Sydney's inner and city fringe commercial property has regained its position as a prime investment. While residential slowed last year, commercial property rose supreme and investors showed no fear of rising interest rates. Even foreign interest remained high despite the rising Australian dollar. CBRE research indicates commercial property sales in the 3rd quarter of 2010 were 268% higher than 2010's second quarter, and 75% above the same period in 2009.
Office suites dominated sales. Investors identified high employment and business confidence would making investment risk low. As a positive economy ended the GFC, demand and rent grew due to limited CBD supply. Small business and executives returned to CBD offices after working from home, whilst other businesses expanded.
Like politics, commercial and residential property seems to divide investors into two disparate parties. Each option has unique pros & cons which appeal to different people's investment situation. However, the old adage "Don't put all your eggs in the one basket" is true. When commercial markets are slow, often the residential real estate market is booming and vice-versa, so diversifying your portfolio to include commercial is a good long-term investment idea.
PROS & CONS of COMMERCIAL:
Long Lease: Commercial property presents the stability of a long term lease, often secured by a bank guarantee. A "set-and forget" lease of 3-20 years with 5 year options to re-let at end of term gives you peace of mind, whereas residential leases are only locked in for 3 to 12 months.
Risk: Balancing the benefit of a long lease is the fact that commercial properties generally have longer vacancy periods: months as opposed to weeks in residential. Also, the commercial market is less predictable and in poor economic conditions, demand drops and leasing empty property becomes difficult. However, existing commercial tenants are generally low-risk, being less likely to default on rent.
Return: Higher risks associated with commercial investment gives reward of higher return: 7%-10% net compared to residential's 5% average. This is achieved by high rent, depreciation deductions and less expenses as tenants pay outgoings such as council rates, insurance and maintenance.
Protecting your property: Commercial tenants have a vested interest in caring for the look and condition of your property as it reflects their image to clients and often employ professional cleaners to regularly maintain the property.
Rent Reviews: Rent review is essentially guaranteed, written into the lease at around 4% or CPI. Commercial leases are very detailed contracts, prepared by solicitors.
Market Entry: Lenders may offer you a 95% or 100% loan on residential, but commercial property generally requires 30% deposit and higher interest rates. Furthermore, loan approval may be difficult on untenanted commercial investments. It is generally easier to buy residential property, and cheaper. Commercial prices are often assumed to be high, due to CBD locality and large size of many retail and industrial spaces. However, small strata offices are a fantastic first investment and you may be surpries how affordable they are. Try these Smart Buys
KEEN TO KNOW MORE? Click these links:
By Martyne Ford -Sales Agent and Marketing Manager, Sydneylinks Real Estate E: martyne@sydneylinks.net
A SPECULATIVE "BUBBLE": Much has been said by media lately that a "bubble" of inflated, unsustainable property prices exists. Combined with rate rise fears some economists claim, and others deny, that the property market is set to fall, or "burst". Indeed prices have stabilised and auction clearance rates dropped. But, is this a reflection of less buyers?.... or more property?
LOW DEMAND or OVERSUPPLY? Spring is peak listing season, and as many who have faced the dilemma of finding the best phone plan, insurance, or the ideal Christmas gift will know....... excess choice is sometimes so confusing & stressful you walk away altogether.
INVESTING IN HIGH DEMAND: It is always a good time to buy investment property in locations characterised by low vacancy rates, high demand, and quality tenants. Sydney's inner city & east remain a good example. We invite you to view sales listings at our website. Fully furnished leases, a specialisation by Sydneylinks, further enhance your investment yield.
RISE UP: INTEREST RATES, WAGES & RENT: Employment is high and wages are rising. In a quality location with great atmosphere and amenities close to the CBD, rent rises are absorbed by executive tenants who identify the value in paying the increase, and understand mortgagees have rate rises to cover.
FLIPPING or KEEPING: It's a buyer's market, but a strategy of buy today, renovate & sell for a profit (known as "flipping"), is not always that easy. The best approach is to make money from the rent & the long-term capital growth. A housing shortfall and no available land in Eastern Sydney suburbs like Potts Point indicate that supply is limited and long-term growth is strong.
ME or MEDIA: Media can help inform our decision. However its also about buying at the time that's right for you and weighing up external hype & hysteria against your own wants, needs and ability. Prices may stabilise but as far as a plunge....sorry to burst you bubble but I won't hold my breath. If you wait for that day, you'll miss out in a few years join the crowd saying "I could have bought that place for half the price"
Most economists predict a growth in property prices by mid to late next year, so close a deal before the prices creep up! Want to know more? Read Andrew Wilson's article in Sydney Morning Herald and Chris Vedelago's investor centre blog
By Martyne Ford -Sales Agent and Marketing Manager, Sydneylinks Real Estate E: martyne@sydneylinks.net
UNIT CAPITAL GROWTH OUTPERFORMED HOUSES: Latest RPData research is great news for smart investors who anticipated this trend and bought investor units: Units now outperform houses in capital growth (7.3% growth in unit values, beating 7% for houses) In the past 5 years there has been a switch to demand for units and this trend looks set to become the norm. Why?.............
NO PLACE LIKE HOME in HIGH DENSITY: In the mid 1990's, only 25% of property purchases by homebuyers were apartments. Now 35% of homebuyers are choosing units in high-density urban locales.
WHO IS DRIVING THE CHANGE?: We no longer all yearn for a big house and backyard. Many young singles, busy working couples and empty nesters prefer the convenience of a low-maintenance apartment. Units are generally located close to amenities these demographics demand: transport, cafes, restaurants, boutiques, galleries, clubs and the city where they study, work and play.
APARTMENT AFFORDABILITY: Furthermore, units are on average more affordable, allowing these groups to purchase in a booming market. According to RPData, the average Sydney unit is $125,000 lower than an average house.
INVESTMENT YIELD: Even with current Sydney sale prices remaining steady, rents continue to rise. Rent returns on units are generally higher, partly because they tend to be located in high demand areas close to inner city workplaces and all amenities. Thus, unit price growth is further boosted by high demand from investor buyers.
BEST HIGH DENSITY SUBURBS: Looking to buy a unit? Potts Point, with one of the highest densities in Australia, was famously nominated by Paul Keating as a success in urban design. Here, a respect for quality in old and new architecture has created character and beauty despite density. Paul Keating described other suburbs' buildings as "ice cube trays" that were a "mess on the pavement".
INVEST NOW: We have a fantastic selection of property to purchase right now. See Sydneylinks website sales list or contact Sydneylinks Sales Agents: Martyne Ford and Trish Muljono. We're proud to represent efficiently designed property close to the city in the rich culture of the Eastern Suburbs and city. Many of our current sales are in Potts Point amidst fantastic cafes, boutiques, restaurants, galleries, parks and theatres. Ever-popular to buy and sell!
By Martyne Ford -Sales Agent and Marketing Manager, Sydneylinks Real Estate
RPDATA's full report on "Higher Density Living Gaining Popularity"
http://www.vision6.com.au/em/message/email/view.php?a=9640&id=734468
RPData blog "Rents and Yield are on the improve"
http://blog.rpdata.com/
Paul Keating's "Ice Cube Tray" speech as covered in Telegraph http://www.dailytelegraph.com.au/money/money-matters/paul-keating-takes-apart-sydneys-ice-cube-tray-high-rise-living/story-fn300aev-1225838889388
Spring Season: Is it a reason to sell? Yes, according to many real estate agents.
But really, the perfect time to sell is about YOU, and your situation, not the season!
There are many reasons to sell, just as there are many reasons to buy.
Here are six times you should seriously consider selling your property:
MOVING ON, UP, OVER and OUT: Upsizing your family, relocating for work, going overseas, sea-changing or tree-changing? It's time to let go of the past and follow your inner compass to the future. Don't hang onto your 'comfort zone' in case you return. Sell, and commit 100% to your new life.
KILL BILL SALE: Can't afford that intimidating pile of accumulating bills? Mortgage, strata, water, electricity, council rates, maintenance......Is it time to sell? You can kill those property bills (and the stress) forever!
INSOMNIAC SALE: No investment property, or home, is worth endless sleepless nights and anxiety from noisy neighbours, disputing owners corporations or worrying development applications. Owning property should bring joy, not burden. When it does, it's time to sell.
LIVE LIFE SALE: Can't remember last time you went out for dinner or bought a luxury without guilt? Do you pay strata and mortgage, but neglect doctor and dental appointments? Perhaps you have a distorted sense of obligation to own your property. Sell! There will always be another property to buy when you're ready. But you only get one life...don't dedicate it to paying bills..live it!
DENIAL SALE: Bought property you don't enjoy living in? Or that doesn't return high rental? Does the property have constant building faults or fail to appreciate no matter how long you hang on? Don't deny it, make a great choice to sell and invest your money somewhere more prosperous.
ROLLING IN MONEY SALE: If by chance, or strategy, you bought a bargain that appreciated beyond your wildest imagination.....Sell up, take the money and run! (To buy another bargain, and repeat the process).
If you think it's the season for selling your property, contact me now for a free property appraisal. Let's discuss how we can make your assets work. Email martyne@sydneylinks.net
By Martyne Ford -Sales Agent & Marketing Manager, Sydneylinks Real Estate
Email: martyne@sydneylinks.net
WINTER TRENDS: Open inspection numbers continue to remain strong, particularly in Sydneylinks' area of investment property sales. However, the trend that emerged at the beginning of 2010 has compounded to the point where 90% of clients I meet are now investors. First home buyers have all but disappeared, and it saddens me to think that the "Great Australian Dream" of owning your own home is almost purely a Dream.
HIGHS & LOWS: Sydney's income-to-house-price ratio is 9 times the median income. No wonder loans for owner-occupied housing are at 9-year lows! This naturally puts more people in the market for rental property.
GROWING & SLOWING: Property prices continue growing but at a slowing rate. Considering this, owners of investment properties currently leased with good returns are in a great position to sell! Increased investor finance in the last 12 months proves investors are buying up big.
APARTMENTS RISE HIGH: Good news has emerged for owners of high-rise apartments: In the past, houses have appreciated more than units but the tables have turned! RP Data-Rismark research proves it, but you may ask why? Perhaps it is because units are more affordable, or because they tend to be located close to cafes, shops, transport and work centres.
EASTERN SALES: Sustained rental and sale demand in Sydney's Eastern Suburbs makes it an appealing time to buy or sell investment property. If you are in the market to buy or sell contact me today. I look forward to being of assistance.
Click to link to more info statistics and research related to this article, as published by Sydney Morning Herald, RPData and Australian Bureau of Statistics.
By Martyne Ford -Sales Agent & Marketing Manager martyne@sydneylinks.net
Are you a foreign citizen keen to buy property in Australia? Or perhaps you have international friends and family interested to make Australia home. Who is eligible to buy local property, and what can be bought? You may be surprised.........
ARE YOU ELIGIBLE?: Foreign citizens or companies wishing to buy residential real estate must apply to the Australian Government’s Foreign Investment Review Board (FIRB). You must apply to FIRB if you DO NOT fit one of the following special category visa holder groups:
· Australian citizens,
· Approved migrants,
· Permanent residents of Australia,
· A foreign national holding a permanent visa or a foreign citizen entitled to permanent residence in Australia.
BEFORE YOU SIGN ANYTHING!: 30 days must be allowed for FIRB to assess and approve or deny applications. Therefore, real estate sales contracts with foreign citizens must contain a clause stating the purchase is conditional upon FIRB approval, likely with 30 days cooling-off (rather than standard 5-days) from contract exchange to purchase confirmation. This means purchases by auction or 66W certificate are unsuitable as they are unconditional purchase contracts. Fines apply to persons who acquire property without first seeking approval.
FIND YOUR PROPERTY: Approval can only be granted on a specifically nominated property. There are no "general" approvals or pre-approvals. FIRB reviews all intended purchases of residential real estate, regardless of price and whether existing or built brand new.
RENT Vs RESIDENCE: Real estate cannot be purchased with intent to rent it out. Property must be used as a permanent residence. Those entitled include residents in Australia on a Temporary Entry Visa (with over 12 months validity) seeking to buy a property for personal residential accommodation. e.g tertiary students over 18 and people in Australia for work. Property must be sold when this status no longer applies or the buyers no longer live in Australia.
BOSS BUYS: A company from a foreign country may buy up to 2 houses/ apartments for its executives posted to Australia for more than 12 months. The executives have to be specifically named and property must be used for residential accommodation. When the employee is no longer living in Australia that property must be sold.
"OFF-THE-PLAN" SPECIALS: Different rules affect properties newly built and never occupied or sold. These are permitted for purchase by foreign investors if the developer applies in advance for this to be allowed. You must ask to see a copy of the developer’s approval letter to ensure that FIRB approval exists for sales to foreign citizens. If a foreign citizen buys a property in this way, the property can be rented out, sold or used by the purchaser. However, foreign interests cannot hold more than half the apartments or townhouses in any one development.
ASK YOUR SOLICITOR: You must always seek lawyer/ solicitor advice on your unique circumstances and check government updates on rules and regulations!
Good luck with your purchase. Check the links for further info and forms:
By Martyne Ford - Sales and Marketing Co-Ordinator: martyne@sydneylinks.net
Our contemporary mindsets with the attention span adjusted to the length of a Twitter update, sees the idea of a quick "flip" as highly appealing. But the idea of "Buy Low.....Sell High" to make fast money does not always equate. Once you've paid the agent, solicitor, strata, government and conducted a quick makeover you may be disappointed at the end profit. Property investment requires time to see good capital gain.
You must also consider that with the advent of the internet, the last sold price of the property is at the fingertips of your potential buyer. So, if 3 months after purchase you are trying to sell the property for $100,000 more, prepare for buyer cynicism.
Even with renovations one cannot guarantee added value. Your dream design is not necessarily compatible with the market and even an experienced property investor can over-capitalise or simply miss the mark.
The key to rising value may not be found in a run-down "do-over" but rather to select property that has characteristics of enduring desirability - attractive views, quality design, well-conceived layout and of course, location, location,location.
This will ensure optimum long-term growth potential and in the short-term ensure the property is always rented at a great rate.
It's a Win-Win.
By Martyne Ford -Sales & Marketing Co-Ordinator martyne@sydneylinks.net
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