Property Investors

EXPERT OPINION

It&rsquo;s time we stopped treating first-home buyers as a protected species and considered the importance of other cohorts in the housing market.

It&rsquo;s become a kneejerk response in mainstream media to cry outrage whenever property prices rise, with concern for first-timers as the justification for strident headlines.

Media seems to never tire of the &ldquo;young Aussies have been priced out of the market&rdquo; storylines. I have a database of articles going back decades showing that this theme has been bashed by media constantly over the years.

The current claims that young adults are doomed to lifetime of renting are a replay of the headlines from last month, last year, two years ago, five years ago, 10 years ago and indeed 20 years ago.

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Were they justified and accurate, the past 18 months would not occurred. Over the past year and a half, we&rsquo;ve seen record buying activity by first-home buyers.

The spectacular price growth seen in that period has been driven, not by investors, but by first-home buyers and other owner-occupier buyers. Helped by a high level of government assistance, they have pumped up demand at a time of low supply, hence the big price rises.

Rising prices make it harder for first-timers to get into their local markets, but otherwise there&rsquo;s never been a time when they&rsquo;ve had so much in their favour.

There are multiple federal and state schemes provided easy access to finance, cash hand-outs and special concessions on costs like stamp duty. The low level of mortgage rates is a bonus.

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Australia is already doing all that it needs to do to smooth the path for budding young buyers.

Beyond that, how about some consideration for other types of buyers.

What about second-time buyers? Consider this scenario: a young couple buys a small apartment as their first home &ndash; it&rsquo;s affordable, well located and suits their lifestyle.

Then they decide to start a family and they need to upgrade to a larger dwelling. For most, this means selling the existing home and buying something more appropriate.

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They&rsquo;re still young, aspirational Aussies seeking to navigate the property minefield of high competition, low supply, rising prices and prohibitive buying/selling costs. But what assistance does this country offer them? The answer is: nothing.

Once they&rsquo;ve bought that first home, they cease to be worthy of consideration or assistance. They&rsquo;re on their own.

So, what about down-sizers? Older Australians rattling around in the family home, with the kids grown and out in the world. The family home is now inappropriate to their needs &ndash; it&rsquo;s too big and it costs time, energy and money to maintain. Ideally, that older couple or individual would like to downsize &ndash; sell the big house and buy a comfortable low-maintenance apartment perhaps.

Many older Australians would like to take that step and we keep hearing politicians encouraging them to do so, to free up those big homes for young families.

But many don&rsquo;t take that step. Why not? Because the costs are prohibitive.

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Selling a home and buying another can easily cost $50,000, $100,000 or more in stamp duty, agents&rsquo; commissions, legal fees, relocation costs and more. When you&rsquo;re retired or approaching retirement, those costs are deal-breakers.

I&rsquo;ve considered making the downsizing decision myself. I won&rsquo;t be doing it any time soon because the costs are ridiculous.

Politicians urge older Australians to make this move, but how much assistance is provided by them in terms of easing the cost burdens? Exactly zero.

And how about some incentives for investors to get active in the market. We have a chronic shortage of rental properties in most locations across Australia because of a series of measures by politicians and bureaucrats over the past 5-6 years that have massively discouraged investors. Australia needs to change course and encourage investors to buy homes and make them available for rent.

We don&rsquo;t need to stop the world and reorganise how our markets work because potential first-home buyers are having a whinge about how tough things are for them. They already have huge levels of government assistance available to them.

Rather, we should be considering ways to help other cohorts in the housing markets who are equally worthy of assistance. 
&nbsp;

It’s become a kneejerk response in mainstream media to cry outrage whenever property prices rise, with concern for first-timers as the justification for strident headlines

terryryder

The first home buyer conundrum and why other buyer segments matter: Hotspotting's Terry Ryder

Investors and first home buyers have both been attracted to Spring St, the newest mixed-use development slated for Box Hill.

The low price point in the project, the first in Box Hill designed by the renowned architecture firm Elenberg Fraser, has both investors and first home buyers on alert, with the latter given the opportunity to get on the ladder in an apartment tower at the centre of everything.

Prices start from a low $395,000 for one-bedroom apartments and $545,000 for two-bedroom apartments, both well below Melbourne&#39;s median of $610,000, calculated by CoreLogic.

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That median value has soared over 2021, having started the year at $576,000. Growth so far in the calendar year has been around 5.6 per cent.

There&#39;s predicted to be continued growth in Melbourne&rsquo;s apartment market, due to its current under-supply in apartments and the return of overseas migration, with both overseas renters and investors playing a major role in driving growth.

Spring St isn&#39;t due for completion until 2024, which gives buyers the opportunity to see the capital gains before the apartment is even finished.

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So far the location of Spring St, on the corner of Spring and Nelson Street, has been one of the most attractive aspects for prospective buyers.

Set in a quiet and leafy area in the bustling heart of Box Hill, Spring St provides convenient public transport, with the 109 tram, trains and buses nearby, as well as local shops and cafes. The ground level of Spring St will also home a number of retail and dining options.

Within a few hundred metres is the Box Hill RSL and Bowls Club, which meets Box Hill Gardens, a one kilometre urban park with sports courts, a running track, barbecue areas, ponds, and a playground.

Box Hill Central is a short walk, as are educational institutions for all ages, including Mont Albert Primary, Our Lady of Sion College, and Box Hill High.

The impressive amenity list at Spring St has also attracted those keen to own and occupy.

The development of 312 apartments will feature a 25 metre pool with spa, a sauna, gym, and a yoga room.

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There will be a games lounge and two entertainment suites, as well as a private dining room with a kitchen, available to book by residents.

Landscaping was a key part of the design, with Tract Consultants creating two outdoor communal spaces, an outdoor garden on the third level podium, and a rooftop garden on level 26.

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The generously sized apartments start from 52 sqm for the one-bedroom apartments, with a further eight sqm of balconies. The average size of one-bedroom apartments in Melbourne is sub-50 sqm.

Spring St&rsquo;s apartments will feature stone bench tops in the kitchen, and floor-to-ceiling glass windows in the living area to maximise the views high above Box Hill Gardens, to the Melbourne CBD, and as far as Mount Dandenong.

Spring St isn't due for completion until 2024, which gives buyers the opportunity to see the capital gains before the apartment is even finished

Joel Robinson

Why Spring St, Box Hill apartments are attracting both first home buyers and investors

Investor lending went up in May, according to the latest monthly data from the Australian Prudential Regulation Authority, but the growth rate was down on the prior wo months.

Strong growth in owner-occupied lending continued with a jump of 0.9 per cent.

Investor lending increased by 0.1 per cent (or $900 million) in May, down on April&#39;s growth rate of 0.3 per cent ($2.1 billion) and March, when it increased by 0.2 per cent ($1.6 billion).

<img alt="" height="519" src="https://s3-ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/pictures/article-images/rba_housing_charts.jpg" width="1200" />

Westpac had the largest rise in the owner-occupied portfolio to $236.9 billion in May but its investor loan portfolio dipped to $177 billion.

The CBA was the next biggest lender to investors with a $161 billion loan book, the the NAB at $100 billion and ANZ at $87 billion. The largest lender outside the big four was Macquarie at $27 billion and Bendigo &amp; Adelaide Band at $15 billion.

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APRA said &quot;the recent sustained growth in home lending continues to reflect robust borrower demand&quot; underpinned by record-low interest rates, government measures supporting first home buyers (such as the First Home Loan Deposit Scheme), and new home building, as well as an optimistic employment outlook.

APRA figures for May show a slowing in investor borrowing

jchancellor

May sees reduced growth in property investor lending: APRA

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EXPERT INSIGHT

Investors have clearly now joined the stampede of buyers rushing housing markets, but the overall home loan market share of investors remains at record low levels, offsetting any concerns by the RBA and financial regulators of potential market disruption.

The ABS reports that the value of national investor lending seasonally adjusted increased by 9.4% over January to $6.4bn which is the highest monthly total recorded since May 2018.

Despite the sharp increase, the overall home loan market share of investors fell to a new record low 19.1% and well behind the long-term average of 33.1%. Recent growth in investor lending still lags the remarkable increases reported by owner-occupiers and first home buyers.

During the similar strong market conditions in 2014, investor market share exceeded 40% which resulted in actions by financial regulators to subdue activity from this group. 

This reflected concerns that record levels of highly-leveraged investors may cause disruptions to housing markets in the event of an increase in official interest rates pushing down home prices.

WA reported the sharpest increase in monthly investor lending over the past year, rising by 47.2%, followed by QLD up 26.7%, NSW up 17.9% and SA up 0.4%. Monthly investor lending in VIC however fell 1.0% over the past year.

NSW accounted for the most investor activity over January with 40.9% of total national activity with $2.21bn in loans approved followed by VIC well behind with $1.47bn, QLD $0.89bn, WA $0.34bn and SA $0.24bn.

The average NSW investor loan reported over January was the highest of all the states at $658,900 followed by VIC 537,388, QLD $441,037, WA $411,649 and SA $368,232.

Although investor lending is on the rise, the overall residential loan market share remains at record low levels with current strong prices growth clearly driven by unprecedented owner-occupier lending activity.

Any misguided move to raise interest rates to quell strong buyer activity would clearly place in jeopardy the current fragile and nascent economic recovery – something the RBA has clearly acknowledged.”

Dr Andrew Wilson is the chief economist at Archistar
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awilson

investors have joined the stampede of buyers rushing housing markets: Archistar's Andrew Wilson

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Expert Observer

The standout feature of the behaviour of our politicians is the degree to which they are out of touch with their constituents and the impact of the decisions they make.

In the real estate sphere, the most startling recent example was the knee-jerk decision-making of state and territory governments in favour of pandemic-affected tenants, without any regard for the impact on the mum-and-dad households who own an investment property.

Equally, our elected representatives collectively appear oblivious to the rental shortage crisis that exists in most (not all) locations across the nation.

The situation has become dire in many parts of Australia, with queues of prospective tenants showing up at open houses and candidates offering more than the asking rent and/or offering to pay six or 12 months in advance to beat the competition.

Here’s the current situation …

According to the monthly report from SQM Research, vacancy rates in our already-tight rental markets fell in six of the capital cities and were unchanged in the other two in January.

The national average vacancy rate fell from 2.2% in December to 2% in January, but five capital cities – Perth, Adelaide, Canberra, Darwin and Hobart – all have vacancy rates below 1%, while Brisbane sits at 1.7%.

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Throughout regional Australia, many centres have vacancy rates below 1% in what represents a national rental crisis for people seeking tenancies. It’s common to find regional locations where the vacancy rate is closer to zero than to 1%.

Keep in mind the industry benchmark is that vacancy rates below 3% represent a shortage of rental properties. Below 1% is a dire situation.

The two biggest cities, where vacancies are highest, showed marked improvements in January, with Sydney falling from 3.6% in December to 3.2%, and Melbourne falling from 4.7% to 4.4%.

SQM CEO Louis Christopher says the figures provide more evidence the worse is over for landlords in the Sydney and Melbourne rental markets. 

He says: “The falls in vacancy rates for the month in those two cities, combined with the increased tightness in other cities and regions, has now brought rental vacancy rates down to below where they were prior to the outbreak of Covid19.”

Christopher says the data, overall, suggests that 2021 will remain largely a tenant’s market in the inner-city areas of the biggest cities “but will also very much remain a landlord’s market for regional Australia”. It would add to that the smaller capital cities – as shown earlier, six of them have ultra-tight rental markets. 
He also notes that rents for both houses and units have risen in the capital cities, on average, over the past month.

In annual terms, the national average is a 10% rise in house rents and a 4% increase in apartments rents.

The growth has been higher in regional markets than in the capital cities, with Sydney and Melbourne rents still lower on average than a year ago.

But there have been strong rises in Perth, Canberra and Darwin.

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In Perth, rents have risen 11.5% for houses and 12.3% for apartments, while in Darwin house rents have increased 27% in 12 months. In Canberra rents have risen around 6% for both houses and units.

The repercussions are spreading well beyond the immediate participants, tenants and landlords. Businesses in regional areas are struggling to find the workers they need because people interested in taking the jobs on offer can’t find anywhere to rent in those areas.

So what are our elected representatives doing about that? Essentially, nothing. They give the impression that aren’t even aware of the problem. This situation is just not part of the national discussion.

Partly mainstream media is to blame. Our major newspapers, especially the Fairfax ones, have been focusing their coverage on the few places in the nation that have high vacancies, specifically inner-city Melbourne and inner-city Sydney and creating the impression that we have an over-supply of dwellings – which is laughable.

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Federal Labor, if they had their way, would make matters worse by scrapping negative gearing, which would be a huge disincentive to investors.

What we need is the opposite – measures to encourage people to buy investment properties and make them available for rental. Rental vacancies are an outcome of the activity of investor buyers – and their absence in recent years is a chief reason we have this crisis.

HomeBuilder is helping the situation by encouraging the creation of new dwellings, but more needs to be done.

If politicians want to help tenants, they need to encourage landlords – instead of treating property investors (most of them ordinary mum-and-dad households) as a criminal class.

Terry Ryder is the founder of hotspotting.com.au

ryder@hotspotting.com.au

twitter.com/hotspotting
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According to the monthly report from SQM Research, vacancy rates in our already-tight rental markets fell in six of the capital cities and were unchanged in the other two in January.



Mum and dad investors hit by favourable COVID-affected tenant rules: Hotspotting's Terry Ryder

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GUEST OBSERVER
For active investors, the Budget comes with positive changes such as in super and home ownership but many are negative such as targeted measures against the banks and sharp cutbacks on property tax breaks. Everyone will be affected by the recently delivered Budget and here are some key features that affect properties:
The government has constantly been pressured to scrap borrowing in super but it has not reversed its position and SMSF operators can still borrow. However, there is a new super cap of $1.6 million and borrowed funds will be computed based on the $1.6 million cap.
Starting 1st July 2017, first-home buyers may salary sacrifice up to $15,000 or a total of $30,000 a year into their superannuation account at a concessional tax rate. They will be allowed to withdraw the cash to use as a deposit on their first home. This measure allows super to be accessed early.
Those who will sell a property investment will be subject to CGT at a marginal tax rate but those who hold a property for more than a year will get a discount of 50 percent on their CGT tax assessment. The negative gearing tax rate remained the same and investors can claim expenses and interest for the cost of an investment property against their tax bill. One advantage of higher interest rates among commercial banks is that the amount that can be deducted in negative gearing increases.
Downsizers may be able to make post-tax contribution to superannuation of up to $300,000 from the proceeds of selling their home, even if they exceed the $1.6 million cap. Investors will no longer be able to claim tax deductions for travel expenses related to inspection, maintenance or rent collection of a property. Many investors have properties a long distance away from their home and they incur travel expenses when they visit their investments.
This change may upset many investors because an outright ban on claims for travel expenses is an absolute loss. It used to have no limit and the allowance may have been abused because the government expects to collect $540 million from the scrapped tax allowance starting 1st of July.
Depreciation deductions may only be claimed on personally purchased items for an investment property, excluding plant and equipment which was included with the purchase. These measures will not please many investors but the truth is, it is to their advantage that negative gearing remained untouched because any changes related to this could have been more dramatic. Investors are relieved that the changes have not gone further as well.
Lastly, foreign property investors will lose the CGT exemption on the sale of their main residence and are now required to report all sales over $750,000 or have a withholding tax applied upon sale. There will also be a new annual levy of at least $5,000 for properties left vacant for more than six months a year.
PS.
Disallowing deductions for travel expenses and depreciating assets not directly bought by the investor may be the thin edge of the wedge and increasing deductions for work-related expenses can be quite worrisome. This change is controversial and some people suggest that if it is a step towards a slow-down of deductions for Australian taxpayers, debate has to begin now.
Ed Chan is the founding partner of <a href="https://www.chan-naylor.com.au/" target="_blank">Chan &amp; Naylor</a>.
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jchancellor-FAypfDUnLy

Federal Budget 2017 features that affect Australia's real estate: Ed Chan

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<img src="https://counter.theconversation.edu.au/content/81319/count.gif?distributor=republish-lightbox-advanced" alt="The Conversation" width="1" height="1">
GUEST OBSERVER
Contrary to the image a property investor might conjure up - a wealthy full-time property speculator - most residential investors in Australia don’t actually rely on it as their primary source of income.
In reality, Australia’s residential investment market is dominated by people who, having bought their own home, have moved onto buying an investment property. These small-scale investors own 83% of all investment properties.
Previous research shows that real estate investors tend to be married, wealthy males with high income and full-time employment. 
A typical rental housing investor is a high-income earner or family partnership, owning one or two dwellings as an extra income source. The probability of becoming a residential investor tends to increase with age and homeowner status, but declines after the age of 65.
<a href="https://www.propertyobserver.com.au/images/2017/08/01/Screen%20Shot%202017-08-01%20at%2011.34.43%20AM.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2017/08/01/Screen%20Shot%202017-08-01%20at%2011.34.43%20AM.png" alt="">
With home ownership rates in Australia at around 70%, the Australian Bureau of Statistics (ABS) reports that residential investment represents, on average, 35% of all housing finance, while the rest are all owner-occupiers. This means residential investment is an important part of the mortgage market and banking system. 
Most residential investment is centred around rent or resale; only a small proportion goes on construction of new homes. And residential investment by corporations or big companies represents only 8% of the market.
Private data from a major mortgage provider used in my research (for the period 2003-09) reveals what the typical real estate investor looks like. They are on average 42 years old; 72% are married; and fewer than two-thirds of investors get finance with a co-borrower. Only a third of investors are female. 
<a href="https://www.propertyobserver.com.au/images/2017/08/01/Screen%20Shot%202017-08-01%20at%2011.35.44%20AM.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2017/08/01/Screen%20Shot%202017-08-01%20at%2011.35.44%20AM.png" alt="">
The Conversation, <a class="license" href="https://creativecommons.org/licenses/by-nd/4.0/" target="_blank">CC BY-ND</a>
According to the same data, residential investors have an average net monthly income of A$8,600, or A$103,200 a year. But if we exclude the 100 investors with a net monthly income over A$100,000, the average net monthly income becomes A$6,617, or A$79,404 a year. 
Residential investors, financing the property with a mortgage, have on average A$934,091 in net wealth (50% of investors have A$581,541 in net wealth). Some of them have diverse portfolios; 6% of investors also own shares with an average value of A$4,884.
The data also show that direct residential investors are mainly professionals, in management positions, small business-owners, or workers with a skilled trade. Overall, 27% are self-employed, relative to the 19% of self-employed owner-occupiers.
Where they invest
The data reveal that direct residential investors invest mainly on existing houses, as do owner-occupiers when buying a property. The ABS reports only 3% of investors’ financial commitments are destined for construction of new dwellings.
Our data shows that residential investors are more willing to invest interstate or in a different postcode than owner-occupiers. While almost half of residential investors invest in a property located in a different postcode to where they live, 11% of residential investors buy properties in states other than the state where they live.
Most residential investors choose rural and regional areas to invest. Many residential investors choose to buy property in big metropolitan cities like Sydney and Melbourne. 
<a href="https://www.propertyobserver.com.au/images/2017/08/01/Screen%20Shot%202017-08-01%20at%2011.37.07%20AM.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2017/08/01/Screen%20Shot%202017-08-01%20at%2011.37.07%20AM.png" alt="">
However, the top 10 postcodes chosen by residential investors to buy property (between 2003 and 2009) include Cairns (QLD), Mandurah (WA), Torquay (VIC), Mackay (QLD) and Launceston (TAS).
Why do they invest?
Our research shows the main reasons for accessing finance to buy a house, other than to live in it, are income and wealth accumulation. 
Some investors invest because they see it as a long-term, secure, “bricks and mortar” investment. To these investors other types of assets (such as shares and bonds) may seem harder to understand and it may be more costly to enter these markets. 
A proportion of real estate investors see it as a source of permanent income, while others speculate on the potential capital gains in real estate and invest expecting to increase their wealth. 
This reason becomes more prominent during periods of strong house price appreciation. For example, between 2003 and 2009 year-to-year average house price inflation has been 8.9%.
Academics have also argued that the Australian taxation system motivates – rather than facilitates – housing investment, as investors are able to access 50% deduction on capital gains and negative gearing. Another motivator to invest in real estate may be more mortgage finance access; for example, between 2003 and 2009 the average 12-month housing credit growth has been of 14.6%. 
Of course there are other reasons to invest, such as moving up or down and maintaining other property as an investment, or getting a holiday home and keeping it as an investment too. There are also “unintentional” real estate investors that may have inherited or acquired property.
Most residential investors are your average Australians, who invest in rural or regional areas as a secondary source of income and to gain equity. So when thinking about who is the typical Australian retail investor, you could probably look at your neighbour.
<a href="https://theconversation.com/profiles/maria-yanotti-349557" target="_blank">Maria Yanotti</a> is Lecturer of Economics and Finance Tasmanian School of Business &amp; Economics, University of Tasmania and author for <a href="https://theconversation.com/au" target="_blank">The Conversation</a>.
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Who is the typical investor in the Australian property market?

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GUEST OBSERVER
If you are looking for a home or property investment that is affordable, has great lifestyle appeal and a solid future, then look no further than 90 minutes south of Sydney to Wollongong. Our local buyer's agent has helped us pin point seven reasons why we believe this area is set to perform.
Wollongong is perhaps best known for its steel works at Port Kembla. Since the original furnace opened in 1930, Wollongong has burgeoned into a vibrant city (officially recognised in 1942) while retaining its relaxed coastal lifestyle.
Since the late 1970’s, Wollongong underwent dramatic change as its economy diversified and transitioned from predominately manufacturing to other industries such as tourism, information technology, hospitality, health services, education, construction, public administration and telecommunications.
This led to large investment in infrastructure, such as the electrification of the Sydney to Wollongong rail line in 1985. The population rapidly expanded as Sydney became within commuting distance and Greater Wollongong is now Australia’s 10th largest city with a population of almost 300,000 people. The Wollongong local government area (LGA) is forecast to grow by around 16.5% over the next 20 years while the CBD was predicted to double between the end of 2014 and mid 2017 thanks to the refurbishment of Crown Street Mall and a number of large apartment buildings due for completion during that time.
Wollongong has changed significantly over the last few decades and I believe real estate in the region is set to shine in 2016 and beyond. Here are the top reasons why:
1.  The ripple effect
The median Sydney house price has grown by around 50% since the start of the growth cycle in 2012. The growth cycle started in the inner ring suburbs and then gradually moved to the middle and outer ring suburbs. Many people are now priced out of the Sydney market and looking to buy in regional areas such as Wollongong, the Southern Highlands and Newcastle.
Wollongong has the unique benefit of being only 80km or 90 minutes via road or rail to Sydney, which allows residents to commute to Sydney. In fact, around 20,000 Wollongong residents do this, which allows them to access higher wages in Sydney while having the attractive lifestyle and lower living costs of Wollongong.
The commute time will be drastically reduced in the future as Stage 2 of the WestConnex project (opening in 2019) will have a ‘tunnel stub’ at Kogarah Golf Course near Sydney airport for the proposed ‘Southern Connector’ freeway linking the M5 in Sydney with the F6 in Wollongong. Once the exact route is announced, Wollongong prices will boom.
2.  Value for money
With a median price of $665,000, you can buy a house in Wollongong for around two-thirds of a Sydney house, which has a median price of $987,000. This is despite being a large city with all the associated amenities and enviable coastal position. However, growth has started to pick up as people realise the value and lifestyle on offer, so I don’t expect this large gap to remain for long.
The northern suburbs are the most expensive in Wollongong as there is a natural geographical boundary between the ocean and the escarpment which limits supply. They also have beautiful beaches, picturesque ocean pools, seaside restaurants and easy access to hiking trails in the Illawarra State Recreation Reserve. Properties located east of the train line are naturally more expensive than those on the western side. Houses in Fairy Meadow, Towradgi and Corrimal are relatively good value as they are priced around the Wollongong average, are relatively close to the CBD and have their own beaches and rail stations. Bellambi is also worth a look as it’s only one station past Corrimal but about $100,000 cheaper.
The Steelworks is located south of the CBD at Port Kembla, Southern suburbs with good prospects include Figtree and Unanderra which have yields for houses and apartments of around 5%. Further south, especially to the west of Lake Illawarra, many developers are offering house and land packages however some of these lack differentiation from their peers, hindering future capital growth. The $1.5 billion Shell Cove project is expected to be completed in 2019, which will include residential property from houses to high density apartments, a town square, shopping precinct, hotel and marina with 300 berths.
3.  Relaxed coastal lifestyle, beaches and entertainment options
Locals love the relaxed Wollongong lifestyle. Beaches and shops aren’t crowded and traffic is a breeze compared to Sydney. From cinemas to golf clubs, art galleries and museums including the interactive Science Centre and Planetarium, Wollongong has it all. The city is now a destination rather than just a cheaper alternative to Sydney and its tourism industry has flourished as a result.
4.  First-class university, hospital and excellent schools
Wollongong University was ranked in the top 10 universities in Australia in 2015 and has over 30,000 students enrolled with almost 500 degrees on offer.
Wollongong Hospital has over 500 beds and recently underwent at $106 million capital works program including the construction of the Illawarra Elective Surgical Services Centre which opened in December 2015. The state-of-the-art facility houses over 100 new beds and a larger intensive care unit (ICU). It can now offer more advanced services, especially in urology and vascular surgery, without referring patients to Sydney.
There are also many well regarded schools in Wollongong including Smiths Hill High School which ranked in the top 50 NSW schools in 2015.  Top class education and hospital facilities are good drivers of local property growth.
5.  Great family and community atmosphere
Wollongong has a fantastic community atmosphere. The area is popular with families and couples, which are the most common demographic of the city. The council also puts on regular free events for locals from community walks to live music performances and beach clean-ups, which help to create a sense of community spirit. The council also provides the free ‘Gong’ shuttle bus which loop in both directions every 10 to 20 minutes from Wollongong Station to Wollongong University via Wollongong Hospital, Burelli Street and the Innovation Campus.
Compared to regional NSW, Wollongong has a higher proportion of 18 to 49 year olds and a lower proportion of other age groups. This is a bright sign for the future because this includes parents in their child bearing years and the majority of the working population.  
6.  Heart of the Illawarra region
Wollongong is the central hub for the Illawarra region and benefits from both locals and tourists from the Royal National Park in the north to Kiama, Gerringong, Nowra and Jervis Bay in the south.
There are over 80,000 jobs in Wollongong and approximately one quarter of the people that work in the city live outside the area. As well as the university and hospital, Wollongong also has all the major stores including department stores Myer, David Jones, Target and Big W.
7.  Local attractions
You can easily spend a week hiking the trails around Wollongong and exploring the beaches, coves and ocean pools dotted along the coast.
The Sublime Point walking track winds though lush coastal rainforest and takes you deep into the Illawarra escarpment.
Wollongong's Blue Mile located along Cliff Road is the best vantage point from which to absorb the beauty of the South Pacific Ocean to the east and the magnificent of the Illawarra Escarpment to the west. The newly constructed boardwalk along the harbour and foreshore is perfect for a casual walk or jog. You can even stop for a coffee or delicious lunch at one of the many seaside dining options along the way. While you’re there, stop by the historic Belmore Basin Lighthouse for a trip back in time and stop to enjoy the view.
Alternatively, the Grand Pacific Drive between Wollongong and Sydney offers great views from the car and takes in breathtaking coastal views and passes over Sea Cliff Bridge – a beautiful road suspended out from the cliff.
There are too many attractions to list here so make sure to leave plenty of time when you visit, because when it comes time to leave you will wish you didn’t have to!
 Rich Harvey is managing director, <a href="https://www.propertybuyer.com.au" target="_blank">www.propertybuyer.com.au</a>
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The seven reasons Wollongong is set to shine: Rich Harvey

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In the December quarter, the gap between rates for investors and owner occupier borrowers widened, with investors now paying 0.21 per cent more on average, RateCity report.
Despite higher rates for some investors, overall mortgage rates fell for both variable and fixed, with the largest cuts applied to the 3-year fixed rates.
"Interestingly, fixed rates – including 5-year terms – are more competitive than variable rates on average and the gap is widening, making fixed rates an appealing option for some people now," RateCity money commentator Sally Tindall noted.
"However, competition in the variable space is driving sharper deals than fixed.
"For example, variable rates are sitting as low as 3.69 per cent, while one of the lowest 5 year fixed rates is 4.39 per cent," she said.
She noted home loan rates have gone both up and down in the space of three months.
The major banks all chose to hike rates by an average of 0.18 percentage points on the back of APRA’s requirement that they hold more capital while competition at the bottom of the market sharpened with around 25 lenders choosing to cut their lowest variable rates to as little as 3.65 per cent.  
"Unsurprisingly, existing mortgage holders primarily missed out on this news as the majority of these cuts were for new customers only.
"The most dramatic change occurred in investor borrowing where there was a $2.1 billion drop in lending figures in just four months.
"The falls came on the back of the introduction of higher home loan rates for investors of up to 1.44 percentage points, with around half of the market adopting this two-tiered pricing structure. 
"We expect lenders will continue to tweak their home loan products in the year ahead in an attempt to reduce risk and control investor growth including a continued tightening of LVR requirements."
<a href="/images/2016/01/22/Screen%20Shot%202016-01-22%20at%208.55.44%20AM.png" target="_blank">Click to enlarge</a>
<img src="/images/2016/01/22/Screen%20Shot%202016-01-22%20at%208.55.44%20AM.png" alt="">
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Gap between rates for investors and owner occupiers widening: RateCity

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<img src="https://counter.theconversation.edu.au/content/77402/count.gif?distributor=republish-lightbox-advanced" alt="The Conversation" width="1" height="1">
GUEST OBSERVER
Investors have played an increasingly important role in the Australian housing market in recent years. Our new research shows the actual return rate for housing investors almost doubled a layman’s expectation. Experienced investors are taking advantage of the knowledge gap and might continue to price out other housing buyers. 
The sharp increase in investor credit in recent years could be partly attributed to the strong growth of housing prices, particularly in Sydney and Melbourne. However, the reported capital gains might not have fully reflected investors’ actual returns as the impact of debt financing in property investment has been neglected. 
Since housing investors typically use large amounts of debt to fund their investment, using the return on equity (after adjusting for debt financing) more accurately reflects their actual return. 
In recent years, regulators such as the Australian Prudential Regulation Authority and lenders have implemented measures to moderate the growth of investor lending. Despite these efforts, investors have come back into the housing market since the second half of 2016. 
Proportion of housing investment loans
<a href="https://www.propertyobserver.com.au/images/2017/05/26/file-20170523-8895-1g4m2hp.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2017/05/26/file-20170523-8895-1g4m2hp.png" alt="">
<div class="enlarge_hint">ABS, Housing Finance, Australia: February 2017</div>
 
<h2>Higher returns come with greater risk</h2>
Our research sampled properties in 14 suburbs across Sydney, using the Property Investors Alliance database. The results provide some empirical evidence to demonstrate the housing return on equity with debt financing is significantly higher, at an annual return of nearly 14 percent per year, than the housing return on property without debt financing of about 7 percent per year.
This could explain the increasing proportion of investment loans in the housing market. The knowledge of investors’ advantage should also be used to inform the ongoing debate about regulating investment housing loans to enhance housing affordability for first home buyers in particular.
It is important to highlight the effect of debt financing on decisions to invest in housing. The results clearly show the enhanced returns are likely to have an acute impact. 
At the same time, a higher risk level as a result of the use of debt financing has also been documented. This highlights that housing investors should closely manage their exposure to financial risk from using debt financing by using a prudential risk-management tool.
Returns and risk on housing portfolios: 2009-2015
<a href="https://www.propertyobserver.com.au/images/2017/05/26/file-20170511-21598-1gyjv43.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2017/05/26/file-20170511-21598-1gyjv43.png" alt="">
Author provided
<h2>Explaining the increased rate of return</h2>
We used an assumption of 20 percent equity to demonstrate the impact of debt financing, which is in line with the current deposit requirement from major banks. Here’s an example to demonstrate the effect of debt financing. 
Say an investor buys a house for A$1 million. The investor provides a 20 percent deposit ($200,000); therefore $800,000 was borrowed. The investor took an “interest-only” loan with an interest rate of 5 percent per year – so the interest cost is $40,000 per year. The investor also receives a net rental income of $30,000 in Year 1.
A year later, the investor decides to sell the property for $1.1 million (its value having increased by 10 percent over the year). The traditional performance analysis of property (without debt financing) would show the return on this housing investment is 13 percent: ($1,100,000-1,000,000+$30,000)/$1,000,000 = 13 percent. 
Given the housing investor used debt financing, 13 percent is not the actual return for the investor. The investor’s actual return on equity for the investor is 45 percent: ($300,000-$200,000)+($30,000-$40,000)/$200,000 = 45 percent. 
Property returns vs equity returns
<a href="https://www.propertyobserver.com.au/images/2017/05/26/file-20170520-12263-sf1nd0.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2017/05/26/file-20170520-12263-sf1nd0.png" alt="">
Author provided
<h2>Experienced investors exploit their advantage</h2>
Overall, the results suggest the actual return rate for housing investors is significantly higher than the layman might expect from the major housing index providers. 
The documented returns may not be applicable, however, to owner occupiers who are also using debt financing, via mortgages, to buy their property. There are two main reasons for this:
<ul>
<li>
owner occupiers mainly use their houses for their own residency purposes, so no rental income will be generated to offset the mortgage repayment; and
</li>
<li>
housing investors are able to sell their properties whenever they want to realise gains in value, while owner occupiers do not have that flexibility.
</li>
</ul>
Importantly, experienced housing investors, in the current low interest rate environment, have realised the benefits of debt financing and taken advantage of the knowledge gap to exploit the higher returns available to them.
These findings also highlight the need for an innovative product to assist home buyers to enter the housing market.
Chyi Lin Lee is associate professor of Property, Western Sydney University and author for The Conversation. He can be contacted <a href="https://theconversation.com/profiles/chyi-lin-lee-368009" target="_blank">here</a>.
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