive year of 100,000 plus increases – a feat never achieved before in Australian history. The state continues to be the main arrival point for internationals with the net increase in overseas migration for the year being 71,161. While the state’s economy remains incredibly strong, lack of housing affordability would be the primary cause for 11,349 people relocating interstate during the year ending June 2016. Queensland’s population growth rate of 1.35 per cent for the year ending June 2016 was just behind New South Wales. The 4,844,473 population spread across the sunshine state is comparable to the population crammed in to greater-Sydney. We may be seeing the beginning of a new trend with Queensland’s population. The 3,328 quarterly increase in interstate migration is its highest since December 2008. The June quarter marked three consecutive periods of interstate migration of more than 3,000. A rebound in coal prices will make it easier for job creation to attract more people across the border but, if Brisbane’s property market is to fully awaken from its slumber, funding initiatives for new infrastructure is what is really needed. South Australia’s population growth rate of 0.1 per cent for the June quarter was the lowest in Australia. Negative growth in interstate migration of 1,873 is the state’s worst performance in over twenty years. Things are really grinding to a halt in Northern Territory with a total increase in population over the year of a mere 534 people. It’s now been twenty seven consecutive quarters since the top end produced a positive interstate migration figure. Improved economic conditions are behind Tasmania’s sustained population rebound. The state has produced positive growth in interstate migration in four of the last five quarters (a stark difference to the previous sixteen consecutive quarters of negative growth). Canberra’s population growth rate of 1.29 per cent for the last year continues to closely follow the national trend. The June 2016 quarter produced the highest natural increase (births / deaths) dating back to the start of ABS in 1981.

The post Population records broken all over Australia appeared first on .

Gold Coast Property Market Outlook – January

Simon Pressley — Mon, 12 Jan 2015 23:25:17 +0000

Propertyology expects the Gold Coast market to surprise many pundits and become one of Australia’s best performers during 2015-2017. The storm clouds are gone, the sun is due to shine – and quite brightly. However, there is still some turbulence in the waters. Tourism drives the Gold Coast’s economy. So, when the GFC hit in late-2008, consumer sentiment disappeared, jobs were shed and its property market suffered. The Gold Coast’s only other industry of note is construction and a significant pre-GFC over-supply compounded things for its property market. In spite of having population growth (3.1% pa during 2003-2013) of almost double that of the national average (1.7%), the Gold Coast was the worst performing market in Australia for a few years. As the above graphic shows, building approvals declined considerably post-GFC and a lot of the surplus supply has now been soaked up. Vacancy rates have tightened. Sales volumes and property prices are already growing. Consumer and business sentiment have improved over recent years. The new Gold Coast hospital plus a $1.8 billion passenger rail project have been good for jobs growth. Work has commenced on a $670 million expansion of Pacific Fair which will make it the largest shopping centre in Queensland. The $500 million athlete’s village for the 2018 Commonwealth Games and a $1 billion luxury hotel by Chinese developer, Ridong, are other major projects. The tourism boom which Propertyology boldly predicted two years ago has arrived, meaning things will only get better for the Coast. A decision on a proposed $7 billion mega resort is due in early-2015. An economic impact statement released by the proponent in September 2014 suggests that, if completed, tourism revenue could increase from $1.15 billion per annum to $8.9 billion; 15,000 jobs could be created. By the end of 2015, I believe the data will show Gold Coast to have been one of the strongest markets in Australia. But don’t be fooled, leopards don’t change their spots! Gold Coast Mayor, Tom Tait, is a developer by trade and he is very pro construction. There have been a number of large building applications lodged during the last 12 months. Significant over-supply is expected again in a few years time. Areas with a high concentration of new supply will include Southport, Coomera and Labrador. Read more: Simon’s updated focus on the Gold Coast property market

The post Gold Coast Property Market Outlook – January appeared first on .