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BELCONNEN MARKET ASSESSMENT INVESTOR REPORT

APRIL 2018


REPUBLIC BY GEOCON

ARTIST IMPRESSION


CONTENTS AT A GLANCE

04

WHY INVEST?

06

MEET THE NEIGHBOURHOOD

08

MACROECONOMIC INDICATORS

10

Population Growth Economic Growth Wage Growth Employment Growth Future Employment Growth

RESIDENTIAL MARKET

18

Household Incomes Demand Supply Rental

EDUCATION 25 University of Canberra

INFRASTRUCTURE 27 Sporting

CULTURE AND LEISURE

27

Retail Amenity

PROPERTY ANALYSIS

28

High Society

FINANCIAL ANALYSIS Case study

34


INVESTOR REPORT

CANBERRA AT A GLANCE Housing Market POPULATION

MEDIAN APARTMENT RENT

396,857

$440

DWELLING APPROVALS

VACANCY RATE

6,035

0.8%

FIRST HOME BUYERS

AVERAGE APARTMENT RENTAL YIELD

2,403

5.8%

MEDIAN APARTMENT PRICE

$410K


05

Labour Force FULL-TIME WORKERS

UNEMPLOYMENT RATE

136,935

4.6%

MANAGERS/PROFESSIONALS

CLERICAL & ADMINISTRATIVE

46.4%

16.9%

COMMUNITY SERVICES

TECHNICAL & TRADES

10.5%

9.6%

Business & Industry TOP 5 EMPLOYING SECTORS

IN THE PRIVATE SECTOR

FEDERAL GOVERNMENT ADMIN

64.5%

DEFENCE HOSPITALS STATE GOVERNMENT ADMIN HIGHER EDUCATION

IN THE PUBLIC SECTOR

35.5% 1300 97 97 57 GEOCON.COM.AU


INVESTOR REPORT

BELCONNEN: WHY INVEST? BELCONNEN IS ABOUT A 10-MINUTE DRIVE WEST OF CANBERRA’S CENTRAL CITY AREA. THE BELCONNEN TOWN CENTRE BORDERS LAKE GINNINDERRA AND IS WITHIN WALKING DISTANCE OF THE UNIVERSITY OF CANBERRA.

POPULATION Over the next 25 years the ACT Government forecasts that the number of dwellings in the Belconnen District will grow by 47 per cent. This will bring additional population to the area and is a key reason underpinning the decision to build the Light Rail Network through Belconnen.

EMPLOYMENT Employment growth has been strong and over the next 25 years, the number of jobs in the area is forecast to increase by one-third.

HOUSING DEMAND Dwelling supply not keeping pace with demand: as at the March 2018 quarter, rental vacancies have reduced to 0.4 per cent indicating a ver y tight market.

FIRST HOME BUYERS In 2017, the average number of dwellings financed by first home buyers was 200 per month; above the average over the last 10 years of 156.

DWELLING PRICES The demand for rental dwellings has pushed up the most recent average asking rents to $429 per week. Since late-2015, asking rents in Belconnen have increased by a compound growth rate equivalent to 5.3 per cent per annum.


07

RENTAL MARKET Belconnen has outperformed the market on rental yields over the past year due to the high demand and lack of sufficient new dwelling supply. The latest data show apparent residential rental yields for units and apartments hitting around 5.8 per cent per annum.

COMPETITIVE ADVANTAGES Employment growth driven by the health care, social ser vices, education and training industries ref lects the regions medical facilities and focus on education, particularly at the university level.

WAGES The broader Canberra employment area is projected to add another 3,000 jobs ever y year. Most of these will be in the highly-paid professional, scientific and technical ser vices sector.

INFRASTRUCTURE Urban transformation triggered by the ACT Government’s light rail investment will drive the future development and amenity of Belconnen.

ECONOMY Construction boom is driving economic growth. In 2017, total building approvals were valued at $254 million. Looking for wards, future building projects to be delivered over the five years from 2018 to 2022, have a cumulative total value of some $937 million.

EDUCATION The Belconnen District is home to major health and education facilities, including the University of Canberra, Australian Institute of Sport and the Calvar y Public Hospital.

LEISURE Retail and entertainment amenity is currently centred around the Westfield Belconnen centre. The ACT Government has forecast retail f loorspace in the Belconnen district will increase by 63% over the next 25 years.

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INVESTOR REPORT

MEET THE NEIGHBOURHOOD MODERNISING THE TRANSIT SYSTEM The Belconnen to City corridor will provide a light rail connection from the City to the north-west of Canberra via Southern Cross Drive, stopping through major demand centres en route. The light rail has already been incorporated into the Belconnen Town Centre Draft Master Plan being prepared by the ACT Government to support growth and develop the centre as a walkable, connected community.

The corridor has key demand centres at each end, as well as along the route. Passengers are expected to come predominently from the Bruce precinct, Calvary Hospital, University of Canberra and the Australian National University. The billion-dollar infrastructure investment by the ACT Government is part of a comprehensive overall plan to connect Canberra’s suburbs with a transit network.


09

YOUNG, ACTIVE, COSMOPOLITAN AND HIGHLY EDUCATED The residents in Belconnen have a median age of 29.7, compared to 34.7 years for all residents across Canberra and 37.2 years for Australia. The median age of women is 23.9 years and for men, 25.9 years.

(44.1 per cent) have come to Australia within the last five years. In comparison for the whole of Canberra, 26.4 per cent were born overseas and 21.3 per cent came to Australia in the last five years.

Due to the younger age demographic, households are typically smaller at an average of 1.9 persons per dwelling. This compares to an average across Canberra of 2.5 persons per dwelling and an Australian average of 2.6.

When at home, 41.7 per cent of the Belconnen population speak a language other than English. As a benchmark, across the whole of Canberra, 21.8 percent of the population speak a language other than English at home and for all Australians the proportion is 20.8 per cent.

The population is predominantly single with 57.8 per cent of people having never married. This is significantly higher than the Canberra proportion of 37.8 per cent and the Australian average of 35.0 per cent. Household incomes in Belconnen are $1,186 (2016 dollars). While this is 8.6 per cent lower than the average for all Canberra households it is almost 1.5 times more than the Australian average household income. Almost half the population of Belconnen (46.2 per cent) were born overseas and a significant proportion of those residents

In Belconnen, 28.9 percent of the population are not Australian Citizens, which is three times higher than the average across the whole of Canberra (9.2 per cent). Educational level is comparatively very high in the precinct. Some 77.6 per cent of residents reported completing a Year-12 education or equivalent. As a benchmark, the average for the whole of Canberra is 69.4 per cent and for Australia the average is 51.9 per cent.

AMENITIES Within ten-minutes’ drive from the town centre are 14 pre-schools, primary schools and secondary schools, the University of Canberra, Australian Institute of Sport, Canberra Institute of Technolog y, Australia National University and the Canberra campus of the University of New South Wales. The region is also home to the GIO Stadium, a large Westfield shopping centre, and a fresh food market.

Belconnen has a growing nightlift scene including 34 dine-in and take-away restaurants and a number of bars. They typically have good ratings (3.5 or more stars out of five) on online ratings sites and they provide a range of dining experiences. The region has around 13 medical centres and allied health facilities, including Calvary Hospital The town centre is a short drive from Gungahlin Drive and just 17 minutes’ drive to Canberra city.

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INVESTOR REPORT

AMENITY AND ACCESSIBILITY Will Drive Future Population Growth POPULATION GROWTH BY AGE

Demographic profile by age cohort, Belconnen, 2011 – 2041 Avg. annual growth (20162041)

ACT avg. annual growth (20162041)

Age Cohort

2011

2016

2021

2026

2031

2036

2041

Avg. change (20162041)

0-19

23,102

23,488

24,901

26,254

27,067

28,058

29,157

202

0.9%

1.4%

20-34

23,855

23,741

24,194

24,020

24,431

26,193

28,392

151

0.7%

1.2%

35-49

18,912

20,111

20,483

21,596

22,329

22,668

23,067

138

0.6%

1.2%

50-64

16,312

15,339

15,385

15,827

16,736

18,156

19,642

111

1.0%

1.5%

65+

10,265

13,374

15,830

17,802

19,303

20,927

22,449

406

2.1%

2.6%

Total

92,446

96,053

100,792

105,498

109,866

116,003

122,708

1,009

1.0%

1.5%

Source: Australian Bureau of Statistics – Census of Population and Housing 2011, 2016, ACT Treasur y – Population Projections, 2015-2041


11

Belconnen’s past population growth has been 0.8 per cent, which shows a mature area with few new dwelling developments. New development will unlock this population growth demand within this highly-desirable area. The ACT Government’s population projections indicate an average annual growth in Belconnen of 1.0 per cent to 2041. Our view is that these projections are

overly conservative and do not align with other projections for the area. For example, the ACT Government has projected that the number of dwellings in the Belconnen District will increase by 47 per cent over the next 25 years. This makes it one of the fastest-growing districts of Canberra. Assuming the dwelling growth projection is close to the mark, then population growth is likely to be closer to 1.6 per cent per annum.

POPULATION GROWTH TOTAL

Historical and projected population growth, Belconnen, 2011 – 2041

Source: Australian Bureau of Statistics – Census of Population and Housing 2011, 2016, ACT Treasur y – Population Projections, 2015-2041

1300 97 97 57 GEOCON.COM.AU


INVESTOR REPORT

CONSTRUCTION BOOM Is Driving Economic Growth in Belconnen LOCAL ECONOMY

Historical and pipeline value of building activity, Belconnen, 2011 – 2022

Source: Australian Bureau of Statistics – Building Approvals, Cordell Connect

Major projects in Belconnen, as at April 2018 Project Title

Suburb

Development Type

Estimated Value

Completion Year

Project Stage

University Of Canberra Sporting Commons

Bruce

Sports facility

$50,000,000

2020

Early Planning

Belconnen Hotel

Belconnen

Hotel/offices/retail

$29,588,000

2019

Contract Let

Bruce Hotel

Bruce

Hotel/apartments/ commercial/ retail/ restaurants

$20,498,000

2020

Development Approval

Higgins Retirement Living Site

Higgins

Retirement/aged care

$15,380,000

2020

Early Planning

University Of Canberra Public Hospital

Bruce

Car park

$15,000,000

2018

Construction

Source: Cordell Connect


13

Building activity has increased over the past several years as the industry has moved to larger projects. The figure above includes all types of building construction – commercial, retail and residential – in Belconnen.

In 2017, total building approvals were valued at $ 254 million. Looking forwards, future building projects to be delivered over the five years from 2018 to 2022, have a cumulative total value of some $ 937 million.

1300 97 97 57 GEOCON.COM.AU


INVESTOR REPORT

LOW UNEMPLOYMENT Will Drive Wage Growth UNEMPLOYMENT ON DOWNWARD TREND

Unemployment rate, Belconnen, December 2010 - 2017

Source: Department of Jobs and Small Business – Small Area Labour Markets, December Quarter 2017

The unemployment rate in Belconnen is typically low and has been stable for the past six months. As at the end of 2017, the unemployment rate for Belconnen was 4.9 per cent, compared to 5.6 across Australia. As a comparison, even though Sydney is undergoing booming economic growth, its unemployment rate is still around 4.8 per cent – approximately the same as for Belconnen.

If the current downward trend continues, there will be localised pressure for wages to increase as businesses in Belconnen find it harder to find workers. Approximately 82.5 per cent of the population are in working age (15 to 64 years), compared to the averages for Canberra and Australia of 68.9 per cent and 65.9 per cent.


15

JOB GROWTH Led by Education and Health LEADING SECTORS BEHIND JOB GROWTH

Top 5 industries leading jobs growth, Belconnen, 2011 - 2016

Source: Australian Bureau of Statistics – Census of Population and Housing 2011, 2016

The recent past employment growth has been strongest for the health care and social assistance sector followed by education and training. Other strong

sectors include public administration and safety, accommodation and food services, administrative and construction.

1300 97 97 57 GEOCON.COM.AU


INVESTOR REPORT

Employment by industry, Belconnen, 2011 and 2016 Industry

2011

2016

Health care and social assistance

3,436

4,090

Education and training

3,825

4,470

Public administration and safety

4,798

5,187

Accommodation and food services

1,563

1,947

Construction

819

1,113

Wholesale trade

164

287

Information media and telecommunications

260

376

Administrative and support services

493

608

Other services

824

924

Arts and recreation services

501

566

Agriculture, forestry and fishing

23

87

Electricity, gas, water and waste services

27

89

Transport, postal and warehousing

492

542

Manufacturing

195

212

Mining

0

4

Rental, hiring and real estate services

369

358

Retail trade

3,174

3,105

Financial and insurance services

732

530

Professional, scientific and technical services

3,512

3,203

Total

25,207

27,698

Source: Australian Bureau of Statistics – Census of Population and Housing 2011, 2016


17

FUTURE JOB GROWTH In the Broader Canberra Labour Force Region Future employment growth in the Canberra labour force region

Source: Australian Department of Employment (2018)

The broader employment market across Greater Canberra is also booming. In May 2017, Canberra's regional employment base was estimated at 216,200 jobs. The Canberra labour force area is projected add another 3,000 jobs every year. Most of these will be in the highly-

paid professional, scientific and technical services sector (forecast growth of 670 jobs per year). Other strong employment sectors include the health care and social assistance (635 jobs per year); public administration and safety (558 jobs per year), and education and training (394 jobs per year). 1300 97 97 57 GEOCON.COM.AU


INVESTOR REPORT

HOUSEHOLD INCOMES Median equivalised total household income ($ per week)

Source: Australian Bureau of Statistics (2018), Data by Region

Household incomes in Belconnen are similar to the Canberra average at $1,186 (2016 dollars). While this is 8.6 per cent lower than the average for all Canberra households, it is 35 per cent more than the Australian average household income.

A primary reason for the lower household incomes is the high number of students in the area that are studying at the University of Canberra and/or the Australian Institute of Sport.


19

INCREASING DEMAND For Hotel Rooms Room nights occupied, ACT, June 2011 – June 2016

Source: Australian Bureau of Statistics – cat. no. 863509 – Tourism Accommodation Statistics 2015-16

Demand for hotel rooms in the ACT is strong and since September 2014, growth has outperformed the Sydney market. Our expectation is that this room demand will remain strong, particularly with the tightness in the rental market (low vacancies, increasing rents).

The fundamentals of economic and employment growth, along with the inf lux of investment into Canberra is sustaining hotel demand. This will impact room rates and can spill over to the residential market where renting can prove to be more economic than booking hotel rooms for frequent visitors to Canberra.

1300 97 97 57 GEOCON.COM.AU


INVESTOR REPORT

NEW DWELLING SUPPLY Not Meeting Demand DWELLING APPROVALS

Dwelling approvals, Belconnen, 2012 - 2017

Source: Australian Bureau of Statistics

New residential development has gradually eased over several years. There were just over 700 new dwellings being approved in Belconnen in 2017.

The existing and older dwelling stock will be taken up by students and people working in lower-paid jobs, such as the hospitality sector.

Our view is that this new dwelling supply is not keeping pace with demand and that there will be a pent-up demand for new dwellings in the Belconnen area in response to population and job growth.

The following sections demonstrate how this low level of new dwelling supply coming to the market is not meeting demand and is forcing dwelling prices and rents higher.


21

FIRST HOME OWNERS GRANT

Dwelling finance by type of buyer, ACT, May 2009 – April 2018

Source: Australian Bureau of Statistics – cat. no. 560909b – Housing Finance Jan 2018

Demand for housing from first home buyers in the ACT is above the 10-year average and first home buyers represent a larger market share than 10 years prior. In 2017, the average number of dwellings financed by first home buyers was 200 per

month; above the average over the period of 156. In January 2018, first home buyers represented 18.1 per cent of the total home buyer market, compared with the 2008 level of 13.8 per cent.

1300 97 97 57 GEOCON.COM.AU


INVESTOR REPORT

RENT HAS OUTPERFORMED As Vacancies Have Fallen RENTAL DEMAND

Vacancy rate, Belconnen, Feb 2009 – Feb 2018

Source: SQM Research

Some 62.1 per cent of the residents of Belconnen rent their dwelling, compared to 30.1 per cent across Canberra and 28.5 per cent across Australia). The average rent paid by residents in Belconnen was $390 per week (2016 dollars) as at the last Census in 2016. For the whole of Canberra, the average rent was $376 and across Australia the average was $352 per week. Rental vacancies in the area have been on a downward trend for the past five years as the demand has increased and the number

of new dwellings has failed to keep pace with the population growth. As at the March 2018 quarter, rental vacancies have reduced to 0.4 per cent indicating a very tight market. This ‘landlord’s market’ for rental dwellings has pushed the most recent average asking rents up to $429 per week. Since late-2015, asking rents in Belconnen have increased by a compound growth rate equivalent to 5.3 per cent per annum.


23

BELCONNEN RENTS

Asking rents for units, Belconnen, May 2009 – April 2018

Source: SQM Research

Competition for the existing dwelling stock and low residential vacancy rates have been the primary drivers for rental growth in Belconnen. In our view the average rents have been constrained by the older

dwelling stock in the area and that newlyconstructed dwellings should be able to achieve a price premium over the historical asking rents.

BELCONNEN RESIDENTIAL RENTAL YIELDS

Implied residential rental yields for units, Belconnen, August 2009 – April 2018

Source: SQM Research

1300 97 97 57 GEOCON.COM.AU


INVESTOR REPORT

Belconnen has displayed consistently strong rental yields over the past year due to the high demand and lack of sufficient new dwelling supply. The latest data show apparent residential rental yields for units and apartments hitting around 5.8 per cent per annum. This is outperforming the Canberra average, and is well-above the Australian average rental yields.

The trend and yield growth in Belconnen is in stark contrast to the Sydney market where yields have fallen away to around 3.7 per cent as at the beginning of 2018. In the broader Australian market, residential rental yields are typically between 5.0 and 5.5 per cent. At present they are at the lower end of that range, indicating that rental yields in most markets are easing off.


25

UNIVERSITY CAMPUS At the Doorstep THE UNIVERSITY OF CANBERRA The University of Canberra has over 17,000 students and total enrolments have increased 57 per cent in the past decade. The main campus in Bruce (an adjacent suburb to Belconnen) has 1,000 staff and covers an area of 117 hectares. Some 77 percent of the students are domestic and the remaining 23 per cent are overseas students.

The five faculties of the university cover; Health, Art and Design, Business, Government and law, Education, Sciences and Technolog y. The University of Canberra was named in the world’s top 100 in 2017. Belconnen is home to one-in-four of Canberra’s tertiary students.

Tertiary students living in the ACT

Source: Australian Bureau of Statistics

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INVESTOR REPORT

OTHER EDUCATIONAL AND HEALTH CARE FACILITIES IN THE BELCONNEN REGION The Belconnen region also has a number of centrally-located education and health facilities including: •

University of Canberra Senior Secondary College Lake Ginninderra

Radford College (Anglican high school)

Bruce Campus of the Canberra Institute of Technolog y

Calvary Public Hospital with emergency facilities and 250 beds.


27

INTERNATIONALCLASS Major Sporting Infrastructure BELCONNEN HAS WORLD-CLASS SPORT AND RECREATION INFRASTRUCTURE Within the Belconnen region is a range of sporting and recreation infrastructure: •

Canberra International Sports and Aquatic Centre – which get over one million patrons/visitors per year.

GIO Stadium – Canberra’s largestcapacity sports facility with 25,011 seats. It is used primarily for national rugby league and rugby union games as well as occasional international sporting events.

The Australian Institute of Sport (AIS) – covering 66 hectares and providing a wide range of sporting programmes. It also serves as a centre for sports science and medicine with more than 190 staff on site.

Lake Ginninderra offers a range of active and passive recreation options, including cycling/walking routes, windsurfing/sailing, swimming and fishing.

RETAIL AMENITY WESTFIELD BELCONNEN Known to the locals as Belconnen Mall, the development is one of Westfield’s largest shopping centres with 270 specialty stores as well as a large Myer Department Store. When built it was promoted as ‘the largest shopping centre in the Southern Hemisphere’. While it may not have retained that title, it remains as a key shopping and entertainment drawcard including a tenscreen cinema complex and a variety of restaurants.

The ACT Government has projected that the retail f loorspace in the Belconnen District will increase by 63 per cent over the next 25 years. This will deliver new jobs opportunities to the area in addition to providing the local community with increased retail and entertainment amenity.

1300 97 97 57 GEOCON.COM.AU


INVESTOR REPORT

PROPERTY ANALYSIS


29

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INVESTOR REPORT

DEVELOPMENT OVERVIEW High Society DEVELOPMENT NAME

High Society

LOCATION

1 Edmondstone St, Belconnen ACT 2617

ARCHITECT

Fender Katsalidis

LANDSCAPE ARCHITECT

Oculus

APARTMENT MIX

541 apartments Apartment

Mix

Internal size

1 bedroom

141

48-58sqm

1 bedroom + media

35

50-54sqm

2 bedroom

275

60-80sqm

2 bedroom + media

48

56-84sqm

3 bedroom

38

92-134sqm

3 bedroom + study

4

134-140sqm

KEY DATES

Works commence Construction complete Sunset clause

AMENITY

• Dining room • Chef’s kitchen • Cinema • Wellness centre • Concierge

LEVELS

Q1 2019 Q4 2020 18 months

• Kids playroom • Pool • Observation deck • Sahred work space • Bike hub and car wash

Tower A - 27 levels , Tower B - 27 levels


31

1300 97 97 57 GEOCON.COM.AU


INVESTOR REPORT

TYPICAL FLOOR PLANS High Society

TYPE 1B - T2A INTERNAL 48SQM EXTERNAL 8SQM TOTAL 56SQM

1 BEDROOM APARTMENTS:

712, 812, 912, 1012, 1112, 1212, 1312, 1412, 1512, 1612, 1712, 1812, 1912, 2012, 2112, 2212, 2312, 2412


33

TYPE 2J - T2B INTERNAL 76SQM EXTERNAL 9SQM TOTAL 85SQM

2 BEDROOM APARTMENTS:

712, 812, 912, 1012, 1112, 1212, 1312, 1412, 1512, 1612, 1712, 1812, 1912, 2012, 2112, 2212

1300 97 97 57 GEOCON.COM.AU


INVESTOR REPORT

INVESTMENT CASE STUDY The following property investment analysis study was prepared for Phil Simmons by his financial advisor. Phil is a Sports Scientist working in at the Australian Institute of Sport in Canberra and earns $72,000 a year. He was looking to buy a property for investment purposes. The two options below were laid out for Phil to consider: either saving his money in an interestbearing account or investing in property.

Whilst the figures below are tailored to Phil’s personal situation, this property investment analysis demonstrates how it could be possible for you, whether you’re buying your first investment property or expanding your property portfolio. The following case study does not represent financial advice and you should seek independent and professional financial advice individual to your situation before making any decisions.

OPTION 1: SAVING CASH Client Details Occupation

Sports Scientist

Income

$72,000

Living Expenses

$34,000

Initial Savings

$115,000

Assumptions Wage (AWOTE) growth

3.50%

Interest earned

2.50%

Marginal taxation rate

32.50%


35

Cash Flow Analysis

Year 1

Year 2

Year 3

Year 4

Year 5

Income earned

$72,000

$74,520

$77,128

$79,828

$82,622

Investment income

$2,875

$3,462

$4,079

$4,728

$5,408

Total inflow

$74,875

$77,982

$81,208

$84,555

$88,030

Living expenses

$34,000

$34,850

$35,721

$36,614

$37,530

Taxation

$17,379

$18,451

$19,564

$20,719

$21,964

Total outflow

$51,379

$53,301

$55,285

$57,333

$59,493

Net cash flow - per annum

$23,496

$24,681

$25,923

$27,222

$28,536

Net cash flow - weekly

$452

$475

$499

$524

$549

Income

$72,000

$74,520

$77,128

$79,828

$82,622

Investment income

$2,875

$3,462

$4,079

$4,728

$5,408

Assessable income

$74,875

$77,982

$81,208

$84,555

$88,030

Allowable deductions (investments)

$0

$0

$0

$0

$0

Taxable income

$74,875

$77,982

$81,208

$84,555

$88,030

Tax payable

15,881

16,891

17,939

19,027

10,203

Medicare levy

1,498

1,560

1,624

1,691

1,761

Net tax payable

17,379

18,451

19,564

20,719

21,964

Average taxation rate

23.21%

23.66%

24.09%

24.50%

24.95%

Not applicable

nil

nil

nil

nil

nil

Not applicable

nil

nil

nil

nil

nil

Not applicable

nil

nil

nil

nil

nil

Total deductions

$0

$0

$0

$0

$0

Net assets

Year 1

Year 2

Year 3

Year 4

Year 5

Cash account

$115,000

$138,496

$163,178

$189,100

$216,323

Total net assets

$115,000

$138,496

$163,178

$189,100

$216,323

Inflow

Outflow

Tax Analysis

Allowable Deductions (Investment)

Saving

1300 97 97 57 GEOCON.COM.AU


INVESTOR REPORT

OPTION 2: INVESTMENT PROPERTY Client Details Occupation

Sports Scientist

Income

$72,000

Living Expenses

$34,000

Initial Savings

$115,000

Property Details Purchase price

$525,000

Deposit

$105,000

Loan amount

$420,000

Stamp duty

$13,995

Assumptions Interest cost

4.30%

Capital growth

6.00%

CPI

2.50%

Wage (AWOTE) growth

3.50%

Interest earned

2.50%

Medicare levy

2.00%

Marginal taxation rate

32.50%

Income and Expenses Weekly rent

$385

Rental income

$20,020

Gross rental yield

$3.81%

Quarterly levies

$595

Annual levies

$2,380

Net rental income

$17,640

Net rental yield

3.36%


37

Cash Flow Analysis

Year 1

Year 2

Year 3

Year 4

Year 5

Income earned

$72,000

$74,520

$77,128

$79,828

$82,622

Investment income

$20,020

$21,221

$22,494

$23,844

$25,275

Total inflow

$92,020

$95,741

$99,623

$103,672

$107,896

Stamp duty

$13,995

$0

$0

$0

$0

Living expenses

$36,000

$36,900

$37,822

$38,768

$39,737

Interest expense

$18,060

$18,060

$18,060

$18,060

$18,060

Strata levies on investment property

$2,380

$2,440

$2,500

$2,563

$2,627

Tax

$7,520

$13,369

$14,425

$15,516

$16,644

Total outflow

$77,955

$70,769

$72,807

$74,907

$77,068

Net cash flow - per annum

$14,065

$24,972

$26,815

$28,764

$30,828

Net cash flow - weekly

$270

$480

$516

$553

$593

Income

$72,000

$74,520

$77,128

$79,828

$82,622

Investment income

$20,020

$20,521

$21,034

$21,559

$22,098

Assessable income

$92,020

$95,041

$98,162

$101,387

$104,720

Allowable deductions (investments)

$45,723

$31,788

$31,848

$31,911

$31,975

Taxable income

$46,298

$63,253

$66,314

$69,477

$72,745

Tax payable

6,594

12,104

13,099

14,127

15,189

Medicare levy

$926

$1,265

$1,326

$1,390

$1,455

Net tax payable

$7,520

$13,369

$14,425

$15,516

$16,644

Average taxation rate

16.24%

21.14%

21.75%

22.33%

22.88%

Interest expense

$18,060

$18,060

$18,060

$18,060

$18,060

Levies

$2,380

$2,440

$2,500

$2,563

$2,627

Stamp duty on leasehold property (ACT only)

$13,995

$0

$0

$0

$0

Depreciation

$11,288

$11,288

$11,288

$11,288

$11,288

Total deductions

$45,723

$31,788

$31,848

$31,911

$31,975

Inflow

Outflow

Tax Analysis

Allowable Deductions (Investment)

1300 97 97 57 GEOCON.COM.AU


INVESTOR REPORT

Property Investment - New Net assets

Year 1

Year 2

Year 3

Year 4

Year 5

Cash account

$5,000

$19,065

$44,037

$70,853

$99,617

Investment property

$525,000

$556,500

$589,890

$625,283

$662,800

Less investment loan

$420,000

$420,000

$420,000

$420,000

$420,000

Total net assets

$110,000

$155,565

$213,927

$276,136

$342,417

NET BENEFIT FROM INVESTMENT BY YEAR 5: $342,417 - $216,323 = $126,094

Note: the above figures include stamp duty payable to the ACT Government. The figures do not include any government incentives. After-tax cash flow includes all the monies that flow into or out of your pocket after Australian taxation is taken into account. It is normally calculated for you as the pre-tax cash flow less any tax credits. (Note that the analysis assumes that you have applied for and received a Tax Variation and that the tax refunds are then credited for the same year in which they are based). When the loan is substantial (negatively geared), the after-tax cash flows are usually negative but may gradually become positive as rents rise with inflation. It is possible to specify that the tax credits be used to reduce the investment loan (i.e debt reduction). This would mean making additional loan repayments in line with what you would have been paying in tax without the negatively-geared investment.


39

SEEK INDEPENDENT PROFESSIONAL ADVICE BEFORE INVESTING Inf luences that may affect the future value, capital growth and rental yields in property investments mean that past performance is no guarantee that targeted returns will be met. A prudent investor would consider the following factors which could affect the financial performance of the investment property. This list is not exhaustive, nor does it cover every potential situation for individual investors. Potential risks may include (but not be limited to): 1. Changes in legislation or government policy such as stamp duty, grants, and general taxes, with respect to property may result in the investor incurring unforeseen expenses, which in turn may affect rental returns and capital growth prospects; 2. Natural disasters, events causing global unrest such as war or terrorism, other hostilities, civil unrest and other major catastrophic events can adversely affect Australian and international markets and economies; 3. New developments in the vicinity providing competition/alterations in demand- a sharp increase in the number of sites under construction within proximity of the subject site may have an adverse effect, resulting in an oversupply from comparable properties, which in turn could have a negative impact on the ability of Investors to divest or sell their investment property at an acceptable price; 4. Interest rate movement - investors should be aware that the performance of any investment property can be affected by the conditions of the economy (or economies) in which it operates. Factors such as interest rates, inf lation,

inf lationary expectations, changes in demand and supply and other economic and political conditions may affect the investment property’s capital growth, value and/or rental yield; 5. Potential investors should be aware that general economic conditions including inf lation and unemployment can impact the value of the investment property and the ability of investors to divest or sell their investment property at an acceptable price; 6. Tenant risk - there is the risk of tenant’s defaulting on their obligations and costs to be incurred in enforcement proceedings and often costs in releasing of the tenancy; 7. Insurance risk - where feasible, damage from fire, storm, malicious damage etc can be covered by insurance. However, the full extent of coverage is subject to the specific terms and conditions of the insurance policy entered into by the body corporate manager on behalf of the Investor; 8. Vacancy risk - there is no guarantee a tenant will be readily found at settlement or that a tenant will renew their tenancy; and 9. Timing risk - market conditions change, if at time of selling investment the market is depressed, investor may realise a loss. You should seek professional advice from your accountant, financial adviser, lawyer or other professional adviser before deciding whether to invest. Geocon Group (and its associated entities, employees, representatives and consultants) do not provide financial advice. 1300 97 97 57 GEOCON.COM.AU


INVESTOR REPORT

1300 97 97 57 GEOCON.COM.AU

Disclaimer: The information contained in this report is of a general nature only and should not be taken as constituting professional advice from Geocon. The report has been prepared without taking into account your financial situation, objectives or needs. Geocon is not a financial adviser and you should consider seeking your own independent legal, financial, taxation or other advice before acting on any information contained in this report. Geocon shall not be liable for any loss or damage of any kind arising out of, caused by, attributable to or resulting from any use of the information contained in this report. If you are a party other than Geocon Group, MacroPlan Dimasi owes you no duty (whether in contract or in tort or under statute or otherwise) with respect to or in connection with the attached report or any part thereof; and will have no liability to you for any loss or damage suffered or costs incurred by you or any other person arising out of or in connection with the provision to you of the attached report or any part thereof, however the loss or damage is caused, including, but not limited to, as a result of negligence. If you are a party other than Geocon Group and you choose to rely upon the attached report or any part thereof, you do so entirely at your own risk. This report does not represent financial advice, and should be considered within the context of your own situation and investment objectives. Information contained in this report is subject to change without notice, and MacroPlan is under no obligation to update information or correct assumptions contained within this report. This publication is subject to copyright. Except as permitted by the Copyright Act 1968, no part in any form may be reproduced, stored in a retrieval system or transmitted without prior written permission.

Geocon Belconnen Investor Report  
Geocon Belconnen Investor Report