http://www.apimagazine.com.au/api-online/newsletter/11/03/bad-design-can-lower-value

http://www.apimagazine.com.au/api-online/newsletter/11/03/bad-design-can-lower-value

Australia’s largest apartment owner and developer Harry Triguboff explained that the Chinese had been major supporters of the Sydney apartment market after higher interest rates reduced local buying. But the Chinese were no longer big buyers of Sydney apartments. They had retreated because their currency is virtually tied to the American dollar and the big rise in the Australian dollar has made our apartments too expensive.

Moreover the Chinese were frightened that their own currency would rise, reducing the value of their investment and they had become nervous of the level of Australian apartment prices.

Triguboff believes that apartment prices are therefore going to soften while interest rates remain high and the Chinese are absent from the market.

Given Triguboff’s position in Sydney apartments, this is not a forecast to be taken lightly.

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There’s no one single right answer as each different investing strategy has it’s own pros and cons. It will depend on how much money you have,… see more  your appetite for risk, how quickly you’re trying to make money and how quickly you want to get there.

For most people that have a reasonable income, I believe the most guaranteed way to make wealth from property is to buy median priced properties in blue chip suburbs 5-15km from a major city i.e Sydney or Melbourne. The 5-15km location from a city is where the majority of people want to live that have high disposable incomes and there is a limit to how high you can build which limits supply.

Buying around the median price means that the majority of people can afford to rent it which means there is plenty of demand. That limited supply and increasing demand is the factor that causes price growth even if the economy is static.

When it comes to specifics on the property I would typically choose:

• 2 bed units – easy for to people to pay $300/wk rent each for a two bedder as opposed to $450/wk for a one bedder, and most don’t want to share a 3 bedder
• Parking – parking is a problem now and it will only get worse
• Quiet st – no one wants to live on a busy noisy main road
• Block under 12 units – it’s harder to get strata decision made if too many units. Boutique is also nicer to live in No lifts, gyms, pools – very expensive to maintain and tenants don’t pay more for them Second hand – new units sell for a premium and can’t be improved
• Double bedrooms – no professional wants to be in a single bed
• North Facing – the more sunlight the better
• Balcony/Garden – everyone wants to enjoy some fresh air

I think a long term buy and hold strategy will give you a more guaranteed return as opposed to speculating and trying to find the next best suburb which may or may not grow. You can normally get more cash out by refinancing rather than selling and so as long as you can cash flow the property in the short term, you should make money in the long term.

Chris Gray

I would strongly suggest that with this in place, you sign up your tenants for 6 month leases only to start with. This means that if we have another year where interest rates start to bite, you will have an opportunity to recoup your margins from rents that will slip if left to be only once a year. We all seek returns, and in this highly letigious environment, lets do simple things to cover our bases first.

One of quirks of investor behaviour is the tendency to take action at the wrong times. Right now it’s clear the property market is coming to the end of its recent growth phase – not surprisingly, given the loss of consumer confidence amid poor federal leadership on both sides of politics, the calling of an election and the Reserve Bank’s earlier mistakes with interest rates. This is the time for investors to become active: price growth appears to have stopped, market activity has declined and interest rates are stable. This constitutes a buyers’ market. Most people, however, will do the opposite: they will retreat into their shells and refuse to come out until the market is raging again – which is the wrong time to be buying. Remember this: no one ever became wealthy by following the pack. The pack always runs in the wrong direction.

AustralianSuper – the country’s largest superannuation fund, with $32 billion under management – has agreed to lend $200 million to a property debt portfolio controlled by Challenger Financial Services Group, and is seeking to increase its property lending portfolio, the paper reports.

“This is the first step we’ve taken to what we think could be a new asset class for superannuation investors,” AustralianSuper chief investment officer Mark Delaney told the AFR.

Mr Delaney said the fund is optimistic on the outlook for the country’s property sector.

“We quite like property because in the current environment because property prices have come down,” he told the paper.

“Cap rates are up substantially. The Australian market is recovering slowly.”

“It’s a good time to invest in property so we’re not worried about property values.”

TOTAL DWELLING UNITS

• The trend estimate for total dwellings approved was flat in April 2010 following rises in the previous 14 months.
• The seasonally adjusted estimate for total dwellings approved fell 14.8% following a rise last month.

PRIVATE SECTOR HOUSES

• The trend estimate for private sector houses approved fell 2.0% in April and is now showing falls for four months.

• The seasonally adjusted estimate for private sector houses approved fell 13.5% following a rise last month.

PRIVATE SECTOR OTHER DWELLING UNITS

• The trend estimate for private sector other dwellings approved rose 5.0% in April and has risen for ten months.

• The seasonally adjusted estimate for private sector other dwellings approved fell 5.4% following a rise last month.

VALUE OF BUILDING APPROVED

• The trend estimate for the value of total building approved fell 1.0% in April and is now showing falls for three months. The trend estimates for the value of building approved should be interpreted with caution.

• The seasonally adjusted estimate for the value of total building approved fell 13.3% in April. The seasonally adjusted estimate for the value of new residential building fell 4.6% while the value of residential alterations and additions fell 8.4%. The seasonally adjusted estimate for the value of non-residential building fell 28.5%.