Why is it so hard to make the first purchase?

Here’s a great post from the Ultimate forums. Michael provides some very sound advice, even to the experienced investor to stay on track.

Question:

Why is it so hard to make the first purchase?

I have been studying the course content for nearly 6 months and have thoroughly enjoyed learning everything about the various strategies. I thrive on the learning aspect and am inspired every single day to make this happen for us …. but every time I sit down to search for properties, I get stuck. I end up feeling disappointed.

I have a couple of strategies that I am focusing on but am yet to make a purchase. Just when I think I have found one, I doubt myself and worry that it isn’t the right property to purchase.

Has anyone else felt like this when first starting out? Does this feeling pass after you make the initial purchase and does it get easier each time? I am so passionate about this and have all of the will power to make it work. What am I missing?

Answer:

What you describe is very common, however knowing this will not help you move forward.
It does get easier when you get more practiced.
The issue is that simply put, you have gone shopping without a shopping list. You are ‘window shopping’
Window shopping is just looking to see what takes your fancy. Buying property is far more ordered than this.
It all starts with understanding your finances and from this working out what your first deal should be (equity or cashflow). Next comes the strategy – the type chosen will dictate the locations ie. renovations need to be done locally whereas subdivisions are more a paper exercise which can be done remotely. Searching should be started with a list that contains:-
1) The maximum price that you can pay. If you have chosen a renovation then remember to allocate a sum of money from your free equity first say $20k , then multiply the remaining amount by 4. This is the top figure that you pay. If this is too low then you will have to consider a JV partnership.
2) The type of property – for a renovation you should be looking in the older areas, for a subdivision you need to look at council areas that allow this to happen ( ring the council planning departments)
3) A statement of what you are trying to achieve ie cashflow with a minimum value of $5k per year or equity growth at a minimum of 4%.

This should be repeated for your potential second purchase.
Now armed with 2 lists you go looking. Do the numbers only on properties that tick the first 2 points. If you find your second deal first no matter just do the deal and turn your attention back to the first. After completing 1 deal set up another list for your 3rd deal and so on. You must always be working with 2 deal lists when looking to buy. Focus primarily on the first but if the second pops up then take it.

We hope that this helps. It is just a matter of being focussed on what your plan tells you to buy. If you have no plan then you will wander aimlessly.

Regards
Michael & Sara

Investor magazines’ 2011 unit hotspots are more misses than hits two years on

The Queensland mining towns of Gladstone, Toowoomba and Chinchilla account for three of the five locations that have delivered median unit growth above inflation (around 5% over two years) when measured by both RP Data and Australian Property Monitors (APM) – the two information providers used by Your Investment Property and Australian Property Investor in compiling their Top 100 lists.

In line with Property Observer’s analysis earlier this week of the 21 collective detached housing hotspots which appeared in both magazines 100 ‘best buy’ suburbs of two year’s ago, analysis of collective unit hotspots also reveal that very few have delivered any meaningful growth to date.

The other two are Paddington, the trendy inner Brisbane suburb and Baulkham Hills, about 31 kilometres north west of the Sydney CBD and part of the Greater Western Sydney growth corridor.

Property Observer looked at the movement in medians of both RP Data and Australian Property Monitors (APM) to also see how the two major data providers differed on the same location.

Similar analysis found just four hotspot markets where house prices had delivered inflation-beating returns to investors over the same period.

Averaging out results across both lists, Gladstone is the standout with 27% price growth between 2011 and 2013.

Two points are worth mentioning:

Firstly, that most astute property investors would take a long term view of their investments – indeed some of these non-performers may turn around in the coming years.

However, many investors would expect to see signs of capital growth in so-called hotspots over a two-year period and certainly not the declines recorded in some locations.

Secondly, astute investors would also be aware that investing in a suburb showing strong capital growth does not necessarily mean your investment property will perform in line with the overall suburb.

You could pick a turkey investment among a so-called ‘hotspots’. Equally, you could make an astute selection in a suburb that has not performed well.

It comes down to the exact street location (even sometimes what side of the street your property sits), the type of property you choose, what you pay for it, whether it appeals to tenants, the cost of maintenance and many other factors.

Hotspot guides can be good starting points if you’re looking for a suitable investment, but always take the recommendations with a grain of salt and due your own research and due diligence.

The figures below are sourced from the 2011 and 2013 hot 100 and top 100 editions of Australian Property Investor magazine and Your Investment Property respectively:

RP Data figures

Suburb State Median unit price 2011 Median unit price 2013 % change over two years Hit or miss?

1.

Ainslie

ACT

$680,000

$728,000

7%

HIT

2.

Townsville

Qld

$473,000

$399,000

-15.6%

MISS

3.

Gladstone

Qld

$388,000

$475,000

+22.4%

HIT

4.

Rockhampton

Qld

$389,000

$325,000

-16.4%

MISS

5.

Toowoomba

Qld

$217,000

$345,000

+58.9%

HIT

6.

Chinchilla

Qld

$293,000

$310,000

+5.8%

HIT

7.

Paddington

Qld

$433,000

$492,000

+13.6%

HIT

8.

Dulwich Hill

NSW

$475,000

$485,000

+2.1%

MISS

9.

Baulkham Hills

NSW

$479,000

$520,000

+8.5%

HIT

10

Bathurst

NSW

$212,000

$227,000

+7%

HIT

11.

Port Macquarie

NSW

$290,000

$265,000

-8.6%

MISS

12.

Geraldton

WA

$265,000

$212,000

-20%

MISS

13.

Broadmeadows

Vic

$334,000

$265,000

-20.6%

MISS

14.

Thornbury

Vic

$385,000

$377,000

-2%

MISS

15.

Warrnambool

Vic

$260,000

$242,000

-6.9%

MISS

16.

St Kilda

Vic

$476,000

$440,000

-7.5%

MISS

17.

Brunswick

Vic

$420,000

$416,000

-0.9%

MISS

18.

Balaclava

Vic

$453,000

$466,000

+2.8%

MISS

19.

Port Noarlunga

SA

$219,000

$260,000

+18.7%

HIT

20.

Kensington

SA

$363,000

$404,000

+11.2%

HIT

Source: Australian Property Investor magazine, Your Investment Property magazine, RP Data

APM figures

Suburb State Median unit price 2011 Median unit price 2013 % change over two years Hit or miss?

1.

Ainslie

ACT

$690,000

$715,000

+3.6%

MISS

2.

Townsville

Qld

$443,000

$393,000

-11.2%

MISS

3.

Gladstone

Qld

$319,000

$475,000

+32.8%

HIT

4.

Rockhampton

Qld

$330,000

??

??

??

5.

Toowoomba

Qld

$281,000

$301,000

+7.1%

HIT

6.

Chinchilla

Qld

$295,000

$385,000

+30.5%

HIT

7.

Paddington

Qld

$399,000

$460,000

+15.2%

HIT

8.

Dulwich Hill

NSW

$478,000

$492,000

+2.9%

MISS

9.

Baulkham Hills

NSW

$443,000

$510,000

+15.1%

HIT

10.

Bathurst

NSW

$216,000

$220,000

+1.8%

MISS

11.

Port Macquarie

NSW

$295,000

$265,000

-10.1%

MISS

12.

Geraldton

WA

$290,000

n/a

??

??

13.

Broadmeadows

Vic

$337,000

n/a

??

??

14.

Thornbury

Vic

$383,000

$370,0000

-3.3%

MISS

15.

Warrnambool

Vic

$232,000

$230,000

-0.9%

MISS

16.

St Kilda

Vic

$480,000

$447,000

-6.8%

MISS

17.

Brunswick

Vic

$415,000

$435,000

+4.8%

MISS

18.

Balaclava

Vic

$455,000

$450,000

-1%

MISS

19.

Port Noarlunga

SA

$220,000

n/a

??

??

20.

Kensington

SA

$411,000

n/a

??

??

Source: Australian Property Investor magazine, Your Investment Property magazine, Australian Property Monitors

Source: http://www.propertyobserver.com.au/hotspots/investor-magazine-unit-hotspots-more-misses-than-hits-two-years-on/2013072563554

Australia’s Waning Boom Saps Mining Area Home Demand: Mortgages

After slashing the price of three planned townhouses by a third in the coal-mining town of Moranbah in remote northeastern Australia, agent Ricardo Baggio still can’t find buyers.

“No one’s got confidence,” said Baggio from broker Ray White Group’s Townsville franchise, about 550 kilometers (341 miles) north of Moranbah in Queensland state. “There are a few mines around the town but they’re not hiring or they’re downsizing.”

Home prices in Australia’s isolated mining towns, which outpaced increases in the rest of the nation over the past decade, are falling as companies such as Glencore Xstrata PLC (GLEN) and Peabody Energy Corp. delay projects and lay off workers amid a slowing resources boom. The percentage of homeowners more than 30 days behind on their mortgage payments in Gladstone, a Queensland coastal town near more than $60 billion of gas projects, was 0.94 percent in March, according to Fitch Ratings, a 71 percent increase in six months.

The Moranbah townhouses, which will be built on a flat, sparsely landscaped street about 1 kilometer from the center of town, are on the market for A$525,000 ($478,485) each, down from an initial price of A$750,000, said Baggio. The median price of a home in Brisbane, the state capital, is A$425,000.

Prices in mining regions could fall as much as 30 percent from a first-quarter peak, real estate-data company SQM Research Pty forecasts.

Demand for housing in central Queensland and Western Australia state’s arid Pilbara region, the nation’s two biggest mining areas, is waning as record investment in resources peaks even as property developers keep building more homes. About A$150 billion of mining and energy projects have been canceled in the past year as commodity prices declined, according to government figures.

Population Drops

“We expect we’ll see an abrupt dropoff in population flows in mining towns,” Sydney-based Matthew Hassan, senior economist at Westpac Banking Corp. (WBC), said in a telephone interview. “How that plays back to housing is extremely complex. But we know the direction: down.”

In Western Australia, while only 1.6 percent of borrowers were late on their home-loan payments in March, “vulnerability in the mining sector and associated projects could result in an increase in arrears during the year,” ratings company Standard& Poor’s said in a March 31 report.

Significant Fluctuations

In Queensland’s Isaac region, which includes Moranbah, home prices tumbled 43 percent in the year to April, and rents slumped 69 percent, according to Sydney-based Australian Property Monitors.

Moranbah, about 1,000 kilometers inland northwest of Brisbane and home to more than 8,000 people, is near coal projects owned by BHP Billiton Ltd. (BHP), Anglo American Plc (AAL) and Rio Tinto Ltd. (RIO) BHP last year closed part of its Gregory coal mine, south of the town, and in February said it wants to sell the mine. Anglo American Chief Executive Officer Mark Cutifani said June 26 that the outlook for coal mining is “grim.” An index of hard-coking coal has more than halved since January 2011, when it peaked at $365.83 a metric ton, according to data from Energy Publishing Inc. compiled by Bloomberg.

Mining towns “are prone to significant fluctuations in property valuations, often driven by a combination of changes in the resource market and the shifting need for accommodation for mining workers,” Michael Savery, chief risk officer at QBE Insurance Group Ltd.’s Lenders Mortgage Insurance unit, said in an e-mail. They “require monitoring at either end of the property market cycle.”

Rockhampton Value

In Gladstone, about 500 kilometers north of Brisbane, property prices are falling as buyers find better value elsewhere. The median home price has fallen 4.6 percent in the year through April to A$450,500, while in Rockhampton, 116 kilometers further north in a region that is dominated by livestock grazing, it has risen 5.4 percent over the past year to A$350,000, APM said.

Housing markets in mining towns “have gotten ahead of themselves in terms of fundamentals and we’ve had a speculative market,” said Andrew Wilson, senior economist at APM. “A lot of potential buyers, especially those employed in the region, are looking at less expensive markets, like Rockhampton.”

House and apartment prices across Australia’s major cities rose 3.8 percent in June from a year earlier, according to the RP Data-Rismark home value index, after the Reserve Bank of Australia lowered its key interest rate by 2 percentage points between late 2011 and May to a record low 2.75 percent.

Pilbara Weakness

Australia had 73 committed mining projects under development in April, 14 less than in October, according to a May report by the Bureau of Research and Energy Economics. The number of people employed in Australia’s mining industry was 6 percent lower in May from a year earlier, government data shows.

Glencore Xstrata, the world’s biggest shipper of coal, halted work on the Balaclava Island export terminal, about 40 kilometers north of Gladstone, in May and cut 450 coal mining jobs in June. It said this month it will suspend production at its magnetite iron ore operation near Cloncurry, about 1,300 kilometers west of Gladstone in inland Queensland.

Across the country, more than 5,000 kilometers west by road from Gladstone, in the Western Australian shire of Roebourne, rents have plunged 22 percent in the 12 months to April, while the median house price has slipped 3.5 percent to A$796,000, APM figures showed.

Roebourne includes Karratha, the biggest town in the Pilbara, a 193,000-square-mile area in Australia’s northwest that is the world’s largest iron ore exporting region.

The recent home price declines in the Pilbara follow average annual gains of almost 20 percent for the past 10 years in the two coastal towns of Karratha and Port Hedland, according to data from the Real Estate Institute of Western Australia.

Aspen Group

Aspen Group Ltd. (APZ), a Perth-based property investment company, said July 5 in a regulatory filing that it reduced by 13 percent the valuation of its 180-unit Karratha Village accommodation facility to A$50 million in December, reflecting“a reduced demand for workforce participation.”

Shares in Aspen are 22 percent lower this year and closed at 17.5 Australian cents on July 19.

The price of iron ore fell 31 percent from a 16-month high in February to a low of A$110.40 on May 31.

Pilbara Cities

The Western Australian government introduced the Pilbara Cities initiative in November 2009 to boost supply of land, housing and infrastructure in the region. It seeks to build Karratha and Port Hedland into cities of 50,000 people by 2035. That compares with the 2011 census that recorded 16,475 people in Karratha and 13,772 in Port Hedland.

As part of the initiative, Mirvac Group (MGR), Australia’s third-largest diversified property trust, is proposing to build the Mulataga community in Karratha, containing 2,000 homes.

“We look at Karratha as a sustainable city and the growth of that city over time as a permanent city,” said John Carfi, head of residential at Sydney-based Mirvac, which is working with the state’s land developer Landcorp on Mulataga.

The Mulataga plan received approval from the Shire of Roebourne in May and is awaiting state planning commission approval.

The number of homes for sale in Karratha rose to 265 in May from 219 a year earlier, SQM said.

Further Declines

“We haven’t hit the bottom of the market yet,” said David Hipworth, principal of broker LJ Hooker Corp. in Karratha. “If we keep going the same way we have so far, in 12 months, I expect another 25 percent drop in rents and 10 percent in prices.”

The April median home price in Port Hedland was A$1.1 million, APM data show. That compares with 448,443 pounds ($677,508) in the greater London area in April, according to LSL Property Services Plc and $346,300 in New York City in May, figures from real estate data provider Zillow Inc. show.

“We like to see these prices fall,” said Ken King, chief executive officer of the Pilbara Development Commission, which is responsible for implementing the Pilbara Cities plan. “And we’d like to see the trend continue, even though this doesn’t sit well with a lot of recent investors.”

About 240 kilometers north along the coast from Karratha, rental vacancies in Port Hedland jumped to 4.6 percent in May from 0.9 percent a year earlier, compared with a national vacancy rate that rose to 2.1 percent from 1.8 percent a year ago, according to SQM.

BHP shelved a A$22 billion harbor expansion plan for Port Hedland in August in favor of a low capital-cost program of improving port and rail operations. CEO Andrew Mackenzie in May said the company plans to cut capital spending 18 percent to $18 billion in fiscal year 2014 and said about 80 percent of construction on its major projects will be completed in the same time frame.

Apartment Buildings

Australia’s resources industry directly employed 261,000 people in May, 2.2 percent of the nation’s total workforce, compared with 12 percent in health care and 11 percent in retail services — the two largest industries by employment, government figures showed.

Outstanding loans in Australia’s mining areas represent about 1.5 percent of all mortgages underlying residential mortgage-backed securities, S&P said in a report in September.

Perth-based developer Finbar Group Ltd. (FRI) is building Karratha’s first high-rise apartment development, Pelago, in the center of town. All but 15 units in the 114-apartment first phase, which was finished about a year ago, have been sold, Robin Schneider of McGees Property, the exclusive selling agent for the project, said in a telephone interview. In the second phase, 81 of the 174 units that are expected to be completed next year were pre-sold as of June 2, he said.

“Obviously the resources sector is getting a lot of attention, which will no doubt have a flow-on effect to confidence and market sentiment,” Darren Pateman, managing director of Finbar, said in an e-mail.

To contact the reporter on this story: Nichola Saminather in Sydney at nsaminather1@bloomberg.net

To contact the editors responsible for this story: Andreea Papuc at apapuc1@bloomberg.net; Rob Urban at robprag@bloomberg.net

http://www.businessweek.com/news/2013-07-21/australia-s-waning-boom-saps-mining-area-home-demand-mortgages

Mining exports still going strong

Australia has posted it largest trade surplus in 18 months as mining exports remain strong.

It was the fourth consecutive monthly surplus.

The balance of goods and services was a surplus of $670 million in May, from $171 million in April, the Australian Bureau of Statistic showed on Wednesday.

During the month, exports rose 4.0 per cent, while imports rose 2.0 per cent, the ABS said.

JP Morgan economist Tom Kennedy said increased volumes of mining and resources exports are starting to come on line after record levels of investment in the sector.

“The recent improvement in the trade data is more of a volumes phenomenon, owing to increased supply capacity following the enormous amount of investment over the past few years,” he said.

“Even though China is slowing down, we’re actually seeing that we’re winning a greater share of global trade in hard commodities.”

Mr Kennedy expects imports of capital goods to ease, with demand to decline following the peak in resources investment later this year.

CommSec economist Savanth Sebastian said the strong export result was driven by the mining and resources sector.

“There were strong exports of iron ore and coal and there was relatively healthy pricing.

“More importantly the falling currency is going to extend that trade story.

“There are good signs that the rebalancing of the economy, away from mining will start to take place.”

http://www.canberratimes.com.au/breaking-news-business/mining-exports-still-going-strong-20130704-2pcyt.html

 

Mackay, Rockhampton and Gladstone median house prices

MACKAY, Rockhampton and Gladstone median house prices from the Real Estate Institute of Queensland.

 

Region Median Sale 12mths Mar13 Median Sale 12mths Mar12 1yr change
MACKAY
MACKAY (LGA)  $ 424,750  $ 418,000 1.6%
MACKAY (LGA) ^  $ 512,500  $ 485,000 5.7%
ANDERGROVE $415,000 $410,000 1.2%
BEACONSFIELD $431,000 $410,000 5.1%
BLACKS BEACH $464,000 $477,500 -2.8%
BUCASIA $455,000 $442,500 2.8%
EAST MACKAY $422,000 $410,000 2.9%
EIMEO $472,600 $450,000 5.0%
GLENELLA $530,000 $530,000 0.0%
MACKAY $399,000 $380,000 5.0%
MARIAN $465,000 $453,500 2.5%
NORTH MACKAY $379,000 $350,000 8.3%
OORALEA $482,000 $490,000 -1.6%
RURAL VIEW $497,000 $490,000 1.4%
SARINA $335,000 $339,000 -1.2%
SARINA ^ $479,000 $477,500 0.3%
SLADE POINT $373,250 $379,000 -1.5%
SOUTH MACKAY $386,000 $365,000 5.8%
WALKERSTON $435,000 $434,000 0.2%
WEST MACKAY $391,000 $366,000 6.8%
ISAAC (LGA)  $ 463,000  $ 545,000 -15.1%
CLERMONT $345,000 $257,500 34.0%
DYSART $530,000 $500,000 6.0%
MORANBAH $677,000 $675,250 0.3%
WHITSUNDAY (LGA)  $ 360,275  $ 325,000 10.9%
WHITSUNDAY (LGA) ^  $ 486,000  $ 475,000 2.3%
BOWEN $345,000 $345,000 0.0%
COLLINSVILLE $250,000 $200,000 25.0%
JUBILEE POCKET $420,000 $420,000 0.0%
PROSERPINE $307,500 $290,500 5.9%
Region Median Sale 12mths Mar13 Median Sale 12mths Mar12 1yr change
ROCKHAMPTON
ROCKHAMPTON (LGA)  $ 320,000  $ 317,700 0.7%
ROCKHAMPTON (LGA) ^  $ 460,000  $ 465,000 -1.1%
ALLENSTOWN $286,750 $279,500 2.6%
BARMARYEE ^ N/A $635,000 N/A
BERSERKER $246,000 $238,000 3.4%
COOEE BAY $384,000 $323,000 18.9%
EMU PARK $325,000 $355,000 -8.5%
FRENCHVILLE $338,750 $338,000 0.2%
GRACEMERE $338,600 $340,000 -0.4%
GRACEMERE ^ $479,000 $527,500 -9.2%
KAWANA $311,000 $310,000 0.3%
KOONGAL $282,000 $250,000 12.8%
LAMMERMOOR $456,000 $410,000 11.2%
MOUNT MORGAN $148,000 $121,750 21.6%
NORMAN GARDENS $400,000 $420,000 -4.8%
PARK AVENUE $267,500 $260,000 2.9%
ROCKHAMPTON CITY $200,000 $205,000 -2.4%
TARANGANBA $377,500 $377,500 0.0%
THE RANGE $370,500 $327,500 13.1%
WANDAL $295,000 $290,000 1.7%
WEST ROCKHAMPTON $263,500 $260,000 1.4%
YEPPOON $386,500 $385,000 0.4%
ZILZIE $380,000 $371,250 2.4%
CENTRAL HIGHLANDS (LGA)  $ 445,000  $ 390,000 14.1%
CENTRAL HIGHLANDS (LGA) ^  $ 555,000  $ 615,000 -9.8%
BLACKWATER $473,000 $372,500 27.0%
EMERALD $455,000 $425,000 7.1%
EMERALD ^ $660,000 $640,000 3.1%
Region Median Sale 12mths Mar13 Median Sale 12mths Mar12 1yr change
GLADSTONE
GLADSTONE (LGA)  $ 459,000  $ 455,750 0.7%
GLADSTONE (LGA) ^  $ 511,250  $ 500,000 2.3%
AGNES WATER ^ $363,000 $348,500 4.2%
BOYNE ISLAND $482,500 $482,000 0.1%
CALLIOPE $450,000 $450,000 0.0%
CLINTON $448,750 $472,500 -5.0%
GLEN EDEN $540,000 $473,000 14.2%
KIN KORA $429,500 $455,750 -5.8%
NEW AUCKLAND $475,000 $472,500 0.5%
SOUTH GLADSTONE $435,000 $431,250 0.9%
SUN VALLEY $430,000 $422,500 1.8%
TANNUM SANDS $517,500 $505,000 2.5%
TELINA $467,000 $479,500 -2.6%
WEST GLADSTONE $432,500 $420,000 3.0%
BANANA SHIRE (LGA)  $ 260,000  $ 265,000 -1.9%
BANANA SHIRE (LGA) ^  $ 400,000  $ 290,000 37.9%
BILOELA $280,000 $282,000 -0.7%

 

 

REIQ EXPLANATORY NOTES
Median Price: The middle sale price when arranged in ascending order, ie where half of the sales recorded were less and half were higher than the median
All figures are preliminary and are subject to further revision. Only suburbs to record sufficient sales numbers have been included.
N/A No preliminary estimate available due to insufficient sales numbers
^ Denotes acreage sales – on land size greater than 2,400m2. All other house and land sale statistics are based on land size under 2,400m2
(LGA) Local Government Area
Brisbane (SD)- Brisbane Statistical Division which includes the LGA’s of Brisbane City, Ipswich City, Logan City, Moreton Bay Regional and Redland City.

Property hotspots from central Queensland to northern NSW

HOMEBUYERS from central Queensland down to the mid-north coast of New South Wales might need to move quickly if they are going to take advantage of emerging hotspots on Australia’s east coast.

After several years of low turnover in the market, experts are starting to see the first signs of increased activity as investors use tougher times to grow their portfolios.

Real Estate Institute of Queensland Mackay zone chairwoman Sally Richards pointed to infrastructure developments guiding growth, with a Masters and Bunnings development bringing attention to Beaconsfield and Glenella.

Other development plans pointed to Ooralea growth.

CLICK HERE FOR CENTRAL QUEENSLAND MEDIAN PRICES.

Noel livingston, REIQ zone chairman for Rockhampton, said the mini-boom in Gracemere on the back of industrial development had been an attention-grabber, but it was the consistency and stability of the region’s market that was underpinning investor interest.

Gladstone region zone chairman Mark Spearing said suburbs close to the CBD were the likely beneficiaries from upcoming infrastructure projects, however the timing of some projects was unclear and might not be locked in until the federal election is out of the way.

Bundaberg zone chairman Michael Dempsey pointed to family friendly areas.

He said a low rental vacancy rate of 0.8% and rental returns of 8% in some cases would continue to draw higher numbers of investors.

CLICK HERE FOR BUNDABERG AND FRASER COAST MEDIAN PRICES.

The Fraser Coast’s Linda Bland said small acreage blocks, up to 5 acres, had drawn a significant rise in demand as buyers look to buy a lifestyle at the bottom of the market, while additional $10,000 first home buyer incentives from the Fraser Coast Regional Council were likely to lead to a spike in demand for newly constructed homes.

Ipswich zone chairman Darren Boettcher said recent subdivisions in Deebing Heights, on the southern side of Ipswich, were an opportunity for buyers to take advantage of previous price declines.

“Securing one of the acreage large lot properties will be a very wise move for the future as the small lot prices will increase and only add tremendous value to the other properties in the area on acreage or large lot living,” Mr Boettcher said.

CLICK HERE FOR IPSWICH AND BRISBANE MEDIAN PRICES.

The fast-forming medical precinct in Birtinya, 12 minutes drive south of Mooloolaba, was appealing to property hunters.

“Soon to be built is the public and private hospitals plus an allied health facility,” a spokesperson for the Sunshine Coast zone said.

“Its expected to be the largest in the Southern Hemisphere and will provide an expected $3.2b economic impact to the greater Sunshine Coast Region.

“As this region develops, we are seeing the existing suburbs around this precinct come under further demand from buyers looking to purchase for the possibly of future upside.”

CLICK HERE FOR SUNSHINE COAST AND GYMPIE MEDIAN PRICES.

Real Estate Institute of New South Wales chief executive officer Tim McKibbin said there continued to be opportunities for buyers in northern NSW, but expressed disappointment that the State Budget had not included incentives for first-home buyers to buy established houses.

“I think it is a huge mistake,” Mr McKibbin said.

He also criticised the state’s planning system, which he described as “just about designed to make you give up”.

He said first home buyers were integral to ensuring supply and demand through the entire property market., and that the state government should go more to assist them, including reductions in stamp duty.

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Mr McKibbin urged young homebuyers to do what they could to get in to the property market, including buying in cheaper areas or buying units or townhouses if that was what they could afford, as they could reap the benefits later when they were ready to upgrade to a larger, more valuable home.

“To do it people need to get in as early as they can,” he said.

“They need to be somewhat realistic about getting in to the market, getting a beachhead in the property market.”

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http://www.dailymercury.com.au/news/property-hotspots-central-queensland-northern-nsw/1926702/

Australia’s biggest investor myth

On paper, mining towns offer a high return on investment, but investors who purchase in one could end up with an asset that performs a lot differently from big city properties – and not for the reasons they’d think .

Prospective Mount Isa investor Dale Collins was checking a well-defined crack in the walls of an old miner’s cottage when the real estate agent spoke of domination.

They were in the house’s kitchen, a closed off room with dusty brown walls and vinyl flooring, and Collins had just remarked that the setup reminded him of the inside of a 1970s caravan. The agent, draped in a black suit and tie in the outback heat, didn’t take kindly to the comment and decided he’d set Collins in his place.

“He told me it didn’t matter,” says Collins. “He said that the kitchen didn’t need to be pretty because the house would get high rents anyway. He said that once people came into Mount Isa they had to submit to their landlords. There was such a need for rental accommodation they’d rent anything and pay a high price for it.”

While the agent failed to persuade Collins, he touched on a growing theory among Australian investors. This line of thinking proposes that the best way to ensure a stream of high rental income and own a property that will quickly double in value is to invest in a mining town such as Mount Isa.

The theory isn’t backed up simply by hearsay. The facts speak for themselves. Of the 50 best performing markets across the country last year, 10 were in mining towns. Look further back and their case is even stronger. The fastest growing market in Australia over the last 10 years was a mining town – Wandoan in Queensland’s coal rich Darling Downs region – and most of the markets that follow close behind are also mining areas.

Then there are the now legendary towns. Coal community Moranbah has had roughly $650,000 added to its median house price since 2003, while Port Hedland, the gateway to the iron-rich Pilbara region in Western Australia, has done even better. Its median house price has increased by more than $1m. In fact, Port Hedland now has the distinction of having the highest median rent in the country, a cool $2,600 a week, according to RP Data.

Astonishing as these increases have been, mining towns have had no shortage of bad press. “I had heard that you could get some good returns in Mount Isa, but yes, you do get worried that you could be making a mistake by investing there,” says Collins. “One of the things I had to check when I was researching Mount Isa was that the place would do ok even if the resources market went a little crooked. That’s what you hear goes wrong in these places. They close a mine and all the people that would have been your tenants split town.”

The list of things that could seemingly go wrong with a mining town investment is long. Mines close, workers get retrenched, developers build too much rental accommodation – any and all of which could happen at one time.

NSW’s Broken Hill is a perfect example of such fears coming to life. Over the first half of the 20th century, the desert community was not just the third largest settlement in the state but one of Australia’s biggest cities. By the 1970s a lot of the mines that had nurtured the city’s growth began to close and this sent the local employment market into free fall. The population, which at that stage had been 30,000, quickly dwindled to 10,000. Property prices plummeted. What had once been a boisterous real estate market had a hole blown from under it and investors had no escape. In the forty years since, the population has slowly increased to about 17,000 and mining activity continues, but the city has never returned to its prior heights.

For some investors, like Dale Collins, such risks have proved too great. “I was interested in Mount Isa, but to be honest, with my budget I wouldn’t have got the right property for that kind of market. I thought I could sniff out a good deal on an older property and renovate it, but it’s hard and I’ve learnt that you can’t half-chance it. You have to spend a lot of money in a mining town.”

For other investors, like Your Investment Property Investor of the Year 2013 winners Kate and Matt Moloney, such risks are part and parcel of the mining town deal. The young couple continue to invest in big projects in Queensland’s Mackay region – particularly Moranbah – which they believe offers great opportunities.

“There is a severe shortage of all types of rental accommodation in Mackay, so it’s helped us to organise some great deals,” says Kate, who adds that thanks largely to mining town investments, she and Matt have built a portfolio of roughly $8m in just a few years.

Kate is quick to admit, however, that she and her husband plan to start diversifying away from mining towns. It’s a viewpoint that hardly reassures new investors. What else can they conclude when even the best investors have doubts about mining towns?

Property in mining towns

Mining towns are not so risky if you know how to play the game, says Next Hot Spot director Andrew Peterson, but he adds this is part of the problem.

“When we’re talking towns that don’t have anything going for them besides mining activity, they are usually markets that you need to get into while they are going good and then get out of quickly, before they start to decline. Considering how long it takes to find a property, settle on it, develop it – if that’s what you’re planning – and then tenant it, not to mention one day sell it, that’s really hard to do,” he says.

Peterson believes understanding the reality of mining towns is to understand the reality of property investing itself. “There’s a clear difference between investing and speculating,” he says. “A speculator is looking for money to make now. Speculators take risks. Investors are in it for the long haul. If you think about it that way, there really is no way to ‘invest’ in a mining town. You can make money if you’re a professional developer, but, if you’re just a mum and dad investor looking for something to support your retirement, a mining town probably won’t work.”

Another problem with mining towns, according to Peterson, is they are usually far from ideal places to live. People are reluctant to settle in them permanently and the local property market suffers as a result.

“Most property markets in mining towns never fully mature. There might be high salaries in the area and that might grab a lot of investors’ attention, but there’s more to the picture,” claims Peterson.

“Most mining workers are very reluctant to spend their money in the mining town they work in. They’d much rather sit on their money and spend it somewhere else. That actually means that it is not the mining towns that benefit, it’s the areas like Perth or Gladstone where the workers fly back to.”

Peterson believes it’s worth making a distinction between ‘source’ areas and ‘catchment’ areas. The source areas are right next to the mines – the one trick pony towns that only exist because of mining. The catchment areas are the places that already have good infrastructure and offer a good lifestyle component, but have the added benefit of receiving a boost from the resources sector in some way – either being close to a major mining area or being a transport hub for one.

The catchment areas are the places that cashed-up mining workers will want to live in permanently, according to Peterson. They are unlikely to have the same incredible rate of rental and capital growth over the short term, but looking ahead to the next 20 years, they will be the areas that end up with the strongest property markets.

Global resource markets

If Peterson is right and it’s the catchment areas that will benefit the most from the resources boom over the long term – Perth, Toowoomba, Gladstone, Rockhampton, Brisbane – the next, and obvious, question is whether the resources boom is something sane investors would want to hedge their bets on in the first place.

According to leading economist, Shane Oliver from APM, there is still no definitive answer. Owing to the unpredictable nature of the international market and its effect on the demand for resources, Oliver says that there will always be an element of uncertainty in the resources market. However, he sees the key being Asia.

“A truly nightmare scenario you tend to see on blogs written in the US and Europe is that China would stop growing. I don’t see that happening and expect China to continue to see good economic growth, so I think the real worst case scenario would come about if there was no pick up in global growth this year. In reality, I think a lot of the worries about Europe will probably start to recede and I see growth in the US economy picking up a notch. Amongst this, China growth will probably stablise at around 7% this year.”

China’s influence on Australia may seem obvious, but Oliver says the Asian giant’s importance cannot be underestimated. “China is our biggest export market. It accounts for 5% of our exports, and that’s up from about 1% a few years ago,” he says.

The soon to arrive ‘mining peak’

While it is difficult to predict when the resources boom might start to falter, a far easier event to forecast is when Australia’s mining project pipeline will peak. According to the QBE LMI Housing Outlook 2012-2015 report, this is likely to occur by late 2014. In between then, the report forecasts mining-related investment to continue to grow, despite some recent falls in commodity prices.

In fact, the report says that commodity prices should have little impact on mining activity over the next two years. This is largely due to many projects being past the stage to “turn back” – mining companies have pumped so much of their capital into these projects that cancelling or scaling back production in the short-term would be near impossible.

A report by Deloitte Access Economics is not as optimistic. Their January Business Outlook report forecasts late 2013 as being the peak point for mega-mining construction projects, but the report also warns that a little perspective is required. Resource related construction will start to wane, it says, but will still remain huge relative to times past.

BIS Shrapnel senior residential manager Angie Zigomanis agrees. “From a domestic perspective, there is still a lot of mining investment activity in the pipeline. If you’re a mining company and you spend $4bn of a $10bn project, you’re going to finish it. The next couple of years of spending are pretty much locked in,” he says.

Zigomanis says that a lot of the projects currently underway are two, three and four year projects and while they are still being built Australia’s resource-affected states – Queensland, WA and Northern Territory – will benefit strongly.

“The question mark is beyond that period,” he adds. “If there is a slowdown or a fall-off from reducing mining investment, there might also be other parts of the economy picking up some of that fall-off so the property market might only start to be affected by 2015 or after.”

Looking at a more regional level, the January Business Outlook report notes that as resource-related building work peaks and passes, the economies of resource-rich Queensland, WA and Northern Territory will still be well supported by the mining sector. “Despite cost cutting from miners, these states still look set for a solid short term growth outlook,” it says, adding that a lot will depend on the strength of the Australian dollar.