Saturday Summary – the most interesting property investment articles I’ve read this week (2013/06/01)

There are more property investment articles, commentaries and analyst reports on the Web every week than anyone could read in a month. Each Saturday morning I like to share some of the interesting ones I’ve read during the week.

Enjoy your weekend…and please forward to your friends by clicking a social link buttons on the left.

Look beyond population growth to supply side criteria: Terry Ryder…

Terry Ryder recommends investors look beyond population growth to supply side criteria in Property Observer.

He says no matter how high the population growth rate is, it won’t create capital growth if developers generate an over-supply.

Basically his message is that investors need to look beyond population growth and ask deeper questions – including questions about vacancy factors and the amount of new housing supply in planning.

He says:

I often receive emails from investors questioning why certain high population growth areas don’t feature is my hotspotting reports. They’re bemused because someone has advised them to buy in the population boom locations.

They’re making the mistake of looking at only one side of the equation – demand. The other side of that equation is supply – and that’s where the problem lies.

Developers invade the high-population-growth places – and often build too much new product. No matter how high the population growth rate, it won’t create capital growth if developers generate an over-supply.

That’s why many of Australia’s leading population growth areas have some of the worst-performing property markets. You could almost argue that rampant growth in resident numbers is a signal for property buyers to stay away.

The Gold Coast is the most obvious example. It has been a national leader on population growth for 20 or more years, but is a habitual under-achiever on capital growth thanks to over-building by developers.

He goes on to say:

Five years ago I was interested in the Wyndham and Melton municipalities in Melbourne, because they had many of the growth-generating factors I look for in a hotspot. After initially delivering good real estate performance, they declined as developers moved in and over-supplied those markets with house-and-land packages.

Today, both those locations have poor capital growth rates, well below city averages. Over-building has meant vacancy rates have been 6% or 7% or higher for much of the past three years (although more recently vacancies have come down to more acceptable levels in both Melton and Wyndham).

The same syndrome is now impacting a couple of Queensland’s boom cities. Both Gladstone and Mackay have sharply rising vacancies, despite their myriad growth factors, because developers have overshot again.

Both places have strong futures, thanks to their links to the resources sector and their expanding export facilities, but right now investors need to be cautious and selective.

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Where are our property markets heading?

Another great Real Estate Talk show  produced by Kevin Turner. If you don’t already subscribe to this excellent weekly Internet based radio show.

Details of this week’s show:
Michael Matusik gives his thoughts on the direction of the property market
Michael Yardney tells us where’s the best place to be born
Terry Ryder answers a question about buying well in rural areas

You should definitely subscribe to this weekly audio program. Click Here It’s free and you can listen on the go on your smartphone, iPad etc.

 

The recent property price decline is just a blip | John McGrath

Leading agent John McGrath says there’s loads of evidence that we are at the start of a new cycle of growth. Here are some of John McGrath’s points to consider…

  1. Auction clearance rates have improved significantly.
  2. The number of mortgages processed in April by Australia’s largest broker, AFG, was 40 per cent higher than in April 2012.
  3. The Reserve Bank has reduced interest rates to the lowest level in our history.
  4. Consumer confidence is rising, properties are selling in a shorter timeframe and buyers and sellers are increasingly finding common ground re pricing.
  5. Sales volumes are higher as more and more buyers re-enter the market
  6. The proportion of investors in the market is very high, indicating a strong sense of opportunity. In NSW, AFG data shows close to 1 in 2 new loans are for investors
  7. Rents continue to rise
  8. The stock market continues to gain strength and is sitting above the 5,200 mark. Portfolios that were seriously damaged during the GFC years are being replenished now, giving investors new options
  9. The number of self-managed super funds (SMSFs) in Australia is increasing and more people are choosing to purchase property with their money
  10. The prestige market which has been soft for many years is now slowly turning around

 

Why we’ll learn to love the higher GST

In his blog Peter Martin asks: Hands up if you think the GST is going to stay at 10 per cent?

He says:

If you believe that I bet you also believed in the tooth fairy, in the Australian government when it said would only use the Tax File Number for tax, in Julia Gillard when she said she wouldn’t increase the Medicare levy and in John Howard when he said he wouldn’t introduce a GST in the first place.

Things change. The GST hasn’t, yet. But it was designed to.

Think about the agony that went into building it. More than a million Australian businesses were forced to become tax collectors. They are made to complete Business Activity Statements, to install special computer codes on their cash registers and to hang on to money due to the Tax Office they would rather spend. A University of NSW study finds it the most expensive of the taxes for businesses to collect, costing each business an average of $12,000 per year.

But now that it is in place, the extra cost of raising it is next to nothing.

All that’s needed is a small change to the line of computer code in each cash register. The real work has already been done.

 

10 quotes from the BRW Rich 200 list

Each year BRW Magazine rolls out its Rich 200 list.

This year they’ve collected 10 great quotes from those in their Rich 200 edition….

Here they are:

You think I work for nothing? Only birds work for nothing. You think I’m a bird?

Property billionaire Harry Triguboff when asked if his fortune went up this year.

 One of the first things you’re asked after 120 years [of life] – this is what the Talmud says – is ‘did you deal honestly in business?’ I don’t know how I’d fare there.

A candid Joseph Gutnick reflects on the role religion plays in his life.

 I’ve been asked a dozen times when I’m going to retire and I normally point at my desk and say, ‘one day you will come in and find me there [having died at work]. I will have been retired. God would have retired me.’

Publican and new Rich 200 member Arthur Laundy on his succession plan.

 I remember Vicki’s voice sort of cracked at the thought we were losing him. Packer kept saying, ‘but it’s a billion dollars’.

Legendary television producer Gerald Stone on the moment Kerry Packer told his closest executives he was selling Channel Nine to Alan Bond for $1.055 billion.

 Kerry and I were partners for 18 years. I am still very friendly with him and we speak often. Everything he learnt, he learnt from me. I am serious when I say that and Kerry will understand what I mean by that.

Rich 200 member Jack Bendat on his protege, Kerry Stokes, who BRW named as its best Rich 200 member from the past 30 years.

 While the booming real estate development [industry] has created many success stories, people wonder whether those first buckets of gold are accumulated through bribery, speculation, loan fraud or tax evasions.

China expert Wenxian Zhang on the rise of China’s elite.

 The fellow that gave me the heart valve replacement did so in a very practised, elegant manner. You know why? Because he has the know-how and experience. If you don’t have the know-how and the experience, how do you do something?

Pokies king Len Ainsworth, aged 89, on why experience matters.

 She’s the one who never gives up. She gives me courage. Often I say ‘no’, she says ‘yes’. We’ve been 15 to 16 years in business and over 30 years in our marriage. We know each other. She has resilience. If she says it can be done, it happens.

Shesh Ghale on his wife Jamuna Gurung, who joins the Rich 200 this year.

 We are still going OK, but we are not making what we used to. Everyone used to be fat and happy and now they’re not so fat and happy.

Mining services entrepreneur Mark Ackroyd reflects on a slightly lean year.

We’ve had cases of wealthy people who have moved overseas and left their family here [in Australia]. They’ve maximised their capital gains, and then returned. That’s where we get into meaningful discussions and legal argument.

Deputy tax commissioner Michael Cranston on the spate of wealthy entrepreneurs moving to low-tax countries such as Singapore.

 

Blogs you may have missed this week:

If you didn’t have a chance to read my daily blog, here’s a list of the blogs you missed this week:

This week’s property market trends | RPData

How much time do you waste when you’re at work?

Murphy’s law and how it relates to property investment

Look what’s happening to housing affordability around Australia – good news!

This week’s property news video with Kevin Turner | 29th May

Buy and hold may not be cool, but it’s very effective

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About

Michael is a director of Metropole Property Strategists who create wealth for their clients through independent, unbiased property advice and advocacy. He's been once agin been voted Australia's leading property investment adviser and his opinions are regularly featured in the media. Visit Metropole.com.au


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