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September 2010 Newsletter

Our monthly email newsletter reports on the state of the Melbourne Real Estate market, keeps you informed and up to date on what's happening at JPP Buyer Advocates, as well as presenting some of our recent success stories.

                to Subscribe, send an email to: chris@jpp.com.au
                to un-Subscribe, send an email to: chris@jpp.com.au

News

Getting the Stats right

Anyone who read the Property Review in The Age last Sunday would have been very surprised to see the list of worst performing suburbs over the past five years. If you have purchased in Toorak, Malvern, Armadale, Hawthorn, Kew, Elwood, Williamstown, Caulfield North, Hawthorn East or Elsternwick around five years ago, then you would have been shocked to know your apartment had dropped substantially in value each year for the past five years.

It is of course, not true. The REIV made an error with the calculations and have reissued a list that is available here

Ian James


Melbourne moving to Stage 2 water restrictions

On 1 September 2010, metropolitan Melbourne will move to Stage 2 water restrictions.


What this means for Melbourne is:

  • Everyone will be able to hand water gardens – with a watering can, bucket or trigger nozzle hose – at any time.
  • Manual watering systems can be used between 6am - 8am and 8pm – 10pm on your specified watering days.
  • Automatic watering systems can be used between midnight and 4am on your specified watering days
  • Watering dates are as follows:
    • Even or no-numbered properties may water on even dates of the month.
    • Odd-numbered properties may water on odd dates of the month.
    • Everyone may water on the 31st.
    • If someone in your household is 70 years or over you can use a manual watering system between 8 - 10am instead of 6 - 8am, and still between 8 - 10pm on your specified watering days.
  • Lawns may not be watered at any time with drinking water, except where a warm season grass exemption has been granted.
  • Cars can be washed at commercial car washes or at home using a bucket or high pressured cleaning device.
  • Rainwater and greywater can be used at any time in the garden.
Find out more here

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Upcoming Seminar

The seminar will include talks on Finance & the Property market including Negotiating in the current market,
Please register your interest if you wish to attend, Limited seats.
Cost - Free
Tea, Coffee & light refreshments provided…

Seminar 3 - September 28th - South Kingsville Community Center, Corner Brunel Street and Paxton Street, South Kingsville
6:30pm Onwards.

JPP Buyer Advocates, Ian James & Justin Lilburne talk about the Property Market.
Followed by Greg Reid - Greg Reid Consulting.

If you are interested in attending our seminar, please let us know.
Call 03 9523 1054 or email enquiry@jpp.com.au

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Market Overview

612 auctions delivered a 70% clearance rate with 575 properties selling privately last week. Another week of over 1000 reported sales to the REIV. Investors are still a strong influence on auction outcomes in the lower end of the market. Good investment properties between $400k and $600k still remain the strongest contests in the market due to their potential good value.

Everyone is comparing this year to last year and talking down the "spring" selling season. It hasn't even started yet!! Has everyone forgotten the AFL final series? Traditionally the busiest weeks of spring are the third week of October, skipping Melbourne Cup weekend and then flowing through to about the second weekend in December.

This weeks 70% clearance rate compared to last year's 83% is noteworthy for another reason. Total reported sales numbers were down 24% on this time last year, yet $turnover was down only 11%. We should see a relatively quiet 2 weeks whilst Collingwood makes its way to the AFL premiership, followed by a flurry of listings in the first two weeks of October. If stock levels don’t pick up then we must assume property prices will rise toward Christmas.

The Domain put out its "Property Review" over the weekend. And, as I have already had a number of enquiries about the worst performing apartments over the last five years, I have contacted The Age for a "please explain". I do realise these figures are supplied by the REIV, but it would have been thoughtful to check at the very least the suburbs that you are going to use in your highlights page. I have not been through all the figures, but the summary on page 7 showing the least 5 year growth for apartments is totally inaccurate, if they are trying to show annualised growth.

For Toorak to have had an annualised growth over five years of -17.3% and to have a current value of $681,000, the median in 2005 must have been $1,760,433. Considering in 2004 it was $562,500, this would have represented a jump of 212.97%. I think somebody may have noticed this. Overall, all 10 of the suburbs listed with negative growth, have according to REIV published figures had a positive growth.

Statistics can be extremely useful and we use them all the time, but never take every published figure for granted. It could mean something completely different to what you thought. If you are interested in purchasing a property in Melbourne, please do not hesitate to give us a call for a chat.

Ian James

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Recent Articles Of Interest

Rental vacancy rates

Information from the REIV shows us why Melbourne is still & will continue to be good place to invest. Whilst there are a lack of homes & the cost of purchasing a home continuing to go up, many families & singles will continue to need to rent. We do not see any short term solution to this, which will continue to make rents increase, whilst if your purchase is in a good area ticking all the investment boxes, you will have good capital growth to continue to expand your portfolio.

Building new homes in outer suburbs doesn’t always help the situation for people needing to rent closer to town for schools, work, etc. the ongoing cost of fuel, transport etc will deter certain people, and then there are many who just want to live closer to the CBD, yet can’t afford to purchase there. The new Estates are affordable for the young couples & families to get into the property market, however the capital growth may take longer to come through than an established place closer to the CBD, the lifestyle for the family having good parks, schools & sporting facilities will help to occupy the young ones. If investing in these areas we will see a slower growth, yet it will get you a higher yield. So it all depends on individual needs at the time of your purchase. Seeking help is always the best way to ensure you make the right decisions for the long term!!!

Read the article here (Source: REIV)

Sam James

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Spotlight on Melbourne Suburbs

In our regular spotlight section we examine a selection of Melbourne suburbs, highlighting what's happening in these areas right now.

Aspendale

Municipality: City Of Kingston
Population: 6404 (2006 census)
Postcode: 3195
Location: 26 km from Melbourne CBD

Aspendale is 26km from the Melbourne CBD. The area is well accessed by public transport with the Frankston train line running through it and Nepean Highway getting you straight back into the city. It is also only about 10 minutes to the central shopping and business areas in Frankston.

The beach is another draw card for Aspendale. The white sandy beaches are very well used in summer and allow for a safe environment to swim in when patrolled over from December. There are some really great looking bathing boxes spotted along the beach for photo opportunities.

Aspendale is an affordable family area which is filled with different styles of homes - ranging from Californian bungalows to new vogue manors. The block sizes on average are around 600sqm - 700sqm allowing for good development in the area. With the new families in the area the need for schooling is very important. There are two primary schools in Aspendale - a Catholic primary school and a public primary school.

Median prices around Aspendale have grown substantially in the past. The average growth between 1995 – 2009 is 11.21% per annum. This puts it in the top third of suburbs in Melbourne. With the continual need for homes and the great development being allowed in the area, Aspendale is a very good investment area.

Median House Prices

  Lower
Quartile
Jun 10
Median
Upper
Quartile
Mar 10
Median
Dec 09
Median
Annual
Change
Aspendale $700,000 $730,000 $1,015,000 $632,500 $- -%
Source: REIV.

Median Unit Prices

  Lower
Quartile
Jun 10
Median
Upper
Quartile
Mar 10
Median
Dec 09
Median
Annual
Change
Aspendale $541,250 $822,500 $946,250 $- $482,000 70.6%
Source: REIV.

Photo from Wikipedia

Justin Lilburne

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Heads or Tails - will our property market crash? 'Maybe'

We're in a global era of uncertainty, fuelled with whims of sentiment and perception. There have been some remarkable events on the back of the global recession - unprecedented regulatory changes to major banking systems, presidential world firsts, great institutional pillars previously 'too big to fail' collapsing under the weight of poorly managed debt. The foundations of faith in the continuing stability of international markets is oppressing and we're not at years end yet.

However, focus in on Australia and we can see a country outshining its rivals in wealth, growth, and resources. It feels as if we've been dealt a better hand than we deserve. There's a swagger in our gait as we 'move forward' (forgive the pun) Even the recent election dramas have done little to affect us on a national or global scale. Our concerns must look rather piddling to countries still facing dark clouded forecasts of laboured recovery after the 2008 recession. Yet it doesn’t stop 'experts' wagging their finger and cautioning it's only a 'matter of time' before we suffer the same great fate.

It's somewhat redundant to make these assertions - historically all great economies run the cycle of expansion and contraction. Crudely put, what goes up can also come down and a lot of time and money is invested in future forecasting to buffer the catastrophic effects which can result. It's easy to take an over the shoulder look and dismantle the links that lead to near destruction. However in reality we blunder forward like a bird crashing into a glass window. Becoming 'Wayne the worrier' gathering our possessions and locking the door until the storm passes isn't an option we're gifted unfortunately. Life goes on.

There are a great many economists trying to answer the question of "where is the market going". Those endorsing residential investment underpin their arguments with the great population debate focusing on supply & demand. Australia's predicted surge of 35 Million by 2050 - 8 million in Melbourne alone - suggest at the current level of growth, Australia is falling short of 40,000 homes a year. That's quite a statement and needs to be qualified considering demand for new homes is generally weak. In truth it's not the amount of homes constructed that's the issue, but the areas they're located in. New housing is largely concentrated in outer lying suburbs - classic 'mortgage belt' neighbourhoods. These areas are subject to affordability attracting first home buyers and low income families. As such, demand fluctuates depending on economic factors such as the first home buyer's grant which is geared towards regional development and new home projects. Demand for new homes is low not just because of the costs involved in building, but because of the negative aspects of living in suburbs with poor infrastructure and limited employment opportunities.

However inner city demand for housing is significant and rising as anyone working at the coalface will tell you. Earlier this year 50 lots of rezoned residential land was auctioned in Melbourne's Bentleigh East. Demand exceeded supply and all 50 blocks - hotly contested - sold under the hammer. Similar scenarios have played out in Sydney, and Canberra as our cities struggle to adapt to a never ending stream of expansion. If migrants aren't buying they'll be renting and one assumption we can make is they'll be looking where jobs are located - close to the city or in suburbs offering an easy commute. Thus the increasing need for investors prepared to take a loss on income to provide this accommodation and hence the tax incentives. Truthfully we lack the 'right' housing that ticks boxes to meet demand, and future state government plans are upwards, not outwards. Historically this has never done much to relieve the pain of inflation.

Recently two well respected economists have entered the fray and declared our real estate market is akin to a ticking time bomb. Co-founder of global investment management firm GMO, Jeremy Grantham, confidently stated that 'it's only a matter of time' before the UK and Australian market collapse.

More recently Gerard Minack head of global developed market strategy at Morgan Stanley, used a list of rather long winded facts and figures to hypostasize that houses are 'unsustainably' priced. He correctly asserts that Australian real estate is amongst the most expensive in the world. However when pondering 'what will prick the bubble' he can produce only two scenarios. One is broad-based job losses which - as he freely admits - look unlikely at least in the short term. The second - an exodus of middle-class landlords selling en-mass. Something I can only envisage as a roll on effect from the first. His arguments touch upon negative gearing - the tax incentives offered by the government which have enabled mum and dad investors to purchase. If the current policy were to be withdrawn or degraded it could have significant effects on house price and demand as the Hawke/Keating government found out in 1985. However despite the Henry Tax Review suggesting an alteration in the system, both major parties have vehemently stated - more than once - there are no future plans for change.

So as we walk the rocky road into 2011 what can we expect? Short term things look set to continue on a gradual upward trend and I can't see anything significant 'looming' to reverse the wheel. The steep rise in the market during the first quarter of 2010 corrected itself mid-year due to rate rises and increased stock. Markets have been largely unaffected by the election and short term neither party has the money for another campaign - in true Aussie style everyone's set to give them 'a fair go'.

Labour's new betrothal to the green party along with the rural 'in laws' has resulted in a pledge of $800 Million into a regional infrastructure fund. This, along with the already planned NBN, indicates growth in our smaller mid-sized cities. As a consequence buyers may be encouraged to migrate to larger regional cities such as Geelong for instance which will ease demand in the inner and middle city suburbs.

The big banks are borrowing large amounts of cash from offshore markets to fund a growing demand for credit. As the cost of borrowing increases, the probability of interest rate rises independent of the RBA look likely. Other factors to consider are the large number of high rise inner city developments planned over the next two years. Any increase in supply reduces demand and multiple smaller sales will produce a drop in median house price data. Established properties will continue to rise, but a drop in median value affords a ripple of negative perception in the investor market which in turn slows growth. Without government intervention to assist first home buyers there will be a larger disparity between those that own property and those who do not. This will change the "ownership" landscape forever if not addressed now.

All in all the path ahead may be a cautious one, but there's nothing to suggest substantial drops any time soon. Will we crash? Maybe - but not in the foreseeable future and not if you follow a few basic rules. The key in 2011 is knowing what to invest in and where. Not all locations and not all properties will perform the same or have the same growth potential. However concentrating on suburbs with limited supply and choosing properties that will stand up in soft and hot markets will reduce risk exposure and ensure capital growth.

Catherine Cashmore

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Self managed superannuation funds, and purchasing property

Prior to September 2007, government legislation did not allow borrowing funds to invest in an asset. This has since changed, and legislation now allows borrowed funds to purchase both commercial and residential properties. While most superannuation funds historically have primarily invested in shares, since the Global Financial Crisis, when we watched property prices in Australia increase, and share prices decrease, many people are preferring to now invest those funds into property. And the recent changes in the law are now allowing it to be possible.

There are many advantages in using a self managed super fund:

  • Allows greater flexibility in investment choices, and increased control into the types of assets to hold within your superannuation fund;
  • A maximum of 15% tax on rental incomes;
  • Interest costs are tax deductible;
  • Maximum of 10% capital gains tax if properties are held for more than twelve months;
  • In comparison to some other superannuation fund structures, this may be a cost effective option to current ongoing fees that you may be paying.

However, there are some disadvantages that people considering moving to this scenario need to be aware of:

  • There are strict compliance guidelines which must be adhered to including annual audits, which come with penalties if they are not complied with;
  • Can be costly to set up, however, some professionals who specialise in setting up self managed super funds are very cost effective in doing this;
  • Unable to access the assets of the funds with the SMSF until retirement age (however, this is the same for any type of superannuation fund);
  • Need in excess of $100,000 in superannuation funds to be cost effective.

Self managed superannuation funds now allow another means for investors to expand their property portfolio by using income to purchase inside and outside your superannuation fund. It is important however for people considering doing this to have experts in setting up the SMSF correctly, setting up the structure of the loan(s) and choosing the right type of property that is going to maximise return on investment with the lowest risk.

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Renovating Tip

Painting for an investment house / apartment

When deciding to update the paint inside your investment house or unit, try to remember you are not living there.

Best options are to paint in neutral colours or stick with white or off white.
1. When it comes time for touch ups, you are not searching for that hard to find colour.
2. Tenants may not have the same taste as you, the bright red bedroom may not suit all, or a green bathroom wont appeal to every tenant…
3. Neutral colours & whites can enhance the size of a room, which when renting out, will appeal to more tenants.
4. A freshly painted house or apartment will rent out faster than an unpainted one. Your tenant will notice that you do care about the house / apartment & hopefully treat your property with more respect.

Sam James

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Technology Monthly

iPhone 4 follow-up part 2.

I have now had a month to have a play with the iPhone and I suppose I should consider myself lucky to have one as 2 other people in the office are still waiting on theirs. All the problems that initially plagued the phone are now solved, the camera is now working well (although that's thanks to me, not Apple) and the reception issues have been solved with a case. I initially did not want to use a case, but after holding the phone, it becomes apparent just how much more fragile this one is than the previous versions, so a case is a must.

The first thing I must comment on is the screen....I have never seen anything like it, it makes everything look unbelievably better, and is at the point where my eyes cannot distinguish individual pixels anymore. The new backlighting technology makes everything (especially video) look much better, with proper black showing and colours much more true.

The camera takes much better photos and videos, but I am not much of an expert on the subject, so I don't know how much better though. What I do like is using iMovie on the phone....with a few clicks you can make a pretty cool little video, complete with titles and sound effects. I am yet to make a facetime call as I am the only person I know with the new phone, so I cannot comment on it's quality.

I am sure there has been a speed increase on the phone, but my 3gs never seemed to have a problem, so I am not sure how much it has improved. I do like the inclusion of a gyroscope so you can turn the screen with your body and it will register, this is especially useful in Google maps. The inclusion of a second microphone for noise cancellation is most apparent using the speakerphone as voices are much clearer without crackling. The battery is now 40% bigger and it really shows....I use the phone quite frequently and the battery lasts for much longer than the 3gs battery.

If you currently have an iPhone 3g, I would definitely recommend upgrading to the 4g (especially if you are using the 4g firmware, which has been causing serious issues in the 3g iPhone). If you have an iPhone 3gs and are not out of contract, you could probably hold out until the next iPhone as it has been rumored to have moved up it's release to the start of 2011...although there are a few new features on the iPhone 4g it would not be enough to warrant spending another $1100 to buy the phone outright.

Additional - I will just say that I am enjoying showing the phone off around the office while I am still the only person with the one.

Chris Thursfield

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Recipe: Chicken Pie

Ingredients:

  • 1 leek, finely chopped
  • 1 cold cooked chicken, shredded
  • 1 x 400g can condensed chicken soup
  • 100g butter
  • Ready rolled puff pastry


Method:

1. Microwave leek and 50 g butter on High for 2 minutes. Stir then microwave for another 2 minutes.

2. Stir in chicken until well combined.

3. Add the soup and stir well.

4. Grease a pie dish with 25 g butter and lay 1-2 sheets of pastry on it, so that it covers the bottom and drops over the sides.

5. Spoon chicken mixture into dish.

6. Top pie with 1-2 sheets of pastry and seal.

7. Dollop remaining butter evenly over pie.

8. Place pie in a cold oven, turn oven on to 180°C. Bake for approximately 30 minutes until pastry is golden brown.


*Recipe From Bestrecipes.com.au, Images are public domain

Chris Thursfield

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Did you know?

Joke

There was a man who entered a local paper's pun contest. He sent in ten different puns, in the hope that at least one of the puns would win.

Unfortunately, no pun in ten did.

MSN Smileys

Useless Fact:

1. Los Angeles's full name is "El Pueblo de Nuestra Senora la Reina de los Angeles de Porciuncula". And can be abbreviated to 3.63% of its size, "L.A."

2. Al Capone's business card said he was a used furniture dealer.

3. "I am." is the shortest complete sentence in the English language.


Brainteaser:

Q. There is a common English word that is nine letters long. Each time you remove a letter from it, it still remains an English word - from nine letters right down to a single letter. What is the original word, and what are the words that it becomes after removing one letter at a time?


Site:

This months site is Classicgameroom

Nowadays there are many shows on the internet doing videogame reviews....but back in 1999 and 2000 there was only a few, and even less that did classic games. Classic game room was a 2 man show that started in November 1999 with then modern game reviews, but after a segment on classic games proved to be popular, they began reviewing earlier titles. Unfortunately due to the low budget and high costs of running the show, it was canceled in October 2000.

The show returned in 2008 run by just one of the original hosts and has been running ever since... it is now even represented at E3. With over 1400 videos currently posted and a new one every day, the series should be around for a while.



*Answer to brainteaser - The base word is Startling - starting - staring - string - sting - sing - sin - in - I

Chris Thursfield

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Kind regards from the team at JPP.

If you have a friend or family member looking for property, please feel free to forward our newsletter on to them.

Don't forget to comment on our blog.

JPP are now on Facebook and Twitter...We will be updating them both frequently from now on.

For our overseas clients and visitors, JPP now has a website translator. Just scroll to the bottom of the homepage, click 'Translate this website' select your language and then click 'Click here to return to the homepage'.

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