Real estate Melbourne | Melbourne real estate prices | Investment choices in Melbourne

By THOMAS HUONG
huong@thestar.com.my

17-March-2012

AUS Property Corp co-founder Steve Galanos says that foreigners investing from abroad should focus more on buying landed residential units.

He says foreign property buyers should note that many Australians do not buy apartments.

“They want space for their families, kids to play and to entertain friends.”

AUS Property Corp is a medium-sized boutique property developer that specialises in landed property in Melbourne.

Galanos says the company has delivered 500 houses in nine developments with a combined gross development value of more than AUD$200mil (RM639mil) over the last three years.

He says the majority of apartment units in Melbourne are sold to foreigners.

“When it comes to landed residential properties, most of the buyers are owner-occupiers.”

In his opinion, buying landed residential units in Australia is a secure investment due to the annual supply and demand situation concerning new properties.

“We don't have a huge population or labour force. Our actual construction rate in terms of dwellings built annually has not increased since the 1980's.”

Australia has a population of about 22 million.

However, Henry Butcher Marketing's international projects director Jazmine Goh offers a different opinion. She says that high-rise residential units in and around the city are still in demand.

“We have parents buying for their children who are studying in the city, empty nesters who prefer smaller units as the kids have left home, and migrants who work in the city and prefer a more vibrant lifestyle.”

According to Goh, the rental returns are typically between 4% to 5% per annum as the market is established and enjoys very low vacancy rates.

“Compared with landed property within a 10km radius of the city, a high-rise residential unit has a lower entry cost.”

Goh points out that landed properties benefit from more long-term capital growth. She says landed property within a 10km radius of the city are more expensive, with the average price for a three-bedroom/two-bathroom house being more than AUD$550,000 (RM1.76mil), depending on how prime the location is and its built-up area.

Jalin Realty International Pte Ltd chief executive officer Ian Chen says investors should look at demographics and location to determine the type of property (apartment or landed) to invest in.

“We need to understand buyers' needs and requirements. If they prefer single tenants and do not mind paying a higher premium, then an apartment in the city may be the investment for them.

However, for the same dollar value of a city apartment, one can also opt for a three-or-four-bedroom home in the suburbs of Melbourne (depending on the location) with a family as a tenant.”

Meanwhile, CB Richard Ellis (Malaysia) executive director Paul Khong says that demand for apartment units is likely to rise as Melbourne consolidates, and becomes more dense. According to him prime land in the city is being re-developed with high-rise projects.

“Affordability pressures would mount on conventional housing forms. However, investors who sell within the short-term, without accumulating sufficient losses, will incur large capital gains tax which is currently 29% in Australia. By investing long-term, an investor is able to accumulate tax losses to minimise the capital gains tax,” says Khong.

He opines that landed properties are usually for owner-occupiers and are located away from the city.

Related Story:
The lure of Melbourne city

Source reference link: http://biz.thestar.com.my/news/story.asp?file=/2012/3/17/business/10927847&sec=business

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Melbourne real estate | The lure of Melbourne city

By THOMAS HUONG
huong@thestar.com.my

17-March-2012

RESIDENTIAL properties in Melbourne, Australia can be an attractive option for Malaysian property investors, despite the high exchange rate of the Australian dollar vis-a-vis the ringgit (A$1 equals RM3.20) and restrictions on foreign buyers, property consultants concur.

The regulatory controls Down Under mean that foreigners are restricted to buying only new properties and not those in the secondary market.

Property consultancy CB Richard Ellis (Malaysia) executive director Paul Khong points out that last August, Melbourne was rated as the best city in the world to live in, edging Vancouver, in a survey by global research and analysis resource Economist Intelligence Unit.

The survey of 140 cities is based on factors such as government stablility, crime rate, quality of infrastructure, access to quality health care, cultural events, education as well as employment rates.

“It is also the second largest city in Australia and its economy is boosted by education. Some cities may experience higher growth rates but they are highly volatile as they depend heavily on mining activities,” points out Khong.

Meanwhile, Jalin Realty International Pte Ltd chief executive officer Ian Chen says statistical data shows that Melbourne has seen substantial growth in median property prices in the past five to six years, compared with other regions.

According to Chen, the best advantage about buying in Melbourne, Victoria would be stamp duty savings, which is generally not available in other cities.

“The investor who buys off the plan (pre-construction) would only be required to pay for stamp duty based on the current land value, whereas in another Australian city, the same investor would be subjected to paying stamp duty based on the full purchase price (land and building cost combined), regardless of how early he purchases the property,” Chen shares with StarBizWeek in an email interview.

Another unique advantage of buying Melbourne properties would be the ability to purchase with the addition of a “and/or nominee” in the contract of sale, which is not available in other cities.

This allows the investor to nominate a relative or friend to carry out the purchase.

“However, people should not use this as a strategy to buy and flip' properties, but rather as an exit strategy,” cautions Chen.

Chen also points out that Australia practises the build-then-sell concept where only 10% of the purchase price is required upon purchase, with the balance payable only upon completion of the property.

“Australian developers are unable to utilise the initial 10% as it is paid to their solicitors trust account backed by the government.”

Chen says that in terms of finance, foreigners can be eligible for up to 80% of the purchase price.

However, Khong advises investors to weigh their investment strategies, objective for property purchase, and also plan their timing and exit.

“They can also consider London, England. The British pound is about RM4.75 against the ringgit, and there are many good deals to consider, given the present state of the property market over there,” says Khong.

According to Khong, in terms of property price appreciation, houses and townhouses in Melbourne have shown an average growth of about of 10% per annum in the last 10 years, with some prime areas performing at close to 15%.

Chen points out that landed properties in Melbourne had seen capital appreciation of 8% to 9% consistently for a four to five-year period before 2011.

“Melbourne property prices posted a drop in 2011 (attributed to cautious consumer sentiment due to global economic uncertainty). This year, many new quality developments in good locations that were previously deemed expensive, would be more easily available to investors.”

Concerning rental returns for a landed unit in Melbourne city, Khong says Melbourne provides an average yield of 4% to 5% per annum, with the actual vacancy rate at less than 3% currently.

Chen concurs, and says with high occupancy rates of up to 98% in inner cities, investors need not worry about renting out their properties.

“Rent reviews are generally after six months or one year (depending on length of tenancy).”

Meanwhile, Henry Butcher Marketing's international projects director Jazmine Goh says foreign investors should look at Australian properties as a mid-to-long term prospect.

“Just like other countries, buying a good property in Australian cities such as Melbourne is about location public amenities and infrastructure, good surrounding tenant catchment and if they are receiving any positive transition from regeneration,” she says.

Location is key

According to AUS Property Corp co-founder Steve Galanos, investors may want to focus on property developments in the western and northern corridors of Melbourne, where he says growth is a lot faster and prices are cheaper comparatively.

“Traditionally, the east and south east corridors of Melbourne have been more popular areas as they are more developed.”

Khong concurs, and points out that prices for new-release apartments in the north and western suburbs are now priced between AUD$7,000 (RM22,362) and AUD$8,500 (RM27,150) per sq metre while similar units in the south and east as well as Melbourne's central business district (CBD) are between AUD$8,500 (RM27,150) and AUD$11,500 (RM36,733) per sq metre.

“It is so much more expensive in the south and east because these developed suburbs offer more in terms of amenities, and public transportation to the CBD. There is also more affluent demographics for buyers and investors to consider.”

Khong explains that in Melbourne, the areas to the east (along the bay's shore and upstream of the Yarra River) were the first to be developed. “There was a major land boom and bust in the 1880's that resulted in Melbourne's south east development. Meanwhile, west of the CBD is swampy and hindered early development.”

Public transport is more developed in the east.

Chen also says there are still huge land parcels in the western suburbs and “this has kept prices attractive to young families. It is still undergoing infrastructural changes with government backing and there is an opportunity to enjoy capital growth over these few years without paying a premium price.”

However, Chen advises investors to look into the long term trend of a specific area before making a decision.

“There are matured suburbs in the east that show 8% to 11% capital growth yearly which trump capital growth in other corridors,” he points out.

Chen says two-and-three bedroom homes in the east or south east would typically be priced from AUD$550,000 (RM1.76mil) onwards.

Current developments

Last November, AUS Property Corp launched a landed residential project in The Lakes at Greenvale, Melbourne.

The development, which will consist of 21 units of 2-storey semi-detached houses, was a value proposition, according to Galanos.

A typical 1,650 sq ft unit is priced in the region of AUD$360,000 (RM1.15mil).

Each unit comes with three-bedrooms, two bathrooms, a powder room and a garage.

The Greenvale suburb is located 23km north of Melbourne's central business district (CBD). The Lakes at Greenvale come with a seven-year builder's warranty.

“We provide heating, cooling, carpets, tiles, window screens, security doors, remote-controlled garage, landscaping and even the clothsline to dry clothing.”

Galanos says in the last 22 months, AUS Property Corp's developments have attracted an increasing number of foreign buyers.

Malaysians, Singaporeans and investors from Hong Kong bought 10 out of 27 houses in the company's Clearwater Rise development in Truganina, 22km west of Melbourne's CBD.

Units were priced in the region of AUD$335,000 (RM1.07mil).

In the first quarter of 2012, AUS Property Corp is also due to launch single and 2-storey houses in the suburb of Point Cook, which is about 20 minutes drive from Melbourne's CBD.

“They will be 4 to 5-bedroom houses, and should not be much more expensive than our current developments.”

Another release of new houses is scheduled for mid-2012 at Toolern Waters, Melbourne.

Meanwhile, Jalin Realty is marketing the second release of a townhouse development in Northcote (6km to Melbourne's CBD).

Chen says the first release was a huge success with investors and owner-occupiers in Australia and Malaysia.

“The second release is selling fast, especially with prices ranging from AUD437,000 (RM1.4mil) to AUD739,000 (RM2.36mil).”

In mid-February, CB Richard Ellis introduced the The William @ William Street condominium project in Melbourne, which consists of 470 units with sizes ranging from 550 sq ft for a one-bedroom unit to 900 sq ft for a three-bedroom unit.

The William @ William Street is the maiden Australian residential project of Hengyi Australia Pty Ltd, a subsidiary of Shandong HYI (Group) Co Ltd.

Henry Butcher Marketing is also promoting two developments in Melbourne, namely Lakeside Central and Coburg Hill. Lakeside Central is a townhouse development located within the award-winning Sanctuary Lakes golf resort.

Goh says the Sanctuary Lakes development has amenities such as schools and a shopping mall, and is a five-minute drive to the Point Cook town centre and about 20 minutes via train or a 30-minute drive to Melbourne city. Land sizes are from 2,336 sq ft to 3,294 sq ft, with a choice of 3 or 4-bedroom townhouses.

Land prices start from AUD$255,000 (RM814,431) excluding the townhouse which costs about AUD$280,000 (RM894,137).

Meanwhile, Coburg Hill is a landed development located 9km north of Melbourne's CBD.

Goh points out that Coburg Hill neighbours the Brunswick suburb, which has seen significant growth over the last few years through urban regeneration schemes.

“Coburg Hill is designated as the principle activity centre in Melbourne. It has a lot of potential and is ranked as one of the top investment hotspots in Melbourne. Properties in that suburb are considered more affordable, and it is getting to be a popular suburb among Australians due to its proximity to the city, its established infrastructure and amenities, as well as the benefits of the gentrification underway,” says Goh.

Related Story:
Investment choices in Melbourne

Pictures below:
An aerial view of Melbourne City at sunset, taken from the Observation Deck at the Rialto Towers on Collins St. Houses and townhouses in Melbourne have shown an average property price appreciation of about of 10% per annum in the last 10 years, with some prime areas performing at close to 15%.

A house at The Lakes at Greenvale, Melbourne is priced in the region of RM1.15mil.

Source reference link: http://biz.thestar.com.my/news/story.asp?file=/2012/3/17/business/10890458&sec=business

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PNB buys two London properties for RM2.6bil

By THEAN LEE CHENG
leecheng@thestar.com.my

9-Mar-2012

PETALING JAYA: Permodalan Nasional Bhd (PNB) has joined the ranks of global investors to buy into prime London commercial offices with its latest purchase of two properties, 90 High Holborn and One Exchange Square, bringing to four its portfolio of properties in the international financial centre.

The two buildings, which come with single tenancies, were bought from German fund manager KanAm for £550mil (RM2.6bil), offering PNB an annual yield of 5.25%, a source said.

One Exchange Square is tenanted by the European Bank for Reconstruction and Development, a quasi public organisation, while 90 High Holborn is the headquarters of law firm Olswang.

The deals are the latest in a series of purchases by PNB since late last year. A local Malay daily reported group president and chief executive officer Tan Sri Hamad Kama Piah Che Othman as saying PNB needs to diversify its investments, instead of solely relying on the equities market.

In December, PNB bought a 12-storey office space in Milton & Shire House on 1 Silk Street for £350mil from US investor Beacon Capital.

In January, it bought Woolgate Exchange, on 25 Basinghall Street, a nine-storey commercial office with a basement floor for £270mil from Irish development and investment company D2, a source said. Woolgate Exchange offers an annual yield of 5.7% compared with the average annual yield of 5.25%.

PNB's first foreign foray was in Australia where it bought Santos Place in Brisbane for A$290mil in August 2010 from Nilson Properties.

The Employees' Provident Fund is the other fund that is buying into London. Prior to PNB's entry into foreign property investment, the EPF has been the most aggressive among Malaysia-based funds, with most, if not all, its overseas investments in Britain. In 2010, EPF said it was putting aside £1bil (RM4.85bil) for its British property investments. EPF has so far spend more than £600mil (RM3.1bil) in London purchases, with most of the properties offering a yield exceeding 5% a year.

Besides PNB and EPF, Tabung Haji may be the other fund seeking investments abroad. Its overseas property assets are located in the Middle East. In the case of Tabung Haji, whatever it purchases must be syariah-compliant, which means the building must be used for halal activities.

PNB manages a fund size of over RM190bil while Tabung Haji manages funds totalling about RM30bil.

London has been considered a “safe haven” with investors from Europe, mainland China, Middle East and Russian investors buying into its commercial office space sector of late.

Source reference link: http://biz.thestar.com.my/news/story.asp?file=/2012/3/9/business/10884844&sec=business

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