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M on Mary CBD Brisbane
Evolution North Bank CBD Brisbane
ALLEGRO South Bank Brsibane
PARC Brsibane City
TEMPO West End Brisbane
EQUINOX Chermside Brisbane
Chancellor Lakeside
Varsity Lakes Gold Coast
Town Centre Emerald Lakes
Carrara Gold Coast
Porto Bellago Emerald Lakes
Carrara Gold Coast
Southport Central Tower 2 and 3
Southport Gold Coast
Hilton Surfers Paradise Hotel and Residences
Surfers Paradise Gold Coast
Cairns One
Cairns
Central Park Hotel Cairns
Cairns CBD
Paradise Palms Cairns
Cairns
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| Greetings!
Happy Seasons Greetings !
"December 2007. Recollection, Reflection and Evaluation.
January 2008. Focus, Persistence, Commitment, Preparation and Belief."
May we prepare to farewell 2007 and welcome 2008 with these thoughts.
There could be turbulence in the markets, some say. Higher interest rates and the possible U.S recession? An investor once told me, "Every problem you face is simply an opportunity in disguise." There is also the explosive economic growth underway in the world's many developing countries. Of course, China and India are responsible for the lion's share: Their combined GDP is projected to rise 7.7% annually over the next 10 years, compared to the anemic 1.5% to 2.5% GDP growth in the U.S. Is Australia again a lucky country, insulated by the growth of Asia and supplying to China's and India's huge resource requirements .
May you persist with your plans and focus on your strategies to achieve your goals. I wish you good fortune.
Yours sincerely, Eric
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Review : Australia - The Big Picture
House prices in most Australian capitals will continue to climb in 2007/2008 due to strong economic growth and continuing demand, economic forecaster BIS Shrapnel predicts. Despite rising interest rates and a forecast easing in economic growth in late 2008/2009, solid underlying demand and a low supply of dwelling stock are expected to maintain an upward pressure on prices. In a report compiled by BIS Shrapnel and the PMI Group, it said, "Strong economic conditions are expected to support continued price growth in most capital city residential markets. ...The favourable economic conditions have created strong wage growth and record levels of net overseas migration, which should drive stronger underlying demand at the national level, while keeping unemployment at long-term low levels."
CBRE ( www.cbre.com.au ) in their 2007 review article wraps up a big picture:
ˇ The factors that underpin the performance of Australian real estate are either in good shape or improving. The economy overall is set to expand at a higher rate with growth stepping up further in 2008.
ˇ In the short term, Western Australia and Queensland are expected to continue to drive the country's economic fortunes.. The Australian economy overall is forecast to grow 4.5% in 2008.
ˇ The only downside of this strong economic growth is the upward pressure it keeps on interest rates. Concern about the future direction and movement in interest rates may be impacting confidence and holding back some real estate purchasers. In turn, it may be part of the reason residential development is running at a cyclical low. Ironically, there is demand for housing through strong population growth, but a lack of confidence from buyers to enter the market.
ˇ One of the most important underlying drivers of real estate is growth in population and according to the most recent release of demographic statistics, Australia's population is increasing at a healthy 1.5% per annum. In this most recent data (12 months to March 2007), Australia's population grew by 307,100 people.
ˇ Important for all property sectors is employment and Australia's workforce has never been larger. Despite very low levels of unemployment (4.3% nationally in August 2007), the number of people employed continues to increase at over 2.6% per annum.
ˇ Overall, these are signs of an economy in good shape and likely to only improve further in the short term.
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Research notes to factor in
Brisbane CBD tight supply . "It is forecast that by the end of 2007, CBD off-the-plan supply levels will be at their lowest point since 2000 with 377 off-the-plan apartments remaining for sale. By 2010, CBD off-the-plan supply will be sitting at just 200 apartments (largely comprised of residual stock within projects which have been on the market for quite some time). The only foreseeable new developments to occur around this time will be Multiplex's Northbank development and potentially stage two of Stockland's Eagle Street Pier. Whilst supply is forecast to dwindle, the median price will continue to rise driven by scarcity of product and leading into another property boom around 2011." Resolution Research and Marketing Solutions.
Brisbane Inner City (4kms of CBD). " ... During the 12 months ending June 07, six inner city suburbs achieved a unit resale price growth of over 10% per annum. West End which ranked in sixth place in March 07 has now taken the lead, with an impresive 14.6% growth per annum for unit resales. The rezoning of previously industrial land between Montague Road and the Brisbane River, and the consequential new developments taking place there, have changed the face of West End bringing some higher end apartments to the area. ... While CBD units still command the highest resale price, it is worth noting the gap between CBD units and the inner ring units which was at its greatest in 2000 is now shrinking. Units in the east and north precincts are now priced only slightly lower than CBD units, with north and south precinct units another step below. For investors however, price growth is often of more interest than sale price." Colliers PRD , October 2007.
Brisbane North Bank. The final plan for a massive commercial and entertainment precinct over part of the Brisbane River has been unveiled when the Queensland Premier announced on 30 November 2007, the new $1.7 billion North Bank would go ahead as part of the modernisation of the Brisbane City. It includes public open spaces, six high rise buildings incorporating units, offices and retail space, a public swimming pool in the heart, a footbridge to South Brisbane, river boardwalks and a new CityCat ferry terminal and berths for tourist boats. The first stage of the development will complete in 2011 and the final stage in 2020. North Bank will be Brisbane's Darling Harbour, transforming a no-go zone into a magnet that will draw people back to the river.
The Gold Coast.
"The Gold Coast is the fastest growing municipality in Australia and is the largest city outside of the Australian capitals. The Gold Coast grows by around 13,000 new residents each year and today holds 525,000 permanent residents. ...The Gold Coast is expected to reach 800,000 permanent residents within the next 25 years. To accomodate this growth, an additional 227,000 new dwellings will be needed, which will double the amount of acccomodation currently on the Gold Coast. This equates to 100 dwellings per week." Source: Matusik Property Insights. Major new infrastructure projects are likely to have a major positive impact on the southern suburbs of the Gold Coast:
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The construction of the $550 million Tugun Bypass scheduled for completion in mid 2008.
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The recent completion of runway extension for the Gold Coast International Airport. Air Asia X now flies directly from Gold Coast to Kuala Lumpur. The airport will service flights to Singapore, the Middle East, China, India , Japan and USA.
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The Queensland Governement has committed $550 million to deliver the Gold Coast Rapid Transit System. The new system will provide a link from the Gold Coast rail line at either Helensvale or Parkwood to Giffith University and the busy centres of Southport, Surfers Paradise, Broadbeach and ultimately the Gold Coast International Airport.
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The $34 million commitment by the Government to revamp the Southport Broadwater park to create boardwalks, piers, water gardens and hidden underground car parks. This is the Gold Coast City Council's town planning to present the Broadwater as one of Australia's most beautiful foreshore areas.
Cairns.
- The Queensland Government has granted a mining development license to Chinese company Chalco, the preferred developer of a $ 3 billion bauxite project at Aurukun. The project is hailed as the largest single foreign investment in Queensland history. Source: Cairns Post September 11, 2007.
- Cairns is the
- # 1 destination in Australia for Japanese tourists
- # 2 destination in Australia for all international tourists
- tourism pumped $2.7 billion per annum into the local economy
- over 60 international flights per week
- # 1 Seaport in Queensland for major cruise liners
- Cairns Convetion Centre ranked in top 10 globally
Major investments in Cairns :
- 2007 : Broadreach Capital Partners, $50 million : Oasis Resort. Juniper Developments, $21 million : Tropical Arcade.
- 2006 : Westfield, $ 160 million : Cairns Central. Qld Public Trustee, $41 million : Cairns Corporate Tower. Goodearth Hotels, $ 21 million : Cairns Colonial Club.
Bill Cummings, senior economist wrote in Business & Property Review, May 2007 : " .. Cairns's role has been expanding as a major servicing and fly-in-fly-out centre for a booming mining sector in northern and north western Queensland, Northern Territory mines, Freeport Indonesia's giant copper mine in Papua Indonesia and for mining and other activity in Papua New Guinea. ... Looking forward mineral prices seem likely to remain high and a range of new mining activities are on the way, including the large new Aurukun bauxite mine in Cape York Pennisula. The region accounts for 27% of Australia's water runoff and is well placed to benefit strongly from expanding world markets for agricultural products including a growing demand for bio fuels. With the new Jetstar international services expected to begin to Japan later this year, Boeing's new generation Dreamliners due to come into service next year and Tiger airlines likely to commence on domestic routes, a new round of tourism growth seems likely to start rolling from about 2008."
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WHATS NEW
- Premium Multi family housing.
The Australian Financial Review 13 December 2007, reported that three property entrepreneurs backed by Westpac Funds Management, are planning to revolutionise Australian housing investment, with what could become a $1 billion network of inner- and middle- ring city apartment communities across the country. The three - Commonwealth Bank's former head of premium banking, Michael Katz, and two experienced developers David Berry and Stewart Ewen, have formed a residential development and management group, weLive. "Our objective is to put rental stock into the market which is city-centered, high quality accommodation, offering value-added facilities and services with an initial lease term of up to three years." Westpac Funds Management , which is building a residential investment funds platform, will be a seed equity investor in the weLive projects. Westpac is the only group that can see the opportunities in Australia's deepening shortage of housing accommodation. In the US , institutional investment is well established in "multi family" housing. The projects will not target low income housing. Instead they will be aimed squarely at 25- to 35- year -olds, and those over 55 , who want to live close to work and the city but want to invest in other assets besides expensive inner city housing. "We will give them a longer tenure with on-site management and a code of conduct, so you can deal with issues and build pride into the property." Last week the group lodged a development application for its first project, a $100 million complex of five buildings, with 308 apartments surrounding a large courtyard at Victoria Park in Sydney's inner south. The project, designed by Bates Smart and not for strata title, will have hallmark environmental sustainability and include features such as café, gym, business centre, cinema, shops and studios. "We would like to see a dozen major projects over the next five years."
- Superfunds can now buy property.
Until the last week of September, self managed superannuation funds (SMSF) could not borrow to invest in property. Pat Mannix a CPA at Gatherum Goss & Associates www.gatherumgoss.com said the law now allows SMSFs to borrow via what's called an "instalment warrant". A complying fund will have at least $120,000 total account balance. A broad example : The SMSF funds the deposit, say 20% plus stamp duty and legal fees plus the first year's interest repayment. The balance of the purchase price is funded by lender / bank in a limited recourse loan. The property is held in trust until the final instalment is paid or the property sold. The SMSF receives all income and capital growth and pays the interests and all costs.
Pat Mannix pointed out the tax efficiencies. There is a maximum of 10% capital gains tax on the sale of a property if held for at least 12 months and potentially nil if sold in the pension phase. There's a maximum of 15% tax on rental income. You may effectively receive a tax deduction for principal repayments via a salary sacrifice arrangement. The interest cost on the warrants is tax deductible which reduces the 15% contributions tax of SMSFs. Retirement is very tax effective in that if you are over 60 there is no tax on withdrawals or pension.
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Money and Property
" The paper you fold and place in your purse or pocket is not money. It is paper with ink on it. It represents Money, but it is not Money. Money is an Idea." Bob Procter.
If the dollar note is only paper. Property is only a vehicle for the investor. Investors buy time not real estate. For example, one popular strategy is the "interest-only" loan structure and not a "principal and interest" repayment structure, to minimise cash flow going out and maximise tax deduction. How to use the property to create wealth should be the key. Ed Chan of Chan and Naylor accountants www.chan-naylor.com.au and co-author with Tony Melvin ( their book How to achieve Wealth for Life) , listed 12 myths of Poor vs Rich.
12 Myths of Poor ( > 95% ) vs 12 truths of Rich ( < 5% )
(1) Debt is bad = Reduce debt (1) Debt is good =
Increase debt
(2) Buy /sell it to make a profit (2) Do not buy / sell
assets = Buy Time
(3) Hard work = Big income (3) Work their capital ,
= Wealth not their body
(4) Size does not matter (4) Size does matter
(5) Positive gear investment (5) Positive gear
is good investment
= ˝ Picture
(6) Tax is good = Making money (6) Tax min = Risk management
(7) Own your own home (7) Ownership = poverty
(8) Property vs Shares (8) Nonsense
(9) Should not pay mortgage (9) Insist on paying
insurance mortgage insurance
(10) Rich are lucky (10) Rich have a different
mindset
(11) Save hard (11) Gear or leverage
(12) Debt is risky (12) Only risky if you
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SupersCycle to Create Wealth : Rule of 72
"The return of an investment divided into 72 will determine how long the investment will take to double in value." Albert Einstein.
So, how many Supercycles do you have to Create Wealth ?
Illustration example :
(A) Growth.
The often quoted capital growth of properties in Australian capital cities is 7% p.a.
Using the Rule of 72. 72 divided by 7 = 10years * . Indeed statistics over 50 years showed that properties in Australian capital cities double every 7 to 10 years.
(B) Supercycles.
How many Supercycles Do You have to Create Wealth?
Life expectancy, say: 85 years
Current age : 50 years
Life expectancy less Current age : 35 years (A)
(A) divide by 10 years ( see above * ) : 3.5 Supercycles
Starting Investment Amount : $400,000 ( today's terms )
End of Supercycle 1 $800,000
End of Supercycle 2 $1,600,000
End of Supercycle 3 $3,200,000
At 50 years old, a person can still have 3 Supercycles to Create Wealth using properties. And double the investment 3 times.
And you can do this Smartly by Leveraging : Have another 3 Persons to help you achieve this : the Bank, the Tenant and the Tax Office.
So, at 85 years old you have another legacy of $ 3.2 Million, because you started with creating another $400,000 property at 50 years old. Often a 10% deposit . A weekly cash allocation of $200 approx to hold the property ( using the illustration of salary income of $60,000 p.a and the tenant pays $360 per week rent).
" ---Took 22 years of slow and steady building - block by block - before the world received a gift called The Taj Mahal. And all wonders are like that - they take time. Lots of hard work. And time. We live in a miracle drug world. We all want what we want - and we want it fast. But great companies/relationships/lives are built over time. Small daily steps, over years, lead to stunning results. --" Robin Sharma www.robinsharma.com
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Astute Property Investments Services are licensed real estate agents specializing in investment properties.
Yours Sincerely,
Eric Wan
Astute Property Investments Services
Mobile: 0412 829 255
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