Go north and multiply!

I hope you’ve had a great start to the new year.

Now that things are beginning to normalize as everyone gets back to work we thought it timely to send out a quick update.

You may recall we sent you a message just before Christmas about new property recommendations in south east Queensland, today I’d like to follow up with some explanation as to why our market recommendations have shifted in recent times.

Predicting the future course of any property market is more a function of supply and demand than anything else. The “Sydney” charts below illustrate a real and recent example of how prolonged periods of low construction can be (and generally are) followed by rising property values.

An extended period of low construction (combined with an increasing population) will eventually leave a market in a state of undersupply. The further a market falls into undersupply, the more upward pressure is applied to property prices, the result of which is a period of rising values as we’ve seen play out in Sydney over the last few years.

On the back of around 60% growth in values since 2012, construction in Sydney has now reached historically high levels. This will eventually lead to a period of stagnation, or even a slight decline, in values as supply outpaces demand.

Queensland’s Gold Coast is currently presenting as fundamentally stronger than any major market in the country. Having experienced a number of years of low construction levels and sluggish growth this market is now in a strikingly similar position to Sydney back in 2011/12.

Consequently, we believe well researched property in the Gold Coast region at middle price points currently represents some of the best property investment in Australia. One such property is Sage Apartments in Merrimac (near Robina) where a new 2 bed, 2 bathroom apartment can be acquired for an average price of $384,000, with an expected rental yield of 5.5% gross. Stages 1 and 2 have sold out. There are 4 apartments available in stage 3.

Click here for details

Stage 1 – Sage Apartments, Merrimac

Whether you’re planning to add to your portfolio in 2016 or would just like to catch up for a chat, feel free to get in touch anytime.

What now…?

You may have noticed we’ve not been very vocal recently. Over the last few months we’ve been quietly working away on a plan for the period ahead. More on that in a moment…

It’s no secret we’ve had a great run in Sydney (and more recently Gosford) over the past few years, the Sydney median house price has increased dramatically and all of us who recognised the opportunity should be well pleased with the results.

See Quartile chart library

Some recent highlights have included The Minchinbury Winery where RP Data valuations are showing increases of around 50% above purchase price. Durham Street Apartments which has finally come to fruition with pre-settlement bank valuations coming in over 30% above purchase prices. The Rise at Glenmore Park which settled around June and then in August three apartments sold for more than 20% above the original prices, not to mention Skye Apartments at Gosford where local agents are reporting sale prices more than 30% up on our stage 1 recommendation of last year. All in all, it’s been a productive couple of years.

So what now?…

With residential construction on the rise in Sydney, it’s inevitable that growth will begin to slow as the housing supply gap closes, we’re certainly not saying that this will happen overnight – it’s worth noting that the most recent REIA data release showed the highest quarterly growth in Sydney medians since June 1991 – but it will happen.

It’s clearly time to be looking to other markets…

As we mentioned back in April, we’ve been keeping a close eye on south east Queensland for a while now and after spending much of the last six months doing our homework, we now have a couple of new property investment recommendations in Brisbane and on the Gold Coast to share with you.

The Gold coast is arguably in a better position than all other major cities at present. Building approvals fell away significantly in 2007 and have just started to climb again over the last couple of years. The lack of housing stock is evident in the low vacancy rate of 1.7% which has been trending down for the last five years and is now lower than all capital cities. Median house prices are only 7.1% above the peak of eight years ago, leaving significant room for future growth.

While we believe the outlook for the Gold Coast is promising, it should be noted that this is a comparatively smaller market and, due largely to it’s lack of economic diversity, can be a tricky one to navigate. For the best result, property in this market should be carefully selected based on a clear understanding of local demographics.


Details on Gold Coast recommendations

Brisbane, while not presenting as strongly as the Gold Coast, does offer a viable alternative for the more risk averse investor. Being a larger city (around four times the size) and supported by a wider range of industry, the Brisbane economy is less susceptible to outside variables and may provide a greater level of stability over the longer term.

It should be noted that construction activity has increased significantly in inner Brisbane recently and investors should be carefully targeting middle to outer areas in close proximity to transport and employment hubs.

Details on Brisbane recommendations

If you’d like to have a conversation about these projects or property markets generally, please get in touch by return email or call (02) 9499 4999.

April 2015

Building and economic forecasters BIS Shrapnel are in the news having predicted a further 20% increase in Sydney prices over the next two years. This is on the back of gains over the last 3 years of around 35% underwritten by the ongoing shortage of Sydney property built up over 10 years of below average construction.

They are also forecasting significant uplift in values in the Brisbane and South East Queensland market generally over the next few years. Quartile has been watching that market with increasing interest for a while now and we’ll keep you posted as markets shift between stage of cycle phases (see comments on the Sydney rental market below).

Some property owners view the buoyant Sydney market as an opportunity to sell and realise the gains made throughout the Sydney metro area in recent times. While we’re not suggesting this is the best way to go (remembering our old adage “always buy – never sell”), it is interesting to see the prices properties are now attracting.

Apartments in The Avenue, Mount Druitt which originally sold at prices ranging from $245,000 to $275,000 for a typical two bedroom, two bathroom, are now changing hands in the mid $300,000’s with a top sale price of $355,000. A slightly smaller apartment in that building is currently available on the Quartile resale market at $349,000 with a tenant in place at $350 per week. Brand new apartments in Mount Druitt are now selling at upwards of $385,000.

Even more impressively, The Minchinbury Winery development in Barossa Drive, Minchinbury has had two “townhouse style” apartments sell at $556,500 and $489,000. These were originally purchased (with settlements a mere 16 months ago) at $455,000 and $375,000 respectively.

It may be a good time to review your portfolio and start thinking about your next move. Get in touch to arrange a FREE appointment.

UPDATE:  Skye Apartments, Gosford
The Stage 1 release of this project was very quickly taken up by investors seeking capital growth opportunities. See project details.

We have recently visited the site and met with the developer for a progress briefing. Excavation has commenced and the basement level should be reached in the next week or so. Completion of stage one is estimated (at this early stage) to occur in early 2016.

The release of stage two is expected in coming weeks – once the draft strata plan is completed. If you would like to reserve an apartment before release to the public, contact us on (02) 9499 4999 or email info@quartile.com.au

 

Bankers burst the bubble bubble
The Australian Banker’s Association (ABA) have released a new report which concludes a price bubble does not exist in Australian residential property markets. In itself a reasonable conclusion (in our view) and based on solid and well presented data and evidence. The interesting part is the vitriolic rage in response to the media’s coverage of the report. “No bubble? How dare you”, they rant from the digital rooftops.

There is so much misinformation AND disinformation out there these days it seems the truth isn’t going to get in the way of a good conspiracy theory anytime soon.

We have long argued that property price bubbles are perfectly normal…just misunderstood. Here’s a piece we published a few years ago on the subject:  Yes Virginia, there is a property bubble

First warning: Sydney rental market
As the supply of rental property in Sydney increases over the next few years we expect to see a progressive increase in the vacancy rate and a continued slowing in the rate of rental growth. This will unfold slowly given the deficit of rental stock that currently exists, however, it is time to start transitioning your property management strategy to defensive mode.

 

Property Charts
With the recent release of the latest quarterly market data for all Australian capital cities, the Quartile chart library has now been updated. This includes charts covering median prices, rents, vacancy rates and building approvals. visit the chart library.

Chart Library – March Quarter update

SVR

 

Chart Library

Capital city price, rent, vacancy and building approval charts for the March Quarter 2014 have been updated.

Sydney – behind the headlines

The Sydney residential market has begun to gain some serious momentum over the last twelve months, recording growth in median house prices of twelve to fourteen percent. A solid result in a low inflation environment which has been widely covered by the media but behind those headlines we find some interesting realities:

  • The last cyclical peak in Sydney values occurred in March 2004 when median house prices reached $571,000.
  • The current median house price in Sydney is $722,700 an increase of around 27% over ten years BUT over the same period CPI inflation has increased by 29.7%. What this means is that despite the double-digit growth we’ve seen in Sydney over the last year, real growth has still not caught up with the cyclical peak of almost ten years ago.

On the supply side of the equation, building approvals have begun to pick up but we still have a long way to go before the supply & demand equation reaches equilibrium. This, weighed with the fact that real growth in Sydney over the last decade is only just catching up with inflation, indicates there is room for Sydney values to grow further over the period ahead.

For a variety of reasons relating to price point, existing and future infrastructure, local demographics, employment and transport to name a few, we currently favour medium density property in Sydney’s western corridor, between Parramatta and Penrith. With that in mind we’d like to draw your attention to a new investment recommendation which is available now with completion estimated for mid to late 2015.  

Artist impression smallBlue Vista, is situated in the Sydney suburb of Glenmore Park and consists of thirty-nine dwellings in one, two and three bedroom configurations, ranging in price from $325,000 to $470,000. The average two bedroom apartment is around $395,000.

It is across the road from a project we recommended to clients just before Christmas which was very well received due in part to its bite-size price and impressive location.

For investors acquiring a two bedroom apartment, using 100% borrowed funds, we estimate a year one annual after-tax holding cost close to break-even at the 37% marginal tax rate and becoming cash flow positive at higher tax rates.

More information: click here or call 02 9499 4999 or email info@quartile.com.au.

Frustrated by the Sydney market?

If you’ve been following our comments in recent years you know we have seen the upturn in the Sydney residential market coming for a while.

Anyone who has picked up a newspaper recently knows, the Sydney market is behaving as predicted being in the early stages of an upturn which looks likely to continue for some time as supply continues to lag demand.

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Whichever way you look at it, and despite the usual alarmist rumblings of price bubbles and claims that “it’s different this time” (it’s not), it’s clear that it is an appropriate time to enter the market. Easier said than done right? Knowing WHEN is one thing…knowing HOW is another matter entirely.

There are so many questions. Where to buy? Which region? Which suburb? What will it really cost? What kind of finance? New property? Resale property? House or unit? Whose name to put it in? Ongoing management? Pay it off? Cash or equity? City, commuter, suburban or exurban locations? What to avoid? On it goes.

All these questions can become frustrating obstacles which lead to inaction and lost opportunities simply because no amount of desktop research or friendly dinner party banter can substitute for experienced, professional advice. You see where I’m heading with this right?

We’d like to start the New Year on the right foot by sharing our time and experience to help you get on the right track with property investment and make the most of what’s going on in Sydney right now. No charge, no obligation, no strings attached.

A fresh start in a fertile new year filled with possibilities – click here for details.

A champagne lifestyle

Phew! What a couple of months it’s been……….

We have been busy on many fronts recently with the completion of The Minchinbury Winery in particular being a major contributor.

OLYMPUS DIGITAL CAMERAThe Winery has been a success story for everyone involved. The builder has done a sensational job and the entire development from the original concept through to the thoughtful detail in construction has come together beautifully.

See The Minchinbury Winery rental brochure.

We are achieving excellent rental yields with almost 40 apartments and townhouses successfully rented in the project over the last 6 weeks. With interest rates currently at historic lows, these properties have proven to be mostly cash flow positive, even where they’ve been acquired with 100% borrowed funds.

There have been a couple of resales in The Winery already with capital gains of up to 16% on original off the plan purchase prices. This is a great start for these investments and reflects astute purchasing as well as the improved state of the Sydney market.

On that note, it is entirely possible that this calendar year (once all the data is in) could shape up to provide the highest level of real growth we’ve experienced in Sydney for over a decade and many commentators are predicting solid growth over the next couple of years.

The upturn in the Sydney market which we’ve been talking about for the last few years has officially begun…and will continue for some time yet!

If you purchased at The Winery, congratulations and well done. If you didn’t, it is not too late to secure a stake in this rising market. We can help you work out an appropriate strategy and will post details on how we can help shortly.

Disclaimer:

Quartile Property Network ("QPN") and its related businesses make no representation and give no warranty as to the accuracy of the information contained in this web site and does not accept any responsibility for any errors or omission from the information contained herein (whether negligent or otherwise) and QPN shall not be liable for any damage howsoever arising from acting or refraining from acting in reliance on any information contained herein. No reader should rely solely on the information contained in this site, as it does not purport to be comprehensive or to render specific advice. Any investor should consider their personal circumstances when assessing the suitability of investment property. Much of the information contained in this site is supplied by third parties believed to be reliable, however, investors should make independent inquires to confirm relevant details, as well as consult their professional advisers. This disclaimer does not purport to exclude any warranties implied by law, which may not be lawfully excluded.

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