Despite Mortgage Downturn

Property investors are continuing to grow in numbers despite an overall decline in the number of mortgages across Australia on the back of successive interest rate rises.

We look at why this is the case…

Portfolios is part of Australia’s largest independent brokerage network Australian Finance Group (AFG). Throughout March, April, and likely to continue in May, AFG confirms the emergence of a two tier mortgage market, with the proportion of investors surging as sales to owner occupiers decline.

Property investors accounted for 36.9% of all mortgages arranged in April, the highest such figure AFG has ever recorded.  This compares with 10.2% for first home buyers and 16.3% for up-graders.

The remaining mortgages in April, 36.6%, were for refinancing purposes.

Why The Confidence in the Investment Property Market?

In our opinion there are a number of reasons to be confident in the Australian property market, we offer some below and welcome your comments:

• The volatility in the share markets always serves as a reminder of the stability and strength offered through a property portfolio
• When company profits fall dividends stop – amongst all of this property investors continue to take in rental income and experience changes on an anualised basis not day by day
• Property investors – buy and hold particularly – are long term investors – minor fluctuations in the market, and they tend to be minor in Australia, do not pose a threat to long term investors
• The Australian population continues to grow at rates outstripping the supply of housing
• Australian lenders continue to operate on the conservative side of the market meaning there is confidence in the capacity for Australians to repay their debt – unlike the scenarios witnessed in the American sub-prime market collapse. See the comment by Paul Braddick below.
• Rents are continuing to climb across most markets regional and metropolitan meaning investors can get in and hang on for longer.

Property Investors Still Making Money

Property investors are continuing to see potential in the Australian property market, particularly in key market areas such as rural mining communities, growth cities such as SE Qld and Brisbane. Major growth centres, or smaller towns receiving substantial financial and infrastructure investment are good bets.

This is not so obvious as in the resource rich state of Queensland where property prices in the mining communities are still reasonable and rentals are beginning to climb even on the back of the existing investment.

Confidence Amongst Bankers

Paul Braddick, Head of Property and Financial System Research, is upbeat about the state of the housing market and is cautious when discussing the need for deleveraging of debt in the market place.

Braddick says “Economy wide debt to income ratios, gearing ratios and even debt service ratios tell us little about the underlying sustainability of household debt. The distribution of debt across the household sector, lending criteria applied and the strength of the labour markets are far more telling for debt sustainability.”

“Relative to offshore  experience, lending into the Australian household sector has remained very conservative.  This is reflected in the virtual absence of a sub-prime mortgage market and extremely low delinquency and default rates.”

Braddick’s sentiments are echoed across the banking sector.

What Next?

Braddick sums it up well:

“In the near term, Australia’s growth prospects are bright and much will depend on the RBA and government’s ability to effectively manage the expansion. Higher household debt means the RBA has considerable leverage over the household sector and their actions during the GFC should instill confidence that the present upswing in growth will be handled well”

Source AFG Mortgage Index April 2010.

Source ANZ Australian Housing Update April 21 2010

With all the talk once again of flattening markets in Australian cities astute property investors are looking to regional Australia, Queensland in particular, and with good reason.

There are plenty of opportunities to be found in regional Australia particularly in the resource rich state of Queensland where the mining boom is being re-born in towns where property values are still affordable.

I seriously think we might be staring at another Karratha in the Darling Downs and around service ports like Gladstone. Karratha is a mining town in northern WA wher the property market soared almost overnight due to the intense mining boom of the last decade. Average properties became million dollar hotspots and rents went from average to exorbitant in a short space of time.

The best part of the Darling Downs and Surat Basin area is that property prices are still reasonable and the large projects for the region are starting .It is a case of strike while the iron is hot and this one is hot.

The government and private sector have committed to investing over $10bn in infrastructure which will on its own create significant demand for housing and rental accommodation.

We mentioned in the last newsletter that the largest company to company deal Australia has ever seen has been signed between a Chinese resource company and an British mining company based in Queensland that will see Liquid Natural Gas exported from the Surat Basin to China over the next 20 years.

Putting the Darling Downs aside there’s Gladstone, and surrounding local region, already a strong infrastructure hub set to receive billions of dollars of investment on top of that invested in the last few years in new industry, mining and infrastructure.

Coming back to something more predictable are the growth spots in SE Brisbane. Brisbane and the Gold Coast is the fastest growing population centre in Australia. Areas such as Coomera north west on the Gold Coast Hinterland is a great investment.

Portfolios has investment properties available in all these areas, ask us about places like Chinchilla, Dalby, Kingaroy or Gladstone, Calliope or Coomera. Properties like these ones present a great investment opportunity to enhance any portfolio. We already have clients snapping up these properties sometimes multiples of them.

You can see some of these properties in our Featured Properties section or ask us about other opportunities for you.

The team look forward to working with you to… Make it Happen

Will the market go up?

Will the market go down?

Will it stay exactly as it is?

What is happening out there?

Without predicting the next market movements lets talk about the state of play.

Currently in Australia the economy is looking good, growth is abounding, people are sensing a greater level of confidence in the market as evidenced in a recent news article. CommSec’s National Performance Guage shows that those who owned shares and property have increased their wealth by 8% in the last year and 40% in the last decade.

The way I see it there  are two sides to the property market – what is going on locally and what is going on globally. I just want to focus on the local market for now.

The Australian Economy is performing well. Growth indicators are up, interest rates are climbing in response to strong economic growth and there has been a considerable jump in house prices.

In the favour of property investors is the growing housing shortage facing Australia. It is predicted that Australia will need an additional 800,000 properties than it is currently supplying if nothing changes between now and 2030. This is a phenominal claim, and even if something is done this is great news for property investors.

A shortage of properties means great potential capital gains, as well as increased rentals driving more cash flow positive property, or at least swallowing the gains in interest rates.

Finally, on the economy, banks continue to be tight in their lending – so getting money for that investment property is a challenge without someone like Portfolios to work for you. We have sound long term relationships with a number of banks and financial institutions , with our level of understanding of the finer details of their policies and ways we can often help you where others cannot.

So boom or bust? – the age old question is when is the right time to buy, but a long history of capital growth has taught us that now is always the right time to buy in the long run.

Join The Queue…

What would you say if we said we could help you pay off your home loan in 6 years by buying investment property?

Do you know there are strategies you could be following that could be leading you to financial freedom while paying off your house sooner.

A recent report put out by PRD Nationwide notes that Australian households now need on average 29% of their income to service the average home loan.

There is a significant impost on already cash strapped families, and with rates set to rise – we believe at least 0.5% over the course of 2010 – affordability can only get worse.

Firstly what does this do to the property market?

The first affect could be slowing the rate of people purchasing property – putting pressure on home prices but also then placing upward pressure on rental as more people entre the rental market.

Secondly it can slow the price of houses as people choose to stay away from property.

Australia does continue to face a chronic shortage of dwellings, effectively insulating us from the risk of downward prices to the extent seen in the USA or the UK. However, as people baulk at the cost of owning a home this could pressure the property market somewhat.

But we believe – the astute buyers can still make money in the property market in Australia, both in rental returns in tight markets and in many capital growth hotspots around the country.

Don’t let the cost of home ownership fool you – we can show you ways that you could own investment property and pay off your home much faster than you are doing now. All without affecting nor using any of your household or job cashflow.

By leveraging some of the equity in your home, people can purchase property, and if properly structured through tax savings, deductions and restructuring finances save yourself time and of course money on your home loan.

I would love to have the time to be able to show you our strategy for saving you money on your home loan and at the same time increasing your investment proeprty portfolio, so why not give me a call and I’ll show you how in your situation.

Make It Happen

Paul Pritchett – Founder Portfolios

Welcome to 2010.

As 2010 gets well and truly underway let me welcome you to Portfolios, some of you for the first time, and thank you for your time as we partner together to build a prosperous year.

2010 certainly has an air of distinct optimism in it – in contrast to how we were all feeling this time last year following the global market collapse. By this time last year whilst indicators were looking weak – it was also becoming clear that Australia was indeed faring very well on the global stage and that by the end of 2009 things would be looking up.

Well here we are in 2010 and we even hear people saying “what recession?” optimism is paramount and people are looking again to build their portfolio and position themselves in our ever growing property market.

Portfolios has followed these trends and in 2010 we plan to keep you abreast of what is going on in the Australian property market.

This space is an opportunity for us to be controversial, and for you to respond to that in an open and honest fashion.

I personally welcome you to the Portfolios monthly issue – The Mortar and The Money – and trust we will build a great rapport with you as the year progresses.

Here’s to a great year , a year you will remember…

Paul Pritchett

Hi there and welcome once again to Mortar And The Money. In this issue we look back on property investment first quarter of the calendar year and try to paint a picture of what is to come.

Looking back on the first quarter for the calendar year it has been an interesting mix of growth and stabilisation. There are challenges overseas with the debt crisis looming in Europe, coupled locally with the decision by the Federal Government to introduce a “Super Profit Tax” on our resources sector.Contrast this with the strengthening of the American Economy and the continued growth in the domestic economy and the picture is very interesting.

With the share market taking another battering we remain confident in the property investment market and know there are still great deals out there. It is providing consistent returns and indicators are that this will not change course in the near future.

Our mission at Portfolios through this newsletter is to help you in your property investment journey, providing vital information on the market and helping you make better decisions in your investments.

This month also started the seminar and presentation for Paul with Renovating for Profit, with 9 workshops between May and November. Check out our website for venue and other details.

I encourage you to regularly visit our website and see what is going on in the market, talk to us about your plans and lets see if together we can… Make it Happen.

Paul Pritchett

Founder – Portfolios

Welcome to the July edition of Mortar and the Money.

It has been a wide and varied month. It looks like the worst of the “super profits tax” is now behind us and we can all take another serious look at the burgeoning mining sector and the properties that are looking promising in these regions.

Well another financial year has come and gone, and with many of us racing to file our personal tax returns perhaps its time to stop and look at your tax bill and how you can put more of your tax dollars to work for you through property.

I also continue to look at the renovating market - we had lots of interest in the last article so I thought it might be pertinent to add to this and bring you some more critical information you need to consider when renovating for investment.

I look forward to meeting you soon and welcome your comment and feedback through the website – if it is useful for others we’ll even post it.

So lets make it happen

Paul Pritchett

Founder – Portfolios