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Australian Historical Real Estate facts
Overseas Investor
There are several compelling reasons why it is a smart move to invest in Australian property:
• A freehold, secure title.
• Opportunity to achieve Capital Gains.
• A reasonable deposit is all that is needed to enter the market.
• Banks are strict in who they lend to, unlike the USA.
• As owner, you can control many aspects of the investment.
• There is a ready and increasing supply of quality tenants.
• There is fair landlord/tenant legislation - the "sitting tenant" concept is virtually unheard of.
• There are exceptional tax benefits.
• You can "add value" as the property ages, increasing dramatically the market price.
• You don't have to watch it every day. It needs very little monitoring. There are professional Property Managers.
• You do not need to actually sell to get your money out.
• Unlike shares, it is much harder to make a truly poor direct property investment, which decimates your capital.
• Virtually all banks accept property for security.
• Real Estate is a necessity, people need shelter, and they need someone to provide it.
• There has been enormous demand in the past, and there will be huge and continuing future demand.
• A freehold, secure title.
• Opportunity to achieve Capital Gains.
• A reasonable deposit is all that is needed to enter the market.
• Banks are strict in who they lend to, unlike the USA.
• As owner, you can control many aspects of the investment.
• There is a ready and increasing supply of quality tenants.
• There is fair landlord/tenant legislation - the "sitting tenant" concept is virtually unheard of.
• There are exceptional tax benefits.
• You can "add value" as the property ages, increasing dramatically the market price.
• You don't have to watch it every day. It needs very little monitoring. There are professional Property Managers.
• You do not need to actually sell to get your money out.
• Unlike shares, it is much harder to make a truly poor direct property investment, which decimates your capital.
• Virtually all banks accept property for security.
• Real Estate is a necessity, people need shelter, and they need someone to provide it.
• There has been enormous demand in the past, and there will be huge and continuing future demand.
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There are several compelling reasons why it is a smart move to invest in Australian property:
• A freehold, secure title.
• Opportunity to achieve Capital Gains.
• A reasonable deposit is all that is needed to enter the market.
• Banks are strict in who they lend to, unlike the USA.
• As owner, you can control many aspects of the investment.
• There is a ready and increasing supply of quality tenants.
• There is fair landlord/tenant legislation - the "sitting tenant" concept is virtually unheard of.
• There are exceptional tax benefits.
• You can "add value" as the property ages, increasing dramatically the market price.
• You don't have to watch it every day. It needs very little monitoring. There are professional Property Managers.
• You do not need to actually sell to get your money out.
• Unlike shares, it is much harder to make a truly poor direct property investment, which decimates your capital.
• Virtually all banks accept property for security.
• Real Estate is a necessity, people need shelter, and they need someone to provide it.
• There has been enormous demand in the past, and there will be huge and continuing future demand.
• A freehold, secure title.
• Opportunity to achieve Capital Gains.
• A reasonable deposit is all that is needed to enter the market.
• Banks are strict in who they lend to, unlike the USA.
• As owner, you can control many aspects of the investment.
• There is a ready and increasing supply of quality tenants.
• There is fair landlord/tenant legislation - the "sitting tenant" concept is virtually unheard of.
• There are exceptional tax benefits.
• You can "add value" as the property ages, increasing dramatically the market price.
• You don't have to watch it every day. It needs very little monitoring. There are professional Property Managers.
• You do not need to actually sell to get your money out.
• Unlike shares, it is much harder to make a truly poor direct property investment, which decimates your capital.
• Virtually all banks accept property for security.
• Real Estate is a necessity, people need shelter, and they need someone to provide it.
• There has been enormous demand in the past, and there will be huge and continuing future demand.
Investing in Australian property?
EXECUTIVE SUMMARY
With the Banking sector and financial markets in turmoil over the past 9 months, people have been asking, what will happen to Australian property?
The flight to quality is on, as people liquidate out of the money markets. Trillions and trillions of dollars have "moved" into cash.
This cash will look for a home.
After the World Stock market crash of October 1987, when the Dow Jones fell some 23%, and the Australian all ordinaries fell some 42%, WHY did Sydney house prices rise by 70% in the 3 years immediately following the stock crash, and Melbourne by over 50%?
First, cash needs a home.
Many people who have been panicked, and burnt, will feel very reluctant to reinvest in similar financial instruments, and stock markets again.
As the flight to safety continues, many people who chased high returns move back to investment fundamentals and for many people that means property.
After the stock markets crashed in October 1987, billions of dollars moved into real estate.
Secondly, the Australian economy remains fairly strong.
Thirdly, there is a chronic shortage of construction and new houses being built all around Australia. THIS IS CRITICAL, and is little understood by most people. They may have "heard" about it, but have not given a minute's thought about how they may be able to make money out of this situation.
In the USA for example, there are reports that literally millions of homes have been oversupplied.
Australia simply doesn't have suburbs full of empty houses awaiting mortgagee sales. Instead we are not building enough houses. Not nearly enough.
If you are an investor, every time you hear that "building approvals are down" or hitting "record lows," you really need to think about what sounds like bad news, is in fact exactly the opposite. It's great news. OVERSUPPLY of houses is NOT what you want! (I.e. building approvals booming)
From a supply and demand perspective America was and is over-built - there are just way too many houses. In Australia it's the exact opposite - we are not building enough houses and now our occupancy rates for rental properties have climbed to record highs.
(This factor, COMBINED with the factor listed next, is going to have huge implications on markets around Australia over the next few years.)
Fourth, there is a huge and continuing migration to Australia.
In calendar year 2007, over 410,000 people migrated to Australia. In 2008 data from the Australian Bureau of Statistics shows that an incredible 483,600 new overseas migrants arrived!
Where will all these people live?
Australia's population increased by 1.9% for the year ending December 2008 according to statistics released by the Australian Bureau of Statistics, June 4 2009. The last time Australia saw higher growth rates (above 2%) was in the 1950's and 1960's as a result of post war migration and high
birth rates.
All states and territories experienced positive population growth over the 12 months ended 31 December 2008. Western Australia recorded the largest percentage gain (3.1%) and Tasmania the smallest (1.0%).
So when you have the biggest population growth in 200 years happening at the same time as the largest shortage of homes being built in 200 years, something big will happen. Either there will be a skyrocketing rentals, OR capital growth, or possibly both at the same time, or most likely in our view, one following the other.
Whilst the absolute "top end" of the market, such as the multi- million dollar houses may take a hit right now as some high flyers try to deleverage to make margin calls etc, the middle priced properties in good areas, are highly unlikely in our view to have anything more than a very minor hiccup if any, before all these effects hit home.
In fact data as at June 2009 seems to indicate exactly that, with Melbourne Houses and apartments as recorded by Residex data having already turned the corner, with THREE CONSEQUATIVE MONTHLY PRICE RISES since February 2009, following many months of falling prices since the start of the financial crisis.
Putting all this together means that we are currently starting to see rental increases, and if you already own Australian property, and are NOT getting rent increases, you need to change your property manager.
These strong rentals will continue for some time, maybe even for years to come, especially if the migration levels continue at this rate.
So, is now actually a good time to invest following all the financial turmoil?
History is full of times when people said "now is not a good time." Yet in many cases, they were proven wrong.
Again, what is known already is that HUNDREDS of new apartment and townhouse projects have already been shelved, as Developers have struggled with either a lack of confidence, or in most cases getting mezzanine and construction finance.
This is an example of how investors will directly BENEFIT FROM THE SUB PRIME CRISIS, AS FEWER PROJECTS MEANS LESS SUPPLY.
And for current projects going ahead, Developers realise that some people will want to keep their hands in the pockets at the moment, so are not pushing up prices for new releases as they usually do on off the plan projects, making them very affordable right now.
But don't go along to a new project in a prime location and expect a "huge discount" on today's already competitive prices, as that is unlikely to happen, unless the property is not well located, or is out of our major cities.
The reason is simple: If Developers have to cut prices to sell then they simply will not proceed and build the project.
But if you can secure a prime property today on just 10% deposit, at today's reasonable price, in a prime rental location, that would have to seem to be a good real estate play.
And who would bet against prices not being substantially higher in 5 years than today?
EXECUTIVE SUMMARY
With the Banking sector and financial markets in turmoil over the past 9 months, people have been asking, what will happen to Australian property?
The flight to quality is on, as people liquidate out of the money markets. Trillions and trillions of dollars have "moved" into cash.
This cash will look for a home.
After the World Stock market crash of October 1987, when the Dow Jones fell some 23%, and the Australian all ordinaries fell some 42%, WHY did Sydney house prices rise by 70% in the 3 years immediately following the stock crash, and Melbourne by over 50%?
First, cash needs a home.
Many people who have been panicked, and burnt, will feel very reluctant to reinvest in similar financial instruments, and stock markets again.
As the flight to safety continues, many people who chased high returns move back to investment fundamentals and for many people that means property.
After the stock markets crashed in October 1987, billions of dollars moved into real estate.
Secondly, the Australian economy remains fairly strong.
Thirdly, there is a chronic shortage of construction and new houses being built all around Australia. THIS IS CRITICAL, and is little understood by most people. They may have "heard" about it, but have not given a minute's thought about how they may be able to make money out of this situation.
In the USA for example, there are reports that literally millions of homes have been oversupplied.
Australia simply doesn't have suburbs full of empty houses awaiting mortgagee sales. Instead we are not building enough houses. Not nearly enough.
If you are an investor, every time you hear that "building approvals are down" or hitting "record lows," you really need to think about what sounds like bad news, is in fact exactly the opposite. It's great news. OVERSUPPLY of houses is NOT what you want! (I.e. building approvals booming)
From a supply and demand perspective America was and is over-built - there are just way too many houses. In Australia it's the exact opposite - we are not building enough houses and now our occupancy rates for rental properties have climbed to record highs.
(This factor, COMBINED with the factor listed next, is going to have huge implications on markets around Australia over the next few years.)
Fourth, there is a huge and continuing migration to Australia.
In calendar year 2007, over 410,000 people migrated to Australia. In 2008 data from the Australian Bureau of Statistics shows that an incredible 483,600 new overseas migrants arrived!
Where will all these people live?
Australia's population increased by 1.9% for the year ending December 2008 according to statistics released by the Australian Bureau of Statistics, June 4 2009. The last time Australia saw higher growth rates (above 2%) was in the 1950's and 1960's as a result of post war migration and high
birth rates.
All states and territories experienced positive population growth over the 12 months ended 31 December 2008. Western Australia recorded the largest percentage gain (3.1%) and Tasmania the smallest (1.0%).
So when you have the biggest population growth in 200 years happening at the same time as the largest shortage of homes being built in 200 years, something big will happen. Either there will be a skyrocketing rentals, OR capital growth, or possibly both at the same time, or most likely in our view, one following the other.
Whilst the absolute "top end" of the market, such as the multi- million dollar houses may take a hit right now as some high flyers try to deleverage to make margin calls etc, the middle priced properties in good areas, are highly unlikely in our view to have anything more than a very minor hiccup if any, before all these effects hit home.
In fact data as at June 2009 seems to indicate exactly that, with Melbourne Houses and apartments as recorded by Residex data having already turned the corner, with THREE CONSEQUATIVE MONTHLY PRICE RISES since February 2009, following many months of falling prices since the start of the financial crisis.
Putting all this together means that we are currently starting to see rental increases, and if you already own Australian property, and are NOT getting rent increases, you need to change your property manager.
These strong rentals will continue for some time, maybe even for years to come, especially if the migration levels continue at this rate.
So, is now actually a good time to invest following all the financial turmoil?
History is full of times when people said "now is not a good time." Yet in many cases, they were proven wrong.
Again, what is known already is that HUNDREDS of new apartment and townhouse projects have already been shelved, as Developers have struggled with either a lack of confidence, or in most cases getting mezzanine and construction finance.
This is an example of how investors will directly BENEFIT FROM THE SUB PRIME CRISIS, AS FEWER PROJECTS MEANS LESS SUPPLY.
And for current projects going ahead, Developers realise that some people will want to keep their hands in the pockets at the moment, so are not pushing up prices for new releases as they usually do on off the plan projects, making them very affordable right now.
But don't go along to a new project in a prime location and expect a "huge discount" on today's already competitive prices, as that is unlikely to happen, unless the property is not well located, or is out of our major cities.
The reason is simple: If Developers have to cut prices to sell then they simply will not proceed and build the project.
But if you can secure a prime property today on just 10% deposit, at today's reasonable price, in a prime rental location, that would have to seem to be a good real estate play.
And who would bet against prices not being substantially higher in 5 years than today?
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