Mount Isa's property investment potential has improved due to the dirty business of uranium mining: Terry Ryder By Terry Ryder
Thursday, 25 October 2012 Page 1 of 2 Two hundred years ago a French dude called Joseph de Maistre commented that “toute nation a le gouvernement qu’elle merite”. These days it’s usually expressed as “you get the government you deserve”. That we do. Australians like to grizzle about politicians who break promises, but we deserve no better because we don’t punish those who do. John Howard had a poor record on keeping promises. but we kept re-electing him. The more he got away with, the more liberties he took. He even came up with the epic rationalisation that it was OK to break a promise that wasn’t a “core promise”. Many Australians are miffed at Julia Gillard over her broken promise on the carbon pricing scheme. But until we punish mendacious politicians at the ballot box, they will go on deceiving us. It created barely a murmur that Campbell Newman’s decision to lift the 30-year ban on uranium mining in Queensland breached a solemn vow made in the election campaign earlier this year. No one who has studied the man’s record as lord mayor of Brisbane will be surprised. The uranium decision (which brings Queensland into line with most other states) bothers me on two grounds: it’s a broken promise, and I’d prefer they left the uranium in the ground where it can’t do any damage. Having gotten that off my chest, there are consequences for real estate from the Queensland Premier’s decision to allow uranium mining – although he says he won’t allow nuclear power or waste disposal in the state. Seriously. No, really, he means it. He kept a completely straight face when he said it. Queensland’s uranium resources (estimated by the Queensland Resources Council to be worth $18 billion) mostly lurk in the state’s north-west, a lot of it not too far from Mount Isa. One of the largest known reserves is just 35 kilometres outside the town. | I haven’t been a huge fan of Mount Isa as a place to invest in recent years because the rental returns have been little better than in capital cities. You don’t buy in mining towns unless you’re compensated for the higher risk by yields big enough to generate positive cashflow. Even then I would be reticent about Mount Isa, which has built a reputation as the most polluted town in the nation. Indeed, it’s the very place I’d expect the dirty business of uranium mining to flourish. But from the cold perspective of pure bloody-minded investment potential Mount Isa has improved of late. Rents have risen, yields have improved and over the long term it has a good capital growth record (the various suburbs of Mount Isa have long-term growth averages ranging from 11% to 16% per year, according to Australian Property Monitors). There are a number of new resources projects in the general area for which Mount Isa is the key regional centre – and as they’re neither iron ore nor coal projects, they’re not so concerned about the recent decline in world prices for those commodities. Mount Isa is about copper, gold, lead, zinc – some of them metals you don’t want to be living near when the processing is going on. And, now it seems, uranium. Mount Isa mayor Tony McGrady, previously a minister for mines and energy in an ALP state government, supports uranium mining and says it will spark a mining boom in the region. That remains to be seen, particularly as nuclear power has taken a popularity dive following the Fukushima event in Japan. Any impact that evolves from the decision will take some years to be felt. Mines don’t become operational overnight. Anyone inclined to take a punt on this becoming a major new industry in a couple of years can expect to pay somewhere in the $300,000s for a Mount Isa house. Typical rents are around $500 per week and gross returns are about 8%. Cloncurry, not far from Mount Isa, is moving into a growth phase because of surrounding mining enterprises. It may also get some economic impact from an evolving uranium industry and has cheaper buy-in prices (median house price about $250,000). Terry Ryder |
Brisbane house prices hold firm for first time in two years as national housing market 'consolidates': APMBy Larry Schlesinger
Thursday, 25 October 2012 Page 1 of 2 Brisbane ended a run of eight consecutive quarters of house price declines as capital city house prices barely moved in the September quarter, according to the latest data from Australian Property Monitors (APM). The median Brisbane house price was almost unchanged at $430,965 over the September quarter, though still down 1.2% year-on-year. APM revised the Brisbane June 2012 figure upwards from a previously reported $427,933 to $430,844. APM senior economist Dr Andrew Wilson called the steady result for Brisbane “encouraging” and a “positive indication the market may have finally bottomed out". Across the country, the national median house price was also unchanged at $533,480, while unit prices declined by 1.1% to a median of $406,415. This followed revisions to June 2012 figures with house prices revised down from $536,075 to $533,695 and unit prices revised down from $411,810 to $410,981. Click to enlarge “Although buyer activity and prices growth appears to be generally consolidating, capital city markets and sub-markets continue to operate at different levels,” says Wilson. The Melbourne unit market remains the weakest capital city market for both house and units, down 6.1% year-on-year. It registered a 1.4% drop over the September quarter – the sixth consecutive quarterly fall – taking the median Melbourne unit price down a median of $381,154. This follows APM revised the June median Melbourne unit price down from $392,862 to $386,678. On average, a Melbourne apartment is $24,000 cheaper to buy now that it was a year ago. Wilson attributed the continued to decline of Melbourne unit prices to a “surplus of new supply in the marketplace” negating an increase in activity from first-home buyers. At the other end of the spectrum Darwin units were the best performing market across both house and units, with the median price of a Darwin apartment rising by more than $30,000 (8.1%) over the three month period to a median of $406,099. This followed revisions to the Darwin median house price in June revised down from $384,384 to $375,666. Apart from the drop in Melbourne unit prices and strength in Darwin unit prices, the September quarter results show that both house and unit prices have essentially been treading water over the past 12 months. The strongest major capital city market over the past 12 months to September has been Perth, with house prices up 1.3% to a median $537,267, followed by Sydney, where house prices are up 1% year-on-year to a median of $641,890. Melbourne registered a 0.8% rise in its median house price over the September quarter to $523,804 to leave prices down 0.8% year-on-year. These figures were calculated based on APM revisions to previous June medians for Sydney (revised up from $642,425 to $644,191), Perth (revised up from $536,151 to $539,823) and Melbourne (revised down from $531,167 to $519,503). Click to enlarge Among the smaller capital city housing markets, Darwin has been the standout with houses up 3% year-on-year to $610,592. Hobart remains the weakest housing market, with a 2% decline over the September quarter and 4.7% drop year-on-year to a median of $305,889. Overall, Wilson says that capital city housing markets continue to “edge their way through a tentative recovery following the downward correction of 2011”. Click to enlarge However, the housing market remains “mixed and patchy”, with individual housing market prospects for the remainder of 2012 “dependant on the performance of local economies”. “Although falling interest rates have improved housing affordability and buyer confidence, market growth has been driven largely by other local factors, including changes to buyer incentives, population growth, and value-buying momentum in some prestige markets. “Given a reasonable economic performance over the remainder of 2012, housing markets will continue to generally find their feet, albeit at varying levels of activity,” Wilson says. House prices are forecast to increase in Sydney, Perth, Darwin with Melbourne prices to remain relatively steady. “The Brisbane market is poised for growth, particularly from rising inner-suburban demand, however the recent increase in the unemployment rate could have an impact. “In Adelaide, the market will likely track sideways, and there are no clear signals that sustained house prices growth is set to return to Hobart,” says Wilson. Sunland boutique projects find niche market but Gold Coast house-and-land sales slump to 27-year lowBy Larry Schlesinger
Thursday, 25 October 2012 There were just 239 sales of vacant residential land and house-and-landpackages on the Gold Coast over the September quarter, according to the latest Prodap report. Of these 239 sales, 56 were house-and-land packages, with vacant lot sales totalling 183. Report author Bill Morris says the Gold Coast residential land market continues to under-perform, though there are some exceptions, with developer Sunland finding a niche market for its architect-designed homes. “The real standout was Sunland Group’s four projects at The Glades (Robina), Gardene at Pacific Pines, The Concourse at Royal Pines (Benowa), and The Address at Sanctuary Cove had all but sold out its available stock, with more to be released with strong pre-sales,” says Morris. “Sunland Group is operating in the mid-price range of $700,000 to $1.1 million for quality three- and four-bedroom products, mainly on golf course frontages." The other developer to manage reasonable sales was Stockland, which recorded 75 sales on its three land estates at Ormeau Ridge (35), Highland Reserve Upper Coomera (25), and Riverstone Crossing Upper Coomera (15). Mirvac managed 15 land sales at its Gainsborough Greens development in Pimpama, with prices ranging from $215,000 to $400,000. Gilston Developments sold 12 townhouses at auction at its Grand Manor estate at the Grand Golf Course, with prices ranging from $595,000 to $1,625,000. Click to enlarge “Vacant land sales continue to hover under 200 per quarter with no sign of improvement,” notes the report, which is based on a survey of every active and passive developer of residential land, house-and-land packages, townhouses and villas on the Gold Coast. This brings total sales to 1,001 lots and house-and-land packages sold over the past 12 months to September – the lowest volume of annualised sales for records going back to 1985. Click to enlarge Despite the record low land sales, the number of lots and house-and-land packages available for purchase remain at historical low levels, with few new projects being launched. There are currently just 818 lots and 388 new houses up for sale representing one year’s supply at current take-up rates. While stock is not rising, Morris says residential rents are increasing at 6% per annum south of Broadbeach for four-bedroom houses, with the market "virtually unserviced for new stock", except for Stockland’s Observatory land project at Reedy Creek in West Burleigh. The report notes there is a pipeline of planned projects comprising 2,848 lots, but Morris says this is “unrealistically positive”, running at three times the current annual sales rate. Morris says low demand rather than over-supply is the main problem – the result of restrictive bank lending policies. Other problems facing the Gold Coast new housing market are record low population growth prohibitive local council infrastructure and charges, which are only new being “re-formulated”. The Gold Coast City Council resolved to impose on a 12-month moratorium on infrastructure charges, which will save developers $28,000 per detached house and $20,000 per one- or two-bedroom apartment. |
Property investors need knowledge to build wealthBy Harry Bozin
Wednesday, 24 October 2012 Page 1 of 2 Most people are familiar with the phrase “knowledge is power”, and for investors who might be looking to expand their asset portfolio, it often pays to remain up-to-date regarding the market values of properties. Not only can this knowledge help to inform decisions about whether or not to grow a property portfolio, but it can also assist in determining how to finance such acquisitions. For many investors, the concept of unlocking property equity to finance additional acquisitions is becoming increasingly attractive – largely due to the liquidity, flexibility, taxation and capital growth benefits that can often result from such. In real estate terms, equity is the difference between the current market value of a property and the amount owing on that particular property. For example, if a home is worth $700,000 and the owner owes $300,000 on a mortgage, he or she has $400,000 worth of equity. Depending on the personal credit circumstances of the owner, he or she may be able to use a proportion of their equity to undertake renovations, refinance the mortgage or purchase additional investment properties. It is important to note that property equity is not fixed, but rather can change according to market conditions; that is, when a property’s market value fluctuates, so too does the proportion of equity invested in it. With this being the case, the ability to use property equity as a source of investment finance will be largely dependent on the degree of equity that actually exists within a property at a particular point in time. As equity and borrowing capacity are inextricably linked, unless an investor has an up-to-date knowledge of how much his property is worth and how much equity he can access, he cannot properly harness his portfolio-expansion prospects. | Property investors need knowledge to build wealthBy Harry Bozin
Wednesday, 24 October 2012 Page 2 of 2 Take, for example, an investor who has been steadily paying off his property portfolio (consisting of several properties) for a number of years. Over this period many prime buying opportunities may have come along – however, if the investor has not remained up-to-date on the market values and equity proportions within their properties, it is possible that he will have not considered, let alone taken advantage of, potentially fortuitous acquisitions. Without knowledge of what you have now, it will be difficult to know what you are able to do in the future. It is for this reason that annual market appraisals can be a powerful tool for property investors; they can enable an investor to remain informed of the available equity in each of their properties, consequently giving them a clearer understanding of their own financial position and current ability to make further acquisitions. Despite the wealth of knowledge that most seasoned property investors have about the real estate market, many will remain unaware of potential sources of finance that may be sitting directly under their noses. A key way to combat this is to have an annual market appraisal – something which will enable you to gain a good idea of how much property equity you might have access to. Doing this, in conjunction with a mortgage capacity check, will place you in a better position to assess your property portfolio expansion prospects, and to be able to act quickly to secure investment opportunities, should you wish to do so. You might not be ready to buy at the moment – however, through knowing what you can afford, you can begin looking at investment opportunities – ready and able to pounce. |
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