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Is Brisbane the new Sydney when it comes to property investment?

Is Brisbane the new Sydney when it comes to property investment?

May 9, 2018 | Investment Property, Property Market

Search any travel guide on Australia and chances are Sydney will be named as the best city to visit. What is there not to love about Sydney? It has two of the most iconic tourist attractions in the world in the Sydney Opera House and Sydney Harbor Bridge. The University of Sydney and the University of New South Wales are among the top 50 educational institutions in the world. Sydney is also widely regarded as the financial hub of the Pacific.

These conditions plus a thriving economy, friendly interest rates and a growing population have contributed to the consistent rise of Sydney’s real estate prices. Sydney is currently ranked 4th to 7th  in most surveys on the most expensive real estate properties in the world. Yet interest in Sydney real estate continues to grow particularly from overseas markets like China, the US and Singapore.

But recent data suggests that property growth in Sydney has slowed down and Brisbane may be the new investment hotbed in Australia. The consensus among market analysts is that Sydney real estate prices have risen to a point that Sydneysiders can no longer afford to buy property.

According to Macquarie Research, when price housing differentials in Sydney and Melbourne have grown to nearly twice that of Brisbane (See Fig.1), it leads to shifts in demand that favour the capital of Queensland. This is because demand for properties in Sydney and Melbourne is no longer sustainable.

Fig 1 House price relativities – Price differentials between Sydney and Melbourne, relative to Brisbane, have reached stretched levels, which have historically been followed by multi-year reversions. 

Currently, properties in Sydney and Melbourne can purchase 2.2 times and 1.5 times properties in Brisbane respectively.

The National Australia Bank (NAB) has echoed the same sentiment stating in its report that it expects property prices in Sydney to flatline in 2017. Meanwhile, Brisbane continues to post strong gains. Its housing prices have increased the past 14 quarters.

A study conducted by CoreLogic RP Data Pain and Gain showed that in 2016, more than 25% of Brisbane properties were sold for at least double their original purchase price.

What makes Brisbane the logical investment choice after Sydney?

  • Property Prices are Still Affordable – Compared to Sydney and Melbourne, property prices in Brisbane which has been estimated at $632,000 are still affordable. An oversupply in available housing has created a dampening effect on property prices but this will soon be rectified by the next factor.
  • Increasing Population – As property prices continue to rise in Sydney, it will increase the level of interstate migration flows to Brisbane. Market analysts expect a net migration inflow of 20,000 to 25,000 people to Brisbane which will create an increased demand for dwellings in the amount of 8,000 to 10,000 per year. This will balance out the oversupply of housing and push real estate prices upward.
  • Improving Economy – BIS Shrapnel expects median house prices in Brisbane to increase by 7% come June 2019. It is one of Australia’s fastest growing economies and with a population that is estimated to hit 3 million in 2031, the demand for new housing could reach 156,000 by then.

Is Brisbane the new Sydney? Only time will tell if Brisbane will supplant Sydney as the preferred destination in Australia. Brisbane currently ranks 3rd behind Sydney and Melbourne in tourism.

Brisbane also has a number of fine educational institutions such as the University of Queensland, Griffith University and the Queensland University of Technology. Similar to Sydney, Brisbane is home to many world-renowned companies in the fields of IT and finance.

As an investment haven, it may be the best time to buy property in Brisbane as prices continue to be on the low side and the full effects of interstate migration on real estate have yet to be felt.

If you want some assistance in your investment property aspirations, please give me a call at 02 9095 6888 or drop me an email at [email protected]

Happiest Clients: Looking beyond the upfront goal

Happiest Clients: Looking beyond the upfront goal

Apr 20, 2018 | Sanford Team

When we meet with a client, we believe it’s our job to look beyond the upfront goal and advise what is best for them considering their financial situation and long-term goals.

In an article on Mortgage Professional Australia, Ivo De Jesus shares how he developed a long-term property investment plan which was at odds with the client’s initial goals, but ultimately better for them financially in the long-term.

Read the article here >>  Happiest Clients: Looking beyond the upfront goal

 

Why using a mortgage broker is a smart way to go

Why using a mortgage broker is a smart way to go

Feb 12, 2018 | Investment Property, Purchasing

Whether you’re buying an investment property or your first home, you have a number of options when borrowing money. Going directly to your bank may feel like the easiest and best option.But is it? Home loan customers can make significant savings if they are prepared to look beyond their own bank and shop around. The best way to achieve this is to use a mortgage broker like Sanford Finance.

We provide you with real choice

Finding the best deal for you only comes from having a choice. Mortgage brokers work with multiple lenders to not only find the right deal but to keep competition alive amongst lenders. We use this competition to our advantage and as leverage to negotiate a better outcome for you – not the banks.

We’ll review your mortgage to ensure you’re getting the best deal

Whilst the Reserve Bank cash rate has remained steady at 1.5% for the past 6 months, this may not always be the case. Changes are always possible depending on the economic climate as are changes to the variable and fixed interest rates offered by lenders.

The current lending environment in Australia is highly competitive, and mortgage holders who are prepared to review their loan are able to obtain better interest rates, saving thousands of dollars a year. As mortgage brokers have access to a wider range of lenders, they can negotiate a much better outcome.

We walk you through the process – and the paperwork.

It’s a fact that lenders require a lot of financial information prior to approving a mortgage. But following up with the lenders and negotiating the best rate is difficult if you have no experience in lending. It’s a mortgage brokers job to manage this process for you, help you organise your paperwork, negotiate on your behalf and do all the legwork required to secure your mortgage.

Whilst the process of securing a mortgage may appear daunting, have a mortgage broker by your side makes it a whole lot easier.

If you’d like to discuss your situation contact us or call on (02) 9095 6888

The changes to depreciation benefits have been legislated. Are you affected?

The changes to depreciation benefits have been legislated. Are you affected?

Dec 5, 2017 | Investment Property

I have been surprised. Australia’s national sport is not AFL or Football. It’s residential property! Everyone participates; whether you have a mortgage, own outright, rent or are an active investor, every Aussie has an opinion on the state of the property market. Its become our national obsession.

So it surprises me that some of the most important changes to residential investment have passed federal parliament and very little if anything has been made of it in the media. Did you read about it? There was no outcry that “the world was going to end” or that “you better get in now before its too late”. Whats the world coming to when the media won’t report these changes let alone overreact! LOL

In all seriousness, the changes to depreciation benefits associated with residential property are some of the most profound I have seen. In case you missed it, federal parliament passed legislation that will affect depreciation benefits on residential property. So below is a good summary of what this new legislation will mean and what to ask your accountant.

  • If you acquire a second-hand residential property after May 10, 2017, which contains “previously used” depreciating assets, you will no longer be able to claim depreciation on those assets.
  • Acquirers of a brand new property will carry on claiming depreciation exactly the way they have done so to date. This is great news for the property industry and the way it should be.
  • The proposed changes only relate to residential property. Commercial, industrial, retail and other non-residential properties are not affected in the slightest.
  • The building allowance or claims on the structure of the building has not changed at all. You will still need a Depreciation Schedule to calculate these deductions. This component typically represents approximately between 80 to 85 percent of the construction cost of a property.
  • The proposed changes do not apply if you buy the property in a corporate tax entity, super fund (note Self-Managed Super Funds do not apply here) or a large unit trust.
  • Perhaps the most interesting point: Whilst investors purchasing second-hand property can now no longer claim depreciation on the existing plant and equipment, they will have the benefit of paying less capital gains tax when they sell the property.

All in all, a pretty good move by the federal government; support the construction of new homes and add to the housing supply while looking after existing landlords. It’s good for tenants, its good for landlords and its good for the economy.

Though, I suspect residential investors will start looking into companies as their preferred asset holding structure. This asset holding structure means nothing has changed.

So what do you think? How is this going to affect you?

To discuss more, please contact me on 02 9095 6888

Note: This article is general in nature and does not constitute property or tax advice.

Dispelling the myth of buying new

Dispelling the myth of buying new

Nov 16, 2017 | Investment Property

When implemented well, buying off the plan – be it a studio in an inner city apartment tower or a house and land package in suburbia can be a powerful way to quickly build your property portfolio.

One of the big advantages is the small amount of upfront capital needed to lock in your piece of real estate. Whether it’s buying your first home, starting that portfolio you have always wanted or expanding your current holdings, buying new can be very advantageous. Most developers only require a 5 or 10% deposit, with some developments taking about two years until completion. This means investors can get in with little capital and spend the months ahead saving and for rising markets, this gets you ahead of the growth curve with little money down.

Finance Expert and Economist, Craig Cobb argues that “What most Australians don’t know is that buying new property over pre-existing property opens up some significant benefits. Buying new means low maintenance, higher yields, tax benefits and builder’s warranties are in place. A major added bonus is that you tend to get better tenants that take pride in the new residence and will look after it.”

As a strategy, purchasing new stock can work well for most investors and deliver excellent benefits – providing you pick the right project, in a good location. So who usually buys new property?

High-Income Earners

For high-income earners who are time poor, purchasing new property can offer excellent upside. On the time-front, new investments require minimal maintenance consequently providing a ‘set and forget’ option for a busy professional.

From a financial perspective, the tax breaks available via depreciation provide investors on high-incomes great savings by reducing their overall taxable incomes. Tax Depreciation Specialist, Mike Mortlock of MCG Quantity Surveyors concludes that “If you’re buying an investment property now, buying new is the only way to ensure you’re getting the best possible depreciation.

“High-income earners benefit the most from depreciation as the deductions can sometimes drop them into a lower tax bracket, but essentially the higher your tax rate, the greater the real impact of depreciation deductions will be.”

Low-income earners

At the other end of the spectrum, low-income earners can also benefit greatly from this type of investment. Higher-yielding, a new property can generate increased cash flow and help cover mortgage repayments. With smaller amounts of cash required to be injected up front and the potential to reap Capital Gains benefits during the building stages, this strategy can help kick-start a low-income earner’s portfolio.

Additionally, building issues covered with Builders Warranty can be a saving grace in the early part of any low-income earners investor journey – limiting a buyer’s need to dip into their pockets if any building issues arise. This being somewhat overlooked by those buying older properties that require a lot more maintenance ongoing and affecting nett return.

SMSF investors

As an SMSF investment, the new stock offers a great ‘set and forget’ option. Generally lower ongoing maintenance and high yielding (requiring a little top up from SMSF funds to maintain cash flow), it can be ready to tenant immediately and start earning straight off the bat.

Craig Cobb agrees stating, “ASX has grown little over the past 3 years and global stock markets have been going up for 9 years and you have the perfect storm for a significant stock market fall in the 40/50% range.

“Buying new investment property in your super not only gives a strong yield and growth play but also reduces the risk by diversifying against potential stock fall scenarios of 40/50% and effectively putting your retirement behind by potentially a decade.”

Like anything involving superannuation, having the right advice to suit your needs, goals and specific scenario is key before embarking on any investment journey.

First homeowners

For first homeowners, new properties can be an attractive option, providing stamp duty concessions and savings via the first home owners grant.

Lawlab Director, Richie Muir suggests that “Housing affordability, especially for first home buyers, has been a hot topic over the past year and federal and state governments have introduced policies that aim to assist first home buyers. Some examples of this are the introduction of the first home super save scheme, and increases in first homeowners grants and first homeowner stamp duty concessions in some states.

First homeowner grants mostly apply to new homes, which can be purchased as a newly built home or as a house and land package, or built by the first home owner.”

A further benefit of purchasing new as a homebuyer can occur, if a purchaser gets in early, a developer may make changes to the layout, finishes and inclusions to secure the purchase. From a lifestyle standpoint, the new stock tends to be built in close proximity to amenities and transport hubs – a big plus for homeowner residents.

Overseas/FIRB buyers

New property stock offers Overseas/FIRB Buyers an entry point into the Australian market. Foreign investors are often able to secure FIRB pre-approval through Australian Developer’s, thus simplifying and de-risking the process. For many overseas investors, the Australian market offers a safer and more stable property investment option in comparison to their home country market.

As with all investment strategies, it is critical to understand your personal situation and make purchasing decisions in accordance. While new property brings with it a range of benefits to many investors at various stages in their respective property journeys, be warned: not all projects are created equal and as with all things property, location is everything.

To discuss the merits of buying a brand new property versus an old property, please contact me on 002 9095 6888