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Perth Property Prices to Increase in Jan 2019

These next two months will be the last for foreign investors to make substantial savings on Perth property purchases. Come Jan 2019, Western Australia will join the rest of the country in imposing a stamp duty surcharge on foreign property buyers in the state.

 

Earlier this year, the Western Australia (WA) government announced that foreign buyers of residential property in the state will have to pay a stamp duty surcharge of 7%. WA is the last state in the country to impose a stamp duty surcharge on foreign property buyers.

The tax will be in force from 1st Jan 2019, and brings WA into line with the rest of Australia in imposing a foreign purchaser duty surcharge. This surcharge is now imposed by the six Australian states and the ACT at varying rates and scope.

Current additional stamp duty rates for foreign buyers in the Australian states.

Australian citizens, Permanent Residents and special category visa holders do not need to pay this tax.

Corporations and trusts are not exempted as long as foreign interests in the entity exceed 50%.

Residential developments with 10 or more lots are excluded from the tax.

Cost breakdown of a WA property valued at A$500,000

Industry players like the Real Estate Institute of Western Australia (REIWA) have opposed the tax. Its outgoing President, Hayden Groves said the tax will cause an upward pressure on rental prices.

A turn for the better

Perth’s median house price for September was at $505,000, 1% lower compared to last year YOY. Comparatively, 3 years ago the median house price was declining at a more significant pace, recording a 4.2% decline between September 2015 and September 2014.

Although prices in Perth remain soft, the decline of house prices has slowed, which is good news and an indicator that prices are starting to bottom out. Improved affordability in the Perth housing market presents investors with an excellent opportunity to get in before the additional stamp duty kicks in on Jan 1st, 2019 and prices start to rise again.

Incoming REIWA president Damian Collins said that in this quarter leasing activity was up, median rents remained stable, stock levels had reduced, average leasing times were quicker and the vacancy rate had plummeted to its lowest level in more than four years.

Perth’s vacancy rate declined to 3.9% during the September 2018 quarter – the lowest level Perth has experienced since the March 2014 quarter.

Mr Collins said, “With all key market indicators improving during the September quarter, Perth’s vacancy rate has now fallen below the 10 year average.

“The rental sector is really leading the charge in the Perth property market recovery. The September 2018 quarter results are very encouraging and should provide landlords and investors with a lot of confidence.”

Interested in to get into the Perth property market before the 7% tax kicks in? One of the latest developments in the city’s prime CBD (central business district), NV Apartments, has a superb location with a whole host of luxurious amenities, from just A$313,000. Act quickly and give us a call at (+65) 3163 8343 (Singapore), 03-2162 2260 (Malaysia), or email us at info@csiprop.com.

By Ian Choong
Edited by Vivienne Pal

Sources:

  • https://reiwa.com.au/about-us/news/perth-rental-market-has-strong-september-quarter/
  • http://www.ironfish.com.au/blog/2018/06/06/foreign-investors-consider-western-australia/
  • https://reiwa.com.au/about-us/news/foreign-buyer-surcharge-sends-wrong-message-to-vital-skilled-migrants/
  • Featured image: Nomads Hostels
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Perth Set to be the Next Melbourne

Perth is set to be the next Melbourne, a new report from Infrastructure Australia indicates.

Currently Perth is Australia’s fourth largest city by population. By 2046 it is forecast to leapfrog Brisbane into third place, with 4.3 million people — the current population of Melbourne. And if the Government’s recent proposal to restrict immigration to Sydney and Melbourne goes through, the city’s eventual population may exceed even that figure.

Australians traditionally are resistant to the idea of living in apartments, and this is more so for those living in Perth. Just 6.6% of the city’s residents live in apartments, half the national average of 13.1%. This will change as numbers increase — as a large-scale city grows, it expands not just outwards but upwards as well.

The Perth suburban sprawl stretches along the Western coastline for about 150km, making it almost nine times as large as Singapore, but with just over a third of its population. As the population grows to a similar scale as Melbourne, apartment living will become more widespread.

The 2016 Australian Census showed that there is one occupied apartment for every five (1:5) occupied separate houses in Australia; compared with one to every seven (1:7) 25 years ago. Apartments are also getting taller. Twenty years ago, about 20% of apartments were in blocks at least four storeys high, with the proportion now closer to 40%.

Over the past decade, the number of apartments in the Perth council area alone has increased by about 150%. Perth has seen changes in planning that recognises this, and state and local governments are encouraging strategic placing of mixed-developments where they benefit the most, close to existing good transport, infrastructure and in high-amenity locations.

One example of these developments is NV, a new off-plan apartment within Perth’s central business district (CBD), benefitting from the completion of the Perth City Link.

Perth City Link is a major urban renewal and redevelopment project to the tune of over A$5 billion, playing a central role in regenerating Perth’s entertainment, cultural, shopping and infrastructure links. Rail and bus links have been completed, connecting the city centre with the Northbridge entertainment precinct. Currently, further development is ongoing on a mix of retail, tourist, office and residential accommodation.

Corelogic looked at changes in the property market across Australia over the last 25 years, and found that prices in Perth grew at an annual 6.7% for houses and 6% for apartment units since 1993 — making it the third best property market after Sydney and Melbourne.

Following the nation’s property downturn, prices have slipped by more than 10% across the city since mid-2014, although some areas have managed to be relatively unscathed. The outlook for the next two years is that improvement in the economy and population growth will stabilise the Perth real estate market. After a stagnant 2017, Corelogic predicts that house prices in the inner city will rise by 3.3% this year and 4.1% in 2019.

Following the other states, Perth will be imposing additional stamp duty for foreign investors in January, which is an extra 7% on the property price. Investors looking to buy property can avoid the hike by signing contracts before Jan 1st, 2019.

Interested in to get into the Perth property market before the 7% tax kicks in? One of the latest developments in the city’s prime CBD, NV Apartments, has a superb location with a whole host of luxurious amenities, from just A$313,000. Act quickly and give us a call at (+65) 3163 8343 (Singapore), 03-2162 2260 (Malaysia), or email us at info@csiprop.com.

By Ian Choong

Sources:
  • https://thewest.com.au/lifestyle/real-estate/perth-destined-to-become-the-next-melbourne-ng-b88972063z
  • https://thewest.com.au/business/housing-market/perth-property-market-suffers-worst-fall-as-inner-city-and-south-west-suburbs-tipped-for-revival-ng-b88962488z
  • http://www.abc.net.au/news/2018-01-16/perth-apartment-development-debate-suburban-sprawl/9324992
  • https://www.perthnow.com.au/news/wa/new-figures-show-more-perth-residents-living-in-apartments-ng-8f60dd3e490dbac3aa5329aa42e51184
  • https://cdn.mra.wa.gov.au/production/documents-media/documents/central-perth/perth-city-link/file/perth-city-link-fact-sheet.pdf
  • https://www.mediastatements.wa.gov.au/Pages/McGowan/2018/08/$158-million-development-approved-for-Perth-City-Link.aspx
  • https://www.finance.wa.gov.au/cms/uploadedFiles/_State_Revenue/Duties/Duties_Circular_17-Foreign_Buyer_Duty.pdf
  • Featured image: State Library & TripAdvisor
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A Guide to the Australia Property Purchase Cycle

You’ve decided to invest in Australia property but have no idea what the purchase process entails. This article will guide you through some of the stages in the investment process.

It starts with choosing a property that fits your budget and investment goals, and appointing an agency that can take you through the purchase process — unless you prefer the hassle of flying to and from Australia and dealing with the developer/seller directly! It is important that your agent works closely with the developers, facilitating communication from the developer to you, and vice versa.

1. Property Reservation

 

The beginning of your property purchase

At CSI Prop, we recommend investments based on your goals and budget. Once you have decided on the property for investment, you will need to sign Reservation Forms and a Solicitor Appointment Letter.

There are several payments required at this stage:

  • Reservation Deposit*: MYR5000 (forms part of the purchase price and is non-refundable)
  • Legal Fees*: approx A$2000

*Payment can vary depending on project/developer/solicitor

CSI Prop works closely with a panel of solicitors and mortgage brokers who are recognised in Australia. We’re happy to recommend our panel, but you also may use solicitors or mortgage brokers of your own choosing.

 

2. Exchange of Contracts & 1st Payment

Subsequently, you will sign the Contract of Sale for the property, and make your first payment to the developer.  For apartments, this is 10% of the property price. For a land and house package, the first payment will be 10% of the land price and 5% of the building price.

You will also need to make an application with the Foreign Investment Review Board (FIRB). This process is required of non-resident foreigners before purchasing any residential property in Australia. The cost for this (as of 2018-19) is A$5,600 for dwellings valued at A$1 million or less.

 

3. Financing

Application for financing can be done 3 to 6 months before settlement, and the banks will assess your financing position and eligibility.

Documents typically required by the bank include:

  • 3 to 6 months salary slips
  • 3 to 6 months bank statements
  • Income Tax Return Form

There are typically no application and processing fees to finance your property. However, the bank legal fees can incur up to 1.5% of the value of your property. There are several banks in Malaysia and internationally that offer financing, please get in touch with us to find out more.

 

4. Final Settlement & Stamp Duties

Once your property achieves completion, the developer will send a Completion Notice to your solicitors. You will need to make full payment for the property at this stage, which is also known as the final settlement.

At this point, you will also need to pay stamp duty, also known as land transfer duty, to the State Government. Stamp duties differ in amount across the different states of Australia, and the following rates covered here are applicable to residential property only. Different rates may apply to commercial property.

 

Victoria (Melbourne)

The following stamp duty rates apply in the state of Victoria for property that is not the buyer’s principal place of residence:

Stamp duty for Victoria (Source: State Revenue Office Victoria)

Foreign property buyers pay an additional 7% duty on top of these normal rates (stamp duty surcharge), unless exemptions apply. There are exemptions for Australian-based corporations or trusts which add to the supply of housing stock in Victoria.

In Victoria, Australian citizens, permanent residents or New Zealand citizens with a special category visa have the following exemptions:

  • First-time buyers pay no stamp duty on a property that costs below A$600,000, or a reduced rate if the property has a value of between A$600,000 and A$750,000.
  • Pensioners don’t have to pay stamp duty on a property that costs below A$330,000. They also get a partial concession on properties valued up to a maximum of A$750,000.

 

Western Australia (Perth)

These are the stamp duty rates for property in Western Australia:

Stamp duty for Western Australia (Source: Department of Finance, WA)

Foreign property buyers pay an additional stamp duty surcharge of 7% in Western Australia starting 1 January 2019.

 

Australian Capital Territory (Canberra)

These are the stamp duty rates in Australian Capital Territory:

Stamp duty for the Australian Capital Territory (Source: ACT Revenue Office)

Foreign property buyers pay an additional stamp duty surcharge of 0.75% in the ACT.

 

New South Wales (Sydney)

These are the stamp duty rates for property in New South Wales:

Stamp duty for New South Wales (Source: Revenue NSW)

Foreign property buyers pay an additional stamp duty surcharge of 8% in New South Wales.

 

Queensland (Brisbane)

These are the stamp duty rates for property in Queensland:

Stamp duty for Queensland (Source: Queensland Government)

Foreign property buyers pay an additional stamp duty surcharge of 7% in Queensland.

 

5. Property Management

When you exchanged contracts with the developer you may have signed an agreement to hire a letting agent. You may also have chosen to manage the property yourself.

The  letting agent will ensure your property  is well-maintained, taking care of all expenses involved, and collecting the rental on your behalf.

 

6. Rental Income

When you receive your rental income, you will need to pay income tax to the Australian Government. Different income tax rates apply for Australian residents and non-residents.

You may also be taxed again on your Australia income by the country where you’re resident in.

Malaysians do not need to pay taxes on rental income from Australia, to the Malaysian Government due to the double taxation agreement that both countries have. If you live in another country, you will need to find out if there is such an agreement between your country and Australia.

Income Tax for Non-residents in Australia

Income Tax for Non-residents in Australia (Source: Australian Taxation Office)

Taxes need to be filed yearly.  You can file your taxes yourself, or hire a tax agency to do it for you. CSI Prop can recommend a qualified professional in Australia to manage your taxes.

Note that if you own a residential property in Victoria that remains unoccupied, you may be liable for Vacant Residential Property Tax (VRPT). The tax was introduced as a measure to increase available rental properties, and is at a rate of 1% of the Capital Improved Value (CIV).

 

7. Property Resale/ Exit

Should you choose to sell off your property, we can recommend a property agent and solicitor to assist you.

The agent’s commission rates, your advertising budget, and exclusivity will be decided by you and the agent. The agent will provide an appraisal of the property indicating how much they expect to sell the property for, and tell you how they plan to market your property.  Agents fees vary according to state.

Legal fees generally range between A$700 and A$1300.

Take note that, unlike stocks, property is not a liquid asset, and you should always expect that it will take some time for the property to be sold.

Capital Gains Tax (CGT)

In Australia, capital gains are treated the same as income from other sources. Any net capital gain from the sale of a property is included as part of the seller’s income and taxed together with their other income. Capital losses can be offset against capital gains. Residents qualify for a 50% Capital Gains Tax discount, as long as they have held the asset for at least 12 months before disposal.

Click here for more guides on property investment, and please subscribe to our website notifications to get the latest updates! Leave us a comment below if you have any thoughts or questions on our article.

If you are interested to explore investing in Australian property for high returns, or if you need us to refer you to a good tax firm in Australia, don’t hesitate to give us a call at (65) 3163 8343 (Singapore), 03-2162 2260 (Malaysia), or email us at info@csiprop.com!

Disclaimer: This guide is an outline of CSI Prop’s purchase process, which may differ from other consultancies. CSI Prop does not provide tax & legal advice and accepts no liability. Readers are encouraged to consult a qualified tax or legal advisor for a thorough review. You should also seek advice based on your particular circumstances from independent advisors and planners.

By Ian Choong
Edited by Vivienne Pal

Sources:

https://www.sro.vic.gov.au/node/1485

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Investors Pay Homage to the King of Fruits

On a recent cloudy Saturday afternoon, CSI Prop hosted yet another exciting and fun Investor Club event, honouring the King of Fruits and the pride of all Malaysians: a Durian Party in recognition of the favourite season of the year!

The party, held at DurianBB Park KL, was a smashing success. The place was packed with investors and their family members who arrived in excited anticipation of the durian spread. As the theme suggests, this day was all about indulging in durian and its greatness.

On the menu were sweet, pulpy, mouth-watering varieties of durians and delicacies made out of durian such as pies and tarts. Other tropical fruits like mangosteens, nangka and rambutans were also served alongside multi-flavoured ice-creams and fresh coconut juice.  

Different types of durian served for the investors and their families

The party kick started with a free flow of durian to every table where investors, alongside their family and friends, relished in the variety of durians, ranging from the mildest-tasting to the rich and creamy Musang King.  

Ever the affable host, CSI Prop Director, Virata Thaivasigamony fleeted from table to table to greet and chat with guests. He then gave his welcome speech,  where he shared about his own investment journey and some informative insights on the UK property and investment market.

Bonding through durian party

Sam Lee of Capricorn Financial Consultancy and our guest speaker from the UK, spoke about the current state of the mortgage market, the various financing terms available and the lending criteria for property investment in the UK.

Sam Lee during his sharing

Switching gears, we had a short and sweet session on how to pick and sample durians according to its intensity of taste, courtesy of DurianBB Park’s Stella Heong. For example, did you know that the Musang King is the strongest-tasting durian and should be eaten last? Neither did we. Stella also shared that  durian and mangosteen, being the ‘fruit couple’, should always be eaten together so that the heat from the durian can be neutralized by the juicy mangosteen.

What’s a party without games? Investors were invited to participate in a durian-tasting game and stand a chance to bring home a free durian. Our investor, Mr Alex Goh, was the winner, guessing correctly in just a matter of minutes!

Are they able to guess the durian?

The durian party was clearly a hit, judging by how quickly more than 200kg of durian were consumed (on top of other fruits and pastries!) and the gleeful smiles on the faces of our guests. The evening closed with our guests receiving a goodie bag of durian snacks.  

Missed out on the last Investor Club event? Stay tuned for our next one in Q4 and wait for your invitation via email!

The CSI Prop Investor Club is open to all clients of CSI Prop. It is a platform for knowledge, fun and networking and is a realisation of our core values of Knowledge, Service and Having Fun. 

By Lydia Devadas Michael
Additions and edits by Vivienne Pal

 

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Australia’s Population Growth Not Slowing Down

Compared to developing nations with far stronger population growth rates, Australia is expanding pretty quickly for a developed country.

Last month, Australia’s population officially ticked past the 25 million mark, according to the latest data by the Australian Bureau of Statistics (ABS) – 33 years earlier than projected!

Over the last three years, the nation’s population grew by around 400,000 people per year. If this trend continues, the number might reach 26 million in the next two to four years. This is no mean feat considering that the population Down Under was only at the 10 million mark back in 1960.

Back in 1960, the Australian population totalled only 10m. Today, the population number has ticked over the 25 million mark. For a developed nation, Australia’s population growth rate is quite incredible! Source: Supplied & News.com.au

Nett migration has continued to outpace births, with the highest migrant numbers coming from China and India.

Newly elected Minister for Cities, Urban Infrastructure and Population, Alan Tudge, in outlining plans for the country’s immigration policy, is not in favour of reducing skilled migrant numbers.

“My view has always been that Australia can be a bigger country. But, ideally, you have a broader distribution rather than very rapid growth in some areas,”he said.

Melbourne and Sydney are expected to grow to the size of New York city by 2050 as migration numbers continue to grow.

To date, Melbourne has the fastest-growing population rate in the country. Naturally, this has something to do with Melbourne’s ranking as the World’s Most Liveable City for seven consecutive years, receiving a perfect score from The Economist for healthcare, education and infrastructure.

“There’s a buzz about the city that keeps bringing the world’s best to enjoy Melbourne,” said the Australian government in a statement.

Victoria has an estimated population of 5.71 million, ranking second in the country with a population density of 25 people per sq km. The state accounts for 25% of the entire Australian population. 

And, for the first time ever, Victoria finally overtook New South Wales as Australia’s strongest economy in CommSec’s latest State of the States report.

Victoria’s high population growth has also supported house prices and rental values in Australia, and is a reason why the Melbourne market has remained strong.

In quarterly data by JLL Australia, apartment price growth for Greater Melbourne (for both new and existing stock) increased 6.6% y-o-y to 1Q2018, which is above the five-year annual average rate of 4.5%. Rental vacancy remains tight in the city.

The recent 2018 Global Real Estate Transparency Index by JLL ranks Australia’s property market as the most transparent in the Asia-Pacific region. This, and the all the things that make Australia such an attraction — good governance, strong healthcare and education systems, etc — are a great draw for property investors and millionaires.

What do you think of Australia’s population growth for the Australian economy and property market as a whole? Leave your comments in the box below! For more details on investing in Australian property, call us at 65-3163 8343 (Singapore), 03-2162 2260 (Malaysia), or email us at info@csiprop.com!

By Noorasikin Ali
Additions & Edits by Vivienne Pal

Sources:

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New Australian PM Scott Morrison: A Property Person’s Prime Minister

Exactly one week ago, Malcolm Turnbull saw his three-year reign at the helm replaced by former treasurer Scott Morrison, following much political chaos within the ruling Liberal party. Australians and foreign investors alike will be keeping an eye on what happens to the economy and housing market. Here’s a snapshot of the new Australia PM.  

Former treasurer, Scott Morrison is Australia’s new Prime Minister, replacing Malcolm Turnbullt who stepped down after three years following a bitter tussle in the leadership of the Liberal Party.

Scott Morrison, or ScoMo, is also Australia’s 30th Prime Minister — the sixth, in fact, within the last 11 years alone. In a closed-door meeting of Liberal lawmakers last week, Morrison won 45 votes to 40 over right-wing populist Peter Dutton. Morrison was known as the most conservative members of the Liberal’s moderate wing.

 

ScoMo the Regular Joe

The Prime Minister is an observant pentecostal Christian who grew up in a Christian home, in the beachside suburb of Sydney. Married with 2 daughters (after a long 18-year wait and 10 attempts at in vitro fertilisation), Morrison had a brief career as a child actor, appearing in several TV commercials. He achieved some notoriety as managing director of Tourism Australia when he approved an $180m international advertising campaign that was subsequently banned in Britain for crass language.

 

ScoMo on Politics & Immigration

Morrison’s exposure to politics began at a young age. At 9, he handed out “how to vote” pamphlets on behalf of his father, a former policeman and local councillor who served as mayor for a spell. He was elected  member of parliament in 2007, holding several positions in government, including minister of Social Services, minister of Immigration & Border Protection and, up until last week, Treasurer.

ScoMo was (in)famously an ardent supporter and enforcer of a contentious policy which turned away immigrants who tried to enter Australia illegally by boat. These asylum seekers were detained in offshore camps.

Conversely, when it comes to skilled migrants, Morrison is clearly a supporter and was known to rebutt former Prime Minister Tony Abbott’s proposal to cut migration rates.

According to Abbott, the current intake of permanent migrants had affected house prices and wage growth in Australia. He suggested that  immigration numbers to be cut by 80,000 a year.

The suggestion did not sit well with ScoMo who felt that Australia had benefitted tremendously from skilled migrants.

“If you cut the level of permanent immigration by 80,000 it would cost the budget, it would hit the bottom line — the deficit — by $4 billion to $5 billion over the next four years,” Morrison quickly countered.

“Basically the economy (would not be) growing at the same level and people who come as skilled migrants pay taxes, make a net contribution to the economy.

“Currently two-thirds of permanent migrants have skills needed by the economy. A cut in overall numbers would reduce the skilled total and emphasise family migration which ultimately gets more dependent on welfare”, he added.

Australia’s foreign migrant inflow continues to drive the growth of the housing market.

 

ScoMo & the Housing Market

Morrison is a supporter of APRA’s regulatory controls, believing that it would help in rebalancing the market. This, according to an analysis in the Australian Financial Review, is part of what makes him a “property person’s prime minister”. He is no stranger to real estate, having worked as national policy and research manager for the Property Council of Australia for 6 years and, according to industry captains, has “shown a deft touch in managing fears around the overheated investment market”.

Morrison is well aware of the conditions of the housing market in Australia but holds a firm belief that the country is not headed towards a housing market crash, citing APRA’s regulatory controls to credit access will help create a smooth landing.

To date, Australia holds the record for not going through a recession for 26 years. During ScoMo’s watch as Treasurer, Australia’s economy grew 1% in 1Q2018 and 3.1% annually — placing Australia on top of advanced economies in terms of economic growth.

 

Looking Ahead

Up until now, not a single Australian Prime Minister has completed a full term. The frequent upheavals have left foreign allies uncertain, according to experts.

In his speech, the newly minted prime minister said, “We will provide the stability, the unity, the direction, and the purpose that the Australian people expect from us.”

What happens from here is anyone’s guess. There are supporters and naysayers on both sides of the political divide, but ScoMo has, at the very least, until May 2019 when the country goes to the polls, to prove himself and the Liberal Party worthy.

How do you think Scott Morrison will fare as the new Prime Minister of Australia? Share your thoughts with us in the comment box below. If you’re keen to learn more about investing in Australian property, call us at 016-228 8691/ 9150 (MY) or (65) 3163 8343.

By Noorasikin Ali
Additions & Edits by Vivienne Pal

Sources:

  1. https://www.theguardian.com/australia-news/video/2018/aug/28/australias-new-pm-who-is-scott-morrison-video
  2. https://www.nzherald.co.nz/world/news/article.cfm?c_id=2&objectid=12113008
  3. https://www.nytimes.com/2018/08/23/world/australia/scott-morrison-prime-minister.html
  4. https://www.theguardian.com/australia-news/2018/aug/24/who-is-scott-morrison-churchgoer-behind-australias-tough-line-on-immigration
  5. https://www.nytimes.com/2018/08/24/world/australia/scott-morrison-malcolm-turnbull-prime-minister.html
  6. https://www.bloomberg.com/news/articles/2018-08-23/australia-waits-to-see-who-will-lead-country-as-turnbull-reels-jl6ibqux
  7. https://www.nytimes.com/aponline/2018/08/23/world/asia/ap-as-australia-politics.html
  8. https://www.smh.com.au/national/hockey-calls-for-compassion-in-funeral-row-20110215-1av7e.html
  9. https://www.news.com.au/national/politics/scott-morrison-slaps-down-immigration-reduction-calls/news-story/23f18bcc8a30010765d4a1ae0906420a
  10. https://www.theguardian.com/australia-news/2018/feb/21/scott-morrison-slaps-down-abbott-over-push-to-slash-immigration
  11. https://www.news.com.au/finance/economy/federal-budget/is-scott-morrisons-generous-budget-really-a-big-risk/news-story/e0f9fff4882d6ced2d174ab2db91a570
  12. https://thenewdaily.com.au/money/finance-news/2017/09/17/affordable-housing-treasurer-own-goal/
  13. https://www.afr.com/real-estate/scott-morrison-is-a-property-persons-prime-minister-20180826-h14jfz
  14. https://www.sbs.com.au/news/housing-policy-settings-right-morrison
  15. https://www.smh.com.au/politics/federal/scott-morrison-moves-to-reassure-investors-australias-housing-market-isnt-heading-for-a-crash-20171012-gyzgnp.html
  16. http://www.abc.net.au/radio/programs/am/australias-economy-strengthening-scott-morrison/9844018
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100 Days On, Is there Hope in Pakatan Harapan?

Today marks Pakatan Harapan’s 100th day in power since the political earthquake that shook Malaysia — the 14th General Election.

The pressing question is whether the nascent government has delivered on its word and lived up to the expectations of Malaysian voters thus far.

The last three months for Pakatan has been like a walk on the proverbial tightrope, with the coalition struggling to deal with the threat of bailing investors and a sovereign downgrade, and a national fiscal debt that has turned out to be more critical than expected.

A survey carried out by the Merdeka Centre earlier this month (August 2018), found that Malaysian citizens were largely satisfied with Pakatan Harapan ministers, but with some concerns about the economy, and racial and religious rights.

As part of its election manifesto, the government had pledged to deliver 10 promises in 100 days, but not all of these promises have been fulfilled.

Tun Dr Mahathir Mohamad, the Prime Minister, said that the reason behind the government’s inability to fulfil the 10 promises was because they had to prioritise other important matters.  

“The government’s focus is not only on the 10 promises in 100 days, the government has a lot of work to do and this includes ‘cleaning up’ the government which was tainted with corrupt practices and abuse of power during the past administration,” he said.

Harapan Tracker, a website which monitors the government’s performance, gave Pakatan a score of 45%, a cumulative average from its two scores of “the letter of the promise” (30%) and “the spirit of the promise” (60%).

 

Housing Not Part of 100-day Pledge

The housing sector, in particular, was not included in Pakatan’s list of 100-day promises. 

Many Malaysians are concerned about housing, and rightly so. There has been a glut of high-end residential property and a scarcity of affordable housing in the country —  an imbalance that has caused many Malaysians, especially those from the bottom 40% of income earners (B40), to be unable to afford their own homes.

Pakatan’s 10 pledges to be achieved in 100 days

Dr Carmelo Ferlito, an economist with the Institute for Democracy and Economic Affairs (Ideas) said the spectacular growth of the high-end property segment was ignited by rising profit expectations, growing demand and easy credit conditions.

“The mix of elements generated a bubble which reached its peak between 2012 and 2013.”

Zuraida Kamaruddin, the new Housing Minister, has embarked on a consolidation of all affordable housing projects under the Ministry in an effort to streamline the building of affordable homes. Certain projects like the 1Malaysia Housing Programme (PR1MA) were previously placed under the Prime Minister’s Department.

The new National Affordable Housing Council is expected to begin its work this month (August 2018) once papers regarding its set-up are finalised by the Cabinet. The council will monitor the construction of affordable housing, coordinate databases and implement a self-renting scheme for the B40 and M40 (middle 40% of income earners) groups nationwide.

Ms Zuraida also plans to set up a one-stop online platform for affordable housing that would enable buyers to submit an application online, and find out their approval status within days.

In an effort to further bring down the price of housing in Malaysia, Finance Minister Lim Guan Eng announced that building materials and construction services will be exempted from the upcoming Sales and Service Tax (SST). The SST is set to kick in on Sept 1.

Under the previous Goods and Services Tax (GST) regime, building materials and construction services were subjected to a 6% tax. However, players in the construction industry are not optimistic that the tax exemption will impact house prices significantly.

Datuk Steve Chong, chairman of the Real Estate and Housing Developers’ Association (Rehda) in Johor, thinks that the exemption is insufficient to bring down the prices of homes.

“We believe that the savings is too small to be passed on to homebuyers which will not in any way translate to a significantly lower price for homes in future,” he said.

Malaysian Institute of Architects (PAM) president Ezumi Ismail added that raw materials only accounted for less than a third of the total development cost, and other factors contributed to high housing prices.

“The rest … would consist of the cost to purchase the land and other compliance charges that come with the building the houses or units. SST may reduce the house prices but it may not be much.

“Some projects require the developers to construct basic infrastructure and facilities that are supposed to be built by utility companies. The added cost would then be (pushed) back (to) the consumers. It would be better if the authorities come up with a building master plan that could address these issues,” he added.

A new National Housing Policy is expected to be announced in September with a considerable number of changes, one of which includes the rental-tenancy market.

The rising supply of residential properties, particularly condominium and apartment units, has caused rentals to continue to drop in Kuala Lumpur.

Previndran Singhe, CEO of Zerin Properties said, “It is a tenant market right now as they have plenty of choices. There have been drops in rental in KL, generally around 10%.”

“Some owners have to reduce their rents because their units are already old and they will not be able to compete (with newer properties) if they don’t upgrade their homes.”

 

Silver Lining

There is a silver lining in sight. Yet, it may be a long while before housing issues are fully addressed in the country. Until then, what stands to remain is the loftiness of house prices in prime areas like the Klang Valley and Penang — and to a certain extent, Johor Bahru —  which will impact not just first home buyers, but also local property investors.

With economists slashing economic growth forecasts due to weak economic data (ahead of Bank Negara Malaysia’s release of GDP 2Q2018 figures), and potentially more fiscal tremors ahead, a single 5-year term may not be enough for the government to make the changes it wants to.

Investors should continue to maintain a wait-and-see stance before embarking on investment-related decisions in the local property market or, alternatively, look beyond Malaysian shores. Virata T of CSI Prop says that investors can still get good returns on properties in countries abroad.

“With rental yields dropping locally, investors wanting to invest in property could look overseas to get better returns on investments. There is a rising interest among Malaysian investors for this type of investment,” he said. 

“Up-and-coming cities in countries with a stable economy like the UK and Australia, are particularly attractive as they provide good returns while reducing investors’ exposure to economic risk.”

What do you think of Pakatan’s performance so far?  Leave us a comment below!

If you are curious about investing overseas and the returns you can obtain thanks to low vacancy rates, call (+65) 3163 8343 (Singapore), 016-228 8691/ 9150 (Malaysia), or email us at info@csiprop.com!

By Ian Choong
Additions & Edits by Vivienne Pal 

Sources:

  • https://www.thestar.com.my/news/nation/2018/08/15/merdeka-centre-august-poll-show-voters-happy-with-pakatan-leaders/
  • https://www.thestar.com.my/news/nation/2018/08/17/pakatan-govt-needs-to-make-good-on-its-promises/
  • https://harapantracker.polimeter.org/
  • https://www.nst.com.my/news/nation/2018/07/392262/pm-concedes-government-not-able-realise-10-promises-100-days
  • http://www.theedgemarkets.com/article/housing-and-local-govt-ministry-set-online-platform-govt-affordable-housing
  • https://www.thestar.com.my/business/business-news/2018/07/25/changes-in-national-housing-policy-to-be-unveiled-in-september/
  • https://www.thestar.com.my/news/nation/2018/08/12/guan-eng-construction-services-building-material-costs-exempted-from-sst/
  • https://www.malaymail.com/s/1662133/johor-developers-sst-exemption-wont-impact-homebuyers
  • https://www.malaymail.com/s/1661951/sst-wont-mean-much-cheaper-homes-says-architect-group
  • http://www.thesundaily.my/news/2018/06/12/national-affordable-housing-council-begin-work-august
  • https://www.edgeprop.my/content/1407669/new-national-housing-policy-rakyat-december
  • https://www.thestar.com.my/business/business-news/2018/07/25/review-on-housing-policy-next-month-says-minister/
  • http://www.thesundaily.my/news/2018/08/16/kl-rental-drops-rising-supply
  • http://www.theedgemarkets.com/article/hlib-cimb-research-slash-msia-2q18-gdp-growth-forecasts-amid-weaker-data
  • Featured image: malaysianaccess.com
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Victoria Smashes NSW as Australia’s Strongest Economy

Victoria, for the first time ever, has finally overtaken New South Wales (NSW) as Australia’s strongest economy, according to CommSec’s latest State of  the States report.

CommSec (Commonwealth Securities) is Australia’s largest online stockbroking firm operated by the Commonwealth Bank of Australia. Each quarter, it releases its State of the States report, which is an economic performance report of Australia’s states and territories. The report covers eight major economic indicators including population, employment, housing, investment, and construction.

Victoria has never owned the top spot in the report’s nine-year history until now, thanks to strong population growth numbers which have been instrumental in driving construction activity. The state currently ranks first in economic growth, dwelling starts and construction work done. In economic growth, Victoria is ahead at 26.5%, followed by NSW at 25.7% and Northern Territory at 25.6%, while Western Australia remains in the last place by 7.6%.

NSW, long standing at the top spot for economic growth in the last four years, slipped to second place due to declines in a number of housing indicators.

Figure shows the percentage of economic growth by state in Australia. Source: CommSec

The gap between the two states, however, remains narrow, leading to the possibility of a change in positions over the next 12 months, said CommSec’s chief economist Craig James.

In terms of population growth, Victoria maintains its position as the clear winner, having toppled other states since 2015. Victoria currently holds a population growth rate of a cool 2.3% above the Australian Capital Territory (ACT) at 2.15% and Queensland at 1.67%.

Meanwhile, the Northern Territory has the lowest population growth at 0.23%.

Victoria is poised to remain in the lead for population growth with research predicting that population figures will reach approximately 6.26 million in 2018.

Victoria claims the highest population growth for the 4th time. Source: CommSec

High population growth will continue to drive the broader economy — by fuelling retail spending and housing demand.

Thus, Victoria’s meteoric population growth will continue to spur Melbourne on as it maintains its credentials as Australia’s “most attractive city” due to stronger rental growth supported by tight vacancy.

As it is, Melbourne — Victoria’s capital city — is predicted to have a swell in population due to its huge student population and migration. In 2016, the Australian Bureau of Statistics (ABS) reported Melbourne as having the most epic population growth of any Australian city, making up almost a third of Australia’s population growth. The contrast is quite significant, with 2.4% in Melbourne compared to 1.2% in the rest of Australia.

With the current undersupply of housing, and demand driving prices, it appears that Melbourne will continue to remain, for some time to come, Australia’s Most Attractive City for global property players in the Asia Pac region.

Looking to purchase a property in Melbourne City? Hit us up — we’ve got limited stock of one of the best residences in one of the most coveted locations in the city. Or, just connect with us to find out more!

By Noorasikin Ali
Additions & Edits by Vivienne Pal

Sources:

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Effects of the Banking Royal Commission on Australia Property Prices

Evidence has emerged to suggest the ongoing Banking Royal Commission will impact availability of financing for house purchases. However, experts say that this is unlikely to have much effect on house prices in the long term. The real drivers of property prices are land availability, construction costs, population growth, and to a lesser extent finance access and cost

The Australian Banking Royal Commission was established last December, after years of public pressure, to investigate alleged misconduct by Australia’s financial services entities.

So far, proof of appalling behaviour by Australia’s major banks and financial planners from the past decade has surfaced, which include alleged bribery, forgery of documents, the repeated failure to verify customers’ living expenses before approving loans, and selling insurance to people who are unable to afford it.

In the aftermath of the scandals, several high profile finance executives have resigned, while shares of Australia’s major banks have all fallen at least 20% from highs reached before last May’s budget.

Commonwealth Bank, Westpac, and National Australia Bank shares are about 23% below their peak of late April 2017, while ANZ’s stock has fallen 20%.

Even as the Royal Commission goes on, tighter lending standards have already been enforced by the Australian regulator, with some self-imposed, as banks attempt to realign lending practices with responsible lending principles.

What the experts say

There has been concern that as tightening regulations reduce availability of financing, demand for property will follow suit, causing a drop in house prices. Several experts have chimed in on the matter.

JP Morgan’s Australian economics team suggests that the Royal Commission will cause slower credit growth, job losses in the finance sector and slower household consumption, which will lead to declines in house prices in the short term.

While JP Morgan believes the fallout from the Royal Commission creates short term downside risks for the Australian economy, in the long run it will leave Australia’s finance and household sectors, as well as the broader economy, on a stronger footing than is currently the case.

All else being equal, JP Morgan is of the view that this should be positive for the longer-term investment and productivity outlook.

Rachel Ong, Professor of Economics at Curtin University says that the stricter regulations are not likely to impact house prices.

“The tightening of banks’ lending standards and stricter credit controls should lead to a reduction in demand for properties.

“However, this prospect is unlikely to translate into any meaningful reductions in property prices. Property prices in Australia have remained persistently high since the early 2000s,” she says.

Brendan Coates, Fellow from Grattan Institute, says that any short term reduction in house prices is unlikely to have much of an impact.

“Tighter lending standards to reduce the amount of money prospective homebuyers could borrow would push down property prices, at least in the short-term. But the effect is likely to be modest, because banks have already tightened lending criteria in recent years,” he says.

Maria Yanotti, Lecturer of Economics and Finance, from University of Tasmania, is of the opinion that the Royal Commission is more likely to affect the supply of financial services, than demand for loans.

“As a consequence of the commission’s findings we would like to think that financial institutions will have to put in place better compliance processes and stop cost-saving or income-generating practices that disadvantage or put consumers at risk. These new processes and practices will translate into higher costs for the financial institutions, which will be passed on to consumers via higher interest rates and/or lower access to finance.

“This situation will result in lower demand from those looking to own a home, in favour of higher demand for rental housing. But the effect of higher interest rates may not be strong enough to decrease demand for property by real estate investors and businesses.

“The real drivers of property prices are land availability, construction costs, population growth, and to a lesser extent finance access and cost,” she observes.

It seems apparent that falls in property prices are unlikely to make much of an impact, or are merely confined to the short-term, giving a good outlook for investment in Australian property for investors keen to get a bargain whilst capital growth has slowed.

What are your thoughts about the impact of the Banking Royal Commission on property in Australia? Drop us a comment below. If you are interested in Australia and, particularly, Melbourne’s potential for high returns, don’t hesitate to give us a call at 3163 8343 (Singapore), 03-2162 2260 (Malaysia), or email us at info@csiprop.com!

By Ian Choong

Sources:

  • https://www.businessinsider.com.au/australia-banking-royal-commission-economic-impact-jp-morgan-employment-house-prices-2018-5
  • http://www.afr.com/real-estate/will-the-banking-royal-commission-push-down-property-prices-we-ask-5-experts-20180514-h102gm
  • https://www.smh.com.au/business/banking-and-finance/housing-royal-commission-jitters-drag-big-banks-into-bear-market-20180613-p4zl88.html
  • https://www.theguardian.com/australia-news/2018/apr/20/banking-royal-commission-all-you-need-to-know-so-far
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AsiaPac Investors Prefer to Invest in Melbourne

Melbourne overtakes Sydney as the top Australian location for offshore real estate investment dollars in Asia Pacific.

Melbourne seems to be collecting more notches on its bedpost. Not only has it been named the Most Liveable City seven consecutive times; it was also named Happiest City. A new survey has now pegged it as Australia’s Most Attractive City for global property players in the Asia Pac region.

A new survey has revealed Melbourne as the No. 1 Australian city for global property players in the Asia Pacific region.

Property sales and research firm CBRE launched their Investor Intentions Survey 2018, which polled a total of 366 respondents, including real estate funds, developers and companies.

Of those polled, 70% were based in Asia, 18% in Western Europe, the Middle East and North America, and 12% in the Pacific.

The survey found Melbourne overtaking Sydney as the preferred Australian location for offshore real estate investment dollars, as Sydney fell down the yearly rankings from first to sixth. Brisbane came in at eighth place — which was Melbourne’s position last year.

Melbourne’s rise as Australia’s “most attractive city” was “due to its stronger rental growth supported by tight vacancy”.

“Although asset pricing poses a major obstacle, investors remain keen to purchase real estate for risk diversification. Investors’ focus is on income growth as capital value appreciation will increasingly be driven by income growth,” the report stated.

CBRE expects a slowdown in Chinese outbound investment to continue following the introduction of new capital controls by the Chinese government last year.

“This year’s survey indicates that Chinese investors are less keen to invest overseas in 2018. While overall interest remains reasonably firm, fewer investors intend to invest more than they did in 2017.

This reduction of Chinese investment is being offset by investors from Singapore. Cushman & Wakefield reported that Singapore overtook China last year as the largest source of foreign capital for Australian commercial real estate.

Investments into Australia from Singapore quadrupled from about $1bn in 2010 to an excess of $4bn in 2017.

It is clear that Melbourne is driving housing market growth in Australia despite slightly weakened prices this year due to tighter regulation and an ongoing Banking Royal Commission investigation.

Yet experts say that the temporary slump will not make a major impact, and, in all likelihood, is just for the short term. Here’s why:

Melbourne faces a serious undersupply of housing, and this has been a strong driver for demand. The Urban Development Institute of Australia (UDIA) warned last year that the city could have a shortfall of 50,000 houses by 2020.

In their latest report in March this year, UDIA found that the state government will need to increase approvals and commencements of new housing by more than 10% in order to meet demand.

The Victorian government has committed more resources to speeding up the approval process of new suburbs, but the delivery of necessary infrastructure such as sewerage and roads remains a bottleneck.

UDIA Victoria CEO, Danni Addison, said that the supply of new housing being delivered right now was being driven by high population and employment growth.

“The numbers tell us that despite record high levels of building activity, we’ve still got a way to go before we can stop playing catch-up and ensure there’s enough new housing to meet the demands of population growth,” she said.

Data released by SQM Research in June 2018 showed that demand for property in Melbourne has stayed at a constant high. Vacancy rates remained incredibly tight at 1.4%, the same as 12 months before.

Rental rates in the city however, have sharply increased by a total of 3.5% since the the last 12 months, giving potential for high returns on investment, whilst capital growth has slowed.

What are your thoughts about investors flocking to Melbourne’s property market? Drop us a comment below. If you are interested in Melbourne’s potential for high returns, don’t hesitate to give us a call at 3163 8343 (Singapore), 03-2162 2260 (Malaysia), or email us at info@csiprop.com!

By Ian Choong

Sources:

  • https://www.news.com.au/finance/real-estate/melbourne-vic/melbourne-no-1-with-offshore-investors/news-story/3cd0133d959eedcc50df55ca4dee19da
  • https://www.cbre.com/research-and-reports/Global-Investor-Intentions-Survey-2018
  • https://sbr.com.sg/commercial-property/in-focus/singapores-real-estate-investment-in-australia-ballooned-141-us35b
  • http://www.afr.com/real-estate/residential/victoria-at-risk-of-housing-undersupply-warns-udia-report-20180314-h0xg5e#ixzz59lZuQh53
  • http://www.sqmresearch.com.au/19%2006%202018_Vacancy%20Rates%20Steady%20in%20May_FINAL.pdf
  • https://csiprop.com/australia-faces-major-housing-undersupply/