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>
Housing affordability for first home buyers loomed large in the news this week, largely because properties in Sydney and Melbourne are selling for more than many first timers can afford.
But if you’re a first home buyer, is this really a time to panic just because you missed out at a couple of auctions?
If there’s 20 bidders at an auction, 19 miss out.
If you’re committed, you still have to save as much deposit as you need, and enough to cover the stamp duty and conveyancing costs. If you don’t have enough, you have to save more.
You also have to monitor your ability to pay the cost of the loan. So be realistic about how much income you can rely upon and what it takes to service your mortgage.
Or, could you do what most home buyers do and buy a cheaper property?
If you don’t want to adjust your goals downwards, you’ll have to adjust upwards your deposit, stamp duty and loan repayment equations.
Also, use an online loan calculator before saying yes to a low-equity mortgage. If housing values weaken again, 20% equity feels better than 10.
On a policy level, would you like to see governments releasing more land to meet demand? Or should government promote more competition in the mortgage market, creating more options for more consumers?
Should New South Wales reinstate the First Home Owners Grant for existing homes?
Regardless, I do wonder if the affordability story is the whole story. Might it have more to do with where people want to buy and less to do with a generation missing out?
Stephen Koukoulas, an economist writing in Business Spectator, uses Reserve Bank numbers and finds that new home loan repayments as a percentage of household income is around the same now as it has been for 30 years. He concludes, “There is no evidence of a first home buyers’ affordability problem.”
He goes further: the prices of so-called cheap city properties bought by older generations were offset by the high interest rates; the rising Sydney house prices are offset by the historically low interest rates.
Interest rates and property markets fluctuate, but households and lenders stay within basic serviceability ranges.
This may not be the desired conclusion for those who have set their hearts on buying somewhere beyond their resources. And it doesn’t fit with the idea of a generational conflict where one cohort is ‘shut out’.
Actually, every first home buyer finds it hard – people in my generation bought modest first homes with interest rates at 20%.
Perhaps the current first home buyers would be better served by recognising the opportunity rather than the problem? At 4.8%, a mortgage is currently cheaper than it will be again in our lifetimes.
This is a massive, historical opportunity. So forget about scapegoats and do what you need to do: which is boost your deposit, set your sights on what is affordable and think in steps – it’s a long road.
What do you think?

<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

First home buyers have no cause to panic: Mark Bouris

<html><body>
Homes were destroyed yesterday as the bushfires raged through Sydney's Blue Mountains, and it isn’t the first time that property owners’ fears have been brought to the surface.
In Springwood and Winmalee in New South Wales, west of Sydney, a number of houses were reportedly destroyed, according to the Rural Fire Service.
Almost 600 firefighters were battling up to 80 bush and grass fires yesterday, 31 uncontained, across the afternoon, The Australian reported.
Around 8,700 homes west, south west and north of Sydney suffered power outages. This morning, reports were coming in from ABC radio with Blue Mountains mayor Mark Greenhill saying a number of properties are lost. ‘‘It’s a scene of utter devastation," Greenhill told the ABC from Emma Parade. "There are at least a dozen home lost right where I'm standing now. We’re seeing just house after house after house that’s gone."
<blockquote class="twitter-tweet">
Salt Ash fire seemed over until this house went up 20 minutes ago. 5 fire trucks now here. But house is gone <a href="https://t.co/T4PRfv3dxP" target="_blank">pic.twitter.com/T4PRfv3dxP</a>
— Sean Berry (@Seanberry7news) <a href="https://www.propertyobserver.com.au/https://twitter.com/Seanberry7news/statuses/389472750659588098" target="_blank">October 13, 2013</a>
</blockquote>
For those currently unsure of where the fires are, this <a href="https://google.org/crisismap/2013-nsw-bushfires" target="_blank">bushfire map</a> is being regularly updated by the NSW Rural Fire Services due to intermittant site outages on their official website.
Even those some distance away from the Blue Mountains reported seeing the “orange glow” of the bushfires. These photos below come from residents in western Sydney suburb, and popular investment spot, Whalan, who shared them with Property Observer (also see our gallery below). While the fire is unlikely to reach these homes, it certainly has many asking how they can protect themselves in case.
<img width="470" height="262" src="/images/stories/2013/10/17/one.jpg" alt="one">
Photo above by Lisa Blundell
<img width="470" height="286" src="/images/stories/2013/10/17/foru.jpg" alt="foru">
Photo above by Nicole Brown
When purchasing a property
Every transaction needs to be entered into with your eyes wide open. That includes knowing the risk of bushfire, floods, cyclones and other natural disasters.
Currently, in Victoria, vendors are now required to <a href="https://www.propertyobserver.com.au/residential/victorian-vendors-to-disclose-threat-of-bushfire-to-residential-land-enzo-raimondo/2012061455127" target="_blank">disclose whether a property is on bushfire prone land</a>. You can also check the details of the land online via this <a href="https://services.land.vic.gov.au/landchannel/content/addressSearch" target="_blank">state government portal</a>.
In New South Wales, a section 149 certificate can be applied for from the correct governing council. This does come at a small cost for the purchaser. For instance, the <a href="https://www.cityofsydney.nsw.gov.au/development/application-guide/application-process/zoning-certificates" target="_blank">City of Sydney charges between $50 and $80</a> for these certificates. If you're intending to develop, rebuild or put a granny flat on the block, the <a href="https://www.rfs.nsw.gov.au/dsp_content.cfm?CAT_ID=1009" target="_blank">NSW Royal Fire Service has some useful information online</a> about which hoops you may need to jump through, and details to be aware of.
Your current property
To create your own property bushfire survival plan, there's a <a target="_blank" href="https://www.rfs.nsw.gov.au/file_system/attachments/Attachment_BushFireSurvivalPlan.pdf">document from the government</a> available that covers everything from clothing to consider, to deciding whether you should leave your home. It’s worth having a read through, particularly if you’re in a more regional area.
The guide recommends that you ask yourself the following questions to determine the property's level of risk.
Ask:
1. Do you live within a couple of streets of bushland?
2. Does your local area have a history of bush fires?
3. Do you have many trees and shrubs around your home?
4. If you need to leave your home, do you need to travel through bushland?
5. Is your Bush Fire Survival Plan more than one year old?
Bushfire maps can also help you determine if your area is potentially at risk.
<blockquote class="twitter-tweet">
Driving through Yellow Rock, rows and rows of gutted homes. Locals guess 150 homes gone on one road. <a href="https://twitter.com/NewsTalk2UE" target="_blank">@NewsTalk2UE</a> <a href="https://t.co/X7IDsQNrwN" target="_blank">pic.twitter.com/X7IDsQNrwN</a>
— Michelle Taverniti (@M_Taverniti) <a href="https://www.propertyobserver.com.au/https://twitter.com/M_Taverniti/statuses/390947028093501441" target="_blank">October 17, 2013</a>
</blockquote>
Preparation tips to protect against bushfires
- Cut back overhanging trees or shrubs and dispose of cuttings appropriately
- Check the condition of your roof and replace damaged or missing tiles
- Non-combustible fences are most effective
- Clean leaves from the roof, gutters and downpipes
- Fit quality metal leaf guards
- Enclose underfloor areas
- Plant trees and shrubs that are less likely to ignite due to low oil content
- Consider installing a Static Water Supply sign if you have a water tank, dam or swimming pool
- Store wood piles well away from the house
- Keep grass cut
- Make sure pressure relief valves on LPG cylinders face away from the house
- Ensure you have a hose long enough to reach your entire home
- Store flammable items away from the house
- Check the condition of external walls/cladding and seal gaps
- Choose a non-combustible doormat
- Metal flywire screens should be attached to the outside windows and doors
When the fires have passed, don't let your guard down. You will need to patrol and ensure no embers or sparks can affect your property.
<blockquote class="twitter-tweet">
Great advice from South Warrandyte Fire Bridgade RT <a href="https://twitter.com/GlobalCareAu" target="_blank">@GlobalCareAu</a>: Help some1 prep their house 4 bushfire season <a href="https://t.co/5X3mZzlWOF" target="_blank">https://t.co/5X3mZzlWOF</a>
— QldFire (@QldFire) <a href="https://www.propertyobserver.com.au/https://twitter.com/QldFire/statuses/390634908735254528" target="_blank">October 17, 2013</a>
</blockquote>
Always ensure that all fire alarms are adequately installed with the correct batteries and that home and content insurance is in place that covers you in the event of a fire. If there are tenants in the property, ensure that they are prepared in the event of a bushfire, and that they are provided with as much information as possible.
Grants from the government are occasionally available for those most badly affected. For instance, in Tasmania these are the <a href="https://www.bushfirerecovery.tas.gov.au/people_and_communities/red_cross_bushfire_appeal/stage2" target="_blank">current listed grants </a>for property owners, tenants and local communities. They include up to $10,000 to assist with rebuilding a property and $5,000 for tenants to assist with replacing their contents.
In Western Australia, this <a href="https://www.legalaid.wa.gov.au/LegalAidServices/publications/Documents/WA%20Bushfires%20Renting.pdf">l</a><a target="_blank" href="">egal aid document</a> lays out the rules between owners and tenants.
"If you own the house and it is now unfit for the tenant to live in, you cannot make a tenant move out immediately so try to work out an agreement with them," the document states. It also covers an outline of the rules surrounding bonds and commercial tenancies.
Observer Jo Chivers has also previously written on the subject of the <a target="_blank" href="https://www.propertyobserver.com.au/developments/the-impact-of-bushfire-zoning-on-your-development-jo-chivers/2013052361604">impact of bushfire zoning on your development</a>. 
Views of the fire around Sydney
{yoogallery src=[images/stories/2013/10/18/fire]}
All our thoughts go to those currently affected.
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Protect your property from bushfires

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Higher density housing is often viewed as an investment opportunity but like all property the outcome depends heavily on a range of factors.
This is apparent when the suburbs of Melbourne are ranked by their indicative gross yield over the past year for units. Using the RP Data Scorecard, the data applies to the year ending September and only includes suburbs with at least 500 dwelling to reduce variability.
Inner city <a target="_blank" href="/news">Carlton </a>tops the list with a yield of 6.9%. The neighbouring <a target="_blank" href="/news">CBD</a> is fourth on the list with a strong 5.9% which underscores why demand from investors is helping to drive the inner city high rise market.
Carlton has a lower rent than the CBD with a median asking price of $360 compared to $450.
The other three suburbs in the top five are at the more affordable end of the market from the perspective of median asking rents but still provide healthy yields. <a target="_blank" href="/news">Broadmeadows</a> has a median rent of $310 per week and a yield of 6%, <a target="_blank" href="/news">Melton</a> a median rent of $255 and yield of 5.8%. Neighbouring <a target="_blank" href="/news">Melton South</a> a median rent of $240 and yield of 5.6% has been recorded.
Does this make these suburbs good investment opportunities? That really depends on the actual property on offer and whether you are seeking a high weekly rent or a larger capital gain.
 
<hr>
 Robert Larocca is Victorian housing market specialist for <a rel="nofollow" href="https://rpdata.com/" target="_blank">RP Data</a>.
 
 
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The best Melbourne suburbs for unit and apartment yields: Robert Larocca

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Last week’s employment data showed a fall in Australia’s workforce participation rate to 64.9%, the lowest for seven years.
If the rate had been maintained at the level of three years ago, unemployment would have been around 6.6% in September, according to some estimates. Labor thus left office with workforce participation having peaked and begun declining on its watch. It’s now a challenge the Coalition has inherited, and a significant one.
The reasons why fewer of us are in, or seeking, paid employment?—?in particular, whether it’s the long-awaited impact of ageing on the workforce?—?aren’t clear (theAFR’s David Bassanese <a rel="nofollow" target="_blank" href="https://www.afr.com/p/business/companies/ageing_only_one_part_of_workforce_RdlA0fb6pyjz3lRSaDpC1M">had a good go this week</a>). In a speech nearly a year ago on the labour market, Reserve Bank Deputy Governor Phil Lowe <a rel="nofollow" target="_blank" href="https://www.rba.gov.au/speeches/2012/sp-dg-091012">told an audience in Hobart</a> that:
<blockquote>
“One interesting aspect of the recent outcomes is that despite only modest overall employment growth, the unemployment rate has not moved up, as had been widely expected. Part of the reason for this is that there has been a decline in labour force participation?—?that is, in the share of the working-age population either with a job or looking for a job. While one always needs to interpret short-run movements with caution, the current participation rate is around half a percentage point lower than the average of the past five years. This stands in contrast to the general upward trend in participation over the past 30 years. “The Reserve Bank has recently spent some time trying to understand what is happening here and what it says about the balance of supply and demand in the labour market.”
</blockquote>
Some of this work looked at demographic changes, high levels of structural change in many industries delaying the re-entry of workers (especially men) and the weakness in construction which traditionally has high levels of self-employed workers. But from the lack of a firm conclusion in this speech, the RBA remains as puzzled, as are many other economists.
Tuesday’s minutes of the <a rel="nofollow" target="_blank" href="https://www.propertyobserver.com.au/https://www.rba.gov.au/monetary-policy/rba-board-minutes/2013/01102013">Reserve Bank’s October meeting</a> carried this tantalising paragraph:
<blockquote>
“Members were briefed on longer-run changes in the industry composition of output and employment. The share of economic activity occurring in service industries had increased over time. Employment in services had recorded a greater increase than in goods-related industries, in part reflecting slower productivity growth in service industries. Over the past decade, the bulk of the increase in employment had been in service industries.”
</blockquote>
This is understood to have been a briefing based on an earlier request from the board. There’s no research being prepared for a later article in the quarterly bulletin or a speech by a senior official, such as Governor Glenn Stevens (who speaks in Sydney on Friday) or Lowe, who is out in public in Melbourne the following week.
The reason for the request isn’t known, but it could be linked to the way the labour market has softened since mid-year, especially with a noticeable fall in the participation rate. The minutes made this observation about the labour market:
<blockquote>
“The labour market had softened further in recent months. The unemployment rate had increased to 5.8 per cent, the participation rate had declined and the level of employment was little changed from earlier in the year. Members noted that hours worked had increased. Although the hours worked data are volatile, possible explanations for the increase included changes in sectoral employment shares, increased hours for existing staff as firms attempted to contain labour costs or reluctance of firms to take on new staff. Forward-looking indicators of labour demand remained soft and the Bank’s liaison suggested that employment intentions had been subdued in recent months, most notably in mining and mining-related sectors.”
</blockquote>
The Howard government was aware of the need to continue to push participation. Joe Hockey defended government assistance for working women in the face of opposition from social conservatives on the basis that “we’re running out of workers”. That government also tried to reduce the price of labour, via Workchoices, thus bringing underskilled workers into or back into the workforce (which had, as Treasury predicted, a negative impact on productivity).
With Workchoices dead, buried, cremated, staked through the heart and shot into space by Tony Abbott as opposition leader, that option isn’t currently available. Now in government, the Coalition does see its PPL scheme as providing a greater participation incentive than the Labor scheme it wants to replace. But addressing participation traditionally requires the rather mundane work of improving training, making jobs more interesting and lowering barriers to older workers (something Labor tried to do) and increase mobility, something Abbott has flagged previously via clunky incentive schemes to encourage workers to move to mining states?—?now useless given mining is shedding workers. And bear in mind high property prices in Sydney and Melbourne might be an increasing disincentive all of their own.
In many respects the weak participation rate is more important than abolishing the mining tax or the carbon tax. In the medium to longer term, higher levels of workforce participation boosts employment, standards of living and tax revenues (especially from the GST) and helps underwrite a higher level of demand in the economy. What the Coalition Employment Minister Luke Hartsuyker does on the issue will have a significant bearing on future budgets and economic growth.
 
<hr>
 This article first appeared on <a target="_blank" rel="nofollow" href="https://www.crikey.com.au/">Crikey</a>.
 
 
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Economists stumped as Australia's participation rate falls to a seven-year low

When it comes to choosing the right investment property, there are a number of different approaches and it can understandably be a confusing environment for many. Emails continually come in to the Property Observer editorial inbox from readers looking at buying in different states, unsure about locations, or just wanting some guidance.

Here, we will briefly run through how to start considering your approach to selecting an investment property. Over the next few weeks, the Property Observer team will tear apart each part in the process to show you just how to replicate the process.

1) Your personal situation

- What are your goals in life?

- What do you hope to achieve with property?

- How will you achieve this?

Figure out what this look like in terms of a time frame (how long do you have?) and how much you need (what return does it need to give me?). Consider cash flow and capital growth, and decide whether you&#39;re requiring a positive cash flow right now, or in the future, or if you&#39;re willing to pay out each week and hope for some capital gain.

Understanding what the property needs to do to fit into your portfolio is absolutely critical. There is little point buying a property that has terrible cash flow, but fantastic long-term capital growth potential, if your plan is to improve your current living situation. Similarly, if you have your heart set on renovating for capital gain, it&#39;s unlikely you&#39;ll want to be buying in a brand new estate. You might want to read Margaret Lomas&rsquo; response to an investor who <a href="https://www.propertyobserver.com.au/residential/ask-margaret-should-i-buy-off-the-plan-or-an-existing-property/2013062862801" target="_blank">asks whether they should buy established or new</a>.

Consider your appetite for risk - are you willing to buy in a mining town that may experience a significant downturn for the chance of strong cash flow? Your &#39;sleep at night&#39; factor is a critical part of this.

You will also want to assess your borrowing capacity, current financial situation and similar. This may require the services of some form of adviser, broker, financial planner or investment mentor. Investors are advised to ensure they check carefully about who they do business with.

2) Turn to the &#39;macro&#39;

- Are you comfortable buying in another state?

- How are the states/territories performing?

- Where do they sit on the property clock?

There are thousands of suburbs across Australia, and there&#39;s no way you can check them all. Property buyers should become familiar with the concept of the property clock and try to place each of the different states and territories onto this diagram as part of their initial analysis.

For investors wanting to learn more about the property clock, observer Jo Chivers wrote about <a href="https://www.propertyobserver.com.au/developments/learn-where-your-region-sits-on-the-property-clock-before-you-begin-your-development/2011110252187" target="_blank">working out where your region sits on this clock</a> before considering development.

Remember that buying low and selling high is a common investment mantra, but that it can be difficult to see where the bottom is and when the top has passed until later down the track.

You will also want to cultivate an understanding of the different overall forces within each state and territory. Understand how changes in the public service may affect the ACT, for instance.

3) Digging down

- What can you afford versus what is available?

- What are the overall plans for the state/territory selected?

- How do the areas stack up based on your statistics?

Here, your price point and borrowing capacity will become even more important. As you try to choose a region or more localised area (such as, for instance, Sydney&#39;s western suburbs) you may find that your price point helps you refine this quickly. Other statistical indicators, relating to your strategy, can also help you shortlist. This may include rental yield, proportion of houses v apartments, income growth and a number of other statistics that investment experts regularly hang their hats on.

You will want to be taking the list of wider areas that you can afford and going through them, checking for overall drivers and growth prospects in the areas. If they&#39;re largely driven by tourism, then you&#39;ll want to understand the potential fluctuations in this labour market, and how this may flow-on to your investment property.

It will also be worth looking at government plans on a wider scale to try and pinpoint areas of growth. If, for instance, a rail line is being put through a whole area and there is significant infrastructure investment, then you may want to consider it more highly. Be wary though, sometimes these initiatives are reactive, rather than proactive - that is, they are put in as a result of growth rather than in expectation of it.

Understand where these areas sit in relation to the rest of the state/territory. Understand its distance from major employment hubs, and how it differs or is similar to other areas.

4) Localising your knowledge

- What are the plans for the areas?

- How do the dynamics work within the local government area (LGA)?

- What are the locals saying?

- What are the statistics saying? We have free data available here.

When you have chosen a broader area, such as an LGA, in your price point, you&#39;ll want to become aware of how the individual suburbs work and the reputations of each.

For instance, in Sydney&#39;s Hills District, Castle Hill is a more expensive suburb with a busy, mini-city like atmosphere where the properties are tightly held. Beaumont Rise, however, is a brand new estate with smaller plots. In quickly developing areas, such as these ones, you&#39;ll want to know the inner-LGA dynamics.

One way to do this is to speak to the locals yourself, discuss with real estate agents, buyer&#39;s agents and property managers, and to call the local council. Ask about upcoming plans for the area, any new developments and similar. Get to know what the people, on average, tend to be like across the region. Jump onto the <a href="https://www.abs.gov.au/websitedbs/censushome.nsf/home/quickstats" target="_blank">ABS&#39; QuickStats Census data</a>, or <a href="https://home.id.com.au/" target="_blank">.id informed decisions</a>&nbsp;to get a statistical understanding, but start reading into the local culture as well. Crime statistics and reading the local paper can also be quite revealing.

Getting an idea for how quickly properties can be developed in the local area is important, as supply/demand statistics will underpin much of your investment strategy. If there is endless developable land, then you might want to have a closer look.

5) Understanding your specific suburb

- What is the good v bad side?

- What is the price ceiling and what are different properties worth?

- Which properties are most desirable?

- Check the level of amenity

When you have a small area to deal with, there is still a &#39;good side&#39; and a &#39;bad side&#39;. Some suburbs have streets where prices range from $1.2 million plus to $500,000, often due to views or busy streets or a combination of factors. This is often referred to as &#39;pricing disparity&#39;.

You need to get a quick knowledge of the worth of properties in the suburb so that you don&#39;t pay too much and can identify a deal quickly when it comes along. You&#39;ll also want to ensure you&#39;re on the right side of a suburb, or the street that doesn&#39;t have an inbuilt &#39;value ceiling&#39; due to unchangeable factors, such as a noisy train line.

To do this it&#39;s worth looking at comparable sales, visiting home opens and, again, speaking to local experts. You will also want to attend auctions if it&#39;s a popular selling method within the suburb. Keep your eyes and ears open, and keep detailed records of what has been selling, comments that other buyers have been making and their reactions to different types of properties. Ideally, you will want to know how the addition of a room, or a pool, or a car space, affects the value of a property.

Observer David Airey wrote about <a href="https://www.propertyobserver.com.au/residential/what-is-the-best-way-to-judge-the-value-of-your-property-david-airey/2013072863556" target="_blank">how to figure out the value of a property</a> in a recent column, while Patrick Bright also told us that <a href="https://www.propertyobserver.com.au/residential/how-to-determine-a-property-s-true-value-patrick-bright/2012121258406" target="_blank">inspecting 100 comparable properties</a> is one way to do this due diligence.

Find out where most of the renters live, and what the renter/owner occupier split looks like. You&#39;ll also want to know how this suburb compares with the averages of the wider area you previously researched.

Get to grips with the local demographic. See how this differs from what you saw in step four. If your chosen suburb is filled with families, then you&#39;ll potentially want to be looking at family-friendly stock. But are they a young family? Do they tend to have two children or three? Are the parents professionals? In different suburbs, the desire for certain types of properties differs. Understand what is desirable currently, but also down the track when you might be inclined to sell.

Check out the local development applications. If there&#39;s a big apartment block going up in the suburb, this isn&#39;t necessarily a negative thing for you. However, you&#39;ll want to know what the impact may be.

Consider tools such as WalkScore, Google Maps and NearMaps to shape the area&#39;s dimensions in your mind. Decide where the &#39;best&#39; pockets of the suburb are - where demand is highest. Then consider how your investment requirements fit around this. It&#39;s often worth heading out there yourself for a look, but remember not to be blinded by emotion.

The next steps

Remember to keep all your details together so you can refer to them when necessary. Every investor has a different strategy and a unique approach to the type of property they buy, and the reasons behind it, and the savviest investors regularly refine their process.

Which parts of the process would you like fleshed out more? We&#39;ll be delving into the different research techniques for you, how to decide the good versus the bad side of a suburb, and how to tell if a property really is comparable.

Email: <a href="mailto:jduke@propertyobserver.com.au">jduke@propertyobserver.com.au</a>

Five steps for choosing the right investment suburb

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I've often been confused by those TV shows where a caller dials in and asks: "Should I buy shares in this company?" or "should I buy a property in this suburb?", particularly when the panellist immeditaley fires back "No, but what you should be doing is...". The obvious problem with this type of financial advice is that there is no consideration of personal needs, financial goals or circumstances. And so it is with the present debate about whether it is a good time to buy a house.
In Australia, renting is usually 'cheaper' than buying in terms of monthly cashflow, so it can definitely make sense to rent where you live and invest your dollars elsewhere. I've long been a strong advocate of this idea, particularly in an age where people are changing jobs and careers far more often than ever before.
One problem is that plenty of people rent and then never invest in anything at all. It would be helpful in Australia if we moved towards longer lease terms or commercial style leases to allow renters more stability and certainty. Another common problem is that, as I specifically warned, it's all well and good to say that you will simply wait for prices to become cheap before buying somewhere to live, but what if prices don't behave themselves? Markets are rarely as predictable as people seem to believe.
And for Sydneysiders, so it is. By the time this cycle is over prices could easily be 40% higher than where they were five years or so ago, pricing many out of our market forever.
Is it a good time to buy if you are likely to have to move in a couple of years, though?
Possibly not. Stamp duty, legal fees and agent fees are material transaction costs that will likely see you fail to benefit from a short ownership period. Sure, you can retain a first property as an investment and some do this well - including my wife in fact, who still owns her first house bought aged 21. This can be great if you're able to buy in a well-located suburb, but the prospects for capital growth in outer and fringe suburbs, in my opinion, are often highly questionable.
The contrast with, say, a 35 year old buying a pure investment property via an SMSF, is stark. Knowing full well that the investment is likely to entail a multi-decade time horizon, the buyer is far less likely to be concerned with short-term market fluctuations. It's not that they would be completely emotionless if there was a sharp market correction, but they would likely be as close to that state as it would be possible to be.
Buying regularly, and buying more in the sales
On one TV panel investment show, the author of Motivated Money (I probably learned more useful information on Aussie share market investment from this one short 130 page book than from many years of reading other information) Peter Thornhill was asked what he hoped for the share markets in coming months. The other pannellists had variously offered the usual platitudes such as "cautiously optimistic for moderate gains", "a stabilising economy" or "firming growth".
Thornhill said simply: "Another GFC". The presenter of the chuckled nervously. Thornhill re-iterated: "I'm serious". He was never invited back on the show.
What Thornhill was getting at, albeit in his usual controversial and confrontational manner, is that market downturns can represent fabulous buying opportunities. His favoured strategy includes buying shares regularly (in particular, in low cost diversified LICs with exposure to financials and industrials, which tend to pay strong dividends and outperform the resources index and REITs over time) rather than obsessing over trying to time the market.
Thornhill warns very strongly that people tend to massively over-estimate their abilities in weather forecasting: "Market timing, for most of us, is no better than genuine guesswork".
Notably, property investors engage in far fewer and generally far larger transactions, so correspondingly buying well becomes far more important. Share investors can more easily average or smooth their results through regular purchases which buy more units when the markets are despondent and PE ratios are low and vice-versa.
And when the market does really tank, Thornhill will simply have some money set aside or in reserve for buying much more heavily, engaging sensible and considered leverage via margin loans at favourable rates, in order to to buy very hard into 'old favourite' stocks like Wesfarmers (WES) and Commonwealth Bank (CBA) when they are 'on sale' at $15 and $30 as the were in 2008/2009.
Thornhill stresses the importance of focussing on the growing income stream from a share portfolio - resulting in an investment strategy rather than price speculation - as opposed to the day-to-say share price fluctuations and unending market commentary. And imagine the dividends yielded from those 2008/2009 purchases today - 10-15% depending on your entry price, not to mention supersonic capital growth.
Dealing with market downturns
Always keen to learn whatever I possibly can about investment pyschology, I felt that this must be a man worth looking up, and over a coffee in Woollahra (actually, over several coffees in Woollahra) I was keen to explore whether Thornhill really dealt with market crashes in such a relaxed manner. His response was that, truthfully, "you would not be human if you did not feel the impact of a market crash". But, rationally, markets do recover over the long term, and after a crash when markets are despondent is often a great time to buy quality investments.
Does it bother me than Thornhill is 100% a shares man and essentially anti-property? Not at all. I've always preferred a balance, and believe that if you are prepared to research property markets thoroughly and buy counter-cyclically (such as in Sydney in 2007 or around London in the 1990s) you will also get great results over the long term.
<img style="padding: 5px; border: 1px solid #ebebeb; box-shadow: rgba(0, 0, 0, 0.0980392) 1px 1px 5px; display: block; margin-left: auto; margin-right: auto;" width="320" src="https://www.rba.gov.au/chart-pack/images/5-6-household-sector/6bl-dwelpri-small.gif?accessed=2013-10-16-06-09-36" height="255" alt="Dwelling Prices graph">
I tend to agree that if you're starting out with several million dollars then the great appeal (yet double-edged sword) of property market leverage is greatly diminished. However, so many of us (including me) started out with absolutely nothing, which is why property markets and the associated leverage available can seem more attractive.
Note the importance of focussing on income-generating ownership assets, such as shares and property. There are plenty espousing the benefits of shorting the market in recent times, yet they are getting their timing badly wrong and getting badly burned time and time again.
Just as bad are the usual swathe of broker "buy recommendations" in speculative mining shares resulting in woeful erosion of capital over a period of several years where simply owning the index has been generating fabulous returns. Before considering broker recommendations, look at what exactly same brokerage firms were tipping over the last 24 months - if you find more than half a dozen 'buys' which have collapsed in price, look elsewhere for advice.
As for gold, which pays no income, how badly is that strategy faring since its peak as compared to Thornhill's outstanding income-generating portfolio? Assets with growing income streams will always dominate over the long haul.

<hr>
Pete Wargent is the co-founder of <a rel="nofollow" target="_blank" href="https://allenwargent.com/">AllenWargent</a> property buyers (London, Sydney) and a best-selling author and <a rel="nofollow" target="_blank" href="https://petewargent.blogspot.com/">blogger</a>.
His new book '<a rel="nofollow" target="_blank" href="https://www.bigskypublishing.com.au/Books/General-Interest/Four-Green-Houses--and-a-Red-Hotel/1015/productview.aspx">Four Green Houses and a Red Hotel</a>' is out now.
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Is now a good time to be buying property? Pete Wargent

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Well, the market seems to now be in agreement. We are officially, whatever that means, in a sustained upward phase or “boom”.
By our reckoning Inner Melbourne at the top end has been in a “boom” since October of last year (2012).
As the realisation of this hits buyers, the questions we are getting have changed from: “How’s the market going, Mal?” to: “When is it all going to end, Mal?
Our answer is: “Who knows?”, and also: “We think you’re actually asking the wrong question.”
Well, you’re asking the wrong question if you want an informed answer. Because, if we ‘experts’ had little absolute idea as to when the market started, it’s unlikely we should know when it will end.
In any case, is it that relevant anyway? For all we know, the ferocious rise of this current market phase may have already eased. On the other hand it could run, as per 2009, for 18 months, or for another six to 12 months as in 2007, or another 13 years as it did from 1994.
We leave prognostications of the future to the economists, as well as to the media commentators who manage to expound at length on the market on evidence about as skimpy as that used by pre-game footy commentators.
The really useful and good buying question, in our opinion, is not a general market-based one – it’s a specific property-based one: Is this home you are currently looking at a good buy?
More specifically, is it a good financial buy?
Let’s test some theories on the recent ups and downs of the market. In the previous boom markets, who made the good decisions?
Did those who bought homes in 2002 or 2005 or 2009 make good or bad buying decisions?
Did those who bought on the precipice of the falls in 2007 and 2010 make good or bad buying decisions?
The financial wisdom of proceeding rarely relates to overall timing. It relates more to the individual circumstances.
You can still buy very well in rising markets if you have the right fundamentals – the right land content, the right location and the right floorplan.
These are things you can control – unlike the ups and downs of the market. And these are what determine the wisdom of your decisions. We are happy to provide a solid list of buys we purchased in 2007 that had solid property fundamentals, and that were sold over the next five years with a significantly increased price.
The fact is, we have no idea when or indeed if the current “boom” will end.
Our predictions always relate to a longer term picture, as it is impossible to get the short term right anyway. The longer term picture says that the population increase from China, then India and then Indonesia, is fuelling demand for our schooling, space, minimal corruption, safety of money and person, stable politics, pollution and our relaxed lifestyle.
In terms of supply – well they ain’t making any more land! The auctioneers are right on that one.
And in terms of price – are we as a community going to build to increase or decrease our overall wealth and wealth generation possibilities?
So in this current boom, forget about when it’s going to end, and think instead about whether you are asking the right question with regards to making good decisions and buying well for the long term.
 
<hr>
 Mal James is principal of<a title="James Buyer Advocates" href="https://www.jamesbuyeradvocates.com.au/" target="_blank" rel="nofollow"> James Buyer Advocates</a>, which advocates on behalf of buyers of property over $1 million.
Mal writes weekly auction reports, advice and in-depth market analysis on James' website.
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Is the market too expensive? Maybe you aren't asking the right questions: Mal James

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The arrival of new major international brands and the continued refurbishment of major city centre retail destinations have seen Australia's prime CBD retail districts maintain their status as amongst the most expensive in the world.
Sydney's Pitt Street Mall was ranked the eighth most expensive retail strip in the world, with rents in the mall averaging US$871 per square foot, according to the annual Colliers International 2013 Global Retail Highlights Report. The figures were based upon the currency exchange rate in March 2013.
Colliers International head of retail, Michael Bate said “The CBD continues to be the first location of choice for major international retailers coming to Australia… Generally, new entrants seek a flagship location in either the Sydney or Melbourne CBD, followed by smaller stores in top performing regional shopping centres".
Among some of the major brands to arrive have been Apple, Zara and Topshop, while others like Tiffany &amp; Co have been expanding their presence.
However, the report noted that new-to-market retailers must now consider options outside of the CBDs, where they would traditionally choose to locate stores. The biggest rent mover in the report was Brisbane Mall, which saw rents rise 5% to US$431.64 per square foot over the same time last year. Rents on Melbourne's Bourke Street Mall were steady at US$677.08 per square foot, while on Adelaide's Rundle Street Mall they fell 8.3% to US$265.99 per square foot.
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Australia's CBD retail districts among the world's most expensive: Colliers

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In addition to listed REITs which own property in the US there are also mortgage REITs which own mortgages and mortgage backed securities.  Assets of mortgage REITs total US$500 billion.  They have a market cap of US $60 billion compared with a market cap of US $550 billion for property REITs.  
In the current interest rate environment mortgage REITs borrow short-term and invest in longer term mortgage backed securities.  They are potentially highly sensitive to interest rate changes.  Gearing employed has been beneficial as borrowing rates kept falling.  Gearing has meant that returns have been strong.  
The quantitative easing (QE) policy adopted by the Federal Reserve in the US has involved purchases of mortgage backed securities which has accentuated the strong return. When QE tapers and borrowing costs rise then the returns will decline. Federal Reserve Governor Stein, US Financial Stability Oversight Council and now the IMF have highlighted this vulnerability.  Mortgage REITs are not the subject of regulatory oversight of capital adequacy.  
When interest rates rise, the risk of falls in market value will increase.  Greater gearing means greater risk. Average gearing is 8.5 times.  
In Australia debenture issuers which share some attributes with mortgage REITs are regulated by ASIC.  Following failure in the sector, ASIC have foreshadowed tighter controls, including a minimum capital ratio adequacy of 8%.  
Failure of financial institutions in the global crisis arose from inadequate equity capital, being excessive gearing, systemic risk of sectors in the financial systems and inadequate liquidity.  
Counter cyclical prudential regulations including capital adequacy are the preferred response supporting public pronouncements about mortgage REITs.
 
<hr>
 Ken Atchison is managing director of <a href="https://www.atchison.com.au/" target="_blank" rel="nofollow">Atchison Consultants</a>.
 
 
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The vulnerability of unregulated US mortgage REITs: Ken Atchison

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The Australian dollar hit a four-month high of $US0.9539 overnight, as the US debt ceiling approaches and credit ratings agency Fitch puts the US on a negative watch warning.
Tomorrow, the United States is scheduled to breach its debts ceiling, which would force the US Treasury to default on its debt.
This would have a dampening effect on the value of the US dollar, which would make the Australian dollar more expensive by comparison, UNSW economist James Morley said.
“An exchange rate back above 97 US cents for the Australian dollar is in theory possible – indeed, if there is a default, it is quite easy to imagine that the Aussie and greenback would hit parity once again.”
Since the start of September, the Australian dollar has appreciated nearly 6% against the greenback. A lot of this could be thanks to American policy, Morley says.
“We were in a situation where financial market expectations about Australian interest rates were the biggest driver of the Australian dollar, which had fallen about 20% off its peak last year.
“Now, however, US monetary policy is driving its rise again.”
But it’s not the only factor. The RBA has had an influence too.
“The RBA had been in an easing cycle, but expectations have shifted away from any further cuts,” Morley says. “The data out of China is stronger than expected, and the RBA is making sounds that they’re not going to ignore big increases in house prices if the economy is weak. They don’t want to fuel an asset-price boom.”
This morning, Fitch warned the US could lose its top-grade AAA credit rating.
"Although Fitch continues to believe that the debt ceiling will be raised soon, the political brinkmanship and reduced financing flexibility could increase the risk of a US default," Fitch said in a statement.
Morley says the ratings agency is reflecting the “very obvious”, but any move towards a downgrade by it is consequential, as it affects the borrowing costs for the US government.
Overnight, House Speaker and Republican Jon Boehner tried twice to get government funding bills through the lower house, but both bills failed to get enough support to pass.
White House spokesman <a rel="nofollow" href="https://www.reuters.com/article/2013/10/15/us-usa-fiscal-whitehouse-idUSBRE99E0PH20131015">Jay Carney said</a> while progress was being made, “we’re far from a deal at this point”.
An American default would have catastrophic global consequences, but Morley is expecting a deal at the last minute.
“There’s not a lot of incentive for Obama to negotiate at this point, as he’s not going to pay a political cost for what the public sees as a responsibility of Congress. The Republicans don’t want this on their hands, so they’ll leave it until the last moment to back down.”
The Australian dollar pulled back slightly this morning – at 11am, it was buying $US0.95.
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This article first appeared on <a href="https://www.smartcompany.com.au" target="_blank">SmartCompany</a>.
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