Saturday Summary – the most interesting property investment articles I’ve read this week (2014/11/16)

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.

Why you shouldn’t believe the property bubble story

Economist Adam Carr explains in API Magazine’s blog that we are not in a property bubble now and no reasonable person would suggest this. He concludes:

Investors have very little to fear and everything to gain from a housing bubble – whatever that is.

Firstly, there is no agreement on what a price bubble actually is, and secondly there is no agreement on what the policy reaction should be if there was one. The policy consensus appears to be that a house price boom should be left to its own devices, unless it is accompanied by a harmful surge in credit growth.

Current indicators – weak credit growth, low debt servicing ratios, and a tiny rate of non-performing bank loans – suggest we are a very, very long way from that.

Will there be a glut of apartments in Sydney? | What questions to ask a finance broker | What to do with a dud property | Margaret Lomas answers questions

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

George Raptis, from Metropole Property Strategists tells us what 25,000 apartments across 130 projects will do to the Sydney market
Louis Christopher from SQM Research also talks about the Sydney apartment projects and predicts there will be an oversupply
Andrew Mirams from Intuitive Finance tells us what questions to ask a finance broker before you sign off on a loan
Michael Yardney answers questions about dud properties
Margaret Lomas from Destiny Financial Solutions answers 3 listeners questions

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.

 

SMSF’s a game changer for this property cycle- Chris Joye

In his column in the Financial Review economist Chris Joye explains:

I’ve only recently turned my mind to how this $530 billion sector could be a game-changer for the current cycle.

The $530 billion or so squirrelled away by mums and dads who have elected to take control of their savings destinies, rather than outsourcing decisions to super fund trustees, has never had much exposure to bricks and mortar.

The first game-changer is thus the quantum of SMSF dollars sitting on the sidelines that can be deployed into housing. The second is that SMSFs are likely to evaluate housing investment differently to the 65 per cent of buyers who are seeking to put a roof over their heads.[sam id=37 codes=’true’]

Most SMSFs are heading into housing because they recognise that with the cheapest money in history and unusually attractive leverage (via ultra-long loan terms and relatively inexpensive rates), it seems to be a good investment bet. This is further backed by accelerating capital gains and decent rental yields of 4 to 5 per cent.

But SMSFs are also likely to be much more unemotional and mobile decision-makers. If house prices start falling when the RBA inevitably normalises mortgage rates back towards long-term averages – say 250 basis points above current marks – SMSFs may rationally decide to cut their losses. En masse. As such a substantial influence at the margin of effective demand and supply, this could have a big impact on house price dynamics.

So just as conventional property investors can amplify the housing cycle’s volatility with speculative activity, SMSFs could significantly expand the pool of hot money.

Joye who was a property bull while so many were bearish after the GFC, has noticeably turned more cautious and concludes:

Anyone who is not exercised by the potent combination of record low borrowing rates, national house price inflation running at three times wages growth, household leverage that is, in the RBA’s latest assessment, a bee’s appendage off its all-time highs, valuation metrics that imply Aussie housing is almost as expensive as it has ever been, and $140 billion of new housing demand, is silly, ignorant, or conflicted.

 

Buying a unit checklist

Your Investment Property Magazine offer a checklist if you’re considering buying an apartment:

Easy access   Is the unit close to lifestyle areas or within walking distance of cafes, shops and beaches?

City location   Is the unit in a densely populated region such as a capital city or major regional centre?

Uniqueness   Is the property in a large complex with hundreds of properties or is it more unique?

Parking   Does the apartment have a lock up garage or a car space?

Renovations potential   Is there any potential to freshen up the unit’s look and will the strata allow a reno project to go ahead unhindered?

Good rents
Does your research suggest similar apartments in the area get good rental returns?

Internal size   If it is a one bedroom unit, is it at least 50 sqm? If it is two bedrooms is it at least +75 sqm? If it is three bedrooms or more, is it larger than 120 sqm?

Body corporate fees   Does the owners corporation charge high maintenance fees and does this include expensive services such as lifts?

Proximity to transport   Are their train or tram stations as well as permanent bus routes nearby?

The floor plan   Is the layout of the unit practical and useable? If it’s a small unit, is it open plan?

Acoustics   Will sound travel easily throughout both the unit and complex or will noise be contained?

Laundry   Is their a shared laundry facility or does the unit have its own?

The view  Is what tenants will see out their windows everyday appealing or at least neutral?

Construction   Is the outside made of good quality brick or a cheap, easily degradable material?

Privacy   Will the unit provide tenants reasonable enough privacy not to restrict what they can do in their private lives?

Extras   Does the unit have extra features such as a private balcony or an outdoor area?

 

The Chinese growth story in Sydney real estate – John McGrath

In his column in Switzer John McGrath explains that Chinese demand for Sydney real estate is only going to grow:

Sydney is an obvious choice for Asian buyers due to its international reputation, strong history of property price growth and its large resident Asian community. Sydney is also home to some of Australia’s best schools and universities and this is crucial to Chinese buyers in particular, with many deciding where to buy based solely on school catchment zones.

The other factors drawing Asian buyers to Sydney include Australia’s comparatively strong post-GFC economy, our political and financial market stability and the fact we are in the same business day zone. The factors pushing Chinese buyers to leave China include concerns over their air and food supply due to mass industrialisation, a perceived price bubble and oversupply of apartments and taxes restricting property investment.

Chinese investment in Australian property (residential and commercial) increased by a stunning 70 per cent over the two years to June 2012, according to the latest Foreign Investment Review Board report. This makes China our third largest foreign real estate investor behind Singapore and the US.

 

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:

Australian Property Market Update – ANZ Bank – 11th November 2013

Negative and positive gearing – real life examples- Pete Wargent

We’re fatter than we thought

8 fundamentals of extreme achievement

Is the property bubble going to burst when the Baby Boomers retire?

More homes for sale as vendors take advantage of strong housing market- Cameron Kusher

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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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