Saturday Summary – the most interesting property investment articles I’ve read this week (2013/07/06)

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.

It’s scary, really, how little people know as they consider spending hundreds of thousands of dollars: Terry Ryder

Terry Ryder writes that it’s scary how little people know as they consider spending hundreds of thousands of dollars to buy an investment property.

He explains that major research sources publish generalised data about the major cities and to get the true picture you have to dig a little deeper.

There’s never a single market situation in any of our cities. There are different scenarios playing out in different price ranges, product types and geographical areas.

For example:

The latest report from the Real Estate Institute of Australia records a 2.3% decline in Brisbane’s median house price in the March quarter and annual growth of just 0.7%.

Does that mean there’s no growth in Brisbane? No, it doesn’t mean that, not if you look behind the generalised figures. The report fine print shows that median price for the outer ring suburbs rose 2% in the March quarter and is up 4.4% on a year ago. Similarly, the median for the inner-city suburbs rose 1.5% in the quarter and is up 6.5% on a year earlier.

The generalised median unit price for Brisbane dropped marginally in the March quarter and is up only 1.1% in annual terms, but hidden behind that data is a 15.7% annual rise in the median unit price for the outer ring suburbs of the Queensland capital.

Adelaide appears to have delivered nothing much in the way of rental growth in the past year but big a little deeper and you find the median rent for three-bedroom houses in the inner ring suburbs rose 5%. Rent for one-bedroom units are up 6.1% in the inner city and 6.8% in the middle ring suburbs.

Sydney overall recorded a 1.6% decrease in the median unit price in the March quarter and only 1.7% growth over 12 months, but the median unit price for the outer ring suburbs is up 5.7% in annual terms.

The median unit price for Melbourne apartments has dropped in the inner-city areas – not surprisingly, given the vast over-supply – but median price for the middle-ring suburbs is up 3.5%.

 

This week’s Real Estate talk Show

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:
Pete Wargent – explains about the property cycle.
Michael Yardney, Louis Christopher and Michael Matusik have their say and tell us what is likely to be ahead for the real estate market.
Chris Rolls from Rental Express shares the most common incorrect questions to ask your property manager.

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.

 

5 features that turn units into risky property investments

Your Investment Property Magazine explains that while established apartments make great investments there are 5 features to avoid so you don’t buy a dud

1. Ageing apartments
Be careful with a lot of the [unit blocks] that were built in the late 1960s and early 1970s as a very, very high percentage of them have got concrete cancer. Make sure you get a really good look at the building inspection, get a good look at the Section 70 certificate, and make sure – and this is crucial to any unit investment – to have a really, really good look at how much is in the administration and sinking fund, so that you’re not getting hit with special levies.

2. Small apartments 
Some experts warn against investors buying into studios or one-bedroom apartments, suggesting that a smaller dwelling may have less potential to add value and subsequently have limited capital growth.

3. High-rise blocks 
When an asset’s value relies on its scarcity factor, the idea of a sky-scratching high-rise seems to scream ‘risk’ from all angles. Indeed, many experts suggest steering clear of huge cookie-cutter unit blocks and instead opting for smaller blocks with a smaller number of investors.

High-rise apartment blocks can limit opportunities for investors, as increased competition restricts resale potential and rental demand. Your investment won’t be unique if there are a few hundred identical products in the exact same block, all competing for the same tenants and/or buyers.

4. Premium price 
Prestige apartments are inherently risky investments. Value-adding opportunities are dampened, the chances of overcapitalising are high and the top end is often the first to go when the going gets tough.

An astronomical buy-in price means that rental amounts need to fly to achieve even a moderate rental yield, and positive cash flow is a distant dream for investors.

The higher strata levies associated with prestige properties can also cut significantly into any gains.

5. Bottom floor units
Is any one level of an apartment block a riskier investment option than another? Is top floor better than ground floor – or is a middle-level apartment a safer bet?

[sam id=31 codes=’true’]Those in favour of ground-floor units argue that their position places no constraint on the tenant market, whereas top-floor apartments may cut out certain groups such as those with prams, wheelchairs and the elderly.

Those who barrack for the top floor, however, say that they offer a more open feel as there is less chance of being built in and overshadowed by surrounding buildings. Top-floor tenants will also enjoy more privacy as their balconies are less likely to stare straight into another building. Apartment blocks with views will obviously favour the higher floors, which can be a huge boost to the property’s value.

Security, noise and insulation all weigh in on the debate, with experts expressing concerns about easier access to ground-floor units and potential noise issues for units on the lower levels. Depending on the building, top-level apartments may also benefit from a better aspect and more natural light.

Purchase price may also enter the equation when assessing which level is a better option for you. The higher a unit is located in a block, the more expensive it may be.

 

On ATO to write to 110,000 rental property owners over incorrect rent deductions

Property Observer reported that more than 110,000 property investors will receive letters from the Australian Tax Office after new data mining technology identified they may have submitted incorrect tax claims based on their 2011-12 tax returns.

Most will relate to incorrect rental property deductions with figures for the 2010-11 tax year revealing that around two-thirds of property investor negatively gearing their investments and claiming losses on their investment properties to offset their tax bills.

The ATO has released tips to ensure property investors know what they can claim and cannot claim.

Expenses that may be claimed “straight away” in the income year in which they are incurred include interest on a loan used to purchase a rental property, interest on a loan to purchase land to build a rental property or interest on a loan to purchase a depreciating asset for the property – such as an air conditioner; or to finance renovations or home improvements, like a deck.

Investors can claim other expenses over a number of years, including the cost of depreciating assets, structural improvements and most borrowing costs.

Assets that are part of the property such as stoves, refrigerators, air conditioning and hot water systems can be claimed over a number of years as a ‘decline in value’ deduction.

Expenses for which investors are not able to claim deductions include acquisition and disposal costs of the property, expenses not actually incurred by them, such as water or electricity charges borne by tenants and expenses that are not related to the rental of a property.

 

Venezuela running out of toilet paper

First milk, butter, coffee and cornmeal ran short. Now Venezuela is running out of the most basic of necessities – toilet paper according to the Telegraph.

Blaming political opponents for the shortfall, as it does for other shortages, the embattled socialist government says it will import 50 million rolls to boost supplies.

That was little comfort to consumers struggling to find toilet paper.

“This is the last straw,” said Manuel Fagundes, a shopper hunting for tissue in downtown Caracas. “I’m 71 years old and this is the first time I’ve seen this.”

Economists say Venezuela’s shortages stem from price controls meant to make basic goods available to the poorest parts of society and the government’s controls on foreign currency.

“State-controlled prices – prices that are set below market-clearing price – always result in shortages. The shortage problem will only get worse, as it did over the years in the Soviet Union,” said Steve Hanke, professor of economics at Johns Hopkins University.

President Nicolas Maduro, who was selected by the dying Hugo Chavez to carry on his “Bolivarian revolution,” claims that anti-government forces, including the private sector, are causing the shortages in an effort to destabilise the country.

The government this week announced it would import 760,000 tons of food and 50 million rolls of toilet paper.

Commerce Minister Alejandro Fleming blamed the shortage of toilet tissue on “excessive demand” built up as a result of “a media campaign that has been generated to disrupt the country.”

“The revolution will bring the country the equivalent of 50 million rolls of toilet paper,” he was quoted as saying on Tuesday by state news agency AVN. “We are going to saturate the market so that our people calm down.”

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

Is some property reporting like throwing darts at a dart board – Part 2

Can you guess the least affordable home market?

The Ruthless Negotiator Gets Payback

Aussies wealth increased 10% in the last year

How many investment properties do Australian investors really own?

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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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