Finance advice

Bank issues dire warning to investors for 2016

By Jack Needham

Investors have been told to brace for rising vacancies, reduced rents, falling property values and greater settlement risks in two of the country’s hottest property markets heading into 2016.

A new report from CBA forecasts a difficult road ahead for investors who have purchased off-the-plan apartments in Melbourne and Brisbane, as the two markets struggle to absorb an increased supply of apartment stock.

In the bank’s Commbank Property Insights Summer Edition it warns of extended vacancy periods arising from the high concentrations of apartment stock set to be completed in the coming 24 months – stating that it may be several years before population demand meets the level of supply.

The report echoes recent warnings about the two markets issued by the Reserve Bank of Australia.

According to CBA’s head of property strategy and research, Kevin Stanley, the situation in Melbourne and Brisbane is likely to increase settlement risk and put downward pressure on values.

“Inner Melbourne and inner Brisbane will experience the highest concentration of apartment completions in absolute terms in the next two years. As a result, these two locations will be subject to rising vacancy and reduced rents, leading to drops in property values and greater settlement risk,” Mr Stanley said.

The bank isolated the top 20 suburbs for apartment completions in 2016, which included the Melbourne CBD and Southbank and the Brisbane suburbs of NewsteadNewstead, QLD Newstead, TAS, South Brisbane, Woolloongabba, Bowen Hills, West EndWest End, QLD West End, QLD West End, QLD West End, QLD, Fortitude Valley.

The inner-city Melbourne market has long been the subject of concerns of apartment oversupply, but the news doesn’t bode well for the Brisbane market, which has already disappointed in 2015.

Domain Group chief economist Dr Andrew Wilson recently lamented the lack of movement in the Brisbane market during 2015, stating that a weak state economy was likely to continue dampening price growth into the future.

“Brisbane’s probably been the disappointment this year, and it may be the surprise packet. There was the prospect that Brisbane would clearly be first place behind Melbourne and Sydney for price growth, but it’s just gone nowhere," he told Smart Property Investment.

“Without a significant pick-up in the economic prospects, particularly of Queensland, there won’t be the revival that many have predicted at that level," he added.

Brisbane-based buyer’s agent Meghan Hetherington explained that investors with existing apartments in the city are already struggling with extended vacancy periods and reduced rentals – with little scope for improvement.

“We’ve got such a strong level of investor activity at the moment I think the most affected market is the unit market. There is quite an oversupply and there’s a lot more to come onto the market. We’re actually going through a lot of analysis on that market at the moment and there isn't an increase in tenants looking for that product – it’s not typically a product that owner-occupiers buy. [It’s an] investor product, the units, but there’s a lot of supply and not a lot of tenants and I think we’re going to see quite long periods of vacancy,” she said.

The news might be grim for Melbourne and Brisbane but, despite recent reports that Sydney’s apartment market is already struggling with increased settlement risk due to revised lending requirements and an oversupply of apartment stock, the report indicates that it is the best-placed capital city to cope with an increase in apartment numbers.

“In Sydney, the broader geographic spread of completions across a large number of suburbs, together with a greater depth to the buyer and occupier market, is likely to mitigate these risks,” CBA’s Mr Stanley said.

The Sydney suburbs with the highest number of estimated apartment completions in 2016 included Mascot, Chippendale, Bondi Junction and Parramatta.

Read more: 

Property bubble burst will reveal new hotspots 

Tax warning for property investors 

2016 Victorian growth areas announced 

What is a property bubble? 

Using equity to build your property portfolio 

 

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  ["title"]=>
  string(72) "Mortgages in a tighter lending economy and why Brisbane is a good option"
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  ["introtext"]=>
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Tune in to the latest episode of Property Showcase, the podcast with the inside track on the products and businesses that will help turbocharge your portfolio, maximise returns and make your overall investment experience seamless and stress-free!

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To hear more about these services, make sure to tune in to this episode of Property Showcase!

 Make sure you never miss an episode by subscribing to us now on iTunes!

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Son Pham is the accredited Head of Mortgages at Rethink Financing\/Rethink Investing. He has over 6 years\u2019 experience writing loans, over 12 years in the wealth management industry working for the likes of CBA, AMP and private practice and he is also a licenced financial planner (AFSL 326450). He has multiple investment properties that are cash flow positive which help pay his mortgage on his home and fund his lifestyle.<\/p>\r\n

Son is able to write all types of residential and commercial property loans.<\/p>\r\n

In this episode of Property Showcase, head of mortgages at Rethink investing Son Pham joins host Tim Neary to unpack how an investor should approach getting a mortgage in place with banks tightening down on serviceability.<\/p>\r\n

Hear from\u00a0Son\u00a0about:\u00a0<\/p>\r\n

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  • The pitfalls that he has seen people get into<\/li>\r\n
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    Whether it\u2019s building a successful property portfolio or investing in one of their Development Funds, Open Corp can help you through every stage of your investment journey. The team has 40 property specialists who collectively have been involved in over $4 billion worth of property transactions and the acquisition of more than 8000 homes and investment properties.<\/p>\r\n

    In this episode of Property Showcase, director of investment services for Open Corp Michael Beresford,\u00a0joins\u00a0editor of Real Estate, Tim Neary to share why he disagrees that the cooling market means that the best times are behind us.<\/p>\r\n

    In this episode, hear from\u00a0Michael\u00a0about:\u00a0<\/p>\r\n

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    • Why Brisbane is a good investment option right now<\/li>\r\n
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Mortgages in a tighter lending economy and why Brisbane is a good option
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Will Magee has had ambitions to enter into the Australian property market for quite some time, but it has been more than just finances holding him back.  Having been granted permanent residency just two weeks ago, Will is wasting no time and is now in the process of signing papers and finding his first investment property.

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In this episode of the Smart Property Investment Show, Will joins host Phil Tarrant to share why he is purchasing his first property in partnership with his brother, discuss the complications that can arise from such a strategy, and unpack the ongoing plan for building a joint property portfolio with his brother.

Will will also share how they approached saving for their first property, why he is taking out the mortgage in his name exclusively, and share their savings plan for the year ahead.

If you like this episode, show your support by rating us or leaving a review on iTunes (The Smart Property Investment Show) and by following Smart Property Investment on social media: FacebookTwitter and LinkedIn.

If you have any questions about what you heard today, any topics of interest you have in mind, or if you’d like to lend your voice to the show, email [email protected] for more insights!

RELATED AREAS OF INTEREST:

From property in Australia to a ski lodge in Japan
Mortgage Trusts, an alternative first step for property investors
Should a real estate title be in one person’s name only?

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A property investment plan years in the making
object(stdClass)#1213 (52) {
  ["id"]=>
  string(5) "18287"
  ["title"]=>
  string(75) "Regional Victoria showing up Melbourne in price performance, new data finds"
  ["alias"]=>
  string(74) "regional-victoria-showing-up-melbourne-in-price-performance-new-data-finds"
  ["introtext"]=>
  string(139) "

Median house prices in regional Victoria outperformed that of Melbourne in the June quarter, the latest REIV figures reveal. 

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Median house prices in the regions rose 4.0 per cent to $419,500 but in Melbourne they dipped by 0.6 of a percentage point to $840,000.

The result in Melbourne was due to a 0.8 of a percentage point fall in prices achieved at auction; this was despite a lift of 2.3 per cent in private sales.

Inner Melbourne suffered due to auction prices, where median prices fell by 4.9 per cent to $1,459,000 but it was middle Melbourne that was hardest hit, with a 5.4 per cent drop to $974,500.

Outer Melbourne had a good quarter with the median rising by 0.5 of a percentage point to $681,000.

Apartment prices in regional Victoria grew by 3.7 per cent to $304,500 while the metro media was up by 0.5 of a percentage point to $604,000.

REIV President Richard Simpson said that despite fewer sales, many sectors of the market were performing well.

“2017 was a bumper year and while the trendline has flattened, despite the fall in median house prices in the June quarter, median prices are still up this calendar year for both houses and units, in Melbourne and in the regions,” Mr Simpson said. 

In particular there was been strong growth in regional centres which is probably due to the first-home buyers’ concessions said Mr Simpsons.

“The first-home buyers’ concession has been a boon for regional areas. A new entrant to the property market buying a house at the regional median will pay no stamp duty, while a first home buyer of an apartment in Melbourne at the median price would pay stamp duty of nearly $25,000,” he said.

Mr Simpson said that more prospective buyers are looking towards regional Victoria which is also having an effect in Melbourne.

“Melbourne’s outer perimeter continues to grow. Small increases in the June quarter mean that the median prices for both houses and units have risen over 10.5 per cent from a year ago.

Mr Simpson said moving forward that vendors need more realistic expectations as the highs of 2017 are now over.

“Negative chatter about the future of the sector coupled with stronger lending controls by financial institutions has created some uncertainty and vendors need to be realistic with their price expectations,” Mr Simpson said.

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Regional Victoria showing up Melbourne in price performance, new data finds

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