The market darlings, where to buy next. July 2006 RETURN
Australia wide the property sector has been in a well documented period of market correction. Some markets have disintegrated, leaving owners scarred, some markets had a quick deep breath and recovered while others have been as buoyant as ever.
This is the very reason why we suggest it imperative to invest in properties that have a sound demand cycle that will lead to capital growth and long term rental incomes. This is totally opposed to some of the reasons for purchase that we hear: it was cheap; there is a rental guarantee; it is near where we live; and so on. The recent difference between pleasure & pain all gets back to property selection, that difference is huge. The market dunces have shown to be a product expanded by ideal, not market forces. An example would be the 1990’s bottom end, off the plan apartment. Too many were built mainly because they were easy for the owners to sell and easy for the buyers to buy. Designs suffered, quality was not attended to and the end use demand not effectively considered.
Lets get down to the fundamentals, we should be seeking why properties can go up. If we are in a low inflation/interest rate environment with little wage growth what are the factors that can determine this? If the economy is not rampant we have to identify what can cause a shift in demand to the property we buy. Infrastructure projects providing improvements to Arterial roadways can heavily influence demand, The Domain Tunnel, Western Ring Road, Geelong By-pass, Scoresby Freeway, West Gate Bridge, etc do or will effect the value of property. They bring suburbs closer to live yet also make it a lot cheaper to conduct business in for those with easy access to the network. Rents and values can soar in both the residential & Commercial/Industrial sectors.
The partial deregulation of our University System allowed an immediate opportunity to bring in paying students from overseas. This created an unparalleled demand for student accommodation. The market reacted quickly providing unique property solutions at a frenzied pace. The spiraling price of petroleum will severely impact the areas whose owners choose to commute from outer suburbs.
Demand shifts are now occurring and while markets are finally consolidating, the amount of new property being built has almost stopped. After a few quiet years, the inevitable shortage is occurring. New properties will not be seen en masse in the near future due to building costs and developer confidence. This sector therefore provides opportunity. Existing property, especially multi-unit residences or apartments that are either under construction or very recently built could not be replaced for the prices you can buy them now. In our opinion they have bottomed out & a severe sale & rental shortage will occur until mid 2008 at least. Current homes in the quality end will almost compete alone for the current or coming demand. The property that is well located, has desirability and meets current needs will easily outperform the market place. We also love the opportunity in the CBD edge OYO office suite sector. Our employment growth is in the personal services sector. Many small to medium companies are opening and do not want to be CBD based, yet wish for quality, accessible facilities. The market has a distinct shortage of such property.
With relocations from NAB, AXA, Fox Studios and possibly the ANZ, the Docklands and N/W CBD have had a massive influx of high income employment that is slowly wishing to live handy. They require executive standard homes of size and impeccable quality. The suburbs of North & West Melbourne are obvious benefactors.
Over the past 12 months we have sought and received the marketing rights to a small yet spectacular selection of suitable property and our investors are already seeing the benefits of proper selection.
Australia wide the property sector has been in a well documented period of market correction. Some markets have disintegrated, leaving owners scarred, some markets had a quick deep breath and recovered while others have been as buoyant as ever.
This is the very reason why we suggest it imperative to invest in properties that have a sound demand cycle that will lead to capital growth and long term rental incomes. This is totally opposed to some of the reasons for purchase that we hear: it was cheap; there is a rental guarantee; it is near where we live; and so on. The recent difference between pleasure & pain all gets back to property selection, that difference is huge. The market dunces have shown to be a product expanded by ideal, not market forces. An example would be the 1990’s bottom end, off the plan apartment. Too many were built mainly because they were easy for the owners to sell and easy for the buyers to buy. Designs suffered, quality was not attended to and the end use demand not effectively considered.
Lets get down to the fundamentals, we should be seeking why properties can go up. If we are in a low inflation/interest rate environment with little wage growth what are the factors that can determine this? If the economy is not rampant we have to identify what can cause a shift in demand to the property we buy. Infrastructure projects providing improvements to Arterial roadways can heavily influence demand, The Domain Tunnel, Western Ring Road, Geelong By-pass, Scoresby Freeway, West Gate Bridge, etc do or will effect the value of property. They bring suburbs closer to live yet also make it a lot cheaper to conduct business in for those with easy access to the network. Rents and values can soar in both the residential & Commercial/Industrial sectors.
The partial deregulation of our University System allowed an immediate opportunity to bring in paying students from overseas. This created an unparalleled demand for student accommodation. The market reacted quickly providing unique property solutions at a frenzied pace. The spiraling price of petroleum will severely impact the areas whose owners choose to commute from outer suburbs.
Demand shifts are now occurring and while markets are finally consolidating, the amount of new property being built has almost stopped. After a few quiet years, the inevitable shortage is occurring. New properties will not be seen en masse in the near future due to building costs and developer confidence. This sector therefore provides opportunity. Existing property, especially multi-unit residences or apartments that are either under construction or very recently built could not be replaced for the prices you can buy them now. In our opinion they have bottomed out & a severe sale & rental shortage will occur until mid 2008 at least. Current homes in the quality end will almost compete alone for the current or coming demand. The property that is well located, has desirability and meets current needs will easily outperform the market place. We also love the opportunity in the CBD edge OYO office suite sector. Our employment growth is in the personal services sector. Many small to medium companies are opening and do not want to be CBD based, yet wish for quality, accessible facilities. The market has a distinct shortage of such property.
With relocations from NAB, AXA, Fox Studios and possibly the ANZ, the Docklands and N/W CBD have had a massive influx of high income employment that is slowly wishing to live handy. They require executive standard homes of size and impeccable quality. The suburbs of North & West Melbourne are obvious benefactors.
Over the past 12 months we have sought and received the marketing rights to a small yet spectacular selection of suitable property and our investors are already seeing the benefits of proper selection.