Property investment

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<p>GUEST OBSERVER</p>
<p>Not being able to pay loan repayments on time is one of the most frightening and common concerns of property investors, and rightly so.</p>
<p>Last year over 50,000 full-time jobs were lost in Australia alone, and with less than half of the country having private health insurance, many investors would be at risk of losing their portfolio if an unforeseen circumstance such as being fired or becoming ill, arose.</p>
<p>Preparing for situations that may result in a loss or diversion of income is essential when it comes to safeguarding your property portfolio. Although preparation is paramount, there are also processes that can be followed once unexpected financial difficulties strike that can offer assistance to avoid an investor having to sell.</p>
<p>To ensure investors are properly prepared prior to any unforeseen circumstances arising, see below:</p>
<ul>
<li>
<strong>Make income protection insurance a priority. </strong>Often income insurance is considered too expensive or unnecessary; however as an investor it is vital to safeguard your portfolio. Although it will be an additional cost to pay monthly, if an illness or injury occurs, most policies will cover 80 percent of your income, meaning expenses incurred via your portfolio are still covered until you recover.  Also, in most cases income protection premiums are a tax deduction.</li>
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<li>
<strong>Research and ensure you have the policy which best suits you.</strong> Unfortunately there isn’t one specific income protection policy that suits everyone. To ensure you are choosing the most cost-effective and beneficial option for your situation, make sure you compare various options before committing to a policy. </li>
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<li>
<strong>Aim to have a neutral to positive cash flow portfolio.</strong> If overall across a property portfolio the rents equal or exceed the costs and repayments, sustaining the portfolio will not be contingent on job income and will give peace of mind in the event you are forced to stop working.</li>
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<li>
<strong>Create a buffer in your offset account.</strong> Once an investor has an offset account set up, you can keep surplus funds there which will give you two primary benefits:</li>
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<li>Offset a portion of the interest being paid on the home loan.</li>
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<li>If the property is negatively geared and you experience an unforeseen circumstance, these funds could be used to cover the weekly shortfall in rent.</li>
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<p>If unforeseen circumstances arise that investors aren’t prepared for:</p>
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<strong>Seek immediate expert counsel.</strong> If an unforeseen circumstance has caught you off guard and you are fearful for how this will affect your finances, arrange to meet with an accountant or financial planner immediately to implement a plan that ensures the obligatory loan repayment is able to be made.</li>
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<strong>Advise the bank of the situation.</strong> All lenders have a financial hardship line, so take the time to work with them on a suitable payment arrangement so you keep on top of your repayments.</li>
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<li>
<strong>Research what the current market rent is on each of your properties.</strong>  The average rent in each market changes constantly. Keeping up to date with the current rate ensures you are able to see where you can increase the rent for better cash flow.</li>
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<p><em>Zaki Ameer is founder of Dream Design Property and can be contacted <a href="https://www.ddpproperty.com.au/" target="_blank">here</a>.</em></p>
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How to safeguard your property: Zaki Ameer

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<p>GUEST OBSERVER</p>
<p>The January housing finance approvals came in above expectations with a notably strong rise in the value of investor lending. </p>
<p>The total number of loans to owner occupiers posted a modest 0.5 percent rise, better than the forecast 1 percent dip but within the range of monthly volatility which is wider for January due to the seasonal low.</p>
<p> Ex refi, ‘new loans’ were softer, down 1.7 percent. Both are up a touch on year ago levels.</p>
<p>Of more note was another strong rise in the value of investor loans, up 4.2 percent/mth to be 27.5 percent higher over the year.</p>
<p>The resurgence since around mid 2016 follows a sharp drop-off over the second half of 2015. The monthly value of investor approvals is now 5.3 percent below its peak in the first half of 2015 and on the basis of January’s update is showing no signs of topping out.</p>
<p><span>Details</span> <br>Owner–occupiers (no.)   0.5%mth, 1.9%yr<br><span>– ex-financing (no.)        –1.7%mth, 4.6%yr</span><span>       </span></p>
<p>Construction of dwellings (no.)               –1.4%mth, –5.1%yr<br><span>Purchase of newly built dwellings (no.)   –0.3%mth, 10.4%yr</span><span>        </span></p>
<p>Value of loans: <br><span>Owner-occupiers ($bn)   –0.2%mth, 1.9%yr<br></span><span>Investors ($bn)              4.2%mth, 27.5%yr<br></span><span>Total ($bn)                    1.5%mth, 11%yr<br></span><span>Total ex refi ($bn)          1.3%mth, 15.6%yr      </span></p>
<p><span><em><span>Matthew Hassan</span> is senior economist with <a href="https://www.westpac.com.au/" target="_blank">Westpac</a>.</em></span></p>
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Investor lending surge continues into January: Matthew Hassan

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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>
<div class="separator"> </div>
<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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<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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<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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<div>Excluding property loans, low interest rates are not really stimulating commercial finance any longer.</div>
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<div>In fact the ABS Lending Finance figures showed total commercial finance declining moderately once again in August. </div>
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<div>In trend terms commercial finance has now been on the slide since May 2015. Yuck!</div>
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<br><div>As a result total lending finance is also about 9 percent lower than it was in Q3 2015, even after accounting for a rebound in property investor loans over the past seven months. </div>
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<br><div><strong><span style="text-decoration: underline;">Sydney investors return with a vengeance</span></strong></div>
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<div>I've been noting for a little while that property investor loans have been quietly creeping back in Australian month-on-month - and in New South Wales in particular - and now the cat is really getting out of the bag again. </div>
<div> </div>
<div>Here are the raw original figures for NSW investor loans in calendar year 2016, not seasonally adjusted:</div>
<div> </div>
<div>January $3.1 billion</div>
<div> </div>
<div>February $3.9 billion</div>
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<div>March $4.5 billion</div>
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<div>April $4.5 billion </div>
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<div>May $5.3 billion</div>
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<div>June $5.8 billion</div>
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<div>July $5.2 billion</div>
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<div>August $5.5 billion</div>
<div> </div>
<div>Remember these figures aren't seasonally adjusted, so the original or 'like-for-like' figures over the past few years look like this:</div>
<div> </div>
<div>August 2012 $2.7 billion</div>
<div> </div>
<div>August 2013 $3.5 billion</div>
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<div>August 2014 $4.6 billion</div>
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<div>August 2015 $5.0 billion</div>
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<div>August 2016 $5.5 billion</div>
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<div>The equivalent figure during the financial crisis nadir in August 2008 was just $1.7 billion.<br><br>Ex-refinancing, investors in NSW are now accounting for nearly 50 per cent of loans again.<br><br>No other state comes remotely close to that, even Victoria.<br><br>Following last year's macroprudential intervention, the value of property investor loans is now higher than a year ago in New South Wales, Victoria, Queensland, and South Australia, and activity looks to be rising again.<br><br>This means that as weaker results start to drop off, when plotted in rolling annual terms, the investor loans chart should be starting to turn up again.<br><br>And, so it is...</div>
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<div>Even Darwin investor loans now seem to have found a base (as do those in Western Australia) - something I didn't think I'd find myself saying in 2016 - with vacancy rates in the Northern Territory capital apparently now declining again. </div>
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<strong><span style="text-decoration: underline;">The wrap</span></strong><br><br>The increases may look to be moderate to date in rolling annual terms,.<br><br>But overall stock levels are well down on last year, hence the pressure on auction clearance rates in inner-suburban areas.<br><br>Sydney recorded a preliminary auction clearance rate of 80 percent today, with the median auction price running as high as $1,222,500.<br><br>It's another leg up.</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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Sydney property investors come storming back

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<p>There’s generally more gain than pain in property, but John McGrath has reminded investors us that it’s possible to lose money if you make the wrong choices.  </p>
<p>He says the biggest contributing factors to re-sale losses in real estate are: </p>
<p><strong>1. Selling too soon after purchasing</strong></p>
<p>For the ordinary buyer, real estate should always be a long-term play. Buy it, sit on it, maybe make some improvements along the way and don’t sell for at least 7-10 years. I say this because on average over the past century, Australian property values have pretty much doubled during this sort of timeframe. Given the costs of buying in, you don’t want to get out until you’ve made some really good money, so a good rule of thumb is a minimum 7-10 years because this is usually enough time for a full-growth cycle to occur. </p>
<p>If you get really lucky and buy just before a boom, you might be able to sell in a shorter timeframe and still make great money, but even so, I still recommend holding for as long as you can to truly maximise your overall gain. </p>
<p><strong>2. Buying in second-tier locations</strong></p>
<p>This can be avoided through rigorous research.</p>
<p>Don’t buy in towns with declining populations or areas that rely on just one or two major industries, particularly volatile industries such as mining and tourism. When it comes to choosing areas within a suburb, or particular streets, talk to agents and become an expert on your target neighbourhood to ensure you make the right purchasing decision.</p>
<p><strong>3. Stretching your budget too far</strong></p>
<p>When buying, don’t stretch your budget beyond what is reasonable for your circumstances. Look ahead 7-10 years. Can you afford the loan repayments at 7-8 percent interest (the long-term average)? Can you keep up the repayments if you lose your job or take time off to have a baby, for example? Do you have enough savings for other unexpected costs? You need a ‘yes’ answer to all these questions before you buy. If not, the likelihood is you’ll end up selling simply to liquidate funds and that will usually involve a loss.</p>
<p>"Real estate is an expensive asset class, but it’s also one of the safest and most reliable vehicles to wealth creation in Australia," he advised in his Switzer blog.</p>
<p>"If you keep it simple – buy good quality property in good quality locations and hold for the long term, you have every reason to expect a very positive outcome." </p>
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The three main reasons behind re-sale losses: John McGrath 

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<p><span>GUEST OBSERVER</span></p>
<p><span>There are two ways to be a consistent winner in investment: information asymmetry (mostly through insider trading, which is illegal) and holding assets in the long term. Both of these methods are protected from short-term volatility. </span></p>
<p><span>The first expects and profits from these movements (often very risky as all public information is already factored in the price), while the latter can safely ignore the daily peaks and troughs, knowing that these will cancel out over a longer period of time. </span></p>
<p><span>Investing for long-term returns and robustness is the appropriate reason to buy treasury bonds, yet it is very counterintuitive for most of us to ignore weekly or monthly yields (even changes over one year can be irrelevant with the right strategy).</span></p>
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<p><span>Business Insider recently published a story called “The week is underway and Australian bonds are getting destroyed” with an image of a building being demolished. Yet as the article correctly points out, yields are still below pre-Brexit levels (bond yields rise as prices fall), which was less than three months ago. It can be difficult to separate signal and noise from information when there is such an abundance of data. </span></p>
<p><span>In our April report on the bond market, the connection between the yield curve (which is a reflection of investor expectations) and changes in the official cash rate was established. A flattening or inverted yield curve almost always leads to interest rate cuts, as the RBA tries to reduce the cost of borrowing. If short-term rates are equal or above long-term rates, there is a disincentive for banks to lend out money. </span></p>
<p><span>Looking at the yield curve for August, while the 25-point rate cut at the start of the month has lowered interest rates across the entire range, it has pushed short-term rates below 10- year yields, meaning the curve is no longer fully inverted. This see-saw action (investors lowering long-term expectations, followed by cuts to short-term rates) can be clearly seen in Figure 1 above.</span></p>
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<p><span>In the past few weeks there has been some saving grace for the reserve bank. Investors have improved their long-term outlook, pushing bond yields up and prices down. This makes another rate cut in the next few months unlikely. </span></p>
<p><span> <em>For more information, <a href="https://secretagent.com.au/" target="_blank">click here</a>.</em></span></p>
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Saving grace for the Reserve Bank: Secret Agent

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<p><img src="https://counter.theconversation.edu.au/content/65092/count.gif" alt="The Conversation" width="1" height="1"></p>
<p>GUEST OBSERVER</p>
<p>Prime Minister Malcolm Turnbull recently said:</p>
<p>“China has more freedom to invest in Australia, indeed all foreigners have more freedom to invest in Australia, than almost any other country.”</p>
<p>But is this true? We asked two experts to discuss the evidence for and against this statement.</p>
<p>Gennadi Kazakevitch argues Turnbull is right given Australia’s ranking as a free and open market, while Jeffrey Wilson presents evidence to show Australia’s foreign investment regime has become much more closed in recent years.</p>
<p><strong>Gennadi Kazakevitch:</strong></p>
<p>I think Mr Turnbull is right.</p>
<p>One measure to support this is the well-established inter-country comparison of economic freedom regularly published by the Heritage Foundation and Wall Street Journal. This measure also looks specifically at foreign investment freedom.</p>
<p>The economic freedom measure ranks countries according to rule of law, government size, regulatory efficiency and – of most relevance to this discussion – market openness. This includes trade freedom, investment freedom, and financial freedom.</p>
<p>In terms of general economic freedom, Australia ranked fifth behind Hong Kong, Singapore, New Zealand, and Switzerland in 2016. Within the “Open Market” component of the index, Australia scores 80 out 100 for investment freedom, putting us among the most free of the 200 countries ranked.</p>
<p>To score a perfect 100, according to the index, a country would have to have no constraints on the flow of investment capital. Individuals and firms would be allowed to move their resources into and out of specific activities, both internally and across the country’s borders, without restriction.</p>
<p>Points are deducted for different sorts of freedom “imperfections”. For Australia, one “imperfection” is the regime of foreign investment reviewwhich requires government approval of investment amounts above a particular level. But Australia’s current review regime does not discriminate against China or indeed any other country.</p>
<p><strong>Jeffrey Wilson:</strong></p>
<p>Australia’s foreign investment regime is more open than many other countries. However, it also remains the case that it has become much more closed in recent years.</p>
<p>Since taking office in September 2013, the Liberal-National Coalition government has imposed several new barriers to foreign investment coming into Australia. These policies include:</p>
<ul>
<li>
<p>The introduction of fees for FIRB applications, and an expansion of the range of sanctions and fines applied to breaches.</p>
</li>
<li>
<p>Instituting new and very low FIRB screening thresholds for investment in the rural sector, including A$15 million for agricultural land and A$55 million for agribusinesses. The threshold had previously been A$255 million.</p>
</li>
<li>
<p>The establishment of a register of ownership of agricultural land. While this is ostensibly designed to “increase transparency”, Deputy Prime Minister Barnaby Joyce explained the intention was to produce a map that would allow people to “see who owns what”.</p>
</li>
<li>
<p>The appointment of two new FIRB Members – David Irvine and David Peever – in order to add further “national security expertise”to the board.</p>
</li>
<li>
<p>Extending the application of the Foreign Acquisitions and Takeovers Act (Cth, as amended) to infrastructure sales made by state governments.</p>
</li>
</ul>
<p>The LNP Coalition government has also rejected a number of foreign investment applications on controversial grounds:</p>
<ul>
<li>
<p>Archer Daniels Midland (US) takeover bid for GrainCorp, 2013. The former head of the FIRB has claimed the deal was killed for political reasons.</p>
</li>
<li>
<p>Dakang Holdings and Pengxin Group (China) bids for Kidman cattle properties, 2016. The bidders appear to have been rejected simply because no Australian buyer made a competitive offer.</p>
</li>
<li>
<p>China State Grid bid for Ausgrid in NSW privatisation program, 2016. Treasurer Scott Morrison refused to explain the full reasons for the rejection, citing national security and confidentiality concerns.</p>
</li>
</ul>
<p>Tellingly, in its entire six-year term in office, the Rudd/Gillard ALP governments rejected only a single large foreign investment application: A bid by the Shanghai Stock Exchange to acquire the ASX in 2011.</p>
<p>As a result of these policy changes and investment decisions, the Australian foreign investment regime is now less open than it has been for over 20 years.</p>
<p>The prime minister’s claim was about the freedom of Chinese companies to make foreign investments into Australia. Unfortunately, there is no quantifiable metric that measures the openness of a country’s foreign investment regime specifically. The Economic Freedom statistics Gennadi cites are instead a broader measure of economic openness and transparency. Thus, they cannot be used to evaluate the prime minister’s claim.</p>
<p><strong>Gennadi Kazakevitch:</strong></p>
<p>The investment freedom component of the economic freedom index is not a perfect measure, but it is sophisticated. It allows for comparing “apples with apples” based on eight qualitative characteristics: national treatment of foreign investments; transparency; policy implementation; restrictions on land ownership; sectoral restrictions; expropriation of investments without fair compensation; foreign exchange controls; and capital controls. For each of those characteristics, there is a breakdown into several levels of restrictions, rules or practices.</p>
<p>It is true that in the most resent years (2012-2016) the investment freedom score for Australia has decreased from 83.7 to 80. But it is also true that Australia remains within a cluster of free economies.</p>
<p>It would be easy to attribute the decline in Australia’s score to the recent changes to regulation rules and practices. However, those changes have not critically affected the investment freedom index for Australia, nor are they discriminatory against a particular country. Therefore, Mr Turnbull’s statement is quite justified.</p>
<p>The six years of Rudd/Gillard ALP governments Jeffrey is referring to was business as usual as far as foreign investment was concerned. However, it is not business as usual any anymore. The most recent cases, such as the Port of Darwin, the Kidman station, and the Ausgrid power transmission business in NSW, have alerted the government and public to national security issues, and rightfully so.</p>
<p>As I proposed in my submission to the Senate inquiry on the foreign investment review framework, the world has changed dramatically since the current regulation was established in 1975.</p>
<p>Until the late 1980s, Australia’s investing partners were mostly persons and companies from developed market economies with similar values and similar foreign investment perceptions of independent entrepreneurship. Economic transition in communist countries, market reforms in one-party controlled countries, and emerging developing market economies have created a variety of economic systems with very different sovereign involvement in running economies and companies. Therefore a “foreign interest independence test” and security risk assessment should be done that takes into account which country the foreign investor is from.</p>
<p>If Australia eventually goes down this path, freedom of investment might be further compromised. If so it will arguably be for a good reason.</p>
<p><strong>Jeffrey Wilson:</strong></p>
<p>It is certainly true Australia’s foreign investment partners have changed many times through history. Prior to the 1950s the main foreign investor was Great Britain, which remains a major investor to this date. But progressive waves of new investors have also arrived: America during the 1960s; Japan in the 1970s; Singapore and Hong Kong in the 1990s; and more recently Chinese investors since 2005.</p>
<p>The arrival of each of these groups has presented Australia with distinct political tension. American investors faced accusations of “neo-imperialism” and threats to Australia’s independence in the world. Japanese investors faced considerable xenophobia, particularly as a result of “war memories”. And today, we are dealing with the fact that many Chinese investors are state-owned corporations, which pose their own unique political and regulatory challenges.</p>
<p>However, these are arguably issues to be managed rather than reasons to reject foreign investment. Australia is a small open economy, which depends on foreign investment to bring in the capital, technology, skills and marketing channels critical for 21st century industries.</p>
<p>In each previous wave, Australian governments have had to devise novel solutions for how to remain open to foreign investment, while managing their distinct political sensitivities. This has been successful in previous years, and there is no reason it should not be possible with Chinese investors today.</p>
<p><em><span class="fn author-name">Jeffrey Wilson is f</span>ellow of the Asia Research Centre, Murdoch University and author for The Conversation. He can be contacted <a href="https://theconversation.com/profiles/jeffrey-wilson-12717" target="_blank">here</a>.</em><br><br><em><span class="fn author-name">Gennadi Kazakevitch d</span>eputy head, Department of Economics, Monash University and author for The Conversation. He can be contacted <a href="https://theconversation.com/profiles/gennadi-kazakevitch-90201" target="_blank">here</a>.</em></p>
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Do foreigners have more freedom to invest in Australia than in almost any other country?

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<p>Property investors are predicted to turn to Western Australia as demand for property in the east coast markets drives increasingly low yields, and correspondingly high prices, according to Savills.</p>
<p>Chris Ireland, State Director Retail Investments/Services, Savills said Perth is primed for a new wave of property investment as investors seek to take advantage of attractive yields in the wake of the end of the mining investment boom, with off-shore investors, particularly Chinese, set to take a more prominent role.</p>
<p>"As demand for property in the east coast markets drives increasingly low yields, and correspondingly high prices, investors will turn to WA, and those who do so first are those who stand to profit most,’’ he said.</p>
<p>"Of course retail, and especially neighbourhood centre retail, is regarded as a defensive investment, the sort of investment that continues to deliver in a downturn and that has been important in the upward sales trend we have seen over the last 12 months.</p>
<p>"But these investors also have an eye to the future in terms of considering location including local population growth and local and state government infrastructure initiatives, which will deliver long after the downturn ends,’’ Mr Ireland said.</p>
<p>Savills have recorded approximately $752.15 million worth of retail  property transactions (&gt;$1m) in the year to June in WA, up from $403.65 million in the previous year, and up on the five year average, of $690 million.</p>
<p>"In relative terms, China remains the sleeping giant but make no mistake its impact on the global economy will be felt for decades as the most significant economic event of a generation.</p>
<p>"We haven’t seen anything like the extent of its force in WA but Chinese overseas direct investment is expected to overtake inbound foreign direct investment in 2016.</p>
<p>"In other words, there will be more investment dollars moving out of China than moving in. This has the ability to significantly impact investment markets worldwide as the Chinese appetite for investment products increases and WA is going to see its fair share of that market."</p>
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Perth primed for new wave of property investment: Savills

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<p>A fair number of Australians are losing their sleep, literally, as they go through the emotional journey of looking for that dream first home, says a recent survey.</p>
<p>More than 70 percent of Australian first home buyers become emotionally invested during their house hunting, says the research commissioned by St.George Bank.</p>
<p>The survey of 1,000 first home buyers reveals that more than 50 percent of respondents said their sleep hours suffered while 25 percent found themselves losing focus at work.</p>
<p>Ross Miller, general manager for St.George Retail Banking, said the research highlighted how much emotion is involved when it comes to purchasing a property.</p>
<p>“Buying your first home is a major milestone and a huge financial investment so it’s no surprise to see almost three quarters of respondents became emotionally invested in the process." </p>
<p>A good number also reported that they missed out on catching up with friends (45.9 percent), visiting family (34.3 percent) and doing house work (33.4 percent) due to the time it took to search for and purchase a first home.</p>
<p>“In this current competitive market, where a majority (63.5 percent) of first home buyers missed out on purchasing a property because they were outpriced, the pressure can be significant.”</p>
<p>Miller offers some tips to manage the first home buying process:</p>
<p>• Set a budget – it might be tempting to overbid when you find a property you love. Avoid spending more than you want to by having a price range in mind;  </p>
<p>• Take care of your wellbeing – purchasing a first home may take its toll; it can be helpful to take a break and spend time with family and friends;  </p>
<p>• Seek out experts who can help – the St.George Bank team can support you with knowledge about the market and advice on the right products for your needs.</p>
<p> “With record low interest rates, now is a fantastic time to take your first step on the property ladder. Come and speak to your local St.George banker to ensure you make the best decision for your financial future,” added Ross.</p>
<p><strong>Summary of key findings</strong></p>
<p>• 71.8 percent become emotionally invested when buying a property  </p>
<p>• 54.8 percent found that their sleep patterns suffered during the house hunting period  </p>
<p>• 25.3 percent found that their productivity at work suffered during the house hunting period  </p>
<p>• 22.1 percent found that their relationship with their partner suffered during the house  hunting period  </p>
<p>• 45.9 percent missed out on catching up with friends during the house hunting period  </p>
<p>• 34.3 percent missed out on visiting family during the house hunting period  </p>
<p>• 33.4 percent missed out on doing house work and chores during the house hunting period  </p>
<p>• 49.3 percent missed out on purchasing a property </p>
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Emotions run high for first home buyers: St George Bank study

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<p>With life expectancy now over 80 for both men and women, the way people are planning for retirement is changing, especially for the first wave of Baby Boomers now aged between 50 and 69 years old.</p>
<p>Financial security is the key factor in decisions about when people can retire, particularly for being able to maintain the same lifestyle before retirement.</p>
<p>With low interest rates, it is now almost impossible to live from savings alone, which is leading to a shift in how people are thinking about investments, with more seeking high yielding options.</p>
<p>Jason Huljich, chief executive officer for Unlisted Property Funds, Centuria said, “With the lowering of the government cash rate, it is near impossible to live on savings alone and when comparing investments many are leaning towards unlisted property funds -- which over time have managed to outperform government bonds, the ASX and Australian Real Estate Investment Trusts.”</p>
<p>Traditionally, Australians have sought safety in bricks and mortar in residential property using negative gearing to grow their investment portfolio. However, commercial real estate is becoming more accessible as an investment for all Australians through unlisted property funds, which can provide attractive monthly income, tax breaks and also potential for capital gains.</p>
<p>“When investing in commercial real estate, investors should explore how certain suburbs may increase in demand due to new transport links and other infrastructure, the lack of development sites, increasing amenity and how the office workforce is becoming decentralised from CBDs due to lower rental costs and easier commutes,” Huljich said.</p>
<p>“It’s equally important to properly assess the property’s tenants to help gauge the strength of an investment. Tenants such as government organisations and ASX-listed companies are preferable to smaller private companies and these larger tenants tend to have longer lease periods.”</p>
<p>A recent report by BIS Shrapnel has found that the metropolitan office market in Sydney has begun a strong upward swing and by 2018 the vacancy rate is forecast to fall to four percent across the city and stay low until at least the end of the decade. The same report expects that it will take at least until 2020 for new office space to meet demand which is likely to raise rental rates and will, in turn fuel investor expectation of capital growth and see significant price escalations from now until the anticipated cycle peak in 2021.</p>
<p>“The BIS Shrapnel report forecast that suburbs such as Chatswood in Sydney will see commercial rents rise by over 38 percent in the next six years and buildings such as The Zenith, which is part of a new Centuria unlisted property fund, are likely to benefit significantly from this forecast over the next decade.”</p>
<p>The Zenith, a property strategically located in the geographic heart of Sydney’s dynamic economic hub of Chatswood is being acquired by Centuria Property Funds and is available for private investment until 20 July 2016.</p>
<p><em>This article reflects the views of unlisted Centuria Property Funds and its CEO Jason Huljich. Centuria Property Funds manages $1.2 billion across 13 unlisted property funds.</em></p>
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