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Investors bask in Australia’s property boom

by Justin Yap, justinyap@theborneopost.com. Posted on April 3, 2012, Tuesday

(Source: Ironfish)

Seulyn Wong

KUCHING: The Australian property market is set to thrive further driven largely by the major mining and resource booms which are gathering momentum across Western Australia, Queensland and South Australia.

According to Ironfish, an international property investment company, foreign investment in the Autralian property market had increased by 51 per cent in 2011, drawn by its stable economy and high-yielding assets.

Foreign buyers made up 42 per cent of all commercial property transactions in Australia in 2011, accounting for 58 assets valued at a hefty A$2.8 billion in the second half of the year alone.

Colliers International’s ‘Global Capital Investment in Australia’ report showed A$7.7 billion in foreign investments in Australian property over the year, up from A$5.1 billion in 2010.

“Investing in properties in Australia is very much different from what it is here. In Malaysia, people tend to buy and sell their properties, while in Australia, the startegy is to buy and hold as long as you can,” Ironfish property investment strategist Seulyn Wong told The Borneo Post in an interview.

“It is general knowledge that Australian properties double their value every seven to 10 years and that’s the average. In fact, between 2004 and 2007, during the mining boom years, properties took only three years to double their value in some parts of Western Australia, especially in Perth,” she added.

Wong further pointed out that the banking structure and systems there were also different from Malaysia. “In Australia, home owners are not required to sell of their maiden properties in order to invest in another. As long as the first property appreciates in value, most banks are willing to approve the second loan.

“Again, if your second property is well chosen, you can use the same principal to acquire a third or fourth property. With a strong portfolio, most banks will approve the lending because they view residential properties as very low risk products,” she explained.

One of the advantages was that, there were plenty of historic statistical data to look at and with the general knowledge of the economy and worldwide scenario, buyers would be able to make informed decisions on ‘where, how and what’ properties to look out for.

Meanwhile, for investors, they could count on attractive rental rates for a well located property and enjoy low vacancy rates. “Demand increases but the supply is not replenishing the market fast enough.

So now, there is a huge gap between demand and supply that augurs well for higher rental rates as well as higher prices for house purchases,” said Wong.

“In Australia, properties undergo a unique cyclical trend that generally will last from seven to 10 years. The beauty of investing in Australia is that different cities are at the different points of a cycle. From an investment point of view, Brisbane and Perth are the two states which are relatively at the low point at the moment,” she added.

“Enter low and ride on the waves when there is an upswing,” was the quote she used when explaining Western Australia as the engine of growth for the country. It had a higher economic growth rate than other states because it was a mining city. She elaborated that the next boom would be located in Perth.

There was a huge flow of investments into the resources industry, which in return, would see more workers being drawn in and that would drive up the population concentration in the vicinity.

“Growing population is the basic driver for property growth. A lot of people don’t realise Australia is gearing to be the world’s second largest producer of Liquefied Natural Gas after Qatar.”

“Now is the best time to enter Perth and Brisbane given that Brisbane is always a few steps ahead of Perth, based on historical data,” Wong hinted.

Asked on the types of properties that were in great demand, she said, “A lot of people in Australia are going into apartments because they are easier to maintain and thus the segment has a good track record of rental returns. The overall rule of thumb is to buy properties as near as possible to the business central districts of a city.”

Australian news reports indicated that the population in Australia would have expanded by another 6.2 million people by 2030 and they would need an extra 2.7 million homes, 125,000 retirement facilities and 24,000 more hospital beds.

Overall, Australia’s population growth was steady at 1.4 per cent, with most growth taking place along the Eastern seaboard and Western Australia. Perth in particular was the fastest growing city at 2.3 per cent.

On the other hand, Melbourne saw the largest increase in numbers with a growth rate of two per cent, with the next largest growth rate seen in Brisbane (1.9 per cent), Sydney (1.7 per cent) and Adelaide (1.3 per cent).

“All of these cities have now surpassed the one million resident population point, with an impressive 65 per cent of the nation’s population now living in the greater metropolitan areas,” according to Ironfish’s latest report.

“At Ironfish, we do our research and we recommend calculated potential investment strategies for our clients. We are specialists at finding projects that have a huge ‘x-factor’, which simply means that in the vicinity of the location of chosen projects there are a lot of on-going government investment activities thriving,” Wong explained.

“Ultimately the vibrant Australian property market allows us the luxury of taking a positive journey in building tangible wealth for our clients,” she added.

Ironfish has eight offices in Australian cities and New Zealand. For more information, visit its website at www.ironfish.com.au.

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