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CAPITAL CITY HOME VALUES RISE IN NOVEMBER – CoreLogic Australia

HOW WESTERN AUSTRALIA IS HANDLING THE END OF THE MINING BOOM – Yahoo 7

PROPERTY EDUCATION

Smart Property Adviser’s The

State Of The Nation Update Issue 131 | 2nd December 2016

WHAT’S INSIDE THIS ISSUE?

Changes for off-the-plan foreign buyers rely on a broken supply argument – The Conversation Media Group

“Welcome to this week’s issue – Enjoy!”

Building approvals drop but Queensland bucks part of trend – Realestate.com.au

NSW Planning Minister argues against negative gearing, wants focus on housing affordability crisis – ABC News

ANZ Bank's Shayne Elliott warns on overbuilding in apartment market – The Sydney Morning Herald

Not just up to the west: Sydney’s east needs to shoulder more of the density load, experts say – Domain News

Storm Financial loses $17m damages claim – Sky News

Adelaide house price growth stable: Paul Bloxham's 2017 forecast – Property Observer

T: 028858 3258 | F: 028858 3299 | www.SmartPropertyAdviser.com.au


Changes for off-the-plan foreign buyers rely on a broken supply argument November 29th 2016 | As published in The Conversation Media Group The government is proposing changes to the foreign investment framework that will allow a foreign real estate investor to purchase an off-the-plan dwelling when another foreign investor has failed to reach settlement. In announcing the changes, Treasurer Scott Morrison deployed a familiar narrative about foreign investment increasing housing supply and making “housing more affordable for more Australians”. This idea is in keeping with property development lobbyists, who are focused on getting government to release more land to solve the complex long-term housing affordability problem in cities. However, researchers have debunked this idea before (see here and here). Their conclusion is that government cannot supply its way out of the housing affordability problem in major Australian cities. The government’s focus on the concerns of the property industry renders invisible a broader set of interested parties and a much more nuanced suite of contributing factors and solutions. The current foreign investment rules are a blunt set of regulatory tools, held captive to the housing supply and global competitiveness debates. Not all foreign real estate investors are the same There are important differences between individual foreign real estate investors, which are regularly conflated in foreign investment policy and the public debate. In broad terms, there are four investor groups. A class-based distinction defines people from the expanding middle class in countries like China. They are called the new middle class. A disposable asset distinction, which excludes primary residences, separates the three remaining groups. High net worth individuals have disposable assets that exceed US$1 million. Ultra high net worth individuals have asset holdings in excess of US$30 million. Ultra, ultra high net worth individuals have a minimum of US$50 million in disposable assets in a wealth management fund. In the absence of fine-grained data about which groups are investing and their differential impacts on cities and housing, the treasurer has opted to protect the development industry rather than the people and places within cities. A regulatory environment that is sensitive to various investor groups is important in Australia because different investors impact their host cities in diverse ways. Regulating foreign investors, sales or capital How foreign capital intersects with local real estate markets depends on on who is investing capital, the properties in which the capital is being invested and the investment vehicles through which the capital is being transferred. The arrival of foreign capital is not always accompanied by the arrival of new permanent residents for the city. Therefore, the investors interact with local infrastructure

and shape housing supply in diverse ways. There is a big difference between the impacts of new middle class and high net worth investors in cities compared to ultra and ultra, ultra high net worth investment. Ultra, ultra high net worth individuals can be “free-floating” investors who travel around the world, purchasing real estate in various global cities. Rowland Atkinson argues this group has little allegiance to the host neighbourhoods. Ultra high net worth investors might move between multiple residences and have attachments to the neighbourhoods their properties are in. The new middle class and high net worth investors might live in, or send their spouse and/or children to live in, the house they have purchased. They often have an allegiance to the cities or neighbourhoods their properties are in. The personal motivations of foreign investors are important too. They can extend far beyond financial considerations. Foreign investors are motivated by the opportunities that exist in Australia and how these relate to their own migration plans, their children’s education and the financial security that Australian real estate supposedly guarantees. Therefore, who is investing and their residency status will shape the neighbourhood, city and perhaps even the country into the future. Neighbourhoods with high concentrations of ultra high net worth investors in London appear to be (or may be) devoid of people. Local businesses in these suburbs have become untenable as local patronage declines. New middle class and high net worth investors might change the social fabric, educational institutions or employment landscape of a neighbourhood or city through habitation, for good or ill. International evidence shows that some investors will occupy their property, others place it on the rental market, some buy multi-milliondollar trophy homes, while others increase the housing supply in a neighbourhood of absentee owners and fading businesses. Therefore, the impact of foreign investors on housing supply is related to the investment practises of each investor, the amount of capital they bring into Australia and how they invest it. More dynamic foreign investment rules needed Housing supply and global competitiveness arguments have captured the foreign real estate investment debate. Both are too simplistic and need to be augmented with additional voices, policies and data. Governments justify their pro-foreign investment and business immigration policies through “financial benefits” arguments in times of prosperity and “economic necessity” arguments in times of hardship. These top-down narratives position foreign real estate investment as good for the local economy, with secondary benefits such as increasing housing supply and jobs growth through targeted skill migration and business development. The government needs to understand how foreign investment is shaping cities from the ground up. This includes: how foreign investment impacts people in the local neighbourhoods where these properties are located; how developers change the dwellings they build to suit foreign investors; how changing educational institutions are shaping foreign student investment; and the experience of first homebuyers who are looking for a home in the same property markets.

NEED HELP SECURING YOUR FINANCE? Buying a home or an investment property is exciting. Trying to find and arrange the loan on your own… not so much. Our experts can help. www.Smartline.com.au/adviser/klee/

[CLICK HERE FOR FULL STORY]3


Chinese property investors may be forced to sell as bank finance dries up [CLICK HERE FOR FULL STORY]

Capital city home values rise in November December 1st 2016 By Tim Lawless as published in CoreLogic The CoreLogic November Hedonic Home Value Index results out today show a rise in dwelling values across every capital city excluding Melbourne over the month. Throughout November, capital city dwelling values rose by 0.2%. While the headline results remained in positive growth territory, the monthly capital gain reading was also the softest result since December 2015 when capital city dwelling values were unchanged over the month. The combined regional areas of Australia showed a weaker result with house values falling by 0.2% over the month.

Thousands of Chinese property investors who bought apartments in Australia are still scrambling to save their investments, six months on from a bank clampdown on foreign lending. Earlier this year, the big four banks cut off lending to offshore investors in a bid to reduce the amount of risk they took on.

According to Mr Lawless, the soft performance across the combined capital city reading was attributable to a 1.5% fall in the Melbourne index, while all other capital cities recorded a positive month-on-month result. He said, “Delving into the Melbourne results in more detail showed that unit values were down a larger 3.2% in November, while Melbourne house values declined by 1.3% over the month.” The November figures show that capital city dwelling values rose by 1.7% over the three months of spring; a substantial improvement over last year. Spring 2015 saw capital city dwelling values fall by 0.2%, with auction clearance rates dipping below 60% in late November and early December. In contrast, auction clearance rates held firm in the mid-70% range throughout spring this year, with Sydney clearance rates holding around the 80% mark over the past three months.

On an annual basis, every capital city except for Perth is now showing a positive annual trend in dwelling value growth. The highest annual growth rate is evident in Sydney and Melbourne where dwelling values are now 13.1% and 11.3% higher respectively, reflecting a steeper upwards trajectory in growth over the second half of the year. The Hobart and Canberra markets have also seen some acceleration in growth rate trends with dwelling values up 8.5%, and 8.4% respectively over the past twelve months. For the first time since February 2015, Darwin’s annual growth rate has moved back into the black and recorded a 1.1% rise in dwelling values over the past year. Mr Lawless notes that results for smaller cities such as Darwin, can tend to show higher levels of volatility. Mr Lawless said, “The November results also show a rise in transaction numbers across the Darwin market over recent months, supporting the moderate improvement in market conditions that the hedonic index is showing.” Currently the national growth cycle has been in play for 4.5 years, with capital city dwelling values rising by 42.2% over the cycle to date. Mr Lawless said, “Disaggregating this growth figure highlights the diversity in market conditions with Sydney and Melbourne at one end of the spectrum experiencing an increase in dwelling values over this period of 67.3% and 46.3% respectively, while at the other end of the spectrum, Perth and Darwin values have broadly declined since 2014. Perth values are 6.9% higher since the cycle commenced in June 2012, while Darwin values are 13.8% higher over this period.” “It appears that higher unit supply is progressively weighing down the capital gains across Melbourne’s unit sector, with annual capital gains tracking at 3.9% for Melbourne units compared with a 12.2% annual gain in Melbourne house values.” [CLICK HERE FOR FULL STORY]

NEED HELP SECURING YOUR FINANCE? Buying a home or an investment property is exciting. Trying to find and arrange the loan on your own… not so much. Our experts can help. www.Smartline.com.au/adviser/klee/

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APRA brakes on property investors appear to be working

lending practices, introduce stricter affordability tests for borrowers and limit interest-only loans with "very long" terms.

A combination of easy money, historically low interest rates and booming house prices saw new investor lending grow by almost 40 per cent between March 2013 and March 2014.

The regulator enforced squeeze on

Despite the investor clamp down, quarterly figures release by APRA show the total residential exposure carried by Australia's banks, building societies and credit unions rose by 7.9 per cent over the year to a record high of $1.46 trillion.

residential property investment is continuing to bite, with new loan approvals to landlords slumping 16 per cent from a year ago.

Total owner-occupier loans rose by 12.9 per cent to $949 million, or 65 per cent of all residential loans.

November 29th 2016 By Stephen Letts as published in ABC News Online

Since the Australian Prudential Regulatory Authority imposed tighter controls two years ago, new investor loans have fallen from $38.6 billion in the 2014 December quarter to $33.2 billion, a drop of 14 per cent.

The average loan size increased over the year from $244,000 to $255,000. APRA also appears to be succeeding in targeting riskier very high LVR and interest-only lending.

APRA warned the banks to rein in the high-loan-to valuation ratio (LVR)

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[CLICK HERE FOR FULL STORY]

Total investor loans slipped 0.2 per cent to $512 billion.

Over the same period new owneroccupier loans being issued have risen 14 per cent from $54.1 billion to $61.9 billion.

In December 2014 APRA, with the backing of a Reserve Bank concerned about an investor driven property bubble blowing up, stepped up its regulatory oversight of the banks to keep investment loan growth under 10 per cent a year.

Apartment building to drop by 40% by 2018/19

New lending for LVRs above 90 per cent - measured by the size of the outstanding loan to the value of the property - fell by 19.5 per cent over the year, while LVRs of between 80 and 90 cent rose 5.9 per cent. The value of new interest only loans fell 15 per cent or $23.9 billion over the year. [CLICK HERE FOR FULL STORY]

Multi-unit commencements could plummet by more than 40 per cent in the next few years as home building returns to “more normal levels”, according to a chief economist. According to a new report by the Housing Industry Association (HIA), the current upturn in new home building, which began in 2012, remains “the longest since modern records began”.


Other Stories You May Have Missed This Fortnight:

One in four millennials stressed over potential rate rise

NSW UPDATE

QLD UPDATE

$1.3bn Hills Shire Site Releasing More Lots

Storm Financial Loses $17m Damages Claim

Located in Box Hill, The Hills of Carmel development is progressing ahead of schedule after 275 lots are snapped up in six months. Council consent has been received for a further 300 lots to be released to buyers over 2017 with construction set to begin on The Hills of Carmel housing in February 2017. More

The Townsville-based company of Emmanuel and Julie Cassimatis cost thousands of customers their entire life savings and homes, after their investment strategy backfired during the 2008 global financial crisis. More

NSW Planning Minister Argues Against Negative Gearing, Wants Focus On Housing Affordability Crisis

Building Approvals Drop But Queensland Bucks Part Of Trend

[CLICK HERE FOR FULL STORY]

Prime Minister Malcolm Turnbull ruled out changes to negative gearing during the election, and last month Treasurer Scott Morrison pressured the states by arguing they needed to release more land to boost supply. More

Overall building approvals figures from the Australian Bureau of Statistics showed that in October all states went backwards: New South Wales (-15.7 per cent), Western Australia (-14.3 per cent), Queensland (-9.8 per cent), South Australia (-8.4 per cent), Tasmania (3.2 per cent) and Victoria (-2.7 per cent). More

Not Just Up To The West: Sydney’s East Needs To Shoulder More Of The Density Load, Experts Say

SE Queensland Again Finding Favour With Cashedup Buyers In Prestige Property Market

Sydney is becoming a tale of two cities, with the western suburbs expected to shoulder most of the growth in housing and population and the eastern suburbs remaining comparatively low density. More

Agents say our southern neighbours are largely responsible for driving what has been a strong high end market in Brisbane and the Gold and the Sunshine Coasts this year as they look to Queensland to spend the spoils of their property boom. More

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Following on from yesterday’s story on the OECD’s recommendation that the Reserve Bank of Australia (RBA) increase its cash rate to encourage economic growth, new research has revealed that a quarter of Australian Millennial mortgage holders are extremely concerned about the impact a potential 1.5% interest rate increase would have on their ability to service their loan.


ANZ Bank's Shayne Elliott warns on overbuilding in apartment market

VIC UPDATE

WA UPDATE

Dozens Of Unit Blocks Up For Grabs In Melbourne As Investors Hope To Cash In

How Western Australia Is Handling The End Of The Mining Boom

Out with the new and in with the old: a quirk of fate is giving savvy Melbourne investors a chance to bypass the glut of shiny new apartment stock, in favour of the humble old walk-up. More

For many years Western Australia enjoyed solid economic growth, matched by business investment and an unemployment rate lower than the national average. More

[CLICK HERE FOR FULL STORY]

Pet Law Change Could Cause Rental Shortage In Melbourne: Property Managers Forcing landlords to accept pets could deter investors from buying homes to lease out, exacerbating the shortage of rentals in Melbourne, property managers say. More

TASMANIA UPDATE Waterfront Residences Launch In Tasmania The Piermont estate is one of the last chances to snap up waterfront property along the Freycinet Coast. Located between Hobart and Launceston, Piermont offers 32 waterfront residences within the 230acre nature Piermont Retreat. More

NT UPDATE The high-rise construction boom that is transforming the skylines of Sydney, Melbourne and Brisbane will probably leave parts of these cities with too many apartments, ANZ chief executive Shayne Elliott says.

Increased Activity In Darwin’s Rural Property Market

Buyer activity is heating up in the Darwin rural area with real estate agents noting more people through open homes and more interest in the mid range of the market. Carina Schmitt from Real Estate Central said the rural market started picking up a couple of months ago. More

As figures showed a sharp fall in approvals for high-rise units, Mr Elliott on Wednesday said the bank was taking a more cautious view on this part of the property market, due to pockets of overbuilding.

SA UPDATE Adelaide House Price Growth Stable: Paul Bloxham's 2017 Forecast Housing price growth is expected to be contained in the Adelaide market throughout 2017 according to HSBC. HSBC senior economist Paul Bloxham said the local housing market is dominated by detached dwellings. More

NEED HELP SECURING YOUR FINANCE? 7

Buying a home or an investment property is exciting. Trying to find and arrange the loan on your own‌ not so much. Our experts can help. www.Smartline.com.au/adviser/klee/


The plan to help first home buyers ... without messing with negative gearing

The Herron Todd White Property Clock - Houses Herron Todd White is a valuation firm in Australia. They have issued its latest property clock for houses. They identify the latest market movements and trends for the various property markets in Australia.

Houses in Newcastle, Coffs Harbour and NSW Central Coast at peak, Gold Coast nearing top: HTW property clock As published in Property Observer, 6 November 2016

[CLICK HERE FOR FULL STORY]

Houses in Newcastle, the NSW Central Coast and Coffs Harbour are now at the peak of the market according to Herron Todd White's houses property clock for November.

[CLICK HERE FOR FULL STORY]

Malcolm Turnbull made the wrong call defending negative gearing in order to get re-elected. He needs to crawl back slowly. There's no shortage of people on his own side telling him to. The latest is Jeff Kennett, who was Victorian premier just as negative gearing began to take off at the end of the 1990s.

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Suburb Spotlight

SPOTLIGHT: COOLANGATTA Coolangatta, a seaside-resort town on the NSW border, 95 km south-east of central Brisbane and is the southern-most settlement within Gold Coast City.

Nestled between Kirra and the NSW border, “Cooly”, as it is known to many locals, features the sheltered Greenmount and Rainbow Bay beaches — the Gold Coast’s only north-facing beaches. In 2011 Census, the population was 5,193. The suburb, which is about 200ha in area, is predominantly populated by those aged 55-64.

People are drawn to the Coolangatta because of the idyllic location by the seaside with city views. Coolangatta is one of the last remaining areas south of the Glitter Strip to still retain a smalltown vibe while being full of amenity. Known to be home to some of the world’s most famous surf beaches. It is a laidback beachside suburb that remains popular with many Gold Coast residents and tourists alike. Besides the beach, Coolangatta’s main retail area, The Strand, recently had a $60 million upgrade, transforming the area into a bustling shopping precinct with more than 120 stores, offices and restaurants. The Strand redevelopment has been a huge plus with a different type of tourist coming to the area. The suburb is named after the ship Coolangatta, which was wrecked in the area in 1846, and is home to the Gold Coast Airport. The Coolangatta campus of Southern Cross University, located near the airport, opened in 2010.

People are drawn to Coolangatta because of the idyllic location by the seaside with city views. Research Sources: Australian Bureau of Statistics 2011 Census QuickStats, realestate.com.au, CoreLogic RP Data.

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State of the Nation Issue 131 December 2, 2016  
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