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This article is in response to '<a target="_blank" href="https://www.propertyobserver.com.au/hotspots/stafford-blooms-but-four-out-of-five-sam-saggers-brisbane-hotspots-yet-to-show-promise-samsaggers/2013053061795">Stafford blooms but four out of five Sam Saggers Brisbane hotspots yet to show promise</a>'
People ask me, “Were you angry about the article?” My reply is pretty simple: I’m not. The way I see it, it’s the job of a journalist to create and start debate.
So better late than never, I’ve finally found time to reply. If you have not read <a target="_blank" href="https://www.propertyobserver.com.au/hotspots/stafford-blooms-but-four-out-of-five-sam-saggers-brisbane-hotspots-yet-to-show-promise-samsaggers/2013053061795">the article I am referring to</a>, it states that four out of five of my “Brisbane hotspots” are “yet to show promise.” I appreciate the perspective. Brisbane has been underperforming for a while now. Yet one thing that still plays on my mind is that in conventional capitalism, it’s still better to buy during a market low rather than a market high. Thus smart investors are buying up in Brisbane LGA and buying as many properties as they can.
Those smart investors also entered the Sydney market late 2009 when prices were simply capitulating and it was a real buyers’ market. Of course scepticism in 2009 was rife, and investors were defiantly swimming against a tide of media gloom. Now in 2013, some five years later, the Sydney market is boiling hot. Early investors that struck at the bottom in 2009 have already made huge gains and that is now not disputable. It’s easier to look back and wish you had bought than it is to buy when sentiment is against you. Remember, despite the medias best efforts to de-rail property investors, the job of an investor is to avoid buying because of a fad or because everyone else is in “boom” mode. It is the job of an investor to swim against the tide.
In 2006 many property investors launched into Melbourne despite negative press, they received their rewards some three years later as the market boomed in 2009 and 2010.  See, investing is a game of courage and a game of patience. It’s not for the faint hearted, that’s for sure.
The article is right; Brisbane LGA suburbs did not match the growth of Perth and Sydney.  But is it all doom and gloom? I personally think it’s a great buying market and I personally have invested there. I am confident in my investments already and the best part is that the market growth upside hasn’t even started.
Let’s take a look at two properties I have bought in the last 18 months in Brisbane.
My first buy was a second-hand one-bedroom unit in the suburb of <a href="/news">New Farm</a>, Queensland. It is a highly sought after suburb due to its picturesque streets and because it’s located only 2 kilometres east of the Brisbane CBD on the river. It boasts the popular cafe, bar and restaurant strips of James and Brunswick Streets, and has excellent transport infrastructure in place with regular Ferry and Citycat services, as well as several bus routes. As unit prices are sub-$500,000 and the median house price is over $1 million, units are extremely attractive for home owners and investors alike. Growth drivers included:
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Supply and demand;
</li>
<li>
Transient population growth; and
</li>
<li>
Demographics.
</li>
</ul>
So what did I buy? I managed to get a great deal due to the soft conditions. I secured the recently refurbished one-bedroom unit for $280,000. Seems cheap? Well, I agree! It rents for $400 a week, which is a 7.4% rental yield. Of course, once the Brisbane market takes off, I can foresee that the unit will reach a value of $400,000 – where I’ll make a small win for my bravery of buying at the bottom of the market cycle.
My second purchase was in <a href="/news">South Brisbane</a>, Queensland. Without doubt the rental yields in South Brisbane are the best for an inner city suburb anywhere in Australia. Located within 300m of the Brisbane CBD. The suburb is a mecca for students, executives and the cities elite. It is a cultural hub of Brisbane. With some of the best award winning restaurants, the museum of Modern Art, access to train lines and amenities a plenty. With over 30,000sqm of commercial office space and some of the largest big name commercial tenants in the country, the residential market is tight. In 2007, there were 17,000 office workers in South Brisbane and 900 apartments. In 2012 there are 30,000 office workers and 1,100 apartments. The rents are some of the best in the city with yields pressing 6.5% if you buy well. There aren’t many locations left in Australia today where you can buy so close to a capital city at an affordable rate. This alone makes South Brisbane a standout market. Nicknamed “Brisbane’s Greenwich village”, growth drivers include:
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<li>
Supply and demand;
</li>
<li>
Yield variation;
</li>
<li>
Transient population growth;
</li>
<li>
Macroeconomics;
</li>
<li>
Infrastructure; and
</li>
<li>
Demographics.
</li>
</ul>
So what did I buy? Well I a decided to buy a brand new unit. I actually bought it off-the-plan and paid $440,000 all up that included some furniture. I rented the property furnished from day one, its current rent is $600 per week and the Defence Force is the tenant. What a formidable return, wouldn’t you agree? Actually both these properties are yet to really perform from a growth aspect. But I’m getting $1000 per week for two properties in two great suburbs, and have paid in total $720,000. That’s a 7.2% return on my investments and I’ve done it in Australia’s third largest city without leaving the 3 kilometres ring of the CBD!  I’m not financially stressed either, because the rents pay my mortgages and it doesn’t cost me anything to hold the properties.
I don’t know about you but I think I have bought really well. So why does the article state they're yet to show promise? And why did I pick areas where the median didn't perform?
What I can tell you is this:
 
Smart Property Investment magazine was doing a property cycle report on Brisbane and asked me to identify suburbs that were likely to represent the best buying opportunities in 2012. At no point did I refer to these areas as ‘hotspots’. I worked with the writer to come up with five areas that fit his criteria. The writer required five suburbs within 10 kilometres of the CBD with properties available for under $400,000. I did express that they were the best buying opportunities available at that time, in that area, for under a certain price – and I still stand by what I said.
I know investors can still buy well and still buy at the bottom of the market in these areas. And if agent interest is anything to go by, I think we are starting to see the winds of change finally creep into the Brisbane market. There is definitely a new air of confidence and agents are becoming increasingly confident as sales volumes begin to surface.
Real estate is a long-term wealth creation strategy, and you can’t expect overnight success. I suggested a market high in 2016-17, which is still three to four years away. I did suggest a double-digit price growth but I did state it would be over a three year time period. Again, as it’s only been just over a year since the article was published and I’d love to revisit this discussion in 2016. In truth neither the article nor I can win this debate, at least not for a few years yet. One thing that is certain though is the way data is reported is often very different to what is happening on the street.
Let's explore:
Michael Matusik published an article on Property Observer commenting on <a href="https://www.propertyobserver.com.au/residential/residential-property-commentary-needs-to-focus-on-sales-volumes-as-well-as-prices-michael-matusik/2013062362542" target="_blank">the inaccuracy of median property prices</a> for judging realistic investment returns. Matusik writes, “Far too much commentary about the residential property these days focuses on price. Very little is actually said about sales.” I completely agree.
Matusik sums it up nicely when he says, “Investors, especially, should pay little or no attention to median or average prices.  It’s sales volumes that are really important.” Well, that’s true and I agree with Matusik, if you are looking for a hot market. Sydney today has massive sales volumes and regardless of the median price, the market is surging. The more sales volume activity, the more demand, the more growth. Would I buy in Sydney now? Well, in truth I don’t have to. I bought three properties over the past four years in Sydney and have done well. Again, primarily using bottom of the market buying strategies.
When will Brisbane sale volumes take off?  Well, as an early investor into that market, I can share with my co–investors, it is not a matter of if they will, but when! One thing I think we can all agree on is, it is smarter to buy in a market low than when the market is high. Brisbane is inexpensive right now and low. If you don’t believe me about the theory, perhaps then Mark Bouris can help win this argument with his buying advise.
To quote Mark Bouris, from his article '<a href="https://www.propertyobserver.com.au/residential/when-is-the-best-time-to-buy-property-mark-bouris-markbouris-ybrwealth/2013060762048" target="_blank">When is the best time to buy property?</a>', “Close followers of house prices are often investors who look for total return on their properties, which combines rental yield and capital appreciation. This can be a good test of overall property health.”
Today Brisbane exhibits strong yields, combine that with expected growth and I think the debate will soon be over. Brisbane LGA and its many inner suburbs, including the ones named in the article, are absolute opportune investment areas and just like Mr Bouris says, once you combine high yields and capital appreciation you have a very healthy property market.
Growth will happen. Brisbane has too much right going for it for it not to.
 
<hr>
 Sam Saggers is CEO of<a href="https://www.positiverealestate.com.au/ME2/Sites/Default.asp?SiteID=697F1E57F8A54C7F9582C3C49417EEC4" target="_blank" rel="nofollow"> Positive Real Estate.</a>
 
 
 
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ssaggers-cYw3HLcXnJ

The property game isn't for the faint-hearted: Brisbane 'not spots' require patience

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The news that BHP Billiton received final approval (or you could say finally received approval, depending upon your point of view) to begin a $30 billion expansion of the Olympic Dam mine in South Australia is certainly welcome news. The environmental impact study on this project was begun in 2005, so this news has been a long time coming. Prices have been dormant since the market rose in 2006 on speculation of the mine going ahead.
In 2007 and 2008, house prices dropped and hit rock bottom and between then and now the market has been sluggish. With Gladstone as a precedent of what can happen to the property market when these huge projects are announced, I would expect higher levels of interest in the Whyalla and Port Augusta markets.
We brokered properties in Whyalla in 2008 at the bottom of the market; however the announcement had been delayed by 18 months. Few imagined that approval would be so long in coming, however investors who bought into the market at that time will, I believe, be able to recycle their equity and tighten their rents as a result of this latest news. Investors can't cash in now. I would wait another three years to see them maximise the best of a market that will heat up.
The Olympic Dam mine is the mothership of projects, so I expect the South Australia economy and workforce to reap the rewards. I think we will see a lot of interest in Whyalla by the middle of this year, with clients looking for capital gains as a spin off from the project. Vacancy rates will tighten up and the outlook is a lot brighter.
Investors should expect to buy into a soft market, and they need to be a little patient to get a growth result. The market offers plenty of housing solutions under $250,000. The market has been really soft with the average days on the market approximately 180 days, so investors will have a great offering of bargains.
The strategy for this market is definitely “buy well” and make your money buying. Get a discount off the asking price of up to 10% and wait for the growth.
The city of Whyalla and nearby Port Augusta will derive a great deal from this expansion. During the construction phase, 6,000 jobs will be created, and the mine will add another 4,000 jobs to its normal operations. Indirectly, the mine expansion will create 15,000 jobs, and the total number of jobs becoming available will total 25,000.
Whyalla is a city that has its urban planning already in place. It could fit twice the amount of people it currently has. Whyalla has been asleep for far too long, relaying mainly on its steel industry and port. It will act as a service centre, so all aspects and industry of the town will do well.
Even though Whyalla has other industries doing reasonably well right now, I believe this announcement will be of huge benefit. The town has been ready for 30 years for this to happen.
One would only have to look at higher house prices and associated wages in Port Lincoln, which relies on tuna fishing and export the tuna to the Japanese, to see what can happen to house prices when an industry actually works in the air peninsular. Port Lincoln house prices are about $40,000 more than current prices in Whyalla.
There is plenty of time for investors to jump into this market. The next nine months will be interesting to watch. I would monitor this market closely now and it will be pivotal to see the reaction of locals and interstate investors. Now the premier of South Australia has signed off on the deal, I believe it will be game on. Many are tipping it as the Gladstone of SA.
BHP’s planned $700 million desalination project to support the Olympic Dam project and the $600 million planned port expansion of nearby Port Bonython will just add to infrastructure that will boost the towns prospects.
Whyalla is emerging as the preferred location for many mining companies looking to tap into the resource-rich area, that includes rare earth oxides, phosphate, gypsum and uranium oxide. Additional factors culminating as growth drivers for Whyalla include access to key infrastructure such as a good road, rail and port facilities, access to a skilled workforce, proximity to seawater for a desalination plant, and the support of the South Australian government for many new miners and projects.
Sam Saggers is CEO of<a href="https://www.positiverealestate.com.au/ME2/Sites/Default.asp?SiteID=697F1E57F8A54C7F9582C3C49417EEC4" target="_blank"> Positive Real Estate.</a>
Photograph by Wayne Thomas, courtesy of <a target="_blank" href="https://www.flickr.com/">Flickr</a>.
 
 
 
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Want to capitalise on the mining boom? Consider Whyalla and South Australia’s Olympic Dam mine: Sam Saggers

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If you could put together a fantastic investment opportunity, what would it entail? Would you make every effort to find an opportunity that has all of the signs of a quality investment such as low supply and high demand, fantastic amenities and a strong, diversified employment base? Would you select a location that is close to all necessary amenities and some that are perhaps unnecessary but highly appealing just the same? Would you search for a location that professionals forecast as a strong growth area for years to come, providing you with massive capital growth and cash flow opportunities? Of course you would. So what would you do if I told you that Newcastle enjoys all of these qualities? You'd take a look for yourself, that's what you'd do!
Low Supply/High Demand
According to the 2010 Lower Hunter State of the Land Report, the region is experiencing a dearth of houses – it is undersupplied by more than 3,000 per year. The area has not been zoned for more residential development, adding to the squeeze on supply already being felt from a growing population. Per <a href="https://realestate.com.au">realestate.com.au</a>'s data, postcodes 2300 and 2302 clearly show that demand is surpassing supply in Newcastle, and has been since October 2009. As the chart below indicates, the rental market for the Newcastle area is quite strong – a little more than half of the population is renting.
<img src="/images/stories/saggers2.gif">
Population is growing as a result of infrastructure spending and employer growth. The largest share of the population growth has been centred in the areas of Lake Macquarie, the Port Stephens council area, the Great Lakes Council area and of course the City of Newcastle. As the data indicates, population has outstripped supply in the Lower Hunter region, and if the population continues to grow as predicted, housing will continue to be in high demand. Infrastructure improvements and jobs outlook for the region has contributed to predictions by The Hunter Valley Research foundation of an increase in the population to 730,000 by 2026.
<img src="/images/stories/saggers3.gif">
Amenities The old real estate dictum “location, location, location” still holds as true today as ever. If your investment property is in an area of low supply and high demand, yet its location lacks many of the amenities desired by today's demographic, then your return on investment will be lacking. Newcastle offers both residents and visitors a distinctive combination of pristine beaches, prosperous wharves and an animated city landscape, offering individuals a wide variety of fun and entertaining things to see and do. Walkers get the chance to take in a bit of natural beauty on Bathers Way, which is a well-known five-kilometre walk along the coastline between Nobbys Beach and Merewether Beach, and shoppers can find the perfect gift among a number of unusual and interesting shops at Cooks Hill's Darby Street. Antique buffs can take a trip back in time among the antique stores in Mayfield and Islington. For a walk on the “wild” side, Blackbutt Reserve is a mere 10 minute drive from the city. Visitors enjoy the chance to connect with Australia's wildlife, while wine enthusiasts can soak in the beauty and enjoy tours courtesy of many Hunter Valley wineries just minutes from downtown Newcastle. Employment ABS reported in June of 2010 that unemployment rates in the Hunter region were at 4.3%  – lower than the state average of 5.2%. Financial services, education and health sectors as well as massive natural resource exploration and extraction is contributing to the Newcastle economy. As China's need for coal continues to grow, so too does Newcastle's export of this highly desired resource. Newcastle's port is the highest exporter of coal in the world, moving a massive 97 metric tonnes during years 2009-2010 with plans to increase that output to 180 metric tonnes by the year 2013. To accomplish this amazing feat, expansions to mining facilities and subsequent employment growth will further strengthen Newcastle's economy.
<img src="/images/stories/saggers.gif">
Market timing In 2010, Newcastle was labelled as the only current “hotspot” in New South Wales by <a href="https://hotspotting.com.au">hotspotting.com.au</a>'s Terry Ryder, and corroborated by Australian Property Investor magazine that same year. These views were in no small part derived from the massive billion dollar infrastructure improvements both planned and currently in progress that are driving factors in the Newcastle and Hunter region economies. Timing, as they say, is everything, and current market indicators suggest that right now represents a perfect time for investors to jump into this market, as Australia’s sixth largest city, Newcastle appears to be on the cusp of recovery. Right now prices are still low for this populous city location, putting investors in a very good position to get in at an affordable price, at the perfect time of the market and realise strong capital gains.
Sam Saggers is CEO of<a href="https://www.positiverealestate.com.au/ME2/Sites/Default.asp?SiteID=697F1E57F8A54C7F9582C3C49417EEC4" target="_blank"> Positive Real Estate.</a>
 
 
 
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Newcastle housing market set to shine

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Imagine rolling, picturesque landscapes and a vibrant and diverse night life and you will catch a glimpse of life in Orange – a city with much to offer. Located approximately 260 kilometres west of Sydney, the City of Orange in New South Wales is a rapidly emerging investors’ hub for many reasons and has been named by many authority figures as the next hotspot to invest in for many reasons, where investors can expect fantastic returns when buying property in this city.
So let me spell out the reasons why.
The city is located to the north and west of Sydney – Mitchell Highway links Orange to Bathurst on the east and on the north-west to Molong, Wellington, Dubbo and Bourke. West of Orange is Parkes (100 kilometres) and Forbes (125 kilometres), which are situated along the Newell Highway running from Brisbane to Melbourne. The Northern Distributor road opened in 2007 as a bypass and the city is served by the Orange Airport, a regional airport.
Two railway stations serve Orange – the main station, served by the Countrylink XPT service (daily), has been open since 1877 and runs between Sydney and Dubbo. The Xplorer service runs weekly between Sydney and Broken Hill.
The smaller station – Orange East Fork – was opened in 1970 and is situated on the branch line to Broken Hill. Indian Pacific provides services two times per week to Perth.
Recently, Positive Real Estate sold five four-bedroom house-and-land packages in beautiful Orange, which promise fantastic rental yields ranging from 7% to 14%, depending upon furnished, unfurnished or serviced/furnished options, which also offered a positive tax cashflow in just one year. Needless to say, once these deals were released to our investors they were snapped up within an hour!
So what makes Orange so special?
Plenty. The city shows all the markers of a growing, robust economy. Orange boasts the lowest vacancy rates in all of New South Wales, and the massive private and government infrastructure spending will continue to drive growth in the region, increasing the potential for huge profits.
Orange is a metropolitan city in every sense of the word, however it has managed to maintain its idyllic persona without sacrificing the best that city living can offer. For example, annual events such as F.O.O.D. Week, which is organized by the local food and wine industries attracts thousands of individuals to the region. The event is popular and impressive enough to be featured in Australian Traveller Magazine's list of “100 Greatest Gourmet Experiences”.
Newcrest Mining's Cadia Hill gold and copper mine, located 40 kilometres to the south west of Orange City, is slated to receive $2 billion dollars' worth of expansion to its facilities. This mine is the largest producer of copper and gold in New South Wales and employs approximately 1,000 people directly and about the same indirectly, bringing $1 billion to the local economy and continued operation for at least 30 years.
Orange has more to offer than simply mining. With a diverse mix of employers, including education, agriculture, health, manufacturing as well as mining, the growth is not dependent upon any one industry.
Infrastructure spending is booming in Orange. For example, Bloomfield Hospital is spending $250 million towards construction of a new general hospital, two mental health facilities and upgrades to four buildings as well.
Other works include $30 million from the state government towards a 30-bed aged-care facility, $47 million for a water pipeline from the Macquarie River to aid Orange City's water supply issues, and $12 million towards 49 two- and three-bedroom unit apartment buildings.
Orange has nearly a dozen primary schools and two Catholic Diocesan Primary Schools, and a number of secondary schools as well. Orange has its own university campus, Charles Sturt University (formerly University of Sydney) which has a recently built dentistry school.
Head of campus professor Kevin Parton told Central Western Daily that as more of the university's projects (such as a proposed medical school) came into play the rental demand would necessarily rise as students search for good housing opportunities while attending university.
“There are some shrewd entrepreneurs in Orange,” Parton said. “They know that with supply so low they'll get a good return.”
Despite the university's ability to keep up with rental demand on campus, Parton said that many students seek out private rentals as they get older instead of living on campus.
“We know that we can't provide that [private accommodation] so they must go out into the private market,” said Parton. “Lots of businesses are expanding, businesses like Cadia, Kinross, Jeff Hort... all of us are putting pressure on the rental market. As a result of this pressure we would expect more construction by the private sector.”
With all of this pressure on the market, and an extremely limited supply, investors will continue to see strong returns for quite some time. According to API Databank Market Watch, the previous decade showed an annual price growth of 8.3%.
Experts believe that Orange City Council's prediction made in 2005 of a 50,000 population by 2020 may be proven a conservative one, due to the massive infrastructure development and commitments for future growth by various industries and government entities.
Blessed by a forward-thinking council, Orange City's well managed strategy to handle growth will continue to be a positive influence on investments in the region, and with massive spending by both private and governmental entities, investors are sure to see solid returns for quite some time.
We recommend that investors take a closer look at Orange. With a very tight rental market, and a booming economy, this city is certain to present fantastic rental yields and positive cashflow opportunities.
Sam Saggers is CEO of<a target="_blank" href="https://www.positiverealestate.com.au/ME2/Sites/Default.asp?SiteID=697F1E57F8A54C7F9582C3C49417EEC4"> Positive Real Estate.</a>
 
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NSW city of Orange offers opportunities for investors

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Mining markets are the golden key to economic growth in Australia right now, whereas industries such as tourism are taking a hit from the high Australian dollar. Knowing where to look in Australia for prime investment property takes a bit of due diligence, however there are plenty of fabulous opportunities for the taking, provided an investor knows what he or she is looking for. For example, rising wages are a key factor to search for when seeking a great investment area. This is due to the fact that rising wages are strongly tied to rising property values.

Certainly we're going to invest where rents are going to grow, where populations are going to grow, where unemployment is low, and where certainly wages are going to grow. We're also going to buy where supply and demand is not keeping up, and so these opportunities are in Australia and not necessarily in the rest of the world.

The mining boom we're experiencing now is, essentially, the biggest in our nation's history and it's really set about because we're now intrinsically linked to the Asian marketplaces. We're more aligned with these marketplaces, putting us in a fantastic position as there's really limited times that China and India will stop building over the next 20 years.

The result of our connection with Asia through the mining markets will be higher wages in Australia. The next 20 years of property to me seem pretty good. Of course it's not necessarily all rosy, and I'll show you some other speeds to the economy so you can get a better understanding of where not to invest. 

To show just how huge the impact the mining markets have had on the economy, consider a measure created by HSBC. Some 10 years ago or even 6 years ago, they were measuring 1 ton of iron ore and converting that into what we tend to buy. The example they chose was a flat screen TV.

One ton of iron ore, back six or seven years ago, when the Australian dollar was lower and commodity prices were lower, was essentially worth 2,200 flat screen TVs. As you will remember, back then a flat screen would set you back about $10,000. Today you can pick yourself up a flat screen TV for about $800 bucks. So today's measurement of 1 ton of iron ore is about 22,000 flat screen TVs. This is a result of a mixture of high commodity prices and the high Australian dollar.

Never before in the history of Australia has our arbitrage or what we own been worth so much compared to what we have to buy, and it's such a unique opportunity and a very prosperous opportunity that Australia needs to take advantage of.

The Australian dollar is higher at the moment, and that's obviously not necessarily great for people exporting, but essentially imports are cheaper.  The Australian dollar has been higher than what it is right now, but it's never been this high since it's inaugural flight back in the ’80s. 

I don't necessarily see that this will change very soon. It's not all a bed of roses, there's certainly some data coming out which does show a two speed economy. 

If we were like New Zealand, that doesn't really have that much mining activity, and we relied on say dairy and meat, we would soon be very similar to those economic countries that don't fuel the engine for the great powers of India and China, and as you can see in the chart below, the line essentially dips and we would no doubt be in a far more recessive environment if it wasn't for the opportunity of the mining markets.
<img src="/images/stories/nonmining.gif">
<shapetype coordsize="21600,21600" path="m@4@5l@4@11@9@11@9@5xe" filled="f" stroked="f"><stroke joinstyle="miter"><formulas><f eqn="if lineDrawn pixelLineWidth 0"><f eqn="sum @0 1 0"><f eqn="sum 0 0 @1"><f eqn="prod @2 1 2"><f eqn="prod @3 21600 pixelWidth"><f eqn="prod @3 21600 pixelHeight"><f eqn="sum @0 0 1"><f eqn="prod @6 1 2"><f eqn="prod @7 21600 pixelWidth"><f eqn="sum @8 21600 0"><f eqn="prod @7 21600 pixelHeight"><f eqn="sum @10 21600 0"></f></f></f></f></f></f></f></f></f></f></f></f></formulas><path gradientshapeok="t"><lock aspectratio="t"></lock></path></stroke></shapetype><shape filled="t"><imagedata src="cid:image010.jpg@01CCB99C.3EF5E1C0"><wrap side="largest"></wrap></imagedata></shape>So the mining markets have made a bit of a resurgence, and they're always typically very small areas where the mines are located and so they create great little pockets of buying opportunities. 

Of course some of the capital cities that link to these mining markets also create great pockets of opportunity. Places like Perth and places like Brisbane are fast becoming the global offices for the mining market sector.

So we're going to see the re-emergence of these marketplaces. Brisbane is certainly going to be the first cab off the rank. We've got some great economic data which has just come out to support the fact that Brisbane is really at the bottom of the market, but recovery is so close now, that buying in that particular marketplace is going to be a very strategic investment. 

We saw during the GFC that the Victorian market and the New South Wales markets do very well, yet the mining markets suffered – Queensland and Western Australia – all those particular marketplaces suffered. 

As interest rates were reduced, the masses bought real estate just after the GFC, in fact we're at a 5% variable interest rate and that'll add a lot of people, where there's millions of people in Sydney and Melbourne to jump into the markets and fuel great growth, but in the less populated states it didn't have that impact, but we're going to see that impact into the future.

The business sentiment is weaker, but the reserve bank has stepped in and they've restored a bit of parity back into the markets by reducing their interest rates and the banks have passed that on which is great.

Over the next 12 months, they're predicting more reductions around the interest rate sector, which could be great for creating a bit of urgency when it comes to buying.
 
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Tourism

There are certainly some issues when it comes to buying in certain marketplaces, and these marketplaces I don't particularly want to buy real estate in at the moment, and they tend to be areas where the sole industry in Australia is tourism. 

Because of the high Australian dollar, we are actually losing more tourists than what we're gaining,  and this is a phenomenon that hasn't occurred since the early 80s. In fact we used to get 120,000 visitors to our shores every month - of course these visitors would bring money from their country and spend it on consumables in our country. Today, we're not getting that 120,000 and in fact because of the high Australian dollar, 120,000 more Australians are actually not holidaying at home, but going abroad to spend their money.

The problem though for areas that are reliant solely on tourists, is that there isn't any pressure on wages, and without pressure on wages there tends to be limited opportunities for properties to grow, and we're seeing that in some places, which solely rely upon tourism, that they defy the employment trend and have employment figures closer to 10%. 

When there's higher unemployment, and an industry that typically has lower wages, which travel and tourism do, compared to say the mining sector, there isn't the ability for a market to push on.

Until there's going to be a turnaround in the amount of tourists that stay on shore and the amount of tourists that visit our country, those particular industries will remain very weak indeed, and that will be reflected in those particular housing prices.

We want to find the industries with the higher wages, and the mining companies are essentially paying the higher wages, and so it's going to be quite interesting when we look at the profits at the moment, compared to that of say 1995, which really is only 16 years ago. 

The profits that the mining companies are making now, are twice that of what they were making 16 years ago, which is fantastic - it allows them to share that dividend with the people who work for them, and of course it opens the debate of should there be a mining tax or not, because the mining companies are doing very well.

Obviously then, without the mining companies, the economy wouldn't be doing so well. 

Another thing about mining companies is they don't borrow money off banks – they are essentially cashed up to the hilt, so whenever they make a decision or make money, they're not making it from a point of leverage, they're actually making it from a pure cash position.

This fact always makes them very appetizing as say a blue-chip stock. If we can follow those blue chip stocks, and link the blue-chip companies who are building, or creating mines, then it makes a lot of sense to buy real estate in some of those areas.

Australia has historically low unemployment, one can understand the Reserve Bank worrying us about reducing rates, and 2011 has been a year which they've had to weigh up essentially a thriving economy – a two-speed economy, linkage to the Asian marketplaces and of course the USA and the European debt crisis. 

So when there's low unemployment – around 5% unemployment – inflation increases…you can understand why the Reserve Bank really was on tenterhooks for some time. In fact we didn't really see any great fluctuations for something like 11 consecutive months, so eventually rates have been reduced, not because of our own country's inability to grow, but because we are safeguarding it from the forces of what is going to happen in Europe. 

Europe is essentially a bit of a basket case at the moment, and we are able to stimulate our market forces because we keep our interest rates quite high compared to the rest of the world. So you've just got to ask yourself, when trouble comes along and we're at a 7% interest rate, the RBA says okay, let's drop that to 6% .

By dropping it to 6% and if the banks follow suit, there's a load of relief into the marketplace, and so we've got, I guess an economy right now that if it were 7 gears to it, and we are at a 7% interest rate, we could essentially drop the gear back 7 times, which is far more sound than say our North Atlantic counterparts who really can't adjust their interest rates very much – especially if they had to drop them much more, there wouldn't be an ability for the banks to get a return on their money. 



Funding Issues

The toughest thing that is occurring in the property market, and in other industries, is bank funding problems. In general, it's a potential risk; however it's been fairly benign. We've all had a poor valuation happen, or a bank knock us back because our documents aren't right, and we've seen limited load-up lending, lower LVRs – we've seen all that. 

Essentially we can deal with it – it takes a little bit more care, it takes a little bit more psychology to understand that there are bigger forces at play than essentially we may believe, and as we go through, and lending is tight, it's the only thing we have to deal with to buy real estate. I don't mind the fact that lending's tight, however, because I would prefer that to the lending habits that have seen European and American economies fall in such a poor state. 

It's tough to lend or borrow money, but that's how it should be – people shouldn't just be given money without the ability to pay money back and unfortunately we've seen that overseas.

Interest rates are going down, and that is a good thing. 2012 will see interest rate cuts. As we've seen just earlier this month the RBA cut rates again by .25%, in order to help a fledging retail sector of the economy – provide a bit of a stimulus over the Christmas period, rather than wait till after Christmas.

As the next two years unfold, I don't see that there's going to be any changes. I believe that we're going to have challenges. Every time we buy a property there's going to be potentially a valuation challenge, all that has to happen is you need to resubmit and you need to find a bank that allows you to resubmit and do it again, and so forth. It's just the way it is, I can't help it, and the market is dictating that.
Sam Saggers is CEO of<a href="https://www.positiverealestate.com.au/ME2/Sites/Default.asp?SiteID=697F1E57F8A54C7F9582C3C49417EEC4" target="_blank"> Positive Real Estate.</a>
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Opportunities for property investors in a two-speed market

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The property at 72-76 Bayswater Road, Potts Point is now 40 luxury apartments, next to the Vibe Hotel Sydney. The land was recently valued at $8.9 million. In 1982 my family owned this parcel of land there and had done for a very long time, in fact for over four decades. On the land they operated a 60-room bed and breakfast.  As people do, they grew weary of the property and the going concern of the bed and breakfast, therefore the duly sold the property for $200,000.  At the time, my parents spent the profit! My mother bought a Datsun sunny motor vehicles and a two-bedroom unit at North Bondi. Five years later 72-76 Bayswater Road, Potts Point sold for $4 million and has since re-sold again for more and now the land alone is worth over $8.9 million. 
So what did those original buyers understand about the property and the area that my parents didn’t? At the time Sydney’s Potts Point was very different landscape to what is today. Being the neighbouring suburb to Kings Cross it was the underbelly of undesirable activity. Being only two kilometres to the city, it was and is still a hotbed of action. 
At the top of Bayswater Road Potts Point, you have the most amazing views of the city and ability if high enough to see the majestic Sydney Harbour. I cannot help to feel that person who acquired my old family estate to be a visionary.  To see through the mist of undesirable activity and know that the property was a diamond in the rough would have taken a lot of market knowledge, surely?
 
Most people look at real estate retrospectively and those that do tend to be home owners not investors.  I think every family has a story about the property that got away from them.  Buying, holding and selling real estate takes some market understanding of the suburb the real estate is in and the suburbs ability to change.  In real estate we call this change to a suburb gentrification. 
The sole purpose of an investor is to turn a profit. Real estate is the only asset class that can be controlled by the people, its bricks and mortar, and it truly is “capital in the hands of the people”. No other investment offers the average Australian the ability to engage the powers of leverage and be able to have hands on self-managed approach to the owning an asset.  The challenge is usually not the ownership; it’s the lack of vision of the future that is the dominant mistake by amateur buyers. 
It is hard to imagine for those many who haven’t yet invested into this wonderful wealth creation asset,  as the assumption by many is that real estate is simply home ownership. The tone that is set by investors and visionaries in real estate is a very different to that of a home owner. Investors strive to invest where markets will grow and change and emerge for the better. Home buyers buy on affordability to nest. 
To understand where to invest in real estate, you need to follow the spending habits of government and the consumer habits of people and the places they inhabitant; success in real estate comes with understanding many aspects of the market in detail however one predominant  key to an investors success is researching or even scrutinising the town plan. 
See in the end, it was my family’s naivety to the “highest and best use” of the suburb that robbed them of an achievable small fortune. For in 1987, $4 million was a vast sum of money. Had they just learnt their local town plan, they would have understood the pending alterations to the town plan in Potts Point allowing zoning and infrastructure changes that eventually lead to the pursuant gentrification of the area! They surely would have held the property goldmine they were sitting on.....if they only knew! 
Town planning 
Explaining and understanding town planning is sometimes a little technical, so the easiest way I think of it is as follows: the thousands of moving parts to a city, town or suburb and how these parts relate to one another. Quintessentially it is “the greatest good for the greatest number”. 
When factoring in real estate and the town plan, its bests to break down town planning into just a few sections. 
<ol>
<li>People</li>
<li>Places </li>
<li>Infrastructure</li>
<li>The state town plan </li>
<li>The local environment plan or LEP ( NSW Terminology ) and the development control plan or DCP (NSW Terminology )</li>
</ol>
The principle behind examining the town plan is that investors can find a better property in more sustainable areas if the locality is progressive and well planned. Extracting value through real estate is most easily done when the market does that for you. Ultimately you want to control assets, add as much value to them or have the market provide a value add to ensure the yields remain high for as long as possible. You don’t want to buy real estate and sell it unnecessarily though a lack of education on what is a progressive town plan and what is not.  Let’s examine some of the variables. 
People – Anthropology is the study of people. Demographics is a huge driver in real estate and within any culture there are groups that make up and drive the economy.  People have a huge impact on property prices.  The key is working out where they want to live next and what they are likely to spend their money on. I always find demographics fascinating as the trends are constantly evolving with time. Each generation has sub cultures that they form! 
These changes in household structure mean Australians have an increased desire to re-shape what property looks like and means to them. See the house sizes in Australia are getting smaller. Research shows that many people no longer want the quarter-acre block and within 15 years 30% of all homes in Australia will be single-person households. 
Demographic influences have a wonderful impact on property; study the spending habits of people and you are sure to find a profit! Understand where people see value next and you will find an emerging suburb to buy in. The areas town plan may have already begun to accommodate the needs of the emerging community and will act as a gage as to whether to invest or not. In the 1900s there were five people to a house in Australia, now it’s around two. Everything we do affects housing, for example divorce!  One out of three couples gets divorced, that rate puts pressure on the property market, now mum and dad both need separate homes. 
Places
Linking the study of people and social movements takes vision!  So why is it, that some of the grungy, cheap areas we all know about with high crime rates and undesirables, become the areas that are trendy and fashionable that eventually leads to  spectacular dwelling capital growth and high house prices. Places like Collingwood Melbourne, Redfern or Marrickville Sydney or Fortitude Valley Brisbane are good examples of urban renewal and gentrification at work. 
The real estate market exposes itself to value and opportunity regularly but not every suburb has value thrust upon it at the same time. In real estate there is an old phrase, “It is better to buy the worst house in the best street, than the best house in the worst street.” However I would like to coin a second phrase. “It is better to buy into a suburb that is a blank canvas rather than into a suburb that is a Picasso.” 
If an area is starting to be exposed to change but full change hasn’t yet occurred that is wonderful sign that capital growth will be assured in the real estate in that area! Bowen Hills in Brisbane is a classic example of gentrification that is yet to occur but surely will.  Located just two km to the CBD of Brisbane it is a solid market with an extraordinary future town plan. Yet, it is currently a “blank canvas”! Conversely other suburbs that are a similar distance to the CBD of Brisbane offer fine coffee and one can eat, drink and socialise with an array of merchants to choose from, these suburbs are bustling small pockets of activity. However these suburbs are already “Picassos”. In other words people are paying top dollar to live in the area and if you buy there, you are just paying for someone else’s capital growth. The science of understanding gentrification is to buy in a neighbourhood that is due to become the next great work of art. 
 
Infrastructure - Developers and governments spend billions of dollars on Infrastructure each year. They provide roads, schools, hospitals, transport, and commercial and office infrastructure to boost the needs of the community. And in doing so, re-shape and redefine the planning requirements for both the state and local government areas. You will find growth if you can locate this emerging infrastructure spend. Be sure the infrastructure is real and forthcoming through, and not fictitious stories, political propaganda or a fanciful hope. Check the town plan and government reports to validate your position. 
Aligning your investment next to huge infrastructure spends is a sensible way to gage future growth. I always consider where the public listed property companies are choosing to invest. It would be naive to think they do not have the best town planners working for them.  I follow their investments with great interest and work out how to buy for less in the same area. Governments and listed companies will spend a fortune, literally billions and billions of dollars influencing areas. Capturing that influence is a very smart way of buying property for the long term. 
State town plan - Each state puts out a plan or vision for the future. It is usually a twenty five year agenda of what the city will look like.  Economic hubs such as cities are areas of state significance.  Where people work is typically high on the radar, when considering a suburb to invest in, when considering the states town plan there is llegislation requiring the consideration of the environmental impact of the state driven development.  The state tends to control the following elements. Understanding these elements can help you understand a whole range of drives, such as supply and demand, economics and population movements and whether to invest in that state at all. 
At age 18 I was a real estate agent in North Ryde in Sydney, a government planning imitative the “Chatswood to Epping” rail link was touted to unfold over a three years period.  As a result of the announcement by government many Investors speculated and bought in the area based on the news. It took some six years before a track was laid and ten years for the infrastructure to be delivered. So the lesson is to buy just as they start the construction. I have never seen a major road or rail network half built! But have seen plenty of false starts. 
The local environmental plan and development control plan or DCP (NSW terminology)
LEP – Each local government area puts out a plan or vision for the future. It is on display within the council. It factors in many aspects and is very useful for understanding opportunities and restrictions of an area. This change can literally be street by street. So you need to get an understanding of it.   The single biggest change that can occur in the local town plan is height and density changes.  This forms the backbone of subdivision and extensions and adding value principles for real estate. 
 
Development control plan or DCP - Each area has a development control plan, so when factoring in the “highest and best use of real estate” you need to engage the plausibility of approval. In other words will the parcel of land pass the development consideration that need to be taken into account? If it does, you could well be on your way, to extracting a profit!
Some elements of consideration are listed below:
<ul>
<li>Car parking</li>
<li>Height limits</li>
<li>Building lines – distance shadows etc</li>
<li>Laundry facilities</li>
<li>Water, sewerage, drainage and electricity </li>
<li>Beatification of unused land – landscaping </li>
<li>Minimum frontage and depth</li>
<li>Minimum block size</li>
<li>Plot ratio – number of floors</li>
<li>Density ratio – number of one-, two- and three-bedroom units</li>
<li>Ingress and egress, ( in and out) driveway, right of way, walkway</li>
<li>Fire ratings</li>
<li>Covenants, caveats, encumbrances </li>
</ul>
 
Town planning is a key education requirement for your journey through investing. It can be the difference between selling a property for $200,000 or for $4,000,000. By researching carefully what attributes the people and a suburb have by exploring the areas ability to embrace change via the town plan you may find opportunity. Often suburbs can be targeted for re-gentrification after similar suburbs have been re-vitalised. Property can reap the benefits of this catalyst for capital growth. Seeing the potential and understanding an area and judging change will serve you well. 
The study of real estate fundamentals is important. It will serve you well and serve you for a lifetime. If people took the time to understand and school themselves in real estate practices, wealth would not just be for a select few. Town planning is an imperative schooling for all investors.
Sam Saggers is CEO of<a href="https://www.positiverealestate.com.au/ME2/Sites/Default.asp?SiteID=697F1E57F8A54C7F9582C3C49417EEC4" target="_blank"> Positive Real Estate.</a>
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Successful property investment requires vision

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As we look to what's ahead for 2012, Property Observer is republishing some of our most noteworthy stories of 2011.
 
Are you searching for your next investment in the mining towns of Mt Isa, Kalgoorlie, Boulder, Cloncurry or Blackwater? Perhaps you should re-think your choice of location. Why?
Towns such as <a href="/news">Mt. Isa</a>, <a href="/news">Kalgoorlie</a>, Boulder, <a href="/news">Cloncurry </a>and <a href="/news">Blackwater</a>, as well as <a href="/news">Port Hedland</a>, <a href="/news">South Hedland</a>, <a href="/news">Karratha</a>, <a href="/news">Weipa</a>, <a href="/news">Moranbah</a>, <a href="/news">Dysart</a>, Kambalda and <a href="/news">Middlemount </a>were fantastic mining town hotspots. Some markets tripled in value from 2004 to 2007, however now they've become either stagnate or they're on a slight slide, as the homes in these areas have now reached their capacity for capital growth.
The markets referenced above performed very well during the commodities boom from 2003 to 2008. These areas grew rapidly as wages were very high while housing prices were relatively low. Wages averaged about $120,000 a year, or $2000 per week, while home prices started at $100,000 in 2003.
Higher wages caused housing prices to grow exponentially, until the growth was no longer sustainable. For the average miner to afford houses in these areas now, he would have to make $200,000 a year for an $800,000 house in Port Hedland to grow in value.
Rather than buy somebody else's capital growth, in tired markets, investors should look for certain key indicators when searching for the next mining hotspots.
<ol start="1">
<li>
Infrastructure spending is key to finding good growth markets. An investor should look for towns with more than $1 billion in planned private investment. One thing to note is that although the old boom towns have a lot of planned private investment in the works, investors would be smart to have a growth strategy in mind when choosing where to buy. Rather than buy homes that have reached their potential, thus buying somebody else's capital growth, investors should sink their funds into markets where house prices are still low.</li>
</ol>
<ol start="2">
<li>
Look for areas with multiple market economies. Markets that rely solely on one resource, for example, copper, will have economies that rise and fall with commodity prices, whereas areas with a more diverse economy can weather market fluctuations. Diversifying into dual market economies are an investor's best bet at getting decent rates of return for his portfolio. I'm now a believer, having lived the last market cycle to diversify into dual market economies. I saw house prices in Cobar reverse 30% in 2008, mainly as it's a single-market economy. Returns in <a href="/news">Cobar </a>were 10% and now they are 6%. Homes are worth 25% less because of the global financial crisis.</li>
</ol>
<ol start="3">
<li>Choose cities with aggressive councils that will set in place procedures to encourage growth and investment in the area.</li>
</ol>
<ol start="4">
<li>
Look for areas where large corporations are injecting billions of dollars in the area, expanding existing infrastructure and building new facilities.s</li>
</ol>
<ol start="5">
<li>
Keep in mind the demographics of the mining market when selecting homes in different areas. Each mining town has different areas that are worth buying in, however it's important to note that a typical miner may not want to live on certain streets because of lower socio-economic social issues. Also, the local demographic does prefer a reasonable standard of accommodation, so I would suggest relatively new properties rather than older ones, otherwise the miner may as well live in a mining camp! </li>
</ol>
<ol start="6">
<li>
Practise due diligence when searching out investment opportunities in mining towns to uncover any potential issues that may interfere with profits. The housing or dwelling type is less relevant than some of the idiosyncrasies a township may have. For example, some mining areas are subject to flooding and have environmental issues as a result from the local refinery. Also, some title towns and streets have title issues, mainly as the mines have covenants over the lands, providing a potential problem should the mines have a need for a mine extension underground. Most of Dysart, for example, is leasehold land, so you’re not even buying Torrens or freehold title in some cases.</li>
</ol>
Mining towns are a fabulous investment for individuals who are looking to invest for retirement. Right now investors can mirror what happened in the last mining boom by seeking out new mining markets that are expected to follow a new commodities boom that is taking place right now. Real estate is an investment that will certainly help you retire comfortably. Bearing this in mind, you need to ask yourself this final question in regards to mining towns: will the mine be yielding and operating the date I retire, or will that be the year they close or slow down production of that commodity and my valuable asset becomes significantly less valuable?
Recently I have read the rebuttals from speculators and many industry “experts” scaring people away from investing in mining towns – claiming towns can simply “disappear” if the mining town goes bust or relocates to other lucrative areas.  I have seen many experts advising people to invest in city locations over mining towns; however based on my investing experience and research there is not just one market in which I would “put all my eggs” so to speak!
I would like to stress that a savvy investor works towards a balanced property portfolio, a portfolio that has both cashflow properties and capital growth properties. So my strategy for profit would be to invest in strong cities and then diversifying to major regional markets that have significant property pressures. I really would not suggest a client goes into a mining town like Gladstone with high rental yields in preference over another investment in a city location with less rental yield unless I knew their particular financial and personal situation.
Sam Saggers is CEO of<a href="https://www.positiverealestate.com.au/ME2/Sites/Default.asp?SiteID=697F1E57F8A54C7F9582C3C49417EEC4" target="_blank"> Positive Real Estate.</a>
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Sam Saggers

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