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The best holiday destinations around Australia to also invest in

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sunshine coast opinion

Good news moving into the Christmas holidays: there is a way to buy property where you love to vacation and make money in the process.

Many property investors usually steer clear of tourism destinations, but property research site LocationScore has crunched the numbers and identified the top holiday hotspots for property investment across the nation.

The new research scores each suburb out of 100, using eight key indicators that measure the level of supply and demand as well as growth prospects.

LocationScore co-founder and research director Jeremy Sheppard said the research showed the long-held perception that holiday homes were a bad property investment did not always hold true.

“Ordinarily I’d advise investors to buy in great growth locations, not simply a place they’d like to live in or where they like to go on holiday,” Mr. Sheppard said.

“According to Location Score, though, there are holiday locations around the country that stack up investment-wise, including having much more demand than supply, which is essential for capital growth.”

Mr Sheppard admitted some of the suburbs that made the list were not necessarily popular holiday destinations themselves but were within close range of those that were.

“Another point to consider is that not everyone wants to holiday in the middle of classic tourist locations. These areas are often close to popular spots but removed enough that the local property market appeals for investors.”

NSW

In NSW, units in Banora Point, just south of Coolangatta, had a remarkable Location Score of 79 out of 100, while houses in nearby Bilambil Heights scored 75.

Both suburbs were popular with holidaymakers from the north and south, as well as being within striking distance of the Gold Coast.

Mr. Sheppard said Banora Point units were being snapped up quickly by eager buyers.

Views for miles: Bilambil Heights, NSW.

Views for miles: Bilambil Heights, NSW. Photo: Sophie Carter Exclusive Properties

“Our measure for this is days on market. On average, units there spend about six weeks on the market, which is pretty quick – about three times faster than the national average of about four months,” he said.

“And rentals have a vacancy rate of less than 1 percent  which is very low — 3 percent is the widely accepted ‘balance’ point. So renters are obviously under pressure and landlords are licking their lips.”

Closer to Sydney, houses in Kanahooka scored 78, which Mr. Sheppard put down to its Lake Illawarra location and short commuting distance to Wollongong.

He added Gosford and the Central Coast were great markets in general for growth, having a holiday feel but just a short drive from Sydney.

Houses in Berkeley Vale on the Central Coast also made the cut, scoring a solid 75.

Queensland

Mr Sheppard said though Queensland had a plethora of holiday destinations, not all of them made wise investment locations.

“Just because a suburb or town is desirable, doesn’t mean it’s in demand,” he said. “They might be really glamorous locations but are they going to go up on price? Is there demand?

“To get the price growth you need people at auction bidding or making offers, driving prices up — there needs to be the competition.”

The Gold Coast was Queensland’s top holiday destination worth investing in, the research showed, with a number of suburbs ticking investment boxes like strong local employment.

The Gold Coast has rated well as a holiday hotspot for investment

The Gold Coast has rated well as a holiday hotspot for property investment. Photo: Supplied

“Houses in Worongary scored 77 out of 100, perhaps partly due to the recent announcement that a new train station is earmarked for the suburb,” Mr Sheppard said.

Elanora had nearly 100 people searching online per property listed for sale. The vacancy rate was 0.46 percent.

Currumbin Waters had over 100 people per property searching online and a healthy yield of 4.74 percent.

On the Sunshine Coast, Currimundi recorded a Location Score of 71 for November, which Mr Sheppard said was partly due to its location just north of the major employment node of Caloundra.

Victoria

It may not be as glitzy as the Gold Coast, but Clifton Springs near Geelong was kicking its own property goals with a Location Score of 76.

Mr. Sheppard said it had a very impressive auction clearance rate of 92 percent: “That’s the extreme end of demand,” he said.

Port Phillip From Clifton Springs, where the auction clearance rate is an impressive 92 per cent.

Port Phillip from Clifton Springs, where the auction clearance rate is an impressive 92 percent. Photo: Richard Cornish

Nearby Torquay was also a beneficiary of the strong Geelong market, scoring 70.

The charms of Swan Hill, located on the Murray River near the NSW border, resulted in it scoring 71 out of 100 for November with much more demand than supply of property, according to the LocationScore research.

Its most impressive metric was its yield of 5.88 percent. That was enough rent to cover all expenses, including mortgage interest, Mr. Sheppard said.

Tasmania

Tasmania’s property market had strengthened thanks to demand from local and interstate investors. Mr. Sheppard said Hobart and Launceston were the top picks for holiday investment, with both locations backed up by robust local economies.

West Launceston and Invermay were two suburbs showing strong growth prospects, he said.

Great for holidays and property investment: Launceston, Tasmania.

Great for holidays and property investment: Launceston, Tasmania.

“When you think of all the fantastic holiday destinations around the country, it’s pretty obvious from our list that great capital growth and great investments don’t often go hand-in-hand,” Mr Sheppard said.

“Although there are some fantastic places to holiday in Australia this summer, don’t be tempted to buy in one as an investment just because you like to visit every now and then.

“You either buy a holiday home or you buy an investment property, which are two different goals, but our research shows that sometimes you can combine both — if you’ve done your research.”

Originally Published: www.domain.com.au

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Opinion

A COLOSSAL RISK: Huge danger sign for housing in Australia

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A COLOSSAL RISK Huge danger sign for housing in Australia
There could be far too many apartments for sale in coming years. Picture: Glenn Hunt/The Australian What does a million dollars buy in Aussie capital cities?

IT COULD be a bad year for housing prices if building approvals are anything to go by. With the housing market teetering on the edge of a serious downturn, apartment developers seem to be having a “last blast”.

Building approvals data released last week shows a serious uptick in the number of homes that were approved. November building approvals were up 0.9 per cent compared to October, and are 8.1 per cent higher than November 2016. The source of the lift is mainly apartments, which rose from already high levels.

Do that many people really want to live in new apartments?

Do that many people really want to live in new apartments?

Do that many people really want to live in new apartments?

The timing of this big push is fascinating because November is exactly when Australian capital city housing prices started falling. Corelogic shows prices fell by 0.1 per cent in that month as Sydney took a sharp downturn. The developers didn’t know in advance that was going to happen, but they might have sensed it. After all, what could drive such a big uptick in building approvals is the sense that it is now or never.

Builders who have just got their approvals will be racing to get their apartment blocks and new developments done before everyone else. Those who finish early can hope to get in before prices really slump. Any who have delays will be worried they’ll end up selling into a soggy, lifeless market.

TIMING IS EVERYTHING

Markets are supposed to co-ordinate supply and demand. But that’s a hard job when supply takes a long time to come online. If you’re halfway through building a big development when the market falls by 10 per cent, you’re in a bind. The losses involved in finishing the properties and selling them for less than they cost to build will almost certainly be smaller than the losses involved in abandoning the project, so you have to push on to get at least some money back. This is the essence of the boom and bust cycle that characterises property.

If apartments are nearing completion in a market downturn, it can be cheaper to finish and sell quickly rather than abandon the project. Picture: Glenn Hunt/The Australian

If apartments are nearing completion in a market downturn, it can be cheaper to finish and sell quickly rather than abandon the project. Picture: Glenn Hunt/The Australian

Some very large developers might finish properties and then sit on them, hoping the market improves over time, but that’s also a risk. Markets can take a very long time to recover.

SOUTH OF THE MURRAY

The really interesting thing about the November building approvals data is where it was focused. All the increase was focused on Victoria. The average number of building approvals in New South Wales, Queensland and South Australia was actually lower than in the previous month, by 2 to 3 per cent. But Victoria saw a whopping 27 per cent rise.

That anomaly becomes especially curious when you consider that Victoria was the market that actually went on to see price appreciation in November (0.5 per cent growth in prices, according to Corelogic). Could it be that developers, sensing Victoria is the only market with price growth left in it, are focusing their attentions there?

It’s curious there’s still many apartments being approved in Victoria, after real estate agent Mariecris Tagala last year claimed more than half of new apartments in Melbourne’s CBD, Docklands, and Southbank have sold at a loss since 2011. Picture: David Geraghty / The Australian.

It’s curious there’s still many apartments being approved in Victoria, after real estate agent Mariecris Tagala last year claimed more than half of new apartments in Melbourne’s CBD, Docklands, and Southbank have sold at a loss since 2011. Picture: David Geraghty / The Australian.

Another explanation for such a massive jump would be if a single large project came through the pipeline in the month of November. A giant apartment development somewhere in Melbourne, for example. For now, it’s not clear if that’s the case. Whether it is one project or many, the impact on housing markets of a big rush of supply is largely the same – extra supply generally makes prices lower than they would otherwise be.

QUIT WHILE YOU’RE WINNING

Some smart developers have already got out of the property development game, telling the financial press they are sitting out until the market repairs itself. The so-called “pipeline” of new building had been shrinking. The November building approval data shows a different picture. It suggests the pipeline might get fatter again for a little while and there could be one more flurry of cranes going up. The one caveat is this – builders can pay to get a building approval and then not use it. That might be the best case scenario.

The big question hanging over Australia’s high housing prices is whether a housing downturn can happen without also crashing the economy. A gentle and controlled downturn might be a positive – young people can afford to get into the market more, but people don’t feel like the sky is falling.

But a severe sharp downturn could be different. A giant backlog of supply that could be released into an already weakened market is a concern because it could accelerate a modest slide into a hard one.

Originally Published: sunshinecoastdaily.com.au

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Opinion

Noel Whittaker says don’t get beached by dream purchase

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Noel Whittaker says don't get beached by dream purchase

Before you get too carried away ask yourself the tough questions.

First, “do we keep it for our own use or rent it out?”

If you don’t rent it out, you’ll be tying up a large amount of capital that could almost certainly be used better elsewhere and, if you have children, you’ll find out that you won’t be able to go there as often as you’d planned.

Then you will have to decide between leasing it

out permanently and making it available for holiday letting.

If you go for a permanent tenant you will achieve a regular income but the trade-off is that you cannot go away and use it for the odd weekend.

If you opt for casual letting you will need to provide everything from plates to a washing machine and will have greatly increased wear and tear because of the constant turnover of tenants, few of whom will treat the property kindly.

If you borrow for it, you’ll only be able to claim a tax deduction for the rates, maintenance, interest and other expenses if the property is income- producing.

This means you will have to rent it out.

If you decide to keep

the peak periods such as school holidays for yourself, you’ll be substantially reducing the income because the highest rents are charged in the holiday season.

And if you do use the property yourself, you’ll only be able to claim a percentage of the costs.

For example, if you occupy the property for 13 weeks, leaving it available for the other 39 weeks, you could claim only 39/52 of all expenses.

Then comes the choice between a house and a unit. A house will be great if you want to take the pets away on weekends with you, and as long as you don’t mind maintaining two gardens.

Unfortunately, the cost of a well-located beach house, as well as the accompanying rates and maintenance, is way out of the reach of most of us. To make matters worse the land tax on the property will put you into a higher land tax bracket which could affect your other rental properties.

Originally Published: www.sunshinecoastdaily.com.au

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Opinion

Would Australian Households Be Better Off if We Ditch Negative Gearing?

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Would Australian Households Be Better Off if We Ditch Negative Gearing

Economic modelling undertaken by University of Melbourne economists, and presented to the Reserve Bank last month, shows that three-quarters of Australian Households would be better off if negative gearing is abolished.

The study was posted on the Reserve Bank website for public release on Friday.

The paper explores the implications of negative gearing – including a 30 per cent collapse in the supply of rental properties – and found that abolishing negative gearing would lead to an overall welfare gain of 1.5 per cent of GDP.

Negative gearing is a policy that largely benefits landlords, and for the 17 per cent of the Australia population that have property investments – out of which 70 per cent are negatively geared – would be worse off.

The study estimated that thirteen per cent of the population would be directly influenced by the removal of negative gearing, and likely to quit their holdings.

“The housing prices fall because removing negative gearing takes a significant amount of housing investment out of the property market,” the report said.

“Both the proportion of landlords and the amount of resources allocated to housing investment, given by the average expenditure, have fallen significantly after the policy reform.

Importantly, removing negative gearing increases the average homeownership rate of the economy from 66.7 per cent to 72.2 per cent.

The improvement in homeownership was observed most predominantly among poor households, where the fall in house price and the rise in rent reduce the price-to-rent ratio in the economy by 4.2 per cent.

“This has direct implications on housing affordability as the fall in house price lowers both the downpayment requirement for mortgages and the size of mortgages required to purchase a house, making it easier for households to own a home.”

If negative gearing was to be scrapped, the average mortgage size held by homeowners would likely decrease 21 per cent.

“Eliminating negative gearing takes young landlords who were rich enough to meet a downpayment requirement for investment properties away from the market.

“This reconciles a recent trend in the property market that there has been a rise in investment housing debt holdings by young and rich 35 households who would have benefitted the most from negative gearing concessions.

“The aggregate welfare for the economy improves upon the repeal of negative gearing … around 80 per cent of households are better off after the policy reform.”

Australia’s negative gearing regime stands alone against comparable OECD countries. Only New Zealand and Japan allow the unrestricted use of negative gearing losses to offset income from other sources.

The report’s authors, Yunho Cho, Shuyun May Li, and Lawrence Uren said that along with their findings on negative gearing it would also be worth considering some partial restrictions, such as allowing tax deductions for mortgage interest payments only.

Originally Published: www.brisbaneinvestor.com.au

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