Australian Property Update - 19th April 2011
This week we take a look at some of the strategic considerations for your property investment.
- Will the Libs drive the Newcastle market even further?
- ‘Turnkey’ investments – make sure the key opens the door
- Is your build as ‘safe as houses’?
- Which “advisers” get property?
- Sydney and Melbourne flat auction results, Sunshine Coast smashed!
NextHotSpot.com.au has been a fan of the Newcastle market for a while now. The massive investments in infrastructure and industrial development have so many spin-off benefits to a city coming out of lean years and probably decades of neglect, that some of these benefits will inevitably flow through to the residential property market.
Is the change of state government a breath of fresh air for Newcastle? Maybe, maybe not, but the winds of change in NSW politics have been blowing a gale. The Liberal-National Party coalition has replaced what is generally considered to have been a terrible Labor Party government at last month’s state election and they will potentially never have a greater mandate.
On a recent research trip to Newcastle, NextHotSpot heard some interesting comments about the change of government. One prominent local businessman told us “we’re certain to boom up here now because the Liberal government will have to back us here to keep their seats”. We believe that Newcastle is well on the way anyhow, but what is the likelihood that the Libs do spend up?
For a fuller discussion of the consequences for Newcastle, please click here
We’ve advised many people on their house and land packages and act as project managers for most of our clients who are building dwellings on their investment property. We do this because the most important component of profiting from Real Estate is buying well and a mismanaged builder can very quickly turn a good buy into a bad one.
NextHotSpot.com.au will post a checklist of considerations over coming weeks but in the meantime, feel free to contact us to discuss your project. As we often tell our clients, every property and every investment is individual, so make sure you understand all the working parts of yours. One of the benefits that we can offer is that we buy in bulk for our clients which gives us some muscle in dealing with the builder.
One of the most crucial steps is to understand what your build contract gets you.
A common trap is that some builders will quote on the basics of the build but omit crucial details that make the property liveable. These can range from curtains to carpets to driveways, but the important concept is that for a supposedly finished house to be “turnkey”, it literally means that you pay your last build instalment when the dwelling is ready for someone to move in. Ideally you will have a tenant lined up by this stage and they’re unlikely to sign a lease for a home they can’t live in immediately.
“Turnkey” means exactly that. The tenant can turn the front door key and walk right into their home of the next year or so. Some of the country’ biggest and best known builders are guilty of this practise of omitting details that the inexperienced landlord may overlook.
Keep an eye out for our comprehensive guide but if you need more urgent help, please give us a call.
The law offers you some protection with building a new dwelling, so…
Building warranties offer a great deal of protection in dealing with some of the issues we just raised. Implied warranties work similar to a warranty on a new car or appliance, and in this case they are cover the building work for 10 years even if the dwelling is sold.
The law differs across the states but essentially a warranty on a new place is there to ensure you get what you paid for. The point about “turnkeys” is to know what you have actually signed up for.
A director of Consumer Affairs Victoria, Dr Claire Noone, offered this interpretation;
"By law, you automatically get warranties from your builder, regardless of the cost of the construction work or whether you have a written contract. These warranties apply to any home building project and they still exist if you sign a contract that appears to take them away."
Warranties are in place to make sure that the builder completes the job at a professional standard, conforms to all legal requirements, and does so in an acceptable timeframe. The builder must hand over the dwelling in a liveable condition and is accountable for any defects or unfinished work. Warranties protect consumers from dodgy builders who go broke or do a runner and also potential damage caused by a builder being unable to complete a project due to illness or death.
If you’re building up to this step and want some help with pulling it all together…
Recent surveys published in the Fairfax press have indicated that a large chunk of the Australian population don’t understand what financial planners offer. Added to this has been the very public failing of Storm, Westpoint and several others in recent years.
Here are a few thoughts for you if you are considering your options for seeking some financial advice, particularly if you, like most Australians, consider property investment to be important to a well rounded portfolio.
Let’s start with the pathetic offerings of the major banks. Essentially what they mean by financial planning is selling you insurance and managed funds from within their own product portfolio. How many competitors’ options do they offer you in any recommendation or even maintain on the “Approved Products” list that they are obliged to keep? Ask them if they will do your tax return or help you identify and purchase investment property. The usual answer will include some mumbling about “financial wisdom”. If they can’t offer anything to support your biggest expense (tax) and your biggest investment (property), don’t let the door hit you in the back of the head on your way out!
Your accountant may be good at tax and bookkeeping, but what do they know about property? Most accountants are not trained or licensed to offer advice on either financial planning or property investment. There’s too much detail to cover here, but if they don’t invest in real estate themselves or have an extensive list of clients that do, you should look elsewhere for help in this area. They are less likely to have relationships with property sources than financial planners unless they offer a financial planning service themselves.
Look for a member of the Financial Planning Association that includes property options in their offering. They will need to have either additional licensing or a close relationship with someone that does.
Some of our clients have had beneficial experiences with Announcer and WLM and we can organise a cost and obligation free initial meeting if that would help. To discuss this with us please email firstname.lastname@example.org
A quick assessment of market appetite based on recent auction results shows that the Sydney and Melbourne markets are flat. The Fin Review ran an article on Mon 18th April reporting 55% clearance rates in Sydney and 60% in Melbourne. A common view on clearance rates is that 60% is neutral and under that number indicates weak demand and therefore a buyers market, but given that the weekend leading up to Easter is usually a peak for activity, the market still looks soft.
We’ve been predicting a flat market over the year for capital cities and see no reason to change this view. We also take no pleasure in being correct about calling the bloodbath taking place in lifestyle destinations, particularly in South East Queensland.
A liquidation auction of 36 units in the Crowne Plaza Resort on the Sunshine Coast last weekend failed to sell ANY units. Built in 2005, it is a quality development offering a spa, pools and access to a championship golf course (remember that the Sunshine Coast’s attraction is lifestyle). There were bids on 30 of the units but as an indication of market weakness, a penthouse listed at $1.58 million last year attracted a maximum bid of $600,000!
Infrastructure investment and the jobs it creates are the drivers for property hotspots. The Gold Coast and Sunshine Coast lack these drivers and will continue to suffer whilst markets are uncertain.
If you have any questions about the above information please click here to send us your details or contact our office on (02) 9917 8600
Missed out on last weeks report? Click below to view the April 13th edition of