A landmark former orphanage site in Surrey Hills could be transformed into a new residential community under plans lodged by <a href="https://www.apartments.com.au/developers/antipodean-land-developments">Antipodean Land Developments</a> that would deliver 76 apartments and townhouses while restoring some of the suburb's most significant heritage buildings.

The burgeoninng Melbourne-based developer has submitted plans for the 9,158 sqm site at 1 Kent Road and 24 Durham Road, home to the former St Joseph's Home for Destitute Children, a historic institutional complex dating back to the late 19th century. The proposal seeks to adaptively reuse several heritage buildings while introducing two new four-storey residential buildings set within extensive landscaped grounds.

Designed by <a href="https://www.apartments.com.au/architects/woods-bagot">Woods Bagot</a> and Kerstin Thompson Architects, the project has been conceived as a contemporary residential village embedded within a restored heritage precinct. The development team describes the design approach as "The Village in the Garden," with new buildings positioned among mature landscaping by OCULUS and significant heritage structures.

<img alt="First look: Antipodean Land Developments plans heritage-led apartment community in Surrey Hills" data-entity-type="file" data-entity-uuid="44ec8c1b-c0b6-44ae-859e-5811b3e6a023" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Untitled%20design%20%281%29.png?VersionId=p.p1_KFh4iQoV4nisdnPfQBAsWNi7m79" />

The proposal would deliver 76 dwellings comprising a mix of apartments and duplex-style residences, significantly increasing housing supply on one of the largest privately held residential landholdings in Surrey Hills. The development includes 127 car spaces, 24 bicycle spaces and more than 1,000 sqm of communal amenity, with the existing chapel building earmarked for conversion into resident facilities.

According to the planning submission, the project centres on the restoration and adaptive reuse of the site's most significant heritage assets, including the original c.1889 St Joseph's building, the chapel designed by architect Augustus Andrew Fritsch, and the historic brick perimeter walls and entry gates. The proposal also incorporates the retention of other contributory buildings including the former infirmary and school building.

Tract Consultants, in the planning report accompanying the application, said the scheme had been shaped through extensive heritage analysis and design development.

"The shared vision for the Site by the project team has culminated in a scheme which successfully breathes life back into a historic site while delivering upon the objectives of Victoria's Housing Statement in a carefully curated and contextually responsive manner."

<img alt="First look: Antipodean Land Developments plans heritage-led apartment community in Surrey Hills" data-entity-type="file" data-entity-uuid="7263b7d8-95ea-400f-9531-6ca7d22c3c33" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Untitled%20design%20%282%29.png?VersionId=4cR1tiWOsDpgxEOwZi5vVFcyvvOsYkIE" />

The proposal is being assessed under Victoria's Significant Residential Development with Affordable Housing pathway. As part of the application, three per cent of the project's residential development cost would be contributed to the Social Housing Growth Fund. The development would also provide a diverse mix of one, two and three-bedroom residences targeting a broader range of buyers than typically found in Surrey Hills' detached housing market.

Sustainability initiatives include an anticipated 66 per cent BESS score, natural cross-ventilation to 80 per cent of apartments, 28 per cent deep soil landscaping and a canopy cover outcome exceeding local planning requirements. The proposal also sets aside more than 1,083 sqm for communal indoor and outdoor resident amenity spaces.

<img alt="First look: Antipodean Land Developments plans heritage-led apartment community in Surrey Hills" data-entity-type="file" data-entity-uuid="33fad46f-fe26-4d0a-acfd-6b776e1c6a3d" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Untitled%20design.png?VersionId=D9F6WVSyYCtGvSUmith35LRp6R7PQkw_" />

Planning documents describe the property as one of the largest underutilised residential sites in Surrey Hills, arguing it presents a rare opportunity to introduce "missing middle" housing in an established inner-eastern suburb while preserving and revitalising a significant heritage precinct.

Antipodean Land Developments has built a reputation for design-focused residential projects across Melbourne, particularly in the medium-density sector. Previous developments include Neighbourhood in Brunswick East, delivered with Breathe Architecture, and Balfe Park Lane, designed by Kerstin Thompson Architects.

They've been very active in site acquisition as they build out their future development pipeline. They recently launched Thornubury House, 45 apartments above a mix of commercial, retail, and food and beverage tenancies, and have plans for a boutique project in Fitzroy and another <a href="https://www.apartments.com.au/news/vic/antipodean-plan-apartments-for-deepdenes-missing-middle-on-whitehorse-road">"missing middle" project</a> on Deepdene's Whitehorse Road.

Joel Robinson

First look: Antipodean Land Developments plans heritage-led apartment community in Surrey Hills

Developer <a href="https://www.apartments.com.au/developers/auyin-property-development">Auyin</a> is the latest to turn to the Victorian Government's Development Facilitation Program in an effort to secure approval for its long-planned, mixed-use project in Elsternwick.

In 2018, Auyin lodged plans with Glen Eira City Council for a 14-storey building, however Council approved a reduced eight-storey scheme. A subsequent VCAT appeal in 2019 upheld the eight-storey height limit.

The project was later amended to nine storeys, but Auyin is now seeking to revive something closer to its original vision. The developer argues that the planning context has evolved significantly over the past decade, particularly within the Elsternwick Activity Centre, where higher-density development has increasingly been encouraged along Glen Huntly Road.

The proposal would transform the 1,239 sqm site at <a href="https://www.apartments.com.au/new-apartments/7-12-horne-street-elsternwick-vic-3185">7-15 Horne Street</a>, opposite Elsternwick Railway Station, into a 13-storey residential and retail development designed by CBG Architects, with 40 apartments

The site currently comprises three commercial properties.

<img alt="First look: 13-storey mixed-use tower planned for Elsternwick activity centre" data-entity-type="file" data-entity-uuid="5f465dd4-509b-4082-a669-0253b313914b" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/elsternwick%20podium.png?VersionId=72frWi0SmQ5AVJ3ARRhX5ILUYObhTm7x" />

The proposed apartment mix comprises 25 two-bedroom and 15 three-bedroom residences above 200 sqm of retail space at ground level. Residents would have access to a 90 sqm wellness facility, a 351 sqm communal indoor and outdoor terrace on the third level, and extensive landscaped areas throughout the development. A publicly accessible 135 sqm plaza would be created on the north-east corner of the site, providing seating, landscaping, and a new gathering space adjoining Horne Street.

The design adopts a four-storey podium that references the finer-grain character of the surrounding streetscape, with the upper tower recessed behind generous setbacks on all boundaries.

<img alt="First look: 13-storey mixed-use tower planned for Elsternwick activity centre" data-entity-type="file" data-entity-uuid="e637e763-2abc-4c34-a0aa-5c7ad36fae18" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/elsternwick%20open.png?VersionId=J1AoOpZgTyaF.KeeFSX6lMjEScX8KKRi" />

A key element of the proposal is the reconfiguration and widening of the surrounding laneways. Vehicle access would be retained from Lois Lane, with upgraded pedestrian connections linking Ross Street and Horne Street. The development would provide 58 residential car spaces, two retail car spaces, and 52 bicycle spaces across two basement levels and ground-floor facilities.

Architecturally, the building draws inspiration from the established character of Elsternwick Village. The façade combines dark charcoal brickwork, textured concrete, bronze-toned metal detailing, and extensive planting integrated into podium and tower levels. The design also incorporates a chamfered corner treatment and publicly accessible plaza intended to strengthen pedestrian activity around the station precinct.

Elsternwick's last new development completion was&nbsp;EVA Elsternwick by Pitard late last year. <a href="https://www.apartments.com.au/developers/milieu-property">Milieu</a> is working away on its nature-led neighbourhood, <a href="https://www.apartments.com.au/new-apartments/elsternwick-gardens-by-milieu-8-gordon-street-elsternwick-vic-3185">Elsternwick Gardens</a>, on Gordon Street, with its first stage expected to complete next year.

First look: Auyin seeks mixed-use apartment project in growing Elsternwick Activity Centre

<a href="https://www.apartments.com.au/new-apartments/otium-parkdale-123-125-como-parade-east-parkdale-vic-3195">Otium Parkdale</a>, the 13-residence boutique development by&nbsp;<a href="https://www.apartments.com.au/developers/huxtable-property">Huxtable Property</a>, has entered its final stages of delivery, with completion expected within the coming month and more than half of the residences sold.

The Como Parade East project is nearing the finish line at a time when opportunities to purchase new apartments in <a href="https://www.apartments.com.au/developments/parkdale-vic-3195">Parkdale</a> remain exceptionally limited. Fewer than 10 per cent of dwellings in the bayside suburb are apartments, making developments like Otium a relatively rare addition to a market traditionally dominated by detached housing.

[smartcode_project:default project_id=134974 project_image_fid=5427]

The three-level development comprises 13 residences, including ten two-bedroom apartments and three larger three-bedroom homes, all positioned above a secure basement car park.

Designed by <a href="https://www.apartments.com.au/architects/almeida-architects">Almeida Architects</a> with a strong connection to its coastal surroundings, Otium combines red brick, exposed concrete and dark metal detailing with integrated landscaping and greenery. Expansive glazing, generous balconies and terraces have been incorporated throughout the design to maximise natural light and reinforce indoor-outdoor living.

Inside, the residences feature engineered European oak flooring, natural and reconstituted stone benchtops, Bosch kitchen appliances, ducted heating and cooling, lift access and secure entry systems. The larger three-bedroom residences on the upper level have been designed with house-like proportions, while the two-bedroom apartments prioritise functionality, flexibility and low-maintenance living.

[smartcode_project:default project_id=134974 project_image_fid=5421]

The project is now in its final stages, with <a href="https://www.apartments.com.au/builders/labco">Labco</a> completing the remaining landscaping and external finishing works following the completion of the residences' interiors.

Otium's location within the heart of Parkdale continues to underpin its appeal. Residents will be just steps from local cafés, restaurants, shops and the newly elevated Parkdale Station, while the beach is less than a kilometre away.

With the project tracking ahead of schedule, buyers can currently secure a residence with a five per cent deposit and benefit from settlement terms of up to eight months. The advanced stage of construction also provides buyers with the opportunity to walk through the near-complete residences and experience the quality and finishes firsthand ahead of completion.

[smartcode_project_cta:default project_id=134974]

Otium Parkdale enters final month before completion as rare apartment opportunity nears sellout

A new boutique apartment development is entering the market in <a href="https://www.apartments.com.au/developments/chermside-qld-4032">Chermside</a>, with Brisbane-based developer <a href="https://www.apartments.com.au/developers/ausdev">Ausdev</a> bringing 33 residences to a well-connected pocket of Brisbane's north.

<a href="https://www.apartments.com.au/new-apartments/parkdrive-apartments-chermside-25-sammells-drive-chermside-qld-4032">Parkdrive Apartments</a>, at 25 Sammells Drive, will comprise a mix of one- and two-bedroom residences positioned within walking distance of Westfield Chermside, The Prince Charles Hospital, and Bradbury Park.

Established in 1989, Ausdev has a long-standing presence across both development and construction, with Parkdrive Apartments representing its latest residential project in Brisbane's northern suburbs.

[smartcode_project:default project_id=152125 project_image_fid=363778]

The development has been designed around open-plan living and natural light, with residences featuring stone benchtops, timber cabinetry, BOSCH appliances, and private balconies that extend the living areas outdoors.

Kitchens are positioned as the centrepiece of the homes, incorporating natural material palettes and integrated appliances, while bathrooms have been designed with a focus on functionality and understated finishes.

Residents will have access to a communal barbecue and entertaining area on Level 3, providing shared outdoor space within the development. Secure parking and lift access are also incorporated into the building.

The project will deliver a limited collection of 33 apartments, with one-bedroom residences priced from $749,000.

[smartcode_project:default project_id=152125 project_image_fid=363782]

Beyond the building itself, the location places residents within easy reach of several of Chermside's key amenities. Bradbury Park is around 350 metres away, while Westfield Chermside is approximately 1.3 kilometres from the site. The Prince Charles Hospital is located within 750 metres, and the Chermside Bus Interchange is around 1.5 kilometres away, providing connections across Brisbane.

Parkdrive Apartments adds to the growing residential pipeline in Chermside, a suburb that continues to evolve as a major retail, healthcare, and transport hub for Brisbane's north.

[smartcode_project_cta:default project_id=152125]

Ausdev introduces boutique Parkdrive Apartments to Chermside's growing centre

<a href="https://www.apartments.com.au/developers/skymark-group">Skymark</a>'s boutique Cronulla development Solis has secured a 10-year Latent Defects Insurance policy through Resilience Insurance, providing buyers of the 16-residence building on Ewos Parade with structural and waterproofing protection that extends a decade beyond the building's completion.

Currently under construction and due for completion in late 2027, <a href="https://www.apartments.com.au/new-apartments/solis-cronulla-8-ewos-parade-cronulla-nsw-2230">Solis</a> is one of a small number of new developments in the Sutherland Shire to carry Resilience LDI coverage, a distinction that carries increasing weight as buyer confidence in the off-the-plan sector continues to be shaped by how developers stand behind their product.

Latent Defects Insurance, which entered the Australian market in 2022 when Resilience Insurance was approved to offer the cover, protects buyers against major structural or waterproofing defects for ten years post-completion. Unlike traditional statutory warranties, it operates as a first-resort policy, if a covered defect arises, the insurer responds directly, without the buyer needing to pursue the builder or developer through a lengthy claims process.

Resilience Insurance CEO Corey Nugent has noted that the product addresses something fundamental to the new apartment market.

"The overarching feedback from prospective buyers in the new development space is that they want more confidence and assurances around the quality of the build," Nugent says.

"Resilience Insurance Latent Defects Insurance not only gives them complete peace of mind for 10 years, but it shows the developer they are buying from is standing by their product."

[smartcode_project:default project_id=150499 project_image_fid=370898]

For Solis, the Resilience LDI policy adds a meaningful layer of accountability to an already considered project. The development comprises nine two-bedroom and seven three-bedroom residences, including one dual-level three-bedroom apartment, across a five-storey building on Ewos Parade, positioned between Shelly Beach and South Cronulla.

Garden apartments connect directly to private landscaped courtyards, while upper-level homes capture beach views to the east from level four and above.&nbsp;

All 16 residences include at least one balcony or courtyard, and select apartments on the upper floors feature bar areas and secondary flexible living spaces.

Hiba Sander, Managing Director of Skymark, says Solis offers a rare balance, nestled between the quiet beauty of secluded beaches and the lively charm of South Cronulla's esplanade.

"It's a place to choose your pace and live gracefully, seaside'," Sander says.

[smartcode_project:default project_id=150499 project_image_fid=370900]

The architecture, designed by <a href="https://www.apartments.com.au/architects/ida-design-group">IDA Design Group</a>'s Michael Trinh, draws from the natural erosion patterns of <a href="https://www.apartments.com.au/developments/cronulla-nsw-2230">Cronulla</a>'s sandstone headlands, translating the organic forms of the coastline into soft curves, pavilion-style massing, and a material palette chosen for longevity in a salt-tinged environment.&nbsp;

Textured natural stone, soft renders, and timber-look battens reference the tones of the surrounding cliffs, while the building has been oriented to maximise natural light and passive ventilation, with primary living spaces facing north and east to capture morning sun and sea breezes.

"At Solis, our aim was to create architecture that feels quietly confident, grounded in natural materials like stone and timber, and elevated by light and landscape," Trinh says.&nbsp;

"The buildings are designed to sit gently within their coastal surrounds, with expansive glazing and abundant greenery creating a seamless dialogue between inside and out."

[smartcode_project:default project_id=150499 project_image_fid=370897]

Interiors by <a href="https://www.apartments.com.au/architects/hot-black">Hot Black</a> carry the same material language through to every room. Kitchens feature integrated Gaggenau appliances, sculpted stone benchtops, and Lo &amp; Co joinery, while bathrooms feature natural stone, timber, and brushed metal finishes.&nbsp;

Hot Black Founder and Design Director Sophie Safrin describes the intent as one of considered restraint: "At Solis, every detail has been thoughtfully considered to create a timeless coastal retreat, calm, refined, and effortlessly liveable. From natural finishes to seamless indoor-outdoor flow, Solis offers a quiet elegance that's deeply connected to its surroundings.

The landscape, designed by Julian Brady of <a href="https://www.apartments.com.au/landscape-architect/sitedesignstudios">Site Design Studios</a>, treats green space as an integral part of the resident experience rather than an afterthought.&nbsp;

"Gentle curves and layered native plantings mirror the ebb and flow of the ocean," Julian Brady says, "creating a serene connection between architecture and place."&nbsp;

Coco Republic has provided bespoke furniture packages tailored to the project's coastal palette.

[smartcode_project:default project_id=150499 project_image_fid=370899]

Skymark has an established track record in the Sutherland Shire, with a portfolio spanning Cronulla, Woolooware and Burraneer that includes Isla, Sylva, Bask, Shells, Sula and Mist. Securing LDI on Solis reflects a broader shift in how the developer is positioning its buildings to buyers, at a time when Resilience Insurance expects the policy to become mandatory in New South Wales by 2028.

Sales at Solis are launching soon through Ray White Projects, with an official event scheduled for 11 June. Enquire for more information.

[smartcode_project_cta:default project_id=150499]

Skymark takes out 10-year Resilience Insurance LDI at Solis Cronulla

Investing

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If you’re considering buying a holiday home right now, you’re not alone. With Australians currently forced to put their plans for international travel on hold and the cost of Australian holiday home rentals on the rise, it's no wonder more people are keen to invest in a holiday home to call their own. 

Like anything in life, buying a holiday home has its pros and cons. Here’s what you should consider. 

<h2>Pros of buying a holiday home right now</h2>

The pandemic has put the importance of lifestyle into the spotlight. Having a holiday home to escape to regularly can be an excellent way to improve your quality of life. If you would usually travel overseas regularly, this can also be a good alternative. 

With the costs of renting a holiday home soaring thanks to huge local demand, combined with record low interest rates, we’re experiencing a unique situation where it may actually be more cost effective to buy rather than regularly rent a holiday home. For those who have managed to save more during the pandemic - such as through forgoing the costs of international travel - the costs of a deposit may also already be covered.

If you already spend money on going on holiday in Australia each year, especially if it's to the same place, then spending that money on a mortgage on a holiday home may make sense. Not only are you spending what you would have spent anyway, if not less, but once you’ve paid off the mortgage you then own an asset which will grow over time. If you can’t afford 100% of the mortgage on your own, then you can always rent it out part of the year until you have paid down the mortgage.

For those getting into the market right now, there’s a window of time where prices will remain affordable. We’re already seeing prices in some areas such as Byron Bay rise significantly. Across the board regional home values rose by 0.4 per cent in September or 4.3 per cent year-on-year.

For those looking to rent out their holiday home for part of the year, there has been a sharp increase in rents, resulting in a better return than usual, at least in the short-term.

<hr>
<address>READ: <a href="/news/qld/5-apartments-for-the-professional-couple-in-queenslands-broadbeach" target="_blank">5 apartments for the professional couple in Queensland’s Broadbeach</a>
</address>

<h2>What are the Cons?</h2>

If you’re looking to purchase a holiday home as an investment, it may not always be the best choice. The short-term surge in rental values might not last once the borders reopen and some people opt to head overseas for their holidays.

If you’re planning on renting out your holiday home when you’re not staying there, you need to be prepared to dedicate time and money to managing bookings, taking inquiries, cleaning and maintaining the property. This can prove burdensome for many people. If your holiday home is not your principal place of residence, then you may need to factor in taxes such as land tax which can impact the property’s affordability. 

If you opt to purchase a holiday home, you’re locked in to one holiday destination. For some people this may feel too limiting, especially once the borders open. 

Securing finance for a holiday home purchase can be more challenging. Lenders will look at the unpredictable rental income and may require a larger deposit, a shorter loan period or a higher interest rate. 

Ultimately, buying a holiday home is a personal choice. Talk to your financial adviser about whether it may be possible with your financial situation and consider your life and wealth goals. If you’ve always wanted to have your own holiday home and it’s an attainable and practical goal, then why not make it happen? 
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Ultimately, buying a holiday home is a personal choice. But, for those getting into the market right now, there’s a window of time where prices will remain affordable

max.kwok_55688

Is now the right time to buy a holiday home?

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Demand for apartments in the Gold Coast hotpsot Burleigh Heads continues to soar as a surge of interstate buyers is creating a critical shortage of supply, particularly for three bedroom apartments which are being snapped up by downsizers.

That's the view of the local estate agents, who are even seeing old and ageing apartments sell for premium prices.

Adam Young of Burleigh Heads’ Black and Young Real Estate, who has been selling real estate in the area for over three decades, says he has never seen the market in Burleigh so strong.

"Burleigh is the ‘go to’ destination on the Gold Coast as a lifestyle, entertainment and dining precinct and real estate sales are reflecting the suburb’s newfound popularity.

“The market is very strong, driven by interstate migration and downsizers who see apartment living in Burleigh Heads as under-valued given its central location and the national park setting which is not unlike Noosa,” Young says.

"We have swathes of interstate buyers who think we are under-valued, and they are probably right."

Young says the problem in Burleigh is that there are very few three bedroom apartments on the market and those that are put on the market are snapped up very quickly.

“You only have to look at what happened with Spyre Group’s Natura project under construction at Burleigh Heads to see the demand, as they sold 25 apartments our of 33 in one weekend last year.

[smartcode_project:default project_id=27699]

“But the market has gone north since then and people are prepared to pay big dollars to secure three bedders that are rare as hen’s teeth.”

There's also been big money sales away from the new luxury developments. An ageing three bedroom apartment on The Esplanade just sold for $2.5 million, more than $600,000 over its reserve.

There was another unrenovated apartment that sold for $1.5 million off-market.

Burleigh is set for a new development, 88 Burleigh, with Gold Coast development company Allure Property Corporation <a href="/expert-insights/buying/plans-lodged-for-new-burleigh-apartment-development-88-burleigh">lodging plans for the boutique luxury apartment project</a>.

Allure paid $13 million for the 809 sqm site on The Esplanade and have had DBI design the 27 apartment, 17 level tower wrapped in glass.

[smartcode_project:default project_id=92609]
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Adam Young of Burleigh Heads’ Black and Young Real Estate says he has never seen the market in Burleigh so strong



Downsizers descend on Burleigh Heads as apartment supply shortage becomes critical

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Hi Margaret,
If I put a deposit to buy a house before the new financial year, can I claim it this year tax time or is it to late to buy? Also, is it greedy to buy our 4th house in 7 months?
Regards,
Thor
 
Hi Thor,
To answer this question we must first work out what can and cannot be claimed against your tax. The deposit on a house is not a claimable item. The costs you incur when you buy a property are able to be claimed, but each item is treated differently.  For example, all buying costs such as legal fees and inspections form part of your cost base, and serve to essentially reduce your payable capital gains tax when you sell, rather than provide an immediate deduction.  Borrowing costs are divided up over 5 years (or the length of time you own the property if less than 5 years) and claimed at the end of the year. I think you are really asking me whether the interest on the deposit is claimable, and the answer is no, for two reasons.  The first one is that any deduction you claim against your income is only available on an 'income producing asset', an at the stage where you pay a deposit, this property does not produce income, for you.  The second one is that the deposit does not denote a transfer of ownership, and so you don't legally own an income producing  asset against which you are allowed to make these claims - the present owner does however, and they are allowed to make those claims right up until you settle the property. As to your second question, it's not greedy to buy your fourth property in seven months, but whether it is wise to do so is an entirely different thing.  You need to ask the following questions: 
<ul>
<li>Do you know your personal risk profile and whether this number of properties is consistent with that?</li>
<li>Have you had an independent, professional investment plan prepared for you by someone who is not trying to sell property to you?</li>
<li>Have you analysed your capacity to meet your current debts and property costs should interest rates rise?</li>
<li>Have you ensured that you have diversified your property portfolio across a number of markets? Some of our markets (namely, Sydney) will likely enter a protracted period of stagnation after this present frenzy, so you don't want all of your properties to be in such a market?</li>
<li>Have you considered your financial future - is there any upcoming changes which may make a larger portfolio create extra stress on your finances?</li>
</ul>
You should not simply buy a property every time you feel like it, or each time the bank offers you more money - instead, your acquisition of property should be part of a carefully articulated plan which considers all of your personal financial circumstances, investing time horizon and risk profile.
Have a property question?  <a href="mailto:askmargaret@propertyobserver.com.au" target="_blank">Ask Margaret!</a>
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mlomas-KC9MUPZ6Ca

Ask Margaret: Is it greedy to buy our 4th house in 7 months?

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A number of young (and the not so young) homebuyers will have stopped looking for their dream home in the last few weeks.
This could be a bad situation (for them).
In fact it could well have been a completely counterproductive action if at any stage, in the future, they want to own a family home.
I bought my first home in 1985. Since then I have bought over a 1000 homes and never have I once purchased a home by not giving it my all.
Waiting never works
Never have I seen a friend or a client be in a better position by waiting out of the market for any length of time. Please don’t confuse this statement with passing on buying the wrong home and then continuing to look for the right one.
There are good and bad homes for each and every one of us. Don’t rush (there is no rush, even now). However you won’t find the good homes by not looking.
A number of younger buyers will have been turned off by media talk, Facebook interactions and discussions at work or home.
There is a lot of talk that we are in a bubble and by implication the bubble will burst, home prices will drop dramatically and bargains will miraculously appear.
We at James do not see that – not over the longer term anyway, not unless the population changes dramatically.
To stop the home search, to give up, to lose focus is WRONG, an untruth , a false perception IF your longer term happiness is tied to being in a family situation where you, or you and your partner control your destiny – eg you live in your own home.
Markets will continue to rise in the longer term
No easing of the market will assist you to any noticeable degree.
We did see the effects of the worst financial markets correction since the Great Depression in 2008, the market has bounced back and now much farther ahead than it was in 2007, 2008 or 2009. If you are viewing a home over a “lifetime” investment horizon, there will be bumps, but it will be a strong long term proposition.
Over time the market will/must continue to rise whilst there is population growth.
It’s simple demand and supply. Infrastructure Australia released their report two weeks ago and in it they have projected a 45% increase in population in Brisbane, Sydney, Melbourne and Perth over the next 15 years.  If that isn’t reassurance of continuing property demand, I don’t know what is. 
The government cannot and will not “save” you, the young homebuyers. 
The only thing that will “save” you, the young homebuyer, is you (and if you are lucky – good parents).
So, Mr. Hockey might have been clumsy in his words, but his message had some truth.
Perhaps I am being generous, but one of the more helpful statements this last week seemed to be the most controversial.
If you want to buy a good home, get a job that pays. This, in my opinion, was one of the few accurate and helpful comments of this last week – if buying a good home is your main priority.
BUT please, there is more to this than getting a good job. A number of young doctors feel they can’t buy their first home and they have what society deems is a good job.
As a young home buyer, please don’t get caught up in the minutiae or the politics.
Mr Hockey’s statement is a helpful pointer if you take it as meaning:
<ol>
<li>Take action yourself</li>
<li>Get the resources you need to get a home</li>
</ol>
You as young home buyers need to act and take it upon yourselves to control your own destiny.
Theories do not put a roof over your head, practical solutions do
House affordability is a theoretical problem.
Effective house buying is a practical solution.
Your choice as a young homebuyer is to be caught up in the problems – good dinner party chatter or caught up in the solutions, which will put a roof over your family’s head and more importantly build long term security for your family.
First the problems and then we put the VIOLIN away and discuss solutions.
Negative Gearers
As a young home buyer you face negative gearers (AND super funds AND other investment vehicles as well).
If you are looking at an $800,000 home and you are competing against a negative gearer, then a negative gearer can borrow all the money they need and can pay well over $2,000,000 for that same $800,000 home and it will still COST LESS to service than what it would for you pay for your mortgage, even assuming you had a 20% deposit.
<a href="https://marketnews.com.au/2015/06/young-homebuyers-issues-solutions/slide1yhb/" rel="attachment wp-att-50829"><img class="aligncenter size-large wp-image-50829" src="https://marketnews.com.au/wp-content/uploads/Slide1YHB-597x422.jpg" alt="Slide1YHB" width="597" height="422"></a>
The argument that negative gearing and super funds increase rentals is true, but its also BALONEY for you because with SMART BABY BOOMER INVESTORS it increases rentals at the cost of young home buyers buying a home.
So lets get rid of negative gearing, super funds OK. 
Maybe, but please not in a hurry, without thinking it through.
We buy a number of homes for parents who have been reading our blogs for the last decade. If the government or the opposition got rid of negative gearing, then in many cases, all they would be doing, is making it easier for overseas buyers to purchase the stock that you are hoping will be freed up for younger people.
I have teenage children and I need the firepower negative gearing gives me to maintain and buy homes against overseas buyers. I represent many parents and they need the firepower negative gearing gives them to maintain and buy homes against overseas investors.
So do you really think the government is going to alienate the baby boomers. In theory yes, but in practice, I’m not so sure. They may water down negative gearing. However, as you can see from the above maths watering down will have limited effect, as the gap is so great.
Many parents need negative gearing or super funds to compete against Chinese buyers and other overseas buyers and are doing so right now. We know as we are buying for parents.
If the government removed negative gearing, super funds they could suffer a tremendous backlash from many people (with resources) because they would take away a significant tool in competing on the international stage for buying Inner Melbourne Homes for their children.
Possible Solution Number One is to get your parents involved NOW.
If we were talking to Grade 6’s about home buying, the main message we would be telling them is get Mum and Dad out there now looking for a good home for you to rent off them when you’re 30. Of course I would be adding in make sure Mum and Dad know the difference between a good and a bad family home to buy for you.
If you cant beat them, join them. Maybe DON’T hate negative gearing, USE IT.
PROPERTY ORPHANS (no helpful parents) STILL want and need negative gearing, otherwise you will get beaten up by OTHER BUYERS.
Here are some clues (but please talk to us about what to buy, most apartments ARE NOT the things to negative gear).
Possible Solution Number Two: Buy a GOOD home NOW and negative gear with a tenant, then move in when you can afford it.
Possible Solution Number Three: Bit more adventurous – buy a GOOD home and get a friend to buy a GOOD home and use negative gearing, possibly with a solicitor and a formal/informal agreement to live in each other’s homes. Your main purpose is not to avoid tax; your main purpose is to provide shelter, to afford a home. The lessening of your tax allows you to compete against other local and overseas buyers. I would still get some legal advice on this type of set up, just in case.
BUT please this is not the whole solution in itself. This is part thereof, of you taking charge and getting negative gearing to help you, not hurt you.
Overseas Buyers
If not Chinese buyers, then Indian buyers, Brazilian buyers, and Indonesian buyers and so on will be competing on the homes you want to buy.
Overseas buying is unlikely to stop in a hurry as all political parties want population growth and they want it from rich overseas people.
Whether that is right or wrong is not for us to say – but Overseas bidding particularly from China dominates the Inner Melbourne Market – even where Chinese people are not bidding.
Overseas buyers have more money to spend on an $800,000 home than you, particularly while the A$ is as it is.
Lets say in 2010 you as a young person decided to save for a deposit on a then $700,000 home. You were looking to save $140,000 deposit. During this time the main issue IS NOT that your $700,000 has gone to $800,000 or $900,000 but that the Australian dollar has dropped and you are in an international market.
The couple in Beijing who were also saving in 2010, but were saving in US dollars have now effectively $210,000 AUS as a deposit and can fund a $1,000,000 purchase simply because of the exchange rate changes. A 50% drop in the AUS $ vs. US$ in the last 5 years.
So for that $700,000 home now worth $800,000 the overseas buyers could bid to $1,000,000 with the same savings since 2010 as you.
<a href="https://marketnews.com.au/2015/06/young-homebuyers-issues-solutions/slide2yhb/" rel="attachment wp-att-50828"><img class="aligncenter size-large wp-image-50828" src="https://marketnews.com.au/wp-content/uploads/Slide2YHB-597x422.jpg" alt="Slide2YHB" width="597" height="422"></a>
That’s only one part of the equation, there are many Chinese and other international families who don’t need to borrow – they are $800,000 to $8,000,000 cash buyers. As we said recently there are over 2,000,000 millionaire Chinese families looking for homes.
Let’s stop Overseas Buyers from taking our kids homes is the under the breath comment at many dinner parties.
OK how? The FIRB Act (designed to limit overseas investment) is as effective as Airline security – meaning if people want to do it, then they will do it – if they have been allowed to get to the threshold stage.
And besides that, will stopping overseas buyers actually help or hurt you in your quest for a good home in Inner Melbourne close to transport, shops, work, friends and schools?
Think about it, overseas buying has positives.
Chinese buying saved Melbourne property in 2009 from experiencing what almost every other country experienced – a significant and sustained property downturn.
Do you really want to stop Chinese buyers? Do you want a 20 year flattish property market like Japan – which has zero population growth and zero immigration?
And its not just the money – Chinese families have a lot to offer us through their older and more modern cultures.
Maybe we want to be like Japan and shut our borders or Canada who has partially shut them to Chinese buyers.
As a community we will all have to make that decision through our politicians.
I’m not so sure any total lockdown is the way to go. Perhaps a focus into regional areas may be a better alternative – maybe not – it needs discussion and then action, rather than knee jerk reactions.
What is true is overseas bidding particularly from China dominates the Inner Melbourne Market – even where Chinese people are not bidding.
However we have had Chinese buying for 40 years, just never at this level of intensity.
But can you and your children wait? They may have gone from 6 to 16, or 16 to 26, or 26 to 36 while discussions are happening and your children need a home sooner than that.
Real Estate Agents and Buyer Advocates
Agents and advocates are ruining it for young people by pushing the prices up.
Good selling agents do push prices up and bad buyer advocates can hurt young homebuyers with their incompetence. But the real truth is us agents/advocates are not that good – we can’t control markets.
It’s demand and supply that controls markets.
Demand is from population, with wealthy immigration being the main driver; and supply is very restricted on most Inner Melbourne Homes with good position and good land.
So while agents are often their own worst enemy (with regards to their quoting and some tactics), they are not the reason why young homebuyers can’t buy a home to live in.
If we stopped everything
Ok, so lets say in your perfect world we’ve got rid of the Chinese buyers, got rid of the Negative gearers, banned Super Funds from buying homes, stopped immigration and yada yada yada.
Where would that leave you – does that mean you can automatically buy a home much more easily?
Not necessarily.
Wounded Underbidders
Have you been to auctions in the Inner North for instance – you know the single-fronters in need of a reno – the ones you can almost afford?
Are you just competing against negative gearers, super funders and families from Asia?
Well no – you are also competing against WOUNDED UNDERBIDDERS – that is other buyers who have bid before. They have come from Inner Melbourne organic population increases via Inner Melbourne births and Australian intra-migration from Outer Melbourne and Regional wealthier homebuyers wanting to be closer to schools and infrastructure that works.
NOW they are better resourced than you. By better resourced we mean they:
<ol>
<li>Have a clearer focus</li>
<li>Have a buyer advocate or other property professional</li>
<li>Have done greater research and so on – eg they may have a more competitive interest rate – every dollar counts!</li>
</ol>
CONCLUSION TO ISSUES for YOUNG HOMEBUYERS
If the government or the army or the media or …….. were somehow able to:
<ul>
<li>Stop the overseas buyers coming</li>
<li>Stop negative gearing and super funds and ….</li>
<li>Stop other locals competing against you</li>
</ul>
and all the while:
<ul>
<li>Kept the economy buoyant</li>
<li>So you can keep a job and</li>
<li>Kept the developers actually building new homes in a negative economic environment.</li>
</ul>
Where would you be?
Do you really want to buy you first home in Whoop Whoop West and live in a country with a 20 year property market like Japan – which gave you almost no hope of a few good property moves that saw you end up in Hawthorn – near schools in a nice home for not much else than three good decisions?
Me personally – I want a gently rising market for my children 
And I want them to learn how to use the rising Melbourne market to their advantage.
Don’t give up – don’t whine about negative gearing and Chinese buyers, learn to deal with them and get into the property mix.
But please get into the property mix sooner rather than later
Because once you are in, then if you make good decisions and buy well, the market will work for you.
Example: We have bought for families who have moved from $480,000 in Albert Park in 2000 to $880,000 in Sandy in 2005 to $2,000,000 in Bayside in 2015 all with manageable changeover costs. Look at the number $480,000 – isn’t that what you have now?
How do you do that, how do you use this market to your advantage?
The four solution keys
<ol>
<li>Good plan</li>
<li>Good professional assistance </li>
<li>Good processes</li>
<li>Good decisions</li>
</ol>
Its all about NOW plus the LONGER TERM, not just the NOW.
Now for young people and by that we mean anybody under say 45, this article may appear lacking in empathy. 
All I can say is I have teenage children and I totally, totally share the concerns re home affordability, BUT………… I share my/our credentials to be able to say what we are saying.
My family has bought two of the needed three homes for our children and we are still paying off those mortgages, just as many other families are. We have used negative gearing. We needed it. Our children are 20,16 and 14. I/we have significant fears that if we had not been working towards this goal our children would have had significant housing problems that would impact negatively on their lives (and that still may happen).
Our family and James Buyer Advocates has been substantial supporters since 2006 of Hanover’s for the Homeless Private Rental Brokerage programme. The work of Hanover has allowed us to see first hand the hundreds and hundreds of families who sleep rough every night because they cannot afford decent housing.
I am a professional buyer advocate, have bought over a 1000 homes and see the current housing affordability situation affecting not only young first homebuyers, but many other people as well. The only generation that has done well from all this is the baby boomers (my generation). In my humble opinion, we as a generation, need to do a hellava lot more in giving back in a meaningful way to help those that follow us; rather than leave some sort of scorched landscape as we depart planet Earth (sorry about the soapbox).
Mal writes weekly auction reports, advice and in-depth market analysis on <a href="https://www.jamesbuyeradvocates.com.au/" target="_blank">James' website</a>.
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maljames-vHwm28JUAa

Attitude and help gets young people into the market: Mal James

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Investec Australia Property Fund has announced plans to pursue an ASX listing and associated capital raising.
The fund plans to raise approximately $100 million through the issue of 76.9 million new units.
IAPF CEO Graeme Katz said that following the ASX listing, the fund will delist from the BSX and will be dual primary listed on the JSE and ASX.
“Following the recent acquisition of 24 Wormald Street in Canberra, and given the current favourable conditions in the Australian REIT market, Investec Property Limited as responsible entity of the Fund has decided to pursue the ASX listing and associated capital raising,” Katz said.
“The proceeds from the capital raising will be used to repay debt and pay the costs associated with the offer, and will result in the Fund’s gearing reducing to approximately 29%n.
“If the ASX listing proceeds, the Fund will be dual primary listed on both the ASX and the JSE. We believe this is an important strategic initiative which will provide the Fund with a more diversified pool of capital to allow it to grow and diversify its property portfolio.”
Further information on the ASX listing and the offer, as well as a special distribution, has been published on <a href="http://www.iapf.com.au" target="_blank">the fund’s website</a>.
The announcement was contained in the fund's financial results statement which declared a final distribution of 5.18 cents per unit, pre-withholding tax, headlining the figures.
Post withholding tax, the cents per unit distribution was 4.75.
Both were slightly higher than the 2018 distributions of 5.08 and 4.65 respectively.
This total distribution for the year was 10.23 cents per unit pre-withholding tax and 9.40 cents per unit post withholding tax.
IAPF said this represents growth for the full year of 2.0% pre-WHT and 1.2% post-WHT, which is in line with guidance given to the market.
Katz said the financial result reflects the fund’s strategy of acquiring properties in established office or industrial precincts supported by key infrastructure, optimising returns through active asset management and the efficient management of the balance sheet and interest rates.
“We are continually looking at ways to improve the tenant experience, whether by improving our management processes or investing in the portfolio through planned or discretionary capital expenditure,” Katz said.
“Ensuring our portfolio remains relevant and understanding users’ occupancy requirements is critical in retaining existing tenants and attracting new tenants which ultimately drives revenue growth.
“During the year we entered into leases over approximately 12%a of the portfolio with only 1 417m2 remaining vacant and 48% of leases expiring after five years.”
IAPF’s portfolio now comprises 28 assets valued at $1063 million, with a gearing ratio as at 31 March 2019 of 38.1%.
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jonathanchancellor-7SQnKwU6yx

Investec announces ASX listing and capital raising plans

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EXPERT OBSERVER
The past financial year saw solid returns for investors but it was a story of two halves.
While the December half year was strong as global share markets moved to factor in stronger global growth and profits helped by US tax cuts, the last six months have been messier and more constrained – with US inflation and interest rate worries, trade war fears, uncertainty around Italy, renewed China and emerging market worries and falling home prices in Australia.
But will returns remain reasonable or is the volatility of the past six months a sign of things to come?
A good year for diversified investors 
The 2017-18 financial year saw yet again pretty solid returns for well diversified investors.
Cash and bank deposits continued to provide poor returns and the combination of low yields and a back-up in some bond yields saw low returns from bonds.
The latter resulted in mixed returns from yield sensitive investments, but Australian real estate investment trusts performed well helped by the RBA leaving rates on hold.
Reflecting strong gains in the December half as investors moved to factor in stronger global growth and profits assisted in the US by tax cuts global shares returned 11% in local currency terms and 15% in Australian dollar terms.
Australian shares also performed well with the ASX 200 rising to a 10-year high and solid dividends resulting in a total return of 13%.
Unlisted assets have continued to benefit from “search for yield” investor demand and faster growth in “rents” with unlisted property returning around 12% and unlisted infrastructure returning around 13.5%.
As a result, balanced growth superannuation returns are estimated to have returned around 9% after taxes and fees which is pretty good given inflation of 2%.
For the last five years balanced growth super returns have also been around 8.5% pa.
<img src="https://www.urban.com.au/images/2018/7/5/Oliver%20Graph%201.JPG" alt="">
Australian residential property slowed with average capital city prices down 1.6%, with prices down in Sydney, Perth and Darwin. Average returns after costs were around zero.
 Key lessons for investors from the last financial year 
Be cautious of the crowd – Bitcoin provided a classic reminder of this with its price peaking at $US19500 just when everyone was getting interested in December only to then plunge 70% in price.
Turn down the noise – despite numerous predictions of disaster it turned out okay.
Maintain a well-diversified portfolio – while cash, bonds and some yield sensitive listed assets had a tougher time, a well-diversified portfolio performed well.
Cash is still not king – while cash and bank deposits provided safe steady returns, they remain very low.
Expect more constrained returns and volatility
We expect returns to slow a bit over the new financial year and just as we have seen over the last six months volatility is likely to remain high.
First the positives, while global growth looks to have passed its peak the growth outlook remains solid.
Business conditions indicators – such as surveys of purchasing managers (Purchasing Managers Indexes or PMIs) – are off their highs and point to some moderation in growth, but they remain strong pointing to solid global overall.
<img src="https://www.urban.com.au/images/2018/7/5/Oliver%20Graoh%202.JPG" alt="">
In Australia, growth is likely to remain between 2.5% and 3% with strong business investment and infrastructure helping but being offset by a housing slowdown and constrained consumer spending.
Second, solid economic growth should continue to underpin solid profit growth from around 7% in Australia to above 10% globally
Third, while we are now further through the global economic cycle there is still little sign of the sort of excess that normally brings on an economic downturn – there is still spare capacity globally, growth in private debt remains moderate, investment as a share of GDP is around average or below, wages growth and inflation remain low and we are yet to see a generalised euphoria in asset prices.
Fourth, global monetary policy remains very easy with the Fed continuing to raise rates gradually, the ECB a long way from raising rates and tightening in Japan years away.
Finally, share valuations are not excessive. While price to earnings ratios are a bit above long-term averages, this is not unusual for a low inflation environment. Valuation measures that allow for low interest rates and bond yields show shares to no longer be as cheap as a year ago but they are still not expensive, particularly outside of the US.
 Against this though there are a few storm clouds
First, the US economy is more at risk of overheating – unemployment is at its lowest since 1969, wages growth is gradually rising and inflationary pressures appear to be picking up. The Fed is aware of this and will continue its process of raising rates. While other countries are behind the US, its share market invariably sets the direction for global markets
Second, global liquidity conditions have tightened compared to a year ago with central bank quantitative easing slowing down and yield curves (ie the gap between long term and short-term bond yields) flattening.
Third, the risks of a trade war dragging on global growth have intensified. While the share of US imports subject to recently imposed tariffs is minor so far (at around 3%) they are threatened to increase. Our base case remains that some sort of negotiated solution will be reached but trade war worries could get worse before they get better.
Fourth, emerging countries face various risks from several problem countries (Turkey, Brazil and South Africa), slowing growth in China, concerns the rising US dollar will make it harder for emerging countries to service their foreign debts and worries they will be adversely affected by a trade war.
Finally, various geopolitical risks remain notably around the Mueller inquiry in the US, the US mid-term elections and Italy heading towards conflict with the EU over fiscal policy. A problem is that various threats around trade and Trump, Italy and China have come along at a time when the hurdle for central banks to respond may be higher than in the past – with the Fed focussed on inflation and the ECB moving to slow its stimulus and less inclined to support Italy.
 What about the return outlook?
Given these conflicting forces it is reasonable to expect some slowing in returns after the very strong returns seen in the last two years.
Solid growth, still easy money and okay valuations should keep returns positive, but they are likely to be constrained and more volatile thanks to the drip feed of Fed rate hikes, trade war fears, China and Emerging Market worries and various geopolitical risks.
In Australia, falling home prices in Sydney and Melbourne along with tightening bank lending standards will be drags.
Looking at the major asset classes, Cash and bank deposit returns are likely to remain poor at around 2% as the RBA is expected to remain on hold out to 2020 at least.
Investors still need to think about what they really want, if it’s capital stability then stick with cash but if it’s a decent stable income then consider the alternatives with Australian shares and real assets such as unlisted commercial property continuing to offer attractive yields.
<img src="https://www.urban.com.au/images/2018/7/5/Oliver%20Graph%203.JPG" alt="">
Still ultra-low sovereign bond yields and the risk of a risking trend in yields, which will result in capital losses, are likely to result in another year of soft returns from bonds.
Unlisted commercial property and infrastructure are likely to benefit from the ongoing “search for yield” (although this is waning) and okay economic growth.
Residential property returns are likely to be mixed with Sydney and Melbourne prices falling, Perth and Darwin bottoming and other cities providing modest gains.
Shares are at risk of a further correction into the seasonally weak September/October period given the storm clouds noted above, but okay valuations, reasonable economic growth and profits and still easy monetary conditions should see the broad trend in shares remain up – just more slowly. We continue to favour global shares over Australian shares.
Finally, the $A is likely to fall as the RBA holds and the Fed hikes adding to the case for unhedged global shares.
Things to keep an eye on
The key things to keep an eye are, global business conditions PMIs for any deeper slowing; risks around a trade war; risks around Trump ahead of the US mid-term elections; the drip feed of Fed rate hikes; conflict with Italy over fiscal policy in Europe; risks around China and emerging countries; and the Australian property market – where a sharp slump in home prices (which is not our view) could threaten Australian growth.
Concluding comments
Returns are likely to remain okay over 2018-19 as conditions are not in place for a US/global recession.
But expect more constrained returns (say around 6% for a diversified fund) and continued volatility.
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soliver-smf6LQXgW9

How listed property performed against other assets in last financial year: Shane Oliver

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GUEST OBSERVER
At its core, successful investing is simple, but we have a knack of making it look complex.
These five great charts help illuminate key aspects of investing: the power of compound interest; the investment cycle; the roller coaster of investor emotion; the wall of worry; and time is on your side when investing. 
Introduction 
Investing is often seen as complicated. And this has been made worse over the years by the increasing complexity in terms of investment products and choices, regulations and rules around investing, the role of the information revolution and social media in amplifying the noise around investment markets and the expanding ways available to access various investments. But at its core, the basic principles of successful investing are simple. And one way to demonstrate that is in charts or pictures – after all, a picture tells a thousand words. So this note looks at five charts I find useful in understanding investing. I’ll put out part 2 – another five great charts on investing – in a few weeks’ time. 
Chart #1 The power of compound interest. 
<a href="https://www.propertyobserver.com.au/images/2017/08/01/Screen%20Shot%202017-08-01%20at%2011.11.02%20AM.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2017/08/01/Screen%20Shot%202017-08-01%20at%2011.11.02%20AM.png" alt="">
This chart is my absolute favourite. My good friend, the well- known economist Dr Don Stammer, has said there are six things we owe our children or grandchildren: a sense of humour; a reasonable education; an early understanding of the magic of compounding; an awareness the cycle lives on; some help when they buy their first house or apartment; and a feeling of optimism. I can’t argue with the first, second and fifth, the fourth I will deal with next, and a feeling of optimism is essential if you wish to succeed as an investor. But on compound interest – he’s right it is like magic! 
The chart shows the value of $1 invested in various Australian assets in 1900 allowing for the reinvestment of dividends and interest along the way. That $1 would have grown to $231 if invested in cash, to $850 if invested in bonds and to $485,815 if invested in shares. While the average return since 1900 is only double that in shares relative to bonds, the huge difference between the two at the end owes to the impact of compounding or earning returns on top of returns. So any interest or return earned in one period is added to the original investment so that it all earns a return in the next period. And so on. 
The “Law of 72” is a useful tool to understanding how long it takes an investment to double in value using compounding. Just divide the rate of return into 72 and that’s the answer (roughly). For example, if the rate of return is 2% per annum (eg, the interest rate on a bank term deposit), it will take 36 years to double in value (= 72 divided by 2). But if it’s, say, 8% pa (eg, the expected total return from shares including dividends), then it will take just 9 years (= 72 divided by 8). 
Key message: if we want to grow our wealth, we must have exposure to growth assets like shares and property. 
Chart #2 The cycle 
<a href="https://www.propertyobserver.com.au/images/2017/08/01/Screen%20Shot%202017-08-01%20at%2011.12.24%20AM.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2017/08/01/Screen%20Shot%202017-08-01%20at%2011.12.24%20AM.png" alt="">
But of course shares can have lots of setbacks along the way as is particularly evident during the periods highlighted by the arrows on the share market line. In fact, the higher returns shares generate over time relative to cash and bonds is compensation for the periodic setbacks that they suffer from. But understanding those periodic setbacks – that there will always be a cycle – is important in not getting blown away from the higher returns that shares and other growth assets provide over time. The next chart shows a stylised version of the investment cycle. 
The investment cycle 
The grey line shows the economic cycle from “boom” to “bust” to “boom” again. Prior to the low point in the economic cycle, shares invariably find a bottom thanks to attractive valuations and easy monetary policy and as smart investors look forward to an eventual economic recovery. This phase is usually characterised by scepticism as economic conditions are yet to improve.
Shares then move higher, eventually supported by stronger earnings on the back of improving economic conditions, which eventually gives way to a blow off phase or euphoria as investors pile in. This is ultimately brought to an end as rising inflation flowing from strong economic conditions results in ever-tightening monetary policy, which combines with smart investors anticipating an economic downturn and results in shares coming under pressure.
Usually around the top of the cycle real assets – like property and infrastructure – are a better bet than shares as they benefit from strong real economic conditions. But once the downturn hits bonds are the place to be as slowing growth eventually gives way to falling inflation all of which sees bond yields decline producing capital gains for investors. At some point, of course, easing monetary conditions and attractive valuations see shares bottom out and the whole cycle repeats. 
Key message: cycles are a fact of life and while they don't repeat precisely, it’s invariably the case that the share market leads the economic cycle (bottoming out before economic 2recovery is clear and topping out before an economic downturn has really hit) and that different assets perform relatively best at different phases in the cycle  
Chart #3 The roller coaster of investor emotion 
<a href="https://www.propertyobserver.com.au/images/2017/08/01/Screen%20Shot%202017-08-01%20at%2011.13.22%20AM.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2017/08/01/Screen%20Shot%202017-08-01%20at%2011.13.22%20AM.png" alt="">
The swings we see in investment markets are far greater than can be justified by movements in investment fundamentals alone – ie profits, dividends, rents, interest rates, etc. In fact, investor emotion plays a huge part. The next chart shows the 4 roller coaster that investor emotion traces through the course of an investment cycle. A bull market runs through optimism, excitement, thrill and ultimately euphoria by which point the asset class is over loved (and usually overvalued too) – everyone who is going to buy has – and it becomes vulnerable to bad news. This is the point of maximum risk.
Once the cycle starts to turn down in a bear market, euphoria gives way to anxiety, denial, fear, capitulation and ultimately depression at which point the asset class is under loved (and usually undervalued) – everyone who is going to sell has – and it becomes vulnerable to good (or less bad) news. This is the point of maximum opportunity. Once the cycle turns up again, depression gives way to hope, relief and optimism before eventually moving on to euphoria again 
Key message: investor emotion plays a huge roll in exaggerating the investment cycle. The key for investors is not to get sucked into this emotional roller coaster: avoid assets where the crowd is euphoric and convinced it’s a sure thing and the asset is over loved, and favour assets where the crowd is depressed and the asset is under loved.
Chart #4 The wall of worry
<a href="https://www.propertyobserver.com.au/images/2017/08/01/Screen%20Shot%202017-08-01%20at%2011.14.29%20AM.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2017/08/01/Screen%20Shot%202017-08-01%20at%2011.14.29%20AM.png" alt="">
It seems that these days there is always something for investors to worry about. This year so far has been no exception with numerous worries about President Trump on multiple fronts (will he overstimulate the US economy? will he cause trade wars? will he deliver on his pro-business policies? will he be impeached? etc), various terrorist attacks, elections in the Netherlands and France and worries about Italy, the surprise election result in the UK, tensions between Saudi Arabia and Qatar, a new plunge in the oil price, intensifying “provocations” from North Korea, ongoing worries about the Australian property market and banks, etc. But most of this stuff is just noise.
The global economy has had plenty of worries over the last century, but it got over them with Australian shares returning 11.8% per annum since 1900, with a broad rising trend in the All Ords price index as can be seen in the next chart, and US shares returning 9.8% pa. (Note that this chart shows the All Ords share price index whereas the first chart shows the value of $1 invested in the All Ords accumulation index, which allows for changes in share prices and dividends.) 
Key message: worries are normal around the economy and investment markets but most of them are just noise.
Chart #5 Time is on your side
<a href="https://www.propertyobserver.com.au/images/2017/08/01/Screen%20Shot%202017-08-01%20at%2011.15.25%20AM.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2017/08/01/Screen%20Shot%202017-08-01%20at%2011.15.25%20AM.png" alt="">
Investment markets bounce all over the place in the short term. As can be seen in the next chart even annual returns in the share market are highly volatile, but longer-term returns tend to be solid and relatively smooth. Since 1900 for Australian shares roughly two years out of ten have had negative returns but there are no negative returns over rolling 20-year periods. (It’s roughly three years out of ten for US shares since 1900.) 
Key message: the longer the time horizon, the greater the chance your investments will meet their goals. So in investing, time is on your side. 
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<a href="https://www.propertyobserver.com.au/https://plus.google.com/110172465327488162875?rel=author" target="_blank">SHANE OLIVER</a> is head of investment strategy and economics and chief economist at <a href="https://www.ampcapital.com.au/home" target="_blank">AMP Capital</a> and is responsible for AMP Capital's diversified investment funds. 
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