Property investment

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<div>APRA's crackdown has skimmed skimmed the high LVR property investors out of the market, but there still exists a relatively high level of demand for investor credit from those with the requisite serviceability that remain. </div>
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<div>The ABS Lending Finance data series for February 2016 showed total lending finance across all measured sectors rebounding nicely in February, but against an underlying downtrend.</div>
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<div>That's in part due to the APRA effect, which has effectively stymied the outlandish surge in property investment demand. </div>
<p><a href="/images/2016/04/19/B4.jpg" target="_blank">Click to enlarge</a><br><img src="/images/2016/04/19/B4.jpg" alt=""></p>
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<div>Breaking out the data into its component parts and using the smoother trend figures we can see that despite a solid rebound in February commercial lending has apparently lost some of its momentum, which is potentially underwhelming news for business.<br><br>Of course, from month to month the underlying business lending figures are lumpy, and there's no getting away from that. <br><br>But for the moment, at least, the trend appears to be softening.</div>
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<div>The figures for personal finance at first blush appear to be almost comically soft, declining to levels last seen in 2007. <br><br>However, I do wonder about classification issues here, given the massive and increasing popularity of mortgage buffers, offset accounts, and redraw facilities. Not really sure about this, but it looks muchos weird to me. Let's pass on that one, Magnus! <br><br>At the state level, commercial finance in rolling annual terms has been trending up marginally in Queensland, but down in Western Australia. However, the latest figures suggest that WA may have at least arrested its decline.</div>
<p><br><a href="/images/2016/04/19/B6.jpg" target="_blank">Click to enlarge</a><br><img src="/images/2016/04/19/B6.jpg" alt=""></p>
<div>Splitting out the commercial finance data by industry it is with no great surprise that we discover with that lending in the mining sector has been obliterated by about a third over the past year to be around 40 per cent below its peak.</div>
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<div><img src="/images/2016/04/19/B3.jpg" alt=""></div>
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<div>Fortunately mining is only one part of Australian industry, and other sectors have fared considerably better, with business lending rates tracking at record lows.</div>
<p><br><strong><span style="text-decoration: underline;">Property investment loans</span></strong><br><br></p>
<div>Macroprudential tools have been deployed in order to cap property investor credit growth at 10 per cent, while the RBA disclosed some of its <a href="https://www.rba.gov.au/information/foi/disclosure-log/pdf/141515.pdf" target="_blank">thought processes</a> in this regard this week - interesting insights indeed (imagine having your emails disclosed like that in the public domain, by the way!).</div>
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<div>These moves have had the desired effect, and the focus has very much shifted towards owner-occupier lending. </div>
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<div>That said the seasonally adjusted February Housing Finance data showed investment loans rebounding by +4.1 per cent in February to $11.9 billion, so there is still a reasonably high volume of investor activity in the post. </div>
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<div>Indeed, investor loans are steadying across most states in February when looked at in rolling annual terms. <br><br>That said, activity in Western Australia was down by 20 per cent in February from the prior year comparative result, so there is possibly still some decline to come there, although a few analysts have already called the market bottom for Perth. </div>
<p><a href="/images/2016/04/19/B1.jpg" target="_blank">Click to enlarge</a></p>
<p><img src="/images/2016/04/19/B1.jpg" alt=""></p>
<p> </p>
<div>Investor activity in the Northern Territory has fallen to such a low level at about $46 million per month that it wouldn't even register as a blip on the above chart. The February result was down by 43 percent from one year ago, so the trend line is shaping as if participating in a race to the bottom.</div>
<p><a href="/images/2016/04/19/B2.jpg" target="_blank"> Click to enlarge</a></p>
<p><img src="/images/2016/04/19/B2.jpg" alt=""></p>
<p><br><span>Not looking all that grand for Darwin, tbh!</span></p>
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<strong><span style="text-decoration: underline;"><br></span></strong><strong><span style="text-decoration: underline;">The wrap</span></strong>
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<div>A decent rebound for Lending Finance in February, but there looks to be a softening tending in business finance. </div>
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<div>Monthly investor lending activity looks to be steadying in New South Wales ($4 billion), Victoria ($2.6 billion), and Queensland ($1.5 billion), though there is still some potential softness in evidence elsewhere.<br><br>With some banks having offered fixed rate home loans as low as 3.99 per cent, anecdotally there was a strong month of owner-occupier lending in March.</div>
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<p><span><em>PETE WARGENT is the co-founder of <a href="https://allenwargent.com/" target="_blank" rel="nofollow">AllenWargent</a> property buyers (London, Sydney) and a best-selling author and <a href="https://petewargent.blogspot.com/" target="_blank" rel="nofollow">blogger</a>.</em><br></span></p>
<p><em>His latest book is <a href="https://www.bigskypublishing.com.au/Books/General-Interest/Four-Green-Houses--and-a-Red-Hotel/1015/productview.aspx" target="_blank" rel="nofollow">Four Green Houses and a Red Hotel</a>.</em></p>
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pwargent-M4siyDbqQY

Property investment loans already bottoming out: Pete Wargent

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<p>OK, here we go again. 2016 has well and truly kicked in and before we know it January will be gone. Strewth, it's Australia Day next week!</p>
<p>So have you set your goals for 2016?ï¿½ Yeah, I know...boring!</p>
<p>Yes, goal setting can be pretty dry - what do they say? Make your goals SMART - Specific, Meaningful, Action Orientated, Realistic and Timely. That's so 1980's - I'm going to an 1980's themed birthday party soon, maybe I'll dress as a SMART goal!</p>
<p>So here's my fun way to set goals.</p>
<p>Each year I go away on a girls weekend and we share our goals or dreams for the following year over a few glasses of wine. One of us stays sober enough to write them all down and then we check in to see how we've all tracked the next year, over more wine of course. It's fun and sharing our goals in this way makes us more accountable.</p>
<p>What I tried to do this year was think about what I wanted to achieve from my goals or dreams. Actually, I focussed on HOW I was going to ENJOY the results of achieving the goals rather than the goals themselves.</p>
<p>So here's the <span style="text-decoration: underline;">results</span> of my goals that I'll be enjoying soon:</p>
<p>- more time hanging out with those I love.</p>
<p>- going to Europe next year with those I love.</p>
<p>- relaxing time at the beach or immersed in other elements of nature.</p>
<p>- becoming fitter and healthier.</p>
<p>- growing my awesome business.</p>
<p>As Napoleon Hill said; "A goal is a dream with a deadline".</p>
<p>Once I had written down what I wanted to enjoy from achieving my goals, writing the goals and setting the deadlines was easy.</p>
<p>Basically my goals are to create more opportunity. Opportunity is defined as; a time or set of circumstances that makes it possible to do something.</p>
<p>Opportunity, whether it be to make money or to meet people or to simply relax, is golden. Being specific and visualising opportunity is important. But the most important thing is to take action.</p>
<p>I've been talking to a number of people lately who are doing just that - taking action. There are some that I'd spoken to months ago, in fact one chap I started talking to five years ago, and after thinking about their investment goals over the Christmas break, they are now ready.</p>
<p>So action will be taken, sooner than later and by Property Bloom for these new clients. By helping them develop property, I'll also be achieving my goals.</p>
<p>I read a funny Seth Godin story where he lists seventeen times to start taking action, my favourite is "The best time to start was last year, the best opportunities are gone" (I've heard this one so many times from property investors) but then he finishes his long list of the best time to starts with; "Actually, as you've probably guessed,ï¿½<strong>the best time to start</strong>ï¿½was last year. The second best time to start isï¿½<em><strong>right now</strong></em><em>."</em></p>
<p><em>ï¿½</em></p>
<p><em><em>Jo Chivers is chief executive officer of property development project managersï¿½<a href="https://www.propertybloom.com.au/about" target="_blank">Property Bloom</a>.</em></em></p>
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jochivers-wq5Bp59R5a

Setting your 2016 property investment goals: Jo Chivers

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<p>In my blogroll I link to some useful sources for the diminishing number of fans of Australian share markets, including Motley Fool (stock picking) and Montgomery (value fund).</p>
<p>Both have put out pieces recently talking about the property market peaking.</p>
<p>Demonstrating excellent efficiency Motley Fool simply released a near carbon copy of last year's note, while by my last count Montgomery has run no fewer than seven articles in a dozen days (could be eight, I've lost count). An impressive hit rate indeed!</p>
<p>Of course, as a property market advisor, I'm duty-bound to say that just as there is no one 'share market', so do homebuyers buy one house, and not the entire real estate market with all of its gleaming dog-boxes in the sky.  </p>
<p>In any case, share market promoters predict property market downturns every year; it's all part of the sales pitch. </p>
<p><strong><span style="text-decoration: underline;">Why property?</span></strong></p>
<p>I do a good deal of my work with hedge funds, and one of the points which often requires explanation to curious visitors from overseas is why everyday Australians even invest in property at all.</p>
<p>Good question. It's partly because Aussies are encouraged or incentivised to do so, since the government invests as close to zero as makes no difference in the provision of rental housing.  </p>
<p>It's also because because Australia is one of the most urbanised nations on earth, with a population broadly set to double by mid-century, and with more than four fifths of that population growth expected to be in just a handful of capital cities. </p>
<p>Investors fancy that by owning property in middle ring capital city suburbs, land prices will rise over time, and over any meaningful period of time they've consistently been very handsomely rewarded for taking that view.</p>
<p><a href="/images/2016/11/11/LAND.jpg" target="_blank">Click to enlarge</a></p>
<p><img src="/images/2016/11/11/LAND.jpg" alt=""></p>
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<div class="separator">Perhaps even more important than all of the above, it's because with our compulsory superannuation contributions tens of thousands of Mum-and-Dad investors saw their retirement plans cruelly FUBAR by the last share market crash (it's a family blog, so you'll have to look up a few of today's acronyms). </div>
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<div class="separator">Small wonder that people look at bricks at mortar as an investment option with mortgage rates close to record lows. </div>
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<div class="separator"><strong><span style="text-decoration: underline;">Elephant in the room</span></strong></div>
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<div class="separator">Since we're on the subject of asset classes that are set to underwhelm, let's talk about Aussie shares!</div>
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<div class="separator">The towering elephant in the room is that Australia's share market has been performing atrociously, with the ASX 200 some 24 per cent below where it was nearly a decade ago, despite yesterday's bounce and in spite of the lowest interest rates on record ("time in the market....lol).</div>
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<div class="separator">Since December 2012 while record low rates have pushed the S&amp;P 500 around 50 per cent higher, Australia's ASX 200 is struggling to record any gains at all (not that this is a new phenomenon - hardly! - Aussie stocks have chronically underperformed the S&amp;P 500 for well over two decades). </div>
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<div class="separator">And what's more, since we have an index that has a fair weighting towards resources stocks, the market is not even heading back to 6000 any time soon, at least not sustainably, however much the vested interests may try to talk it up. </div>
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<div class="separator"><span>Thanks to collapsing resources earnings, the market is actually offering less value than all those years ago, not more, as measured by forward PE ratios.</span></div>
<div class="separator"><span> </span></div>
<div class="separator"><span>What's that you say? Ah, you don't invest in the market, you invest in individual securities? Ha, t<span>ouché!</span></span></div>
<div class="separator"><span><span> </span></span></div>
<div class="separator">Yes, I know, I know, it's all about the dividends (assuming that those don't get slashed as well). </div>
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<div class="separator"><span><span><strong><span style="text-decoration: underline;">Market is not returning to 2007 peak</span></strong></span></span></div>
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<div class="separator">In my opinion, the share market is more likely to fall than rise, just as soon as the latest ridiculous spike in commodity prices inevitably reverses, and as APRA taps on the credit brakes again.</div>
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<div class="separator">When I wrote my first book in 2011, I set out some introductory guidelines for how investors should assess 'value' in the share markets.</div>
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<div class="separator">I noted in that book that healthcare was definitely a sector worthy of attention, not only because I'd previously worked in the listed healthcare sector as a Group FC - spending endless hours and weekends fine-tuning my beloved Annual Reports and ASX releases - but because of our ageing population.</div>
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<div class="separator"><strong><span style="text-decoration: underline;">Volatility</span></strong></div>
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<div class="separator">Share market investors could be forgiven for being confused, as there is a lot of conflicting advice around. Some like to invest actively or trade, others like to invest passively with low fees, others still take a more focused or value approach.</div>
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<div class="separator">As a value investor, Montgomery has previously noted that technical analysis is "nonsense", which may well be so, but TA does at least present market participants with some guidance for when to sell. </div>
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<div class="separator">Value investors need to be rigorous, and to employ a considered judgement call for when a stock is no longer offering value, all the while benchmarking a portfolio against new opportunities as they arise. </div>
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<div class="separator">One of the challenges for value investors is that the most mouthwatering opportunities inevitably lie outside the largest listed companies, in smaller and more dynamic businesses with far greater potential for growth.</div>
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<div class="separator">These mid-cap companies have potential for greater returns, and can be more volatile (higher beta, if CAPM is your thing), which means that you might sometimes need to be able to cope with large drawdowns. </div>
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<div class="separator">Here's value stock favourite Vita Group (VTG), for example, which recently crashed spectacularly. </div>
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<br><div>And in the healthcare sector, which has performed tremendously well in recent years, here's another favourite value stock Healthscope (HSO), which has also recently crashed.</div>
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<br><div>It's also been quite a rollercoaster ride for value investors' favourite Sirtex Medical (SRX) over the past year, which rose quite impressively before crashing.</div>
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<a href="/images/2016/11/11/SRX.jpg" target="_blank">Click to enlarge</a><br><br><div class="separator"><img src="/images/2016/11/11/SRX.jpg" alt=""></div>
<br>A value investor's motto is that you should buy shares like you buy groceries (i.e. BTFD...more acronyms sorry) and therefore theoretically these crashes in the share price can represent buying opportunities.<br><br>Assuming that you still see the intrinsic value stacking up, and assuming that you are right and the market is wrong, that is.<br><br><strong><span style="text-decoration: underline;">Buyer beware</span></strong> </div>
<div>
<br>Like you and me, all businesses have a life cycle. They are born, they grow, and one day, they wither and die (or merge, or get bought out, or taken over).<br><br>For that reason a value investor must know when to sell as well as when to buy.<br><br>
</div>
<div>Forge Group (FGE) was one of Montgomery's "A1" services businesses of yesteryear, while Decmil (DCG) was another favourite, both of which ran into trouble after the resources capex cycle peaked in 2012.<br><br>Fortunately Montgomery is a market pro, and being in the market full time he has the ability to manage risk, so in turn he was able to see the writing on the wall for the mining service sector and sold out in 2012 before the SHTF.<br><br>The way in which this is possible is to forecast the economy and its unpredictable cycles, and to recalculate the intrinsic value of a security on an ongoing basis.<br><br>In my experience, too many amateur investors fall in love with their analysis, and while they enjoy the process of buying stocks they find that breaking up is harder to do (too often they think the market is wrong, when perhaps it is the outlook for the company or sector that has changed).<br><br>Here's what happened to Decmil (DCG), which struggled to stay profitable after the resources investment boom peaked in 2012:<br><br><div class="separator"><a href="/images/2016/11/11/DCG.jpg" target="_blank">Click to enlarge</a></div>
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<div class="separator"><img src="/images/2016/11/11/DCG.jpg" alt=""></div>
<br>Forge Group (FGE) went to the wall almost overnight in 2013 after massive power station losses were unexpectedly revealed to the market, with Forge's Managing Director David Craig (not the singer) noting that the this was "extremely disappointing".<br><br>David Craig (not the singer) proved to a master of understatement as he noted that unexpected writedowns on two power stations for the 2013/14 financial year totalling $127 million were "not acceptable to the board". Probably not that acceptable to shareholders either, tbh.</div>
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<br><div>Even in September 2013, just before the company went into administration, the intrinsic value of FGE was said to be above $13 (when the real value was closing in on $nil, had the full story been disclosed to the market). </div>
<div>
<br>Herein can lie some of the many challenges with value investing in individual stocks - companies can report half-truths, or mask enormous losses, or trade while insolvent, or sometimes even worse. </div>
<br><div>In case you think you won't ever pick a dud stock, recall that Warren Buffett recently took an enormous bath on his huge investment in Tesco, when a corporate fraud was uncovered in the guise of aggressive accounting and overstated profits.<br><br>
</div>
<strong><span style="text-decoration: underline;">ASX to fall</span></strong><br><div> </div>
<div>Don't be duped into believing that the Australian share market offers better value just because the index is still much lower than it was in 2007. It doesn't.<br><br>In fact, in my opinion the index is probably heading lower when the prices of coal and iron ore crash again, and, as always, it's only a matter of time before the next 30 to 50 percent drawdown. So you'd better be prepared. </div>
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<p><span><em>PETE WARGENT is the co-founder of <a href="https://allenwargent.com/" target="_blank" rel="nofollow">AllenWargent</a> property buyers (London, Sydney) and a best-selling author and <a href="https://petewargent.blogspot.com/" target="_blank" rel="nofollow">blogger</a>.</em><br></span></p>
<p><em>His latest book is <a href="https://www.bigskypublishing.com.au/Books/General-Interest/Four-Green-Houses--and-a-Red-Hotel/1015/productview.aspx" target="_blank" rel="nofollow">Four Green Houses and a Red Hotel</a>.</em></p>
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Why Australians invest in property

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<p>Of the many personality types who inhabit the real estate investment, the least enlightened are the ones I call the real estate snobs.</p>
<p>These are the people who won’t consider investing in an area they personally would not choose to live in. Their objections are usually couched in these terms: “What person in their right mind would want to live there?”</p>
<p>This kind of attitude invariably is directed at a downmarket area, perhaps stigmatized by a bad reputation for social issues or above-average crime rates. They’re places with plenty of housing that fits the “ugly real estate” tag.</p>
<p>But I’ve found in my 30-plus years researching and writing about real estate that ugly real estate grows in value quite nicely, so long as it sits in an area that fulfils certain criteria.</p>
<p>We might all aspire to live in Toorak or Woollahra but the reality is that 99 percent of Australians can’t afford those places. People buy where they can afford the house prices and if the area offers basics like shops, schools and public transport, there will be no shortage of demand from home-buyers and tenants.</p>
<p>One of the most enduring formulas for capital growth is affordability + jobs nodes + infrastructure. So ugly or not, downmarket or not, and regardless of the attitude of the real estate snobs, locations with these qualities deliver solid capital growth.</p>
<p>Recently, amid the strong market in Melbourne, few locations have delivered better capital growth than the precinct based around the stigmatized suburb of Sunshine. Right now, the locations with the most active markets in the Melbourne metropolitan area are the outer-ring areas where homes are affordable.</p>
<p>That brings me to the Brisbane suburban area of Inala, which arguably carries more heavy stigma that anywhere else in the Queensland capital. Just the word Inala evokes all kinds of negative thoughts and reactions.</p>
<p>The Inala precinct has long been branded as a downmarket area with lots of problems - but the market right now is busy because its offers affordability. And Inala and neighbours like Durack and Richlands have recorded annual price growth in the 10-13% range recently.</p>
<p>Inala is, in fact, well-placed to be a strong real estate performer. It is well-located, has good transport links and sits in an area with good services, including education, health and shopping facilities.</p>
<p>The billion-dollar evolution of new suburbs in the general vicinity, including two major master-planned communities, is creating infrastructure, services and jobs within striking distance of the Inala precinct.</p>
<p>Inala’s greatest strength is its affordable housing options. It is an established suburban area amid new development, therefore offering cheaper alternatives to the new product. It also offers a good range of amenities - lots of schools, parks, golf course, good road connections, a train station at Richlands and the Inala Town Centre.</p>
<p>The Inala precinct is well located between Ipswich and the Brisbane CBD. It is nestled at the gateway of the new communities of Springfield and Ripley Valley. Inala connects to Springfield via the Centenary Highway and the new Springfield metropolitan train line which has stations at Darra, Richlands, Springfield and Springfield Central stations.</p>
<p>Inala began as a community of affordable housing for ex-servicemen after WWII, evolving into a Housing Commission area. This led to its downmarket image which has been compounded by high unemployment and crime rates. Data from the 2011 Census indicates a low percentage of students completed year 12.</p>
<p>These negatives have not prevented the local property market from rising, partly because the area has good services and amenities.</p>
<p>The Inala Town Centre is made up of a plethora of medical centres, business services and supermarkets catering for a diverse range of residents. Richlands Plaza is relatively new and there are several large shopping centres in nearby Redbank, including Redbank Plaza which  houses Coles, Target, Supa IGA, Kmart, Aldi, an 8-screen cinema and 110 specialty stores.</p>
<p>Schools in the immediate area include Richlands East Primary School, Serviceton South Primary School, St Marks Primary School, Inala Primary School, Durack State School, Glenala High School and Western Suburbs Special School. Inala also has a TAFE campus. Springfield’s Education City provides plenty of tertiary options from a variety of providers including the University of Southern Queensland.</p>
<p>The great appeal of the Inala precint is affordability. From 2008–2010, median prices were about $300,000 according to realestate.com.au. In the next three years prices fell before starting a steady rise in 2014.</p>
<p>Data from CoreLogic suggests the median house price in Inala is now $350,000 based on 174 annual sales. This follows a 10% increase in the last 12 months. There have been similar rises in Durack and Richlands.</p>
<p>The long-term growth rate, i.e. the average annual growth in median house prices over the past 10 years, is a steady 6% per year.</p>
<p>Another strength is the low vacancy rate for postcode 4077 (Durack, Inala and Richlands) which is 1.7% and has been below 3% for five years.</p>
<p>Inala has good transport links to employment hubs in Springfield, Ipswich and inner Brisbane. The  $200 million Springfield Health City and the $350 million Metroplex Westgate project at Wacol are examples. The 60ha Wacol Army Barracks will be converted into a mixed-use commercial development.</p>
<p>Work on improving connectivity between Ipswich and Brisbane has been ongoing for numerous years. The latest project involves a $400 million upgrade of the Ipswich Motorway.</p>
<p>So there are plenty of reasons for those on a budget to disregard the gossip and consider the Inala precinct as a good place to live.</p>
<p><span>Terry Ryder is the founder of </span><a href="https://www.hotspotting.com.au/" target="_blank">hotspotting.com.au</a><span>. You can </span><a href="mailto:%20%3Cscript%20type='text/javascript'%3E%20%3C!--%20var%20prefix%20=%20'ma'%20+%20'il'%20+%20'to';%20var%20path%20=%20'hr'%20+%20'ef'%20+%20'=';%20var%20addy38821%20=%20'ryder'%20+%20'@';%20addy38821%20=%20addy38821%20+%20'hotspotting'%20+%20'.'%20+%20'com'%20+%20'.'%20+%20'au';%20document.write('%3Ca%20'%20+%20path%20+%20'/''%20+%20prefix%20+%20':'%20+%20addy38821%20+%20'/'%3E');%20document.write(addy38821);%20document.write('%3C//a%3E');%20//--%3E/n%20%3C/script%3E%3Cscript%20type='text/javascript'" target="_blank">email him</a><span> or follow him on </span><a href="https://twitter.com/hotspotting" target="_blank">Twitter.</a></p>
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terryryder-YECXbqmri2

Ugly real estate is worth investment, even for real estate snobs 

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<p>If you're one of the <u><strong><a href="https://onproperty.com.au/percentage-of-australians-own-property/">7.9% of Australians</a></strong></u>* who own an investment property, you'll know that like any home, it requires a lot of time and money spent on maintenance. The good news is that if you’re prepared to spend on professional maintenance and property check-ups, you could avoid some high-cost issues in the long run and improve the wellbeing and happiness of your tenants. One of the main differences between owning your own home, and owning a rental property is that anything spent on maintenance and upgrades has the potential to be earned back in rental income.</p>

<p><em>*Based on 2011 census</em></p>

<p>Here are a few things you should keep an eye on next time you visit your rental property:</p>

<h2><strong>#1 Replacing smoke detectors </strong></h2>

<p>While changing batteries may seem like a simple task, it is still the landlord's responsibility and should be undertaken by the property owner or real estate agent. By checking working smoke detectors are installed in the right areas throughout the home, you are firstly ensuring the safety of your tenants, while also reducing the risk of any fire damage to your property.</p>

<h2><strong>#2 Unclog gutters and pipes </strong></h2>

<p>The damage caused by clogged guttering and pipes can end up costing you thousands if flooding or pipe breakage occurs. Hiring a professional to undergo a regular check and remembering to remove leaves and debris from exposed guttering could save you money in future.</p>

<h2><strong>#3 Undertake regular pest checks </strong></h2>

<p>If you’ve ever experienced a termite or mouse infestation, you’ll understand the perils of trying to mitigate the problem once it’s already out of control. Encourage your tenants to alert you of any sightings early on and engage a professional to deal with the problem and provide you with a plan to prevent the issue escalating.</p>

<h2><strong>#4 Get onto mould issues ASAP </strong></h2>

<p>Regularly check shower grouting, ceilings, behind furniture, window sills, and damp zones (such as bathrooms, foyers etc.) for any signs of mould. Stachybotrys Chartarum (or black mould) releases toxic compounds known as ‘mycotoxins’ and when inhaled can lead to a myriad of health complications. While regular cleaning can help eliminate mould, often it’s a greater issue and requires professional attention. Protect your tenants by seeking mould specialists, who can often deal with the problem for around $300 per room.</p>

<h2><strong>#5 Eliminate hazardous materials </strong></h2>

<p>From exposed rusty stakes to asbestos cladding, it’s always a good idea to undergo a building inspection to ensure your home is safe for its inhabitants. Removing anything that could be toxic, flammable or hazardous will eliminate the chance of future issues to arise.</p>

<h2><strong>#6 Check bathroom extractor fans </strong></h2>

<p>Extractor fans play an important role in bathrooms – especially those without an opening window. Ensuring the fan is working will help with reducing mould and mildew growing in the bathroom.</p>

<h2><strong>#7 Change locks between tenancies </strong></h2>

<p>During a tenancy, you often don't know how many keys have been cut for household members, as well as their friends and family. Ensure the safety of your property and your new tenants by having the locks changed. This is a relatively simple task which can be done on the property, within an hour or two by a locksmith.</p>

<h2><strong>#8 Invest in value upgrades</strong></h2>

<p>Upgrading the kitchen or bathroom of your rental property is often likely to increase its value, reduce vacancy rates and will encourage your tenants to treat your property with respect and care. Significant property upgrades are also likely to increase the market value of your property once you decide to on-sell it.</p>

<h2><strong>#9 Employ a gardener </strong></h2>

<p>The unrulier the grounds, the more challenging they are to deal with. Aim to keep weeds at bay and lawns short and consider employing a gardener as this can be a tax-deductible expense.</p>

<h2><strong>#10 Identify wood rot early on </strong></h2>

<p>A deck layered with algae or wood that is disintegrating can pose accident risk for your tenants. Fix the problem early by replacing the deck or undergoing remedial work.</p>

<h2><strong>#11 Look for leaks after a downpour </strong></h2>

<p>While many homes aren’t hermetically sealed and often have gaps to encourage airflow, water pouring in through the window or dripping from the roof is never a good sign and needs to be addressed immediately. Mould can occur within the walls/ceiling and are sometimes issues that only present themselves when it’s too late. Consider using a waterproof paint and silicone sealant.</p>

<h2><strong>#12 Aim to prevent foundation repairs </strong></h2>

<p>Foundation repairs can set you back anywhere from $450 - $11,000 and are often due to natural causes such as soil swelling. It’s important to keep the soil around your home moist and ensure there is sufficient water drainage – ideally a gradual slope. If foundation repairs are likely to be needed, some signs can include doors and windows which are hard to shut, cracks on the walls, sloping flooring and water pooling in your garage/basement or in corners of your house.</p>

<h2><strong>#13 Periodic roof inspections </strong></h2>

<p>Similar to foundation repairs, to replace a roof can cost from $650 - $6,000. The general rule of thumb is to get your roof checked 10 years post installation and every 3 years after.</p>

<h2><strong>#14 Wash flooring and carpets </strong></h2>

<p>Keeping your floors in good nick could make them last longer. Between each tenancy, hire a professional carpet cleaner, and repolish wooden floors. When you clean a carpet stain, you are only cleaning the surface layer, meaning the stain won’t be removed completely. Regular carpet cleaning can reduce permanent damage to your flooring.</p>
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Olivia Round

Own rental property? Here are 14 things to check to avoid major problems in future 

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<p>There are two sides to a trade.</p>
<p>If you are buying an investment someone is selling it.</p>
<p>Ask yourself, then, a simple question: why are they selling?</p>
<p>It might be for personal reasons. </p>
<p>They could be selling some shares before financial year end to reduced a tax liability, for example.  </p>
<p>Or it might be for another genuine reason.</p>
<p>In the property markets, vendors often sell an apartment because they want to trade up and move into a house. </p>
<p>Or, maybe, they don't like the investment as much as you think you do, and that's why they selling.  </p>
<p><strong>Group think</strong></p>
<p>Group think can be dangerous.</p>
<p>When everyone is piling into an asset class or certain investment, this may not be a great sign for future returns.</p>
<p>Try to become a contrary thinker.  </p>
<p>This is not necessarily a skill you are born with, but it can certainly become a learned habit over time.</p>
<p>Question everything - not to the point of inaction, or sleepless nights - but don't simply blindly trust widely held beliefs. </p>
<p>Try to think of counter-arguments your investment decision, or list potentially dissenting views. </p>
<p>Think of some worst case scenarios, and what you would do or feel if they played out. </p>
<p><strong>Asymmetric information </strong></p>
<p>Could the seller know more than you?</p>
<p>Real estate is an imperfect market which offers amazing opportunities to buy below market value or add value. </p>
<p>But asymmetric information is a common hurdle that needs to be overcome via thorough market research. </p>
<p>Almost by definition, the vendor of a property tends to know more about the potential problems and challenges than the buyer.</p>
<p>In the share markets insider information is also rife.</p>
<p>People often like to think they know more than the market, but the truth is, they often don't.</p>
<p>Therefore, before you pull the trigger on an investment, think to yourself:</p>
<p>"Why are they selling?"</p>
<p class="p1"><span class="s1">PETE WARGENT is the co-founder of <a href="https://allenwargent.com/" target="_blank"><span class="s2">AllenWargent</span></a> property buyers (London, Sydney) and a best-selling author and <a href="https://petewargent.blogspot.com/" target="_blank"><span class="s2">blogger</span></a>.</span></p>
<p class="p2"><span class="s3"><em>His latest book is </em><a href="https://www.bigskypublishing.com.au/Books/General-Interest/Four-Green-Houses--and-a-Red-Hotel/1015/productview.aspx" target="_blank"><span class="s2"><em>Four Green Houses and a Red Hotel</em></span></a><em>.</em></span></p>
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Why are they selling? Pete Wargent

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<p>The latest housing finance and housing credit data confirm that the level of activity from investors in the housing market is slowing.</p>
<p>Australian mortgage lenders have been rationing credit to the investor segment and lifting mortgage rates and these changes are starting to bite with investor demand now slowing. It remains to be seen if this slowdown lasts or, if once these limits are eased the investor segment of the market comes back to residential property.</p>
<p><a href="https://www.propertyobserver.com.au/images/2017/06/20/chart-1-4.jpg" target="_blank">Click to enlarge</a></p>
<p><img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2017/06/20/chart-1-4.jpg" alt=""></p>
<p>Since August 2015, Australian mortgage lenders have been charging interest rate premiums for investors.  While standard variable mortgage rates for owner occupiers were recorded at 5.45% in August 2015, the same mortgage type for investors had a mortgage rate of 5.75% or a 30 basis point premium.  Since August 2015, the cash rate has fallen by 50 basis points however, mortgage rates have not shown the same decline. </p>
<p>At the end of May 2017, standard variable mortgage rates were recorded at 5.3% for owner occupiers and 5.8% for investors.  Despite two 25 basis point interest rate cuts since August 2015, owner occupier mortgages rates are only 15 basis points lower while investor mortgage rates are 5 basis points higher and have a premium of 50 basis points compared to a typical owner occupier mortgage.</p>
<p>The mortgage rate premium for investors appears to finally be biting into the market with weakness in both total investor credit and investor housing finance commitments.  The April 2017 lending aggregates data from the Reserve Bank (RBA) showed that investor credit rose by 0.55% over the month, its lowest monthly increase since August 2016. </p>
<p>At the same time, April 2017 housing finance data shows there was $12.6 billion in investor housing finance commitments over the month, the lowest value since September 2016.  Since August and September of last year, standard variable mortgage rates for investors have risen by 30 basis points compared to a 5 basis point increase for owner occupiers.</p>
<p><a href="https://www.propertyobserver.com.au/images/2017/06/20/chart-2-4.jpg" target="_blank">Click to enlarge</a></p>
<p><img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2017/06/20/chart-2-4.jpg" alt=""></p>
<p>There are individual states and territories in which a slowdown in mortgage demand by investors will have more of an impact, namely New South Wales and Victoria.</p>
<p><a href="https://www.propertyobserver.com.au/images/2017/06/20/chart-3-3.jpg" target="_blank">Click to enlarge</a></p>
<p><img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2017/06/20/chart-3-3.jpg" alt=""></p>
<p>Tasmania is the only state or territory where the value of lending to housing investors is currently rising however, in terms of the value of lending to investors, New South Wales and Victoria account for a substantial majority of overall lending. </p>
<p>This is partly a function of higher housing costs in these two states, nevertheless, New South Wales accounted for 49.3% of all investor lending nationally in April 2017 with Victoria accounting for 27.4%. A pull-back in lending to investors is inherently likely to have more of an impact on the New South Wales (Sydney) and Victorian (Melbourne) housing markets.</p>
<p><a href="https://www.propertyobserver.com.au/images/2017/06/20/chart-4-3.jpg" target="_blank">Click to enlarge</a></p>
<p><img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2017/06/20/chart-4-3.jpg" alt=""></p>
<p>The potential impact on the New South Wales and Victorian housing markets of an investor slowdown is further highlighted in the final charts.  Excluding refinances (which are also trending lower) investors accounted for 55.3% of mortgage demand in New South Wales in April 2017 and 46.8% in Victoria.  In all other states and territories investors accounted for less than 40% of mortgage demand in April 2017, with the proportion trending lower over recent months in most regions.</p>
<p>It is anticipated that investor demand will continue to slow over the coming months.  Lenders are continuing to re-price mortgage rates for investors and we are yet to see the full impact of the policy changes designed to slow the level of interest-only lending.  With investor demand likely to continue to fade, it is expected that this will also contribute to a further slowing of the rate of value growth in the Sydney and Melbourne housing markets where investor demand has been significantly greater than it has been elsewhere.</p>
<p>A reduction in the pace of capital gains will add further disincentive to investors.  Considering that rental yields in Sydney and Melbourne are close to record lows, we can assume most investors are focused on the prospects for capital growth and relying on a negative gearing strategy to offset the cash flow losses.  If investors anticipate the prospects for capital gains have dissipated we may see investment demand deflect to those markets where the growth cycle is less mature than Sydney and Melbourne’s and where rental yields haven’t been depleted as substantially.</p>
<p><em>Cameron Kusher is head of research for CoreLogic. You can contact him <a href="https://blog.corelogic.com.au/about/"><span class="s2">here</span></a>.</em></p>
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ckusher-ujnxiKuFQs

The housing investment slowdown is upon us (for at least a while)

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<p>The latest housing data from the Australian Bureau of Statistics (ABS) shows that while lending to owner occupiers is fairly flat, demand from the investor segment has continued to stall. </p>
<p>When you dig deeper, the data shows that owner occupier demand is growing for new lending as refinancing stalls.</p>
<p>The April 2017 housing finance data indicated over the month there was $32.5 billion worth of commitments which was -1.6% lower than the $33.0 billion in commitments in March.  Relative to April 2016, the value of housing finance commitments was 3.6% higher in April of this year.</p>
<p><a href="https://www.propertyobserver.com.au/images/2017/06/09/chart-1-1.jpg" target="_blank">Click to enlarge</a></p>
<p><img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2017/06/09/chart-1-1.jpg" alt=""></p>
<p>Over the month of April 2017 there was $19.9 billion worth of housing finance commitments to owner occupiers which was actually the lowest value of lending to owner occupiers since November 2016.  There was a further $12.6 billion in finance commitments to investors which was the lowest value of lending to this cohort since September 2016.  Remember that the cooling of investor lending has largely occurred before the recent changes to investor lending policies have come into effect.  Investors have though been feeling the impact of greater interest rates increases than those implemented for owner occupiers.</p>
<p><a href="https://www.propertyobserver.com.au/images/2017/06/09/chart-2-1.jpg" target="_blank">Click to enlarge</a></p>
<p><img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2017/06/09/chart-2-1.jpg" alt=""></p>
<p>The $19.9 billion in owner occupier housing finance commitments in April 2017 consisted of $1.9 billion for the construction of dwellings, $1.1 billion for purchase of new dwellings, $5.8 billion for refinancing of established dwellings and $11.1 billion for purchase of established dwellings.  The above chart highlights how the value of lending for purchase of established housing stock is continuing to lift while refinancing has continued to slow.  In fact, the value of lending for the purchase of established housing was at its highest level since November 2015 while the value of refinances for established dwellings was at its lowest level since May 2015.  The value of housing finance commitments for refinancing of established dwellings is now -20.9% lower than it was at its December 2015 peak.</p>
<p><a href="https://www.propertyobserver.com.au/images/2017/06/09/chart-3.jpg" target="_blank">Click to enlarge</a></p>
<p><img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2017/06/09/chart-3.jpg" alt=""></p>
<p>Investors committed to $12.6 billion in housing finance commitments over the month consisting of $1.1 billion for the construction of dwellings and $11.4 billion for established housing.  Investor housing demand is slowing, due to a pull-back in demand for established investment properties.</p>
<p><a href="https://www.propertyobserver.com.au/images/2017/06/09/chart-4.jpg" target="_blank">Click to enlarge</a></p>
<p><img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2017/06/09/chart-4.jpg" alt=""></p>
<p>Looking at lending across the states and territories the thing that is immediately noticeable is how overweight investment lending is in New South Wales and to a lesser degree in Victoria.  In fact New South Wales is the only state in which new lending to owner occupiers is lower in value than lending to investors.  The state level data is not seasonally adjusted and given the large volume of public holidays in April the data is generally weaker than data from March, nevertheless when we look at the proportion of lending it shows that there is some emerging weakness in investor lending.</p>
<p><a href="https://www.propertyobserver.com.au/images/2017/06/09/chart-5.jpg" target="_blank">Click to enlarge</a></p>
<p><img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2017/06/09/chart-5.jpg" alt=""> </p>
<p>If you strip out refinancing to focus on only new lending, the majority of new lending in New South Wales is to investors while in most other states and territories investors are less than 40% of new lending.  Compared to recent levels the proportion of lending has slowed in New South Wales falling from 57.6% in January 2017 to 55.3% currently, it has also fallen in Victoria from 47.6% of all new lending in September 2016 to 46.8% currently.  The pull-back in lending to investors in the two most populous states which also have the hottest housing markets would be encouraging for banking regulators.  Of course, both of these states are still seeing investor participation which is well above long-term average levels and a further pull-back, which is anticipated, could slow the rate of value appreciation in Sydney and Melbourne.</p>
<p>Overall the data points to further weakness in housing finance demand from investors and from owner occupiers that are refinancing.  The investors slowdown is likely due largely so far to the higher interest rates being pushed to customers, with a crackdown on new interest-only lending yet to come into effect it is reasonable to expect further weakness in investor demand over the coming months.  In terms of refinance, this is potentially slowing because some of the lending policy changes are making it more difficult for people to refinance, particularly if it is with the intention to then take out an investor loan.</p>
<p>If, as expected, the weakness in housing finance demand continues, it is likely to lead to a slowdown in housing demand.  As a result this would likely lead to slower levels of value growth over the coming months, particularly once the tougher lending rules come into effect for interest-only lending.  This is even before considering the potential for additional costs due to the banking levy and the recent credit downgrading of the non-major banks which are likely in some form to be passed on to mortgagees.</p>
<p class="p1"><em><span class="s1">Cameron Kusher is head of research for CoreLogic. You can contact him <a href="https://blog.corelogic.com.au/about/"><span class="s2">here</span></a>.</span></em></p>
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Investor demand and refinancing by owner occupiers continues to stall in April 2017

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<p>The former director-general of domestic intelligence agency ASIO, David Irvine has been ­appointed as the new chairman of the Foreign Investment Review Board.</p>
<p>It has been interpreted as a signal from the Turnbull government that national sec­urity is a key priority in the ­assessment of foreign bids for Australia’s critical infrastructure following controversial decisions including the sale of the Port of Darwin.</p>
<p>Irvine will replace the outgoing chairman, Brian Wilson who hailed from the investment banking sector.</p>
<p>“Australia welcomes foreign investment, foreign investment in the national interest … and I don’t see that changing,” Irvine told The Weekend Australian.</p>
<p>Irvine joined the FIRB board last year.</p>
<p>He has served as the director-general of both ASIO and ASIS and as a former ambassador to China.</p>
<p>Irvine on the board by Michael D’Ascenzo, David Peever, the former Australian head of Rio Tinto, Patrick Secker and Ms Alice Williams.</p>
<p>It has been long viewed the inadequately funded FIRB was weak on enforcement until recent initiatives.</p>
<p>Treasurer the Hon. Scott Morrison recently ordered the forced sale of a further 15 Australian residential properties held by foreign nationals in breach of the foreign investment framework, taking the total number of forced sales to 61, with a combined value of $107 million.</p>
<p>The 15 latest properties are located in Victoria and Queensland, with a combined purchase price of more than $14 million. The foreign owners come from a range of countries including China, India, Indonesia, Iran, Malaysia, the United Kingdom and Germany.</p>
<p>Under the previous Labor government, no foreign nationals were forced to divest illegally held Australian property.</p>
<p>A further 36 foreign nationals have sold properties during the course of Australian Taxation Office (ATO) investigations, showing improved compliance with the rules and a strengthening of the enforcement program.</p>
<p>The ATO has detected more than 570 foreign nationals who have breached the rules. </p>
<p>Under the Government’s enhanced penalty regime the ATO has issued 388 penalty notices to foreign nationals in breach of the rules, attracting penalties of more than $2 million.</p>
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