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In-House News, April 2004 In this month's issue of In-House News, we address the question on every investors lips...where is the residential property market headed? Is this simply a hiccup or is this the shape of things to come? We also look at the age old question of negative gearing. With many properties guru's knocking the concept, it's time to look at the real truth behind positive and negative gearing and how each strategy might work for you. Also, with the help of
Quest Newspapers, we have published an article which ran in our local paper
last month. For interstate clients, you'll find this very interesting indeed
as you read the local perspective on the continuing rise in building rates in
Of course, with the new financial year with us, it's time to start to put in place your investment plans for the year ahead. One popular strategy today is to buy an old home and renovate it for capital gain. However, be warned. There are many hazards that you may not have considered. This month we look at the very real dangers of home renovation and what you have to look out for. And finally we have a great story from a local resident who has chosen to work with Investment House. In Peter's article he addresses the very real opportunity that this property now gives his family. We hope you enjoy this month's issue.
Southern
Markets Slow, but Where is the Building Activity Set to Continue for at Least Two More Years - Do not expect the cranes in the city to disappear or the hammering in the suburbs to stop in a hurry. While new residents are queuing at the border, the building boom will continue and 91 new homes will need to be built every day. Click here for more Why Choose Negative Gearing? - How many times have you heard the promoters push negative gearing to save tax? It's no wonder that visiting American "Gurus" knock negative gearing and promote positive gearing - apart from having a vested interest. So why would you choose negative gearing when positive sounds far more sensible? Click here for more The Hidden Dangers of Renovating - With so many do-it-yourself shows on television today, it can be pretty tempting to save money on trades people and have a go renovating your next property yourself. Although doing the renovation yourself can be cost effective and emotionally rewarding when you see the finished product, don't overlook the dangers that you could be exposing yourself and your family to. Click here for more Buying
Property in your own Back Yard - I guess my story is a little different from those I have read
in recent issues of InHouse News. For one, I actually live in It's Official! Brisbane People are amongst the happiest in Australia - We have always suspected that Brisbane had some of the most content residents in Australia, however in the recent Australian Unity Wellbeing Index, Brisbane ranked as the epicenter of Australian wellbeing. Click here for more Southern Markets Slow, but Where is the Queensland Market Headed? If you have any interest in the residential property market, you have no doubt been watching property sales and noticed that there has been a slowing of the residential market recently. Of course the question on every investor's lips is… Has the market run out of steam, or is it just pausing to catch its breath? According to leading economic forecasters BIS Shrapnel there has indeed been a cooling off of the economy in general and the residential market, however as they point out in their June 2004 Economic Outlook…
They go onto say that although they acknowledge the housing market has cooled off across the country, the price falls haven't been that dramatic and that…
Almost everyone knows price growth comes from the balance of supply and demand. And in Queensland there is still plenty of demand. From our perspective as property developers we have seen the recent changes in the property market as a blessing for many our investors. Why would we say that? Simply because it has meant there have been more good value properties on the market. The downturn has taken the hot-headed speculators out of the market which is great for our clients. With this softening in the market we now have far more negotiating power. As a result we have (in some cases) been able to source sites for $100,000 less than they were 12 months ago. That extra negotiating power converts into excellent profits for our clients. Currently the sector of the market that is showing the most promising signs of growth is new and fully renovated homes in the inner suburbs. Investors providing a solutions in these areas are well positioned to make a very handsome profit along the way. So in summary, although the overall property market in Australia has seen a downturn, it has been most evident in major southern cities of Sydney and Melbourne. For investors in the South East Queensland region, the future is still bright with continuing demand for housing combined with greater negotiating power. And of course, given we approach our projects as developers, we do not rely on simple market growth to make our profits, but inject equity into the projects by the use of the developer style strategies we've discussed in previous editions. Remember the old adage "buy in gloom and sell in boom". As human beings it is difficult to do the opposite of what the masses are doing, however if you dare to look, you'll find there are some amazing opportunities available in the Brisbane market at the moment. If you've been thinking of investing in Brisbane - now is a great time. Call Sailesh or Paul on (07) 3369 0111 for a snapshot of some of the projects available. Building Activity Set to Continue for at Least Two More
Years By Pam Carstens Do not expect the cranes
in the city to disappear or the hammering in the suburbs to stop in a hurry.
While new residents are queuing at the border, the building boom will
continue and 91 new homes will need to be built every day. Master Builders
Queensland says the residential and commercial construction activity is yet
to reach its peak with demand set to continue into 2006. After that, in 2007,
will come a slowdown, says Master Builders Queensland executive director
Graham Cuthbert. Mr Cuthbert said the
value of overall construction activity in Queensland was forecast to jump to
$24.5 billion by June 2006, up 39 per cent on the projected figure of $17.6
billion to June 2004. Mr Cuthbert said
residential construction activity would increase by almost 50 per cent from
$8.7 billion to $13 billion by June 2006. Commercial construction activity is
forecast to increase by 46 per cent from $4.3 billion to $6.3 billion and
civil construction 13 per cent from $4.6 billion to $5.2 billion. Interstate migration was
driving demand in the residential sector while the return of private sector
developers and the need for infrastructure to support population growth was
driving demand in the commercial sector, Mr Cuthbert said. Figures from the
Australian Bureau of Statistics show net interstate migration to Queensland
for the year to September 2003 was 38,502, up 8.7 per cent when compared with
the previous year. Queensland's natural population increased 2.6 per cent to
24, 135 and net overseas migration increased by 0.4 per cent to 23,510. When translated into
future housing requirements, this growth means 91 new dwellings need to be
built per day, 365 days of the year (based on a 2.6 person household) just to
meet population growth needs. Reproduced from the
Westside News with permission from Quest Newspapers. By Ben
Healy How many
times have you heard the promoters push negative gearing to save tax? It's no
wonder that visiting American "Gurus" knock negative gearing and
promote positive gearing - apart from having a vested interest. So why would
you choose negative gearing when positive sounds far more sensible? The question
is a red herring. In most cases what we are looking for is capital growth.
Negative or positive (or neutral) gearing refers to the cashflow and that is
a secondary consideration. Let's look at
an example. We have
borrowed $300k that we wish to invest. Assuming we're going to use a buy and
hold strategy we might hope that over 10 years it will average 7% capital
growth per annum and double in value. We would now have $300k equity in our
$600k investment. The secondary
question is the cashflow issue - "what will it cost us to hold the
investment?" Now ideally
it wouldn't cost us anything and would even pay us while we waited. That
would be positive gearing. If we could achieve the capital growth and get a
positive cashflow it would be a great scenario. Unfortunately we don't see it
very often. We try and get the best cashflow we can but normally it ends up
negative. So we don't go out to find a negatively geared property, we go out
to find a high capital growth property. If we make
positive gearing our main priority and sometimes this can be appropriate,
then we usually have to choose properties further away from the high demand
areas and hence achieve a lower capital growth rate. One consolation is that
even properties that start off negatively geared soon turn into positive
geared property as the rental income increases. Ben Healy is
Managing Director of Wealth Coach Australia. Check out their new website www.wealthcoachaustralia.com.au
The
Hidden Dangers of Renovating With so many
do-it-yourself shows on television today, it can be pretty tempting to save
money on trades people and have a go renovating your next property yourself.
Although doing the renovation yourself can be cost effective and emotionally
rewarding when you see the finished product, don't overlook the dangers that
you could be exposing yourself and your family to. Besides the
obvious dangers we all face when the inexperienced picks up a power tool,
there are other dangers you may not consider. Particularly with older homes,
you must be aware of the following. Lead Now we all
know about the dangers of lead poisoning, and most people are aware of the
risk of lead based paints in older homes. However you may not have considered
that these lead particles also have a habit of finding themselves a resting
place in your ceiling. The fact that
many people are opening up ceiling space in their old homes with a variety of
renovations, underlines the need for greater awareness of this potential
source of significant lead contamination. This is especially important in
older homes when the volume of dust is excessive. According to
the Lead Advisory Service Australia, a professional ceiling dust remover has
reported "more than 200 kg of ceiling dust removed from an inner western
suburbs house (in Sydney) ... and about 800 kg of dust from a
Federation-style home in Petersham." This is shocking stuff! According
to the Lead Advisory Services Australia website, one of the main sources of
lead poisoning today is from renovations. If you think
your house isn't old enough to have paint that contains lead, think again.
The Lead Advisory Service documents that there are at least 3.5 million homes
in Australia with lead based paint. And contrary to popular belief it cannot
be identified just by its look. Buildings built prior to 1970 will most
likely have paint with a lead content. The lead
paint often tastes sweet and therefore children will pick at it and animals
will lick it. When this paint is sanded, scraped or is peeling it creates a
dangerous lead dust that is easily inhaled or swallowed. This dust also
enters soil where it is easily accessed by children or animals. The
frightening news is that lead does not break down. It will remain toxic and
unless dealt with safely it will not go away. The moral of this story, leave
any lead removal to the professionals who are skilled at handling this
medium. Asbestos Another
hidden danger in today's renovators delight! Most of us are aware that asbestos
was used in building materials in Australia from the 1940's to the 1980's.
Over the years there has been plenty of publicity regarding the dangers of
asbestos in corrugated roof sheeting and fibro. However, did you know the
risk of asbestos doesn't stop there! Asbestos actually comes in two forms, a
loosely bound form as well as the more commonly recognised firmly bound form.
Items that
may well contain asbestos in your old home include… ·
Flat or corrugated sheeting (fibro cement or 'AC'
sheeting) ·
Water pipes ·
Flue pipes ·
Roof shingles ·
Flexible building boards ·
Plaster patching compounds ·
Textured paint ·
Vinyl floor tiles ·
The backings of linoleum floor coverings ·
Insulation on hot water pipes ·
Insulation in old domestic heaters ·
Insulation in stoves ·
Ceiling insulation products At this
stage, there is no law to say that a householder cannot legally remove
asbestos from their property. However, it is recommended that only a licensed
professional remove loosely bound asbestos. If you plan to handle asbestos
material, you need to take precautions to minimise the release of asbestos
fibre. If you do not
feel confident you have the skills and equipment to safely remove the
asbestos material, you should contact a licensed asbestos removalist. Be aware of
the dangers involved with renovating an old house, and remember, Investment House offers a
service to take care of all of your renovation needs. We only use licenced
professionals and ensure the area is correctly prepared and that the site is
thoroughly cleaned after any procedure which may contain hazardous materials.
This is one area of home renovation it really does pay to call in the
professionals. They may not only save your sanity, they may ultimately save
your health! Buying Property in your own Back Yard By Peter
Churchward I guess my
story is a little different from those I have read in recent issues of
InHouse News. For one, I actually live in Brisbane and so have experienced
first hand the massive growth the city has experienced, both in residents and
property prices over the last few years. Secondly,
unlike most investors, I have the added benefit of having a close relative in
the building industry who could help me with my property investment
decisions. So why then, did I choose Investment House to work with? Let me
take you back just over ten years ago. Back in 1993,
I purchased my first investment property with the help of Investment House.
Although the service and advice given was sound, I struggled for years with
the concept of property investing, simply due to the overall performance of
the property market during that time. Certainly not anything I could blame on
the team at Investment House! So last year,
when I decided to step back into the property investing arena, I contacted
Col and the team at Investment House for their assistance. After explaining
my goals and my reservations, they suggested I look at undertaking a Slider
development. What
impressed me right from the start was their attention to detail when researching
the available properties, before putting forward a property for me to
inspect. Although I have known others who have undertaken similar projects on
their own, I know I could not have done this without the help of Investment
House. Their detailed knowledge of the industry and the pitfalls that can
easily trap you, allowed us to move through the project with ease. We ultimately
chose a property in Park Road Graceville. We purchased the property for
$452,500. As part of our development strategy we moved the orginal house to
one side of the block, creating a second development site. This cost us about
$77,500 including some minor renovations. The property
at Park Road suits us to a tee. As well as being a highly desirable suburb in
Brisbane, I have my own fond memories of the area, after growing up in near
by Corina. With our current lifestyle I have regular cause to travel over to
Graceville and enjoy driving past the property, to check on its progress.
Although it
has taken its time, the house has just been slid in the last few weeks,
adding to our excitement. At this stage, we are looking at selling the raw
slider which has a market value of about $400,000. This will allow us to move
ahead quicker and develop a home on the newly created block. Looking at the
current market, it will cost around $275,000 to build this house, which, when
finished, will have a market value of approximately $680,000. In a suburb
that is experiencing a surge in gentrification, it is rewarding to watch
other blocks undergoing similar developments, opening up new land in this
highly desirable region. With our new
investment property underway, this now opens up real choices for our family.
Again, being a local, my wife and I have spoken about perhaps moving into the
investment property ourselves at some stage in the future. This development
is now not only a great investment, but it has the potential to offer us
choices we may not have had, if we hadn't taken this path. Thank you to
the team at Investment House. I've enjoyed our relationship over the 11 years
I have known you and look forward to continuing successes in the coming
years. It's Official! Brisbane People are amongst the happiest in
Australia We have always suspected
that Brisbane had some of the most content residents in Australia, however in
the recent Australian Unity Wellbeing Index, Brisbane ranked as the
epicenter of Australian wellbeing. Australian Unity, in
partnership with the Australian Centre on Quality of Life at Deakin
University, has developed a pioneering study that provides a fascinating
insight into Australians' feelings about various aspects of their personal
lives and national life in Australia. It includes economic, environmental and
social conditions in Australia, as well as giving ongoing insights into our
perceptions of individual wellbeing. The index ranked
Australian capital cities across 13 aspects of life, and Brisbane ranked the
highest in nine of the 13, including personal safety, future security, how
Australia is governed, business life as a whole, the environment, national
wellbeing, the economy and social conditions. With these results, is it any
wonder that according to the Australian Bureau of Statistics, Queensland's
population is growing faster every year. In the year 2002/2003 the
states population increased by 85,803 which represented a growth rate of
2.3%. Still higher than the previous year at 2.2% Compared to the other states
Western Australian came a distant second with a growth rate of 1.4%, the same
as the previous year. According to the ABS's
findings, 80% of Queensland's extra population settles within a 150 km radius
of Brisbane. With the 49.7% within the Brisbane City and Outer Suburbs. With
so many people migrating to Queensland, is this an issue when it comes to
employment?
According to the Office of
Economic and Statistical Research, Queensland recorded an increase in trend
of employment in April 2004 with the Queensland sector strengthened to 3.2%
compared to the rest of Australia which sat at 1.8%. This was the largest
annual rise in employment in any state, (58,200 persons), accounting for
around 30% of the national rise in employment over the year. Queensland also boasts an
unemployment rate of 6.2% for the sixth consecutive month, its lowest rate in
more than 21 years. When you consider the results of the recent Wellbeing
Index survey the continuing migration to Queensland and the healthy
employment prospects this is all great news for those who continue to invest
in the south east quarter!
Investment House Pty Ltd Brisbane - Australia investmenthouse.com.au Investment House is an organisation that works as buyers agents, development advisory consultants, and project managers for investors looking to acquire residential property. The information contained herein is of a general nature and does not take into account individual situations, needs or goals. Its purpose is to give you a general understanding of the specific topics covered. For further information relating to your specific situation please contact the team at Investment House direct. No reader should rely solely on the information contained in this publication as it does not purport to be comprehensive or to render specific advice. Please be aware that the authors of this newsletter are NOT licensed investment advisors or planners, licensed financial planners or advisors, qualified or practicing accountants. |
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