Investment House's In-House News, November 2005

It’s hot off the press - a medium density residential development in the Brisbane inner suburb of Greenslopes that has been designed with the “end users” in mind.

That’s remarkable because most developments are designed simply with the developer’s bottom line in mind. Nothing wrong with that - until it results in the development of tiny apartments comprising pokey rooms and limited car accommodation. Of course it’s done by design to facilitate maximum profit for the developer, but the problem comes when it doesn’t offer a very attractive investment prospect to the end user (buyer). But not this time.

This time, our Research Team has found a developer prepared to run against the grain and design a really impressive development – and because of that, it stands out from the crowd by a country mile… this one is special.

Obviously, if it’s as good as we’re suggesting, it isn’t going to be on the market very long. Aside of the very strong fundamentals, the timing of this email bring with it a further opportunity. That’s because the developer is currently looking for a number of “pre-sales” to secure more attractive development funding, and this represents a short term opportunity for investors to buy into the project at a discounted price – but you’ll have to move smartly.

Along with its impressive location, the project is poised for success because the developer has provided flexible design solutions for both future owner occupiers, and tenants. This works directly into the hand of the investor.

At the end of the day, for a successful investment, you want high capital growth coupled with low net cost of ownership. And this project delivers.

The optimum medium density formula is - three ample bedrooms with master ensuited. Two car lock-up garaging with direct internal access to spacious air conditioned living areas. And you want expansive entertaining areas to take advantage of the Queensland climate and lifestyle. And the ultimate wish list includes direct street frontage and a view.

And you want it located near a dominant “infrastructure and service” component where there are constraints on further competitive supply.

Rental prospects are promising too. Traditional “long term” rental prospects have been appraised at $420 pw for the three bedroom townhouses and short term occupancy rates are $120 per night for the dual key apartments (Note: figures in the electronic brochure (see below) are based on $120 per night with a 75% vacancy rate equalling $630).

What must not go under stated is the huge hospital driven demand for short term accommodation in the area.

In recent years the health care industry has increasingly encouraged patients to spend less time in hospital beds and more time as out patients. This translates into increasing demand for short term local accommodation around major hospitals. The hospital recently undertook a massive $37M upgrade and now boasts the title “Australia’s largest private hospital”.

Check the hospital website yourself. It provides a list of possible short term accommodation providers to anyone inquiring – you can view it at www.ramsayhealth.com.au/gph/visitors/accommodation.asp. You might like to check out the competition currently available at neighbouring “Greenslopes Apartments” (which you can view at www.greenslopesapartments.com)

The following link will take you to an electronic brochure providing artist’s impressions, floor plans of the development along with an Information Brochure. At the end of the brochure you’ll see an illustrative cash flow analysis – please note that the depreciation rate used for buildings in this report should be increased from 2.5% to 4% for serviced apartment style letting (which just serves to make the numbers even more attractive). Your link is www.investmenthouse.com.au/NicholsonTerraces.

If you’d like to secure one of these impressive units, simply download the “expression of interest” and return it (scan and email or fax: 07-3369-0777). From there we’ll arrange for the full “off the plan” contract package to be forwarded to you. If you want one of the three bedroom townhouses with road frontage, you’d best move smartly. It’s simply first in - best dressed.

Of course, if you require any elements clarified, please contact Colin Ferguson at colin@investmenthouse.com.au or (+617) 3369 0111.


	subscribe unsubscribe
	Aussie John’s amazing “Property Market” prediction, is he right? Many of you would have heard by now the commotion caused by John Symond of Aussie Home Loans on Channel 9’s recent Sunday program. In typical Aussie John’s stirring style he said “If I was an investor I would be selling as soon as I can” and “home buyers should be thinking about deferring buying property”. “Generally speaking, for the average mums and dads out there, I think the price of real estate today will decline, and continue to decline, over the next couple of years." With all the talk about housing bubbles and over heated markets its easy for someone to forget the most basic premise of property investment, it’s a long term strategy, not a “Get Rich Quick” scheme. You only have to look at Australian house price data over the last 20 years or so to see the reality of that (see Table 1 below). According to the table the median house prices in the 8 capital cities of Australia in the 10 years between 1994 and 2004 has averaged an increase of 191.87%. That’s not too bad a return, but also remember the effect of adding leverage to that and the results can increase dramatically! Only 24 out of 250 "data cells" has there been a price drop recorded (8 capital cities x 34 years of data each = 272 yrs, less 22 yrs without data). Of those years that a price drop has been recorded the average is only 2.04%. Remember, there is no such thing as a particular property market. Instead there are all sorts of different properties, in all sorts of different markets, in all sorts of different locations. Any predictions of what might happen to property prices in general should be taken with a pinch of salt, especially when predicting short term movements! Residential property investment has always had a very low risk factor. The key to success in property investment is to invest in areas that are currently undergoing a proven permanent increasing population shift. This is definitely the case in south-east Queensland. Remember supply and demand are the long term drivers of property growth. In our recent economic update - quoting statistics from BIS Shrapnel - we stated “population migration to Queensland has remained strong with net international migration of 22,000 and net interstate migration of 32,000. The forecast is for it to remain strong (at about this rate) which provides a platform for continued high demand for housing.” Sydney, Melbourne and Canberra prices appear to be ‘off the boil’ at the moment but in 10 years time we will still definitely say “remember how low prices were in 2005”. In summary remember the adage “it’s always a good time to buy property” and look to the long term growth prospects of investing in high quality residential real estate. Back to the Top
	Market Snapshot - It all adds up to a warming Queensland market...
		The Queensland Economy Queensland again recorded solid economic growth in June quarter 2005. The most recent Queensland State Accounts (QSA), released by the Office of Economic and Statistical Research, show that gross state product (GSP) rose 0.8% in the June quarter to be 3.8% higher over the year. GSP growth in Queensland continued to outpace growth in the rest of Australia, which recorded quarterly growth of 0.7% and annual growth of 2.3% in the June quarter. Apart from a brief pause in mid-2003, business investment in Queensland has surged since early 2001. In June quarter 2005 growth in other buildings and structures investment (2.9%) outpaced growth in machinery and equipment investment (1.6%), to produce 2.1% growth in aggregate business investment. Queensland’s trend unemployment rate declined 0.1 percentage point to 4.9% in October 2005, while the national unemployment rate remained unchanged at 5.1%. The unemployment rate in Queensland has been below or equal to that nationally since June 2004. Auction Clearance Rates Brisbane Auction Clearance Rates show a steady 37% average over the last 6 weeks, approximately 1% higher than this time last year. Although clearance rates are relatively low a slow incline shows a warming market. Housing Approvals September Housing Approvals show Queensland as arguably the best state when comparing volume and population data. Queensland has the second highest volume with 3,094 approvals (25.3% of the Australian total) which when considering the population disparity between states is a massive amount. The -1.2% approval drop is only a small downturn given the approval volume and population difference. In comparison Victoria's volume was 3,206 only 112 higher than Queensland's', however a disappointing 3.5% downturn in approvals makes this an average result. N.S.W.'s approvals were 412 less than Queensland's' with 2,682 with a low -2% downturn. The combined approvals for S.A., W.A., Tas, N.T. and A.C.T. was 3,260. Population Growth Population Growth Rates show Queensland booming ahead of Western Australia and Northern Territory. Well above the Australian average.
	Sources: Economic Data as well as Population Growth and Housing Approval graphs are from the Office of Economic and Statistical Research, Brisbane Auction Clearance Rates are from Australian Property Monitors’ Home Price Guide. Back to the Top
	Nicholson Terraces are selling fast, take a look at these affordable and stylish positive geared apartments and townhouses... Download the information brochure here www.investmenthouse.com.au/NicholsonTerraces. Here’s the project in a nutshell: 5.5km from Brisbane GPO and strategically located beside a major Brisbane hospital with easy access to the South East Freeway, Comprising Eighteen spacious three bedroom ensuited townhouses with double lockup car accommodation Seventeen dual key two bedroom ensuited apartments, that will produce a super high yield Opportunity for cash flow positive investment with short term occupancy style letting Settlement expected late 2007 Pre-Sale discount $20,000 It’s hot off the press - a medium density residential development in the Brisbane inner suburb of Greenslopes that has been designed with the “end users” in mind. That’s remarkable because most developments are designed simply with the developer’s bottom line in mind. Nothing wrong with that - until it results in the development of tiny apartments comprising pokey rooms and limited car accommodation. Of course it’s done by design to facilitate maximum profit for the developer, but the problem comes when it doesn’t offer a very attractive investment prospect to the end user (buyer). But not this time. This time, our Research Team has found a developer prepared to run against the grain and design a really impressive development – and because of that, it stands out from the crowd by a country mile… this one is special. Obviously, if it’s as good as we’re suggesting, it isn’t going to be on the market very long. Aside of the very strong fundamentals, the timing of this email bring with it a further opportunity. That’s because the developer is currently looking for a number of “pre-sales” to secure more attractive development funding, and this represents a short term opportunity for investors to buy into the project at a discounted price – but you’ll have to move smartly. Along with its impressive location, the project is poised for success because the developer has provided flexible design solutions for both future owner occupiers, and tenants. This works directly into the hand of the investor. At the end of the day, for a successful investment, you want high capital growth coupled with low net cost of ownership. And this project delivers. To get high capital growth – you want property that will be attractive to the “owner occupier” market. The “owner occupiers” are the future buyers to whom you’ll want to sell. “Owner occupiers” make up the bulk of the buying market place (making a stable market) and they make emotional buying decisions (meaning higher resales). And even if you don’t actually sell, the fact your property is in demand by those buyers drives your capital value higher and higher. If you’re looking for low net cost of ownership (or even positive cash flow) – you want maximum income from the tenant, and maximum contributions from the tax commissioner. Tax deductions are optimised in buying new low maintenance properties and can be increased further by using the property for short term rental (enjoying a higher rate of capital allowance). Rental Yield in itself is optimised with the right balance of design characteristics coupled with proximity to infrastructure and services. The optimum medium density formula is - three ample bedrooms with master ensuited. Two car lock-up garaging with direct internal access to spacious air conditioned living areas. And you want expansive entertaining areas to take advantage of the Queensland climate and lifestyle. And the ultimate wish list includes direct street frontage and a view. And you want it located near a dominant “infrastructure and service” component where there are constraints on further competitive supply. Rental prospects are promising too. Traditional “long term” rental prospects have been appraised at $420 pw for the three bedroom townhouses and short term occupancy rates are $120 per night for the dual key apartments (Note: figures in the electronic brochure (see below) are based on $120 per night with a 75% vacancy rate equalling $630). What must not go under stated is the huge hospital driven demand for short term accommodation in the area. In recent years the health care industry has increasingly encouraged patients to spend less time in hospital beds and more time as out patients. This translates into increasing demand for short term local accommodation around major hospitals. The hospital recently undertook a massive $37M upgrade and now boasts the title “Australia’s largest private hospital”. Check the hospital website yourself. It provides a list of possible short term accommodation providers to anyone inquiring – you can view it at www.ramsayhealth.com.au/gph/visitors/accommodation.asp. You might like to check out the competition currently available at neighbouring “Greenslopes Apartments” (which you can view at www.greenslopesapartments.com) The following link will take you to an electronic brochure providing artist’s impressions, floor plans of the development along with an Information Brochure. At the end of the brochure you’ll see an illustrative cash flow analysis – please note that the depreciation rate used for buildings in this report should be increased from 2.5% to 4% for serviced apartment style letting (which just serves to make the numbers even more attractive). Your link is www.investmenthouse.com.au/NicholsonTerraces. If you’d like to secure one of these impressive units, simply download the “expression of interest” and return it (scan and email or fax: 07-3369-0777). From there we’ll arrange for the full “off the plan” contract package to be forwarded to you. If you want one of the three bedroom townhouses with road frontage, you’d best move smartly. It’s simply first in - best dressed. Of course, if you require any elements clarified, please contact Colin Ferguson at colin@investmenthouse.com.au or (+617) 3369 0111. Back to the Top
	Site of the Month - A superb site with serious profit potential What a month readers! The Research team at Investment house have looked at over 200 sites in the past 4 weeks. One property we checked out was so water-affected the agent should have warned us to bring our swimmers along to the inspection! The Brisbane market at the moment seems to be flooded (forgive the pun) with sub-par splitter sites in the $500,000 to $750,000 range. It IS hard to find a value for money site with real money-making potential - sometimes it seems as if it’s akin to finding a needle in a haystack. But that’s what we at Investment House have done, and will continue to do. This month’s site, is perched high on a hill in the prestigious Indooroopilly/Taringa region 6km from the Brisbane CBD/ This 1108m2 site is larger and slightly more expensive ($600,000) than the properties we usually source for our clients however it is found in a high-performing area with very strong long term investment prospects for the future. With an existing Development Approval (DA) to remove the current homes and sub-divide the block (2 large 550m2 lots) the success of this site is its simplicity. All the hard work has been done and all that is left is for us to submit plans for 2 new homes. In line with the time-tested but proven real-estate adage of `LOCATION LOCATION LOCATION`, the strength of recent home sales in the area has allowed us to confidently attach a value of $750,000 to the finished products. In fact one sale in a near street of $710,000 was on a site of just 354m2! With resale evidence in strong support of these values, your estimated profit from this project is $105,000 (this is assuming you build one property, sell it and build the other… if you built both at the same time your profit would be even bigger). And because council have given their nod of approval in the form of the DA, the risk levels for this project are minimal. No nasty surprises, no sleepless nights! The client who ends up purchasing this site will be able to relax and reap the rewards of following sound investment practices in an area with strong fundamentals. For a detailed feasibility on this site, please call Marco on (+61 7) 3369 0111 Back to the Top
	Case Study - We love those win-win solutions! This month’s case study is a great demonstration of persistence and thinking outside the square. After finalising our research brief with one of our new clients, Investment House sent them information on three great sites that we thought fitted all their needs. After a few hours, we had a call back from them and they said they would take any one of the three - the clients loved all three sites. That made our job very easy. Our Research Manger jumped on the phone and called the agents of the three sites (two of the sites were with one agent). Our research Manager told both agents that the clients had liked three sites and were only in a position to buy one. The first vendor that wanted to sell would get the sale. Now we thought that the agents would jump through hoops to get the sale - they had a hot buyer who was ready to sign a contract and since our Research Manger call them early in the day we assumed they could probably still get on the first plane to Hawaii if they wrapped up the deal by 4:00pm. However, all our plotting was to no avail. Both agents called up a few hours later and said that the vendors did not want to sell at the price we had offered – no trip to Hawaii for the agents… We therefore, went back to our clients and explained the situation. They were not fazed and said lets see what happens over the next few days. Well, what happened over the next few days was a lot of plotting and scheming by our Research team. On one of the sites the agent had told us that the vendors had decided to complete the council approval and sub-divide the blocks. After several phone calls back and forth we were also told that the vendor had already paid the council contributions of $10,000 (which the agent had failed to mention on our first offers) and that the vendor had already organised for the house that was currently sitting on the site to be demolished and all site rubbish removed. Now our final offer of $420,000 was rejected (they wanted $470,000) however our Research team put together a new offer based on the new information. We played with our numbers and even increased the settlement period and were able to offer $455,000 for the site. And that was a lot closer to their asking price. More importantly, the vendor did not have to go through all the work of sub-dividing the land (and paying for all the operational works including sewerage and water) and “maybe” sell the 2 blocks once the full subdivision went through. Therefore, we placed a new offer and once again after several phone calls got the deal. Our clients basically got the same deal at $455,000 as they would if they bought the site for $420,000. The vendor had basically “paid” for all of the costs upfront for the client by paying for the council contributions, removing the house and allowing us to finalise the drawings with an extra month of settlement time. Lots of plotting and plenty of money… Back to the Top
	Disclaimer
	All information in this report is general information only. Nothing in this report is meant to be specific investment advice, nor should you treat it as such. Everyone's individual circumstances will vary widely and you must seek advice from your own independent licensed investment adviser before investing into any form of investment. Investment House, its employees and representatives take no responsibility for the result of any actions taken by the readers of this report. Investment House and its related businesses makes no representation and gives no warranty as to the accuracy of the information in this document and accepts no liability for any errors, misprints or omission herein (whether negligent or otherwise).
	subscribe unsubscribe

Nicholson Terraces are selling fast, take a look at these affordable and stylish positive geared apartments and townhouses...