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Hope for young buyers? Experts predict property prices will fall by up to 10 PERCENT by 2017 due to an oversupply in key markets (… after telling us for years we’re not building enough!)

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property prices will fall by up to 10 PERCENT by 2017 due to an oversupply in key markets.

 

  • House prices tipped to fall by up to 10 percent in some states with economists predicting a housing surplus in 2017
  • Goldman Sachs predicts population growth will slow to 1.25 per cent over the next three years creating oversupply 
  • Biggest hit will be in markets where construction supply has been strong, such as inner-city Melbourne and Perth

 

Property prices are predicted to fall by up to 10 per cent in some states with economists tipping a housing surplus in 2017.

In a new report, Goldman Sachs predicts population growth will slow to 1.25 per cent over the next three years due to low birth rates, high death rates and falling net migration.

This is significantly lower than widely-used Australian Bureau of Statistics population predictions of between 1.7 and 1.8 per cent – which Goldman Sachs analysts Tim Toohey and Andrew Boak label as ‘too optimistic’.

This will create an oversupply and see property prices fall by between 5 and 10 per cent in markets where construction supply has been strong – particularly inner-city Melbourne and Perth – according to BIS Shrapnel managing director Robert Mellor.


 

property prices will fall by up to 10 PERCENT by 2017 due to an oversupply in key markets.

A new housing development at 88 Alfred Street in Milsons Point, on the lower north shore of Sydney, with panoramic views of the harbour.


 

property prices will fall by up to 10 PERCENT by 2017 due to an oversupply in key markets.

Sydney will be one of the only markets not to be hit by an oversupply of housing in the next three years, according to economists.


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Property prices are predicted to fall by up to 10 per cent in some states with economists tipping a housing surplus in 2017.


‘It is correct to talk about the markets going to go from chronic undersupply to the fact there will be excess supply developing in a number of markets,’ Mr Mellor told Daily Mail Australia.

‘One market we’ve been concerned about for quite a long time is inner city apartments in Melbourne, such as in Docklands, Southbank and the CBD.

‘While there might be a shift in demand patterns with renters wanting to live closer in, it’s not going to be sufficient.

‘Supply will swamp the amount of demand and lead to excess supply, and you’re going to find a substantial reduction in rents and the risk of falling values.’

Mr Mellor said there is a likelihood Perth, Canberra and Adelaide will see declines.

‘Perth is seeing a substantial turnaround in supply at the moment and a reduction in underlying demand,’ he said.

‘Even in markets like Adelaide construction has been relatively strong and as a result there could be some excess supply.


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Goldman Sachs predicts population growth will slow to 1.25 per cent due to low birth rates, high death rates and falling net migration.


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Property prices could fall by between 5 and 10 per cent in markets where construction supply has been strong.


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This new housing development is at 8 Bank Street in the West End, Brisbane. Brisbane will also be relatively stable, economists say.


‘Canberra has a significant excess supply because of overbuilding of inner city apartments.’

He added that there was no risk of oversupply in Sydney.

‘In Sydney the underlying level of demand is so strong relative to supply, and the fact this is a market where there hasn’t been enough building.

There is very little risk of excess supply developing in this market in the next three years to five years.

‘Brisbane does have some risk that problems could occur but then again the timing of that is going to be dependent on how much more supply comes into that market over the next couple of years.’

Goldman Sachs forecast a 75,000 underlying surplus of established homes across Australia by the end of 2017.

The report predicts that Australia’s population will be 530,000 smaller ABS estimates for 2017.


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‘It is correct to talk about the markets going to go from chronic undersupply to the fact there will be excess supply developing in a number of markets,’ BIS Shrapnel managing director Robert Mellor said.


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In Sydney the underlying level of demand is so strong relative to supply, and there hasn’t been enough building activity, he said.


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Goldman Sachs forecast a 75,000 underlying surplus of established homes across Australia by the end of 2017.


Advice from home-buyers on when and where to buy property


This is tipped to reduce potential economic growth from 2.9 per cent to 2.5 per cent for the 2015-2017 period.

‘A lower “potential” rate of economic growth suggests disinflationary pressures will stabilise through 2015 and support the case for interest rate rises through 2017, and the RBA will likely be in the position of lifting interest rates into an oversupplied housing market,’ Mr Toohey and Mr Boak write.

‘Australia will need 105,000 fewer homes by the end of 2015 relative to that suggested by [ABS figures], 165,000 fewer homes by the end of 2016 and 215,000 fewer homes by the end of 2017,’ the report states.

Australia’s population growth is set to slow sharply through 2015, according to Goldman Sachs, with births declining ‘at the fastest rate on record’ and uncertain labour markets affecting net migration.

‘We also suggest the rate of growth of deaths will easily double its historical average over the coming decade as the sheer number of individuals moving into age brackets with higher mortality rates swamps any further extension to average years lived,’ the report states.


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Declining populations are tipped to reduce potential economic growth from 2.9 per cent to 2.5 per cent for the 2015-2017 period


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Australia’s population growth is set to slow sharply through 2015, according to Goldman Sachs, with births declining ‘at the fastest rate on record’ and uncertain labour markets affecting net migration

 

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Opinion

Brisbane suburbs to watch in 2019

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brisbane suburbs to watch in 2019

Brisbane suburbs to watch in 2019

These are the suburbs to watch in Brisbane in 2019, where a window of opportunity exists to get in ahead of demand driving prices up.

These are the suburbs to watch in Brisbane in 2019, where a window of opportunity exists to get in ahead of demand driving prices up.

The list, compiled via the Price Predictor Index by Hotspotting’s Terry Ryder, tracks increases in sales demand — which is generally considered to be a precursor to increased prices.

“This precedes the price reaction,” Mr Ryder said. “Where there are sales increasing, prices will follow eventually.”

For buyers, rising demand can be a handy early warning system, particularly if suburbs they are interested in are on the list of those seeing steady rises.

“It’s a chance to buy in areas that are rising before prices really take off,” he said.

The Moreton Bay region was still the top market in Greater Brisbane in terms of rising suburbs — with seven on the list including Kippa-Ring which also made the national top 50 list.

suburbs in brisbane to watch in 2019

Brisbane is becoming a haven for cyclists with more appearing across the suburbs as infrastructure improves. Picture: Bruce Long Source:News Corp Australia

The Brisbane-south region came in second with five rising suburbs, followed by Brisbane-north and Redland City, both with four growth suburbs, while there were just two rising suburbs in Logan City.

Graceville and Indooroopilly were named along with Kippa-Ring as the top three suburbs in Brisbane.

“The whole premise is there is a time lag from when sales activity rises and prices go up,” Mr Ryder said.

“If you are already in an area where sales activity is picking up strongly, well that’s good because you are ahead of the strong price rises.”

Mr Ryder expects improvements in the Queensland economy including rising infrastructure spending — much of which was focused on inner Brisbane — to have a strong positive effect on the housing market.

suburbs to watch in 2019

Opening of Howard Smith Wharves precinct parklands and Cliff-face lift in inner Brisbane. Picture: Liam Kidston. Source:News Corp Australia

“Brisbane has definitely lagged because it hasn’t had the same drivers that Sydney and Melbourne have had. I do expect Brisbane in the coming year to be stronger than it has been.”

“We’re seeing that big infrastructure spend, population growth data is favourable as well, with Queensland now the number one state for net gains for interstate migration — and 90 per cent of that goes to SEQ. Those are all things falling into line for a rise.”

29 suburbs to watch in Brisbane in 2019:

(Alphabetical order)

Suburb/Municipality/Dwelling Type/Current Median Price

Albany Creek Moreton Bay H 585,000

Alexandra Hills Redland H 470,000

Annerley Brisbane-south H 720,000

Bald Hills Brisbane-north H 440,000

Banksia Beach Moreton Bay H 560,000

Bethania Logan H 365,000

Burpengary Moreton Bay H 465,000

Camira Ipswich H 407,000

Cleveland Redland H 620,000

Clontarf Moreton Bay H 445,000

Corinda Brisbane-south H 745,000

Eatons Hill Moreton Bay H 600,000

Geebung Brisbane-north H 545,000

Gordon Park Brisbane-north H 845,000

Graceville Brisbane-west H 905,000

Indooroopilly Brisbane-west H 905,000

Indooroopilly Brisbane-west U 475,000

Kenmore Brisbane-west H 700,000

Kippa Ring Moreton Bay H 430,000

Logan Reserve Logan H 410,000

Mansfield Brisbane-south H 680,000

Mt Cotton Redland H 550,000

Ormiston Redland H 680,000

Redcliffe Moreton Bay H 440,000

Redcliffe Moreton Bay U 415,000

Stafford Heights Brisbane-north H 605,000

Sunnybank Hills Brisbane-south H 680,000

Tarragindi Brisbane-south H 775,000

Tingalpa Brisbane-east H 555,000

Wakerley Brisbane-east H 755,000

Wynnum West Brisbane-east H 540,000

(Source: The Price Predictor Index)

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Property Investment Advice

What’s in a name? Why the name on title deeds matters for property investors

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brisbane investment advice

Our interest and appetite for investing in property haven’t calmed down over the last 12 months, with most areas in Australia continuing to rise in price. Of course, that’s not to say that prices are going to keep increasing. Just like the Melbourne Cup, it’s a long race and at some point, the gallop will end and we’ll see a slowing down of house prices.

If you are still determined to enter the property market as an investor or you are a recent entrant, it’s important to do your homework. By homework, I’m not simply talking about where you should purchase, which of course is critical. Instead, I’m talking about one of the most skated-over decisions that arise with property investment (or any type of investment) – how should you own your investment. This question means you have considered protecting your asset, you’re thinking long-term as not just simply maximising the short-term returns and tax deductibility of the investment you have purchased.

brisbane investment advice

It makes sense to have a property in the name of the higher income earner for negative gearing, but what about capital gains tax when it comes time to sell?

The decision I’m referring to is whose name the investment should be purchased in. That’s because you shouldn’t simply default (like many people do) to purchasing the property in the highest income earner’s name.

Why wouldn’t you default to this when negative gearing is so attractive for higher income earners? That’s because too often investors are only focused on negative gearing the property, which is only one of the many things you should be considering. Yes, the negative gearing benefits can be attractive but what about when you sell? If the property is only in the name of the highest income earner (or 99 percent in their name), the entire capital gain proceeds on sale will also be in the name of the highest income earner, which means there is no ability to split the sale proceeds with lower income earners.

brisbane investment advice

Australians are continuing to invest in property.

It’s also important to be aware that if you’ve had a depreciation report prepared and are claiming depreciation on your property (which is a great thing to do), you may need to add back this depreciation when you sell which means the capital gain could be even higher than your quick back of the envelope scratchings.

Instead, you should consider your plans for the property – if you intend to pay down the debt, how long you plan to hold it for and what other debts you have. That’s because if it makes sense to pay down the debt, the property may only be negatively geared for a short period of time. Or if interest rates remain low and rents rise you may find yourself in a positively geared situation sooner than expected which may mean that the highest income earner holding the property may be non-beneficial.

Of course, tax deductibility is only one piece of the puzzle. Asset protection is another reason why you might not necessarily default to holding a property in your own name/s. If you own your own business or if your job means you might be susceptible to a liability claim, it might be wise for you not to hold assets in your own name. Of course, in NSW, land tax can mean holding your property in a family trust may not be attractive and companies don’t get access to capital gains concessions so that might not be a great option. However, you might consider a special unit trust where a family trust or a self-managed super fund (SMSF) holds the units. You might even consider purchasing the property directly within an SMSF. Yes, there are strict rules with some of these structures you need to be aware of and follow. However, they can give you more flexibility in some cases and even a willingness to hold a property that is positively geared, as well as providing the advantage of an asset that is safeguarded because it’s not in your name.

Yes, owning investments such as property or shares in your own name is easy and simple. However, sometimes the unintended consequences of paying more tax further down the road, exposing your private assets to creditors or even less flexibility in a market of low-interest rates and rising rents can mean that simple is not always better.

Originally Published: www.brisbanetimes.com.au

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Property Investment Advice

Investors search nation for best property returns

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Tom and Antonia Murphy are digital-savvy property investors who understand the need to look beyond their neighbourhood and home state to find the best returns.

The couple are saving for a Sydney home by buying investment properties in Brisbane and the Gold Coast where prices are lower, yields higher and prospects for capital growth stronger.

“If the numbers add up, then we buy,” says events manager Antonia, 29. Tom is a high-voltage lineman. The couple base their buying decisions on latest market data and advice from a buyers’ advocate. “We will eventually sell the properties and buy our home,” she adds. “We have taken the emotion out of buying. We see the properties as a way of making money.”

It’s a strategy being used by an increasing number of investors aware of the widening spreads between different states, regions and dwelling styles, particularly high- and low-rise apartments.

“Years ago you could rely on everything going up,” says Damian Collins, managing director of Momentum Wealth, a Perth-based buyers’ advocacy.

“We are now in a different world,” he says. “Low wage growth, low inflation and low interest rates mean consumers cannot expect 8 per cent returns every year.”

Sydney still a gold mine

CoreLogic, which monitors property values, says the number of properties resold at a loss on the purchase price has jumped from 8.3 per cent to 9.2 per cent in the first quarter of this year.

“There is a difference between houses and apartments,” says CoreLogic’s head of research Cameron Kusher. “A property owner is much more likely to sell a unit than a house at a loss.”

Nearly 20 per cent of inner Melbourne apartments are being sold at a loss, the highest level in more than a decade, according to CoreLogic analysis.

Sydney – for the moment – remains a real estate gold mine, with nearly everyone who purchased five years ago hitting pay dirt when they sell, says Corelogic.

Sydney home prices rose 6.6 per cent in the three months to May.

“But including the months between October and February (when prices fell by 2.2 per cent), the overall performance was a more modest 4.4 per cent over eight months rather than 6.6 per cent over three,” says Glenn Piper, chief executive of buyer’s advocacy Meridian Australia.

Forced sales

“The next four months will be interesting – if values stay flat, then we could see a lower single-digit 12-month growth performance for Sydney,” Piper says.

In Perth 40 per cent of all sales are lossmakers, says CoreLogic.

The fall in price in former boom suburbs around Perth, such as Mandurah, is more than three times the national average, with buyers selling after just six years, suggesting that many could be forced sales.

“Bargain hunters are out there,” says Momentum’s Collins, who adds real estate agents are increasingly advertising that properties “must be sold”, which is often code for distressed sales.

Many buyer’s advocates believe Sydney and Melbourne house price rises have outpaced wages growth and savings and are running out of puff, which means they are looking at other markets.

“There are still pockets of value in Sydney,” says Rich Harvey, chief executive of Property Buyer, a Sydney-based buyers’ advocacy. “But investors need to have more modest expectations.”

Affordability

Collins and Paul Nugent, a director of Wakelin Property Advisory, believe the time it takes for a top-performing investment property to double in value has – at best – doubled from between seven and 10 years to more than 15 years.

The prospect of values doubling is a traditional benchmark used by real estate agents to attract buyers.

CoreLogic estimates it takes 17.5 years to double the purchase price. The typical house sold at a loss was held for six years. Those sold at a profit were typically held for 10 years.

Low wage growth, record low interest rates, a ban on some foreign investors, and low single-digit inflation mean likely growth is expected to be about 4 per cent, which is about 2 per cent over wage growth. This could be slightly higher in strong demand postcodes, says Collins.

Affordability continues to be a key factor in predicting market direction.

Sydney mortgage repayments as a percentage of household disposable incomes are more than 40.5 per cent, or 30 basis points higher than at the end of Sydney’s last price boom in 2004, says Piper.

Local issues

It was about 29 per cent at the start of the most recent boom in 2009. Since then prices have increased by 78 per cent,

In Melbourne the ratio of mortgage repayments as a percentage of household disposable income is 34.4 per cent, compared to 37.5 per cent in June 2010, the end of the city’s last boom. The median price has since increased by more than 33 per cent.

“Melbourne and Sydney are close to, or above, the previous affordability capacity reached in their last boom,” says Piper, who believes both cities’ prices will move sideways because of lack of affordability, poor yields and increased supply.

But investors like Tom and Antonia Murphy claim they need to dig deeper and discover what local issues are encouraging, or retarding, growth.

For example, a property price boom was sparked in the Queensland town of Gladstone in 2010 by the inflow of well-paid construction workers to build three refineries. But it quickly wound down as workers began seeking jobs elsewhere and developers started constructing dwellings.

Hobart’s rental returns have increased by 10 per cent in the past 12 months, or more than three times Sydney’ returns, according to analysis by SQM Research, which monitors property market prices and returns.

Potent combination

But veteran buyers’ agents, like Harvey, say the attractive returns provide little insight as to whether they will be sustained by rising population, well-paid jobs and high employment, which typically drive property market growth.

“Any of these three factors in isolation will not drive a market, but together they are a potent combination,” he says.

CoreLogic’s report also highlights that different types of properties, such as holiday houses and high-rise apartments, can also fall when other types are rising, or fall faster and harder when markets turn.

For example, nearly five times as many Melbourne apartment owners are selling at a loss than those selling houses.

The southern capital is struggling to digest a huge supply of apartments, many purchased at inflated prices by off-the-plan buyers chasing stamp duty tax breaks offered by the state government to encourage construction.

Four in 10 apartment sellers in the Northern Territory are under water, four times as many house sellers experiencing losses. The Northern Territory’s housing market is also suffering from an over-supply and a slump in demand following the end of the mining boom.

Monitor prospects

Properties in Mandurah, a popular holiday resort about 70 kilometres south of Perth, are selling on average at a 30 per cent loss to the purchase price only six years after purchase, which suggests holiday houses are an early target for budgeting households.

Tom and Antonia, childhood sweethearts who married three months ago, recently sold a house in the Sydney suburb of Parramatta they had purchased five years ago for a $200,000 profit.

They own four other properties in Brisbane and the Gold Coast and believe they will have enough to buy their Sydney home in about three years. They use Meridian to help them monitor prospects for future returns based upon capital growth, yield, affordability and population growth.

“We rent where we want to live, which is in Sydney, and buy where we can make the most capital gains,” says Antonia.

Original article published at www.afr.com by Duncan Hughes 9/7/16

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