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CBD apartment sales surge on foreign cash
THE AUSTRALIAN JUNE 24, 2015 12:00AM

Property Writer
Competition from offshore groups vying for apartment sites has pushed the value of inner city sales in Sydney, Melbourne and Brisbane to a record of $4 billion in the past 12 months.

Developers including Greenland, Country Garden, AZX Group and Golden Age are among offshore groups who have accounted for almost 60 per cent of apartment site transactions occurring within a 5km radius of the three city centres in the past year, according to a CBRE Viewpoint report.

“They simply play by different rules,” CBRE Melbourne director Mark Wizel said of the number of offshore developers snapping up apartment sites. “They sell quicker, they fund cheaper and they seem generally better equipped to handle large projects than local private developers.”

Much of the demand for sites from local and foreign developers has been triggered by a surge in demand for inner city apartments, many of which are being bought by foreign investors, according to CBRE analyst Jacob Fong.

“Foreign investment inflows have targeted Australia’s inner city new unit sector, triggering even greater development activity,” Mr Fong said.

“The buyer demand has transformed the inner city real estate markets in all three cities. The highest and best use for sites has traditionally been commercial.”

In Melbourne, AZX Group from China’s Fujian province has spent more than $140 million in the past year on properties ripe for residential redevelopment including Grocon’s CUB site and the Austpac site in Melbourne and an office tower at 605 Latrobe Street formerly owned by Charter Hall and Flagship.

“The Melbourne CBD will continue to be dominated by Singaporean, Malaysian and Chinese developers,” Mr Wizel said.

CBRE director of residential development, Matthew Ramsay, agrees. “Inbound investment by foreign capital, particularly from Chinese developers, is likely to remain at high levels,” he said, noting that new infrastructure projects such as the North West Rail Link were likely to stoke developer demand.

In Sydney, Greenland has spent almost $400m in the past two years amassing a Sydney property portfolio of five mammoth sites in North Sydney, Parramatta, the CBD, Kings Cross and Leichhardt.

Total transaction values across Sydney, Melbourne and Brisbane have nearly doubled between April 2014 and 2015 to $4 billion, up from $2.6 billion in the 12 months to April 2014.

I think this post is valid here as well:

Actually this is a misconception... buying with cash does not mean you are not debt funded unless you know the structure behind. Sometimes people only look at onshore debt but forget capital is international. And capital is not always equity.

Just as SGX will see you buy stocks with cash but only yourself and maybe the broker will know how you fund it.

(25-06-2015, 12:13 AM)newbie11 Wrote: [ -> ]The world is different. People buy with cash or little leverage. They don't need 90% unlike the locals.

http://www.valuebuddies.com/thread-5625-...#pid115268

Agree.. I am speaking based on my observations

http://www.smh.com.au/business/the-econo...hx2tq.html

Chinese demand for a home in Australia as strong as ever
Date
June 25, 2015 - 9:17AM

Angus Whitley and Narayanan Somasundaram

Chinese already buy almost a quarter of new homes in Sydney and their outlay will more than double to $60 billion in the six years to 2020. Photo: Tanya Lake

Surging Chinese demand for Australian homes is dwarfing efforts to root out illegal buyers as the government struggles to avert a backlash against unaffordable housing.

Since announcing a crackdown on unlawful home purchases in February, the government has forced only one foreigner to sell. Chinese already buy almost a quarter of new homes in Sydney and their outlay will more than double to $60 billion in the six years to 2020, according to Credit Suisse Group.

"Forget the anti-corruption," said Ray Chan, managing director of Sydney-based Henson Properties, which sells homes almost exclusively to Chinese. "A lot of money is coming through."

Joe Hockey forced a firm owned by billionaire Hui Ka Yan's Evergrande Real Estate Group to sell a $39 million mansion overlooking Sydney harbour.
Joe Hockey forced a firm owned by billionaire Hui Ka Yan's Evergrande Real Estate Group to sell a $39 million mansion overlooking Sydney harbour.
Amid concern that offshore demand is pricing locals out of the market, Treasurer Joe Hockey plans bigger fines and jail time for those flouting restrictions. Yet more than six months after a parliamentary inquiry called for a national register of the citizenship of buyers, the database is still a work in progress - leaving officials with no firm grasp of the scale of overseas purchases.

"Current data on foreign investment in property is inadequate, making policy evaluations very difficult," Kelly O'Dwyer, the lawmaker who chaired the 2014 inquiry, said in an emailed reply to questions.

A fresh inquiry into home ownership holds its first public hearing on Friday, just as Treasury warns of a bubble in the Sydney market.

A fresh inquiry into home ownership holds its first public hearing on Friday, just as Treasury warns of a bubble in the Sydney market.
A fresh inquiry into home ownership holds its first public hearing on Friday, just as Treasury warns of a bubble in the Sydney market. Photo: Rob Homer
Home values in the nation's biggest city have jumped 40 per cent in three years, while the median house price is now $900,000, according to CoreLogic. The central bank governor said this month that elements of the Sydney market had gone crazy.

Overseas buyers are largely limited by Australian law to new homes and need approval from the Foreign Investment Review Board. Temporary residents can buy new or existing properties with the board's approval, but must sell them when they leave the country.

Last year's inquiry also recommended existing rules should be better policed. The government suspects many buyers no longer in Australia haven't sold their homes as required.

Many Chinese fund home purchases for their children who've settled in Australia, according to Henson Properties founder Chan, who was born in Shanghai and established the firm in 1984 after emigrating.

"Their wealth is building up so fast in China," Chan said in an interview at his office near Sydney's Chinatown, recalling one client who tried to put an $800,000 apartment on his credit card. He expects prices to rise for at least another three years.

Joseph Zaja, managing director of Ausin Group, which offers Australian real estate to buyers in China, expects his company's sales to double this year to about 2500 properties, fetching an average of $650,000 apiece.

At the current rate of supply, Chinese demand would take out 20 per cent of new homes nationwide in 2020, up from 15 per cent now, Credit Suisse analysts led by Hasan Tevfik in Sydney said in a report last month.

Chinese demand is skewed to certain pockets and may not be enough to underpin the market if Australia's economy worsens, according to Martin North, principal at Digital Finance Analytics in Sydney. As Australia enters its 25th year without recession, growth is slowing, firms plan to cut investment by the most on record and wages are stagnant.

"If local demand tapers away because of economic conditions there will still be some degree of support from overseas markets, particularly China," said North, whose research firm has partnered with JPMorgan Chase to produce mortgage reports for more than 10 years. "If the prospect of continued capital growth eases, then it is likely the buoyant overseas demand will also fall."

From December, the government will charge foreigners an application fee of at least $5000 to buy homes, as it seeks to fund stronger enforcement. Those who flout the rules may be forced to sell, be fined as much 25 per cent of the value of the property or face three years in jail.

Hockey has announced just one divestment order - forcing a firm owned by billionaire Hui Ka Yan's Evergrande Real Estate Group to sell a $39 million mansion overlooking Sydney harbour.

Authorities are investigating 195 cases.

With the most recent data showing FIRB approved more than 23,000 residential real estate purchases by foreigners in the year ended June 2014, Hockey's crackdown will do little to ease pressure on home prices, said John Warhurst, a political analyst at the Australian National University in Canberra.

"It's more of a symbolic gesture than a really hard policy," he said.

Jun 26 2015 at 9:00 AM Updated 1 hr ago
Cooling rental market warning for property investors

Finding tenants is becoming harder because there is an oversupply of rental properties. Jim Rice

by Duncan Hughes
Some owners of investment properties are finding it tough to find tenants and it's likely to get worse because of a huge increase in the number of apartments available to rent, property managers say.

Analysis of rentals and property prices shows sluggish growth – or falls – in rents because of building booms that are transforming the suburban streetscapes and skylines in many large cities.

Sydney, which has taken over from the mining capitals as the nation's real estate boom town, is also beginning to slow from a surfeit of rental properties, which are expected to increase by more than 1000 a week between now and Christmas.

"The market is soft and getting softer," Gerri Keays, a rental specialist and director of Ray White Real Estate, says.

What to ask when you're looking for an agent
What to ask when you're looking for an agent
A "best-guess" number of available rental properties in Victoria is about 120,000, or three times those in NSW, says LF Economics, which bases its research on government statistics.

"Anything that is not well marketed, well presented and well priced will not go," Keays says about finding a tenant for a property in Sydney. "The perception that anything can be suitable for renting has gone."

It is much worse in former mining centres such as Darwin and Perth, where the recent boom attracted thousands of transient workers and triggered a building boom that is delivering completed projects into a weakening economy and property market.

YIELDS HAVE PLUNGED

Rental yields have plunged by nearly 14 per cent in Darwin and more than 6 per cent in Perth during the past 12 months, says SQM Research, a company that monitors prices. House prices have fallen in these cities over the same period.

Yield, which is measured by dividing the property price by rental income, falls as prices rise. But it can also fall when a landlord cannot find a tenant or has to slash rent because of excess supply and falling prices.

"The rental market slowdown is showing up in our stats," Louis Christopher, managing director of SQM Research, says about the Sydney market.

Rental yields in Melbourne and Sydney are about 3 per cent, equivalent to fixed-term deposits and about double the rise in consumer prices.

Digital Financial Analytics, a company that monitors trends for banks and financial service companies, says the changing market conditions coincide with Australia becoming a nation of landlords, as record-high real estate prices force house-hunters into buying and renting property rather than becoming owner-occupiers.

Property investors are younger than before and are more likely to own several rental properties, with the number of investors owning more than five properties having increased by 35 per cent in the past 12 months, from 175,000 to 272,000, Digital Financial Analytics says.

The gamble for many prospective landlords will be how long rising supply can be soaked up by tenants, Martin North, principal of Digital Financial, says.

UNIQUE QUALITIES

Shrewd investors will buy property with unique qualities, such as location – particularly proximity to public transport, amenity or special features – that can't be superseded by another block in the same postcode, he says.

Richard Wakelin, director of Wakelin Property Advisory, says: "A good property manager is more than just a manager. They are commercially savvy and strategically minded."

That means they need to have current information about rental market demand in their area and tenant expectations for the quality and amenity of the property.

An average tenancy is about 18 months and replacing tenants involves advertising, leases, taxes and preparing the property for the next tenant.

Ray White's Keays says renting a property is about annual, not weekly, income and the aim should be to retain good tenants.

"A property has to be presented as competitively as possible," she says.

Property managers are not covered by a specific set of regulations, code of practice or restrictions on entry. Landlord and tenancy laws vary between states and territories.

"A 'she'll be right' approach has no place in property management, but it can easily flourish," Wakelin says. "That's because 99 per cent of the time a property does not need management – it's an insurance policy for emergencies, plus check-ins with a tenant and landlord. Bad managers cruise along, hoping crises won't happen and then are generally unprepared when they do."

There are estimated to be more than two million rental households in Australia with about six million residents, generating more than $39 billion annually, research group IBIS World says.

CASE STUDY

Bob Shergold, a civil engineer and property investor, says appointing a property manager is the beginning, not the end, of an investors' involvement in managing a portfolio.

Shergold, who owns three two-bedroomed apartments around Melbourne's inner suburbs, had to sack his first manager for setting rental prices too low, failing to provide any feedback from his tenants and being negligent about arranging six-monthly inspections.

"He was not pushing himself hard enough," says Shergold, who was paying the manager 7 per cent of the gross rent.

"You have got to be on their back. My experience is that managers are often junior employees and have about 40 or 50 properties to manage," he says.

His latest manager has more than 15 years' experience and is prepared to provide advice on rental issues, such as whether a tenant should be allowed to repaint an apartment.

"You cannot set and forget," he says. "I have heard plenty of horror stories about bad tenants, so I want someone who is closely watching the property and communicating with me and the tenant."

Typo in article, Yield should be dividing income by price... but this article does reflect the softening rental market. Which property prices will have to adjust to sooner or later

sent from my Galaxy Tab S

Jun 27 2015 at 12:15 AM Updated Jun 27 2015 at 12:15 AM
Population slowdown puts cloud over growth, housing

The unexpected slowdown in Australia's population throws up yet another challenge for Treasurer Joe Hockey.
by Ben Potter and Michael Bleby

A surge in deaths and a slowdown in births and immigration has produced the weakest population growth in eight years, placing a cloud over official growth forecasts and increasing the chances of an interest rate cut.

The unexpected slowdown in Australia's population throws up yet another challenge for Treasurer Joe Hockey, who is already battling weak commodity prices and tax revenue, as well as scepticism about his forecasts of the budget returning to surplus.

CommSec's chief economist Craig James said the population slowdown was unexpected.

"Most people looking at the figures would say it was a bit of a surprise," he said.

The Australian population grew at an annual rate of just 1.42 per cent in the year to December, the Australian Bureau of Statistics said. That is less than the 1.49 per cent average of the past 15 year, the 1.56 per cent rate assumed in the last ABS long-term population projection in 2013 and a slightly higher rate assumed in the 2015 Intergenerational Report.

The new rate of population growth is also much lower than near-term rates of 1.7 per cent to 1.8 per cent assumed by the ABS and the Reserve Bank of Australia for the next two years.

MORE PRESSURE

It could place the budget under more pressure by reducing economic growth and revenue. But if a higher death rate was maintained and people didn't continue to live longer, as expected, that could also reduce pressure on the health system and infrastructure, said John Daley, chief executive of the think tank the Grattan Institute.

Goldman Sachs head of economics and strategy Tim Toohey said slower population growth could shave half a percentage point off the Reserve Bank of Australia's 3 per cent to 3.5 per cent growth forecast and make another interest rate cut more likely in the short term.

"But it also suggests that there will be fewer spare resources in the economy in the medium term and hence significant interest rate easings are less likely in the medium term," he said in a note to clients.

Australia is in the midst of a housing boom, with 200,000-plus housing starts in 2015. Any slowdown in population growth increases the risk that the country might have a surplus of housing. Goldman Sachs, the first to notice weaker population growth, warned in April that Australia could have too many houses, especially in Melbourne and Perth, by 2017.

Saul Eslake, an independent market economist, worries the RBA is being too accommodating.

"We still have a shortage of housing nationally and in most national cities," Mr Eslake said.

"But if the rate of population growth and hence the rate growth in underlying housing demand continues to slow ... I would guess that in less than four years we won't have a shortage of housing and in some cities, most obviously Melbourne and Perth, we might have an excess."

KIWIS GOING HOME

New Zealanders returning home in greater numbers that they were arriving – for the first time since 1993 – were responsible for the immigration slowdown, he said.

"A reasonable chunk of Australia's immigration intake has come from New Zealand. Quite evidently – you can see it in the New Zealand figures – Kiwis are going home," he said.

"I would hazard a guess that the drop in the number of people coming in to work in the mining industry, combined with the number of New Zealanders going home, probably accounts for most of the slowing in migration over the last year or so."

Population is one of the "three Ps" cited as sources of growth in Intergenerational Reports going back to 2002. If it slows that means none of the three Ps will be firing because the other two – productivity and participation in the workforce – have already slowed.

HSBC Australia chief economist Paul Bloxham said it was too early to say if the population slowdown was a trend or a blip, but if it was sustained potential economic growth would be lower than the long-term trend of 3 per cent.

"I don't think you can make that claim yet. The population growth numbers are still looking reasonably solid, but have slowed over the past few quarters," he said.

Dale Alcock, the managing director of Perth-based ABN Group, the country's third-largest home builder, said the slowdown in net immigration was a "slight concern" but lower population growth did not necessarily translate straight into weaker housing activity.

"There's not a direct correlation and immediacy of building activity either increasing or decreasing as a direct linkage to population data changing in my option.

"There's a lot feeders into this issue that generates building activity. Confidence is a key one – a direct linkage to population data changing in my option."

Jun 26 2015 at 5:39 PM Updated Jun 26 2015 at 5:39 PM
Racial tensions spill over into property auction

Jenny Wilkinson from the Department of Treasury during the public inquiry on home ownership. Alex Ellinghausen
by Joanna Mather and Su-Lin Tan

A Melbourne property auction turned nasty when a spectator turned to a Chinese family and demanded to know whether they had the correct residency status to purchase a home.

The Property Council said it was concerned about "xenophobic sentiment" after the ugly incident, which occurred as a parliamentary inquiry in Canberra began hearing evidence about the factors driving the housing affordability crunch in Sydney and Melbourne.

Appearing before the inquiry, senior Treasury official Jenny Wilkinson sidestepped controversy by declining to use the word bubble in relation to the housing market.

"It's certainly the Treasury's view that house prices have been growing very strongly," she said.

Ms Wilkinson, the acting deputy secretary of Treasury's macroeconomic group, picked carefully through questions from Labor MPs so as to avoid a repeat of the controversy that broke out when her boss, Treasury Secretary John Fraser, told another committee that Sydney and parts of Melbourne were in a housing bubble.

At the auction of a four-bedroom period home in inner-city Melbourne, a heated bidding war ended with an offensive remark by a spectator. The local man in his 60s yelled at a Chinese family bidding for the $2.7 million property: "Have you go the appropriate residency?"

The Abbott government is cracking down on breaches of foreign investment rules that prevent non-residents buying established homes without approval.

'ISOLATED INCIDENT'

Marshall White auctioneer Antony Woodley said the Melbourne incident was sad. "I think it was an isolated incident because I haven't seen it before," he said.

"There's a misconception from the public about Asian buyers because they read the sensationalism in the papers. The majority of them are normal buyers like any families who want a good home."

Race Discrimination Commissioner Dr Tim Soutphommasane said he has been monitoring the tension between foreign and local property buyers and said Australians should not be complacent about the incident in Mont Albert.

"It's unfortunate that some xenophobia has been unleashed by rising anxiety about property prices and housing affordability," he said.

"We should have a proper property debate about the various factors at play. It's overly simplistic to blame foreign buyers for the situation in the property market.

"Incidents like Mont Albert could be temporary but we have to be careful such sentiments do not undermine Australia's long-term attractiveness to foreign investment."

As well as spearheading the crackdown on foreign investors, Treasurer Joe Hockey has directed the Standing Committee on Economics to examine home ownership.

TREASURY BACKED FRASER

Ms Wilkinson said Treasury stood behind Mr Fraser's evidence last month that there was "unequivocally" a housing bubble in Sydney and parts of Melbourne, but she did not use the word bubble. Ms Wilkinson said building approvals had increased by more than 16 per cent in the year to April 2013.

Further, government forecasts were for a 6.5 per cent increase in dwelling investment this year and next, followed by 4.5 per cent in 2016-17. She said the fact construction workers had been pulled onto mining projects in recent years may have been a factor in reducing the supply of new homes.

"Supply does seem to have been somewhat constrained, partly potentially [by] the availability of labour, but also it looks to have been constrained by land release," Ms Wilkinson said.

"Our sense is that the current upswing in activity will certainly improve the balance between demand and supply."

Labor MPs Ed Husic and Jim Chalmers asked whether Treasury had done any modelling on the impact of negative gearing on the housing market or on using superannuation to help first home buyers. The answer to both questions was no.

Property Council of Australia chief executive Ken Morrison said foreign investment was the solution to Australia's high property prices.

"A new home purchased by a foreign investor enables up to four others to be built, adding to local supply," he said.

Jun 29 2015 at 12:15 AM Updated 1 hr ago
House prices to drop in 2017: BIS Shrapnel

By June 2018, the median apartment price in most cities will be lower than it is today, according to forecaster, BIS Shrapnel. Dallas Kilponen

by Robert Harley
House prices will start falling in 2016-17 as the threat of rising interest rates coincides with worsening affordability, a big increase in supply and weaker investment returns according to forecaster BIS Shrapnel.

But the doomsday warnings of a house price crash are "a little premature" said BIS Shrapnel in its flagship report, Residential Property Prospects 2015-2018. Instead the house price falls will be similar to the less than 10 per cent experienced in 2011-12.

Prices will continue to rise in undersupplied markets for the next 12 months, even pick up pace in south-east Queensland and in regional cities like Wollongong, Newcastle, and Cairns.

But the three-year outlook for Sydney and Melbourne, while it will comfort the Reserve Bank, does not justify the current level of frenzied buying.

By June 2018, the median house price in Sydney will only be 2 per cent higher than it is today and still under the $1 million mark. In Melbourne the gain will be 4 per cent. In Perth and Canberra, prices will fall marginally.

AMP Capital chief economist, Shane Oliver has a similar view. "The real risk for property is in 2017 when the Reserve Bank starts raising rates and then you will see prices come off 5 to10 per cent, particularly in Sydney," he said on Friday.

For apartments the outlook is even weaker. Only in Brisbane will apartment prices be higher in June 2018 than they are today.

STRONGEST MARKETS

The author of the report, BIS Shrapnel senior manager, Angie Zigomanis, said the level of apartment construction was creating a disconnect between the balance of supply in the house and unit markets and a difference in price outlook.

"Most capital cities are building apartments at record rates, driven by investor demand," he said. "As these projects are progressively completed, strong tenant demand will be required to support rents and consequently values upon completion."

BIS Shrapnel warned that the slowdown in net overseas migration would weaken the rental/investor sector, particularly in the resource-based markets.

For the next 12 month, the strongest markets will be NSW, Queensland and Victoria, which still have a supply deficiency.

But worsening affordability will cut price rises in Sydney and Melbourne to single digits where as the improvement in affordability in Brisbane will spur stronger growth. Elsewhere the price rises in 2015-16 will be flat to negative.

The big "change in gears" will come in the 2016-17 financial year according to BIS Shrapnel. The economy and employment will start to pick up, giving some initial support to house prices, but also starting an interest rate tightening phase towards the end of 2016.

Mr Zigomanis expects the cash rate to rise by only 50 basis points but that will be enough to extinguish the enthusiasm in Sydney and Melbourne and weaken other markets where price growth has been limited.

For BIS Shrapnel, some of the best performers in the next three years will be the regional cities with prices to rise by 10 per cent or more in Wollongong, Newcastle, the Gold Coast, the Sunshine Coast and in Cairns.

New home sales dip in May
MICHAEL RODDAN BUSINESS SPECTATOR JUNE 30, 2015 11:17AM

New homes sales in Australia pared back from record highs in May, as the number of detached house sales fell, despite the number of new apartments sold during the month hitting a fresh high.

The Housing Industry Association said today the number of new homes sales in May faltered, declining 2.3 per cent and ending four months of consecutive increases in the figures.

“The four-month winning streak came to a modest end in May,” HIA chief economist Harley Dale said.

“The decline was driven by a 5.1 per cent dip in detached house sales -- reflecting weaker monthly demand in four out of the five states surveyed,” Mr Dale said.

But sales of newly constructed multi-units -- or apartments -- hit a new record, increasing by 7.6 per cent during May. Sales of new apartments have now increased 26.7 per cent over the three months to May.

Mr Dale said the headline figure decline was a softer result at face value, but the underlying conditions in the home building industry were healthy, particularly in New South Wales and Victoria.

“Strength in detached houses sales is evident in NSW and Victoria, with growth in the May 2015 ‘quarter’ of 5.2 per cent and 6.2 per cent, respectively,” Mr Dale said.

Detached house sales fell by 2.3 per cent in NSW, 9.9 per cent in Victoria, 8.1 per cent in Western Australia, and by 5.2 per cent in South Australia. Queensland, meanwhile, posted a modest 3.3 per cent increase in the month.

However, over the three months to May, Queensland detached home sales were down by 7.5 per cent. South Australian sales dropped 8.1 per cent, and WA sales fell 1.3 per cent.

Business Spectator