Property Predictions for 2014

When is the ‘right’ time to Invest in Property?

Right Now !

 

Australian house price have risen by a moderate 7.6% in the past year, with expectations of further growth in 2014

What this will mean for new dwellings / off the plan is that as the gap between existing property and current off the plan pricing narrows; developers will want to take higher profits (they have been unable to attain the past 4 – 6 years) and will thus increase the price of off the plan developments accordingly.

When is the right time to Invest / Buy = NOW!

As one of our recent clients quoted “Never before in our History has the stars been so aligned to make a perfect time to take advantage of all that is right and Invest!”  … referring to current property values, low interest rates, high demand for rental property and strong rental yields.

All these factors giving you a platform off which to grow and secure wealth by owning an Investment Property that is Cash Flow Positive and thus not costing you a cent! Sentiment that we have been advocating for a while now.

Where else could you draw down on current equity in your home at say 5.5% and invest it to earn 30% to 40% or upwards on this money?

Yet we meet people on a daily basis who repeat their same mistakes and are once again waiting to see what happens!!  Go figure?

What will happen we ask them when the value of property continues to grow (as expected), what will they do then? And the standard answer is “I will wait to then see what happens.   We are looking for those of you who recognise the opportunity in high rents, low interest and the chance to own a cash flow positive investment that could grow in value.

If you invested say $50k to secure an asset of say $500,000; you are now earning capital growth on $500,000 of investment you didn’t previously own; which in all likelihood is Cash Flow Positive. Whereas the same $50k in your home loan is only as effective as the 5.5% interest you are not paying on it. You could then use the extra cash flow on your new investment property to help pay down your home loan that much faster + have title to a new investment property that is being paid off for you by your tenant and the tax man. Do you also see the opportunity at hand?

Terry Ryder says “I have no doubt that Brisbane will be the big improver among the capital city markets in 2014. And, in terms of the states and territories, Queensland is where investors should be concentrating.

Brisbane has lagged Sydney, Perth, Melbourne and Darwin in house price growth because of a triple whammy of events. As well as the national downturn that hit after 2010, there were the 2011 floods and later the extensive jobs and spending reductions by the state government.

 As 2013 has worn on, there has been improving evidence of recovery in the Brisbane market. The ABS recorded a 4.1% rise in the Brisbane House Price Index in the 12 months to the end of September. I expect growth to build as we get into 2014.

 

Where is the ‘next’ Capital Growth ?

Pick up any newspaper, investment magazine or tune into other media and you will clearly identify that certain pockets of Queensland are sitting on the verge of Capital Growth, and you have every opportunity of securing your own slice of wealth by undertaking due diligence and speaking to professionals such as ourselves to help you come to an informed decision.

It is time to get on board or miss this boat and once again sadly admit to yourself and your friends “I should have!”

Sydeny prices are now so hight that rental yields have dropped as a direct result, meaning you will be paying more out of your pocket to negative gear your investment to get into an already expensive market.

(There is wonderful opportunity in Mudgee in NSW based on Coal Mining and also CSG. Population growth and rental yields of 7%)

Melbourne was predicted to be flat for a few years but is demonstrating some growth is returning investors around 4% rent on older properties and 4.5 to 5% on newer properties valued under $650k.

Brisbane has only grown by 3.5% with plenty room for further Capital Growth due to population growth and a strong demand for property. Brisbane is already returning 5% and over on new properties, with plenty opportunity to achieve a 6% yield. This extra rent will benefit your investment significantly over the 7 – 10 year period you would consider holding it for.

Achieving a higher rent + potential of capital growth allows you to secure your next investment property all that much quicker!

The REIQ sait that ‘we are well and truly early in the cycle at this stage, hence the interest and direct investment by Interstate Investors into Queensland. Ray White has reported that ‘Southern Investors are buyign up big in Brisbane, fuelling the recovery in the city’s property market in a bit to get more bang for their buck.’

 Queensland “Fastet growing State in Australia”

Which Locations in Queensland?

Government have invested billions of dollars into Brisbane and surrounding suburbs, South East Queensland, the massive growth corridor out to the West (Ipswich, Greater Springfield) and further north into Mackay, Rockhampton, Gladstone due to increased job availability directly attributed to the massive Coal Seam Gas / LNG and Coal Industries which offer long term economic stability to the northern region of QLD

NB: Arrow Energy Gas Plant gets green light from Government for the new $17.6 Billion plant slated to create 3715 new jobe in Gladstone, owned by Shell and PetroChina! read article here

Right now there is a potential over supply of property and rentals have come off their unusual highs; once this lag catches up due to continued population growth there will be reknewed demand on supply. This will put upward pressure on pricing and rental yields once again in the next property cycle.

For investors with a ‘riskier apetite’ smaller mining towns in the Galilee and Surat basin are offering investors very comfortable returns. Viewed to some as risk being a mining town and viewed by others as opportunity based on long term mining activity, secure jobs and growing populations to meet the job availability.

Gladstone is offering investors the opportunity to secure a 4 bed home with 2 bathrooms and double garage for only *$540k on a block of over 600 sq/m. This comes with a 1 year rental guarantee of $750 pw, giving you a 7% yield (or around *$140 pw Cash Flow Positive in your pocket). Yes after the year it could go back to 5% yield, but so what? Most people are only to happy to secure a 5% rental yield with the opportunity of Capital Growth.

Another incredible story is ongoing success of Greater Springfield :

Greater Springfield has been voted as the Number 1 Master Planned Estate in the world and thus presents itself as an astute investment opportunity to you based on the following :

  • Project Investment to date – $9.7 billion
  • Estimated cost on completion – $23 billion
  • Project completion to date – approximately 13%
  • Total land area – 2,860 hectares (7,067 acres)
  • CBD land area (Springfield Central) – 390 hectares (963 acres) or twice the land area of Brisbane CBD
  • Approval for over 1.4 million square metres of mixed use space in the CBD
  • Access to 86% of Brisbane’s metropolitan workforce in a 32 minute drive *
  • Population of over 560,000 within a 22 minute drive of the CBD *
  • Commitment by State Government to deliver two train stations (Springfield Central and Springfield Lakes) by 2013 (now delivered)
  • Mater Private Hospital Springfield Central to commence construction August 2013
  • Planned job creation in Springfield is one in 3 residents will work in the Estate
  • Greater Springfield is made up of 6 suburbs
  • With 2 x rail stops in the estate well serviced by public bus transport

 

Self Managed Super Funds and Investment Property

More investors are looking to gain control of their own Retirement Destinies and wanting secure investments that have a clear track record, low risk profile but give realistic returns that not only out perform inflation but an investment vehicle that has the potential to double in value every 10 to 15 years.

Other reasons why Investors are looking at investing in a property include

  • The ability to borrow money to purchase the investment
  • By borrowing funds you are now able to achieve Capital Growth off a higher capital value ie. the value of the Property (and not just the value of the funds under management)
  • Investors want choice and control of their preferred investment strategy and asset class
  • Investors also dont want to pay ongoing high fees to fund managers or financial planners, they would rather save these fees for their own retirement
  • Bricks and Mortar has always doubled in value every 7 – 10 years in Australia
  • There is a high demand for Rental Properties, with vacancy rates traditionally very low across most cities in Australia
  • See other reasons why here

However, not all property makes for a sound investment which has attracted the attention of the SRO which we recently wrote about in our previous blog here

Having said this, it is important that you work with property professionals such as ourselves who will share information and their industry experiences and contacts with you so that you are able to make that important informed decision, prior to committing. After all you do want to avoid the scrutiny of the tax man and your goal is to Grow your Wealth.

Why a SMSF and Property here

Setting up a SMSF here

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