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.
Eight potential pitfalls to watch out for when you buy off-the-plan
Journalist Larry Schlesinger recently gave the following warning in Property Observer
Investing in a new apartment can be significantly cheaper than buying an existing house or apartment, plus you can take advantage of tax depreciation benefits. However, there are major potential pitfalls and stumbling blocks, which you should be aware of before you sign a contract and pay your deposit.
Here are eight things to keep in mind:
1. Settlement period won’t be long enough
Uncertainty about when settlement will be required can be a major and costly headache for investors. Once registration of title has occurred, developer will usually require settlement to take place as soon as possible, which can be as early as just 14 days under many contracts of sale. This can be a wholly inadequate period.
2. You may not be satisfied with the end product
When you are buying off the plan, you are purchasing something that has not yet been finished and relying on sketches, plans and artist impressions. The finished product may not match these projections.
3. You may need to find extra cash if valuation comes in lower at settlement
[sam id=34 codes=’true’]Lenders will only give conditional approval to finance an off-the-plan purchase, subject to a future valuation. When the unit is complete in 12 to 24 months time the lender will then get a valuer to value the unit. If the unit is valued at less than the purchase price (the market may have fallen in this time) the lender will finance a lesser percentage of the purchase price leaving you with the shortfall to make up.
4. Rental guarantees may be misleading
Rental guarantees offered by developers may seem tempting but they should be treated with a fair degree of suspicion. Investors should always do the numbers to see if they really stack up.
5. You may be buying the wrong type of apartment for the area
Buying the wrong property type off the plan for an area can result in poor re-sell values and/or a struggle to find tenants
6. The area becomes oversupplied with other off the plan developments
Scarcity creates value. If there are three or four other off-the-plan developments set to be completed in the next couple of years with similar features and targeted at the same demographic as your development, an oversupply situation could develop.
7. Fees and costs you have not factored in may reduce your return
Having factored in costs like mortgage fees, stamp duty, land taxes and legal fees, off the plan buyers may find there are other costs once they settle and rent out their apartment. Quarterly strata fees and the body corporate structure should also be factored into the purchase.
8. The developer may go bust or there may be delays
While there are laws to protect buyers if a developer goes bust (a number of high profile large building groups have collapsed in recent times) or they take longer to complete the project then agreed to, you may have to go to court at your own cost initially to recoup your investment.
Create equity quickly –Cherie Barber | What to do if you own a lemon | Negotiation skills plus more
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:
We find out how you can create equity quickly when we talk to the Renovation Queen Cherie Barber
Michael Yardney returns this week to tell us what we can do to solve the problem of having a lemon in your portfolio
Terry Ryder talks about how alarming it is how little we know before we commit to the purchase of a property
John Potter spends some time with us detailing some of the skills you will need to be a master negotiator
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.
Sydney’s inner west “the new prestige environment”
It might be a stretch to say that the inner west of Sydney is the new prestige environment for property owners – the eastern suburbs will always be the most favoured as they are closer to the beaches – but as I’ve suggested on this blog since I first started it, the inner west has been the hot sector for some time.
These things move in cycles, though, and the east’s time will come again. The lower north shore is also a popular choice these days.
The popular press and the laggards are finally latching on to the fact that the property markets are on the up, which has been reflected in the figures reported by RP Data since the start of the cycle: Sydney +8.5% to a new peak, Perth +9.0% and even Melbourne once again +6.5%.
However, the gains have been muted in Brisbane and Adelaide given the low interest rate environment.
It’s probably time to start looking ahead to when this property cycle will stall and reverse.
With all major capital city markets other than Sydney remaining below their peaks and Sydney perhaps showing the strongest fundamentals, it could be a case of the Sydney market running away as the rest plateau.
Perth has surprised us before so it will be interesting to see if it can keep up its outstanding run.
Railway Suburbs offer good investment opportunities – PRD Research
PRDnationwide ‘s Australian Railway Suburbs Report show that units in suburbs that are serviced by public rail services present a more attractive investment opportunity and deliver stronger rental yields than properties that do not have ready access to rail transport hubs.
Broker News reports:
Low vacancy rates ranging between 1.2% (Perth) and 2.7% (Melbourne) in railway suburbs in Australian metropolitan centres and rental yields that are ‘consistently outperforming’ those of houses and unit accommodation in non-rail suburbs are prompting investors to bargain hunt properties within striking distance of rail transport.
In particular, railway suburb units are appearing to be ideal for cashed-up investors looking to buy and hold in the Sydney and Brisbane markets, with affordable prices and low vacancy rates an indication of the current strength in the rental market.
“Investors snapping up properties in railway suburbs in west of Sydney are experiencing rental yields of between 4.6% and 5.2%,”
“Similarly, houses in railway zones in Brisbane offer a robust investment opportunity as they consistently deliver higher rental yields whilst being no more expensive to purchase than unit accommodation in non-rail suburbs.”
The scenario is slightly different in the extremely tight rental market in Perth, with units just nudging out houses as the most appealing investment stock through greater rental yields.
“Historically, Perth rail and non-rail localities have experienced negligible price differences,” says Maskrey. ”
However, we can see that investors are buying into railway suburbs with a noticeable 19.3% increase in unit sales when compared to 12 months ago. Outside of inner-city Perth to the North and East, unit owners are pocketing rental returns that are around 1% more lucrative than similar sized and priced units in non-rail areas.”
In Melbourne, unit investments are not delivering the higher rental yields seen in other capital cities, with some localities to the North and the West of the city actually being outperformed by non-rail suburbs. Maskrey says the city is going through a transitional phase in the unit market that’s seeing prices and yields in both railway and non-railway suburbs remain closely linked.
“The Melbourne unit market is currently transitioning through its existing stock, resulting in lower yields compared to those seen in Sydney, Brisbane, or Perth. However, railway house stock in Melbourne consistently maintains a higher price threshold so there are still buy-opportunities in the Victorian market.”
Weight loss improves brain function
If anyone carrying a few extra pounds needs further motivation to lose it then here it is. People who are obese tend to show deficits in memory for events, but this is reversible according to Science Daily:
“Memory performance improved after weight loss, and…the brain-activity pattern during memory testing reflected this improvement.
After weight loss, brain activity reportedly increased during memory encoding in the brain regions that are important for identification and matching of faces.”
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:
If you’re serious about property investment please join me and a group of property and tax experts at my upcoming Property Market and Economic Updates that I’ll be conducting in 4 states in August and September 2013
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