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PROPERTY: How to invest in Australian real-estate


Investors who prefer landed properties can consider Bellevista’s three-storey townhouses, located 10km from Melbourne’s CBD and due for completion next year.

By Stella Thng

A recent international property investment survey conducted by HSBC reveals that Australia ranks No. 2 among Singaporeans, after Malaysia. “Buying properties in Australia’s key cities is not a new trend for Singaporeans,” says Alan Song, a division director from SLP Scotia who specialises in Australian properties.

Many of Alan’s buyers say they invest in Australia because they previously studied there, visited it during vacation or are planning for their kids’ education there. “The more ‘advanced’ investors appreciate the country’s stability and ease of investing,” he adds.

Australia’s strong, diversified economy is supported by significant natural resources, agriculture, manufacturing, and services such as education, tourism and finance. Investors are also attracted to the good governance in a stable political environment, and the country’s steady population growth is expected to continue with an influx of migrants and an improvement in fertility rates. This translates to an expanding rental and resale market.

Real-estate legislations for the purchasing process and taxation matters are well established and relatively straightforward. Still, Glen Goh from 2Goh Capital, a Perth-based property developer, advises buyers: “Get a good understanding of Australia’s tax system, in particular, those applicable to foreign investors, and the stamp duties and costs involved in residential real-estate transactions.”

Also, do note that foreign investors can purchase only new residential real estate or vacant land (to be built on), and all purchases must be approved by the Foreign Investment Review Board.

Another draw: the attractive financing options. Typically, investors borrow 65 per cent to 75 per cent of the property’s price (though some banks offer up to 80 per cent), with the loan taken from an Australian bank based in

Australia or Australian banks based in Singapore. Some Singaporean and Malaysian banks, such as United Overseas Bank and OCBC Bank, offer loans for Australian properties, capped at a maximum of 70 per cent of the loan quantum.

Singaporean investors also enjoy a favourable exchange rate. From as high as $1.34 in 2012, the rate dipped to just $1.17 at press time, making Aussie properties more affordable.

“With the multiple cooling measures imposed on Singapore’s property market in recent years, many are seeking to invest their funds elsewhere,” says Alan. Australia, being just a four- to eight-hour plane ride away, is a natural and popular choice. We take a closer look at property investment opportunities in two cities familiar to Singaporeans, but with distinctly different vibes: cosmopolitan Melbourne and laid-back Perth.


MELBOURNE


Bellevista’s chic townhouses are near Lake Valley and upcoming amenities such as a boutique hotel, a conference centre, offices and retail shops.

Why Melbourne? Voted the world’s most livable city three years in a row by The Economist Intelligence Unit’s Global Livability Survey, Melbourne beckons with universities such as RMIT University, Monash University and the University of Melbourne, chic cafes and a reputation as the arts and culture capital of Australia.

Projected to overtake Sydney as Australia’s biggest city in terms of population growth, Melbourne’s growth reached 4.35 million last year and is expected to increase to eight million by 2049, spawning greater demand for housing and higher prices. According to HSBC’s research, prices have already risen by 12 per cent over last year.

Where to buy? Apartment projects within the Central Business District (CBD) area have been aggressively marketed in recent years, but Alan recommends apartment projects up to 5km outside the CBD. “These apartments offer some serenity as they aren’t in the middle of the CBD congestion,” he says, highlighting areas such as South Morang (which has the biggest population growth of any suburb in Australia), Abbotsford, East Brunswick, St Kilda and Hawthorn.

Though apartments are popular with investors as they are easy to rent out, more investors are looking into landed properties in Melbourne’s more affordable and fast-growing outer suburbs.

Point Cook, for example, is located about 25km south-west from the CBD and recorded the second-biggest population growth among all Australian suburbs. Part of the East Werribee CBD master plan, it benefits from a government-approved plan with 58,000 jobs created in the precinct. Property prices have already increased over the last few years and are set to soar further as Werribee becomes the next big satellite city along the western corridor. The median house price in Melbourne last year was A$563,000 (S$656,800), but a house and land package at Point Cook starts from an affordable A$470,000.

For a home closer to the city, Bellevista is 10 km away from the CBD and boasts elevated townhouses with rare lake views. Part of the Valley Lake master-plan community, driven by the Urban Renewal Authority, upcoming developments include a boutique hotel, conference centre, offices and retail outlets. Prices start from A$488,000 for a three-storey townhouse.

PERTH

WHY PERTH? “Western Australia (or Perth, in particular) is undergoing a period of revitalisation on the back of the resources boom in iron ore and liquefied natural gas,” highlights Glen. It went through a major property boom in 2005 and 2006, but has since stabilised, and current investment confidence from both private and public sectors remain high. The Ritz-Carlton Hotel Company and Far East Consortium recently announced plans to build a new luxury hotel-cum-residence at the Elizabeth Quay and Crown Casino is expanding with a new hotel, while a stadium is being constructed at the Burswood Peninsula.

Glen reckons that migration is probably the key driver for Singaporean investors, though many also buy properties for their children studying in Perth. In recent years, more have been attracted to the stable capital growth and rental income as Perth became Australia’s fastest-growing city, its population ballooning by 271,500 in five years to 1.9 million in the middle of 2012. This is partly due to healthy annual inbound migration figures. “The population increase forms a base for the demand of housing – both rental and ownership – and hence supports the property prices,” says Glen. David Airey, president of the Real Estate Institute of West Australia, recently predicted that Perth’s median house prices will hit a record A$600,000 by year’s end, making Perth’s prices the second-highest in Australia, after Sydney.

WHERE TO BUY? “Focus on good suburbs with good schools and access to amenities. The older suburbs within 12km from the city are a good bet. Take note that there are good and bad areas within a suburb and avoid the busy streets,” warns Glen.

Avoid overpaying by doing your due diligence. “Attend as many ‘open houses’ as you can. Find out if there are any future plans by the government or council that might have an adverse impact on the property, and if there are any restrictions.” A good tip: “Check the school catchment area. Sometimes, one side of the street is within the zone of a good school while the other is not, and the price difference can be substantial.” If the deal looks cheap, it’s always better to double- or triple-check.

Should you get an apartment or landed property? Glen personally prefers the latter as it offers better capital growth. “In general, land appreciates and buildings depreciate. For long-term investment, owning a piece of real estate in a good location will always be the winner,” he advises. “Apartment-living was deemed the future in living trends, but I don’t think it has taken off in Perth (yet). Many locals still prefer landed properties in the suburbs with manageable gardens.”

Glen had developed a four-townhouse project at 11 Leigh Street in Burswood. Centrally located 5km from the city and within walking distance to the train station, the river and Burswood Entertainment Complex, one townhouse was sold to a Singaporean who rented it out within weeks. The last house available, a 2,476sqf, double-storey four-bedder with two bathrooms and a double garage, is marketed at A$800,000.

Another project of his is in Portree Way in Ardross, a family-friendly suburb close to good schools, Garden City Shopping Centre and the river, about 8km from the city. Each of the two luxurious and modern 4,392sqf homes boast five bedrooms, three bathrooms, double garages, a media room, an activity room and a spacious backyard. Due to be completed in September next year, each is priced at A$1.4 million.


Each of the four townhouses at 11 Leigh Street in Burswood, Perth, have four bedrooms, two bathrooms and a double garage, with open-plan living, dining and kitchen areas.


BUYER’S CHECKLIST
Alan Song, a division director from SLP Scotia, shares four important questions you should ask yourself before making your Australian property investment.

1) What is the true rental yield for my investment? Make sure you research on the suburb’s vacancy rate and actual rental return. Many developers package guaranteed rental return deals with their projects. While this may sound attractive, Alan warns buyers that some rental guarantees may not be sustainable.
2) Is there potential for capital gain? Find out the median property prices and how much prices have increased. While rental in Australia is sufficient enough to offset mortgage and other property-management fees most of the time, capital gain is still key. Hence, Glen’s company focuses on areas that show potential to double the property’s value in the next five to seven years.
3) Buy where the locals buy, or in the CBD? It’s a matter of preference, though Alan cautions: “For foreign investors, it doesn’t always mean that properties within the CBD are the most popular and have the greatest potential.” CBD properties may be easy to lease out, but are hard to sell as locals may prefer not to live in the expensive city area.
4) Any local government initiatives? In Australia, different suburbs have their own master plan or Precinct Structure Plan, outlining the area’s future development. Just like in Singapore, an upcoming shopping mall, sports facility or train station can boost your property’s prices in the future, so do your research.

(Images: SLP Scotia & 2Goh Capital)

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