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Saturday Summary – the most interesting property investment articles I’ve read this week (2012/11/23)

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.

Avoid property investment traps

Karina Barrymore wrote an article for news.com.au to which I contributed. She asked 4 experts to share 5 financial taps for unwary property investors.

Here’s my list…

* Going directly to a bank rather than going through an investment-savvy finance broker. Brokers can offer a wide range of products from multiple lenders and give finance structuring advice.

* Not having a financial buffer. Investors should have a “rainy day” reserve for unexpected repairs, vacancies and inevitable interest rate rises.

* Choosing a loan based on the interest rate only. Interest is one of the least important criteria as it will vary over the life of the loan. Choose a loan with facilities you need and the flexibility to cope with the varying circumstances.

* Waiting too long to save a deposit. Consider lenders mortgage insurance which allows a purchase with just 10 per cent deposit instead of 20 per cent.

* Not calculating hidden costs such as stamp duty, registration fees, land tax, conveyancing, insurances, council rates and owners corporation fees and management costs.

To learn the warnings of the other experts read more here…

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Should negative gearing be abolished?

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

The original goal of negative gearing was to boost investment in rental property and thereby increase supply and ease affordability.  That has not happened but is that because negative gearing doesn’t work or are there other factors at play.  This week we pit together two experts with opposing views. Metropole’s Michael Yardney goes up against independent property consultant Catherine Cashmore.

This week we have two case studies – Greg Timbs a Sydney investor who tells us some of the mistakes he has made in building his portfolio over the last 12 years and Adam Hampson an investor who is based in Hong Kong who will detail how to successfully buy property sight unseen.

Brad Beer from BMT Tax Depreciation helps us understand more about what you can claim and today in the show will deal with claiming on older properties – not just brand new ones.

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.

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Are mining towns really property investment goldmines?

Margaret Lomas writes and insightful article in Property Observer warning not to get caught in the hype of investing in a mining town.

She says: You’ve probably met someone who bought property in a mining town and made a bucket load.

Years ago when everyone else was turning up their noses at those giant red holes in the ground that were mining towns, some crazy risk-takers bit the bullet and took the gamble.  It wasn’t much of a gamble, really – you could buy property that probably fit within your credit card limit, but at that time everyone figured nothing much could come of it.

Stories abounded of untold success.  It was the first we’d ever heard of a “donga”, but apparently these tin sheds skyrocketed and fetched astronomical prices and rental yields.    Everyone wanted a piece of that action, and you had to jump out of the way to avoid the stampede of investors racing to these one-horse towns for their piece of investing gold.

There’s no question that a great return can potentially be made buying property in a mining town, but people make money investing in pork bellies and trading foreign currency, too.  Why don’t we all jump on that bandwagon?  Quite simply, because we know they are high risk, and we are mostly pretty acquainted with our own personal appetite for risk.

So what madness is this that causes property investors, many of them without money to lose and gambling the equity in their own family homes, to completely ignore the risk factor attached to buying in mining towns?

Click here to read Margaret’s thoughts. She concluded by saying:

I’ll never argue that significant gains cannot be made by those who invest in towns such as these, typically mining towns.

However, all investing must be undertaken with a sound grasp of the true risks involved. If you are prepared to accept those risks, and you have considered what your position would be if you owned a property that suffered a significant loss, then a mining town may be an excellent investment for you.

Contrarily, if you need a little more surety in your investing, stick with areas of more diversity, which can manage industry closures because there are many other employers to take up the slack.

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No bubble trouble in house price rise: RBA

Property prices are showing signs of life but there will be no repeat of a 1990s-style housing boom, a senior Reserve Bank of Australia (RBA) analyst says.

A growing population, the current low rate of new home construction and a tight rental market have created the right circumstances for an uptick in housing demand, according to Jonathan Kearns, RBA head of economic analysis.

‘‘We are not seeing declines in income growth or a significant increase in unemployment, so the strength in earnings and incomes for households is still going to be quite reasonable and certainly sufficient to support an increase in housing construction,’’ Mr Kearns told an Australian Business Economists (ABE) lunch in Sydney.

‘‘We are already seeing some signs of that occurring – we do have low interest rates, we have rising rents, (and) rental yields picking up a little bit.

Mr Kearns said property prices would not spike to the high levels of the late 1990s and early 2000s because buyers had less appetite for debt and prices were already at a high level relative to income, leaving little room for large increases.

‘‘Overall it looks likely that dwelling investment will pick up at a relatively moderate rate in the medium term,’’ he said.

Read more…

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RPData Property Market Wrap

The Australian Bureau of Statistics (ABS) released Housing Finance data for September 2012. The data showed that the total number of owner occupier housing finance commitments rose by 0.9% over the month.

This figure was comprised of a 0.2% increase in refinance commitments and a 1.2% increase in non-refinance commitments. Over the 12 months to September 2012, refinance commitments have fallen by -4.3% compared to a 10.3% increase in non-refinance commitments.

The number of finance commitments has been trending upwards for most of 2012, a further positive sign that housing market conditions are gradually improving.

Over the month there was a sharp rise in the total value of investment finance commitments. The value of owner occupier finance commitments rose 1.5% (1.7% ex-refinances) and investment finance commitments rose by 8.6%. Over the past 12 months, the total value of owner occupier finance commitments has risen by 4.4% (9.0% ex-refinances) and by 8.8% for investments commitments.

The number of housing finance commitments to first home buyers fell by -5.9% over the month however, they have risen by 3.7% over the past 12 months. In September 2012, first home buyers accounted for 19.3% of all owner occupier finance commitments, up from 18.6% in August.

Westpac and the Melbourne Institute released the November 2012 results of their Consumer Confidence Survey this week. Over the month, the Consumer Sentiment Index rose to 104.3% which was the highest reading since April 2011 and the first time consumers were showing higher levels of optimism than pessimism since February 2012.

Each component of the Index rose over the month with respondents most optimistic about it being time to purchase a major household item (136.1) and family finances over the next year (100.2). All other components continued to show greater pessimism than optimism.

You can read the full market wrap from RPData by clicking here

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Australians are living longer

According to the latest stats from the Bureau of Statistics life tables were living longer.

A decade ago an Australian man who had just turned 50 could expect to live another 29.9 years. Today the official figure is 32 years.

Even the past year has made an enormous difference: only 12 months ago he could officially expect an extra 31.7 years rather than 32.

Apparently this extraordinary jump in longevity is playing havoc with the superannuation system and Australians who get their super in a lump sum are increasingly likely to exhaust it before they die according to an article in the Age.

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Blogs you may have missed

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

Oversupply or not? An important question for property investors

15 ways rich people think differently

First home buyers prefer Western Australia and Queensland

Where are the best property investment opportunities for 2013?

 



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About

Michael is a director of Metropole Property Strategists who help their clients grow, protect and pass on their wealth through independent, unbiased property advice and advocacy. He's once again 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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