Gold Coast developer Drew Group is fast approaching sell-out at its Main Beach apartment development, Lagoon Main Beach.

In the last nine months, Drew Group and sales partner Pezet Matheson have secured 31 sales totalling over $75 million, as the two-tower development advances towards completion under the expert eye of Hutchinson Builders.

“Today's buyers are more discerning than ever," Drew Group Managing Director Jon Drew says.

"It's essential to provide something truly unique that sets a development apart, and we believe Lagoon has achieved just that."

[smartcode_project:default project_id=108747 project_image_fid=193023]

Just over 50 per cent of recent&nbsp;sales have been to local buyers, reflecting the deep trust and connection within the Gold Coast community that Drew Group has developed over the years.

Demand has been particularly robust at the top end, with two of the three exclusive penthouses already sold, alongside five sub-penthouses. Only seven apartments remain in Lagoon's Signature Series — one&nbsp;penthouse and six sub-penthouses.

[smartcode_project:default project_id=108747 project_image_fid=284864]

Drew Group has also removed the much-maligned sunset clause from all contracts at Lagoon. The sunset clause — although rarely invoked, yet on occasion known to have been — allows developers to take back contracts on apartments should the building not be completed within the timeframe specified in the contract.

Pezet Matheson Co-Director Jayde Pezet says the fact Lagoon is&nbsp;within a year of completion, and has no sunset clause in contracts, provides certainty to buyers.

"This is paramount in the current market," Pezet says.

Drew Group has committed to providing the highest level of security inclusions — none more impressive than the Ubiquity Access Control System, a cutting-edge facial recognition technology that is one of the most state-of-the-art keyless entry systems on the market.

[smartcode_project:default project_id=108747 project_image_fid=190743]

One of the biggest drawcards to Lagoon has been the size of the apartments.

"It is unlikely that any future new development in Main Beach will be able to offer such spacious living at this price point," Drew says.

"Today's buyers are more discerning than ever, carefully evaluating amenities like gyms, spas, workspaces, and beach lockers, along with quality finishes. It's essential to provide something truly unique that sets a development apart, and we believe Lagoon has achieved just that."

Lagoon is set to complete construction in mid-2026.

[smartcode_project_cta:default project_id=108747]

Joel Robinson

Lagoon Main Beach approaches sell-out as local buyers drive $75m in sales

National apartment developer Abadeen has topped out its debut Gold Coast apartment project,&nbsp;<a href="https://www.apartments.com.au/new-apartments/villea-palm-beach-26-mawarra-street-palm-beach-qld-4221">Villea Palm Beach</a>.

Buyers will move into the $120 million development in early 2026, with builder Emicon now focusing its attention towards the fitout stage of the apartments.

<a href="https://www.apartments.com.au/developers/abadeen-group">Abadeen</a>’s Executive Chairman and Founder, Justin Brown, said topping out at Villea represented an exciting step forward for the company’s national growth and the delivery of a benchmark coastal development.

“Villea Palm Beach represents everything Abadeen stands for — design-led living, premium quality, and the convenience we are bringing for residents to feel part of a perfect beachside community," Brown said.

"It is a particularly special project for us, being our first with spectacular ocean views, just metres from the water and with the addition of ground-floor retail. To reach the top floor is a proud moment, and I am incredibly proud of the Abadeen and Emicon teams for the way they are bringing this project to life for future residents.”

[smartcode_project:default project_id=106840 project_image_fid=336444]

Pierre Saab, Director of builder <a href="https://www.apartments.com.au/builders/emicon">Emicon</a>, said topping out was an exciting milestone and the team is now focused on interiors and detailing.

“This is a fantastic milestone to reach. With the final roof pour complete, we’ve moved into the fit-out stage where the detailing will truly bring Villea to life,"&nbsp;Saab said.

"Standing on the top floor, the team was struck by the stunning 180-degree views of the ocean and all that <a href="https://www.apartments.com.au/developments/palm-beach-qld-4221">Palm Beach</a> has to offer — a daily reminder of the exceptional lifestyle this project will deliver.”

[smartcode_project:default project_id=106840 project_image_fid=336441]

Nick Clydsdale, Director of SRQ, who is managing sales and marketing for Villea, said the milestone marks the next phase of the sales campaign.

“With construction now at its highest point, we are excited to kick start the next phase of the campaign off the back of strong sales momentum driven by the local market,"&nbsp;Clydsdale said.

"Villea is a prized offering in the popular suburb of Palm Beach— ideally suited to owner-occupiers and downsizers seeking a convenient and beautiful coastal lifestyle. At the same time, with forecasts pointing to further price growth across the Gold Coast in 2025, Villea offers investors the opportunity to enter early in the upswing cycle."

[smartcode_project:default project_id=106840 project_image_fid=336442]

&nbsp;

Designed by acclaimed architects <a href="https://www.apartments.com.au/architects/bda-architecture">BDA</a>, Villea comprises 69 two- and three-bedroom residences with light-filled layouts, premium finishes including timber flooring, Fisher &amp; Paykel appliances, and high-performance glazing to maximise comfort.

Many residences capture ocean views, while all benefiting from generous open plan designs and access to shared amenities like a&nbsp;pool, gym, barbecue facilities, and outdoor entertaining spaces, all just 400m from the beach.

A ground floor retail leasing campaign is also underway, with Abadeen set to handpick a curated mix of tenants to enhance the experience for both residents and the wider community.

[smartcode_project_cta:default project_id=106840]

Abadeen tops out Villea Palm Beach

<a href="https://www.apartments.com.au/developers/urban-property-group">Urban Property Group</a> has officially unveiled its vision for a landmark development in Little Bay.

The vertically integrated developer-builder is set to launch <a href="https://www.apartments.com.au/new-apartments/este-jennifer-street-little-bay-nsw-2036">ESTE</a>, a collection of low-rise buildings designed by <a href="https://www.apartments.com.au/architects/hill-thalis-architecture-urban-projects-pty-ltd">Hill Thalis Architects</a>, comprising 94 apartments.

Targeted at local downsizers, upgraders, nature lovers, and golf enthusiasts, ESTE offers close proximity to Kamay-Botany Bay National Park, Little Bay Beach, and the renowned St Michael’s Golf Club — widely considered one of New South Wales’ top courses.

Many of the apartments, with interiors by Richard Stanisich, boast uninterrupted ocean views — a rare offering in Sydney.

[smartcode_project:default project_id=112343 project_image_fid=210130]

Residents will enjoy exclusive access to a private rooftop amenity level featuring a heated infinity pool, a fitness centre equipped with the latest TechnoGym technology, and a sauna.

Urban Property Group has taken a careful and considered approach to the design and planning stages, ensuring ESTE delivers an architecturally appropriate and sensitive addition to a suburb that rarely sees new development.

Plans were first submitted to Randwick City Council in late 2022, following concept approval from the NSW Government earlier that year.

Construction commenced in November 2024, with the project expected to top out in Q4 2025 and reach completion in Q3 2026.&nbsp;

Urban was one of the first developers in New South Wales to adopt the sought-after 10-year <a href="https://www.apartments.com.au/news/resilience-latent-defects-insurance">Latent Defects Insurance policy from Resilience Insurance</a>. The policy — that can only be taken out by developers or builders and not by individual apartment buyers — covers any structural or waterproofing defects for a full 10 years post-completion, providing buyers with the most comprehensive protection available when purchasing off the plan.

Read more:&nbsp;<a href="https://www.apartments.com.au/news/what-is-latent-defects-insurance-and-is-it-bringing-confidence-to-the-off-the-plan-apartment-market">What is Latent Defects Insurance and is it bringing confidence to the off the plan apartment market?</a>

SRM Residential will be launching ESTE in the coming months.

[smartcode_project_cta:default project_id=112343]

Urban Property Group unveils ESTE Little Bay apartments

For the first time, prospective off the plan apartment buyers in Sydney's <a href="https://www.apartments.com.au/developments/homebush-nsw-2140">Homebush</a> can purchase with the confidence of a 10-year defect protection for their new apartment building.

<a href="https://www.apartments.com.au/new-apartments/bridge-road-residences-homebush-3-5-bridge-road-homebush-nsw-2140">Bridge Road Residences</a>, the latest development by <a href="https://www.apartments.com.au/developers/ventus-group">Ventus Group</a>, is the first new apartment complex in the area to offer the highly sought-after 10-year Latent Defects Insurance, provided by Resilience Insurance.

This policy, which applies to all 80 apartments in the new building on Bridge Road, covers homeowners against&nbsp;structural or design defects defects that may arise within the first 10 years after the building's completion. It can only be taken out by the developer or builder of the new development, and not by individual apartment owners.

Half of the apartments in the building have already been quickly snapped up. Buyers have been attracted by the insurance policy, along with the guarantee of a quality build, thanks to the insurance's Technical Inspection Service. This service involves third-party experts visiting the construction site at least once a month to ensure the building is being properly constructed, making defects highly unlikely.

[smartcode_project:default project_id=6989 project_image_fid=2132]

Located on Bridge Road, the development offers a mix of apartment configurations, from studios to three-bedroom apartments.

Apartments have been designed&nbsp;by MX Architects with liveability in mind, featuring open-plan layouts, engineered timber floors, wool-blend carpet in bedrooms, and either ducted or split-system air conditioning depending on configuration.&nbsp;

Many apartments also include north-facing aspects or oversized balconies, enhancing natural light and outdoor usability.

The development includes landscaped communal gardens with a central lawn, shaded seating, and barbecue areas. A rooftop terrace offers views across the city and Sydney Olympic Park. These amenities are designed to provide outdoor spaces for both relaxation and socialising, without increasing maintenance burden.

[smartcode_project:default project_id=6989 project_image_fid=2135]

Bridge Road Residences is less than 10 minutes’ walk from Homebush Station and close to major road links including the M4 and M8.&nbsp;

Residents will have immediate access to Rochester Street’s cafes, grocers, and restaurants, as well as retail and dining hubs at North Strathfield’s Bakehouse Quarter, Strathfield Plaza, and DFO Homebush.&nbsp;

The area is also well-served by schools and tertiary institutions, including Homebush Public School and the University of Sydney.

Construction is being led by <a href="https://www.apartments.com.au/builders/one-way-dc">One Way Development &amp; Construction</a>. They are expecting to complete the build in Q3 2026.

[smartcode_project_cta:default project_id=6989]

Bridge Road Residences brings 10-year defects guarantee to Homebush

<a href="https://www.apartments.com.au/developers/romano-property-group">Romano Property Group</a> has appointed AG Construct to deliver their boutique new Fitzroy apartment development, Napier 235.

Half of the apartment in the architecturally-striking block of 14 have already been snapped up.

Located just 150 metres from Brunswick Street, <a href="https://www.apartments.com.au/new-apartments/napier-235-235-napier-street-fitzroy-vic-3065">Napier 235</a> will bring a mix of two and three-bedroom residences to the tightly held inner-city neighbourhood, including a full-floor penthouse and one townhouse.

[smartcode_project:default project_id=144904 project_image_fid=3217]

Designed by <a href="https://www.apartments.com.au/architects/ewert-leaf">Ewert Leaf</a> with landscaping by <a href="https://www.apartments.com.au/landscape-architect/florian-wild">Florian Wild</a>, Napier 235 presents a sculptural, low-rise form that aligns with Fitzroy’s heritage character while introducing contemporary detailing.&nbsp;

Residences are all north-facing and feature large private terraces, with living areas that connect to the outdoors via floor-to-ceiling sliding glass.

Inside, kitchens are anchored by 3.5-metre stone island benches and include walk-in pantries, Miele and Gaggenau appliances, and built-in bars with wine fridges in most apartments.&nbsp;

Customisable floor plans allow buyers to tailor internal layouts to suit their needs.

[smartcode_project:default project_id=144904 project_image_fid=3220]

Sustainability has been prioritised from the outset. Napier 235 ranks in the top five per cent of Victorian developments under current planning policy benchmarks, reflecting efficient energy use and environmentally responsible design.

Napier 235 places residents within walking distance of <a href="https://www.apartments.com.au/developments/fitzroy-vic-3065">Fitzroy</a>’s food and retail precincts, including Marion, Morning Market, and Bentwood Café. Fitzroy Gardens, Carlton Gardens, and tram connections to the CBD are also nearby. Despite its proximity to major amenity, the development sits within a quieter residential pocket.

Pricing for two-bedroom apartments at Napier 235 starts at $1,225,000.

[smartcode_project_cta:default project_id=144904]

Construction to commence at Napier 235 in Fitzroy as Romano appoints builder

Strategy

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On Wednesday I spoke at seminars in Sydney where I heard about a property investment strategy that is different in many respects to one I would pursue. But it’s a very good and successful one, nevertheless.
It reinforces a point about which I’m constantly aware: there’s no single strategy for property investment that can be called the right one. The best strategy for buying property and building a portfolio differs from one person to the next.
Here’s what David McMillan of Performance Property Advisory does on behalf of his clients. He and his team identify one market which, above all others, stands out as the one that offers the most value.
They focus exclusively on that market and devote big resources there to learn all they can, establish a network of service providers and be ready to move quickly when the right properties become available. 
A core plank of the strategy is to buy in areas likely to show good growth in the first three years. Early growth creates the equity that helps to fund the next purchase and build the portfolio.
“People can’t stump up a deposit of $100,000 or $150,000 every time they want to buy another property,” McMillan says. “So we buy them something for $500,000 that will be worth $650,000 in three years time. They build their portfolio using the equity that has been created.
“Most investors only get as far as one property, because they make mistakes. Those mistakes are leveraged and amplified.”
McMillan and his team has a track record of targeting future growth markets well ahead of the pack. They were buying in prime suburbs of Sydney in 2012, in advance of the three years of strong price growth that followed.
Once the temperature rose as the herd stampeded into Sydney, the PPA team exited. The properties bought for their clients in Sydney have grown 40% to 60% in value.
The next focus was Brisbane, with the emphasis on prime suburbs close to the CBD. They started buying there in mid-2013 and have bought close to 300 properties for clients. They’re now on the way out of Brisbane, as more investors come into that market, making it harder to find good-value investments.
“We buy established property, not new property. New property is the most expensive way to buy real estate and the least effective way to grow a portfolio. We look for scarcity and we look for good quality property in good areas.”
How do they know the right time to focus on a particular market? One of the key research tools is charting the relationship between prices and rents.
When Sydney had gone multiple years without significant price growth, but rents had grown considerably, they knew it was the right time to strike. “We want a location with price stagnation for 5-7 years plus a significant increase in rents,” he said.
An example was the top end suburb of Rose Bay. In 2012, the median price had grown only 15% in the previous eight years. But rents had grown 70%. According to the formula, that meant the suburb and many others like it in Sydney were primed for a growth spurt. 
“It was very clear what was going to happen in Sydney,” McMillan says. 
McMillan offers three keys to successful investment:  buy in markets showing value, buy at or below the median price for the target region, and buy quality.
“We won’t recommend a property to a client that we wouldn’t put in our own portfolio. If you don’t like it and wouldn’t live in yourself, then it’s probably not a good property to invest in.”
TERRY RYDER is the founder of <a href="https://www.hotspotting.com.au/" target="_blank">hotspotting.com.au</a>. You can <a href="https://mailto:ryder@hotspotting.com.au" target="_blank">email him</a> or follow him on <a href="https://twitter.com/hotspotting" target="_blank">Twitter.</a>
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terryryder-YECXbqmri2

Charting the relationship between prices and rents: Terry Ryder

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One of the hardest quests in property is to time your home sale at the market peak, to sit out, and to then buy back at the very bottom.
As we never really know what is around the corner, it is only some time after that the so-called peak and bottom can be gleaned.
Even then because there are so many separate cycles, it is not really possible to say there is just the one peak or bottom.
Buying back into a depressed real estate market, having determined it as a good time to buy, rather than evidence of ongoing doom, is not for everyone.
Waiting for the perfect bottom timing may see you never make the return acquisition and miss out altogether. 
And the best time to buy differs for everyone.
Of course, this is not going to stop some boasting of selling at the top of the Sydney market - around late 2016 early 2017 - and buying back at the bottom.
Good luck to them, because it is a tricky occurrence, thwart with risks at both ends of the deal.
Buying property is the biggest financial decision in most lifetimes, and there is stress involved, regardless of when or how often you buy.
Battling your own emotions could be hard, and then telling family and friends that you’re intent on pulling off a property masterstoke, could see pride and ego cloud your judgment.
For most property buyers, it is the norm to simply buy and sell in the same market which does offer some price comfort, especially for upsizers.
First home buyers get a greater shot at buying better too. 
Sydney is at a stage in its cycle where many are wondering if the property market is close to bottoming out, although the autumn market is marked by uncertainty, caution and a reluctance to commit.
The rate of the price fall is in decline, according to CoreLogic, and Sydney has also seen the strongest capital city auction clearance rate.
The overall market direction is set to be interest rate driven with other contributing factors including levels of consumer and business confidence, the state of the share market, stability in national and global economic conditions, along with government policy.
I'd suggest these are more unknown than usual.
The only way we will know the market has bottomed is in hindsight – and you'll have likely missed it by the time the data driven headlines advise when the bottom was.
Instead of trying to do what is almost impossible, the better strategy is to get educated about the markets.
Look out for minor increases in both buyer interest and transaction activity.
The tell-tale signs the market is about to turn a corner include well-priced properties starting to sell soon after their listing.
There will be multiple offers occurring on well-priced properties.
Some auction properties will be selling surprisingly above reserve.
A shortage of stock for sale across the suburb could be occurring with time on the market dropping.
Of course even if the market has bottomed there is no guarantee we will see any noteworthy increase in values any time soon.
The values might sit there for some years, as it did following the bottom after the 2003 boom.
But the successful property purchaser knows how to create wealth at any point in a cycle while others do poorly even in good times.
This article first appeared in The Daily Telegraph. 
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jchancellor-FAypfDUnLy

Buying at the bottom sounds great, but educating yourself about the market is ever better

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No-one envisaged the Sydney property boom would continue with similar gusto into 2018, which would have been its sixth year.
But the accelerated price reversal has caught many sellers by surprise after an extended period of double digit annual price growth.
Prices haven't yet fallen back by a prior year's growth, but negative equity does now loom.
This concern, along with not knowing just how much further there will be in falls, is creating uncertainty.
And property markets don't like uncertainty.
Falling prices are not the only factor hitting the feel good wealth effect. 
There are the recent sharemarket wobbles, the royal commission-induced tighter lending conditions, low wage growth, apartment oversupply fears, high household debt and the erratic political leadership.
The potential implementation of Labor Government policy hitting negative gearing incentives and hiking capital gains tax also has the markets worried as the Coalition government finally gets traction on raising the contextual consequences in a falling property market.
We are only starting to see the shocks of uncertainty in the property market.
And if it continues we will see it start being a drag on the wider economy too as fears about job security could see demand for goods fall, at least temporarily.
The RBA has modelling that found increases in uncertainty can trigger a downturn characterised by lower employment growth, weaker retail sales growth, and a fall in consumer confidence.
Olivier Blanchard, former chief economist of the International Monetary Fund, wrote in 2009 after the collapse of the US financial markets that there was “(nearly) nothing to fear but the fear itself.”
That was obvious at weekend auctions.
There's enduring purchasing interest, with extreme caution.
Some 18 contracts were issued to potential buyers during the marketing of <a href="https://www.realestate.com.au/property-house-nsw-north+balgowlah-129409278" target="_blank">a North Balgowlah brick home </a>(pictured above) in a great bushland location with renovation upside.
But not one bid came at its onsite auction.
Buyers and sellers are gaining insights that real estate goes up, down and or plateaus in cycles.
This article first appeared in The Daily Telegraph.
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Property markets don't like uncertainty

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Financial adviser Noel Whittaker says headlines about property booms can lure inexperienced buyers into traps.
He also wrote recently that headlines with doom and gloom scenarios can scare people from making a good decision to buy.
"So, if you are serious about investing in property, stop reading the headlines and set yourself a specific plan," advised Noel Whittaker, the author of Making Money Made Simple and numerous other books on personal finance.
"One day we are told that real estate is booming, the next day people like Steve Keen and Harry Dent are predicting falls of up to 40%.
"When a boom is on we are even subjected to articles telling us how much our home is increasing each day, often accompanied by comments that it’s a tax-free gain and worth more than we are earning.
"Of course, it’s all nonsense – capital gain is not something that is happening, it is something that has happened.
"And the sad reality is that a big capital gain last year is a red flag that next year may be very different."
Whittaker noted the principal is called regression to the mean.
"I am not at all troubled by the usual negative comments about property that are circulating at the moment. 
"Australia’s population is on track to reach 40 million within 35 years – this has to be positive for anybody who buys well-located, quality real estate today and hangs on to it for the long term."
He advised there is no such a thing as a single property market – not for Australia, not even for a single capital city – there are myriad property markets all doing their own thing.
"How can you compare a townhouse in Cairns with a mansion in Point Piper?
"All over Australia some markets may be rising, other markets may be falling, and some may be flat."
He also noted real estate figures are notoriously unreliable because they take no account of improvements by owners,
Whittaker advised the first task for prospective investors was to find out exactly what they could afford, which means talking to a lender or mortgage broker, and laying all your cards on the table.
"Then, having worked out your price bracket, you need to research areas where you can buy a property you like for the price you’re able to pay.
"Once you have established that you are in the running, take the time to research the market thoroughly so that you become an expert on the area.
"You do this by going to open houses, befriending local real estate agents, and reading everything you can about your preferred location.
"Then when you come across a genuine bargain you will know that you have struck a winner.
"Always keep in mind that the secret of success in real estate is to buy well, and then add value." 
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j.ballantyne1990-6AQqhLzZaK

Noel Whittaker says if you want to invest in property, stop reading the news

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EXPERT OBSERVATION

With the advent of lower clearance rates, we are seeing more Melbourne auctions ending in a pass in.

A “pass in” occurs when the bidding at an auction does not reach the vendor’s reserve and, as such, the auctioneer having failed to illicit a high enough bid, passes the property in and according to the rules of the auction, must negotiate with the highest bidder first. 

If you have been to many auctions, you will probably have heard the auctioneer open up the auction with a “vendor bid”.

This is a bid, made by the auctioneer, on behalf of the vendor, quite often, to kick things off and get the bidding started.

But it is sometimes used by auctioneers to advance the bidding if they have only one bidder.

In other words, a bidder from the crowd bids $600,000 and nobody else says anything, so the auctioneer will bid $650,000 “Vendor Bid” and then ask the original bidder to go over the top. 

Now the auctioneer will say things like, only the top bidder gets the lawful right of first negotiation and as the Vendor Bid is the highest, then nobody has this right.

This is totally incorrect and a total lie.

The highest “real bid” from the audience does have the first right to negotiate with the vendor. 

In both 2012 and again in 2016 the Real Estate Institute of Victoria analysed the rules and publicly acknowledged that if a genuine bid had been made, that no vendor bid could be used to remove the right to first negotiation. 

<a href="https://www.consumer.vic.gov.au/housing/buying-and-selling-property/selling-property/selling-property-by-auction" target="_blank">Consumer Affairs Victoria </a>have also addressed this exact situation and on their website has said that the highest bidder has the first right too negotiate with the vendor.

This includes if the property is passed in on a vendor bid.

So, if you are bidding anywhere in Victoria on Saturday and you have the highest bid, and the auctioneer tries to remove your right of first negotiation by continually vendor bidding over you, call him out.

If you are the highest “real” bid you do have the first right to negotiate ahead of anyone else.

Ian James is a director at JPP Buyer Advocates

<h2>Recently listed properties in Melbourne:</h2>

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[smartcode_project:default project_id=4939]

[smartcode_project:default project_id=22699]
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Don't get fooled by a vendor bid, Victorian bidders have rights: Ian James

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<div>
Cromwell Property Group has today announced a $170 million strategic placement to SingHaiyi Group Ltd. and Haiyi Holdings Pte. Ltd., which are entities associated with Gordon Tang and Celine Tang, cornerstone investors in the Cromwell European REIT.</div>
<div>
 SingHaiyi Group Ltd. is also listed on the Main Board of the SGX-ST and specialises in property development, real estate investment, real estate co-investing and real estate management services. With interests that span Singapore, US and Europe it has considerable expertise in real estate development, investment and management across both listed and unlisted vehicles, principally held through Haiyi Holdings Pte. Ltd. Proceeds from the strategic placement will be used to repay short term debt associated with Cromwell’s investment in CEREIT and for investment in value adding opportunities in the portfolio and potential acquisition opportunities. “I highlighted last week that the successful IPO of CEREIT was a transformative deal,” said Cromwell CEO Paul Weightman. 
</div>
<div> Approximately 175 million new Cromwell stapled securities (New Securities) will be issued under the strategic placement at an issue price of $0.9691 per New Security. The issue price represents a 4.9% discount to the 30 day VWAP of $1.02 to 8 December 2017. The New Securities will be allotted on 15 December.</div>
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Cromwell announces new $170 million strategic placement 

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GUEST OBSERVATION
With interest rates at or near-record lows and the recent release of the 2015 Australian government Intergenerational Report, people nearing retirement may well be evaluating their retirement investment decisions.
Retirees who invest in increasingly conservative assets, such as reallocating their capital from equities to bonds and/or cash, are under threat. If current low bond yields and cash rates persist, which looks likely, the lifecycle method of investing, with all its benefits, will fall short in meeting retirees’ income needs.
Lifecycle investing is the conventional idea of allocating capital into risky assets (equities) during your working life and then de-risking your super savings into more conservative assets (bonds and/or term deposits) as you approach retirement.
A glidepath is the relationship between a fund’s asset allocation and an individual’s age. While equity investment do not typically fall to zero at retirement for lifecycle strategies, many advisors justify the concept of a declining equity glidepath on the basis that retiree’s horizon decreases with increasing age.
Put simply, the young investor is assumed to be able to accept more risk than the older investor. Hence the young investor should invest a large proportion of their savings in equities at the onset and gradually reduce the allocation to equities over time.
Although recent studies suggest otherwise, financial planners are resolute in reducing their clients’ asset allocation in equities when their clients approach retirement. Why? Because it seems right! Conventional thinking suggests that retirees with a moderate nest egg will look to protect their savings in retirement and deploy their lifetime savings in low risk investments.
A big challenge to the lifecycle strategy in an era of low interest rates is accumulating enough lifetime savings to fund your longevity risk. This is the risk of individuals living for an unusually long time and thereby outliving their retirement incomes.
In Australia, many funds use the Strategic Asset Allocation (SAA) framework as a default investment strategy. This strategy is representative of the optimal combination of different asset classes. These assets are periodically rebalanced to the target allocations as investment returns skew the original asset allocation proportions.
With the masses of Australians paying their Superannuation Guarantee (SG) into their fund’s default strategies, the Australian government introduced a cost-effective product called <a href="https://www.apra.gov.au/Super/Publications/Documents/20141002_MySuper_selected_feature_overview.pdf">MySuper</a>.
There are currently 116 MySuper products, 88 of which have a single investment strategy with the remaining having a lifecycle investment strategy. The static strategy has up to 49% of assets invested in equities while the lifecycle strategy holds approximately 31% of wealth in growth assets (equities) at retirement age 65 and the remainder in conservative assets.
<a href="https://aatheory.blogspot.com.au/2007/12/dynamic-allocation-strategies-for">Research</a> has shown that the SAA outperforms portfolios with decreasing asset allocations in equities. More importantly, <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2324930">recent studies</a> find evidence to support an increasing (that’s correct, increasing) asset allocation to equity investments in retirement which challenges the conventional thinking in the financial planning profession.
The increasing equity glidepath has the potential to reduce both the probability of failure and the magnitude of failure for investment portfolios. The idea of an increasing equity glidepath in retirement may present some concerns for retirees from a risk tolerance perspective, and therefore require a very meticulous approach.
<a href="https://www.mercer.com.au/content/mercer/asia-pacific/au/en/newsroom/white-collar-workers-killing-average-life-expectancies">Life expectancy</a> among Australians is among the highest in the world today. Retirees have elongated life expectancies of up to 86 and 90 for males and females, respectively. There is a 15% chance that one person of a retired couple will live past the age of 95.
Some 20% of white collar male and females are now expected to live to age 94 and 96, respectively. And 5% of the male white collar cohort will live to age 99, with the females living beyond 100. These statistics suggest that if you’re planning to retire at 65, you potentially face a very long retirement period which you will need to fund. The current world of low interest rates means retirees investing in safe assets risk facing financial ruin over long retirement horizons.
These low interest rates in today’s financial markets may be the “nudge” financial advisors need to address the issues of longevity risk. One proven method is to consider these new equity-focused investment strategies that exhibit a higher probability of investment success. Although the past is not necessarily indicative of the future, it is illustrative for risk purposes.
Strategies that follow the concept of de-risking with increasing age under-performs <a href="https://www.researchaffiliates.com/Our%20Ideas/Insights/Fundamentals/Pages/F_2012_Sep_The_Glidepath_Illusion.aspx">contrarian strategies given 141 years of historical data</a>. When we lower our expectations and live in the present, with low yields and market uncertainties, the outcomes do not change. Equity-centric strategies perceived to be riskier provides more certainty with retirement outcomes.
The eminent economist John Maynard Keynes famously said, “When the facts change, I change my mind. What do you do, sir?” From a retiree perspective, when bond/cash yields change, let our investment and retirement advice change along with it.
Osei K. Wiafe is research fellow, Griffith Centre for Personal Finance and Superannuation (GCPFS) at Griffith University.
This article was originally published on <a href="https://theconversation.com">The Conversation</a>.
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Low interest rates set to stay, so what’s the best investment course for retirees? Osei K. Wiafe

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Australian blue chip shares typically provided better tax breaks, less effort and lower costs than property, but investors still are still flooding the booming Sydney property market.
Fully franked dividend income from top-performing bank shares typically provide more than double the rental income from a Sydney house before management fees and maintenance costs, suggests Tony Bates, joint principal of Bluepoint Consulting, an advisory group that specialises in high-net-worth clients.
"The income that lands in your pockets is much better from shares than it is from houses, and a substantial part of the difference is tax and costs," Bates told the Australian Financial Review in an article on the income dilemma for those who have traditionally relied on fixed-term deposits to contribute to their income.
Bates undertook a comparison of income returns from term deposit accounts, blue chip shares and an investment property.
An $800,000 investment in a 12-month term deposit with Westpac Bank offering about 3% will pay about $24,800 on maturity, or around $476 a week.
Alternatively, an investor might consider investing $800,000 in a three-bedroomed house (rather than typical two bedroom unit) on the outskirts of Sydney, paying weekly rental income of about $600, which is $31,200 a year.
The investor would be left with about 3%, or around $450 a week, after agent's fees, land tax and maintenance costs. The third investment scenario involved about 21,000 Westpac shares which will pay about $41,800, or more than $800 a week, plus franking credits of $17,600, or around $340 a week – a total return of more than $1,140 a week. 
"So if you can imagine $800,000 of Westpac shares as a rental property, it will cost you less to buy, nothing to maintain and it will pay about $1140 per week in your pocket, compared with somewhere between $450 and $600 per week from the property," Bates suggested.
Of course one of the reasons property has become popular is spreading the risk as the focus on high-yielding stocks exposes investors to heightened ‘concentration risk’, as well as to the normal equity risk of the share market.
The broking firm Credit Suisse estimated recently that since June 2005 the self managed super funds have ploughed $121 billion into shares – equivalent to one-third of net new equity issuance over the period.
With about 32% of their assets held in Australian shares, Credit Suisse says SMSFs now own more than 16% of the Australian share market, or about $229 billion worth of shares.
Andrew Aitken, Bennelong Funds Management’s head of distribution, noted because super funds have a lower tax rate than the company tax rate of 30%, they receive cash rebates of the franking credits that they’re unable to use to offset their tax.
"If an SMSF is in ‘accumulation phase’, its tax rate is 15% and it gets a partial tax refund of $215 for every $1,000 of fully franked dividends it receives. For such investors, a dollar of fully franked dividend income is effectively worth more than a dollar," said Aitken.
"It is even better when the SMSF moves to ‘pension phase’; that is, it is paying pensions to its members.
"The assets are held in the fund’s ‘pension account’, which means they are being used solely for the purpose of paying out a pension.
"In this instance, there’s no tax on the income or capital gains from the assets and the franked dividends can actually be refunded fully by the ATO.
"The fund gets a tax refund of $429 for every $1,000 of fully franked dividends it receives, which can turbo-charge the nominal dividend yield quite spectacularly."
For example, on market consensus forecasts, Telstra is expected to pay a fully franked dividend of 32.2 cents in FY16. At a share price of $6.60, that dividend would represent a nominal dividend yield of 4.9% – more than attractive when the official interest rate is 2.25%, and a one-year term deposit will pay you about 3.3%.
But to an SMSF in accumulation phase, that nominal yield of 4.9% becomes – courtesy of the partial franking credits rebate – effectively the equivalent of 5.9%. And to a pension-paying fund, receiving a full rebate of the unused franking credits, Telstra’s effective yield rises almost to 7%. In a low interest rate environment, that is a massive attraction.
SMSFs investing for yield in this way account for a massive chunk of the self-managed funds’ share of the sharemarket. Telstra and Commonwealth Bank are some of the SMSFs’ favourite stocks: as at their most recent annual reports, Telstra has 1.4 million shareholders, while CBA has 770,000.
Other popular blue-chip ‘income’ stocks include Westpac (596,000 shareholders), National Australia Bank (533,000), ANZ Bank (500,000), Wesfarmers (514,000) and Woolworths (441,000). Add BHP (555,000 Australian shareholders) and Rio Tinto (207,000 Australian shareholders) and you have about 60% of the Australian market’s value.
"That is unacceptably high concentration risk," Aitken concluded.
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Shares, term deposits v property: The search for yields

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This week we did a little back flip on a development project and I thought I'd talk about what to do when things don't necessarily go your way.
We found a wonderful property for our clients well located right in the CBD of a town.  The project would eventually end up as a three unit development which would include the existing house. Our plans are to renovate the house (which we have now completed) and build a duplex (two attached dwellings) behind the house. It's termed 'three unit' by council as when you lodge your development application (DA) they assess the house as one of the units.
We had a few options to explore on this before we lodged our DA. The property backed onto a laneway which for all purposes is used as a road. It's bitumen sealed with kerbing and used mainly by retailers for deliveries and to access the shopping centre nearby.
We met with council with the proposal to face the duplex to the laneway and have direct vehicle access onto the laneway considering it's condition. Mostly laneways in this suburb are gravel tracks unsealed with no kerbing or drainage.
A few weeks after an over the counter meeting at council, we finally received feedback from the town planner we'd met with. She explained that council probably would not support vehicle access to the laneway as they didn't want to set a precedent. Whilst disappointing, we switched to our back- up plan of a 'battleaxe' style development with vehicle access from the road. This is more costly due to the long driveway. There were also added  costs to fill and retain the rear of the site to get the right fall for the stormwater to drain to the street.
We lodged the DA and received a letter from the planner requesting some ridiculous changes around our stormwater drainage. Without going into all the detail, it would have a big impact on costs.
I pondered over this for a few days, we can argue and fight but thinking about this particular site and its location and my client's goals which are to build their investment portfolio and create as much equity as possible in the process.
I set up a meeting with our clients to present an idea I had. Our DA is still in council, but I wanted to present another development strategy to them. The strategy included withdrawing the DA and building a granny flat on their property. The granny flat tenants are allowed to use the laneway for access and so we could have it completed quickly - within three months - and their yield would be increased. Then, to replace the equity creation that the three unit project was to deliver, I presented a dual occupancy project to them on land we'd just located. This project would actually create more equity than we estimated the three unit project would for them.
They were happy to change tact. But we are still investigating whether we complete the DA and then they sell the property in a few years time with a DA approval in place or whether they proceed with the granny flat construction. Either may have good outcomes for them.
So when an unexpected hurdle pops up, it's important to investigate other options and not just stay with the original plan for the sake of it. By looking at a different project to deliver one of their goals we are still fulfilling the goal of building a portfolio. There can be many hurdles to jump as property developers but sometimes investigating a different path is better than trying to jump a hurdle that keeps moving.
<a href="https://www.propertybloom.com.au" target="_blank">www.propertybloom.com.au</a>
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