Winter has well and truly hit in WA. Real Estate agents know they have to work extra hard to sell their clients homes at this time of the year as many buyers stay at home instead of venturing to home opens and otherwise beautifully presented homes for sale don’t look their best through the rain and bleak winter days.
However this is upside to selling in winter. Less competition and fewer houses on the market can be in your favour together with the following tips:
Leaky gutters, broken roof tiles and other winter problems become more obvious and more important to fix in winter. Ensuring everything is in proper working order will prevent any problems arising in your home opens or after sale.
Focus on making your home winter friendly
for home opens, first impressions count. Ensure your home is warm with heating, there are welcome mats for wet and muddy shoes and even an umbrella stand can make all the difference in welcoming potential buyers.
For Sale Photos
Just because you’re selling your home in winter doesn’t mean your photos need to be wintery! Twilight photos are a great way to make your home stand out on the property portals when sunny days are hard to come by. This will assist your property to stand out above the crowd when others sellers have their photography done on overcast days
Some homes are positioned so they get great winter light and can really stand out during the cooler months. Regardless, by opening all your blinds and curtains you can maximise light for your home opens and photographs.
Additional lighting such as floor lamps and stronger light bulbs can assist creating a warmer environment.
Interior Space Appeal
Although many Perth homes focus on the outdoor BBQ and alfresco areas, use winter as a time to showcase your homes internal features such as a kid’s indoor playroom, theatre rooms and indoor entertaining areas.
You can also feature external areas that are winter friendly. These can be an alfresco that can be sheltered with roll down blind’s, heated/well insulated tool and storage sheds and outdoor heaters and lighting.
Although we can’t control the weather, these tips will help you maximise your house regardless of the weather. Our real estate agents are experienced with selling properties no matter what the circumstances.
Becoming a parent can be an exciting journey. It can also be an expensive one so it’s important to prepare for the new addition in your life.
Here’s some tips to expect financially when you’re expecting:
The upfront costs
Before having a child, it pays to be organised and be prepared for the upfront costs. These may include:
- Baby clothes and equipment
- Upgrades at home—you may need to make baby friendly changes, paint and decorate the baby’s room.
- Doctor’s bills and hospital expenses.
Saving for these well in advance will assist greatly especially if one parent will be taking time off work or a reduction in income.
The ongoing costs
Many parenting blogs out there say new parents underestimate the ongoing costs of raising a child/children.
According to the AMP.NATSEM survey, a first child can cost on average $281 per week. Food, clothes, child care, education, hobbies and a range of other costs can continue growing and impacting your household budgets.
Just like upfront costs, planning ahead and even considering school fees now will only help set you up for success down the track
Taking the time now before baby comes to get your budget in order and creating a long term savings plan will help you in your new role as parents.
When planning to balance your household income and expenses, factor in your household income before and after the baby’s born (taking into account any loss of income) and consider:
- Essential living costs such as loan repayments, mortgage/rent and other regular ongoing expenses.
- The upfront and ongoing costs mentioned above
- Paid parental leave you or your partner may receive from your employer/s
- Any government contributions you may be entitled to.
- Day care and other care expenses.
Your Savings Plan
With a budget in place, you’ll begin to understand the costs you’ll need to be prepared for. Sticking to this budget will be easier if you set up a baby savings plan and automatically save money for these upcoming expenses.
The earlier you start saving the better, even if you’re not starting a family just yet, you can still put a savings plan in place today.
Starting a family is a major life event, so it’s important to seek help in managing your finances if you need to. Getting professional advice ensures you can make the most of any money you earn before the baby’s born and avoid financial stress at a time that can be one of life’s most special events.
Recent research has found that 95% of working Australians are not financially prepared for a comfortable retirement and a significate number continue to delay planning for life after work. There is usually a gap in what they envisage for their retirement and what the reality is.
Around 87% will be dependent on welfare so if the pension age is increased to 70, many of us will need to consider working longer to have an income and build more retirement savings.
Think you’re too young to start worrying about retirement? Decisions you make now regarding life style and financial choices will make your retirement what you want down the track.
Whether it consists of golf club memberships, living in your dream home or luxury holidays, here’s our top tips to ensure you’re retirement ready:
Think about retirement when you think about saving
It really does pay to start thinking about your retirement when you save today.
Although in Australia if you’re employed a percentage of your income is paid to prepare for this, it’s not always enough for your future needs. The more of your income you set aside for retirement, the easier it’ll be to retire comfortably. By saving early you can ensure your retirement benefits from the value of compound interest.
Have a plan
When it comes to retirement most people don’t have a plan or retirement strategy. The success of this plan is the cumulative effect of the small steps and decisions you make each day.
By evaluating this plan, you may need to adjust your lifestyle choices of today to make it a realistic one. Living a champagne lifestyle today may get you a beer budget come retirement.
What age will you retire?
Do you know how many years your retirement savings need to provide enough income for? These days it can be safe to assume that many of us will live to the age of 90 or beyond.
With many of us wanting to retire in our 60’s, there is usually a big difference in the age people say they want to retire to when they actually do.
Insurance is important
Taking out insurance to protect your retirement plan is an important part of your strategy.. There are many types of insurance that should be considered include life insurance, health insurance and long-term care and can make the difference between a comfortable retirement or financial stress and worry.
The exciting part of getting ready for retirement
When transitioning from work life to retirement, we work less and play more. It’s more than just money we’ll need, but the reality is all retirement dreams need money — to a degree. Thinking about things like relationships, health and a life that engages your interest and fulfils you can help you save more.
Once your financial goals are in place and your retirement plan filled with motivating interests, you’re find yourself one step closer to a comfortable retirement in all areas!
Want to retire earlier? Do you know how much you need?
If you need assistance is creating a retirement plan and strategy, contact one of our wealth creation specialists today. They can help you create what you really want; a financially secure future, a retirement to look forward to and to enjoy life’s luxuries along the way.
Start your plan now
It all sounds so simple doesn’t it? I’ll buy a block of land or a house, then I’ll demolish and build multiple units. Then I’ll sell some, then I’ll….. and it gets a bit too much.
Most of us get on the property investment bandwagon to increase our net worth, generate income and inevitably achieve financial freedom.
Contrary to popular belief you don’t need to be earning six figures to start investing, in fact most successful investors I know all started out small.
Here’s some top tips on getting started and not pushing the comfort barrier too early:
1) Save something every week
Whether it’s $50 or $500, get into the habit of putting something aside each and every week to boost your starting balance. It’s not about how much you save if you’re only doing it every now and again, it’s about making that commitment week in, week out. The major banks will expect to see a history of geuinine savings when you apply for your next loan.
2) Research the market and find an affordable area to get your start
You don’t have to launch straight into a million dollar investment. Purchasing a smaller investment will get you into the market and open up your options. You will also learn and grow by taking action, not by thinking about it!
3) Be patient
We are a culture of wanting everything now including huge financial returns but that’s not the way property investing usually works. Entering the property game is a long term strategy that will get you to your financial goals, if you stick with it.
4) Get creative
There are an abundant of great investment opportunities out there, may of which are not where you’d expect to find them. Do your research, meet industry experts and you will find the perfect opportunity to start.
5) Consider joint ventures
Owning a share of something is better than owning nothing so if you’re still unsure or not ready to go out alone why not consider investing with other people. It’s a good idea though to invest with people who have experience already that you can leverage off.
Property wealth can seem like its ever so slow at first, but it soon accelerates. The key is you have to make a start, no matter how small. With property investment all you need is time, the right information, and patience.
Leave a comment and let me know. Is there something you’re stopping yourself from doing because you’re not willing to start small or at all?
There’s concern in the marketplace at the moment over the prospect of an apartment glut in some of our capital cities. While Melbourne has been at the centre of discussions for some time, now Sydney and Perth are finding themselves the subject of media articles on apartment oversupply.
Australia as a whole is well known for having a housing shortage, which is why property is typically seen as a sound investment.
So how can we now be facing an oversupply? Well, in short, it generally comes down to whether the right type of housing is being built in the right areas. Large apartment blocks bring plenty of accommodation to market. But small flats in the CBD only appeal to a certain demographic. Is there enough demand from single professionals and students to fill them?
New and off the plan apartments are appealing investments. They offer a host of benefits: affordability, the option to secure a property with just a deposit, minimal maintenance and the ability to maximise depreciation claims, to name a few.
Some areas, such as inner Sydney, have also delivered impressive capital growth in recent years, returning 12% on average over the last 12 months according to RP Data.
It’s easy to see why investors are drawn to these opportunities. So, should you be considering these types of investments in the current market or are you wise to stay away?
What’s happening?Inner city apartment development has gone into overdrive in Melbourne in recent years as developers have sought to capitalise on the population boom that was fuelled by overseas and interstate migration. Unfortunately, the now slowing population, coupled with many inner city complexes poor reputation for quality and below-standard floor space, has resulted in a glut.
Consequently, price growth in the Melbourne market has been poor, declining more than 2% over the past 12 months and vacancy rates are at 4.6% (SQM Research).
What can we expect? The outlook from BIS Schrapnel’s latest housing report isn’t rosy with continuing poor capital growth and vacancy rates predicted to rise further over the next 12 months.
What this does suggest is that the market is bottoming out. The next couple of years may provide investors with an opportune time to buy in low before the market turns. Selecting quality properties from reputable developers will be key.
What’s happening? Sydney’s inner city apartment market is caught in the middle. On one side there are those who are confident the market will remain undersupplied for at least the near to medium term. On the other, there are those concerned over the influx of Chinese developers and the growing pipeline of supply.
Currently, there is still strong demand from young professionals and students – plenty it seems to absorb supply. However, it could be a different story in a couple of years.
What can we expect? BIS suggests that the level of supply hitting the market combined with affordability issues from skyrocketing price growth could see a price decline in 2016. As I have discussed frequently in my blogs, understanding how to read property cycles is essential to maximising returns. Consider where Sydney CBD apartments are at in the property cycle and what returns are likely before it peaks and enters decline.
What’s happening? Perth has also experienced a surge in inner city development in recent years driven by the resources boom and the ensuing large workforces.
Unfortunately, the mining downturn is now having the opposite effect – rising vacancy rates (sitting at a very undesirable 9% for city units according to RP Data) and slowing price growth have been well reported.
What can we expect? Perth as a whole certainly appears to be trending downwards and BIS forecasts this trend to continue for at least the next three years. As with Melbourne, this presents an opportunity to buy in ahead of the next upswing. Agriculture is tipped to be the next driver of economic growth in WA and investment in civil infrastructure, particularly in inner city areas, will create a highly desirable lifestyle that will help drive the next boom cycle.
For investors already in these markets, a long term strategy is required, with the possible exception being Sydney where some capital gains could be realised in the next 12 to 24 months if nimble investors keep their finger on the pulse.
For those ready to invest now, I would suggest keeping your eye on the Perth and Melbourne apartment markets over the coming months and re-evaluate the situation in 12 months time. In 2014, consider other housing types and locations where demand drivers are more favourable.
Last week I looked at three regional towns currently delivering strong rental yields with good prospects for future capital growth. This week’s blog highlights three capital city areas with promising investment profiles for strong rental return and capital growth prospects.
Units, over houses, are generally performing better across the board in capital cites.
Brisbane – City
· Yield: up to 7% (units)
· Vacancy Rate: 4.5%
· Growth (1yr/3yrs/5yrs): 0.11%/3.33%/1.09% (units)
Sources: RP Data, SQM Research
Why Invest: The Brisbane market has now entered its next growth phase after a period of decline. Investors have the opportunity to buy-in at very affordable prices, considerably less (up to 45%) than the Sydney and Brisbane medians for quality inner city units.
Brisbane has been undergoing transformation in recent years and along with fantastic weather now counts world-class culture, entertainment and dining options among its draw cards. It’s also investing heavily into infrastructure with $132 billion of projects planned between 2010 and 2014, with a significant focus on improving transport.
Queensland is also one of Australia’s most resources-rich states with a massive LNG export industry that’s only in its early phases of development, further strengthening the state’s industry with significant flow-on effects to Brisbane.
Top tip: Investor demand is most definitely on the rise in Brisbane – apartment sales in 2013 almost doubled that of 2012. Get in now and make the most of the current affordability and opportunity to maximise growth. Look for boutique apartments with unique features.
Risks: Apartment oversupply is an issue in Brisbane, as it is with many Australian capital cities. This could result in slow rental and capital growth, and high vacancy rates in the short to medium term until supply is absorbed.
Sydney – Western Suburbs (e.g. Whalan, Mt Druitt, Lethbridge Park)
· Yield: 6-7%
· Vacancy Rate: 0.7%
· Growth (1yr/3yrs/5yrs): 15%/35%/34% (Averages)
Sources: RP Data, SQM Research
Why invest: Sydney’s market has boomed in recent years prompting investors to look outside the usual inner city areas – which have reached unaffordable heights – to suburbs where they can secure decent sized blocks for renovation or development and where the low buy-in can facilitate good yields.
While not considered highly desirable locations to live in the past, suburbs such as Whalan, Mt Druitt and Lethbridge Park, which all fall within the local government area of Blacktown, have emerged as areas worth further investigation for these very reasons. Despite the LGA’s rapid population growth – a 25% increase over the last 10 years – median property prices range from just $270,000 for a unit to $410,000 for a house across Whalan, Mt Druitt and Lethbridge Park.
They might be 40km from Sydney’s CBD, but transport connections are excellent which is one of the area’s most desirable features. There are direct rail lines to central station and close access to major motorways. Vacancy rates are extremely low at 0.7% and the area is very popular with families.
Top Tip: These outer suburbs are ripe for renovation projects and larger blocks mean the addition of granny flats to increase income are also worth considering.
Risks: Sydney’s capital growth over recent years has been huge and is now slowing. A ‘crash’ is unlikely but investors should be aware that growth will more than likely to be slower than recent years and this is cash flow investment rather than a capital growth investment.
Perth – City of Bayswater
· Yield: Around 5-6% for units
· Vacancy Rate: 1.9%
· Average Annual Growth: 10% (houses and units)
Sources: RP Data, SQM Research
Why invest: It has been reported that slower growth, sales and rising vacancy rates suggest that Perth’s booming property market is softening and maybe reaching – or have already reached – its peak. However, this doesn’t mean good yields can’t be found in certain pockets within the city.
Bayswater council – which includes the suburbs of Bayswater, Maylands, Morley and others – has plenty of highlights. It’s just 7km from the CBD, the Swan river is on its door step, there are excellent bus and rail connections and a lively cultural and entertainment precinct in neighbouring suburb, Mount Lawley.
Top tip: Morley looks to be one of the most interesting of the suburbs within Bayswater due to its recent and future development. Despite not having its own train station, unlike some of the other Bayswater suburbs, it has superb bus infrastructure – the CBD is only around 15 minutes by bus. Major roads are also easily accessible and the light industrial area in Ashfield, under development, is within a couple of kilometres.
In 2011, the $60 million Coventry Square, Perth’s biggest markets complex, opened in Morley, creating a major tourist and entertainment destination.
A masterplan for the further development of the Morley city centre has also been approved. The plans include a new central park, improving public transport, upgrading streetscapes and public spaces, and making streets more pedestrian friendly.
Risks: The Bayswater area has experienced good capital growth in recent years and could slow based on the broader market indications for Perth.
Below are my top three high yield location recommendations.
While these can change monthly, they have been and are currently performing and in my expert opinion, look like they will continue to perform well.
- Yield: up to 9% – 10% (units are currently attracting the best yields)
- Vacancy Rate: 1.9%
- Growth: Flat to negative
Source: RP Data, SQM Research
Cairns, the gateway to the Great Barrier Reef, should be back on investors’ radars following the announcement of the proposed $8.15 billion Aquis Great Barrier Reef Resort development in the northern end of the town.
Why invest: While the proposed Aquis resort development still requires some approvals before construction can begin, it’s already having an impact on the local market. The proposed 343ha development features eight hotels totalling 7500 rooms, two casinos, a golf course, shops, an aquarium, theatres and more.
According to plans, the first phase of construction will create 3,750 construction jobs and 11,000 operational jobs. The second stage will create 3,500 construction jobs and 9,000 operational roles. Its location is 13km north of Cairns, just outside Yorkeys Knob.
Top tip: While the suburbs closest to the proposed development have experienced a sudden surge in demand, the locations to look at now are those in the southern Cairns area where property is more affordable, while still benefitting from the project and producing decent yields. Suburbs such as Woree, where units are currently delivering 10% yield, have a number of schools and other local amenities, which add to the appeal. Once the Aquis project has final approval, the market is expected to take off in a big way and those seeking to maximise capital gains, as well as yield, will need to weigh up the risks and get in quick.
Risks: The obvious risk here is what will happen to the market in the event the Aquis project doesn’t receive final approval? Cairns has a robust tourism industry and purchasing in an area that is less reliant on the Aquis attraction as the main drawcard (such as those with schools) and with a large proportion of owner occupiers will help minimise any negative impact should the project not come to fruition.
- Yield: 8-10% (houses)
- Vacancy Rates: 6.1%
- Growth: -20% since 2011
Source: REIWA, SQM Research
Why invest: Despite having undergone a significant house price correction over the past two years, rental yields in Karratha have remained relatively strong, and well above the national average.
The drop in property prices is now providing investors with an ideal opportunity to access the market at the bottom of the current cycle ahead of expected upward swing as the population continues to grow and absorb current supply on the back of developing local & resource infrastructure projects over the coming 18 months..
Recent news that the development of Anketell Port is progressing through initial approvals should help further ignite the market and stimulate population growth once in full swing.
The WA government has unveiled a master plan for the multi-user, multi-commodity deepwater port which is to be located just 30km from Karratha. The plans would see Anketell have an eventual export capacity of more than 350 million tonnes a year. This would be more than double the total exports through the nearby Dampier Port and 20% larger than shipments at Port Hedland, placing it as Australia’s biggest export facility. The government estimates the project would create 4,000 construction jobs.
Major investment into civil infrastructure in Karratha is also underway to redevelop and revitalise the town and support the projected population increase.
Fundamentally, Karratha remains the service centre for Chevron’s Gorgon LNG project – Australia’s largest ever single resource natural gas project – and
Woodside’s Pluto LNG project – both which have lifespans of 40 years.
Top tip: Take advantage of the current low prices to maximise capital growth and secure a quality property that will appeal to the corporate leasing market.
Risks: Resource towns can experience higher volatility and relatively short market cycles, compared to capital cities. Investors should have a comprehensive strategy in place focused on investing for the medium to long term to ensure they’re financially prepared to withstand volatility periods.
- Yield: 9-12%
- Vacancy Rates: 3.7% and declining based on current trend
- Growth (1yr/3yrs/5yrs): -6.38%/16.79%/56.86%
Source: RP Data, SQM Research
Why invest: South Hedland is a major residential area forming part of the economic powerhouse that is Port Hedland. Port Hedland is now the largest bulk commodity port in Australia, used predominantly by iron ore giants BHP Billiton and Fortescue Metals Group. Both companies have invested billions over recent years to upgrade and expand port infrastructure to facilitate a ramp up of exports. The town’s next mega project – rail and port infrastructure for Gina Rinehart’s $10 billion Roy Hill iron ore project – is now underway.
Investment into civil infrastructure has also been significant in South Hedland. A new town centre, waterpark and sports stadium, among other projects, have all helped create a very desirable lifestyle and multiple commercial opportunities.
In just three years, Hedland’s economy has grown by more than 60% and the rapidly increasing workforce has resulted in a population surge. The town counts 20,000 residents today, rising around 30% in just five years.
Port activity remains strong with Roy Hill ramping up development of its rail and port infrastructure. Port expansions have also been flagged by both BHP and Roy Hill.
Top tip: The recent slump in house prices has provided good buying opportunities and has an opportunity to buy in low ahead of the next upswing. Whilst the town throughout the recent slowdown has continued to benefit from nation leading rental returns as high as 12% on large family homes.
Risks: Capital growth is likely to be slow in the short to medium term as the market moves through the current cycle. Investors should also take note of the current residential development pipeline which and avoid buying older properties in the town.
Imagine as property investors if we could predict the future!
We could identify the best hotspot locations around the country before they happen and hey presto – instant growth!
The problem with property hotspots is that once they become widely known as hotspots, investors flood in, prices rise and the best opportunities for maximising rapid growth have usually passed.
The key to finding a hotspot ahead of the rest is to identify areas which are experiencing a dynamic shift in population or growth trends, resulting in upwards pressure on rents and house prices.
How do you find such places?
Consider these factors when doing your research to identify the next hotspot before everyone else does.
Infrastructure investment. In metro areas, suburbs experiencing population growth are likely to be those undergoing urban revitalisation or new development. Regionally, large industrial infrastructure projects will bring with them large construction and ongoing operational and maintenance workforces.
Location. Look for areas with good transport connections – easy access to trains, buses, airports and key roads for example – close to schools or with good connections to the CBD. This will ensure the area is attractive to a wider population demographic.
Neighbouring areas. Areas already well known as hotspots, where demand continues to outstrip supply, pressure can cause spill over into adjoining suburbs and towns in close proximity. This means suburbs surrounding an area that’s in high demand may also start to benefit from house value and rent rises as buyers and renters overflow into these next closest locations.
Demographic appeal. Certain city suburbs will also appeal to certain demographics. In metro areas the FIFO worker population, for example, often prefers to live close to the airport, tertiary students close to universities and families close to schools, creating ongoing demand for housing in those areas. The best locations however are generally those that appeal to a wider demographic – from students to workers and families.
Industrial growth. In regional towns, strong population growth derives from industry growth. Towns on the verge of a population boom are those most likely to create positively geared property markets due to sharply increasing rents as demand for accommodation from the rising workforce outstrips supply.
New projects and workforce numbers. Look for areas where new projects have been committed and establish the proposed temporary and permanent workforce numbers. Identify where these workers will come from (how many will relocate from other areas) and how they will be accommodated. Consider that some companies may supply their own temporary worker accommodation villages which reduce the impact that workforce numbers can have on a town’s housing supply.
Multiple projects. For risk mitigation purposes, it pays to choose towns with multiple projects to reduce the impact project closures may have on the population. Consider the level and timing of future infrastructure spending and the size and diversity of the proposed projects in the area. Also investigate the financial strength of the key companies operating in the area and expected duration of any expansion works.
Population trend. It’s also important to examine the population trend to determine the sustainability of any increase. If a town’s population shows a historical downward trend then there is likely to be housing over supply which means the arrival of a new workforce will have less impact on the market.
Population trends and a variety of other useful information that will assist with your property research can easily be accessed from the Australian Bureau of Statistics (www.abs.gov.au).
Housing supply. Investigate the level of new housing development currently being undertaken in the area and if the current level could affect the demand/supply imbalance when it comes online.
Occupation and income. As a general rule, the more people earn, the more they will spend on housing. In metro locations, identify where there are growing populations of professionals and high income earners as they are likely to be contributing to increasing rents and house prices. Regionally, increasing numbers of FIFO and DIDO workers – one of Australia’s most highly paid groups – are a sure sign that rents and prices are on the rise, particularly if workers are being accommodated in town housing. Another precursor of a market increase within resource towns is whether major companies are offering subsidies to employees who purchase within the town. Company-backed home ownership is a sure sign of increasing strength and activity in the marketplace.
Landlord types. Look for areas where government housing is low. Areas with high numbers of owner occupiers can also be beneficial as it generally means better street aesthetics and neighbourhoods, helping to boost values.
Vacancy rate. Check the town or suburb’s vacancy rate. A low rate indicates an undersupply, a high rate indicates an oversupply. A consistent increase in population suggests that (if new development is constrained) supply will struggle to keep up with demand putting pressure on rents.
Beware the median price statistic. Rises and falls in average house prices can be grossly distorted. They can be dragged up by a handful of sales at the higher end of the market or dragged down by a string of sales of lower priced properties. Median house price growth/falls are not an accurate reflection of the market and do not mean that every house in that area has increased/decreased in value.
Property selection within a hotspot. Choosing a property that will appeal to the area’s demographic and the type of tenant you want is the final step. Talk to local property experts to determine what types of housing are in greatest demand and if there are any particular streets to avoid. In resource town hotspots there is an increasing trend towards new, well located properties such as luxury lifestyle apartments and large houses close to the ocean or town centre. Blue chip companies prefer this type of housing as it ensures they attract and retain their desired workforce.
Yield and capital growth. Gain advice from local property experts to gauge the rent you can expect for a particular property, the level of demand for the area and where the market is in its property cycle. This will allow you to determine what return you can expect over your intended holding period.
Each and every year hotspot towns emerge around the country with the ability to pay large dividends to investors willing to spot the signs, research the areas and ultimately purchase in a location that ticks all the hotspot boxes.
Take these factors into account when conducting your research and give your next investment purchase the best chance of featuring in the next emerging hotspot!
Western Australia’s residential design codes, or ‘R-Codes’, determine the density of housing by stating the minimum and average sizes of lots in an area.
On August 2nd, the changes to the R-Codes came into affect. Many of them are good news for investors and developers as they will increase the development potential of certain residential lots and properties, providing an opportunity to increase asset returns.
Being aware of the R-Codes can mean a difference of hundreds of thousands to your portfolio’s capital growth and cash flow.
Investors should take the changes into consideration and assess the potential value-add of the new R-Codes to their next or existing properties.
Among the changes of most significance to investors are:
Changes to R20 (i.e. 20 dwellings per hectare): the average size of a dwelling in an area coded as R20 has been reduced from 500sqm to 450sqm. So where previously you could only build one house on a 900sqm lot, for example, you can now build two. This will greatly enhance the money-making potential of many sites and enable sub division without the need for planning permission. This translates to more assets, a quicker build and the ability to bring your product to market sooner.
Furthermore, a minimum site area of 350sqm is now permissible under the R20 code, increasing sub division flexibility.
R25 and R30: While the average sizes for lots under these codes remain unchanged, the minimum site areas have been reduced to 300sqm under R25 and 260sqm under R30, again increasing sub division flexibility and facilitating more rapid development.
Planning approval for a single dwelling is now only required for lots smaller than 260sqm (reduced from 350sqm) also helping to fast track development.
R60: the average size for lots coded R60 has also been reduced from 180sqm to 150sqm
The R-Codes also now make provision for R80 dwellings with an average site area of 120sqm and minimum of 100sqm.
Granny flats: The change immediately beneficial for investors, as it presents the greatest opportunity for increasing cash flow quickly, is the change to the ‘granny flat’ code.
From August 2nd, granny flats will not have to be rented to a family member of the main household. This means that any investors (or owner occupiers) with a property of more than 450sqm can build a granny flat onsite and rent it out to anyone. The allowed floor space has also been increased from 60sqm to 70sqm. It provides an instant opportunity to enhance the value of an existing asset and increase yield.
The mining town of Tom Price in WA’s Pilbara has seen house prices increase 19.3% per annum on average over the past decade while its median rent is now at $2,300 per week, according to REIWA, placing it as the highest of all the Pilbara towns.
The doubling of its population to 5,400 in just six years, as a result of the integral role it plays in Rio Tinto’s and FMG’s iron ore operations in the region, along limited housing supply has put immense pressure on its housing market.
But while its performance has been consistent with other regional towns in the Pilbara, it has not garnered the same level of attention.
With 92% of the town’s residential housing is owned by Rio Tinto and a lack of new development (until 2011, there had been no new no land releases in 40 years) investors have had fairly restricted access to this lucrative market.
However, recent land releases have now opened up opportunities. Given its large rental market (86% of the population rent their home), zero vacancy rate and Rio Tinto’s and FMG’s significant new and expanding projects nearby, investors are standing up and taking note.
Rio Tinto intends to expand its iron ore operations in the Pilbara, investing about US$20 billion in the next five years (requiring over 6,000 employees) to facilitate a planned ramp up of production to 360 million tonnes per annum (mtpa), an increase of more than 50% of its current capacity.
The expansion includes a major investment in infrastructure at Rio’s Nammuldi mine, 60km north-west of Tom Price, which will increase production capacity from eight to 23mtpa, creating almost 1,500 construction jobs and secure ongoing employment for more than 700 people.
Recent news further enhanced the town’s prospects as an ongoing hot spot with Rio receiving approval from the Environmental Approval Authority to further expand its Western Turner Syncline hub, just 20km from the town. Western Turner Syncline has just ramped up capacity to 15mpta but the execution of these recent plans would see it double capacity to 32mtpa. While these plans are still in their early stages, it suggests significant growth ahead for the company’s Pilbara operations.
The fact that Rio’s Pilbara operations are the lowest cost in the region’s iron ore industry, indicates the mining giant is well positioned to deliver on these additional expansion plans.
Located 70km north of Tom Price, the Solomon Hub is FMG’s next major project and the largest iron ore start-up in Australia. The Fire-tail and Kings deposits are the first stage of the project and are currently under construction. When complete, they will produce a total 60mtpa of ore each year.
The Solomon Hub is the lowest cost operation in FMG’s business and has significant expansion potential.
The expansion of Solomon and development of Western Hub, an FMG project just 20km from Tom price would see thousands of additional construction and operational workers brought to Tom Price.
As well as investment into industry, the town has also received a $20 billion civil infrastructure upgrade as part of the government’s Pilbara Cities initiative which has dramatically upgraded the town centre, and sporting and community facilities.
Pressure on housing is likely to continue as any further land releases and residential developments are unlikely to create an oversupply given the projected workforce growth and housing shortfall.
According to a report by Regional Development Australia, Tom Price had a dwelling shortfall of 259 homes in 2012 and will require a total of between 271 and 471 new homes by 2015. Only 37 residential lots were released in 2011 and further releases are yet to be announced.
Encouraging news for investors seeking to build and diversify their property portfolios, by identifying the next WA Hotspot.