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The Spiraling Growth of Melbourne CBD

Housing is a necessity in Melbourne. As the population continues to swell, so must housing supply.

Perhaps the easiest measure of how deserving Melbourne is of the World’s Most Liveable City title for the 7th consecutive year, is its increasing population growth. That, and the fact that it is perhaps the most populated state capital city in Australia, with 75% of the population of the entire state of Victoria living in Melbourne city alone.

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.

Australia’s population growth is faster than many OECD countries including Malaysia, Philippines, Singapore and the UK. Image source & credit: ABS

Australia’s population growth is faster than many OECD countries including Malaysia, Philippines, Singapore and the UK. Image source & credit: ABS(For the record, Australia’s population growth is faster than many OECD countries including Malaysia, Philippines, Singapore and the UK. This is an interesting fact because a developed nation’s growth is typically slower than that of a developing nation, hence property prices should grow faster in a developing nation. Australia, however, is the exception.)

In ABS’ latest report, Melbourne (Victoria) continues to headline the country’s population growth of 388,100 people, with an increase of 2.3% year-on-year.

But first, a short lesson in geography: Melbourne, with its population of approximately 4.8 million people, comprises the broader metropolitan area (also known as Greater Melbourne) as well as the city centre. Altogether, it consists of 31 municipalities.

However, this article specifically refers to the city of Melbourne which encompasses the Melbourne CBD, Southbank, Docklands and many of the suburbs in Melbourne’s inner city.

As of 2016, the estimated  residential population in the municipality of the City of Melbourne was 151,176. A whopping approximate of 903,000 people people were recorded as having travelled to, or were present in the municipality on an average weekday in that same year, an increase of 6% from 2014.

Statistics in the City of Melbourne’s Daily Population Estimates and Forecasts reveal that expansion in the city will continue, and is expected to hit 266,455 residents by 2037 due, largely, to births and immigration.  According to projection estimates, there will be over 1 million people in the city on an average weekday within the next 5 years, and 1.4 million by 2036.

By 2037, the population of Melbourne (CBD) is expected to reach 76,982. This is 44.68% higher than the population in 2017. Credit & source: http://bit.ly/2rYxoi3
By 2037, the population of Melbourne (CBD) is expected to reach 76,982. This is 44.68% higher than the population in 2017. Image redit & source: http://bit.ly/2rYxoi3

Recently, BIS Oxford Economics predicted that Melbourne is headed for an undersupply in housing. What makes this especially noteworthy is the fact that it was a complete reversal of its earlier prediction that the city would suffer a surplus of apartments! The consultancy has based its forecast on census figures that show Melbourne had 109,000 more people than previously expected.

“We thought it would get to a 20,000 excess (of apartments) in Victoria by 2018. We’re now saying in 2018, the market has still got an undersupply of about 2000 dwellings. We’re talking a 20,000 turnaround,” said BIS managing director Robert Mellor.

There are currently 25,321 private dwellings in Melbourne (CBD). By 2037, this is expected to increase to 56,838. Image source & credit: http://bit.ly/2rYxoi3
There are currently 25,321 private dwellings in Melbourne (CBD). By 2037, this is expected to increase to 56,838. Image source & credit: http://bit.ly/2rYxoi3

Spiralling Growth in the CBD

Figures by the ABS show that between 1991 and 2016, the population living within 10km of the CBD grew by 40%, from 743,000 to 1,042,000.

Melbourne’s CBD has also seen spectacular growth; with its population swelling from 1611 in 1911 to 15,249 in 2006 and 35,447 in 2016.

The increase in population is reflected by a sharply-tightened vacancy rate of 1.7% and 1.4% for apartment units and houses at as recent as Q3 2017.

According to Mellor, census figures show that the proportion of students rose to 27% demand for inner city apartments in 2016, from 20% in 2011. Students comprise a key demographic occupying apartments in the CBD, where Melbourne’s high-rise supply has been concentrated.

The increase in population is reflected by a sharply-tightened vacancy rate of 1.7% and 1.4% for apartment units and houses in Melbourne at as recent as Q3 2017. Image source & credit: Domain.com.au
The increase in population is reflected by a sharply-tightened vacancy rate of 1.7% and 1.4% for apartment units and houses in Melbourne at as recent as Q3 2017. Image source & credit: Domain.com.au

According to SQM managing director Louis Christopher, the last time the figure slipped as low as 1.7% was in June 2007.

“This is quite remarkable — despite predictions of looming apartment oversupply in inner-city Melbourne, we are seeing vacancies fall rather than rise,” he said.

“Even in the Docklands the vacancy rate tumbled to just 2.4% (as at July 2017), down from a high of 6% in December.”

The tight vacancy rate is good news for landlords, especially if seen from the perspective of future population growth.

By 2037, the CBD’s population is expected to reach 76,982, 44% higher than the population in 2017. Interestingly, this growth forms 29% of the total projected population growth of the City of Melbourne within the same time frame — a significant percentage, particularly if you consider that the CBD spans an area of about only 6.2km2!

In terms of age, the CBD population will be dominated by the 25- to 34-year-olds, followed by the 35- to 44-year-olds by 2037. Logically and based on current property prices, the 25- to 34-year-olds represent the demographic that is most likely to rent a property.  Image credit & source: http://bit.ly/2rYxoi3
In terms of age, the CBD population will be dominated by the 25- to 34-year-olds, followed by the 35- to 44-year-olds by 2037. Logically and based on current property prices, the 25- to 34-year-olds represent the demographic that is most likely to rent a property.  Image credit & source: http://bit.ly/2rYxoi3

In terms of age, the CBD population will be dominated by the 25- to 34-year-olds, followed by the 35- to 44-year-olds by 2037. Logically and based on current property prices, the 25- to 34-year-olds represent the demographic that is most likely to rent a property.  

Meanwhile, housing looks set to increase too, with the number of private dwellings projected to grow to 56,838 in 2037, compared to 25,321 dwellings in 2017.

Back in the day, the CBD was probably last on a laundry list of choice residential areas, but this trend is changing. While the CBD may not be the cheapest area to live in Melbourne, there is a growing community of residents.

What will continue to draw the crowd and keep the CBD alive, are its industries and jobs, and its proximity to universities, festivals and the arts, food and beverage, services and retail.

Article by Vivienne Pal

CSI Prop proudly promotes international investment property with high yields at low risk. Our portfolio comprises residential and commercial property including student accommodation and carehomes, in cities across the United Kingdom (London, Luton, Manchester, Liverpool, Newcastle, York, Glasgow, Scotland; Sheffield, etc) and Australia (Melbourne, Perth, Brisbane). Our projects are concentrated in high-growth areas with great educational, infrastructural and job growth potentials. We aspire to make a difference in the lives of our clients by helping them achieve their investment goals through strong market research backed by third party experts and due diligence. 

Disclaimer: 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.

Need advice or clarification? Call us for more information and/or to find out about our projects! Hotline: 03-2162 2260

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Australia Property Outlook 2018

Subdued, Yet Still Robust

It has been said that housing is, by far, one of Australia’s largest assets and the foundation of its household wealth, financial system and economy. Little wonder, that: as of Dec 2017, the total value of the nation’s 10 million residential dwellings stands at $6.8 trillion according to latest official estimates by the Australian Bureau of Statistics (ABS).

Over the last 5 years, house prices in Sydney and Melbourne — two of Australia’s biggest property markets — had increased 75% and 59%, respectively.

Just 3 months ago (Oct 2017), a report by the Swiss-based Bank of International Settlements (BIS) pegged Australia as having the 6th highest rise in annual property prices in the world over the last 5 decades, with house prices surging 6556% since the 1960s at an average increase of 8.1% per year.

Be that as it may, Australia’s housing market saw substantial moderation in 2017 (particularly the second half) led largely by Sydney, and, to a lesser extent, Melbourne, due to stricter lending measures which have affected investor appetite. What, then, would the outlook be like in 2018?

The Bank of International Settlements (BIS) pegged Australia as having the 6th highest rise in annual property prices in the world over the last 5 decades, with house prices surging 6556% since the 1960s at an average increase of 8.1% per year. Image credit: http://bit.ly/2ri0BEl

The Bank of International Settlements (BIS) pegged Australia as having the 6th highest rise in annual property prices in the world over the last 5 decades, with house prices surging 6556% since the 1960s at an average increase of 8.1% per year. Image credit: http://bit.ly/2ri0BEl

The property market will continue to see growth in 2018, albeit at fairly modest levels as tightened regulatory and lending criteria for investors remain in place. The moderation of house values across Australia will be driven by Sydney, which had already begun experiencing a drop in price levels in Nov 2017.

Yes, it does appear that the Sydney boom is over, but while we agree with the common perception that prices in Sydney may fall in 2018, we don’t think the prices will drop drastically within the year.

In Melbourne, price growth will also ease though not at Sydney’s rates, given that property is more affordable. Speculators are pulling back but serious investors know that the city is backed by strong population growth. Again, in both cities, we don’t see anything that suggests widespread declines in prices.

Perth will be a city to watch as we think the housing market has finally reached its bottom. Market experts predict that Perth property prices will be flat in 2018, but that interest levels and, consequently, demand will eventually pick up. A recent ANZ-Property Council Survey reveals that confidence levels in Western Australia are rising to similar levels seen in Australia’s eastern states.

Experts are also predicting modest growth to continue in Adelaide and Brisbane, slowing at more moderate levels in Canberra. Hobart, Australia’s stand-out performer last year, will continue to have strong growth levels, albeit slower than its double-digit surge in 2017.

The value of the property market next year will depend largely on whether the Bank of Australia (RBA) will increase interest rates, or if there will be further tightening on lending criteria. That said, it looks unlikely that interest rates will budge from the 1.5% level that it is at currently.

SILVER LINING

Australia’s housing market has remained vibrant due to active investor activity and strong population growth.

The latest Foreign Investment Review Board (FIRB) Annual Report 2015-2016 found that residential real estate applications had increased by 19% to to $72.4bn in 2015-2016 compared to $60.8bn in the previous year. The total number of applications approved for residential real estate had also jumped from 36,841 to 40,149 during this period. It is interesting to note that residential property approvals comprised 96.9% of all foreign investment approvals.

FIRB's largest residential approvals were in Victoria (44%), followed by New South Wales (32%), Queensland (17%) and Western Australia (4%). Image & source credit: FIRB
FIRB’s largest residential approvals were in Victoria (44%), followed by New South Wales (32%), Queensland (17%) and Western Australia (4%). Image & source credit: FIRB

The largest residential approvals were in Victoria (44%), followed by New South Wales (32%), Queensland (17%) and Western Australia (4%). Meanwhile, the top 10 countries that dominate real estate in Australia include China (highest at $31.9m), US, Singapore, Malaysia and Japan.

It must be noted that Chinese investments has levelled off over the past year due to tightened investment regulations in China. Charles Pittar, CEO of international property site, Juwai.com, said, “Over the past year we have seen growth in Chinese investment level off, from 90% growth in Chinese buyer enquiries via Juwai.com in 2015 to 28% in 2016.”

 

STRONG POPULATION GROWTH

Tightened regulations will continue to moderate investor sentiment, but not too substantially, as the housing market remains underpinned by strong population growth. This will translate to increased demand for housing.

The latest report by the Australian Bureau of Statistics (ABS) shows that Australia’s population grew by 388,100 people with Victoria being the fastest-growing state or territory, with a population increase of 2.3%.

The latest report by the Australian Bureau of Statistics (ABS) shows that Australia’s population grew by 388,100 people and Nett Overseas Migration at a 27% increase. Source & image credit: Australian Bureau of Statistics
The latest report by the Australian Bureau of Statistics (ABS) shows that Australia’s population grew by 388,100 people and Nett Overseas Migration at a 27% increase.  Victoria charted the highest population increase in Australia. Source & image credit: Australian Bureau of Statistics

Nett overseas migration (NOM) was recorded at 245,400 in 2017 — an increase of 27% from the previous 12 months. New South Wales (NSW) was the most popular destination with NOM of 98,600 followed by Victoria with 86,900, Queensland (31,100) and Western Australia (13,100).

“NOM in NSW and Victoria increased by 31% and 23%, respectively. This growth has seen both states surpass their previous recorded high in 2008-09,” said ABS Demography Director Beidar Cho.

 

CONTINUED INVESTMENT POTENTIAL

Despite the cooling in price growths in the mainstream markets, Australia will continue to attract migrants, says Virata Thaivasigamony of CSI Prop.

“There is a strong desire to live in Australia, and this will cause demand for property to increase,” he says. “Naturally, investors will question whether property will remain a good investment, but it is the strategic investors who will view property with a long term outlook. This period of slower growth is a buying opportunity for long term appreciation.”

Movements in some of the main cities in Australia projected from 2017 – 2020. Image source & credit: QBE Housing Outlook 2017-2020

For whatever it’s worth, the current ANZ-Property Council of Australia Confidence Index (March quarter) came in at 137.7 in their latest survey, just below the all-time high of 139.5 in the final quarter of 2017. That’s a lot of confidence in the market!

Article by Vivienne Pal

CSI Prop proudly promotes international investment property with high yields at low risk. Our portfolio comprises residential and commercial property including student accommodation and carehomes, in cities across the United Kingdom (London, Luton, Manchester, Liverpool, Newcastle, York, Glasgow, Scotland; Sheffield, etc) and Australia (Melbourne, Perth, Brisbane). Our projects are concentrated in high-growth areas with great educational, infrastructural and job growth potentials. We aspire to make a difference in the lives of our clients by helping them achieve their investment goals through strong market research backed by third party experts and due diligence. 

Disclaimer: 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.

Need advice or clarification? Call us for more information and/or to find out about our projects! Hotline: 03-2162 2260

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Most Liveable City 2017 Goes to Melbourne

The Australian city of Melbourne has been declared the world’s most liveable city again – for the 7th consecutive time. Image credit: http://bit.ly/2wSBIgX

Melbourne is the only country to win World’s Most Liveable City for 7 consecutive years.

The Australian city of Melbourne, Victoria has been declared the world’s most liveable city again – for the 7th consecutive time.

This is the first time in the survey’s 15-year history that a city has held top spot in The Economist Intelligence Unit’s Global Liveability Index for seven consecutive years. Vancouver, which shared the top-ranked spot with Melbourne from 2002 to 2004, held the title for 6 years.

The Economist’s report scores each city out of 100 for stability, healthcare, culture and environment, education and infrastructure. It also looks at factors such as crime, how good the food is and even how bearable the temperature is in each of the 140 cities surveyed. Housing affordability is not considered.

Melbourne’s overall rating is 97.5 out of 100. Little wonder that the population of the city has continued to swell dramatically by around 2000 people a week, a quarter of them from Sydney.

Melbourne is not the only Australian city listed in the Survey. Adelaide is at 5th place (with Calgary in Canada), Perth at 7th place, Sydney at 11th and Brisbane at 16th. Sydney used to be in the global top 10 and is now overtaken by two smaller Australian cities.

Melbourne wins most liveable city again in EIU’s Global Liveability Survey Rankings for 2017. Image credit: The Economist


CSI Prop proudly promotes international investment property with high yields at low risk. Our portfolio comprises residential and purpose-built student property in cities across the United Kingdom (London, Luton, Manchester, Liverpool, Newcastle, York, Glasgow, Scotland; Sheffield, etc); Australia (Melbourne, Perth, Brisbane) and Thailand (Bangkok). Our projects are concentrated in high-growth areas with great educational, infrastructural and job growth potentials. We aspire to make a difference in the lives of our clients by helping them achieve their investment goals through strong market research backed by third party experts and due diligence. 

Disclaimer: 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.

Need advice or clarification? Call us for more information and/or to find out about our projects! Hotline: 03-2162 2260

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Last Chance: Save ~A$20K Before Stamp Duty Increase on Melbourne Property

Stamp duty will be increasing in Melbourne again. This increase is caused by the removal of the off-plan stamp duty concession on Melbourne property, which will affect all buyers. THIS WEEK COULD PROVE THE LAST CHANCE FOR YOU TO SAVE ~$A20K in stamp duty on Melbourne property.

WANT TO KNOW MORE ABOUT THE STAMP DUTY INCREASE? WATCH THIS VIDEO:

This video follows articles that we had written and published on our website previously regarding this change from as far back as 2 months ago.

To read our article on the new stamp duty increase, please click HERE.

To read about Vacant Residential Property Tax (VRPT), please click HERE.

These articles and video are our way of sharing knowledge with our clients and friends.

CSI Prop proudly promotes international investment property with high yields at low risk. Our portfolio comprises residential and purpose-built student property in cities across the United Kingdom (London, Luton, Manchester, Liverpool, Newcastle, York, Glasgow, Scotland; Sheffield, etc); Australia (Melbourne, Perth, Brisbane) and Thailand (Bangkok). Our projects are concentrated in high-growth areas with great educational, infrastructural and job growth potentials. We aspire to make a difference in the lives of our clients by helping them achieve their investment goals through strong market research backed by third party experts and due diligence. 

Disclaimer: 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.

Need advice or clarification? Call us for more information and/or to find out about our projects! Hotline: 03-2162 2260

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Melbourne: Vacancy Tax to Hit Foreign Property Buyers

Foreign buyers who don’t have a tenant in their property (or live in it themselves) for more than 6 months in a year, will be hit with a vacancy tax, effective 1 January 2018. Image credit: sourceable.net

Government measures for affordable housing at expense of foreign investors:

(i) Vacant Residential Property Tax (VRPT)
(ii) New residential developments restricted to only 50% foreign buyers

 

Last month we published an article announcing the latest raft of changes by the government to scrap off-the-plan stamp duty concessions in order to waive stamp duties for first-time buyers of houses worth up to $600,000 in Melbourne. (Click HERE to access the article).

More restrictions are in store for foreign investors. The Victoria government has also now effected a vacancy tax (Vacant Residential Property Tax or VRPT) which will will cost foreign buyers who don’t have a tenant in their property (or live in it themselves) for more than 6 months in a year, an annual penalty of 1% of the property’s capital-improved value. This means investors with a home worth $500,000 will pay $5,000 in tax if they don’t rent the place out.

The tax takes effect on 1 January 2018 and will target homes around inner and middle suburbs of Melbourne. This would include the following local council areas: Banyule, Bayside, Boroondara, Darebin, Glen Eira, Hobsons Bay, Manningham, Maribyrnong, Melbourne, Monash, Moonee Valley, Moreland, Port Phillip, Stonnington, Whitehorse and Yarra.

At press time, it is still unknown how the new tax will be applied or policed, but a on the State Revenue Office (SRO) of Victoria website states that the tax will be self-reporting, i.e, owners of vacant residential property will be required to notify the SRO of any vacant properties they own.

Meanwhile, moving forward, developers can only sell 50% of properties in new developments to foreign buyers. This means that at least 50% of new homes will be sold locally.

The suite of changes introduced by the government has drawn mixed reactions from the public and industry players. Some agree that it is a great move towards housing affordability, but there are parties — including from within the party — that have criticised this move.

What’s clear is that while this is a populist move that brings in the votes, it is a temporary measure that could cause the property market to remain on the boil.

CSI Prop proudly promotes international investment property with high yields at low risk. Our portfolio comprises residential and purpose-built student property in cities across the United Kingdom (London, Luton, Manchester, Liverpool, Newcastle, York, Glasgow, Scotland; Sheffield, etc); Australia (Melbourne, Perth, Brisbane) and Thailand (Bangkok). Our projects are concentrated in high-growth areas with great educational, infrastructural and job growth potentials. We aspire to make a difference in the lives of our clients by helping them achieve their investment goals through strong market research backed by third party experts and due diligence. 

Disclaimer: 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.

Need advice or clarification? Call us for more information and/or to find out about our projects! Hotline: 03-2162 2260

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Why Investors Must Buy Melbourne Property NOW Before 1 July 2017

The Victoria government has made changes to the stamp duty laws, which effectively means no more off-the-plan concession for investment properties. Image credit: Win Real Estate
  • From 1 July 2017, purchasers of off-the-plan (not yet built) commercial or residential investment properties will be liable to stamp duty on the purchase price or market value of the property (whichever greater)
  • Investors will possibly pay approximately $15K – $20K* more than what they are currently paying
  • Off-the-plan concession only for purchasers who make the property their principal dwelling

Investors should get into the Melbourne property market NOW and exchange by 30 June 2017 to avoid hefty stamp duty charges, which could cost some $15K to $20K* more than current rates. From 1 July 2017, investors of Melbourne property are no longer eligible for stamp duty concessions, resulting in payment of tens of thousands of dollars more. Note: Victoria is the only state in Australia that has stamp duty concessions.

The increase in stamp duty charges are due to the Victoria government’s changes to the First Home Owner Grant and new stamp duty exemptions and reductions for first home buyers (i.e, concessions have been removed to fund these reductions and exemptions). First home buyers in this case refers to local Australians or foreigners with PR who are purchasing a property for the first time with the intent of occupation.  

Effective 1 July 2017, off-the-plan stamp duty concessions will only be available for people who intend to live in the property. First home buyers no longer need to pay stamp duty on properties valued under $600K, while discounts are available on a sliding scale for purchases between $600K – $750K.

Impact of new stamp duty on investors

The new laws will impact borrowing capacity as investors will need to include the new stamp duty into their calculations. We advise that you speak to a mortgage broker to understand its full implications.

How does stamp duty currently work?

Victoria has the highest stamp duty rates in all Australia. However, unlike other states, Victoria stamp duty is split into land and construction.

Investors/owners of completed properties pay FULL stamp duty, fulfilling both the land and construction components.

Investors/owners of off-the-plan property that has yet to commence need only pay stamp duty on the land component.

Investors/owners of off-the-plan property that has begun construction will need to pay duty on the land component plus a tiered payment for the construction component depending on how far along construction has taken place.

Example:

Your apartment is valued at $500,000 and its land is valued at $100,000

PROGRESS OFF-THE-PLAN CONSTRUCTION BEGUN COMPLETED PROPERTY
PAYMENT DUE $2,150 $2,150 + tiered amount $25,070

AVOID FULL STAMP DUTY COSTS OF $15K – $20k* – INVEST IN MELBOURNE NOW AND EXCHANGE BY 30 JUNE 2017.

*The $15K-$20K estimation is benchmarked on a 1-bedroom property priced at $400K-$500K. A 2-bedroom property priced at $1million or more will cost higher stamp duty charges

CSI Prop proudly promotes international investment property with high yields at low risk. Our portfolio comprises residential and purpose-built student property in cities across the United Kingdom (London, Luton, Manchester, Liverpool, Newcastle, York, Glasgow, Scotland; Sheffield, etc); Australia (Melbourne, Perth, Brisbane) and Thailand (Bangkok). Our projects are concentrated in high-growth areas with great educational, infrastructural and job growth potentials. We aspire to make a difference in the lives of our clients by helping them achieve their investment goals through strong market research backed by third party experts and due diligence. 

Disclaimer: 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.

Need advice or clarification? Call us for more information and/or to find out about our projects! Hotline: 03-2162 2260

Source: http://bit.ly/2prHWAb or http://bit.ly/2p405Y7

 

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Australia’s Housing Market to Remain Bubbling

Looks like the Australian housing bubble is here to stay for some time yet. Image credit: globalriskinsights.com

Very recently, the Victorian government announced the abolishment of the controversial stamp duty for first-time homebuyers. This ‘lifeline’ to young people struggling to get on the property ladder takes effect from July 2017 and is applicable for any homebuyer in Victoria whose property costs less than AUD$600K.

In a market where experts and market watchers are spouting concern over housing undersupply and skyrocketing house prices, this could well be the road to hell being paved by good intentions’.

Why?

Because simple economics tells us that cheaper property prices (in the form of the abolished stamp duty in this case) will stimulate demand. And increased demand in an overheated market will push prices higher in that price range. Even Federal Treasurer Scott Morrison has shared his reservations, which you can read here.

Compounding this is the low interest rates (the central bank slashed rates twice last year) which  contributed to the boom in house prices, particularly in Melbourne and Sydney. Experts argue that to put a dent in the housing market, the RBA would need to raise interest rates, which is unlikely due to concerns about inflation and the risk that it would impact the economy significantly.

Sharp increases in interest rates may not be the wisest thing to do because it will affect growth and if anything, the RBA would likely increase rates on a gradual basis.

Which is why it may be some time yet before the prices of property will collapse as interest rates would have to rise to a certain level before the property bubble will pop. An article in The Daily Reckoning reports that when the US housing market blew up in 2007/2008n, it was the result of the Federal Reserve raising rates 17 times (25 basis points each time) from 2004 to 2006.

So it seems most likely that the housing market may well bubble merrily away…and house prices in Melbourne at the very least will continue going higher for some time to come.

Read more at http://bit.ly/2m6wLL1

CSI Prop proudly promotes international investment property with high yields at low risk. Our portfolio comprises residential and purpose-built student property in cities across the United Kingdom (London, Luton, Manchester, Liverpool, Newcastle, York, Glasgow, Scotland; Sheffield, etc); Australia (Melbourne, Perth, Brisbane) and Thailand (Bangkok). Our projects are concentrated in high-growth areas with great educational, infrastructural and job growth potentials. We aspire to make a difference in the lives of our clients by helping them achieve their investment goals through strong market research backed by third party experts and due diligence. 

Disclaimer: 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.

Need advice or clarification? Call us for more information and/or to find out about our projects! Hotline: 03-2162 2260

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The Right Time to Invest in Perth

Artists impression pictures of the new footbridge to connect East Perth with the Burswood peninsula as part of the new Perth stadium project.
Source: Government of WA

“I like Perth and am thinking of investing in property there, but everyone says now’s a bad time. When is it a good time to invest?”

Here’s a valid and oft-asked question. True, the Perth property market has hit a low but could now be the best time to focus on the Perth property market? Our answer is: “YES”.

Questions will arise as to why now is a ‘bad’ time for investment, but here are 5 Reasons that challenges the status quo and explains why the time is NOW.

#1 Affordable prices. Big choices. Greater yield potential

The Perth property market is at the bottom of the current property cycle. Property prices here are among the most affordable of any capital city in mainland Australia, and half that of Sydney — perhaps the most affordable it has ever been. Perth residents are spending 21.5% of their monthly household income on mortgage repayments, the lowest in 10 years, says a report from Moody’s. By contrast, homeowners in Sydney are spendng 39% and 34% respectively of their income on mortgage. Simple math works out that you can buy more at $500K in Perth, with a pick from some of the most prime locations (compared to Melbourne or Sydney) and still likely achieve a discount off the listed price.

Once the property market starts to go up again, you stand to reap significant benefits. The market is already buzzing that Perth property market cycle will turn in 2017, with prices going up albeit at a slow and steady rate.

#2 Perth Economy – More than Just Mining

Western Australia is rich with resources in a region and world in need of iron ore, bauxite and liquefied natural gas. But Perth is more than a mineral supply; Western Australia is well positioned to serve as a base for military back operations and transportation and logistics businesses that service the western half of the continent.

Plans are afoot to bring a vibrance to the economy and transform Perth by 2021 thanks to several multimillion-dollar infrastructure projects:

  • New additions to Perth CBD & skyline to include apartment towers and a Ritz-Carlton Hotel at Elizabeth Quay, a public square and marketplace at the Perth City Link and a new museum in the cultural centre
  • A $12 billion boost to tourism by 2020 will see four new hotels built in the CBD, whilst suburbs such as Shenton Bay, Cottlesloe, Armadale, Gosnells and Butler, among others, would start to take shape as development stepped up along major transport routes.

But back to mining: both Pilbara Minerals and Altura Mining have announced plans to secure abandoned workers camps in Roy Hill for their future mining projects. Additionally, there is growing investment in lithium and the world’s premier producer of lithium concentrate from spodumene, Tianqi Lithium, has confirmed plans to build a $400-million lithium hydroxide plant in Kwinana which will create 500 jobs.

Estimated & projected population, larger Greater Capital Cities – 1973 to 2053. Source: ABS

#3 Growing Population

Perth today is like Sydney 20 years ago, some say. With the growth in infrastructure, the City of Perth’s population alone is forecast to grow from 22,324 last year to 27,317 in 2021. But that aside, Perth’s population is on a long-term upward trajectory with expert predictions that its population could be at least 3.9 million people or nearly double what it is today by 2050. Perth is expected to supersede Brisbane in becoming Australia’s third largest city by 2028 according to the Australian Bureau of Statistics (ABS). ABS also predicts that Perth will grow at a rate of 187% between 2012 and 2061.

#4 Long Term Success

The west has gone through a number of cycles before, previously in the 1990s and then the early 2000s, with the last good year being 2012 during the mining boom (if you held property over the long term, you would have gained significant capital growth). Long-term residents and business operators well understand the west’s cycle of growth and development and realise how these cycles represent opportunity for expansion and investment.

Perth is now in a state of adjustment and has been since 2013. Experts are predicting the market will pick up in 2017 albeit at a slow pace, and savvy investors are taking their pick of properties in the city, in anticipation of growth. Nerida Conisbee, REA group chief economist says, “It’s not about the short term. Perth is for someone with a slightly stronger appetite for risk, but they’ve got a longer window for investment so it’s for someone on a high income, who is in a younger age bracket, someone who can absorb the first couple of years being slightly choppy in terms of performance.”

Artist impression of the Perth City Link project. Source: https://yhoo.it/2giZDic

#5 Jobs Growth

Yes, unemployment has taken a bit of a dip, but there are job opportunities on the cards, what with new infrastructure in the city, which includes a new sports stadium, road and rail upgrades, new social projects planned along the Swan River, among others (see #2). In September, recruitment specialists DFP Recruitment says there is a cause for cautious optimism after a 16.3% increase in job ads in WA (mainly in mining) over the past 12 months — the biggest growth of any state.

Conclusion: Buck the Trend

Most property investors follow the herd, investing in growth markets and competing with each other, causing prices to increase. Investing at the bottom of the cycle, with careful observation of the market, means you get substantial growth when the cycle peaks. Remember, all property markets go through cycles.

CSI Prop proudly promotes international investment property with high yields at low risk. Our portfolio comprises residential and purpose-built student property in cities across the United Kingdom (London, Luton, Manchester, Liverpool, Newcastle, York, Glasgow, Scotland; Sheffield, etc); Australia (Melbourne, Perth, Brisbane) and Thailand (Bangkok). Our projects are concentrated in high-growth areas with great educational, infrastructural and job growth potentials. We aspire to make a difference in the lives of our clients by helping them achieve their investment goals through strong market research backed by third party experts and due diligence. 

Disclaimer: 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.

Need advice or clarification? Call us for more information and/or to find out about our projects! Hotline: 03-2162 2260

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Will the Australian Property Market Crash?

Is the Australian property market going to crash? Image credit: http://bit.ly/2f3ezlS

Word is going round again that the Australian property market is up for a crash. Over the last five years or so, this topic has been a popular refrain among doomsayers, yet Australia has managed to avoid the Global Financial Crisis and property prices have gone up, almost doubling in Sydney.

True, there has been a slight dip in investment now compared to last year, but the numbers are still strong according to CoreLogic RP Data’s latest report in October and FIRB’s latest annual report for the FYE 2014-2015, if that is anything to go by. Prices have continued to rise with Sydney and Melbourne leading the pack. And, for all the concerns that have been voiced, capital city auction clearance rates remain high, led by Sydney (>80%) and Melbourne (>70%).

Taking a step back, the prediction about a property crash is resultative of and/or predicated upon several factors including:

  • General unaffordability of property especially in Melbourne and Sydney
  • Tighter regulations on foreign property ownership in Australia
  • Lower rental yields
  • Tightening of lending policies to foreigners by Australia’s top banks
  • Property (over)supply in cities like Brisbane, Melbourne & Sydney

We’re not about to ‘cry wolf’ as the future of the Australian property market should be based on the history of its performance and on facts. Here’s our take on why the Australian property market won’t crash.

Fact #1: Robust Population

Australia has been charting robust population growth. From 2013 to 2016, its population increased by approximately 1 million! Part of this growth is attributable to immigration, with the large majority of immigrants moving to Sydney, Melbourne and Brisbane. An increased population usually results in increased demand for housing. Logically, the reported oversupply of apartments should be absorbed by the incoming population.

Latest demographic data from the Australian Bureau of Statistics (ABS) showed that over the 12 months, the national population increased by 1.4% which translates into an increase of 327,610 persons. Charting the growth is the state of Victoria, as Melbourne remains the powerhouse of population expansion in the country.

Latest figures released by Australian Bureau of Statitics in Sept 2016 show growth in population over the last 12 months, with Victoria charting the growth. Image credit: CoreLogic. Source: ABS& CoreLogic

Click here to WATCH a SPECIAL NEWS REPORT on the growing population of Melbourne.

Fact #2: Sound governance & banking system

The state governments of Victoria, NSW and Queensland have imposed stamp duty taxes on foreigners while the FIRB is now levying new fees on foreign buyers. In the meantime, Australia’s main banks have tightened lending policies to foreigners, at the same time that the Reserve Bank has cut interest rates — now at the lowest level on record. The tightening measures imposed by the government and financial sector is a means to keep a lid on house prices.

On the issue of rates reduction — it is a move to stimulate the property market. Reduced rates encourage more people to take loans and buy property. It seems unlikely that the bank will implement this if the property bubble was a concern as reduced interest rates will mean more people buy and prices rise further.

Fact #3: Fragmented market

Australia’s property market is fragmented. It is inaccurate to blanket the entire market as one, as each state is at its own stage of a property cycle. Even in each state, different segments of the markets behave differently.

Real case study

In Sept 2016, demand for houses and apartments nationally grew 3.1% and 1.9% respectively, yet it was dragged below April levels by a softening WA market. Demand was high, driven by Sydney and Melbourne, yet in WA there was reduced demand. And yet, despite the decline, pockets of Perth bucked the trend: demand for WA houses and apartments fell 6% and 2.9% respectively, but demand for dwellings was at 2.9% increase in September.

Fact #4: Investor Appetite

Offshore investor interest is still high despite the 4 main Australian banks pulling the brakes on lending to foreign buyers earlier this year, as other banks continue lending. HSBC, for example, is enjoying steady lending to foreigners especially with the cuts to interest rates this year. This is the 12th cut since 2011 and the lowest since. In addition, tightening governmental policies have done little to dim the allure of Australian properties among Asian investors.

Fact #5: Sound economy & low unemployment rate

Australia’s seasonally adjusted unemployment rate was at 5.6% in Sept 2016 – the lowest jobless rate since September 2013. Unemployment rates source: ABS. Image credit: Trading Economics

Australia generally enjoys a sound economy, despite the slight dip in its performance this year. But growth is poised to strengthen in 2017 as the nation continues to transition from a mining-based boom to non-resource drivers of growth. Australia currently enjoys the lowest unemployment rate in the last three years according to the Australian Bureau of Statistics and the government is expecting employment growth to remain solid.

Conclusion

The property market has always been a cyclical one. Too many doomsayers have come forth in the past, but none of their predictions have come to pass. This is not to say that everything is hunky-dory. Yes, we think there will problems — there will be a correction and moderation in certain segments of the housing market just as there had been before; as an example the CBDs in major cities like Melbourne and Sydney have already been correcting over the past few years (we have been advising clients to stay clear of the CBD if they are expecting strong short term capital growth). Yes, there is all that, but certainly not enough to cause the economy to implode.

CSI Prop proudly promotes international investment property with high yields at low risk. Our portfolio comprises residential and purpose-built student property in cities across the United Kingdom (London, Luton, Manchester, Liverpool, Newcastle, York, Glasgow, Scotland; Sheffield, etc); Australia (Melbourne, Perth, Brisbane) and Thailand (Bangkok). Our projects are concentrated in high-growth areas with great educational, infrastructural and job growth potentials. We aspire to make a difference in the lives of our clients by helping them achieve their investment goals through strong market research backed by third party experts and due diligence. 

Disclaimer: 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.

Need advice or clarification? Call us for more information and/or to find out about our projects! Hotline: 03-2162 2260

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Melbourne – 3 Weeks to Stamp Duty Increase

Victoria-stamp-duty-increase-csiprop
Victoria is due to impose on foreign real estate purchasers a 4% hike in stamp duty effective 1 July 2016. This totals to a 7% hike. Image credit: http://bit.ly/1rfUryG

TICK TOCK.

The clock is ticking. Come 1 July 2016, the 4% increase in stamp duty surcharge imposed by the Victoria state government on foreign property investors shall take effect. This increase, announced late April 2016, comes hard on the heels of the 3% stamp duty surcharge introduced on 1 July last year.

Victoria’s new stamp duty for foreign buyers of residential property is similar to changes adopted by the governments of Hong Kong, Singapore (and Malaysia), which charge an additional 15% stamp duty over and above the amount paid by domestic buyers.

Below is a FAQ detailing what the increase in stamp duty surcharge means for the foreign investor, and the implications to housing and investment into Victoria moving forward.

What is the new stamp duty rate imposed on foreign purchasers on 1 July 2016?

On 1 July 2016, foreigners will have to pay a stamp duty of 7% on purchases of houses, apartments and vacant residential zoned land in Melbourne and across Victoria. This is a 4% increase from the stamp duty surcharge introduced barely a year ago.

When does it take effect?

The new stamp duty surcharge applies to contracts signed on or after 1 July 2016.

Why is there a hike in stamp duty surcharge?

The Andrews Labour Government is taking action to ensure foreign buyers of residential property — who do not pay payroll tax and GST — contribute their fair share to the liveability of the state, and maintenance and development of government services. We believe that this new and rather sudden increment could be politically motivated: a federal election to determine all 226 members of the 45th Parliament of Australia will take place on Saturday, 2 July 2016 (one day after new stamp duty rate taks effect) after an eight-week official campaign period. This is Australia’s first double dissolution since the 1987 election. Yup, the stakes are high and this is a big deal, politically.

Melbourne’s population is set for massive growth, overtaking Sydney in 2053.

Statistics show that Victoria will have the largest population in Australia in the future, driven by massive and rapid growth in Melbourne city (source: CBRE). The Australia Bureau of Statistics projects that Melbourne will overtake Sydney as Australia’s biggest city in 2053. An increased population will lead to continual sprawl in the city and drive the demand for housing. And as migrants continue to move into Melbourne, there will be a greater need for rental accommodation.

With this increased surcharge, the Victorian government expects to raise $486 million over the next four years.

Are there any exclusions?

Yes; permanent Australian residents and New Zealanders will be excluded from the surcharge.

How does this affect the foreign investor and how should you take advantage of the situation in the short term?

(i) Save RM50K++ in duties*

Foreign investors are rushing to lock in their investments before the increased surcharge takes place. Timing is crucial and the window leading up to the surcharge increase, is small. If you have been thinking of investing in Melbourne property, now is a good time o decide. Acting quickly could save you more than RM50K++ in duties and ensure that you snap an investment in a good location.

For example, you could save approximately RM50K in stamp duties on a property worth $400K and about RM100K for a property worth $800K.

*dependent on price of property

(ii) Wise decisions go a long way

You should not invest for the sake of it or if you are not ready. We are strong advocates of making informed decisions: a thriving locality with potential for job growth, a growing economy, good amenities and increased infrastructure are key to a good investment. The best areas for investment and living in Melbourne are within the fringe of the CBD (click here to find out why). These include areas like Brunswick, North Melbourne, St Kilda and South Yarra, as well as landed housing across Melbourne, as they fetch better rental, capital appreciation and have higher chance of resale to Australians (by law, foreigners are only allowed to purchase brand new property. As such foreign investors can only dispose of their property to Australians who generally prefer to live outside the CBD).

What happens if you do not buy now?

You will merely have to purchase at a higher price, which means your rental return will be diminished. We stand by our advice to not be hasty, but to make informed decisions.

What are the ramifications of the stamp duty hike on foreign investment?

We foresee a slowdown in investments into Victoria and Melbourne in the short term. This could translate to a slowdown in construction of new builds, thus affecting supply of housing. This also means that Melbourne will become a more expensive city to invest in than Sydney, which is starting to see a comeback in investment. However, with the impending  growth and changes in Melbourne, we feel that foreign investments into Victorian property will continue unimpeded in the long run.


CSI Prop proudly promotes international investment property with high yields at low risk. Our portfolio comprises residential and purpose-built student property in cities across the United Kingdom (London, Luton, Manchester, Liverpool, Newcastle, York, Glasgow, Scotland; Sheffield, etc); Australia (Melbourne, Perth, Brisbane) and Thailand (Bangkok). Our projects are concentrated in high-growth areas with great educational, infrastructural and job growth potentials. We aspire to make a difference in the lives of our clients by helping them achieve their investment goals through strong market research backed by third party experts and due diligence. 

Disclaimer: 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.

Need advice or clarification? Call us for more information and/or to find out about our projects! Hotline: 03-2162 2260