Investment Property Update - Summer 2006
Summary by Harold Upton BSc (Hons) Dip FP - July 2006
SEQ house prices have bottomed and are now on the increase, vacancy rates are low, demand for rental properties is increasing (so rents are increasing both in real terms and as a percentage yield), and the SEQ economy is still growing strongly.
This is great news for property investors with SEQ house and land packages still the best low-risk wealth creation option for medium to long term investors.
Existing investors should relax and let the market work for them while new investors should purchase a quality new home in SEQ Queensland before the next boom.
Queensland's Economic Outlook
- Barry Pickering
- Barry Pickering is CEO of Queensland based Onsite Direct
The demand for housing in the Sunshine State has long been driven by population growth and the unbelievable wealth of the state, make no mistake the state is booming and has been for some time and not just the mining industry. The economy was already running hot before the commodities and resources boom kicked in two years ago with massive growth in population, jobs and output far outstripping the rest of Australia.
The mining sector is in a boom, no disputing that, coking coal and copper are in hot demand world wide, but they do not underpin the economy of Queensland. Whilst mining constitutes 20-22% of the Gross Domestic Product (GDP) of Western Australia it only contributes 7-8% of the GDP of Queensland.
The government of Queensland has just committed to over $17 billion in borrowings for more than $66 billion in infrastructure but this will have no effect on it's Standard and Poor's AAA rating, the Government has over $5000 in the bank for every man women and child living in the state. Victoria, South Australia and New South Wales have debt per person with Western Australia and Tasmania having only a few dollars per person.
A close look at the numbers supports what most people know, second lowest state for taxes, economic growth nearly 2% ahead of the rest of Australia, unemployment at 4.5% and with only 20% of Australia's population it accounts for nearly 1/3 of its population growth and 30% of its economic expansion. Some little known facts;
Brisbane airport moved more passengers than Melbourne's Tullamarine in the first quarter 2006;
- Qld 107,000 jobs were created in the last 12 months - 71,000 in NSW;
- 475,000 new jobs needed for Qld by 2026;
- 892,608 new dwellings needed for Qld by 2031;
- Aust population increases 240,000 per annum, 80,000 locate in Queensland (1,500 per week);
- Over 1/3 of Australia's potential property investors believe Qld is best buy;
- Average age of new arrival 34 years
- 3 bed house average 15.6% yield and growth last 20 years
- 11% of Australia's G.D.P comes from SE Qld
Why is an investment Strategy Important?
Michael Yardney (director of Metropole Properties and a highly regarded property commentator) was asked "What is the single most important lesson you have learnt about property investing?" his answer "Over the years I have seen investors chase the latest fads, rather than adhering to an investment system or strategy."
"If you have a system for your investing, that takes the emotion out of your investment decisions that gives you a better chance of investment success."
"Investors get bored with the simplicity of buying well located good properties and letting leverage, compounding and time work their magic. The problem is most investors haven't done well by chasing the latest fad or the next big thing or looking for the next big growth area."
We have seen investors get excited about time share investments, cash flow positive properties, regional properties, options, New Zealand properties and more recently Chinese & USA properties.
Michael says that "the lesson I have learnt is that investors who have been the most successful in the long term and have done so safely and without speculating are the ones who bought quality properties in good locations and allowed them to grow in value. They never or rarely sold their properties but would refinance against the increasing equity in their properties." "So the lesson is buy the best quality properties you can in the best location you can reasonable afford and never sell it." - M Yardney.
It is this strategy that underpins the research strategy of Phoenix Property Consultants; our charter is to assist you buy the best quality properties you can in the best location you can reasonable afford and let time do the rest for you!
What is Happening to Rents?
- This year has also seen considerable pressure on rental markets and vacancy rates are declining around the country with rentals increasing strongly in most states, especially SEQ. According to Pamela Yardney, Associate Director of Metropole Property Management in Melbourne "With limited new construction occurring and fewer investors placing properties into the rental market, it is likely that rentals will increase substantially over the next 2 years. There is a miss match of available stock and the strong tenant demand and this is unlikely to be resolved for some time".
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Vacancy rates - REIA
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A looming shortage of housing stock is also heralded by the Australian Bureau of Statistics (A.B.S.) figures released in mid September, showing new home starts declined in the June 2006 quarter (fell by 2.3%) and fell by 4.3% for the 2005/06 financial year. According to the HIA this level was well down on that required to satisfy underlying demand for both new houses and apartments.
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For Investment Properties that really work call;
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Ruth Ivens Managing Director 0427 438 607
To Save Tax, Create Wealth & Start a Financial Plan call;
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Harold Upton Financial Advisor 0408 000 555