26 MarAsset Structuring For Property Investors 101

 

Asset structuring is a vital component of property investment however, it is often bypassed by newbie property investors or developers. Asset structuring should be tailored to the individual investor however, there are some crucial factors to consider when deciding on the best structure for your needs. Here are some of the key issues that you should think about when structuring your assets as a property investor:

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25 MarSE QLD- Australia’s New Investment Hotspot

 

The Australian housing market and reports of declining property prices has created an air of uncertainty for potential and established property investors. However, there are still opportunities for in growth in Australian housing investment. The key to successful property investing in Australia is to find the most viable locations.

 

According to property investors and media coverage, Sydney and Melbourne have suffered the most in the property market downturn. However, smart investors are looking elsewhere, and South East Queensland is looking like an attractive option.

 

South East Queensland Property Outlook 2019

SEQ property prices are steadily improving, and it looks like growth is on its way. SEQ has never experienced massive growth like southern states. However, experts believe that SEQ could be an excellent place to consider when searching for properties to purchase.

 

According to CoreLogic’s Hedonic Home Value Index, Brisbane performed well compared to other capitals in Australia. The latter part of 2018 showed some obvious growth in the property market throughout Inner city Brisbane, in 2019 the predicted growth for inner city Brisbane is 4%.

 

Affordability is a definite pull for potential property investors and young families moving to Queensland and investors looking to invest in property in the Queensland market.

 

Queensland is a good place for potential investors to start. Residential vacancies are currently low and look set to stay that way for the foreseeable future. According to SQM Research rates declined from 3.4% in August 2017 to 2.8% in August 2018.

 

Population Growth

Queensland’s predicted upturn is directly related to affordability, rapid migration, ongoing population growth, and infrastructure development.

 

State Government predictions indicate that Queensland’s population is set to rise rapidly to 6.7 million by 2036.  A direct reaction to population growth will be widespread infrastructure development, meaning new roads, hospitals, schools, and recreational activities for a growing population of young families and professionals. To meet the demand, at least 30,000 new properties need to  be built each year for the next 25 years.

 

The potential for growth lies in the fact that there is a shortage of housing in crucial areas. Therefore, as the population grows, more housing will be needed to meet the demand.

 

Suburbs like Ipswich and Logan will need to increase property development to meet the needs of the growing population. For example, population growth is set to increase by 144% by 2036. Logan’s population is set to grow by 46% by 2036.

 

The Queensland Infrastructure Boom

Queensland will experience a massive boost in infrastructure spending over the next few years, with a predicted spend of $25 billion.

 

According to the Queensland State Infrastructure Plan March 2016, these are the main infrastructure plans to be completed by 2021:

  • $10.94 million transport plans with a $2 billion Brisbane Airport upgrade and multi billion Cross River Rail Initiative
  • $743 million arts recreation facilities
  • $2 billion Brisbane Live Entertainment facility
  • $2.03 billion in energy development
  • $5.37 billion for health and medical facilities
  • $504 million for education and training
  • $267 million for water projects

 

Significant infrastructure development is a vital sign that there are property investment opportunities in a particular area. This is not a surefire reason; however to invest in that area but in the case of South East Queensland, there are lots of reasons why investing in property is a good idea.

 

As stated earlier, extensive research is necessary when purchasing a property.

 

Analyse property cycles, and create a comprehensive risk management strategy before committing to anything.

 

There is definitely huge potential in Queensland for new and established property investors. However, it is necessary to conduct extensive research before committing to purchase a property.

 

Property investment requires comprehensive risk management strategies and in-depth research into the location, costs, interest rates, population growth, local business, and overall viability.

 

South East Queensland is being dubbed the newest investment hotspot nonetheless personal research, and intensive investigation is imperative.

25 MarRisk Management Strategies For Property Investors

When investing in property, having a well-researched risk management plan is essential.

Traditional property investment is not generally considered a high-risk investment.

Investors generally believe that researching location and establishing trust structures is all they need to do before investing in property. However, most investors fail to create a well-constructed risk management plan; investing in property  without a plan is risky.

Here are some essential risk management strategies to consider when purchasing investment properties.

Risk Management Strategies For Property Investing

Understand The Numbers

Investing in property without fully understanding the numbers is a recipe for failure. Knowing your numbers is imperative because it allows you to analyse the risk factors involved.

Once you know the financial risk, you can adequately assess the viability of purchasing a particular property.

Create a Strategy

Plan your property portfolio, purchasing properties without a proper strategy is unwise.

Your investment portfolio plan should include the number of properties you want to buy, is it financially viable?

How much you plan to spend, loan to value ratios, profit, and loss, expected cash flow for each property. Include taxation, time projections, interest rates, etc. You should review and adjust your strategy annually.

Financial Buffers

Think about it like this, when you buy a car, having some extra money in the bank to cover unexpected expenses is essential. Likewise, when you invest in property, it is crucial that you have some additional money saved to cover unexpected costs. Investing in property without financial buffers is risky business.

Location

The location should undoubtedly be part of your risk management strategy. When searching for potential locations, you should be looking for areas that balance cash flow and capital growth.

Also, make sure the property prices fall in line with your budget; make sure you are looking for locations with properties mid-range prices. Pricing is vital because when you invest in property, it is capital growth that will help you to build wealth.

Diversification

Diversification is critical, plan to purchase properties in different locations. Do not put all your eggs into one basket. Gaining knowledge about property cycles is necessary here.

Research

Conduct extensive research on the location you wish to purchase a property. Delve deep into infrastructure development, population growth, unemployment rates, property prices.

Speak to local business owners, make your projections for the next 10-15 years. Just because purchasing a property in a particular area looks good now does not mean that it will be a good idea in the next 15 years.

Do extensive research to make sure you are making the right decision.

Insurance

Planning for insurance is an essential risk management strategy. Do not just focus on the standard insurance plans such as landlord or content insurance. It would help if you also looked into Life insurance and income protection insurance too.

Advice

If you need further assistance, seek professional help. Trying to do everything on your own is unwise,  especially when you are a new property investor.

In conclusion, plan, plan, plan!

You simply cannot build a profitable property portfolio without planning. A risk management plan should include various smaller plans to create a comprehensive property investment risk management strategy that will minimise risk and safeguard you when unexpected issues arise.

Seeking the support and advise of a professional property investment advisor is always a good idea.  Property investment is a relatively low risk investment in comparison to other forms of investment. However, it is still essential for you to seek advice in areas that you lack knowledge and understanding.

Creating a concise, well put together risk management strategy will give you a clearer understanding of how the property game works, and it will minimise uncertainty and risk.

 

 

24 Mar6 Clues House Values Are About To Rise

As a budding property investor, spotting potential opportunities is crucial.

Here are six simple clues to help you identify when property values are on the verge of rising in suburban areas.

Low Vacancy Rate

A lower vacancy rate often signifies that there is a high demand from renters. Research the vacancy rate of a suburb, and if the rate is below 3%, this usually indicates that rental properties are in scarce supply in that particular area.

High demand often leads to rental price increases. Higher rental prices are attractive to property investors; this could lead to a spike in property values.

Number of Days On The Market

The length of time property is on the market can provide you with some clues about the property market in that specific area. Check the city average; if the length of time is less, it indicates that there is high demand in that area.

Extensive research is necessary when searching for potential investment opportunities. Less time on the market could also indicate high property value. Therefore, it is best to extend your research beyond the number of days a property stays on the market. 

Number Of Auctions

When demand is high, real estate agents and property sellers attempt to sell more properties to create competition, which often leads to price increases. An increase in auction clearance rates could signify an imminent property boom.

Vendor Discount

Research vendor discounting, this will give you a greater understanding of market trends in your chosen suburb. The discount is the difference between the asking price and the price upon sale.

If there is a significant discount, this could mean that the buying power is in the hands of the buyer, this is often a sign of market decline. However, if the discount is insignificant, this could signify that property values are set to rise.

Infrastructure Improvement

Conduct research on infrastructure growth and improvement. Find out about development plans, road, and public transport plans. Infrastructure development plans are vital because they usually provide clues about future population growth.

Population growth will mean higher demand for housing, which could eventually lead to a rise in property value. Timing is everything when it comes to property investment, delving deeper into infrastructure growth could provide you with some hidden clues about the property market.

Take a look at council websites to find out about immediate development plans.

Percentage of Stock On The Market

An analysis of the percentage of stock on the market can provide essential clues on the state of the market in a particular suburb. Look at the number of properties on the market as a percentage of the overall number of properties in an area.

If the percentage is below 2%, this could mean that supply is low, and price increases could be a possibility if demand increases. If the overall percentage is say 3% or more, then this could signify high supply and low demand.

Summing Up

When searching for clues about the state of the property market in a particular area, it is vital you conduct thorough research on all aspects of the area you have chosen.

For example, rental property shortage could be a sign of high demand; however, it could also indicate that property values have already risen.

Analyze all factors to make intelligent, informed decisions about whether or not to invest in property in a specific area.

22 MarUnderstanding Property Cycles

An in depth knowledge of property cycles is vital for property investors.

Learning about property cycles will facilitate the investment process and allow you to fully understand how property investment works.

The general consensus is that property investment should be seen as a long term investment. In order to get the most out of your investment, the value of a property needs a period of time to increase in value and/or you need time to pay down the principal to a meaningful extent.

Property investment can be lucrative if done right however, it is imperative that property investors understand what happens during the growth stage after the property purchase stage.

The value of property in Australia goes up and down, this is known as the ‘property cycle’. Knowing how the property cycle works will provide you with the knowledge to know when to buy and sell a property.

The Property Cycle

The property cycle typically takes place over a 7-10 year timeframe. Property prices increase, decrease and then they go through a stability stage. There are four stages to the property cycle:

Stable Opportunity Phase

The opportunity stage is when the property price is stable, most investors think that this is the perfect time to buy because the prices do not appear to be increasing or decreasing.

However, those with an in depth knowledge of the property market will know that when property prices stabilise, they are more likely to rise at this time. Therefore, this is not the best time to sell.

Growth Phase

During the growth stage, the property prices start to go up, vacancy rates also decrease at this time and rental prices begin to increase, investor interest rises as they start to see potential in a particular area.

This can often start with inner metropolitan suburbs and then work its way out so that middle and outer suburbs will also experience some growth.

A good time to invest is in the first half of the growth stage. At the point the property prices are not too high or not too low. However, as the cycle moves into the peak phase investors can expect good returns.

Peak Phase

The cycle enters into the peak phase when more investors recognise the potential in a particular area, recognising the investment opportunities during the growth stage, the prices increase. At this time, the market typically increases by north of 10%.

The peak phase is short and intense as investors frantically take advantage of the growth stage.

The peak phase is short lived and it often ends with with excess supply as property developers, builders and owners saturate the market.

Fall Phase 

The peak phase leads to the fall stage where there is an oversupply of properties on the market. This leads to a rise in vacancy rates, a reduction in rental returns and prices decrease or stabilise at this point.

What Influences The Property Cycle?

The property cycle is influenced by the following factors:

Population Growth

Population growth has a significant impact on the property cycle because when the population increases, the demand for properties increases. When the population decreases, the demand for property typically drops with it.

When you are researching property cycles and delving deep into a particular area, doing some research on population growth is worthwhile.

Interest Rates

When interest rates decrease, it attracts investors and home buyers alike because of improved affordability.

Exchange Rates

Exchange rates influence the property cycle because when exchange rates are lower, this is good news for foreign investors. Property prices are generally cheaper when exchange rates are lower, thus attracting more foreign buyers.

Unemployment Rates

When unemployment rates are relatively low, it drives more potential property investors. Why? Because low unemployment often points to an oversupply of jobs which is a good thing for rental returns and price growth in the area for property investors.

When unemployment rates are high, these areas are often considered high risk areas with little potential for growth.

Infrastructure

Developments in the local area will typically increase interest in a particular place. For example, new roads, schools, hospitals and shopping facilities.

Banks

Bank lending restrictions and leniency can most certainly influence the property cycle. If banks are less willing to lend money to investors, this can affect the property market greatly.

When banks are more open to lend to investors this increases the amount of investors interested in purchasing property, which makes sense!

The good news is, at the current time, banks are relaxing their lending criteria.

When Is The Perfect Time To Buy ?

Understanding the dynamics of the property cycle is crucial, as it facilitates the decision making process. When it comes to property investment, knowledge is key.

Generally speaking, the best time to purchase is when the market is stable, the growth stage is close and the peak stage is in the distant future.

Things are not binary when it comes to property investment therefore, carrying out the necessary research is essential. Understanding the different stages and the factors that influence those stages is a vital component in your property investment journey.

20 MarMelbourne Property Forecast 2019: Top Suburbs and Market Outlook

 

The Melbourne property market experienced the most significant quarterly decline in ten years. By the end of 2018, the Melbourne real estate market dropped by -4.7%.

The NAB residential property index highlights that property investors are losing interest in the city and as a result of this and the decline in Sydney’s housing market, Australian house prices have dropped by -2.7% in the last year.

Considering the overall state of the property market in 2018, how will 2019 fare? What is the overall market outlook for Melbourne in 2019?

What Happened in 2018?

After five years of steady growth, Melbourne’s property market experienced a sharp decline. Here are some of the possible reasons why the figures dropped:

  • Credit restrictions particularly for property investor loans
  • Reduced foreign investment
  • More properties, fewer buyers
  • Clearance rate reduction
  • Oversupply of apartment units

Despite the overall decline in the Melbourne housing market in 2018, some outer suburbs held their prices (+6.2%) In comparison, Melbourne’s inner and middle ring suburbs experienced some price reductions with middle ring suburbs declining -5.7% and inner suburbs -24%.

Melbourne Housing Market Forecast 2019

Property experts predict that by June 2019, the median house price in Melbourne will drop to $820,000, approximately 8.4% less than the recorded median for December 2017. Units are also set to experience a decline, with a predicted 3% drop expected.

By June 2021 the median unit price is forecast to be at $545,000, which works out 2% less than the recorded median in June 2018.

SQM Research suggests that one of the factors affecting the property market is the reduction in interstate migration in the past two years.

Migration to Victoria has reduced by 4,000 since 2017. Other factors include bank finance restrictions and weakening foreign investment.

Expected Price Changes in 2019

Some property experts have predicted price drops of -9% to -6% in 2019. Here are some of the factors that might affect property prices in 2019.

-9% decline to -6% decline if the cash rate stays the same, slow economy and Labor government elected.

-11% decline to -6% decline if interest rates rise by 0.20 % and Labor government

-3% decline to 0% decline if 0.50% interest rate reduction and Labor government.

If a Labour government is elected, their planned negative gearing repeal policy  could have a significant impact on the property market.

BIS Oxford Economics predicts median unit prices to drop -3.6% by 2020.

Top Melbourne Suburbs to Invest in 2019

It is certainly not all doom and gloom for the property market in Melbourne. These are just some of the top suburbs to carefully consider investing in 2019.

  • North Melbourne
  • Collingwood
  • Ringwood
  • Croydon

Growth is more likely on the outskirts of the city, for example, Werribee is up 17.86%, and Officer was up 30.55% in the past year.

Infrastructure development and expensive housing in the city center is luring first time buyers to Melbourne’s outer belts.

Lending restrictions, reduced population growth and weakening foreign investment are all factors affecting the Melbourne property market currently.

However, although further decline is expected in 2019, there is still hope for first time buyers and potential investors in the outer Melbourne suburbs.

Property analysts and major banks have recently modified their predictions for market growth in Melbourne, advising property buyers to tread with caution in 2019.

 

20 MarTasmania Property Forecast 2019: Top Suburbs and Market Outlook

 

Hobart, the capital city of Tasmania, has gained a significant amount of attention from potential investors and first-time house buyers in the past three years. The quaint scenery and quirky architecture and steady economic growth has made Hobart an attractive choice for property buyers.

 

The market downturn that affected Sydney, Melbourne and other Australian cities had little effect on the capital city of Tasmania. Hobart has experienced the most rapid growth in property prices in recent years, and it still maintains a relatively affordable median house price.

 

Considering the current market climate, what does 2019 have in store for Hobart?

What Happened in 2018?

Despite the market decline in other parts of Australia, Hobart remained mostly unaffected in 2018. It experienced notable growth, with a strong rental market and steady population growth, Hobart avoided much of the issues that plague Sydney and Melbourne.

 

QBE’s Australian Housing Outlook 2018-2021 states that Hobart’s median house price was $481,000 in June 2018, a 10.6% increase since June 2017.

The most notable growth happened in Brighton, a 17.3% increase in the past year.

Hobart City recorded a lower growth rate of 6.3% from 2017-2018.

The rental market recorded vacancy rates of 0.7% in June 2018, the same as in 2017.

Hobart Property Market Forecast 2019

Property experts predict that growth will continue in 2019. However, Hobart could experience a slight property market growth reduction in the next two to three years.

QBE Australian Housing Outlook predicts a +8% price growth for 2019-2021, thus bringing the median house price to $520,000. The median unit price is expected to increase to $420,000 which is a +9% rise.

Forecasted figures may vary depending on political climate, economic growth, and bank interest rates. Here are some of the factors that might affect Hobart’s property market in 2019.

 

+5% – +9% growth if the cash rate remains the same and the economy slows down, and Labor government

+4%- +7% and a 0.20% interest rate increase, no change in cash rate and Labor government

+5%- +9% with a 0.50% rate reduction by banks, and a Labor government

 

If Labour  government is elected in 2019, this could harm the property market; however, as it stands, Hobart’s property market looks relatively healthy.

Top Suburbs To Invest in Hobart 2019

As a potential property investor, understanding the best areas to invest your money is crucial. Here are some of the suburbs to consider when thinking about investing in Tasmania property.

 

Focus on affordable suburbs north-west of the city such as Glenorchy and Moonah. These areas provide good vacancy rates and strong rental returns. For example, Glenorchy’s rental yields are 5.4% currently, and the median house price is $365,000.

 

The outer ring suburbs are often the best choice because they offer the most substantial growth potential and they are less costly.

 

Kingston is a decent option if you are looking South of the city, with strong price growth, affordability, and 4.7% rental yields, it is a viable choice for potential property investors.

 

Lindisfarne is also a suburb to watch in 2019, North-east of the city, it provides, excellent living conditions, and affordability. As well as healthy rental yields of 4.6%, unemployment and crime rates are relatively low as well as good schools, shops, and efficient transport links, Lindisfarne is another excellent choice for potential property investors in 2019.

 

5 MarSydney Property Forecast 2019: Top Suburbs and Market Outlook

 

The Sydney property market enjoyed ten years of steady and unobstructed growth; however, 2018 saw a slight softening of the market. The overall consensus is that 2019 will see much of the same. What is the general forecast for the 2019 Sydney property market?

The period of steady decline in the Sydney property market saw:

  • Credit restrictions
  • Less foreign investment
  • Increasing bank funding costs
  • Expensive housing
  • Oversupply of apartment units in some places

 

2019 Forecast

The median house price in June 2018 was $1,103,50, a 7.6% decline since June 2017.

Outer and Western suburbs experienced a 2.8% drop, in addition to this, vacancy rates increased from 1.8% to 2.5% in June 2018. There was a 7.4% decline for Sydney dwellings by October 2018.

2019 Predictions

Property experts SQM Research have predicted an underwhelming softening of the Sydney property market in 2019 and beyond.

An overall property pricing crash is not expected. They highlight a steady national economy, stable population growth and low unemployment to indicate that a significant property pricing crash is not on the cards for Sydney.

 

QBE’S Australian Housing Outlook has predicted a fall in prices between 2019 and 2020. Their predictions indicate that 2019 should see an 11 percent decline in prices with the median prices dropping -5.4% between 2019 and 2020.

 

CoreLogic highlights various factors that could affect overall property prices in Sydney in 2019:

 

-9% decline if there is no cash rate change, Labor government May 2019 and a slow economy

-11% to -6% drop if 0.20% interest increase and Labor government

-6 % to -3 % drop if cash rate stays the same, slow economy and Liberals stay in power in the upcoming election

 

Property analysts have predicted that Labor’s planned repeal of negative gearing policy could harm property prices.

 

Best  Sydney Suburbs To Invest in 2019

Eveleigh

Dubbed the next Silicon Valley, Eveleigh is a trendy inner-city suburb with lots of investment potential. Up and coming tech innovation projects will lead to new job creation and startups setting up shop in the area. With brand new apartment projects, art center and hip cafes, Eveleigh is the perfect suburb for young families, professionals, and creative communities alike.

Waterloo

Waterloo is set to become a hot zone for property investors, with brand new apartment developments, local parks, art galleries, trendy shops, cafes and restaurants, a possible Metro line could be in the pipeline. Waterloo is certainly looking like  one of the suburbs to watch in 2019.

Brookvale

Brookvale offers relatively affordable housing, close to beaches. There are plans to transform Brookvale into a bustling place to be, with new bars, cafes and new residential developments on the cards. The transport system is efficient, and things are looking up for the Brookvale area.

Baulkham Hills

Baulkham Hills is a family-focused suburb with lots of investor potential. 20% of the suburb is rented, which is excellent news for potential property investors. The brand new Sydney Metro Northwest rail line which is due to open in 2020 will add value to the up and coming suburb, making it one to watch in 2019 and beyond.

 

The  general consensus for the 2019 Sydney property market is that property buyers will most likely have more buying power with softening of the market set to continue, there is no indication that there will be a total property price crash in Sydney.

There is still lots of investment potential in the suburbs with continued infrastructure development, 2019 is set to experience a steady price decline overall, so it is still a case of buyer beware.