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"Affordable Homes Starting at $250 Million", this is the tag line for the upcoming blockbuster science fiction action film Elysium starring Matt Damon and Jodie Foster.
What on earth does that have to do with property, you might ask?
I saw this tagline on posters, billboards, and banner ads online recently and thought to myself, what an interesting premise for a film.
The film is a futuristic and stylised approach to the global problem of housing affordability, and also the problem of finding space for housing in the areas where people want to live.
These concepts led me to thinking about affordability in an Australian context, and the challenge of meeting demand versus supply, in the locations where Australians are wanting to live.   The basic premise of Elysium is this: over time, human populations on Earth spiral out of control. With people packed like sardines on Earth, living in increased volumes of poverty and despair, those with enough money are able to buy a spacious property, become an elite class within society and can afford to purchase a spacious apartment - in space.
The film then segues into big budget action sequences with an undertone of  class warfare.
Elysium is the second film from South African director Neill Blomkamp, whose previous blockbuster District 9 also balanced weighty social issues with action and adventure.
I have not yet seen the film, however the premise does raise some issues about not only housing affordability, but also availability.
The marketing gimic of using billboard space to run ads that appear to be for prestige property, really does command attention. Additionally, an innovative viral marketing campaign has seen posters being glued on to street furniture and bus stations that advertise properties for sale within the fictional space station setting of the film.
When looking at projections of population growth globally from now until 2030 from reputable data organisations such as the United Nations (specifically their 2010 ‘Data Projection 2030’ report, and their ‘FAO Global Report 2012’) and the World Health Organisation’s 2013 ‘Population Projection 2030’ report, they each more or less agree that the expotential global population growth occurring since the 1950s will continue at an even faster rate than before.
This means that based on the current global population today of around 7.1 billion, many reputable data sources agree that over the next 17 years human populations will likely be between 8.2 and 8.4 billion people.
This is actually a conservative forecast. The U.N.’s ‘higher likelihood’ figure predicts that number to be more around the 8.9 billion mark.
So what does this mean for supply and demand of housing?
Well, we know that most people prefer to live in locations close to proper infrastructure and crucially, to readily available employment hubs.
In other words, there is an increasing trend and desire in not only developed but in developing countries for people to live in cities. This then creates problems with population density and supply and demand issues with housing available within these cities.
 
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Having recently returned from Singapore and also having travelled over the last decade to some of the world’s most densely populated cities in locations where geographic future expansion is limited (cities like Sao Paulo, Tokyo, Casablanca and Istanbul), I can foresee the challenges that lay ahead for city planning in such locations based on rapid population expansion.
Housing affordability in major cities is increasingly becoming a problem, particularly in large-population countries where cultural and economic shifts are creating a rising middle class and demand for larger and more premium housing is ever increasing.
I recently blogged about a Credit Suisse report that cites the least afforable cities in the world (by assessing housing pricing to wage ratios).
What is interesting is that of the top ten, three of the least affordable cities for property (Singapore, Tokyo, and Hong Kong), are all cities with limited geographical growth capability. Seemingly bucking this trend is Australia.
From an outsider perspective, I’ve had friends and visitors often comment about the degree of underpopulation in Australia in relation to our geographic size.
There is no denying that to the untrained eye, Australia appears as a very underpopulated country. But when taking into consideration some other important metrics, such as trade, industrial development, limited resources and the need to import many goods and services from offshore, Australia’s low population represents different problems.
Although our major employment centers are still very much focused around larger metropolitan cities, as Australia’s economy begins to shift towards the growing and developing resources sector, it is likely we will see a shift in housing demand.
Not a huge one in the beginning, but rather a gradual shift to housing demand increasing in regional centres outside of capital cities, that are tied to the developing resources sectors.
 
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Regardless, Australia has faced – and continues to face – housing demand shortages.
Even if demographic trends steer towards regional centres becoming bigger, housing in many of these centers still struggles to keep up with demand.
Adding to this is the expense of developing and building new properties in the areas where people are wanting to live.
Housing affordability in Australia also is poor due to the high taxes, stamp duties, and costs-of-living (electricty, gas, water, services) associated with buying a home, and then maintaining it once it has been purchased.
When compared with say, South Africa (the country/culture that inspired the rich/poor divide storyline of Elysium), whilst Australia does have property markets that span basic, middle class and prestige/premium, quality housing can still be within a modest salary or paycheck’s reach.
We do have a prestige property market, but by-and-large the occupants of such residents pay a premium more for the lifestyle, views, and property features; as opposed to paying for any ‘privelege’ to be further away from a lower class of people.
In Australia, it is very uncommon (though not unheard of) to come across any of the gated-community style (complete with armed guards, barb-wire 14 feet wall enclosures, and every nook and cranny monitored by CCTV) of luxury residences and then find these micro-neighbourhoods within an otherwise lower socio-economic neighbourhood or suburb, such as you might find in pockets of Cape Town and Johannesberg in South Africa.
The rich people in Australia occupying prestige large houses in blue-chip neighbourhoods, do not wish to rub their luxury in the face of the working and modest classes.
Rather, the challenge for Australia is to address overall housing affordability and accessibility, regardless of any market or macro-economic environment.
Where other countries have this challenge in compact and overcrowded cities, where the only real viable solutions are to either build upwards or have city planning policy encourage employment centers located outside of the city, Australia’s challenge could not be any more different.
Ours is to ensure housing availability and affordable in higher-demand regional centers is met, whilst also ensuring that growing cities are furnished with the needed infrastructure that will eventually ease the cost of living for inhabitants of those cities.
Cameron McEvoy is a NSW-based property investor and maintains a blog, <a target="_blank" rel="nofollow" href="https://propertyspectator.blogspot.com.au/">Property Correspondent.</a>
 
 
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"Elysium" and the sci-fi vision of gated housing communities: Cameron McEvoy

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In my view, overall investment desirability in an area is heavily dependent on infrastructure.
So how would I rank the various infrastructure basics in order of importance?
I would argue there is not one checklist of infrastructure vitals you need to investigate when considering an investment property purchase, but two.
The first list I came up with are what I call ‘Area Vitals’ and this includes the core vitals pertaining to the basics of human life: safety, security, and employment.
But the second list, ‘Area Desirables’ are just that, the ‘nice-to-have’ factors that can – and do – persuade prospective tenants to choose one suburb over a similar suburb to live in. I would recommend considering each of these lists when you are deciding where to invest:
Infrastructure Checklist – Area Vitals:
-          Emergency services (local police, fire, ambulance)
-          Employment prospects (look for job creation in a variety, not just a handful, of industries or trades)
-          Proximity to transport nodes (rail, bus, tram; as well as domestic and international airports)
-          Shopping &amp; retail facilities (basic/core groceries)
-          Proximity to education facilities (pre-school through to tertiary)
-          Digital services (fast access internet, subscription television)
-          Provision of basic leisure facilities (parks, local sports grounds, town centres, restaurants/bars)
-          Well-maintained roads and intersecting/connecting motorways
Infrastructure Checklist – Area Desirables:
-          Prestigious education facilities (beyond basic, so esteemed schools/universities with a good reputation)
-          Nearby national parks &amp; hiking trails
-          Hospital facilities that provide sophisticated surgeries &amp; procedures
-          Bustling local entertainment venues (abundance of restaurant choices/cultures, popular nightspots)
-          Proximity to premium entertainment &amp; sports venues (for big concerts, major sporting calendar events)
-          Provision of adequate parking nearby to transport nodes
In an ideal suburb, you would hope to check off as many items on these lists as possible, but of equal importance is to consider areas where projects related to any of the above have commenced construction.
For example, if values in your chosen area have not shown much capital growth in the last five years or so, yet a new motorway that will make this area more connected to major employment centres has already begun construction, you ought to take these factors in to account.
 
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Recently, I returned from a trip to Singapore and Malaysia.
My time in Singapore was mostly for business, but my time in Malaysia was for a short break, not on the mainland but instead on a remote island. Apart from the climate, the two places I visited could not be more different.
Singapore is a tiny, bustling, and high-density city-state, brimming with business people from all around the world. There are over five million people crammed into an island about one third the geographical size of Sydney.
On the other hand, the small Malaysian island of Tioman on the east coast of Johor Bahru, has a population smaller than that of Darwin.
From a property perspective the two areas, though neighbours, could not be more different.
Spending a little bit of time on each island, I began to appreciate just how important the presence of good infrastructure is, in determining where you invest.
When comparing the infrastructure of these two places, again, they could not be more different.
Singapore is everything you would expect; practically anywhere one would choose to live on the island is in very close proximity to not only the fundamental/basic infrastructure of city living, but to more sophisticated infrastructure like major lifestyle venues (zoos, grand botanical gardens, major entertainment venues, sporting grounds, and so on).
The rent costs being commanded by landlords in most parts of Singapore are in line with such world-class lifestyle facilities. Yet demand for property of any kind in Singapore remains fiercely strong, and in many instances, highly competitive.
Conversely, the remote island of Tioman in Malaysia faces an entirely different problem.
Apart from a small volume to Tourism, the island has little to no infrastructure.
The only airport that services the island will cease all flights from September onwards, making all access to the mainland of Malaysia reliant on ferry services. Even these ferries are reliant on fluctuating tides and if the water tide is too shallow on any given day, the ferries simply do not run.
Infrastructure on the island is very weak indeed with no doctors, let alone a hospital, only a handful of police officers to service a population of over one hundred thousand and no sophisticated urban planning zoning or restrictions, making construction and importations of any kind challenging for the developer.
Employment prospects are poor and services to roads, communities, and technology are also very limited.
Most people would think of infrastructure as being separate to employment prospects, but the two are often related.
 
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A good example of this is Kempsey on the mid-coast of NSW.
I visited this area in April 2013 and was initially pleasantly surprised by the affordability of residential property in this mid-size town.
Houses in most suburbs are very affordable; according to RP data the current median price for a house in Kempsey is $165,000.
The town should have solid appeal as an area to live; it is a very short drive to beautiful coastal beaches, the weather is mild most of the year and sunny, and there are almost a dozen state and national parks surrounding the city in every direction.
The recently completed upgrade of the Pacific Highway included a bypass path that re-routed traffic around the city. This has stopped noise, pollution, and traffic running through the centre of town and once would think this would restore the town centre with a sleepier, pleasant vibe, akin to that of nearby Grafton.
Yet despite all of this, the longterm growth trend for house values remains muted.
After visiting and speaking to some locals there, as well as making some calls to local estate agents, I began to realise that economic growth for the city had stunted due to lack of infrastructure.
It turns out that Kempsey is about a 45 minute drive to much larger cities Port Macquarie and Coffs Harbour.
Residents of Kempsey would often commute to either of these places to seek work, due to a lack of infrastrucutre and services in Kempsey having resulted in little to no new job creation in Kempsey.
The town does have basic services – a small hospital, police station, fire station and so on. However, the council has not promoted industrial and agricultural infrastructure growth in the town and this has resulted in limited job growth prospects.
With retail being the only developed industry, employment prospects remain muted and this in turn reduces desirability and increases vacancy rates, resulting in capital growth remaining stunted.
Education is always a strong influence when it comes to infrastructure.
In the example of Kempsey, apart from a small TAFE with very limited course offerings, there are no universities in the area, meaning that residents wanting to study for a career beyond basic trades, have to leave the town to do so.
A lack of solid infrastructure can restrict growth in industry, leading to high unemployment rates that keeps a town or city with otherwise great appeal and desirability, deflated.
Cameron McEvoy is a NSW-based property investor and maintains a blog, <a href="https://propertyspectator.blogspot.com.au/" rel="nofollow" target="_blank">Property Correspondent.</a>
 
 
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The vital and desirable infrastructure checklist before you invest any suburb

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Perhaps I have been watching a little ‘too’ much 'American Horror Story' lately.
As unrelated to Australian property investment as this show may sound, it actually formed the inspiration for writing this article today. The first season of the show is about a family who moves into a suspiciously under-priced large Los Angeles Deco-era family home.
Of course, as the series progresses the family discovers the true history of the home – several gruesome crimes, repeated stories of hauntings, the usual horror movie home truths! – and realises that the stigma attached to the house’s history is the reason why they were able to buy it so cheaply to begin with.
Later on when the family tries to re-sell the house, they are burdened with the history and struggle to even get back what they paid for it.
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The house at it appears in real life on the left compared to how it appears in 'American Horror Story'
Though this is just a silly television series and a very over the top/extreme example of how a property’s history can affect values, it got me thinking about the sentiment that sellers and buyers of properties will attach to the history or superstition behind a property.
In Australian culture we actually do see mild examples on a day to day basis of where superstition can influence demand for property.
Take for example the fact that in several Asian cultures many favour apartments and houses with the number ‘8’ in them based on the belief that this number brings prosperity and fortune with it and, to a lesser extent, some western/anglo-Australian buyers showing caution toward properties numbered ‘13’ based on superstitious reasons of ‘bad luck’.
I have read on several websites and also a feature article in Australian Property Investor Magazine about a year ago, about the story of the gentleman who purchased the ‘Bodies in Barrels’ murder house, which was attached to a bank, in the otherwise sleepy South Australian town of Snowtown.
After being placed on eBay for sale – a curious sales tactic in itself – the 4-bedroom residential house behind the attached bank building (where the actual horrors took place) was eventually bulldozed to make way for a new unit development.
The bank itself was placed on auction at a reserve cost of $200,000, though achieving a sale price of only half of that, though was later resold closer to original reserve price (at $185,000) to a family who intended to owner-occupy it after some conversion and renovation.
 
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Though I am citing an extreme and extraordinary example; it does provide some insights for us. The initial stigma attached to a property shortly after a horrific event did see its value deplete – no surprises there.
However, within just over a decade after the occurrence, the property value gradually crawled back up.
Perhaps time heals all wounds.
In this way, would-be investors with arguably a higher risk-profile than most could consider procuring heavily discounted properties where unfortunate incidents took place, employ a buy-and-hold approach for a medium-to-long term and hedge their bets that time heals wounds (and the memories) of their would-be buyers in years to come.
Personally, I consider it a somewhat macabre and bleak prospect but the professional investor in me urges me to consider the bottom-line element, and not the superstition or stigma around it.
However this alludes to a bigger problem, when considering such property types on their initial 'bargain’ merits.
From a buying perspective, there may be long-term capital gains, but what good are these gains if you cannot feasibly hold this property with tenants in place?  
Where superstition and history are really important is the occupants of a residence.
The association of tragedy, superstition, or creepiness, may be too great for some would-be tenants to handle. They may inspect the property not knowing the recent history, but within months of moving in, they are looking to leave after their first six-month lease expires.
A good example of the persistent challenges of established property stigma that results in a property being unable to function as a regular rented residence; is Crawley House.
No, not the picturesque setting for the UK series, Downton Abbey, but Crawley House aka the Monte Cristo Homestead (pictured below) in Junee, NSW.
<img alt="mcevoyjuly16two" src="/images/stories/2013/07/mcevoyjuly16two.jpg" width="470" height="375">
Though it is a palatial 1885 manor fit for a large well-to-do family of that era, its tragic past changed the residence from being able to function as a home forever and has instead remained for decades as a museum, antique store, and tourist attraction.
That said, where the stories and ‘sightings’ of ghosts have closed the door to its function as a residence, it has opened other commercial opportunity doors instead.
 
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The truth is, the safest way to proceed with any property purchase is to do your homework.
If, for example, you are buying in an area that has a significant Asian population, it is worth at least being aware of the number of the dwelling and how this number may be perceived by that target audience.
Whether you end up selling or renting this property, it could be likely that your buyer may be of an Asian background and planning for such considerations may enable your target market to broaden as a result.
More crucially though, if you suspect the asking price for a property seems to be suspiciously lower than similar others in the area/street, ask the estate agent for full disclosure of any known history of the property.
Do as much research as you can around the history of the property and any occurrences that could have implicated on the sentiment towards it. Where and if possible, ask neighbours about the property. They probably won’t know anything but it never hurts to ask.
As a separate (and seemingly unrelated) step, I would always recommend that if your offer on a property is accepted, you buy the RP Data historical report for it.
This will highlight the sales history and any occurrences of note, pertaining to the history of the property.
Things to look for would be any disclosure of violent crime occurring there, or potentially a consistent (say, over twenty years) frequency of buy-and-sell; with no single owner retaining ownership of the property for more than a year or so.
I am not suggesting the reason will be anything to do with violent history or superstition, though you could discover something perhaps more startling, a structural or physical problem with the property over time.
Cameron McEvoy is a NSW-based property investor and maintains a blog, <a href="https://propertyspectator.blogspot.com.au/" rel="nofollow" target="_blank">Property Correspondent.</a>
'Haunted house' photo courtesy of  Sean MacEntee
 
 
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Can a property's turbulent history affect its market price: Cameron McEvoy

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A new financial year begins this month and for some lucky people, it may bring a handsome income tax return along with it. If you are expecting a nice return and intend to add this to, or make a start to, a deposit for your first property purchase, well done!
Whether it be that first home purchase that you hope will leapfrog you into an investment career, or making that first property buy an investment, as you save for your deposit over the years leading up, you’ll have plenty of time on your hands to prepare. As you get within a few months of your target property purchase time; the due diligence and research you need to conduct ramps up considerably.
But what if you are still a year, two years, or further, away from purchasing? Other than saving the money in your bank account, there is plenty that can be done, so today I’ll cover off some basics that you should really be doing in this slow build-up. <a imageanchor="1" href="https://1.bp.blogspot.com/-zwd_PXqYuuE/Uc6Nf3c9l2I/AAAAAAAAAf8/ijz839PsA4g/s850/Buying+your+first+property+home+investment+in+Australia+tips+to+help+you+save+more+deposit.jpg"></a> Credit history – Sort out those credit cards and personal loans Though you may be more than twelve months away from applying for a mortgage, it is important you start to build a positive credit rating, and for two reasons:
-          Firstly, if you have several credit cards, a personal loan, and any outstanding unpaid debts or bill, you can imagine how poorly this reflects on your credit history, and restricts your borrowing capacity if you still have all these overheads when you make your application. Against some popular belief though, sometimes having just one or two personal debts (like a single credit card or modest personal loan) that features a diligent (never late; and where possible; beyond making the ‘minimum repayment’) and sterling payment history. This can be good evidence of a committed repayment-maker, and may work favourably for some applicants.
-          More importantly though; if your property goals are very ambitious and you perhaps have not formed good spending and saving habits, now is a good time to reign that in and take stock of your self-discipline and self-restraint. Having entered my thirties recently, I have become a much more disciplined and well-budgeted individual compared to my early twenties. These days though, it is not uncommon for young Australians in their late teens and early twenties to develop property ambitions early on. I purchased my first property when I was twenty-five and I can tell you, in the two years or so leading up to that achievement, I really had to take stock of credit card debts and begin showing an evidenced savings approach. It is important to do this to avoid future disappointment.
 
Mortgage Broker – Get one to do a borrowing capacity check now, even if you do not use them Most mortgage brokers effectively work ‘for free’ to their client. Like some ‘no win, no fee’ solicitors, mortgage brokers typically only get paid for their service as a commission from the lender once you are unconditionally approved for, and take up, a mortgage with a lender.
However, lenders offer so much more than just helping with the process and finding you the best rates/package features in the market.
Lenders have access to software that allows them to do a run across dozens and dozens of lenders, using your personal data, to give a pretty precise ‘maximum lend capacity’ for each of the lenders. Also, they will identify which lenders, after considering your current (or future-predicted) financial situation, will flat-out refuse to lend to you (or lend to you an amount or a product that does not work for you).
So contact a broker now, give them either your current financial situation/current deposit amount, or a future-predicted situation in twelve or more months’ time and have them run their report on who will lend to you, and by how much. Sometimes the results are startling – and this can be positive or negative.
If the amount you had in mind is nowhere near the reality of even the most generous lender’s maximum lend rate, it could be a time to reassess your goals or rethink your first purchase strategy. Conversely, if your aspirations are more conservative, you may be pleasantly surprised by how much various lenders will give you, assuming a certain set of personal circumstance variables.  <a imageanchor="1" href="https://3.bp.blogspot.com/-3JLIr19tu-8/Uc6NfuN6SuI/AAAAAAAAAgA/zmQLdN9t-RU/s500/Saving+for+your+first+house+purchase+Australia+research+how+to+save+for+your+first+property+and+tips+and+tricks+to+do+this.jpg"></a> Develop a ‘property needs assessment and usage over time’ document This does not need to be ‘War and Peace’. Rather it should simply be a bullet-pointed word document that forms the plan for how you intend to you use this property over time and what the ‘must-haves’ for this property are. This is really just to ensure you form a plan and stick to it.
It is no good saving up for a modest apartment to use solely as an investment property; then twelve months down the track when your savings goal is achieved, you throw the plan out the window and decide you want to by a lavish home to live in instead. This will throw back to the drawing board, right at the time when you should be ready to act/execute on all of the planning and due diligence you’d done.
This could see you making hasty or foolish buying decisions in light of an inconsistent or poorly kept-to plan.
This comes back to what I mentioned earlier about developing self-discipline. It is important to have goals and stick to them. The other element of this plan is how the property will be used over time. Though I am a big advocate of purchasing property for a single use (say, home or investment) and not detouring from that usage, I have made exceptions to this for a couple of property purchases over the years too.
So this plan will look very different depending on whether it is bought as a home or as an investment. Here is a shortlist of questions to consider answering, in writing your list:
Home purchase: -          Is it a starter home? I.e. something modest that you’ll have for just a few years, then upgrade when you have the means to move into a bigger/more expensive home. -          Will it always be a home? I.e. will you sell it to move to a bigger home, or keep it as an investment, thereby changing the property usage? If so, have a think about what the ramifications of this will be, before you buy. -          Are you looking for a home that is established, renovated already, with not a thing to do? Or, are you looking at taking something on that requires a bit of work over the first few years, to bring up to scratch?
Investment property: -          What is your risk profile? Identify how much risk you are willing to take on and this will usually dictate the area, type of dwelling, and overall investment you pursue. -          Is this the only one? Do you just want one investment that you can keep over the years and pay off over time, so you have it as a revenue-stream when you retire? Or is this the first of what you want to be many investment properties? Think about the consequences. -          Depending on how you answer the above question; what are you seeking most from this investment – capital growth (the property increasing in overall potential sale value over time), or rent return (where the monthly rent more than pays for all expenses and produces you positive income each month).
In a utopian world, we’d all be buying properties that can do both; but this is often a challenge to find! Particularly for your investment property you may be better off pursuing on type of return initially.
Investors who are content with buying one property only typically focus more on capital growth over time. Portfolio-builder on the other hand will sometimes value rental return more; as it can enable them to have good enough cash-flow to progress to their second purchase and beyond.
 
Educate yourself – You need to do this proactively; wisdom is rarely imparted, rather it is requested You have plenty of time up your sleeve while you are saving, so it is time to school up! Be like an interrogator with information that comes to you. Some would-be buyers take a passive approach to this, casually overhearing conversations with friends, or flipping through a magazine and a story on property happens to come up.
Whilst this can be nice to get a feel for the climate, this is not proactive research. Proactivity means you need to seek out independently, the answers that matter to you, rather than being influenced by other people’s casual conversations or news-grabbing dramatic headlines about the property market/industry.
Even as you read this article; ask yourself – ‘did I casually stumble upon it and read it because I was bored?’ Or were you actively Google-searching something like ‘how to buy your first house’ or something similar? Once you have written your word document above, you’ll have lots of questions you’ve created for yourself.
Pursue these answers proactively and independently; and do not be afraid of being taken on a tangent every time you learn something new (I.e. you open a second browser window to search about something you read in the first browser window!).
As I say above, I believe that wisdom is rarely imparted, rather it is requested. In the end though, the key to planning a successful first property buy – be it home or investment – is to remain active.
Do not become passive and do not push out all of your pre-purchase tasks as ‘things I can do later’. Instead of using your feet to toe-tap and wait for information and opportunities to come to you, use your feet to hit the pavement and start preparing. The key to a successful purchase – and especially to a successful property investment – lies in proactivity and planning, so get started now!
Cameron McEvoy is a NSW-based property investor and maintains a blog, <a target="_blank" rel="nofollow" href="https://propertyspectator.blogspot.com.au/">Property Correspondent.</a>
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Taking the first steps towards your first home: Cameron McEvoy

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I recently came across a method of property purchasing common to the people in Brazil who are interested in buying residential property in their home country.
The concept was initally foreign to me so I felt compelled to write about it, because I've never come across anything like it in my property life.
It is the concept or rather, practice of Consórcios (literally translated, means ‘Consortiums’). This is where would-be property buyers who perhaps either struggled to get a mortgage on their own from a lender, or did not see the value in paying wasted ‘interest’ dollars, or should I say ‘Reais’ (pronounced ‘hay-ice’) to a lender, group together with other like-minded folks, in the interest of a common goal; home ownership.
Instead of approaching lenders for loans, the group do not use loans. Instead, they use a lawyer and an administrative company who, for a fee, underwrite a sound contract between all participants of the consortium. The price of a single property is then agreed between all parties and is kept the same. The value of all properties is added together and split into monthly instalments.
From month #1 onwards; each participant must pay their fee. After a very short time, there are enough fees paid for one property. So who gets the first one?
A lottery is drawn at random and whoever is luckiest gets their property purchased outright – mortgage-free. Participants (including the now lucky new home owner participant) continue paying their monthly allotments for the remainder of the contract. Each month another name gets drawn and a property is bought for that ‘winner’.
I will divulge the flaws and risks in such a plan later on, but astute readers can probably quite easily identify a few challenges with this concept already.
<a imageanchor="1" href="https://4.bp.blogspot.com/-HKcy_PKWD8M/Uc6Hy1OPa-I/AAAAAAAAAfk/R77e36vuC9Q/s531/Brazil+consorcio+group+buying+Australia+property+investment+alternative+buying+approaches.JPG"></a>
There is more granular detail on Consorcio schemes <a target="_blank" href="https://thebrazilbusiness.com/article/consorcio-in-brazil">here</a>.
So let me work with some real numbers as an example, before this gets confusing. Let’s say 10 would-be property buyers group together and form a Consortium. Let’s say they each agreed they wanted a property costing $400,000 each. So that is $4 million of overall property value.
The Consortium Administrator divvies up $4 million dollars across say a 10-year period, into monthly instalments that each participant must pay, month in, month out; regardless of who ‘wins’ their property bought at every annual draw (remember it is annual because in this example, there are 10 participants buying 10 properties over 10 years; to keep it simple; so – one per year).
 
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For the purposes of this example let’s ignore the inclusion of any legal/admin fees for now and just focus on the concept. So, $4 million/10 years/12 months/10 participants = $3,333.33 cost-per-month-per-participant. Not too bad when you consider that this is you fixed monthly repayment for ten years, and then after ten years you own the property outright, huh?
However, this is where the risks and element of chance/gambling comes in to it. Each year, a participant is pulled out of the hat and awarded a property. Because $400K is collected every 12 months, a property can be purchased outright (cash), each 12 months.
So, the best case scenario you could find yourself in, in such an arrangement, would be to be pulled out after 12 months, or maybe in year #2 or #3. This means that you get to move into your new home the fastest, and you ‘own’ it instantly (but of course are committed to 9, 8, or 7 more years of payments like everyone else). It also means that you can ‘go shopping’ for a $400K property when the property you want is actually worth $400K at the time.
Clearly then, the ‘losers’ in this scheme are those who are drawn in years #8, #9, and #10.
Not only have you had to fork out payments on everyone else’s properties for 8-10 years depending on the final year you are drawn; but you are stuck with just $400K to spend at the end, just like everything else. Problem is, $400K, ten years down the track, does not buy what it used to! Suddenly the property type that you fancied 8-10 years ago that was $400K, is now hundreds of thousands of dollars more expensive, right?
However, even in this unfortunate circumstance, I would argue that a participants’ position is not entirely weakened. Remember that for almost ten years you have avoided paying interest; only paying capital. If you took out a $400K interest-only loan at a flat interest rate of say 5% per year (which is very conservative and based only on the record-low interest rate environment in July 2013); you would pay around $200,000 in interest anyways.
So, even as a year #10 ‘loser’, and providing you can save up the amount you would have paid in interest, over ten years; you still end up in a very similar position really; you’ll have $600K in your pocket to go shopping then and there; and own a property outright in year ten.
At the end of the day though; as a year #10 loser, you really do lose out. You would have to live every day with not one but three property outgoing costs; you’d be paying rent (you’ll need somewhere to live whilst you wait!), whilst paying consortium commitments every month (remember, I neglected to include the legal and administration fees payable in addition every month; though this is a minute fraction of the cost you’d be paying in interest to a lender), whilst also saving a little extra to safeguard you should you be a year #10 loser, so you can still afford a relevant property by then.
But I guess that is the gamble of such a scheme. Another gray area of the scheme which I could not get specific clarity on; was insurances. What if participants stopped paying after a few years and skipped town? I would imagine the administration fees include insurance schedules, but these premiums would surely come at significant cost.
In the real world, you can enter much safer Consorcios in Brazil, whereby there are not ten members, but thousands (remember, Brazil is a population of almost 200 million people); and the duration of a consorcio may be more flexible than ten years (either shorter or longer). The best part of this is that you can choose different types, from these Consorcio administrations, depending on your risk profile and needs upcoming.
What surprises me most about this concept is how much Banco Central Do Brasil (Central Bank of Brazil); embraces this practice. Consortiums sound like, to me, a massive ‘middle finger’ to the big banks; and offer a way for like-minded property buyers to have a secure means to effectively chip in and pay for each other’s properties whilst avoiding interest repayments for as long as possible.
 
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Plus, the management/administration/legal/insurance costs would need to be paid by all participants, along the way. In many ways, it is the banks genuinely doing people a favour. It is like saying ‘sorry, we won’t approve you for a mortgage with us, but we do offer administration services for consortium arrangements, should you want to participate in one of those, we can help organise it’.
The bank is happy because it takes on additional revenue, but with much less risk associated. Consorcios are actually more commonly used in Brazil for smaller ticket items such as car purchases, than homes, and this makes sound logical sense. Lower risk and exposure for all participants.
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Thinking in an Australian context; there are ways you could make this concept work, and it all comes down to scale.
For example, if you entered a smaller scheme such as my example, then the administrator would ensure that seeing as a property needs purchasing only once every year; for the other eleven months of the year; everyone’s contributions would be working hard in a high-interest savings account. This interest would help pay for the legal and administration costs each year; saving the participants money.
You could take this one step further and perhaps park some of the interest earnings from the first say five years, to offset those participants who have to wait for the last five years, to help offset some of the challenges they face when their name is drawn. This would give the ‘losing end’ of the lottery a ‘fair go’ – something very Australian in itself!
Beyond consortiums though, the concept of ‘group buying’ has been around for a long time in various countries, but just never as refined, legally binding, and prescriptive, as Brazil’s system. Thinking again to Australia; this time to the post-WWII Greek-Australian immigrants, arriving to the country for the first time with very little resources behind them.
The Greek community established itself quickly in Australia and brought with them a renewed sense of family closeness and trust that perhaps culturally, the Europeans exercised better than locals. Greek family and family-friend communities would group together across large extended families (so, sometimes up to dozens of cousins, aunts, uncles, nieces, nephews and so on); to ‘chip-in’ to buy each married-off sibling/cousin within the family; a property at the time of marriage, in cash. Then, once the first couple’s property was purchased outright; all family members (including the new property-owning youngster couple) would chip in for the next cousins’ wedding-property.
The problem is; this concept never took off in any formal capacity in Australia, because, well, there was no infrastructure or 3rd party governing body able to reside over these arrangements, making them high-risk and entirely based on human trust.
If we were to add in the element of legal certainty and responsibility, along with insurance and security in; when introducing such a concept in Australia, these costs would add greatly to the participant cost (It is very expensive to do business in Australia in a legally binding, and insurance-covered fashion!). Plus; if a participant skipped town and stopped paying their share; the entire house-of-cards structure would topple if the insurer challenged the consortium or group-buying association’s circumstances.
Still, one must wonder; even with these legal and insurance costs included, it would still be cheaper than paying all that bank interest on each property, over the years, no?
So from my limited understanding of this scheme, I would still argue that, when you consider the first home buyer market in Australia; the relevance and introduction of a practice such as Consorcios would still be conversation worth having.
The truth is that although the motivator Brazilians entering into a consortium versus Australians is very different, it is just as relevant here as it is there. In Brazil, the major barrier to people getting mortgages to buy property is demanding credit rating assessment approval, which sees would-be house buyers not progress through to finance approval.
Usually applicants are hard-working, reliable people; however on paper, the lenders may not agree that their stability is so, well, stable. In Australia it is a different problem. Lenders have more confidence that applicants have stable incomes; it is just that the marketplace here is so expensive; first-home buyers are hard-placed to agree.
For investors it is a different story. Because you may not own a property for many years; you cannot rent it out, meaning it cannot earn income. This does not make for a good investment.
Cameron McEvoy is a NSW-based property investor and maintains a blog, <a target="_blank" rel="nofollow" href="https://propertyspectator.blogspot.com.au/">Property Correspondent.</a>
 
 
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An unusual Brazilian property buying scheme that is relevant to Australia: Cameron McEvoy

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With development proposal approvals and construction starts appearing to be on the increase in several states in recent months, I thought it good timing to address the investment option of purchasing off the plan.
There has always been a degree of risk associated with purchasing residential properties off the plan, yet for some investors, a well-researched off-the-plan purchase can present solid opportunity and make for a good strategic addition to their portfolio.
So today I’ve shortlisted some of the major risks associated with off-the-plan buying, along with ways you can remedy these before they become bigger problems further down the track. Key to this though is that all of this risk management can be executed before you sign off on any contracts with a developer.
Risk: High penetration of other developments, resulting in weaker-than-expected values at completion
You need look no further than markets such as the Gold Coast and Inner Melbourne for examples of how this can be a serious problem for investors. High market penetration occurs when too many large-scale development applications are approved by a council and are completed a few years later, resulting in an instant oversupply of housing stock in that area that flattens capital values and reduces rental rates achievable.
This hurts investors who purchased a dwelling off the plan at a certain rate, because when the market becomes oversupplied, almost overnight, values can drop sharply, as can the rental rates for such developments due to so much choice in the market.
Prospective tenants can become picky and this can leave some developments struggling to find tenants to occupy these buildings. This can significantly reduce the profitability of these dwellings and overall make for a bad investment.
You would think developers would try to avoid this occuring more often; and they certainly do not intend to pit themselves against so many competing developments in an area, but it is not always avoidable. Sometimes zoning restrictions enforced by councils can buck the trend of where the demographic data is ‘telling’ the developers to build their next block, resulting in developers having to pick their second, third, or fourth favourite site for a particular construction.
This occurance can often result in them being forced to develop in a very competitive area for them. Not really ideal for many parties involved.
Remedy: Research other projects in approval &amp; construction in an area
This is a common risk associated with buying off the plan and a real problem for investors. The best practice here is to do your own research on the area where you are interested in a particular development.
Do not be lured or attracted by the developer’s ‘word’ that their opportunity is particularly unique; or their assurance that there is genuinely a limited supply or restriction to other developments appearing in your chosen area. Instead, contact the local council of this area to get an understanding of the area zoning.
Most councils in Australia have this information, along with a list of the pending development applications (and their approval status) readily available on their websites. If not, call them. This will give you a feel for the future use of the area where your desired block will be located. Additionally, investigate the surrounding dwellings in proximity to where the building is. Things to look for when doing this are:
-          Hertiage listed sites. In a word, these are great. So your desired block is going up in amongst four parallel streets full of mostly heritage-listed workman’s semis/cottages? Great! This means that those little dwellings are not going to be bulldozed any time soon, potentially making your desired apartment block as rare as hen’s teeth in that area, which in turn could result in your dwelling holding its value or increasing in value faster
-          Former-industrial areas going through gentrification. Be cautious here. If there are many old factories or industrial businesses surrounding the area, and some are already being bulldozed over, be weary. Often times, when an area gentrifies, it means the land becomes more valuable being used as blocks of apartments, than, say, it being used as a row of little mechanics, warehouses, storage facilities and so forth. This could mean your area is at risk of becoming an apartment ‘jungle’ in coming years. Proceed with caution in this instance.
 
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Risk: Wrong property type for area
Another risk commonly associated with buying off the plan – but also for purchasing established dwellings – is the property type and its appropriation for an area. One would think that a developer would have a keen eye for ensuring they build the right property type for the demographic demand within a suburb or area, but they do not always get this right!
For instance, what good is purchasing a 3-bedroom, 2-bathroom, double-car garage unit off the plan, in an area where the strongest property demand is for studio and one bedroom apartments? Or conversely – and this is actually quite a common occurance – building little 2-bedroom townhouse or apartment developments in regional towns where the demand is more for detached houses on bigger blocks with good sized yards.
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. You may find a tenant quickly, but they may not be willing to pay the desired rental rate, if the property is not their ‘first choice’ for that area.
Another thing to be mindful of is the more widespread trend of an ageing population and catering to their needs. Developments in regional towns and coastal areas where tree/sea-changes are likely to migrate to, in their later years, should be considered carefully.
Is a top-floor apartment in a three-floor walk-up building with no elevator, such a good idea, if it is in an area where every year; more and more retiree and baby-boomers are migrating to?
Remedy: Study your desired area before shortlisting off-the-plan developments
Get to know your potential area and do this in several ways:
-          First, use online tools to study the demographic breakdown of your chosen area, to get a feel for the type of family (or single-person household), and develop a ‘persona’ of who is most likely to be living there. Is the off-the-plan unit befit for their needs?
-          Actually take a walk in the area. Buy a coffee at the local cafe, and people-watch (one of my favourite pasttimes I picked up back in the day when I was a backpacker). You learn so much about the inhabitants of an area in this way. Get a feel for what they like and the lifestyle features that are valuable to them, and this will pave way to how they are likely to live.
-          Look at recent sales on real estate sales websites. What kinds of properties are selling the fastest? Talk to agents in the area to get a feel for the things that buyers and renters demand the most, in an area. These people are your best resource in finding out what an area is like.
 
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Risk: Wrong property features for an area
A similar risk to the above but altogether more subtle; where ‘property type’ typically refers to things like bedroom volume, whether it is a unit, villa, townhouse etc, and the parking situation; property features is more specific to the features that will make a would-be tenant, when inspecting the interior, say ‘yes – this place has everything I need’.
If the development is in a lower socio-economic area and the developer is keenly spriuking the ‘luxury’ features of the building, this should raise alarm bells in your head. Astute property investors are keenly aware of the risk of overcapitalising on a property, especially when it is off the plan.
What good is having expensive Smeg appliances, spa baths, plush Persian fibre carpets, and intricate feature wall designs in each room, if your target tenant is not the type to pay extra rent to have such features? Even worse, if your would-be tenant does not value such things, it is likely they will not take particularly good care of them.
Conversely, if you are eyeing off a development in an inner-city, high renter-to-owner ratio, ‘commuting executive’ kind of area, it would be risky to buy off the plan in a development that does not cater to the needs of these people. So, a modest development with no gym, cheap fixtures and fittings, and poor security, might not be the best investment for this demographic.
Remedy: Study your desired area before shortlisting off-the-plan developments
The remedy here is exactly as above – research your demographic ‘persona’, before buying off the plan. Who is most likely to be living in it? What kind of features would they need or want? Cut out the ‘noise’ of the developer’s pitch, and assess what features, fixtures, and inclusions your target audience would truly want.
Take yourself out of the picture. Unsuccessful investors will assess a development based on their own personal desires and likes. They may really like the kitchen colours, or the floor plan works for them personally. But this is not about you.
You will not be living there, so start thinking of whether your desired tenant, or owner-occupier that you’ll be reselling this property too, will like it. Go to open-house inspections on near-new dwellings in the area and get a feel for how these places look and the features they have.
 
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Risk: Trusting a developer’s numbers without checking figures yourself
When buying off the plan, developers will present capital growth projections, forecasts of rental growth, and may even have a third-party industry expert provide assurance of future growth figures to hand. Nothing really is assured, though.
The reality is that there is no way to know this for sure, particulary if the developer is basing their metrics on flawed or missing data sources to begin with. Trusting only their figures (however knowingly or unknowingly skewed or biased these may be) is a road to failure for off the plan buying.
Remedy: Seek out independent numbers and see if these correlate
There are a number of resources you can seek council on, to verify numbers or refute a developer’s forecast:
-          Sources like RP Data will identify recent sales; mid-long term growth patterns in terms of values, and actual historical vacancy rates for the area
-          If you have collected numbers and statistics from elements I’d mentioned earlier, these will also help you here to verify the likelihood that the developer’s ROI numbers stack up
-          Ask for references from this developer on previous completed projects, and request to see an ‘end-to-end’ case study of success stories from their last development. If they cannot provide these, or refuse to, alarm bells should be going off
-          Google the developer’s name and their company name too. Add in the word ‘Somersoft’ into your search term bar and you should be able to find chatter on the Somersoft forums about this developer, their reputation, and (hopefully not) any horror stories from previous purchasers from them. Developers often settle extreme cases in and outside of the courts, and in either instance will likely impose silence clauses in these settlement terms contracts, so investigating the blogs and forums can be a great option to hear real stories and accounts
 
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Risk: Agreed fixtures, fittings, and inclusions are not honored at completion
I am conscious that I am painting a negative picture of developers in some of the risks identified above. Though many in the industry regard them with little high regard, developers are not ‘bad’ people. Well, most of the time. Just like buy-and-hold investor types; developers are in the business of making high profit volumes.
And so they should, really, considering the degree of risks these companies take on, in executing these projects. However, most of you will be aware of horror stories where developers promised quality/luxury appliances, lighting, flooring, and any other features, yet at the end of construction these were replaced by inferior alternatives. This becomes a problem when valuers assess the market value lower than expected at the end of the project
Risk: Get your solicitor to approve the contract that details precise inclusions, precisely!
As you move closer to contract stages with the developer, get in writing as part of this; every single inclusion and feature/fixture/fitting that is to be part of your property purchase. Have your solicitor cast his or her eye over it before signing off. Be particularly weary of developers that give you grief for requesting such levels of detail. This can be extensive but worth it.
Even go so far as to name the brands of the toilets, dishwashers, ovens, and so on that the developer is saying they will use in the finish. On items where brand name is not possible, you need to ensure that the category is detailed. For example, if floating floorboards are to be laid, this must be specified, or else cheap carpets could wind up there in the end.
Another one is double-glazing on windows; particualry in inner-city developments; be sure to have this as a contractual inclusion if they’ve mentioned it; and if not, agree a price for their inclusion at point of delivery. Things like floor-plan adherence, ceiling heights, and voltage of lighting fixtures , should all be specified contractually.
Risk: Developers pitching future success of an off-the-plan purchase on the ‘promise’ of future infrastructure
Sometimes developments that are not as initially profitable for a developer as once desired, need to be marketed in different ways. Another investor-buyer trap that one can fall into is being sold the idea that because there is new school/hospital/railway station/employment hub ‘planned’ for an area; the future demand for the development is a sure thing.
This is dangerous territory. Some buyers will purchase properties off the plan in a development because they are told by the developer that the future use/growth of that area is guaranteed because all of these great plans ‘have been approved by council or state’.
After buying, and said future infrastructures are scrapped and never even built, the property may not hold its value very much nor produce much rental demand due to the area never really growing.
Remedy: Do your homework with the local or state government on the actual progress of these infrastructures
Most state governments in Australia sadly seem to be in a perpetual state of near-bankruptcy. For this reason, infrastructure and planning developments regularly get delayed or even worse, scrapped. Take Sydney’s north-west rail link, which was in various stages of ‘planning’ since the late 1980’s, but took until 2013 before actual construction sites started appearing to lay the rail line foundations and diggers commenced ripping up the dirt.
Perhaps my perspective is ever-skeptical, but you would be wise to not believe that any state government infrastructure development will go ahead – no matter if it has been given an ‘official approval’ – until you actually start to see soil being penetrated by machinery. As for non-state enterprises, like new private schools or business parks in close proximity, you need to conduct extra due diligence to be assured that they will go ahead.
Cameron McEvoy is a NSW-based property investor and maintains a blog, <a target="_blank" rel="nofollow" href="https://propertyspectator.blogspot.com.au/">Property Correspondent.</a>
 
 
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The risks of buying off-the-plan and how to remedy them: Cameron McEvoy

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Back in January 2013 I wrote <a target="_blank" href="https://propertyspectator.blogspot.com.au/2013/01/arckaringa-basin-oil-discovery">(article found here)</a> about the Arckaringa Basin area of South Australia from a property investment opportunity perspective.
Whilst I am not a micro-markets writer typically – I prefer to write on trends, techniques, and experience-based content pieces – I did take particular interest in this massive expanse of a region. This was in light of major breaking news earlier in January about the confirmed discovery of shale rock under the ground, in very large volumes.
With shale oil production ramping up globally, as the cost of traditional oil per barrel increases to be either on par with historically ‘expensive’ shale oil, it is clear that shale oil discoveries around the world will become significant mining and production sites.
In fact, you need look no further than northern USA (the Dakotas, Wyoming, etc) and southern Canada (Saskatchewan). Historically shale rock was difficult and expensive to extract, and equally challenging to refine into oil. Technological advancement has brought these costs down, whilst all the while, the price of regular oil has been sharply increasing due to the finite nature of the resource and increased global demand.
So with the discoveries in South Australia – and I use plural because over the past couple of years, multiple sites have been discovered and are now collectively referred to as the ‘Arckaringa Basin’ – there has been much talk since January about the dawning of a new age of the mining sector in Australia. The region is sizeable, it is roughly the land size equivalent of Poland, with shale rock deposits dotted throughout the area.
<img height="203" width="470" src="/images/stories/2013/06/mcevoyjune12one.png" alt="mcevoyjune12one">
The Arckaringa Basin Area is about the size of Poland.
As most readers would be aware of, even without these discoveries, the mining sector for other minerals and resources outside of shale oil in Australia is in incredibly great shape.
Though there has been a mild stalling in profits and productivity posted (and forecasted) from the mining sector, the overall long term outlook is very positive indeed. Arckaringa, if realised properly, will only add to this strength.
So what role does property investment play in the Arckaringa region? And what are the risks in investing in residential real estate in this region?
Well, on the first question, when I wrote about five months ago on the state of the residential property market there, I did identify – from a pure property-investor/buyer ‘numbers’-based mindset – immediate opportunity. By that, I mean that rental return achievable in proportion to the outlay cost of purchasing a property there, was very significant:
-          The kinds of double-digit returns achievable was comparable to the 2009-2011 era of US residential property markets. We are talking rental returns of 20-30% and upwards. -          Due to the very accessible cost of procuring tenant-ready properties there in comparison to capital city markets (we are talking 5-digit property costs versus 6-digit/half-a-million-dollar property costs), this means that two kinds of investment structures could be feasibly considered: A) ‘Cash-on-cash’ investments whereby no mortgage is needed for the initial outlay, due to the very affordable entry-rate of purchasing property, and instant monthly rental return achieved due. B) The more traditional mortgage-secured investment property structure. Securing even a 70/30 LVR (Loan to Value Ratio) loan would make for minimal risk/outlay, and maximum positively geared return.
This all sounds pretty great, right?
 
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As mentioned last time though, this area is very high risk, and not for faint-hearted. With no personal investment experience there myself, I cannot commentate on the actual success of investing there, though I believe that it would be a very high-risk and high-maintenance location to invest in residential property.
<img height="115" width="470" src="/images/stories/2013/06/mcevoyjune12two.png" alt="mcevoyjune12two">
Residential property in the Arckaringa Basin is mostly partially underground to minimise extreme heat outdoor conditions.
I am conscious that I intended today’s piece as a follow-up to January’s article, yet all I seem to have done is re-cap it.
Well, in the five months since, I’ve kept a casual eye on the investment property market in the major townships within the Arckaringa region. Here are some of my observations. As mentioned, I am not an expert on the region and can only claim to have a fleeting interest, but here is my view of the state of the market, risks, and opportunities:
Sales volumes on the up, but this doesn’t mean much:
Actual volume of property sales seems to have picked up in the last six months, compared to the six months before that. Using sales volume data from REA group, I can confirm that there were about 25% more residential properties purchased in the townships-regions in the last six months compared to the six months before that.
However, when dealing in such low-volume sales-data pools (these aren’t cities of millions of people and hundreds of thousands of dwellings, of which we can get reliable trended data, these are towns of perhaps only a dozen or less available properties for sale at any one moment), this data is neither conclusive nor even dependable as viewing it as a reflection of any real market sales ‘growth’.
Residential properties in the region now being more ‘investor’ targeted in their marketing:
What is more reliable that small-sales-pool volume data, is this: When looking at the volume of available properties for sale now compared to six months ago, the ‘marketing speak’ in the sales information on each property listing on both Domain and RealEstate.com.au is significantly different.
Where sales-speak six months ago was focused on language around ‘affordable’, or ‘keeps cool being semi-dugout underground’ or ‘close to town and employment centres’, and other such dwelling-specific rhetoric, most of the Coober Pedy and other Arckaringa regional towns noted <a target="_blank" href="https://propertyspectator.blogspot.com.au/2013/01/arckaringa-basin-oil-discovery">here</a> are now being heavily marketed as being very ‘investor friendly’, indicating that agents in the areas feel strongly enough that the mining industry growth will be reliable enough to sustain property investment growth, and soon.
Whilst sales agents are chiefly interested in just that, getting a sale over the line, we can sometimes also rely on sales agents to have more precise knowledge of their postcode regions than us outsiders ever could. 
Feasibility of regional growth occurring any time soon:
Beyond the property investment element of Arckaringa though, I’ve also been reading articles from several news sources questioning and criticising the viability of getting shale rock mining projects off the ground in the foreseeable future. There are a number of economic, political, and environmental issues cited as being barriers to getting the region to ‘take off’ any time soon.
Investors should be wary not to get caught up in the excitement of the ‘gold rush boom’ effect usually associated with the pending rapid growth of a mining town, as this could lead to disappointment when no dramatic improvements are seen in your desired time scales. 
But this may not be such a bad thing for longer term ‘buy and hold’ strategic property investors:
So it may take a bit longer to see any real capital growth in the region – fine – as long as it is assured that it will occur at some point in the ‘feasible’ future (say the next 5-10 years), if, and only if, property can be sourced that remains very cash-flow-positive over this 5-10 year period.
What I am suggesting is that if it is a low entry point/low-risk purchase, and though it does not show any capital growth over the next few years, if the rent more than covers the expenses and that cash-flow.
The same usual ‘mining town high risks’ apply to Arckaringa, but with even more than usual:
Back on the negative front now, all of the risks associated with any mining town investment property purchase exist in Arckaringa, but unfortunately with an added bunch of additional worrisome risks. This area is not for the faint-hearted investor. Such additional risks are as follows:
-          This area is one of the most remote, inaccessible, and infrastructure-lacking areas of Australia! Getting a busted pipe or leaking tap fixed there is a nightmare. The maintenance costs will be quite extortionate -          Similarly, property management in these towns is very tough, with several of them not even possessing the infrastructure of having a real estate agency in town itself. This means that property managers are usually based as far away as Adelaide, and manage remotely. This adds additional risk to projects -          Tenant quality appears to be very poor. I’ve been reading several blogs and forums on this area from people who already hold residential property there, and tenant quality is a challenge
In the future I will continue to check in on this area with increasing interest and report any further noteworthy observations. My view is that the area certainly does have potential, and those with the appropriate risk profile could do very well here, however for those property investors starting out, a high-yielding property buy here would not be advisable.
Seasoned and established investors who have had a few years’ experience would be better equipped to handle the volatility and management challenge that is holding property in the Arckaringa Basin region.
Cameron McEvoy is a NSW-based property investor and maintains a blog, <a href="https://propertyspectator.blogspot.com.au/" rel="nofollow" target="_blank">Property Correspondent.</a>  
 
 
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Mining town high risks apply to Arckaringa, but even more than usual: Cameron McEvoy

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Last week, I <a href="https://www.propertyobserver.com.au/residential/it-s-a-great-time-to-re-finance-but-consider-the-true-cost-of-doing-so-cameron-mcevoy/2013052361540" target="_blank">mentioned how now is a great time to refinance</a>, and listed some general considerations to costs involved when refinancing and identifying whether it is worth it to switch or stay put.
Today I want to take that one step further and (assuming you have calculated it is worth your while to refinance) present some tactics to consider when refinancing and the kinds of setups you might want to consider. I’ll then illustrate how these tactics can work with an example.
Before I do that though, I must mention up front that I am not a finance expert, nor do I have any qualifications in financial planning whatsoever, so I cannot offer any advice whatsoever regarding finance strategy.
Please do not take my examples and tactical suggestions as financial advice specific to you; instead this is more generalist tactics that I urge to you at least consider in your decision making process. So, whilst I’ll aim to answer questions such as:
-          Do you fix the lost?
-          How much do you fix and how much do you leave as variable?
-          Do you cross collateralise or not?
I can only offer a view on such questions. The truth is, every situation is different, so these are decisions you must make and seek professional advice on. All I can do is share some things that have worked for me on my journey. I am keen to hear from others who have employed successful refinancing strategies within their portfolios, as well as any criticisms of the tactical approach I mention below.
With that said, I would suggest you consider some of following tactical examples. Where possible I try to use fictional examples because it is easier to explain things in that way.
1) Know your short, medium, and long term goals within a property investment context
And I don't mean wishy-washy 'life goals' such as ‘I want to retire at age X’ or ‘I want to have enough money to go on a holiday every year’. These kinds of goals are important for us all, but to realise those big bold ones via tactics like property investment, you need to break that down into specific goals within purely your property investment life. Knowing where you want to be during these timescales will help infer your course of action.
2) Consider the type of loan product split that is right for you
As an investor and not a home owner, you should consider majority-fixed mortgage products due to the great rates on offer and the short-term (say 2-3 years) security that a majority-fixed loan at such a low rate, offers you. This is especially true if you are in an acquisition phase of your property investment life. Having the security of (mostly) fixed repayments for a couple of years means you can know your plan what buckets you allow your income streams to feed into, and enables you to park dollars in other places that you will have saved whilst on this short term phase. This could result in you being enabled to acquire more properties during the coming years more quickly than before.
 
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3) Think about what happens to the fixed portion of any loan product, when it ends
So you are refinancing to a new 25 or 30 year mortgage, with a great fixed rate on a big portion of that loan. However, the fixed rate expires in only a couple of years (say five years maximum). It is critical to negotiate and agree a good deal for that fixed portion when its term ends. Normally, a fixed portion simply reverts to a variable loan, and gets the rate-of-the-day for that variable portion. You need to be mindful of this and where possible, negotiate a good variable rate incentive (say, a portion of discount on whatever their standard variable loan rate is, at the time), for when the fixed rate portion expires.
4) Consider the 'true benefit' of fixing a majority portion of a loan for that time period
Even though I am not a finance expert, I can tell you that as an investor, no planner will ever recommend you fix 100% of your mortgage(s). That is simply not a smart move. In my view, the strategy that has worked for me during my pre-refinance calculations is this: Only leave as a variable portion, a percentage of the overall loan amount that enables the benefit of an offset account’s maximum value usage. This maximum usage can really only feasibly be an amount either equal to, or slightly greater, than the cash amount you could save up yourself, within that fixed rate period of the overall loan. What on earth does that mean, I hear you think? Let me illustrate with an example where I will attempt to simplify it:
-          Let's say you have one investment property that carries a $300K loan, and you are considering switching to a loan where you can get a great rate fixed for two years
-          As an investor you know the value of having an offset account already, so you know you want one on your new mortgage product with the new lender
-          Let's say your current annual income salary after tax is $45K. Out of that, after deducting living expenses and commitments, as well as all holding costs on the property - including interest repayments, rates, management costs and so on - and allowing for things like holidays and other purchases, you figure you'll have save say $15K of your salary per year
-          This means over that first 2-year period of that fixed rate deal, you'll probably save no more than $30K cash. Assuming you park all of this in your offset account, this means that at month #24 of the new product, you'll have the offset benefit of $30K of 'loan' that you avoid paying interest on. Happy days!
-          The way an offset account works means that there is no point having one, if it is not able to offset at least as much as you would be able to put into it. I.e. if your variable loan portion was only $20K of your $300K mortgage, the offset is only good for up to $20K of value, meaning that if you had $30K of savings, you’d have $10K that would have to sit in your regular savings account, doing sweet-nothing to reduce interest on $10K’s worth of mortgage repayments.
-          So, to help infer how much of your new mortgage you'd want to fix at a great rate and how much you'll leave variable (I.e. up to the 'chance' of variable rates staying low too, over two years!), you should leave as the fixed amount, say 10% more than the maximum you feel you could save during the period, as a neat buffer to work with
-          For this example, the person should really consider a variable loan portion of $33K ($30K maximum savings achievement plus 10% buffer). This makes the ratio of variable product overall, about 11%, meaning that 89% of the remainder of the loan product ($267K) should be fixed - if the fixed rate on offer is super-duper of course!
In my personal circumstance I am actually in the settlement phase of fixing a big portion of my entire portfolio for two years. My personal ratios for this period will be 87% fixed, with 13% variable.
I know that for that variable portion: over two years I'll probably only be able to save about 9-11% of that 13%, meaning I'll maximize my offset benefit whilst still allowing a buffer either side.
I have also ensured that at the end of the two years, that 87% fixed portion can be either renewed for another fixed period (if I feel rates are favourable to this arrangement), or it will revert to a variable rate that has already been pre-discounted for me, for when that day comes.
To conclude this two-part piece, my fundamental recommendation when refinancing your investment property mortgage(s) is really very simple, and involves just two things:
1)      Do your maths and find out if it is worth it to switch
2)      If switching, make sure you get a produce and access to account features that enable you to take advantage of the cheap rates of interest, in order to unlock more wealth to acquire more property.
Cameron McEvoy is a NSW-based property investor and maintains a blog, <a href="https://propertyspectator.blogspot.com.au/" rel="nofollow" target="_blank">Property Correspondent.</a>  
 
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Tactics to consider when refinancing your mortgage: Cameron McEvoy

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With interest rates at 53-year lows, and confidence returning to much of the Australian property market, it seems a smart time for not only new investors to get into the market but for existing investors to add to their portfolios.
Like many other existing investors at the moment – and despite the outcomes and revelations from the federal budget plan for the year ahead recently – I am going through the process of re-financing my portfolio. Existing home owners and investors alike should all be considering refinancing in these times of (very) cheap interest rates on offer.
However, it is important to run the numbers and make sure that you will actually be better off switching to a new lender and/or new mortgage products. If most investors are like me – i.e. working Australians on a sub-six-figure salary who have a medium to long term 'buy and hold' approach to property investing – reducing the amount of interest you pay on your mortgage(s) will be a huge priority. I would argue that the only investor types who do not value the importance of reducing interest repayments on loans would be those who are on much higher incomes ($150k plus), where they may be so negatively geared that it is more beneficial for them, year-to-year, to pay more interest due to the tax benefits for them.
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I digress though. Assuming you are an average property investor and are considering re-financing in these opportunistic times, here is a list of things to think about when refinancing, to not only secure the best possible deal, but to maximise your interest-paying efficiencies throughout the property holding period. 
1) Be conscious of the 'real cost' of attractive ‘honeymoon’ style loan products when switching
Honeymoon loans are products that will offer heavily reduced interest rates for the first year or two, sometimes significantly lower than even the best standard rates in the marketplace at any time, and are very appealing for that reason. But you must investigate what then happens in say year #3 and beyond, when you take up such a product. For instance, what does your rate revert to, at that time? Oftentimes these offers from lenders are to attract new customers in, however the true cost of these products is not nearly as heavily promoted during the marketing campaign. Run the sums and calculate if this is actually a better product over say a 20 year holding period than say the most attractive standard deal on offer from another lender. Most of the time, standard mortgage products fare better in the medium-to-long term. 
 
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2) Lender fees for breaking your existing mortgage (aka ‘break fees’)
Once you’ve found a loan product that you are convinced will save you money on your interest repayments during the short, medium, or long term (or even one that saves money from day #1 onwards), you must consider the additional fees and charges to break your current mortgage. Up until a few years ago this was a nightmare, with some lenders charging their customers exorbitant exit costs should they break a contract. However, there is great news here: in recent years, the federal government has introduced new strict guidelines that all lenders must abide by, to ensure customers can exit mortgage products without paying severe penalties to that lender for doing so.
Whilst the legislation assures much saving, it is still very critical that you check what the exit fees on your current loan(s) actually are, before committing to a new lender's products, as there are loopholes within the legislation that lenders have identified and capitalised fee structures around. For example, one of my mortgage products is less than one year old. Many lenders will have severe fees for those who break their mortgage in say the first twelve months. Fortunately for me, this particular lender only charged $95 to break this mortgage though other lenders can have fees in the thousands of dollars for breaking a contract within the first year. Such fees can make a plan to refinance to save money, redundant in the first place! 
3) Changes to the value of loan credit you are seeking creating additional expenses
When refinancing, the new lender will need to approve you just as your previous lender did. Just because you were approved for lender X, several years ago, does not mean lender Y will not do their homework on you! New lenders will always demand a valuation of the property be conducted, and good lenders worth their salt will have an independent valuer dispatched at your expense – and not just use their own internal valuer and no (aka ‘free to you’) expense. This is a good thing – you should consider the independent valuation and investment and here is why: It is smarter for you to pay a small $100 (or so) valuation fee (tax deductible, mind you) and get a 'true' appraisal of your property value, rather than the new lender using their an internal bank-employed valuer, who will almost always provide a more conservative/lower end value which is worse for you. Variances could be in the tens of thousands of dollars, so if you were looking to refinance to extend your mortgage further, this valuation could make all the difference, so be sure to request from your new lender that an independent valuer be appointed at your cost.
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4) Loan-to-value changes potentially causing Lender’s Mortgage Insurance to be paid
As mentioned above, if you are looking to increase the amount of the mortgage when refinancing, that valuer’s final figure is all the more critical. Why? A favourable valuation even $5K higher than a conservative one could be that 'make or break' difference between paying lenders mortgage insurance (aka LMI, which is arguably my biggest pet hate in all of property investment finance!), or not paying it. As a general rule/recommendation, I would argue that almost any refinancing plan where LMI becomes payable as a result of refinancing, is a bad refinancing plan, and you should be hitting the abort button and staying put in your mortgage product for another year or so.
 
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5) Non-lender based transfer of title fees should be considered
Nominal as they may be, you are best to explore these as they may vary from state to state, as they must be tallied in with everything else when you are forecasting your profitability spread sheet prior to refinancing. If you are refinancing say an entire portfolio of ten properties, you can imagine these nominal costs adding up! Usually the state will charge paperwork (administration/stamping duty) fees for exiting one mortgage and transferring the title to the new lender. The good news is that most of this is a tax deductible expense. Part of the reason I am refinancing now, right near the end of financial year, is to make an early claim for these expenses as quickly as possible, to enable my case flow to increase faster, and get me expanding my portfolio with the next property purchase, quicker too.
6) New lender establishment fees and ongoing charges
Last of all you have the setup/establishment fees for the new lender. These can vary from lender to lender but my recommendation is this, the more established an investor you are, and the more properties you may be transferring to one lender (I.e. bringing more 'new business' to the new lender), the more negotiating power you have up your sleeve to get these initial costs such as application fees, waived or reduced. Maybe you can get some waived? Remember, in life of you don't ask, you don't get, so it never hurts to ask! Also remember that as you grow in your life as a property investor, you’ll eventually become a highly desirable customer to any lender, so use this leverage. Even as a first time investor who is refinancing your first property, do not be afraid to talk yourself up during this process. Mention that you are a professional investor who is looking to ‘grow’ with a strategic lender partner, as you expand your portfolio over the years. This is usually music to a lender rep’s ears, and they will regard you very highly as a result.
And negotiation should not end there. Some lenders may consider you a 'high value customer' if you have loans totalling over a particular dollar value, use this as negotiating power to maximise the rate deal you are offered. Consider both the establishment fees and ongoing fee schedule into your forecasting spread sheet to realise whether it is worth your while to switch lenders or not
Once you have tallied up all the lender and government costs to refinance in your spread sheets, simply run two scenarios:
1) The first one assumes you are switching and you should calculate say the first three years of that mortgage product.
2) The second one assumes you stay in your current mortgage product for the same term (another three years) for example. Though your rate might be higher, you could be better off staying put for three years if this figure overall is lower than the Sanrio #1's figure. Admittedly this scenario forecast is a lot harder to conduct if you are in a variable rate product and are switching to a mostly-fixed product.
Stay tuned for Part #2 where I will mention some refinancing tactics to consider and illustrate these with some examples.
Cameron McEvoy is a NSW-based property investor and maintains a blog, <a href="https://propertyspectator.blogspot.com.au/" rel="nofollow" target="_blank">Property Correspondent.</a>  
 
 
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It's a great time to re-finance but consider the true cost of doing so: Cameron McEvoy

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A couple of years ago at an property show in Sydney, I noted the abundance of overseas property investment stands.
Whilst most were related to the US, Thailand, and Bali, there were a couple of stands fronted by New Zealand specialists.
At the time I was focused on other things and did not really entertain the prospect of investing in the Kiwi market.
However, after doing some further digging recently, I uncovered more about our neighbour to the East, Aotearoa; the ‘Land of the Long White Cloud’.
Today I thought I’d provide a few of the pros and cons I perceive for investors considering the New Zealand market.
Whilst my findings are certainly very limited, and my own knowledge of, and experience in, this market is limited to many snowboarding trips and a few tongue-in-cheek jokes, I think New Zealand is certainly a market to consider for those who can see value in offshore property investment.
As merely a ‘tourist’ in my coverage of this market, I am keen to here from other Australians who have had residential property investment experience in New Zealand.
No doubt there are many further pros and cons that I have neglected to mention.
Cons:
Macroeconomic factors that challenge job security:
Some macroeconomic limitations can adversely affect many of the property markets in employment centres such as Auckland and Wellington.
According to Wikipedia, New Zealand overall has a market this is quite connected to international trade partners such as Australia, Europe, USA, China, Japan, and Korea.
However, what comes with these connections are the peaks and troughs that these bigger markets can fluctuate through. What I am getting at is that for a country so heavily dependent on trade with other markets, jobs can be adversely effected at random, in Auckland and Wellington.
Environmental challenges:
The tragedy that was the 2011 Christchurch earthquake changed the city of Christchurch forever.
The quake was the result of what was a previously-unknown defined tectonic plate fault-line until about 2010; leading to the big 6.3 magnitude quake, just outside the CBD area of the city.
Since then the city has been rebuilding and creating infrastructure that is better-equipped for future tremors. Still, the unpredictable volatility of the ground beneath this city has led to many investors recording losses and selling properties at reduced costs in and around this Canterbury region of New Zealand.
Environmentally and ecologically, Australia and New Zealand could not be more different. In Australia, the continent is very secure, with zero tectonic plate faultlines meaning that we can pretty much build what we want, where we want.
Conversely, New Zealand as a nation is constantly reviewing and upgrading needs-assessments for construction projects ranging from small granny flats, all the way up to skyscrapers on the city skyline.
There is actually one main pro and one main con to perceive this moving into the future:
Con: existing dwellings may later be required by law to be ‘future-proofed’. As an investor this is high risk. You could pick up a house for a great rate now, but what happens in a few years when new compliance construction laws come in, requiring you to fortify the dwelling to ensure its compliance with new laws?
The costs involved could completely diminish any further gains-potential from the property, as a viable investment. This trend may or may not be confined to ‘known’ Earthquake-risk areas. I.e. the New Zealand government could nationalise these compliance laws, which could upset the property investment landscape significantly
Pro: This has potential to create the ‘San Francisco Effect’ for property investors. The San Francisco Effect is a term I have just made up then! San Francisco is a city on a limited volume of land – a trait that on its own is enough to effect supply and demand ratios positively for investors – with the added challenge of being earthquake-prone.
This reduces the height of buildings that can be built there, and also the materials able to be used. Ever notice how those pretty three-storey weatherboard homes line the streets neatly in San Francisco and cost a small fortune to purchase? Well, that trend was not down to a designer saying ‘let’s make San Fran a city of really cute, adorable old-fashioned houses and not big concrete-and-glass apartment blocks like every other city’.
No, the materials used and height limits decided are necessary to earthquake-proof the dwellings. This creates further limitations for future city expansion, making those dwellings highly coveted in demand, and thus increasingly returns and values sharply. Cities like Christchurch, which is an important economic hub for New Zealand, could go down this path in the future, meaning that securing a good deal on an earthquake-compliant, well-located property in Christchurch now, could pay significant dividends in the future.
 
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Pros:
Opportunity exists for year-round holiday investment property types:
Though I mentioned above some challenges with job security due to macroeconomic and international-dependent factors adversely affecting job supply, there are opportunities in New Zealand property in areas not as affected by these drivers.
Take, for example, certain areas of the south island where tourism is high, year-round. In Australia, it is harder to find tourism-dependent property types that can consistently (read: ‘year-round’) provide secure rental revenue.
Here in Australia, the weather greatly affects such areas. For example, in the tropic north, tourists avoid the wet season, making an investment property up there, very seasonal, with a high risk of long-term vacancy during the ‘off’ months.
In cooler tourist areas such as the Snowy Mountains and Tasmania, it changes again, with the demand in the ‘off months’ for each of these regions arguably reducing heavily.
In New Zealand, many holiday hotspots are valued year-round for their appeal. Queenstown in the South Island for instance; is valued in winter for its skiing/snowboarding, yet in summer it can still achieve similar patronage numbers for is river-sports and extreme sports activities along with trails and trekking that is otherwise difficult in winter. Areas with year-round appeal like this can make for solid investments.
Your Australian dollar buys you more:
This is a pretty obvious one but must be stated nonetheless. The AUD certainly performs well when buying NZD currency.
At the time of writing, XE.com reported that 1 AUD will buy NZD 1.22. This is significant when considering the entrance costs to any property investment. Furthermore, regardless of the dollar conversion figure; without a doubt your dollar goes further in many parts of New Zealand when compared to Australia, on an apples-for-apples basis.
Yields can be as significant in some parts of New Zealand as say a US investment. Whilst capital growth may not be as significant as Australia, if you can ‘hold’ a high yielding property for five years, the opportunity to open more doors and grow a portfolio quicker, is significant.
Stamp duty concessions:
When you compare Australia with New Zealand in terms of ‘up front costs’, you cannot help but think somewhat that Australians are being ripped off. The extortionate stamp duty costs attached to investment (aka non-first-home) properties in Australia are amongst the worlds highest.
In truth, it is important to note that ‘stamp duty’ as a tax, does weed itself into a property investor’s balance sheet in some way or another, in many other countries in the world; but it is certainly not as initially prohibitive in the way Australia’s is, when spread out over a longer term or payable later on. For example, in the US, ‘county taxes’ are payable yes, but these are significantly higher than say the ‘council rates’ you’d expect to pay quarterly when holding property in Australia.
This is due, in part, to some of the ‘stamp duty’ tax making its way into county tax costs. The difference is, you do not have to pay an huge sum up front.
This enables you to pour more money into the actual deposit and start your property investment career much more quickly. Well according to a 2012 white paper by Deloitte on ‘Taxation and Investment in New Zealand 2012’, New Zealand does not carry any stamp duty on property purchases. And it gets better; in addition to this, there is no transfer fee/tax on property purchases, along with no national or provincial (I.e. ‘North Island’ or ‘South Island’) land tax on physical plots of land in the country.
Counties and councils will charge their own land rates but these are certainly not as extreme as land tax thresholds payable in states of Australia when you own land of greater values than these thresholds. One thing to be mindful of though, is the way Australians are taxed for New Zealand investment properties.
Whilst NZ will not charge capital gains tax at the point of sale, in Australia you will be liable for tax when selling your NZ property, though this tax rate is in line with your tax rate in Australia. This is as per the CER agreement between the countries. You income from the NZ property whilst you are holding it is taxed at your Australian rate.
However, building depreciation schedules are much better in New Zealand and higher depreciation rates can be claimed on any property (no age restriction like in Australia).
 
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Fostering the ‘Special Relationship’ between Australia and New Zealand in loan terms:
Following on from the taxation incentives of buying, holding, and selling residential property in New Zealand, there are added financial advantages when investing as an Australian that many other non-New Zealand citizens are not privy to.
One of the biggest advantages comes via lenders who operate in both countries. As an Australian, when buying property in countries like the US and UK, investors are often at the mercy of dealing with in-country lenders in these places who, on top of charging higher interest rates on mortgage products, will charge additional set-up fees to foreign investors.
Lenders such as ANZ, however, are able to provide access to Australian citizens, loans securing properties in New Zealand, at competitive interest rates and often-times without any of the additional fees that they may ordinarily charge investors from other countries.
New Zealand is a very business-friendly country:
Seemingly contradicting one of the cons I mention above about the NZ economy being tied to other regions, New Zealand is becoming a very attractive country to do business, and offers many incentives to international business to set up shop there.
Just as some states in the US (Delaware, and Nevada, for example) offer tax incentives and infrastructure support to encourage business to those states), New Zealand offers incentives that countries such as Australia, Indonesia, and Singapore, do not.
According to Wikipedia, back in 2005 the World Bank praised New Zealand for being the most business-friendly country in the world. Being so reliant on its agriculture and tourism industries and knowing it cannot continue to compete with much larger countries in the agriculture and technology sectors, Kiwi’s have cleverly aligned their incentives to their strongest suits, resulting in an economy that continually ‘defies the odds’ that are stacked up against it.
Supply and demand ratios are trending upwards for investors:
In Australia, we know that certain cities (Sydney and Darwin for example) are significantly undersupplied with available properties.
In other words, demand is greater than supply which in turn pushes both rents and values up. This is great news for investors, not so great for aspiring home owners and renters. Other areas though (Melbourne and Gold Coast City for example) have the opposite problem – oversupply, which is not good news for investors but holds potential opportunity for aspiring home owners in those cities).
But how does this differ in New Zealand and what is the trend? According to February 2013 research from Properazzi NZ, supply and demand is varied in the main cities and population centres; so one must tread very carefully, as you would do when considering property in Australia.
No doubt Auckland continues to drive local demand, with supply levels subdued against demand for property, so there are opportunities in this city. However, there are also opportunities in smaller population centres based on demand. The Otago region is one such example. The other ratio in supply and demand is New Zealand’s ageing population. Just like Australia and many other developed countries (Japan, Sweden, Canada etc.), New Zealand is experiencing an ageing population that on the long term, could result in slower population growth. Curbing that however, is an incentivised skilled immigration program and as I mentioned previously.
There are incentives for more international business to set up shop there, which would in turn bring new workers in to New Zealand, which over time would increase the population again.
So, where does this leave us, and what is my verdict (if there is one to be made from my limited findings)?
Well, like most markets around the world, New Zealand is no doubt a market comprised of hundreds of sub-markets, and there is value and risk to be associated with many of these.
Personally I would consider a NZ investment as a component to my portfolio, as I think whilst the potential for rapid capital gains is not as great as Australia, this could be offset by reduced holding costs and overall better mid-long term yield as you progress along with holding property there.
All of the existing Australia-based ‘due diligence’ checklist of items still apply, when canvassing potential properties in New Zealand. However, there are unquestionably some additional items that are specific to this market.
An ‘outside the box’ approach is required to due diligence when contemplating taking a plunge into this market as an Australian.
Cameron McEvoy is a NSW-based property investor and maintains a blog, <a href="https://propertyspectator.blogspot.com.au/" rel="nofollow" target="_blank">Property Correspondent.</a> 
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Weighing the pros and cons of investing in New Zealand property: Cameron McEvoy

Developers and apartment buyers have a narrowing window of opportunity before Brisbane's Olympic infrastructure pipeline begins competing directly with residential construction, pushing up costs, tightening labour supply and making new projects increasingly difficult to deliver.

While Brisbane's apartment market continues to benefit from strong population growth and limited housing supply, industry research suggests the years leading up to 2027 could prove to be the most important period for developers looking to secure builders and buyers hoping to purchase before the next wave of price increases.

A new Colliers report, Brisbane 2032 Olympic and Paralympic Games: Creating Solutions, highlights the scale of the challenge. While thousands of new homes are planned across South East Queensland, the Brisbane Olympic Athletes Village alone will deliver more than 10,500 beds during the Games before being converted into around 1,750 to 2,000 apartments. Equivalent to almost two years of typical inner-city apartment supply, the project will also absorb a significant share of the construction workforce and building materials.

The broader construction pipeline paints an even clearer picture.

Construction Skills Queensland's Horizon 2032 report forecasts Queensland's annual construction pipeline will average $69 billion over the coming years before peaking at $75 billion in 2027-28. Demand for construction workers is expected to increase by 17 per cent to almost 150,000 people, with the industry facing an annual shortfall of around 19,000 workers that could blow out to as many as 35,000 during the peak construction period.

The Olympic venues, athletes village and supporting infrastructure will account for billions of dollars worth of work across South East Queensland through to 2032, creating intense competition for labour at a time when Australia's residential construction sector is already under pressure.

[smartcode_project:default project_id=150489 project_image_fid=373834]

Colliers Queensland Residential Director Andrew Scriven said the convergence of these projects is creating a clear window of opportunity for both developers and buyers.

"From 2027 onwards, the market will shift dramatically," Scriven said.

"Labour will increasingly be locked into government-led infrastructure and Olympic projects, which means private residential developments will face higher costs and tighter margins. The developers who move now are the ones most likely to get projects off the ground."

Scriven said the same dynamic would also affect buyers, with fewer apartment projects expected to launch once construction capacity tightens.

"If you're looking to change your lifestyle over the next five years, now is your window of opportunity to buy."

[smartcode_project:default project_id=150713 project_image_fid=373827]

Developers are already positioning themselves ahead of that window.

Following the success of Monarch at Toowong, Consolidated Properties is preparing to launch two new Brisbane apartment projects in the second half of 2026. They include <a href="https://www.apartments.com.au/new-apartments/gloriette-30-bedivere-street-yeerongpilly-qld-4105">Gloriette</a> at Yeerongpilly Green, a 25-storey tower within one of Brisbane's key Olympic precincts, and <a href="https://www.apartments.com.au/new-apartments/castile-47-skyring-terrace-newstead-qld-4006">Castile</a>, a recently approved 25-storey riverfront development at 47 Skyring Terrace in Newstead.

Hutchinson Builders will deliver both projects, with early works already underway at Yeerongpilly and Newstead expected to commence later this year.

The timing comes as Brisbane's fundamentals continue to strengthen, with strong interstate migration, population growth and vacancy rates remaining below 1.5 per cent.

Colliers Queensland researcher Pragya Sharma said Greater Brisbane is forecast to require around 40,000 new apartments between 2021 and 2031.

"There's a real mismatch emerging between when housing is needed and when it will be feasible to build," Sharma said.

"As a result, the period leading up to 2027 presents a key window of opportunity for developers to secure approvals, funding and construction capacity, while buyers will have greater choice before supply constraints intensify."

Colliers research outlines a critical pre-2027 window to start residential projects before labour squeeze: now is the time to buy

Joel Robinson

Developers, buyers on watch in South East Queensland ahead of construction crunch: Colliers

It's taken less than nine months for developer Sherpa Property Group to sell out all 51 apartments in its <a href="https://www.apartments.com.au/new-apartments/flourish-oasis-palm-beach-7-9-sixth-avenue-palm-beach-qld-4221">Flourish Oasis</a> development in <a href="https://www.apartments.com.au/developments/palm-beach-qld-4221">Palm Beach</a>, over a year before its anticipated completion.

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Located at 7-9 Sixth Avenue, the $67 million development has resonated strongly with both local owner-occupiers and downsizers seeking high-quality apartments within walking distance of the beach, dining precincts and everyday amenities.

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Christie Leet, Founder of <a href="https://www.apartments.com.au/developers/sherpa-property-group">Sherpa Group</a>, said the sell-out reflected both the strength of the Palm Beach market and the success of Sherpa's community-first approach to development.

"The sell-out of Oasis is a fantastic outcome and reinforces the strong demand we're seeing for thoughtfully designed apartments in lifestyle locations," Leet said.

"From the outset, our vision was to create a development that genuinely enhanced the Palm Beach community while providing residents with exceptional homes and wellness-focused amenities.

"We've been incredibly encouraged by the level of local support throughout the campaign, 72.5 per cent of buyers are locals, with a significant proportion of purchasers choosing Oasis as their future home rather than an investment."

[smartcode_project:default project_id=151449 project_image_fid=357463]

Construction is now progressing following development approval, with trusted builder LPS Group delivering the project and completion anticipated in Q3 2027.

Oasis forms part of Sherpa Group's successful Flourish collection, which has become recognised for its focus on wellness, community and elevated coastal living.

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Residents will have private access to a rooftop amenity space featuring a pool, gym, sauna, steam room, hot and cold plunge pools, spa and barbecue facilities.

"The success of Oasis demonstrates that buyers continue to prioritise quality, location and lifestyle," Leet said.

"We are proud to have delivered a project that has resonated so strongly with the market and look forward to bringing Oasis to life for our future residents."

Sherpa recently launched <a href="https://www.apartments.com.au/new-apartments/flourish-soleira-palm-beach-1150-1160-gold-coast-highway-palm-beach-qld-4221">Flourish Soleira</a>, its third instalment of the Flourish brand in Palm Beach following Flourish Oasis and <a href="https://www.apartments.com.au/new-apartments/amargo-6-12-sixth-avenue-palm-beach-qld-4221">Flourish Amargo</a>.

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Sherpa sells out Flourish Oasis in booming Palm Beach

Urban Property Group's <a href="https://www.apartments.com.au/new-apartments/la-vera-macquarie-park-94-talavera-road-macquarie-park-nsw-2113">La Vera</a> is leading the next phase of Macquarie Park's residential evolution, with the new apartment development set to become the first of several new apartment projects in the precinct to complete.

The 169-apartment building has now topped out ahead of its scheduled completion in the third quarter of 2026, as new residential investment continues to reshape one of Sydney's largest employment hubs into a true mixed-use precinct.

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Cox Architecture has designed La Vera to capture the best of its unique positioning on Talavera Road, orienting the building towards Lane Cove National Park.&nbsp;The building features a sculpted northern façade with flowing curves inspired by the surrounding landscape, while its city-facing elevation adopts a more structured architectural expression to maximise skyline views.

"The vision for the project was to conceive a building that adopted an organic and curvilinear form to the northern portion that faces the Lane Cove National Park," <a href="https://www.apartments.com.au/architects/cox-architecture">Cox Architecture</a> Director Felipe Miranda said.

"The residents that reside in the northern portion of the building benefit by having beautifully crafted curved balconies that speak to the natural context and heighten the relationship of their internal living spaces to the external balconies."

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La Vera offers a diverse mix of one, two, three, and four-bedroom configurations, with prices currently starting from $740,000. Buyers so far have been a mix of Sydney-based investors,&nbsp;metro commuters, owner-occupiers and downsizers from surrounding North Shore suburbs.

Both investors and owner-occupiers have been drawn to La Vera's proximity to Macquarie University, Macquarie University Hospital, Macquarie Centre and the Sydney Metro, infrastructure that supports both strong rental demand and a convenient lifestyle for residents.

The apartments feature full-height glazing, timber flooring throughout living areas, stone kitchen benchtops, SMEG appliances, floor-to-ceiling bathroom tiling and ducted air conditioning.

Residents will have access to a rooftop recreation level featuring a swimming pool, sauna, barbecue facilities and landscaped relaxation areas, complemented by additional communal space at ground level. Many apartments enjoy uninterrupted views across Lane Cove National Park, reinforcing the project's connection to its natural setting.

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<a href="https://www.apartments.com.au/developers/urban-property-group">Urban Property Group</a>, a family-owned developer and builder with nearly four decades of experience, holds a 4.5-star iCIRT rating and was Australia's first developer to introduce 10-Year Latent Defects Insurance (LDI). La Vera is the first apartment development in <a href="https://www.apartments.com.au/developments/macquarie-park-nsw-2113">Macquarie Park</a> approved to offer the additional insurance protection, alongside a five-year warranty on SMEG appliances.

Urban Property Group CEO Patrick Elias said the additional protection reflects changing buyer expectations in the off the plan market.

"Consumers are a lot more weary and a lot more concerned in buying off the plan than they ever have been. Having LDI is a tool to portray the confidence that we have in our product, and a confidence we want buyers to share," Elias said.

Following completion of the building later this year, buyers will move into their apartments well before Christmas.

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La Vera closes in on completion as Macquarie Park continues residential transformation

Brisbane developer Red &amp; Co's decision to include dual key apartments in its debut Gold Coast apartment development, <a href="https://www.apartments.com.au/new-apartments/como-varsity-lakes-22-lake-street-varsity-lakes-qld-4227">COMO Varsity Lakes</a>, is proving to be one of the project's biggest drawcards, with buyers quickly snapping up the flexible residences.

More than half of the project's 36 dual key apartments have already sold, helping drive COMO beyond the 50 per cent sold mark within the first month of launch.

The strong response highlights growing demand for apartment designs that can adapt to changing lifestyles, with buyers increasingly looking for homes that accommodate multi-generational living, provide rental income opportunities or simply offer greater flexibility over time.

Located on the shores of Lake Orr, COMO will deliver 156 apartments across 16 levels, with the dual-key residences forming a limited release within the broader development.

Each combines a primary two-bedroom apartment with a fully self-contained studio on a single title, connected by a shared foyer and lockable internal door. The design allows owners to house ageing parents, adult children or guests while maintaining privacy, or lease the secondary residence to generate additional income.

Just 17 of the original 36 dual key apartments remain available.

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The innovative configuration combines two fully self-contained residences on a single title, typically comprising a primary two-bedroom apartment alongside a separate studio residence, connected via a shared foyer and lockable internal door.&nbsp;

The model is proving particularly attractive to owner occupiers navigating changing family dynamics and the realities of the current housing crisis.&nbsp;

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<a href="https://www.apartments.com.au/project-marketer/npa">NPA</a>&nbsp;CEO Andrew Erwin said dual key living was resonating strongly with modern buyers because it delivered both financial flexibility and practical lifestyle benefits.&nbsp;

“The housing crisis and rising cost of living are fundamentally changing how Australians think about home ownership,” Erwin said.&nbsp;

“Dual key apartments provide a genuine solution for families who want to stay connected while maintaining independence. Parents can help adult children save for a future home, ageing parents can remain nearby without moving into aged care, and owners still retain privacy and flexibility.

“Importantly, buyers are also recognising the financial advantages. It creates the opportunity to generate additional income from part of the home without the holding costs associated with owning a separate investment property.”&nbsp;

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Unlike traditional dual occupancy arrangements, the residences operate under a single title, meaning owners only incur one set of body corporate fees, council rates and holding costs.&nbsp;

The secondary residence can also evolve over time - functioning as guest accommodation, a home office, creative studio or private retreat before later becoming an income-producing asset.

<a href="https://www.apartments.com.au/developers/red-co">Red &amp; Co</a>&nbsp;Director and Co-Founder David Laverty said the strong early sales reflected growing buyer urgency and changing priorities within the market.&nbsp;

“Securing more than half of COMO’s residences within such a short timeframe is an outstanding result and a clear endorsement of both the design and location,” Laverty said.&nbsp;

“Buyers are responding to the combination of location, connectivity and amenity, but ultimately it’s value relative to other East Coast markets that is driving enquiry.”&nbsp;

“We’re also seeing strong interest from owner occupiers looking for homes that can adapt with them over time. Flexibility has become one of the most important considerations for buyers in today’s market.”&nbsp;

[smartcode_project:default project_id=135546 project_image_fid=363515]

Designed by <a href="https://www.apartments.com.au/architects/bda-architecture">BDA Architecture</a>, COMO features a mix of one-, two- and three-bedroom residences with 2.7-metre ceilings and larger-format floorplans aimed at owner occupiers, downsizers and lifestyle-focused buyers.&nbsp;

The development will feature an extensive rooftop recreation and wellness offering including a 25-metre lap pool, sundeck, barbecue and dining areas, gym, sauna, plunge baths, landscaped gardens, wellness spaces and rooftop pickleball and paddleball courts.

The remaining dual key apartments range from 137 sqm to 167 sqm and include generous three-bedroom layouts with separate self-contained studio accommodation and dual parking.&nbsp;

Erwin said the dual key concept represented a broader shift in how Australians would live in the future.

“People want homes that can evolve with their lives,” he said.&nbsp;

“A dual key apartment can suit a family today, support an ageing parent tomorrow, and potentially generate income later on. That adaptability is becoming incredibly valuable in the current environment.”

Prices currently range from $2,115,750 to $2,583,000.&nbsp;

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Inter-generational living drives demand for COMO’s dual key apartments as housing pressures reshape buyer priorities 

Builder-developer&nbsp;<a href="https://www.apartments.com.au/developers/ceerose">Ceerose</a> has doubled down on its Leichhardt ambitions, lodging its second State Significant Development Application (SSDA) in the suburb in the last six months.

Their newest proposal seeks to transform a former industrial precinct into a new residential community centred around the adaptive reuse of one of the site's heritage warehouse buildings.

The new project, on a 6,930 sqm block at&nbsp;<a href="https://www.apartments.com.au/new-apartments/40-76-william-street-leichhardt-nsw-2040">40–76 William Street</a>, will bring more than 200 apartments to a suburb that has seen little to no new supply in recent years. It follows Ceerose's late 2025 SSDA for a mixed-use apartment project on nearby Parramatta Road, signalling the developer's growing investment in Sydney's Inner West.

Ceerose Founder Edward Doueihi told Apartments.com.au the developer’s long-standing presence in Leichhardt and the Inner West had given it a strong understanding of how the area has evolved and where its future opportunities lie.

“Ceerose has had a long-standing presence in Leichhardt and the Inner West, giving us a unique understanding of the area’s evolution and future potential,” Doueihi said.

“Having delivered projects throughout the region, we have witnessed the suburb’s transformation first-hand and understand the opportunities for its continued growth.”

Doueihi said that understanding also informed the planning process, with a comprehensive Stakeholder Engagement Outcomes Report prepared before the application was lodged.

The report identified the key issues and concerns raised by neighbouring residents and other stakeholders, allowing those matters to be considered and incorporated into the design where appropriate.

He said the delivery of additional housing would also play an important role in supporting the revitalisation of Norton Street and the Italian Forum.

“By increasing the local residential population, the development is expected to strengthen demand for local businesses, encourage further investment, and help restore the vibrancy that made the precinct a thriving destination in the early 2000s.”

<img alt="First look: Ceerose returns to Leichhardt with 203-apartment adaptive reuse proposal at former warehouse site" data-entity-type="file" data-entity-uuid="7258c54c-8167-479e-8361-2d5fca9915b4" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Appendix%2010B%20-%20CGI%20-%20View%202.jpg?VersionId=S9DQfxu_jpcB5LrAEYFUbyMzg5odW6i5" />

Designed by <a href="https://www.apartments.com.au/architects/woods-bagot">Woods Bagot</a>, the redevelopment would involve the demolition of four existing industrial buildings while retaining and adaptively reusing the site's most significant warehouse. The retained structure would anchor a new residential precinct comprising five interconnected buildings arranged around a large central landscaped courtyard, with heights stepping from five storeys along the surrounding residential streets to 11 storeys at the William Street corner.

According to the Architecture Design Report by Woods Bagot, the proposal "seeks to create a residential village centred around a generous green heart while celebrating the site's industrial heritage through the adaptive reuse of the existing warehouse building."

The development would comprise 203 apartments, with 188 proposed as build-to-sell residences, alongside 15 affordable housing apartments.

Rather than treating the retained warehouse as a standalone heritage object, Woods Bagot has sought to weave the site's industrial history throughout the masterplan. The proposal retains the north and west facades of the landmark corner warehouse, while new buildings reinterpret the site's brick-and-steel industrial language through their material palette and architectural expression.

<img alt="First look: Ceerose returns to Leichhardt with 203-apartment adaptive reuse proposal at former warehouse site" data-entity-type="file" data-entity-uuid="9e8c64c2-881b-49e1-8c90-6b6acaaa45b6" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Appendix%2010C%20-%20CGI%20-%20View%203.jpg?VersionId=Qm8_8H_Xrg_sc4Mdjc59vlAcKF_5wRTb" />

The design is organised around what Woods Bagot describes as a "green heart", a landscaped communal open space that reinstates the leafy character removed when the site became an industrial storage facility. A new pedestrian laneway running through the site would improve permeability between William, North and Francis streets, linking residents through landscaped public spaces while activating the ground plane.

Residents would have access to communal gardens and shared recreation areas distributed throughout the development. Sustainability has also been prioritised, with the project targeting an average 7.9-star NatHERS rating. Proposed initiatives include rooftop solar generation, rainwater harvesting, passive solar design, naturally ventilated lobbies, extensive cross-ventilation and the reuse of existing building fabric to reduce embodied carbon.

The adaptive reuse strategy became a defining feature of the application after heritage investigations found only one of the site's industrial buildings could feasibly be retained. The Heritage Impact Statement concludes that preserving the key warehouse façades while referencing the site's industrial character throughout the new development provides an appropriate balance between renewal and conservation.

<img alt="First look: Ceerose returns to Leichhardt with 203-apartment adaptive reuse proposal at former warehouse site" data-entity-type="file" data-entity-uuid="efffafdb-594f-4e2b-a067-921fd51c05e1" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Appendix%2010D%20-%20CGI%20-%20View%204.jpg?VersionId=DPmE4.k16YRt0i27hEZVtJAffarpvUfx" />

"Retention and adaptation of the site buildings has been explored but found not to be feasible except for the tallest building, whose street facades will be retained," the heritage report states.

"The proposed building will interpret the brick and steel character of the subject site, including reuse of some components and construction of a large 'sawtooth' structure in the proposed open space."

<img alt="First look: Ceerose returns to Leichhardt with 203-apartment adaptive reuse proposal at former warehouse site" data-entity-type="file" data-entity-uuid="3bfef2b5-83f5-40cd-9cab-767092f34266" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Appendix%2010E%20-%20CGI%20-%20View%205.jpg?VersionId=7asb3i_ql4ybbuJOUb5UHBEIy0Q9t.DF" />

The William Street site is located around 300 metres from Leichhardt North Light Rail station and a short walk to Norton Street's retail, dining and hospitality precinct. The surrounding area has increasingly become a focus for urban renewal given its proximity to public transport and the Parramatta Road corridor.

Doueihi founded Ceerose in 1998 and has grown the business to become one of Sydney's more active apartment developers in recent years, with completed projects including The Alex Collective in Alexandria, Abbie's Lane in Annandale, and the award-winning Munro House in Elizabeth Bay. They are currently delivering Belgravia, 17 luxury apartments in Potts Point.

Cameron McEvoy

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