Thursday, April 29, 2010

Property Update

Ark Total Wealth : taking you beyond what you thought possible

The 'Informer' is an Ark Total Wealth initiative, developed to help individuals identify and understand the current opportunities that exist in investment markets. This initiative forms part of our commitment to provide innovative solutions and advice to clients, with the aim of creating, managing and protecting wealth.

This edition will focus on the re-emergence of investment property.

Over the past 18 months quality projects in the property investment market have been in short supply. Although we did manage to secure some stand out projects, it became increasingly difficult to find stock that was fair value due to the lack of liquidity and supply shortages (symptoms of the Global financial Crisis, GFC).

Now that the Australian economy is regaining strength and momentum, we take a look at what the research is indicating for two of Australia’s largest property markets (Sydney and Melbourne).

Sydney- Snapshot

The Sydney property market as a whole over the past 12 months has been relatively stagnant, however there have been some pockets that have performed relatively well. The resilience of the Sydney market and in particular Blue Chip Stock is largely attributable to:
• The shortage in Sydney wide rental accommodation
• Low levels of building construction and completion
• Consistent population growth
• Planning delays and sluggish rezoning
The net effect of these factors has resulted in increasing rental yields, assisting with the holding cost of property for investors. It is anticipated that rents will increase by as much as 21% over the next three years (BIS Shrapnel, 2009), further emphasizing this effect.

The leading indicators all point to a sustained recovery in the largest and most robust property market in the nation (Sydney).

Based on our research, we have projects in the following locations:
• Bondi
• Petersham
• Concord
• Parramatta

Melbourne - Snapshot

The Melbourne property market has varied in terms of performance over the past few years, however the fundamentals for growth have remained in tact.

As with Sydney, the lack of construction, which was amplified by the Global Financial Crisis has resulted in declining level of rental accommodation in Melbourne. The lack of rental supply will continue to have positive impacts on rental returns for investors.

As a whole, Melbourne is less affected by yields and price fluctuations, because of its high levels of owner occupiers (highest level in Australia). This combined with the projected increase in population (1 million in the next 30years) is predicted to reinforce the strength in the Melbourne property market.

It is anticipated that there will be a change in the housing demand in the future, with 90% of new dwellings occupied by 1 or 2 people, thus impacting the type of development within the city (increase in medium to high density).

The Melbourne property market is well placed for further growth due to the combination of strong population increases, improving yields and the shortage of medium to high density housing in line changing consumer demand.

Based on our research, we have projects in the following locations:
• Brunswick
• South Yarra

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