High-profile apartment defect cases have changed the way many NSW buyers approach purchasing, putting greater scrutiny on building quality, strata records and the parties behind a development before a contract is signed.

The industry buyers are assessing today, however, is also different from the one in which cases such as Opal Tower and Mascot Towers emerged.

NSW has introduced a series of regulatory measures aimed at strengthening oversight of apartment construction, including Building Commission NSW, the Residential Apartment Buildings Act 2020 and the Strata Building Bond and Inspections Scheme. Under the latter, developers are required to lodge a bond, with independent inspections forming part of the process for identifying defects in new strata developments.

Those changes provide another layer of protection, but they haven't removed the importance of buyer due diligence.

[smartcode_project:default project_id=5743 project_image_fid=372394]

For purchasers considering an apartment, that means looking beyond the residence itself. Building and strata history, strata reports, the track record of the builder and developer, the condition of common property and any known or planned expenditure by the owners corporation can all form part of assessing a building before purchase.

Whether the development is already complete can also materially change what can be assessed.

An off-the-plan purchaser is necessarily buying before the finished product exists. A completed apartment, by comparison, can be walked through before contracts are signed, allowing the purchaser to see the finishes, common areas and broader building as they have actually been delivered rather than relying solely on plans and renders.

It also removes exposure to some of the uncertainties that exist between an off-the-plan purchase and completion, including construction delays, cost pressures and builder insolvency during the delivery period.

[smartcode_project:default project_id=5743 project_image_fid=927]

<a href="https://www.apartments.com.au/project-marketer/equitifund-group">Projects by Equitifund</a> National Sales Director Ben Hamblett said that greater focus on tangible evidence is increasingly evident among apartment purchasers.

“The biggest shift we're seeing is buyers wanting proof, not promises,” Hamblett said.

“That's exactly why we deal in completed stock - you can inspect the building before you commit - and why we've backed every purchase with a cash bond against special levies.”

At <a href="https://www.apartments.com.au/buildings/the-lennox-parramatta-12-phillip-street-parramatta-nsw-2150">The Lennox</a> in Parramatta, that emphasis on a completed, inspectable product is already in place.

The 413-apartment, 46-level tower at 12 Phillip Street is being marketed by Projects by Equitifund, allowing prospective purchasers to inspect the residences, common areas and resident facilities before committing.

[smartcode_project:default project_id=5743 project_image_fid=375255]

The Lennox also introduces another layer to the due-diligence conversation through Strata Surety.

The vendor-funded arrangement provides purchasers with a cash-backed bond held in their own solicitor's trust account from settlement. According to Equitifund, the bond covers any special levy raised during the applicable cover period and is provided at no cost to the purchaser.

Special levies can create an unexpected cost for apartment owners where an owners corporation needs funding beyond its existing strata contributions. Under NSW strata law, a special levy requires approval by owners at a general meeting.

Equitifund Executive Chairman Greg Huxley said Strata Surety was designed to provide something more concrete than reassurance about that potential exposure.

“Buyers have every right to ask hard questions about strata risk - the industry has given them plenty of reasons to,” Huxley said.

“Our answer isn't a reassurance, it's a bond. Strata Surety puts real money behind that confidence, held by the buyer's own solicitor, not by us.”

[smartcode_project:default project_id=5743 project_image_fid=375281]

For The Lennox, its completed status also means purchasers can assess not only the apartment itself, but a building that has already been occupied and operating for several years.

Completed in 2021, the $300 million development, designed by <a href="https://www.apartments.com.au/architects/marchese-partners">Marchese Partners</a>, comprises one, two, three and four-bedroom apartments, with open-plan living areas extending to private balconies. Interiors incorporate engineered timber flooring, stone benchtops and integrated appliances, while many upper-level residences have views across the river and surrounding district.

Its established amenity can similarly be inspected in operation. Resident facilities include the Watermark precinct with a 20-metre pool, outdoor terrace, barbecue areas, gym, fitness studio and conference room, while ground-floor retail addresses the river walk and surrounding public space.

The Lennox is also home to the Southern Hemisphere's first fully robotic residential car park, which has now operated for several years. Its nine-level basement combines three conventional parking levels with six automated levels, accommodating 327 vehicles using technology from German firm Lödige Industries.

[smartcode_project:default project_id=5743 project_image_fid=925]

The riverfront address puts The Lennox close to much of central <a href="https://www.apartments.com.au/developments/parramatta-nsw-2150">Parramatta</a>'s existing infrastructure, including Parramatta Station, Westfield Parramatta, Parramatta Park, and the Church Street dining precinct.

The remaining apartments form part of a limited release secured by Equitifund, following the sale of the majority of residences before and shortly after completion.

The regulatory environment around NSW apartment construction has changed considerably since the defect cases that reshaped public discussion around the sector. For purchasers, however, regulation is only one part of the equation. The ability to investigate a building's history, review its strata position and, where possible, inspect what has actually been delivered remains central to making an informed apartment purchase.

At The Lennox, its completed status provides that opportunity before contracts are signed, while Strata Surety adds a financial backstop against special levies beyond the protections already provided under NSW strata law.

[smartcode_project_cta:default project_id=5743]

Joel Robinson

Buying with confidence: What NSW apartment buyers should check beyond the defect headlines

Too often, heritage buildings become the podium for a contemporary tower. At <a href="https://www.apartments.com.au/new-apartments/623-collins-607-623-collins-street-melbourne-vic-3000">623 Collins</a>, <a>Sterling Global</a> challenged its design team to reverse that process.

The brief to <a href="https://www.apartments.com.au/architects/plus-studio">Plus Studio</a> was deliberately simple: "Don't design around the heritage. Design from it." It became the philosophy behind a project that draws inspiration not only from two landmark heritage buildings, but from Collins Street itself, a street layered with architectural history and civic significance.

That philosophy has shaped one of <a href="https://www.apartments.com.au/developments/melbourne-vic-3000">Melbourne</a> CBD's most considered residential projects, where the 1924 State Savings Bank and neighbouring Batman's Hill Hotel have become the architectural foundation for 623 Collins rather than remnants preserved beneath a new development.

[smartcode_project:default project_id=145324 project_image_fid=372749]

Rather than approaching the site as a blank canvas, <a href="https://www.apartments.com.au/developers/sterling-global">Sterling Global</a> saw the existing buildings as the beginning of the story.

"Sites like this rarely become available," the developer said.

"623 Collins wasn't simply an opportunity to develop a prominent CBD site. It was an opportunity to restore and reimagine one of Melbourne's important heritage landmarks while contributing to the continued evolution of Collins Street. For us, the existing buildings weren't constraints. They were the beginning of the story."

Instead of mimicking the ornate heritage architecture, Plus Studio studied the proportions, rhythm and craftsmanship of the original buildings before translating those characteristics into a contemporary 42-storey tower.

[smartcode_project:default project_id=145324 project_image_fid=372748]

"The brief challenged us to create a contemporary landmark that respected Melbourne's architectural history without becoming nostalgic," Plus Studio said.

"Rather than mimicking heritage, we sought to understand its proportions, rhythm and material language before translating those qualities into a distinctly contemporary architectural expression."

The practice says the State Savings Bank and Batman's Hill Hotel became the project's primary source of inspiration, allowing the heritage buildings and contemporary architecture to exist "in conversation rather than contrast." Generous planted terraces further soften the transition between old and new, creating elevated green spaces while reinforcing the dialogue between the restored podium and the contemporary tower.

That dialogue continues throughout the interiors, where Melbourne designer Fiona Lynch developed a material palette inspired by the idea of alchemy, balancing contrasting materials that reference both the Neo-Grec detailing of the original bank and contemporary urban living. The result is a series of spaces that feel timeless rather than trend-driven.

[smartcode_project:default project_id=145324 project_image_fid=354343]

The project will deliver 316 residences across four collections, Heirloom, Signature, Reserve and the Penthouse Collection, with each responding differently to its position within the building, from the restored heritage podium through to the upper levels of the tower. The Heirloom Residences retain defining heritage elements including original heritage windows, generous proportions and high ceilings, while the tower introduces contemporary homes with expansive layouts and elevated views.

Amenities have likewise been designed to support long-term city living rather than short-stay convenience. Residents will have access to concierge services, wellness facilities including a pool, cold plunge, sauna, steam room and gym, alongside private lounges, entertaining spaces and dedicated resident clubs.

Sterling Global says that approach is resonating with buyers seeking permanence rather than novelty.

[smartcode_project:default project_id=145324 project_image_fid=354347]

According to the sales team, purchasers are looking for enduring architecture, generous floorplans, heritage character and long-term value, with many commenting that 623 Collins "doesn't feel like another apartment development" because of the way the architecture has been curated around the site's history.

Situated on the prominent corner of Collins and Spencer streets, the project occupies one of Melbourne's most recognisable gateway sites, marking the western entrance to the city's best-known street. For Sterling Global, it also reflects a broader shift in city-making.

"Rather than maximising development yield, the project embraces adaptive reuse as a design philosophy, allowing heritage to inform architecture, interiors and the overall resident experience," the developer said.

"The result is a building that feels uniquely connected to Melbourne."

[smartcode_project_cta:default project_id=145324]

How Sterling Global designed 623 Collins from Melbourne's history

Avant Townhomes is adding to Ivanhoe’s family-sized housing options with <a href="https://www.apartments.com.au/new-townhouses/three-82-ivanhoe-382-upper-heidelberg-road-ivanhoe-vic-3079">Three 82</a>, a collection of just 16 four-bedroom townhomes on Upper Heidelberg Road.

The <a href="https://www.apartments.com.au/developers/intrapac-property">Intrapac Property</a> townhome division has taken a contemporary approach to the traditional family home, pairing larger floorplans with the lower-maintenance format of a townhouse.

[smartcode_project:default project_id=152069 project_image_fid=374394]

Designed by <a href="https://www.apartments.com.au/architects/arcadia-studio">Arcadia</a>, with landscaping by Landsite, the homes feature generous open-plan living and dining areas that connect directly to outdoor spaces, with layouts also designed to maximise natural light and privacy.

Natural stone is used throughout the interiors, including in kitchens that pair stone surfaces with bespoke cabinetry, considered storage and SMEG appliances.

The four-bedroom layouts include built-in wardrobes and a main bedroom with its own ensuite, while family bathrooms service the additional bedrooms. Each home also includes a lock-up double garage and intercom entry.

[smartcode_project:default project_id=152069 project_image_fid=374399]

Energy efficiency has been incorporated into the design through solar panels, double glazing and reverse-cycle heating and cooling, with the homes targeting 7-star energy ratings.

Rather than incorporating extensive communal facilities, Three 82 has been conceived around private residential amenity, with the 16-home scale keeping the focus on individual homes and their own indoor and outdoor spaces.

The development is located at 382 Upper Heidelberg Road, around one kilometre from Ivanhoe Village's cafés and retail and a short drive from Eaglemont Station and Ivanhoe Station.

[smartcode_project:default project_id=152069 project_image_fid=374393]

Several of Ivanhoe's established schools are also nearby, including Ivanhoe Girls' Grammar and Ivanhoe Grammar School. The address also provides access to the suburb's parklands and the wider Yarra River corridor.

<a href="https://www.apartments.com.au/project-marketer/nelson-alexander">Nelson Alexander</a> has been appointed to handle sales.

Construction is underway and progressing well, with Three 82 currently tracking toward completion in Q2 2027.

[smartcode_project_cta:default project_id=152069]

Three 82 brings boutique four-bedroom townhome collection to Ivanhoe

Builder-developer&nbsp;<a href="https://www.apartments.com.au/developers/graya">Graya</a> has secured a prime Newstead site from fellow developer Fraser, subsequently lodging plans for The Silo, a major mixed-use residential project in Newstead designed around a new public laneway linking the James Street precinct with the wider Gasworks and Newstead neighbourhood.

Proposed for the corner of Chester and Morse streets, the <a href="https://www.apartments.com.au/architects/bureauproberts">Bureau^Proberts</a>-designed project places its strongest emphasis at ground level, where retail, landscaping and a new cobblestone pedestrian connection would open the site to the surrounding neighbourhood. The design team describes The Silo as “more than a residential building”, positioning the development as an extension of Newstead’s public realm rather than a standalone apartment tower.

“A new cobblestone laneway and landscaped connection between James Street and Gasworks unlock a missing pedestrian link, improving walkability and stitching together two of Brisbane’s significant urban destinations,” Bureau Proberts said in its Urban Design Report.

<img alt="First look: Graya plans The Silo as new pedestrian link between James Street and Gasworks" data-entity-type="file" data-entity-uuid="0ea1b06a-75f5-40a5-b2c5-33c97bc86052" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/silo%20bldg.png?VersionId=KmjsAtNePu57_B31EM_DJ5T6KPJHtcmo" />

The Silo is planned as a mixed-use development incorporating apartments alongside a bar and centre activities including food and drink outlets, indoor sport and recreation, office and retail uses.

Architecturally, Bureau Proberts has conceived the building as a collection of vertically expressed, stepping forms rather than a single uniform tower. The composition rises from an articulated podium before being broken by a triple-height landscaped recreation level, with the upper section becoming more compact before terminating in a landscaped rooftop garden.

The project's name and architectural language draw directly from Newstead's industrial history. Patterned off-form concrete is proposed as the principal façade material, complemented by slender metal rod balustrades and extensive planting. The cylindrical and vertically ribbed elements give the building its silo-like expression, while curved balconies and planted edges introduce a softer subtropical layer.

“The Silo reinterprets its robust forms, scale and materiality through a contemporary subtropical architectural expression, creating a building that acknowledges its industrial legacy, while responding to the way the precinct is occupied today,” Bureau^Proberts said.

The recreation level is one of the defining breaks in the tower. Plans include a lap pool, mature subtropical planting and shared resident facilities within an elevated communal garden. Landscaping continues through the podium and onto the rooftop, where a further garden forms what the architects describe as a “subtropical crown” to the building.

<img alt="First look: Graya plans The Silo as new pedestrian link between James Street and Gasworks" data-entity-type="file" data-entity-uuid="f8451036-35a4-49a9-8d88-2ef4438eba3d" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Silo%20Lane.png?VersionId=h8N31_rYmCEqoNrpt4kbYVQhJGZn60LH" />

At street level, the development has been designed to establish a more permeable block. Retail and hospitality tenancies address the public realm, while landscaped pedestrian spaces lead into the new laneway connection. Renders in the design report show the proposed “Silo Lane” as a substantial opening through the podium, framed by cylindrical concrete forms with cascading planting above.

The Silo continues Graya's move into larger apartment developments after building its reputation across high-end residential projects in Brisbane and the Gold Coast.

Graya buys Frasers Newstead site, plans The Silo between James Street and Gasworks precincts

<a href="https://www.apartments.com.au/developers/wickton">Wickton</a>’s completed Linacre Rise development in Hampton is giving Bayside downsizers the opportunity to move into a spacious apartment near the beach, with the developer covering stamp duty for a limited time.

The 27-residence development has been designed for buyers who want to simplify their living arrangements without giving up the space, warmth and quality associated with a long-term family home. Most apartments have already been secured by Bayside locals, leaving a select collection of two and three-bedroom residences and penthouses available.

Two-bedroom apartments are priced from $1.275 million, three-bedroom residences from $2.25 million and penthouses from $3.375 million, with the completed homes available to inspect and move into now.

[smartcode_project:default project_id=95289 project_image_fid=366760]

<a href="https://www.apartments.com.au/buildings/linacre-rise-hampton-8-10-linacre-road-hampton-vic-3188">Linacre Rise</a> occupies an elevated position on one of <a href="https://www.apartments.com.au/developments/hampton-vic-3188">Hampton</a>’s quiet, tree-lined streets, around 250 metres from the bay and 500 metres from Hampton’s village centre. Its setting gives residents access to the beach, local cafés, shops and Hampton Train Station while retaining the feel of an established residential neighbourhood.

Architecture and interiors by <a href="https://www.apartments.com.au/architects/ewert-leaf">Ewert Leaf</a> draw on the warmth and permanence of traditional brickwork, with the building integrated into terraced landscaping by <a href="https://www.apartments.com.au/landscape-architect/john-patrick-landscape-architects">John Patrick</a>. Ground-floor apartments are elevated above the street and include private garden courtyards, while several upper-level residences have generous balconies and outlooks toward the bay.

Inside, the residences favour natural materials and generous proportions. Herringbone-pattern European oak flooring, natural stone benchtops, premium joinery and Swiss V-ZUG appliances are among the key inclusions, while integrated storage has been incorporated across kitchens, bathrooms, studies and living areas.

The kitchens have been planned as practical spaces for both everyday use and entertaining, with substantial island benches, detailed cabinetry and adjoining dining and living zones. Full-height wardrobes, plush bedroom carpeting and carefully considered lighting reinforce the residential character Wickton sought to retain for buyers moving from larger homes.

[smartcode_project:default project_id=95289 project_image_fid=366769]

A Linacre Rise purchaser said the completed apartment had delivered the space, outlook and construction quality they had been seeking.

“The unit is very light, has views to die for over the bay, all construction materials and fittings are premium quality, we have secure parking for three cars, EV charging at very competitive rates, the neighbours are friendly and there is just a lovely ambiance about the place,” the purchaser said.

Environmental features include solar panels, shared electric vehicle charging stations, rainwater harvesting for toilet flushing and landscape irrigation, double-glazed windows and water-efficient fixtures and appliances.

[smartcode_project:default project_id=95289 project_image_fid=366762]

The development was built by Balmain &amp; Co, with Wickton managing the broader development process through its in-house team.

For downsizers, the project’s completed status removes much of the uncertainty associated with buying off the plan. Purchasers can inspect the finished apartments, understand their outlook and proportions, and move in without waiting for construction to conclude.

The remaining selection includes north-oriented balconies, corner configurations and penthouses with elevated bay views. The developer-paid stamp duty initiative is available for a limited time, with potential savings of up to $200,000 depending on the residence purchased.

[smartcode_project_cta:default project_id=95289]

Limited-time stamp duty offer at completed Linacre Rise apartments in Hampton

Prominent New Zealand apartment and hotel operator, <a href="/developers/safari-group">Safari Group</a>, is offering up a prime investment opportunity for Australians to purchase off the plan in one of the world’s most popular ski destinations.

They recently took to market Mountain Oak Queenstown Apartments, in the growing precinct of Remarkables Park in Frankton, near the airport and at the foot of The Remarkables - the mountain range the locals like to call “The Remarks”.&nbsp;

Sydney investors have shown interest in the one, two and three-bedroom apartments that secure high-season occupancy six months over the year, primarily over summer and winter months.

They average 90 per cent occupancy across their portfolio over January, February, March, August, November and December, while shoulder season months of April, July, September and October are still occupied 70 per cent of the time, with the growing appeal of Queenstown becoming not just a hotspot for the snow, but a lifestyle destination.

Even in the low seasons of May and June, occupancy levels reach around 40 per cent.

<img alt="Safari Group’s Mountain Oak Apartments brings new investment potential to Queenstown" data-entity-type="" data-entity-uuid="" src="https://res.cloudinary.com/dz9xllyip/image/fetch/f_auto,c_limit,w_1440,q_auto/https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/field/image/Ext_Cam15_Sunny.jpg?VersionId=SJAROUM_1s.Tr5ciMk4EEj5oAt_Vewmv" />

Safari’s Safari Hotels arm can also manage the holiday letting for an investor, from the listing on holiday accommodation websites such as Airbnb and Booking.com to the cleaning and maintenance of the investment. They’ve been in the short stay management business for 15 years and offer 24/7 support for investors, an important convenience benefit for any overseas investor

Another major drawcard for Australians is that New Zealand doesn’t have a stamp duty policy - so the entry price of NZ$639,000 (AU$586,000), is all that is payable on completion.

<img alt="Safari Group’s Mountain Oak Apartments brings new investment potential to Queenstown" data-entity-type="" data-entity-uuid="" src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,dpr_2.0,q_auto:good/https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/313_Livingv2_WEB.jpg?VersionId=nV229fM0ZeYpoxOrX372HyGjfwY_LR8c" />

Safari is starting construction of the 141 apartments in Q2 this year, with a two-year build estimated to complete in mid-to-late 2027.<img alt="" data-entity-type="" data-entity-uuid="" height="15" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXczFpFAb7WuA6f4f9TtKWcqXyNwR8qqtakWv352ERkpqNlP3KwIo8YKxw67jZNHfpjEGIZGv5MQTbnvLZwNt8iu9IVdOrswOjCvBZ4zhSoOOLrpt6etVEZTN1gkBho0r_R72zdHNA?key=yq3daOanqHSb88QFd8jGYKdb" title="Click and drag to move" width="15" />​

The apartments will feature modern amenities and contemporary designs with expansive windows capturing sweeping views of The Remarkables mountain range.&nbsp;

Interiors are equipped with modern finishes, premium appliances, and secure electronic key-locked doors, ensuring a comfortable living experience for residents and guests alike.

With its strategic location near Coronet Peak and Cardrona Alpine Resort, as well as key retail and dining precincts such as Market Street, Five Mile Shopping Centre, and Remarkables Market, Mountain Oak offers a strong proposition for investors seeking high rental yields and capital appreciation in one of New Zealand’s most sought-after locations.&nbsp;

Queenstown’s sustained demand for visitor accommodation and rental properties is underpinned by a shortage of housing options, attracting both local and international buyers.

Safari Group offers low-touch investment proposition in Queenstown’s popular ski fields district

<html><body>
The reported seasonally adjusted estimate for total construction work done rose by +2.7% to $53,427 million for the September quarter, outshining expectations and being driven by increases in non-residential and engineering construction.
<a href="https://2.bp.blogspot.com/-O10dgtQhl98/UpkudK9hXuI/AAAAAAAAK98/mKcYB0PLYgc/s1600/ABS+Construction.jpg" imageanchor="1"><img height="255" src="https://2.bp.blogspot.com/-O10dgtQhl98/UpkudK9hXuI/AAAAAAAAK98/mKcYB0PLYgc/s400/ABS+Construction.jpg" width="470"></a>
Source: ABS
It was pleasing that total construction work done beat analyst expectations, yet not so smart was the fact that residential construction once again went nowhere, for a third consecutive print. Given that the economy is supposed to be rebalancing away from engineering construction (i.e. mining) and into residential projects, this doesn't look so great.
If you live or work in inner Sydney this might come as a surprise given that there is an uplift in construction happening here. However, it is not so elsewhere, and for this reason property analyst Michael Matusik is in the camp of those <a href="https://matusikmissive.com.au/2013/11/27/rates-to-fall/" target="_blank">expecting further rate cuts</a>:
"The continued subdued nature of new housing starts – despite record low interest rates &amp; a high number of actual dwelling approvals – means a lower than anticipated economic growth rate for next year; something below 3% per annum.  Very few new jobs will be created across the country if GDP stays below 3%.  Anything less than 2.5% usually means job losses.
"Whilst the RBA jawbones for a lower Aussie Dollar – yes, something in the mid 80 cent range would be very good – the only real tool we have to help get housing starts increasing again (and by ten-plus percentage points per annum) - and with that type of growth rate, many more jobs – is interest rates.
"At present new housing construction – for the year ending September – grew by just 1% across Australia.  New housing construction is actually contracting across Queensland – down 2% on last year.
"Despite talk to the contrary of late, interest rates need to fall again and soon. We need to build more new homes."
Matusik is <a href="https://www.propertyobserver.com.au/trends/seven-reasons-why-prices-might-rise-25-in-select-australian-east-coast-cities-over-next-three-years-michael-matusik/2013081464226" target="_blank">b</a><a href="https://www.propertyobserver.com.au/trends/seven-reasons-why-prices-might-rise-25-in-select-australian-east-coast-cities-over-next-three-years-michael-matusik/2013081464226" target="_blank">ullish about the outlook for east coast residential property</a> and in particular for Sydney, Melbourne and south-east Queensland, noting that prices could rise by as much as 25% over the next 3 years.
Private capital expenditure - actual and expected
Most of us are probably familiar with the doomsday scenario by now: mining capital expenditure tanks "off a cliff" through 2014 and beyond, our terms of trade collapse, unemployment rises and Australia sinks into recession. In contrast, what we actually want to happen is a relatively smooth transition from mining construction to mining production.
In this context, total new capital expenditure rebounding by 3.6% in the third quarter was a welcome surprise to the upside.
<a href="https://1.bp.blogspot.com/-kVRGoW5GxdM/UpkxlZdSeFI/AAAAAAAAK-I/2bdRkSRgow0/s1600/private+and+actual.jpg" imageanchor="1"><img height="296" src="https://1.bp.blogspot.com/-kVRGoW5GxdM/UpkxlZdSeFI/AAAAAAAAK-I/2bdRkSRgow0/s400/private+and+actual.jpg" width="470"></a>
Source: ABS
The "estimate four" figure for total capital expenditure in for 2013-14 came in strong at $166,832 million which is 3.2% higher than the estimate three for 2013-14. In plain English, this means that capital expenditure next year is expected to hold up a little better than had been feared - perhaps more of a plateau or a gentle taper rather than a cliff?
<img height="180" src="https://www.abs.gov.au/ausstats/abs@.nsf/be4aa82cd8cf7f07ca2570d60018da27/1ecf42b5ec12e8bcca2573460014f2df/Body/0.121E!OpenElement&amp;FieldElemFormat=gif" width="470">
Source: ABS
Similarly, the estimated figure for expected mining capital expenditure ticked up a little. The widely feared 'capex cliff' has not materialised to date.
<img height="180" src="https://www.abs.gov.au/ausstats/abs@.nsf/be4aa82cd8cf7f07ca2570d60018da27/1ecf42b5ec12e8bcca2573460014f2df/Body/1.3B8C!OpenElement&amp;FieldElemFormat=gif" width="470">
Source: ABS
There could be any number of reasons for this, including project cost overruns. Paradoxically, such inefficiencies appear to be a positive in capital expenditure actual prints (in line with the 'parable of the broken window' - if our aim it simply to boost GDP we should all go and smash a window tomorrow).
From my own experience I know how hard it can be to estimate capital expenditure in mining surveys and material blowouts are not uncommon. Expected figures which may appear entirely reasonable at the feasibility/FID stages can go badly awry over time. Labour costs are high in Australian mining and construction activities are tightly regulated (as they might say in mining parlance: "you can't go to the bathroom without filling out a form", or words to that effect).
New home sales
A weaker month <a href="https://hia.com.au/media/~/media/Files/MediaMicrosite/Media%20Releases/New%20Home%20Sales%20Take%20a%20Breather%20in%20October.ashx" target="_blank">recorded by the Housing Industry Association in October</a>. The small sample sizes mean that the data set is volatile, particularly at the state level. Clearly, new home sales are significantly stronger than they were in Q3 2012, with total sales up by around 25% year on year (in particular house sales are up strongly by more than 33%).
The largest increase across the three months to October this year was in South Australia (+10.5%), followed by Victoria (+6.0%), Western Australia (+5.3%), Queensland (+5.1%), and New South Wales (+2.0%). The trend in new home sales remains up, albeit not in an earth-shattering manner.
<a href="https://3.bp.blogspot.com/-xdqmii0NWeM/UpkyzMz-H3I/AAAAAAAAK-Y/hGcepL1te2E/s1600/HIA.jpg" imageanchor="1"><img height="295" src="https://3.bp.blogspot.com/-xdqmii0NWeM/UpkyzMz-H3I/AAAAAAAAK-Y/hGcepL1te2E/s400/HIA.jpg" width="470"></a>
Source: HIA
Affordability
The HIA caused a stir by <a href="https://hia.com.au/media/~/media/Files/MediaMicrosite/Media%20Releases/Low%20Interest%20Rates%20Continue%20to%20Drive%20Improved%20Housing%20Affordability.ashx" target="_blank">also releasing its housing affordability index</a> this week, showing 'affordability' at an 11 year high thanks to 225 basic points (2.25%) of interest rate cuts since 2011. Clearly repayments have dropped sharply, but entry prices remain elevated.
Dwelling prices
RP Data's <a href="https://www.rpdata.com/research/daily_indices" target="_blank">Daily Home Value Index</a> sees dwelling price growth lately as moderate or having moderated everywhere except for Sydney. Melbourne dwelling values will be reported as having fallen by more than 2% in November, although to some extent the index is likely have been impacted by a change in the sales mix.
<a href="https://3.bp.blogspot.com/-3fJJmMKEbM4/Upk2VSnIvqI/AAAAAAAAK-g/52Z1jZgRILU/s1600/RPD.jpg" imageanchor="1"><img height="212" src="https://3.bp.blogspot.com/-3fJJmMKEbM4/Upk2VSnIvqI/AAAAAAAAK-g/52Z1jZgRILU/s400/RPD.jpg" width="470"></a>
Source: RP Data
Summary and risks to the outlook
So, where does this all leave us? The rebound in total capital expenditure combined with improved retail sales suggests that the Q3 GDP print next week might be a little better than had been expected, perhaps in the realm of 0.6%-0.7% for the quarter. However, residential construction is not firing across Australia and the official cash rate appears set to be stuck in the 2-3% range for the foreseeable future.
<a href="https://3.bp.blogspot.com/-J84z62z_mms/Upk2zTtBB3I/AAAAAAAAK-o/HYL6l987DsA/s1600/RBA+rate+tracker+301113.jpg" imageanchor="1"><img height="290" src="https://3.bp.blogspot.com/-J84z62z_mms/Upk2zTtBB3I/AAAAAAAAK-o/HYL6l987DsA/s400/RBA+rate+tracker+301113.jpg" width="470"></a>
Source: ABS
I've alluded to some of the risks for 2014 and beyond above, including any severe drop in mining capital expenditure or a major weakening of our terms of trade from historically very high levels.
<img alt="Terms of Trade graph" height="382" src="https://www.rba.gov.au/chart-pack/images/15-commodity-prices/15br-tot-small.gif?accessed=2013-11-30-12-31-27" width="470">
Mining production is increasing, the iron ore spot has held up well at $135/tonne at a time of year when support may begin to return to the price, and the Aussie dollar is threatening to sneak into the 80-90%range which may help producers to remain competitive.
The biggest unknown is probably the outlook for China. No surprises that growth in China looks set to hit its target, but significant question marks still remain about the stability of the model. The Chinese economy is imbalanced, with a very high percentage of GDP growth being driven by investment rather than by consumption: the building of apartments (tens of millions of which reportedly sit vacant), infrastructure and factories.
Whether or not China is able to rebalance away from investment towards consumption in the years ahead is unclear, and consequently it needs to be considered whether the growth rates that we have come to expect from China are sustainable going forward.
<img alt="GDP Growth – China and India graph" height="404" src="https://www.rba.gov.au/chart-pack/images/1-3-world-economy/1tr-gdpci-small.gif?accessed=2013-11-30-12-30-57" width="470">
 
<hr>
 Pete Wargent is the co-founder of <a href="https://allenwargent.com/" target="_blank" rel="nofollow">AllenWargent</a> property buyers (London, Sydney) and a best-selling author and <a href="https://petewargent.blogspot.com/" target="_blank" rel="nofollow">blogger</a>.
 
His new book '<a href="https://www.bigskypublishing.com.au/Books/General-Interest/Four-Green-Houses--and-a-Red-Hotel/1015/productview.aspx" target="_blank" rel="nofollow">Four Green Houses and a Red Hotel</a>' is out now.
 
 
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pwargent-M4siyDbqQY

Some positive signs for the economy, but residential construction is going nowhere

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December brings out the opportunity for property experts to delve into their Christmas stockings and bring out a crystal ball to predict what some of the key trends for the pending 12 months may be.
Whilst uncertainty remains over weather commercial tenant demand will bounce back or if shoppers will start buying anything other than groceries again, one thing that is certain is that the continued emergence of Asian capital into all commercial property markets across our major capital cities.
Whilst the latest wave (post 2010) of Asian investment is being compared to the highs of the Japanese assault on Australian property in the early 1990's when  investigate in more detail it is so different for so many reasons and on so many different levels.
Malaysian and Singaporean investment dominated 2013 with a wide range of transactions being completed in both Melbourne and Sydney, deals varied from development sites to commercial office investments but the flow was strong and is expected to remain this way in 2014.
Whilst it is widely accepted that the stimulant for investors from these countries to target Australia has been based on their own political instability, the fall in the value of the Australian dollar and cooling measures that have been instilled on developers in their home countries, the Chinese investors and developers seem to be driven by many different reasons to their nearby counterparts from South East Asia.
Chinese investments into the Australian property market arguably presents our industry with the greatest opportunity for job and industry growth than any other single structural buyer shift spanning back more than 30 years.
Next year will see the continued dominance of Chinese investors wanting to acquire both development and passive opportunities as the relationship between Australian property and Chinese players grows with additional education across a wider range of markets, and more established infrastructure to assist the Chinese in completing transactions locally. Good news stories are being sent back to China off the back of sustained strong performance for Chinese developers, as they continue to deliver on many projects that they have been working on for some time.
As a property industry, we must better equip ourselves to benefit from the structural change that is occurring on so many levels. We must work hard and with purpose to ensure that we do not jeopardize in any way the intent and established level of comfort to date that Chinese investors have towards Australian property.  We must remain competitive on all levels from the federal government to local council and do what we can to encourage, foster and assist in the development of Chinese investment into our markets.
 
<hr>
 Mark Wizel is director of CBRE Melbourne city sales and Victorian retail investment properties
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mwizel-Mt6xbQordU

Chinese investment is arguably the greatest opportunity for our industry in over 30 years

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Over <a target="_blank" href="https://www.propertyobserver.com.au/developments/the-buyer-s-journey-the-gap-between-today-s-reality-and-future-plans-is-what-the-sales-centre-must-fill/2013112566584">the last few weeks</a> I have looked in detail at some of the <a target="_blank" href="https://www.propertyobserver.com.au/residential/the-fundamentals-of-a-creating-a-great-buyer-s-experience/2013111866420">key project marketing tools</a> we use to create and <a target="_blank" href="https://www.propertyobserver.com.au/residential/delivering-a-top-buyers-experience-real-estate-has-to-compete-like-any-other-service/2013110466153">enhance the buyers experience</a> which in turn is the key factor that underscores brand values across every project, our marketing brand and personal brand.
Now to finish this topic I want to take a detailed look at personal service. Because I believe this is where success is created and in such a highly charged market one on one service is still the winner, not only in the short-term but also for the long-run, after all market conditions are always changing and a good ‘personal brand’ is a real asset. Not only for the individual, but also across the board impacting every aspect of a project and the entire sales path.
Clearly what happens at a face to face level will influence the buyer’s experience and so I always give high priority to supporting and training the every member of the sales team. And my definition of team is extensive and is not only confined to the direct selling team members. To create a service focused environment I fervently embrace team sales training, structured (but not dogmatic) sales paths and importantly a diverse and structured role for sales mentoring and most importantly recruitment policies that looks at always finding leaders.
Seven seconds to make a first impression
One of the main reasons personal service is so important is the fact that you only get one chance to create a good impression. The moment that a new buyer, or for that matter a potential new client, sees you, both their and your brain gets busy asking a thousand questions: Is this someone to approach or to avoid? Friend or foe? Hard work, likeable, or a genuine prospect? And according to lots of reports this all happens in the first seven seconds of meeting.
We can all appreciate that in a sales environment first impressions count. While none of us can avoid making snap decisions with good training a robust sales path we can aim to make these decisions work in our favour. Likewise getting off to a good start also naturally puts the buyer off to a good start.
All important first impressions are more heavily influenced by non-verbal cues, but the environment can also be important. As <a href="https://www.propertyobserver.com.au/developments/the-buyer-s-journey-the-gap-between-today-s-reality-and-future-plans-is-what-the-sales-centre-must-fill/2013112566584">discussed last week</a>, this is where a well-planned and designed sales centre will speak volumes in helping to make a great first impression.
Key ways the team can make a positive first impression
It’s not my intention here to create a how-to manual, but I think it is always important to remind ourselves of the importance of keeping on message when we engage buyers. A big point is to always adjust your attitude, always be interest and fresh. People pick up on our attitude and that includes a late arrival at the sales centre ten minutes before closing time!
Our personal posture and a smile will always say “I’m friendly and approachable” and you’re welcome to be here, I think we always need to keep in mind that for most buyers these first few steps can be a little hesitant and with a degree of emotion involved.
Another golden rule, that none of us are too smart to overlook is to always make eye contact. I read once that if you open your eyes slightly more than normal to simulate eye contact we signal of recognition and acknowledgement, and that’s how we want every buyer to feel, isn’t it?
Then we come to the moment to shake hands and with an attentive body posture establish rapport. But as we all know in varied cultural circumstances we need to be respectful of the other person’s space and culture, and as we deal with more and more offshore buyers there’s a need here for awareness and sensitivity.
And so if you’ve got just seven seconds it’s good to remind ourselves of how when you think about it seeing these simple ideas in action is frequently the secret of great salespeople, they do it by nature, but I am also sure they think about every new encounter so as not to waste an opportunity.
Article continues on next page. Please click below.
 
<hr class="system-pagebreak">
It all starts with recruitment
To finish off this important topic, I hope that I have established that the face to face relationship that is established between the consumer, the potential buyer and the sales person that he or she deals with is a make or break point in every project’s sales cycle.
While no sales person will intentionally risk a potential sale with poor service, the stakes for the project, your brand and reputation are high and so the recruitment of the sales team is a very important step. It is a step that will greatly impact on the success of any project.
The sales team should be matched to the project and team members should be used in different ways and times to try and ensure the best results. It should also be kept in mind that even the best team players will become stale. This is another aspect of recruitment that has to be managed. It’s important to remain fresh and keep ideas with lots of energy.
While a sales team member might have a great deal of project knowledge and history care is needed to make sure they always remain bright, active and committed to the project. It can be possible to start to develop blinker vision and this can slow sales and might not show up until it’s too late, with the damage done.
External agents or in house teams
Sales teams can be recruited and then employed in-house by the developer; or the developer can appoint a real estate agent to market the project; or like some developers, they appoint accredited agents working under the project’s branding. There can also be a mix of internal teams and external agents. My choice is for a clear cut full service agency model as the most accountable and successful way to market projects.
In either case, for a major project the way the sales force is structured and managed is of great importance. It’s the biggest part of the marketing dynamic.
Both options have their own advantages and both have some disadvantages and while consumers may not see any difference in the delivery of the service they receive, there is a need to be sensitive to this appointment within the overall marketing plan.
We all know that buyers are, and I am sure we can all agree on this, the lifeblood of every project. At times markets are full of activity, selling well, running smoothly and this is usually not by accident. While big picture market dynamics are always a force, so too is the service we give and how we manage and deliver our project marketing roles, we should never take buyers for granted no matter how markets are performing, and I am sure that the most successful sales people never do.

<hr>
Peter Chittenden is managing director for residential of <a target="_blank" rel="nofollow" href="https://www.colliers.com.au/Colliers%20Corporate/Residential.aspx">Colliers International.</a>
 
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pchittenden-eLqUUC8TWW

Face to face contact can make or break the buyer's experience

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At any other time, Friday’s decision by treasurer Joe Hockey to reject Archer Daniels Midland’s (ADM) A$3.4 billion takeover bid for GrainCorp might have been just another controversial foreign investment decision.

Indeed, were it not for a <a href="https://www.businessspectator.com.au/news/2013/11/5/politics/graincorp-bid-splits-coalition" target="_blank">widely</a> <a href="https://www.smh.com.au/federal-politics/political-news/graincorp-takeover-failure-stirs-fury-among-some-liberals-20131129-2yh7x" target="_blank">reported</a> split in the Coalition over the proposal, the decision may not have made it out of the business section of the national press.
However, inserted within the <a href="https://theconversation.com/hockey-kills-graincorp-takeover-by-adm-experts-react-20941" target="_blank">ADM-GrainCorp decision</a> was a never-before-seen rationale for rejecting a foreign investment: the tenor of community attitudes and level of popular support. This seemingly minor caveat may radically change the way in which foreign investment reviews are conducted by the Coalition government in coming years.
Australia’s foreign investment framework
Debate about Australia’s foreign investment policy was catalysed in 2008, with the highly contentious “<a href="https://www.ft.com/intl/cms/s/0/a51f903e-d09f-11dc-953a-0000779fd2ac" target="_parent">dawn raid</a>” by Chinalco on Rio Tinto.
Since then, an ongoing series of high-profile foreign investment deals has attracted both intense public and regulatory scrutiny: these include the takeover of <a href="https://www.smh.com.au/national/doubts-over-oz-decision-20090331-9i9t" target="_blank">OzMinerals by China’s Minmetals</a>; the acquisition of Felix Resources by <a href="https://www.bloomberg.com/news/2013-11-13/australian-regulator-said-to-tell-yanzhou-to-cut-yancoal-stake" target="_blank">Chinese state-owned Yanzhou Coal</a>; the failed <a href="https://www.theaustralian.com.au/business/wayne-swan-sinks-84bn-asx-takeover-by-singapore/story-e6frg8zx-1226034348911" target="_blank">Singapore Stock Exchange bid</a> for the Australian Stock Exchange, SAB Miller’s <a href="https://www.ft.com/intl/cms/s/0/0dee9878-173a-11e1-b00e-00144feabdc0" target="_blank">acquisition of Fosters</a>, and the current takeover bid of <a href="https://www.theaustralian.com.au/business/companies/saputo-matches-murray-goulburn-bid-for-warrnambool-cheese-butter/story-fn91v9q3-1226761417207" target="_blank">Warrnambool Cheese &amp; Butter</a> by Canadian dairy group Saputo.
Australian foreign investment policy presumes in favour of foreign investment, and generally does not enforce local ownership requirements. However, investments in a small minority of cases are screened by the Treasurer to ensure they are consistent with the national interest.
This screening process is conducted by the Foreign Investment Review Board (FIRB), and <a href="https://firb.gov.au/content/_downloads/AFIP_2013.pdf">must be undertaken</a> if an investment: a) is from a foreign government investor; b) is a business investment over 15% of the targeted firm and valued at over $248 million; c) is in real estate; or d) is in a defined set of “sensitive” sectors (such as banking, airlines, airports, shipping, media and telecommunications). All other foreign investment applications receive automatic approval.
Reviewed applications are subject to a six-point “national interest test”, administered by the FIRB. This considers:
<ul>
<li>
Impacts on national security
</li>
<li>
Impacts on competition
</li>
<li>
Impacts on Australian government policies
</li>
<li>
Impacts on the Australian economy and community
</li>
<li>
The character of the investor
</li>
<li>
[For state-owned enterprises] The commercial orientation of the investor
</li>
</ul>
Following its enquiries, the FIRB makes a (confidential) report to the treasurer, who may either approve, reject or conditionally approve the investment.
The overwhelming number of screened foreign investments are approved. Over the five years to 2011-12, 38,590 applications were approved (valued at A$860 billion), while only 63 were rejected. The bulk of these were in the real estate sector, and prior to the GrainCorp decision only two major business proposals had been recently rejected: the 2001 <a href="https://www.abc.net.au/pm/stories/s281616.htm" target="_blank">Shell takeover over Woodside Petroleum</a>, and the Singapore Stock Exchange’s 2011 <a href="https://www.smh.com.au/business/singapore-finally-walks-from-asx-bid-20110408-1d6o4" target="_blank">bid for the ASX</a>.
GrainCorp: a new populist precedent?
Friday’s decision is significant because it may set a new precedent for how foreign investment is screened. It would appear the ADM-Graincorp decision is implicitly adding a new, seventh criteria to the FIRB’s national interest test: community attitudes and popular support.
In explaining his decision, Treasurer Joe Hockey <a href="https://jbh.ministers.treasury.gov.au/media-release/026-2013/" target="_blank">outlined two reasons</a> for rejecting the proposal: that there is limited competition in the grains handling industry (presently dominated by GrainCorp), and that there was a “high level of concern from stakeholders and the broader community”. He also argued that “allowing it to proceed could risk undermining public support for the foreign investment regime and ongoing foreign investment more generally”.
<a href="https://www.smh.com.au/business/grain-of-doubt-over-national-interest-case-20131129-2yh6n" target="_blank">Several</a> <a href="https://www.smh.com.au/federal-politics/political-opinion/graincorp-decision-joe-hockey-caught-between-national-and-nationals-interest-20131129-2yfw2" target="_blank">analysts</a> <a href="https://www.businessspectator.com.au/article/2013/11/29/politics/hockey-fails-leadership-test-graincorp" target="_blank">have</a> <a href="https://www.businessspectator.com.au/article/2013/11/29/economy/adms-rejection-goes-against-grain-logic" target="_blank">argued</a> the competition policy rationale is relatively weak. The Australian Competition and Consumer Commission (ACCC) had already <a href="https://www.accc.gov.au/media-release/accc-to-not-oppose-archer-daniels-midland-acquisition-of-graincorp" target="_blank">approved the deal</a> in June on the grounds it would be unlikely to substantially lessen competition, and ADM had made <a href="https://www.theaustralian.com.au/business/latest/adm-ups-graincorp-spending-promises/story-e6frg90f-1226769989671" target="_blank">significant commitments</a> to improve bottlenecks in the grain handling chain.
Thus, it would seem political concerns have loomed large. One consideration appears to be opposition from the Nationals, who had <a href="https://theconversation.com/big-win-for-nats-as-hockey-rejects-graincorp-bid-20948" target="_blank">campaigned</a> <a href="https://www.watoday.com.au/federal-politics/political-news/graincorp-takeover-failure-stirs-fury-among-some-liberals-20131129-2yh7x" target="_blank">hard</a> against the application being approved. But another was widespread community opposition to the deal, with Hockey instructing the FIRB to consider the <a href="https://jbh.ministers.treasury.gov.au/media-release/026-2013/" target="_blank">“wider ramifications”</a> of the deal – including public attitudes – mid-way through the assessment process.
Until now, community attitudes have not been part of the FIRB’s national interest test. While “community concerns” are considered, these are defined in economic terms – a fair return to the community, opportunities for Australian participation, the interests of employees.
The FIRB has not assessed whether an investment is considered “popular”, or how it will influence community attitudes to foreign investment more broadly. Moreover, no recent decision by the treasurer – whether approval, rejection, or conditional approval – has made reference to public sentiments. Until now.
The implications of community attitudes
The ADM-GrainCorp case is of course a single decision, and it is not clear whether this will be a one-off, or will be followed by the Coalition government in future cases. But it raises questions over how community attitudes should be assessed, and whether the FIRB even has the capability to assess them.
Community attitudes are a nebulous and difficult to measure concept. For example: if the majority of the country supports an agricultural investment, but a majority of rural residents oppose it, whose views should dominate? Moreover, the economic policy-focussed FIRB has no experience in assessing community mood, nor the resources or capabilities to do so at present.
Whether this would be a robust test, or simply a “get out of jail free” card that allows the Treasurer to reject controversial cases, remains to be seen.
Secondly, it would significantly reduce legal certainty for foreign investors in Australia. At present, there is a clear set of national interest guidelines, which have been applied in a transparent and consistent manner. A foreign investor will have a good idea as to whether their proposal ticks the boxes before committing, and can be confident the goalposts will not be moved part-way through the process.
Introducing volatile and contested community attitudes into the process may deter investors out of fear their proposals will be decided at the whim of populist politics.
Third, it will “politicise” the foreign investment assessment process. Rather than approving investments based on their economic merits, popular attitudes will also become a key criterion. A number of worrying outcomes may result.
Investment proposals could become an issue for party politics, determined more by the electoral fortunes of the government of the day rather than sound policy criteria. A business’s competitors may try and sabotage a deal by stirring up community opposition, transforming the FIRB process into a politically-contested commercial battleground. Vested interests with something to lose may also use popularity arguments to sink deals, even when they bring net national benefits.
If the example set in the ADM-GrainCorp decision becomes common practice, Australia’s supposedly <a href="https://www.theaustralian.com.au/opinion/columnists/coalition-steadies-the-ship-of-state-as-shaky-labor-hogs-the-headlines/story-e6frg75f-1226718001935" target="_blank">“open for business”</a> approach to foreign investment may change radically.

<hr>
Jeffrey Wilson is fellow of the Asia Research Centre at <a rel="nofollow" href="https://www.murdoch.edu.au/" target="_blank">Murdoch University</a>.
This article was originally published at <a href="https://theconversation.com" target="_blank">The Conversation</a>. Read the <a href="https://theconversation.com/foreign-investment-and-the-popularity-test-does-graincorp-set-a-new-precedent-20992" target="_blank">original article</a>.
<img width="1" src="https://counter.theconversation.edu.au/content/20992/count.gif" height="1" alt="The Conversation">
 
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jwilson-73uvCTKJtg

Does the government's rejection of GrainCorp set a new foreign investment precedent?

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There are many reasons to own investment property: you might want an asset for retirement, you might wish to rent where you live and own a property elsewhere, or property might be your choice of wealth-creation. Regardless of why you invest in property, there are a few things to keep in mind:
<ul>
<li>
Goal: be clear about what you want to achieve, and in what time-frames. Before you buy a property you should decide on your earning goals: will this be a negatively or positively geared investment? Will you invest in renovations to increase your rental return?
</li>
<li>
Budget: write detailed plans about what you have to spend, how much you will have to borrow, and what the borrowings will cost. Include the cost of renovating, repairs and maintenance as well as the predicted costs of management, insurance and rates. And then calculate rental income.
</li>
<li>
Research: Do your research before you buy a property. Go to real estate agencies in the area and pick up their ‘for rent’ sheets. See what rents are being asked for what kind of properties. Ask agents what properties they would like to manage. Go to some open days. Get a sense of which agents are on their game.
</li>
<li>
Inspections: if you’re buying a place to rent to others, basic things must be in working order that you might let slide if you lived there yourself. Always have an inspection done by a qualified expert.
</li>
<li>
Tax advice: don’t rely on barbecue chatter for your tax advice. If you intend to negatively gear your rental property, and claim the loss you make against your taxable income, then you should be advised by a solicitor or accountant, at least before the purchase and for the first tax return you lodge.
</li>
<li>
Fixed or variable: budget a scenario for a fixed rate and a variable rate. Fixed rates are currently very low, and give you interest rate certainty for two, three or five years. But variable rates provide you with flexibility. Many lenders allow you to split your mortgage between fixed and variable.
</li>
<li>
Renovation: do your best to assess the renovation requirements before buying the property, and put these in your budget. Don’t get carried away with renovations – stay within your budget.
</li>
<li>
Insurance: landlord insurance is imperative and you should contact a broker if the inclusions and exclusions confuse you. Renting property is a business and some of the features of landlord insurance might not be familiar. Get this right.
</li>
<li>
Management: there’s a clear choice. You either decide to manage the property yourself, doing basic maintenance and repairs. Or you use a managing agent who will charge a percentage of the rent. DIY managers of property can usually do the handiwork, but inexperienced owners usually stumble on tenant law and collecting rent.
</li>
</ul>
Investing in property is an excellent way to build wealth, but it should be approached like a business. Have a goal, have a plan and work within your budget.
Good luck.
 
<hr>
 Mark Bouris is executive chairman of <a href="https://www.ybr.com.au/" rel="nofollow" target="_blank">Yellow Brick Road</a>, a financial services company offering home loans, financial planning, accounting and tax, and insurance.
You can contact Mark on <a target="_blank" href="https://twitter.com/markbouris" rel="nofollow">Twitter</a>.
 
 
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mbouris-tauSvXGAM2

Starting out as a property investor: The nine things to keep in mind

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First home buyers are <a href="https://www.abs.gov.au/AUSSTATS/abs@.nsf/ProductsbyReleaseDate/05DBCE56402EC566CA25723D000F2999?OpenDocument" target="_blank">slipping</a> in the ranks of Australians purchasing a home, and once again negative gearing and supply issues are back in the spotlight.
Even Aussie Home Loans founder John Symond has <a href="https://www.abc.net.au/tv/qanda/txt/s3873461.htm" target="_blank">acknowledged</a> negative gearing is skewed towards high income earners and should be addressed as part of a tax system review.
There is also growing concern from the <a href="https://www.rba.gov.au/publications/fsr/2013/sep/pdf/0913.pdf" target="_blank">Reserve Bank</a> that highly geared property investments by self-managed super funds (SMSF) are pushing up prices, with the potential to drive home ownership further from the reach of ordinary households.
In his first major <a href="https://chfa.com.au/sites/default/files/sites/default/files/docs/kevin_andrews_speech_national_housing_conference_adl_1nov13.pdf" target="_blank">speech</a> on housing since the election, Social Services Minister Kevin Andrews referred to a national housing shortfall which the National Housing Supply Council expects will grow to nearly 370,000 dwellings by 2016. Minister Andrews stressed the economic imperative of attracting a variety of investors into housing, and specifically towards private rental.
Willing and able contenders include Australia’s rapidly growing superannuation funds. Yet as SMSFs have shown, they can also drive up the price of existing dwellings. Much more efficient and effective investment pathways are required to boost housing supply and improve affordability.
Obviously, to attract the right kind of super funds, Australian governments need to be conscious of what drives their investment strategies. Risks, returns, liquidity and scale are all variables which cannot be ignored. Driven by tax incentives, highly geared speculative investment is not only costly for governments but also damaging to rental security.
Industry fund managers are actively learning about Australia’s emerging affordable rental housing providers, such as housing associations and rental co-operatives, and trying to define the terms and conditions under which they would be willing to invest. Australian Super, our largest industry super fund, recently hosted an international think tank to design an investment mechanism.
Currently, bank lending terms are stymieing the growth of the affordable housing industry. The cost and conditions of lending can be improved by rerouting the financing pathway, matching super funds risk/return appetite with the secure rent revenue of well-regulated community housing organisations.
Recently published research by RMIT and UNSW for the Australian Housing and Urban Research Institute (AHURI) has explored how governments can attract institutional investment to this new asset class, by supporting the establishment of a specialist financial intermediary to pool borrowing demands and providing a conditional government guarantee.
Housing associations and co-operatives aim to grow the supply of affordable rental housing for a range of low and middle income households where needed across Australia. Yet they remain small as optimum public-private financing arrangements lag behind.
RMIT research has found commercial borrowing by housing associations has expanded considerably in the past five years, but the variation in terms offered and the length of the debt-raising process suggests such borrowing is still immature with a limited number of engaged lenders.
Loan tenures are extremely short, often less than three years, imposing significant refinancing risks. Many loan facilities are interest-only, preventing organisations from amortising debt and building up any equity. Research strongly suggests commercial banks are unlikely to provide the considerable financing required to expand affordable rental housing in the future.
Luring the super sector
According to the RMIT AHURI <a href="https://www.ahuri.edu.au/publications/projects/p53019" target="_blank">report</a>, a new financing option could attract investment from Australia’s rapidly growing superannuation sector. Australian funds invest heavily in more risky equity investments as well as infrastructure such as toll roads, rail and airports. But they also invest and hold lower yield, fixed income securities as a hedge against inflation and to ensure greater diversity alongside more risky equity investments.
To help establish a new market, governments can guarantee investment in well regulated not-for-profit landlords, such as community housing organisations. This would enable long term rental housing providers to attract lower cost, longer term investment.
The RMIT AHURI research has analysed seven schemes in Europe and the US detailing how guarantees and intermediaries channel longer term, lower cost investment to increase the supply of social and affordable housing. One of the most important findings of this review is the minimal impact that guarantees have had on government budgets.
Through appropriate revenue support and regulation, sound business management practices and carefully structured guarantees, there has been a zero default rate among many European housing providers receiving guaranteed loans.
A stable and supportive policy environment could deliver the same result for Australia.

<hr>
Julie Lawson is honorary associate professor with the <a href="https://www.rmit.edu.au/ahuri" target="_blank">AHURI RMIT Research Centre</a>. Together with emeritus professor Mike Berry, she conducted international and national research on the design of targeted guarantee schemes to increase investment in affordable rental housing. This was funded by a competitive grant from the Australian Housing and Urban Research Institute, an independent not for profit research organisation.
This article was originally published at <a href="https://theconversation.com">The Conversation</a>. Read the <a href="https://theconversation.com/its-time-we-incentivised-affordable-housing-investment-19969">original article</a>.
 
 
<img alt="The Conversation" height="1" src="https://counter.theconversation.edu.au/content/19969/count.gif" width="1">
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jlawson-EsDwT89dxJ

We need to start incentivising investment in affordable housing

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They're back. Investors have returned to the market and with that comes a need to make some key decisions. The biggest is probably; do you or don't you? I'm talking about property management.
I see it as the DIY dilemma of real estate. 
Think about it. You decide to retile the bathroom. You get a quote from a professional tiler. You have a heart attack. You decide it can't be that hard. You will do it yourself for half the price.
Uh oh. Fast forward three months. You've had more trips to the hardware store than you can count, a trip to hospital and the cost of the project is already in line with the quote you laughed at....and it still isn't finished.
It can be the same with property management. You get a quote from an agent and decide 'it can't be that hard. I'll save money and do it myself.'
But just as not everybody can conquer the DIY renovation, the same is true of property management.
It's much more than securing a good tenant and ensuring the rent and bills are paid. There is the slightly tedious reality of always being on call to manage any maintenance and tenant issues. Then there are the countless 'other' issues that come when dealing with people, personalities and property and it's when the inevitable, unexpected, sometimes the truly unbelievable, happens that the DIY owner will be left wishing they had left it to the experts.
 
<hr>
 Ewan Morton is managing director of the Sydney based <a rel="nofollow" href="https://www.mortonandmorton.com.au/" target="_blank">Morton &amp; Morton</a>.
 
 
 
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emorton-DecMjPQt5h

Property management: Should you do it yourself or leave it to the experts?

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China has signalled its intention, reiterated in the recent Third Plenum, to open up its financial markets. This would be an important reform which carries significant risks and opportunities both for China, and many opportunities for Australia.
There are two main elements to the reforms. The first is to remove many of the regulated prices in the domestic financial system and to allow markets more scope to set them. The second is to float the Renminbi and allow freer international flows of capital. Both carry substantial risks.
Until recently bank lending and deposit rates, and hence bank net interest margins, were heavily regulated. The effect was to guarantee bank margins and protect the (mainly government owned) banks from much of the low quality lending they had engaged in during the 1990s.
With the deposit rate set artificially low, funds were cheap. Over time however less-regulated financial institutions found ways to offer higher returns to depositors. Many of these wealth management products were effectively deposits in that they could be readily turned back into cash. China has thus seen a rapid growth in its shadow banking system as a result.
The deregulation of lending rates squeezed the banks. Since they were forced to pay a below-market price for deposits but had to compete in lending, their margins have been under pressure.
Deregulating deposit rates is the next big step. But regulators are worried about whether the banks will cope with competition for deposits. The risk of bank failure increases significantly.
China currently limits its banks to only lend out a fixed proportion of their deposits, that is the volume of their deposits always exceeds the value of loans they make – unless they make very poor lending decisions. The deregulation of deposit rates puts this at risk. It is now far more likely that banks will fail, and depositors lose money. Since China does not have a deposit insurance system, this is a significant risk.
Protecting depositors
China is currently working on developing the required deposit insurance scheme. We are unlikely to see the deregulation of deposits until that is in place. Even that though does not end the problems.
The transition of banks from only having to worry about the quality of their assets (loans extended) to also having to worry about their liabilities (deposits and other forms of funding) is problematic.
Australia <a href="https://penguinunearthed.wordpress.com/2006/04/02/book-review-westpac-the-bank-that-broke-the-bank/" target="_parent">almost lost</a> one of our major banks (Westpac) in the process of adjusting to a liberalised financial system, although there is little doubt that the economy functions better now than it did in the 1980s.
The implicit trade-off between the additional growth generated by a better allocation of resources valued against the risk of more frequent crises has generally come down in favour of liberalisation (see for example Ranciere, Tornelland and Westerman’ paper “Systemic Crises and Growth” in the Quarterly Journal of Economics, February 2008).
Those with longer memories will also remember many Australians losing money when they took out loans in foreign currencies just before a big fall in the Australian dollar. Some elements of the Asian crisis were also worsened by foreign currency borrowing as countries (partially) liberalised their capital accounts.
Both the internal reforms and the floating of the currency provide opportunities. While Australian banks, wealth managers and insurers have struggled to get a strong foothold in China in the face of strict regulation, that should change with the next phase of reform.
The biggest opportunities for Australia however will derive from the opening up of the Chinese capital market to the freer flow of money in and out of the country. Recent <a href="https://www.imf.org/external/pubs/ft/wp/2013/wp13189.pdf" target="_blank">work by the IMF</a> suggests while it’s hard to see whether China will finish up importing or exporting capital, the size of the flows both inward and outward will increase significantly. Chinese will seek to diversify their portfolios away from China, and foreigners will try to increase their exposure to China.
The IMF paper actually suggests that Chinese will increase their current foreign asset holdings by a factor of five, and that foreign holdings of Chinese assets will increase by a factor of three. That is, China will be a net foreign investor.
Australia will have to get used to the idea of Chinese companies and individuals continuing to buy local assets. This should bid up the price of assets, which is good for their owners, but is likely to raise community concern. There will obviously be sizeable business opportunities involved in servicing this outflow.
The other flow is also important. Australian wealth managers, and Australian companies, will have very significant business opportunities servicing the outward flow.
 
<hr>
 Rodney Maddock is Vice Chancellor's fellow at Victoria University and adjunct professor of economics at <a href="https://theconversation.com/institutions/monash-university" target="_blank">Monash University</a>
 
This article was originally published at <a href="https://theconversation.com">The Conversation</a>. Read the <a href="https://theconversation.com/china-is-liberalising-its-banks-and-thats-good-news-for-australia-20708">original article</a>.
<img width="1" src="https://counter.theconversation.edu.au/content/20708/count.gif" height="1" alt="The Conversation">
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rmaddock-AxiRakmDz9

Why China's move to liberalise its banks is good news for Australia

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Owner occupiers represent a small but important component of the inner Brisbane apartment market. At the youngest end, they represent occupiers who could potentially be occupying greenfield development in the outer suburbs and thus helping to reduce the requirement for new infrastructure. Similarly, at those at the older end are likely to have freed up an existing established home for the next generation to move into.
As part of the preliminary work for our upcoming Inner Brisbane Apartments 2013 to 2020 report, we have taken a closer look at the actions of owner occupier purchasers by undertaking an analysis of two buildings that were built targeting different markets. Both buildings were marketed and completed in the early to mid 1990s, which allows us to identify long term trends.
<ul>
<li>
Admiralty Towers in Howard Street faces the Brisbane River and contains 152 apartments that were pitched at the investor end of the market.
</li>
<li>
The Moreton in the Dockside development is located in Kangaroo Point and also faces the Brisbane River, with 106 apartments and was pitched at higher price points, and presumably being more attractive to owner occupiers.
</li>
</ul>
Reflecting the market positioning of each building, a higher average pre-sale price was achieved at The Moreton, at $425,000 per apartment versus $377,000 per apartment at Admiralty Towers—although this could also reflect the mix of apartments and location as well as the size/quality of apartments.
An analysis of sales shows that despite the different price points, pre-sales were dominated by investors (which include second home purchasers) in both projects, who accounted for 75% of off the plan sales in The Moreton and as much as 84% of apartments in Admiralty Towers (see chart below).
Click to enlarge
<a title="Click to enlarge" href="/images/stories/2013/11/29/angie-nov-29-one.gif" rel="shadowbox"><img src="/images/stories/2013/11/29/angie-nov-29-two.gif"></a>
Source: PriceFinder
Subsequent sales show that both buildings attracted a higher level of owner occupier purchasers after completion, although they favoured the higher priced The Moreton project at Kangaroo Point. The majority (52%) of apartments in The Moreton are now owner occupiers, and while investors are still the majority in Admiralty Towers, owner occupiers now fill out 40% of apartments.
This reflects two things:
<ul>
<li>
Investors are attracted at pre-sale, most likely due to the negative gearing benefits of depreciation, etc, being at their greatest. There may also be stamp duty benefits in purchasing off-the-plan.
</li>
<li>
Owner occupiers prefer to come in after the building is completed. As the negative gearing benefits are not relevant to an owner occupier, there is less incentive to purchase off-the-plan, while they can also “touch and feel” the dwelling that they will be living in. Moreover, the timing of their requirement for an apartment may not necessarily coincide with the timing of the construction of a new apartment project. For example, a first home buyer could wait up to three years or more between signing the contract and when their apartment is completed, while upgraders and downsizers face a more uncertain market in the future to sell their existing dwelling before moving in.
</li>
</ul>
Interestingly, there was a greater turnover of apartments in The Moreton—88% of apartments have recorded a re-sale compared to 74% in Admiralty Towers—despite the perception of owner occupiers having more stable occupancy. Perhaps for many owner occupiers of apartments, this represents a stepping stone into another dwelling.
Nevertheless, despite the higher turnover, apartments in The Moreton achieved higher price growth on average than Admiralty Towers, with sales on average achieving a rate of growth of 3.9% per annum, compared to 3.6% per annum. The margin may not be substantial, but it builds up in aggregate over an extended holding period.
What does this mean?
While a development can be developed and marketed as attractive to owner occupiers, developers are nevertheless reliant on investor purchasers to achieve the pre-sales for development finance to proceed. This poses a problem for policy makers, who would like a greater level of owner occupiers living in apartments.
The limited owner occupier demand at pre-sale means that developers are likely to build stock at a price point to be more attractive to investor purchasers in order to achieve the required pre-sales in a timely manner. Owner occupiers instead then prefer to purchase the finished product, where the look and quality of the apartment is a known quantity. However, a development developed and priced to maximise investor sales may not necessarily be attractive to owner occupiers in the future.
Even in conducive locations where a developer may develop and seek to target a higher share of owner occupiers for off-the-plan sales, investors are a necessary—and indeed compulsory—part of the marketing equation. Only smaller or unique buildings can get away with being purchased in majority by future owner occupiers, as they could potentially face a more limited opportunity to buy in at re-sale. Nevertheless, the prospect of greater future price growth and potential onsale to either another investor or an owner occupier can play a part in marketing to investors. Such a project would also attract a larger, although probably still a minority, share of owner occupiers provided the project is developed as being attractive to this market upon completion.
 
<hr>
 Angie Zigomanis is senior manager of <a rel="nofollow" title="BIS Shrapnel" href="https://www.bis.com.au/" target="_blank">BIS Shrapnel.</a>
 
 
 
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angiezigomanis-VT64gGbExQ

How important are owner occupiers in the inner Brisbane apartment market?

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While Sydney and Melbourne are frequently mentioned as Australia’s start-up hotspots, a new report into state-based business taxes has revealed South Australia and Queensland are the cheapest states to launch a company in.
The state-by-state tax review of Australia released by accounting, auditing and investment group <a href="https://www.propertyobserver.com.au/https://www.startupsmart.com.au/financing-a-business/venture-capital/pitcher-partners-director-tells-how-to-get-a-start-up-investment-ready/2013080210386">Pitcher Partners</a> looks at what taxes two hypothetical start-ups would pay in each state.
Paul Glover, a partner at Pitcher Partners, told StartupSmart the reason these two states had performed well was due to lower property costs and the state governments being more proactive in updating their tax regimes to encourage small business.
“We decided to take into account the relative property values because if you don’t do that it does leave out a serious factor that would influence where you might start up,” Glover says. “Also their taxes are more attractive because they’ve done more to make it so for business.”
For the smaller start-up with an annual payroll of $1,178,427, <a href="https://www.propertyobserver.com.au/https://www.startupsmart.com.au/growth/growth-strategy/brisbane-emerging-as-a-start-up-hot-spot-on-tech-scene/2013091010686">Queensland</a> had the lowest payroll tax, followed by New South Wales, <a href="https://www.propertyobserver.com.au/https://www.startupsmart.com.au/planning/entrepreneurial-perth-digs-in-as-the-resource-investment-boom-slows/2013062710074">Western Australia</a>, <a href="https://www.propertyobserver.com.au/https://www.startupsmart.com.au/growth/adelaide-aiming-to-become-start-up-hot-spot/2013090310623">South Australia</a> and Victoria.
For the larger start-up, with an annual payroll of $5,834,950, Victoria had the lowest payroll tax, followed by Queensland, New South Wales, Western Australia and South Australia.
New South Wales and Western Australia were the most expensive states to launch a company in, largely due to high property prices.
“New South Wales and Western Australia need to focus a bit more on their state tax systems because there is a risk they could lose out when start-ups and other established businesses become more mobile and able to move. They shouldn’t sit back and relax because they’re the leaders at the moment for business,” Glover says.
The report found the states were fairly similar when it came to the costs for larger start-ups, excluding NSW, which was significantly more expensive.
“There has been a very large stamp duty recovery in NSW due to the hot property market, and this gives them the opportunity to invest that revenue into reforming their tax system to make the state more efficient,” Glover says.
You can <a href="https://www.startupsmart.com.au/images/stories/20121120/pitcher%20partners%20state%20tax%20review%202013-2014.pdf">download the full report here</a>. 
 
<hr>
 This article first appeared on <a rel="nofollow" href="https://www.startupsmart.com.au/">StartupSmart</a>.
 
 
 
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