PIR 1131 Property Investment Report

Transcription

Property Investment Report
PIR 1,131
5-7 Kleins Road,
Northmead
NSW 4152
Positive Real Estate Pty Ltd
Suite 3, Level 2, 11 Albany St
St Leonards
NSW 2065
P: +61 1300 365 886
F: +61 2 8282 4432
www.positiverealestate.com.au
Table of Contents
Table of Contents ............................................................................................... 2
Disclaimer......................................................................................................... 3
5-7 Kleins Rd Northmead, NSW 4152 .................................................................... 4
Liquidity Meter .................................................................................................. 5
Property Overview ............................................................................................. 6
Key Investment Indicators ............................................................................ 6
Parramatta - A Growing Economy ......................................................................... 7
Price List .......................................................................................................... 9
Tenancy Details ................................................................................................. 9
Property Photos ............................................................................................... 10
Location and Surroundings ................................................................................ 11
Transport........................................................................................................ 11
Roads ...................................................................................................... 11
Rail ......................................................................................................... 11
Bus ......................................................................................................... 12
Hospitals ........................................................................................................ 12
Shopping ........................................................................................................ 12
Parkland & Sports ............................................................................................ 12
Education ....................................................................................................... 12
Employment .................................................................................................... 13
Parramatta CBD ............................................................................................... 13
Builder Profile .................................................................................................. 14
Location Map ................................................................................................... 18
Google Earth Map ............................................................................................ 20
Google Street View .......................................................................................... 21
Property Financial Details .................................................................................. 22
10 Year forecast – Unit 11 Example .............................................................. 22
Financial summary– ................................................................................... 23
Automatic Acquisition Plan- ......................................................................... 24
Who Pays? ................................................................................................ 25
Appendix I| Rental Appraisals ............................................................................ 26
Appendix IV| Schedule of Finishes ...................................................................... 29
Appendix IV| Capital Growth Rates ..................................................................... 30
Appendix V| Comparable Sales .......................................................................... 31
Appendix VI| Demographic Details ..................................................................... 32
Appendix VII| Risks .......................................................................................... 33
Appendix VIII| Glossary of Terms ....................................................................... 35
APPENDIX IX| FAQ’s ......................................................................................... 37
CONFIDENTIAL | PAGE 2
Copyright 2009. Positive Real Estate Pty Ltd
All information contained in this report collated from third parties and provided in good faith. No representation is given or implied as to its accuracy or
its interpretation. All interested parties must rely on their own research before making any investment decision.
Disclaimer
Positive Real Estate Pty Ltd does not provide advice on investments. All interested parties must
rely on their own research before making any investment decision and should seek advice from a
qualified Financial Planner or similar professional.
The information contained within this document has been compiled from various sources to assist
you in conducting your due-diligence. Please ensure you validate all information contained within
this document. All sources for information contained within this Property Summary will be
disclosed at your request. Positive Real Estate Pty Ltd will not accept responsibility for inaccurate
information provided from external sources or third parties.
As part of your due-diligence, it is the Purchaser’s responsibility to seek a legal opinion of the
contract and any additional terms or clauses. You must adhere to the terms, conditions and
subject clauses contained within the contract of sale. We note that Positive Real Estate Pty Ltd has
made a number of assumptions when preparing this analysis – these assumptions have a material
impact on the financials and therefore should be assessed carefully by investors.
5-7 Kleins Rd Northmead, NSW 4152
Property Strategy
OTP Growth
Property Type
1, 2 or 3 bedroom unit
11 units in total available
Price per sqm2
Ave. $5,569 per sqm2
Investment Brief
Market Timing:
(rising)
Internal Size
49 - 86m2
Property Age
New
(Approx. 5 months left of
construction)
Lending Category
90% LVR
Total Purchasing
Costs
Ave. $14,500 (5% Deposit)+
$5,792 (LMI)+
$9,998 (Stamp Duty)+
$2,000 (Solicitor Fees)
$ 32,290
Deposit Types
Liquidity Of
Market
Av. Growth 10
years
Av. Growth 3
years
Median Sales
prices
5% Deposits
Cash or Bank Guarantee
Becoming Liquid
4.6%
8.0%
Northmead units 2000 to
2010<$500,000
(Peak of last cycle 2003)
Demographics
Predominantly young working
population. Majority of people
commute to Parramatta or
Sydney CBD for work.
Increasing trend towards young
executive couples.
Infrastructure
New M2 overpass access onto
Windsor Rd, allowing easier
commuter access. <1km to
Westmead Hospital, <2.5kms to
Parramatta CBD, <2.5kms to
access onto M2 Motorway.
Suburb Yield
Supply And
Demand
Benchmarks
Population
Ave. 5.4%
Increasing supply of residential
dwellings to area in line with
increasing demand. Yet to reach
a surplus, continuing rental
demand.
Comparable new units in
Parramatta (just 2kms away)
selling for $500,000+
Suburb: 10,000+
Parramatta: 160,000+
Statistics
Purchase Price
1 beds from $335,000
Appraised Rent
1 beds $340-360pw
2 beds $400-420pw
3 beds $430-450pw
Gross Yield
($390,000
example)
5.4%
Net Yield
3.9%
Y1 Pre-Tax Cash
Flow
(10%
Equity Deposit)
-$14,233
Y1
After-Tax
Cash Flow (10%
Equity Deposit)
-$4,879
Note: Completed on 100% finance. For more financial information see property financial details. Buyers please be aware that all information has been collected by
third parties and buyers need to conduct their own further due diligence on all aspects suggested within this report.
Liquidity Meter
Property Overview
Positive Real Estate has secured a fantastic investment opportunity in Sydney’s booming
Western Suburbs. Located in the well appointed suburb of Northmead, just minutes from
Parramatta CBD, are a total of 11 off the plan (OTP) unit opportunities. There is a mix of 1,
2 and 3 bedroom opportunities within the boutique block of only 19 residential units.
The development is located at 5-7 Kleins Road, Northmead. Construction has begun on the
units and is expected to be completing around December of 2011. As construction has started
we unfortunately don’t get the full 100% NSW Stamp Duty exemption but are still able to
receive a bonus 25% reduction under the same scheme.
PRE has worked with the developer and builder in the past and in 2009 launched another
project of theirs not too far away from this one in which we sold 29 units. The units were
completed to a high standard and settlement went according to plan. These units are now
fully rented and receiving great returns, showing the opportunity that is at hand with this
new development.
The development spans over just three levels with 19 residential units and 1
retail/commercial suite on the ground floor. Each unit has an underground car-spot and the
parking is security gated. The units are being constructed to a high standard including
finishes such as gas kitchen cook-tops, Caesar stone kitchen bench-tops, tiled kitchen splashbacks, built in robes to all rooms, carpeted living areas and bedrooms, air-conditioning and
security intercom to the residences.
Kleins Road is in a great position offering good proximity to the M2 Motorway, Windsor Road
and Parramatta CBD. It is a relatively quiet road with a few other small residential
developments on it along with other small retail outlets such as Dominos to the Northern end
and larger commercial/industrial lettings to the South such as Pet-Barn. These units are in a
great position desirable to both owner occupiers and renters, which places them in a
comfortable position for future growth.
Key Investment Indicators
Boutique block of only 19 residential units + 1 commercial suite
Fantastic location close to all necessary amenities; schools, parks, bus-stops,
restaurants, cafes etc
Just 2.5kms to Parramatta CBD.
Strong predicted future growth – rising market place (prices have corrected post
2003 boom)
5% deposits, minimising required funds put down for the deal
25% reduction of stamp duty – NSW Stamp Duty Concession
Rental management bonus with Key Asset Management -3 months free
management + small 6.6% fee thereafter.
Brand new product with full depreciation benefits
Parramatta; Annual Gross Regional Product is estimated at nearly $9 billion which
represents more than 3% of the total value of NSW production
Around 86,530 people work in the Parramatta Local Government Area with around
38,000 people working in the Parramatta CBD.
Parramatta; the 12th largest local government area in NSW with 152,000 residents,
the city’s population is expected to grow to 178,000 by 2026
More than $2 billion in public and private investment is transforming the face of
Parramatta
Parramatta - A Growing Economy
Western Sydney is the third largest economy in Australia, generating $76.4 billion in
2006‐07. The region is already home to approximately 1.8 million people and 30 percent of
Australia's Top 500 companies. At its economic epicentre is Parramatta ‐ home to
approximately 160,000 residents, 16,000 businesses, and generating $11 billion annually.
Over the next 20 years, and without any specific intervention or assistance, the number of
jobs in the Parramatta Central Business District (CBD) will increase by 27,000.
Within the NSW Metropolitan Strategy the Sydney CBD (incorporating North Sydney),
Parramatta, Penrith and Liverpool have all been identified as major activity centres (refer to
the picture below). With three of these four centres in Western Sydney, there is little doubt
that the region is the driving force for future growth. Parramatta is, and will continue to be,
at the centre of activity in Western Sydney. Indeed the Metropolitan Strategy Review
explicitly states “Parramatta has clearly emerged as Sydney's second CBD”.
Parramatta is a thriving economy located just 24kms West of Sydney CBD. It is currently
going through an exciting period of change with huge amounts of public and private spending
taking place in the CBD and to surrounding suburbs such as Northmead. The property market
in Parramatta and adjacent suburbs such as Westmead and Northmead experienced
exceptionally strong growth in the last property boom. It has since corrected itself in the
years following the peak of the property cycle in 2003 and with current population trends,
infrastructure onsets and supply patterns all signs are pointing to a market that is set to rise.
Parramatta’s economy is rapidly growing with booming industries such as finance &
insurance, manufacturing, and property and business services are among the most dominant.
Parramatta is actually the 3rd largest business centre in NSW behind the CDB and North
Sydney in terms of office stock.
Public and Private entities are continually moving their centres to the Parramatta region in
realization of its commercial attractiveness. Some of the Public & Private investment into
Parramatta Includes:
Public
Children’s Court 2006
Attorney Generals Department
NSW Police HQ
RTA HQ
Sydney Water HQ
Office of State Revenue and many more…
Private
NRMA HQ
Coca-Cola Amatil
Shell
Pfizer and many more…
Other varying projects recently completed or underway include:
-
-
-
$110 million Transport Interchange development (upgrade of Parramatta Station)
which currently delivers 54,000 people per day and provides improved transport
services and facilities for the growing population of Western Sydney;
On 21 July 2006, Parramatta City Council signed a Public Private Partnership with
Grocon Developments to revitalize 3.5 hectares of the CBD. The $1.4 billion Civic
Place Project is one of the largest urban renewal projects undertaken outside the
Sydney CBD. Due for completion by 2014, Civic Place will feature environmentally
sustainable design, European style piazza’s, art house cinemas, a new media gallery
and library and outstanding community facilities
$109 million expansion of Westfield Parramatta which attracts 360,000 visitors per
day;
$330 million upgrade of the Parramatta Justice Precinct, making it the second largest
legal precenct in Australia;
$119 million first stage redevelopment of Westmead Hospital
$140 million expansion of the Coca Cola Amatil facility at Northmead that will secure
employment for 700 workers and generate an additional 165 jobs for Western Sydney.
New M2 bypass access onto Windor Rd, increasing ease of access and egress from
Parramatta & Northmead.
More information on the Windsor Road Interchange can be found by visiting the link below:
http://www.hillsm2upgrade.com.au/files/M2_Upgrade_Project_overview.pdf
Price List
Bath
Car
Internal
Size
External
Size
Total (sqm)
3
2
1
86.3
30.2
116.5
$
420,000
SW
3
2
1
86.3
13.5
99.8
$
425,000
2
SW
3
2
1
86.3
13.9
100.2
$
425,000
7
1
SE
2
2
1
78.5
10.7
89.2
$
390,000
9
1
NW
2
2
1
73.6
10
83.6
$
385,000
10
1
SE
1
1
1
49.4
11
60.4
$
335,000
11
2
NW
2
2
1
78.5
10.7
89.2
$
395,000
13
2
NW
2
2
1
73.6
10
83.6
$
390,000
14
2
SE
1
1
1
49.4
11
60.4
$
340,000
17
3
NW
2
2
1
73.6
10
83.6
$
395,000
18
3
SE
1
1
1
49.4
11
60.4
$
345,000
Unit
Floor
Aspect No of Beds
1
1
SW
3
2
4
Price
Tenancy Details
The units will settle vacant. However, you will be engaging a rental manager prior to
settlement who will be working to get a tenant in as soon as possible. Management fees in
this area are typically 7.7%.
Key Asset Management are offering a deal exclusive to PRE clients whereby they receive the
first 3 months of their rental free of management charges, which for a $400pw rent
equates to over $350 of savings. Key Asset Management have successfully rented out over
25 units in another development just 100m away on Howard Avenue so they are experienced
in letting units in the area and will be able to get you the best rent possible. They are also
offering a continual management rate after the 3 month free period of only 6.6%.
Estimated rates pa: $320pq
Estimated Body Corporate fees pa: $480-540pq
Property Photos
Location and Surroundings
The development is located at Northmead, within a few hundred metres of Westmead
Hospital and other world class health facilities including Royal Alexandra Hospital for Children,
Cumberland Hospital, Westmead College of dental therapy and NRMA care flight to name a
few.
Investment Outlook
Northmead is an established suburb with a substantial infrastructure and is located 1.5km
north of Parramatta, Australia’s 6th largest CBD and the economic powerhouse of Greater
Western Sydney with a burgeoning population and strong work force. Parramatta’s strong
population growth, low unemployment and large skilled work force offer a number of distinct
advantages for businesses.
Northmead forms part of the greater western Sydney area, which is one of Australia’s largest
and most diverse economies and has experienced major strong population growth. Demand
for new product is high with a shortage of supply. A strong rental market and a low vacancy
rate coupled with strong population growth make this location an attractive investment
opportunity.
Northmead - strong growth potential
Situated in Northmead in western Sydney, NSW, this development is located 1.5kms north
west of Parramatta CBD. For the 90,000 people who work in the City, Parramatta offers a
diverse range of activities. The City has some of the finest cafes in Sydney and
offers a rich shopping experience and exposure to theatre, movies, music or the performing
arts. With a vibrant economy, the City is experiencing growth across a number industry
sectors including finance & insurance, medical health services, retail and professional
services. A further 30,000 additional jobs are forecast for the City over the next 20 years.
Northmead is a prominent suburb located within the Parramatta City region. Parramatta City
is located in Sydney’s western suburbs, about 24 kilometres from the Sydney GPO.
Parramatta City is bounded by Baulkham Hills Shire and Hornsby Shire in the north, the City
of Ryde in the east, Auburn, Bankstown and Fairfield councils in the south and Holroyd and
Blacktown councils in the west.
Transport
The suburb is serviced extensively by public transport including trains, trams and buses.
Roads
More than 60% of commuters travel to work by car and so having a parking space as part of
the property is important (source: ABS). Within several minutes drive are major arterials
such as the Cumberland Highway (400m), Windsor Road (900m) and the M4 (2.4kms). These
roads are all within close proximity to the suburb allowing commuters uninterrupted access to
Sydney’s north, south, east and west.
Rail
There are two main stations within walking distance of Beamish Road that service Northmead
(Westmead (1.2kms) and Wentworthville (1.9kms), providing quick and direct access to
Parramatta and Sydney CBD’s.
Bus
Bus services operate from all over Sydney to Parramatta, with a special shuttle service from
Sydney Airport directly to the Hospital. A local minibus runs from Westmead to Parramatta
city centre, Parramatta Rivercat ferry and Parramatta railway station every 12 minutes on
weekdays.
Hospitals
Northmead and its immediate surrounds are renowned internationally for the world class
healthcare facilities that are provided in the area: Westmead Hospital, a major teaching
hospital, which was constructed in the 1970s; Royal Alexandra Hospital for Children;
Cumberland Hospital, a psychiatric hospital; Westmead College of Dental Therapy; NETS, the
moving intensive care service for kids; NRMA CareFlight, the adult medical retrieval service
and Telstra Child Flight to name only a few of them.
Shopping
Parramatta lies 1.5kms to the south east of Northmead. Long been considered the population
centre of Sydney, Parramatta is also known for its historic colonial buildings, excellent
restaurants and as a shopping paradise. Parramatta Westfields, along with other Parramatta
department stores, shops, boutiques and speciality stores offer an almost bewildering amount
of choice, with more than 600 retail shops to choose from. In Church Street there is an
enjoyable collection of restaurants and eateries which feature al fresco dining. There are
many more than 140 restaurants offering all sorts of cosmopolitan fare in the streets leading
to Church Street as well.
Parkland & Sports
Northmead is 700m from a major park called Parramatta Park which includes Parramatta
Stadium, home to the famous Parramatta Eels rugby team. Northmead and its immediate
neighbours also have basketball, cricket, tennis, baseball, swimming, table tennis, track and
field athletics and soccer clubs.
Education
•
•
•
•
There are also an abundance of educational facilities in and around Northmead including
several primary and high schools and university:
Westmead Public School
The Catherine McAuley Catholic High School
Parramatta Marist High (the oldest Catholic school in Australia)
UWS College, Westmead Campus
Employment
The unemployment rate in the City of Parramatta has been consistently lower than the
national average. The unemployment rate in the City of Parramatta was 4.1% in the
September Quarter 2008, the same level as that recorded in the September Quarter 2007.
The unemployment rate in the City of Parramatta is lower than the averages for the Sydney
region (4.2%), New South Wales (4.6%) and Australia (4.2%). A high proportion of tenants
and property owners in Northmead work at Westmead/ Children’s Hospitals or commute
2kms to the Parramatta CBD to work in the business and financial industries. Northmead and
its surrounds are as well placed as any city in Australia to provide employment opportunities
for its residents. Sydney West Area Health Service employs more than 14,000 people
(source: Westmead Hospital Records).
Parramatta CBD
•
Northmead is a prominent suburb located within the Parramatta City region. Parramatta
City is located in Sydney’s western suburbs, about 24 kilometres from the Sydney GPO.
Parramatta City is bounded by Baulkham Hills Shire and Hornsby Shire in the north, the
City of Ryde in the east, Auburn, Bankstown and Fairfield councils in the south and
Holroyd and Blacktown councils in the west.
•
Parramatta City has a current estimated population of 157,505 people (2007) and
includes the suburbs of Camellia, Carlingford, Chester Hill, Clyde, Constitution Hill,
Dundas, Dundas Valley, Eastwood, Epping, Ermington, Granville, Guildford, Harris Park,
Melrose Park, Merrylands, North Parramatta, Northmead, Oatlands, Old Toongabbie,
Toongabbie, Parramatta, Pendle Hill, Rosehill, Rydalmere, South Granville, Telopea,
Wentworthville, Westmead and Winston Hills.
•
Parramatta was originally known as Rose Hill. Parramatta City is a predominantly
residential area with substantial institutional, industrial and commercial land use. Major
features of the City include Westfield Shopping town, the Parramatta City Centre,
Westmead Hospital, The Children’s Hospital at Westmead, TAFE NSW South Western
Sydney Institute (Granville College), University of Western Sydney(Parramatta Campus
and Westmead Precinct), Old Government House, Elizabeth Farmhouse, Parramatta
Heritage Centre, Rosehill Gardens Racecourse, Parramatta City Raceway, Parramatta
Stadium, Parramatta Regional Park, Lake Parramatta and the Parramatta River.
•
The City is served by the Western M4 Motorway, the Great Western Highway and the main
western, main northern and Carlingford railway lines. The City encompasses a total land area
of about 61 square kilometres.
Builder Profile
Director: John Bouchahine
20 years experience.
5 years working in industry, 15 years constructing in the industry.
General
Target Projects:
This organization has been targeting small, medium and large density
residential and commercial developments to date. it has undertaken a wide
variety of projects as can be demonstrated by the wide variety of projects
completed.
Safety plan/ Environment plan:
The project safety plan has been developed to assist all personnel associated
with Oz Owned’s projects and HCM Group Pty Ltd to meet their obligation to
help the company achieve their objective and targets with respect to safety and
environmental issues.
The company safety management system is based on both the NSW CFSC
management guidelines, and on the AS/NZS ISO 14001.
Structure:
DEVELOPER: Harry’s constructions, Jadex Constructions
CONSTRUCTION: HCM Group Pty Ltd
Building License No: 177840C
Type of Work:
Property development and builder
Project management and cost management
Construction management
Marketing and property investment
Building Consultant
Design and construct
Sub Contractors:
70 Sub-contract companies –contractual obligation over 15 years
Past projects:
Job Address
Project specification
Type of works
Value of Works
Completion
:
:
:
:
:
24 Jersey Rd South Wentworthville
6 Villa/Townhouse
Builders
1 million
4 months
Job Address
Type of works
Value of Works
Completion
:
:
:
:
:
60 Hampden Rd Wentworthville
8 Townhouse
Builders/developer Design and construct
1.1 Million
5 months
Job Address
Type of works
Value of Works
Completion
:
:
:
:
:
133 Toongabbie Rd Toongabbie
7 townhouses
Builders/ developer design and construct
$900 000
4 months
Job Address
Type of works
Value of Works
Completion
:
:
:
:
:
20 Jersey Rd South Wentworthville
6 villas townhouses
$800 000
4 months
Job Address
Type of works
Value of Works
Completion
:
:
:
:
:
33-35 Meacher St Mt Druitt
17 villas/ townhouse
2.1 million
6 months
Job Address
Type of works
Value of Works
Completion
:
:
:
:
:
26-28 Jersey Rd South Wentworthville
9 villas/ townhouses
Builders
2.4 million
4 months
Job Address
Type of works
Value of Works
Completion
:
:
:
:
:
63 Elsimer St Long Jetty
3 townhouses
$450 000
3 months
Job Address
Type of works
Value of Works
Completion
:
:
:
:
:
16-18 Methven St Mt Druitt
16 villas/ townhouses
2.1 million
6 months
Job Address
Type of works
Value of Works
Completion
:
:
:
:
:
1-5 Durham St Mt Druitt
72 units
9.2 million
12 months
Job Address
Type of works
Value of Works
Completion
:
:
:
:
:
7 Sybil St Eastwood
10 villas
Builders/ Joint venture design and construct
1 million
5 months
Job Address
: 7-11 Webb Avenue Hornsby
Type of works
Value of Works
Completion
:
:
:
:
18 townhouses
1.8 million
6 months
Job Address
Type of works
Value of Works
Completion
:
:
:
:
:
29 McLachlan Avenue Long Jetty
3 townhouses
$450 000
4 months
Job Address
Type of works
Value of Works
Completion
:
:
:
:
:
141-145 Old Northern Rd
10 villas
1 million
8 months
Job Address
Type of works
Value of Works
Completion
:
:
:
:
:
41-43 Hampden Rd South Wentworthville
6 townhouses and 8 villas
1.4 million
8 months
Job Address
Type of works
Value of Works
Completion
:
:
:
:
:
36-40 Jersey Rd Wentworthville
6 townhouses 8 villas
1.4 million
8 months
Job Address
Type of works
Value of Works
Completion
:
:
:
:
:
12 Richardson Marylands
Dual occupancy
Builders
$400 000
2 months
Job Address
Type of works
Value of Works
Completion
:
:
:
:
:
45 Hampden Rd, South Wentworthville
5 townhouses
Builders
1.5 million
5 months
Job Address
Type of works
Value of Works
Completion
:
:
:
:
:
20-22 Briens Rd Northmead
20 units
Builders/ Joint Venture design and construct
2.1 million
8 months
Job Address
Type of works
Value of Works
Completion
:
:
:
:
:
1 Rein Rd Greystanes
Duplex
Builders
$600, 000
2 months
Job Address
Type of works
Value of Works
Completion
:
:
:
:
:
53 Clarence St Merrylands
2 townhouses and 2 villas
Builders/ Joint Venture design and construct
1.2 million
5 months
Job Address
Type of works
Value of Works
:
:
:
:
254 Beams Avenue Mt Druitt
61 units and 5 commercial
9.7 million
Completion
: 18 months
Job Address
Type of works
Value of Works
Completion
:
:
:
:
:
29 Wahgunyah Rd Nelson Bay
6 townhouses
Builders
2.4 million
9 months
Job Address
Type of works
Value of Works
Completion
:
:
:
:
:
Golf Avenue, Mona Vale
12 luxury apartments
12 million
14months
Job Address
Type of works
Value of Works
Completion
:
:
:
:
:
Springthorpe Ave, Castle Hill
1 house
Builders
$700, 000
5 months
Job Address
Type of works
Value of Works
Completion
:
:
:
:
:
18 Stella st Long Jetty
3 townhouses
Builders/joint venture
$900,000
5 months
Job Address
Type of works
Value of Works
Completion
:
:
:
:
:
11-13 Raglan rd Auburn
10 units
Builders
2.5million
10 months
Location Map
Google Earth Map
Google Street View
Property Financial Details
10 Year forecast – Unit 11 Example
Financial summary–
Automatic Acquisition Plan-
Who Pays?
Appendix I| Rental Appraisals
Appendix IV| Schedule of Finishes
Appendix IV| Capital Growth Rates
Appendix V| Comparable Sales
Appendix VI| Demographic Details
Appendix VII| Risks
All investments involve risk. While drivers of growth and other attributes that have a positive
effect on an investment have been analysed in depth, it is equally important to be aware of
and understand the risks that could have an adverse impact on the investment’s
performance. Following are some of the risks that investors should consider prior to investing
in property:
1. Market Value Risk
This risk relates to the risk of the investment failing to achieve the expected growth.
Much of the information we have used in our analysis is predictive and the rate of
return may be affected by known and unknown risks and uncertainties. This in turn
could result in the re-sale value of the investment not achieving what is expected if the
vendor chooses to sell during or following depressed market activity.
2. Construction Risk
This is applied to properties purchased off the plan. Throughout such projects the
developer may arrange finance facilities related to the land acquisition, development
and construction of the project. This may result in issues arising in the delivery of the
product on time and as specified on the contracted terms. Delays in the delivery period
would result in opportunity costs as investors funds may not be able to be redirected to
alternative investments.
3. Rental Yields
Rental yields fluctuate and are affected by other market factors. They may go up or
down depending on factors such as supply, demand, employment, investment in the
area and the state of the overall residential market.
4. General Risk
In addition to the risk factors specific to investment in property development projects,
there are more general risks that can affect the value of the investment in the
development, including:
•
•
•
•
The state of Australia’s and the world economies
Movements in inflation and employment
Changes in socio-economic factors
Natural or man-made disasters.
5. Personal Risk
Investment strategies will often depend on the income of the investor. Should there be
a reduction or loss in the flow of income from the investor it may present a risk in the
future ability to hold the investment. These risks may be managed through the
appropriate use of income protection insurance, life insurance and trauma insurance.
6. Interest Rate Risk
Movements in interest rates can have a number of effects on an individual property
investment. Specifically, an increase in interest rates may have an immediate effect on
the costs of holding an investment property. Additionally, sustained interest rate rises
may have a lagging effect in the form of reduced sales activity and property growth.
7. Policy Risk
Changes in government policy may affect both holding costs and the expected growth
performance of specific property investments. This may result in additional expenditure
in order to finance your portfolio and the expected returns.
8. Oversupply
An oversupply in property will have effects on both achievable rents and growth
performance. Due to the length of time typically required to construct medium and high
density developments, the short term supply curve is inelastic. This means that
property supply has an inherent inability to adjust quickly enough to meet demand. A
sudden reduction in demand or an unexpected increase in supply may result in
oversupply. Typically this risk is most acute towards the end of the property cycle. We
do not foresee any short term risk of oversupply in the current market.
9. Settlement Risk
Settlement risks may prevent the purchaser’s ability to settle on the property.
Typically, these are related to difficulties in obtaining finance through valuation
shortfalls at the time of settlement or changes in the purchaser’s personal
circumstances that result in the refusal of the purchaser’s credit application. This may
result in the loss of the deposit or any monies owed to the developer. This risk may be
managed by obtaining pre-approval of finance (for completed property) prior to
exchange of contracts.
Appendix VIII| Glossary of Terms
Common terms used by property Investors and Financial Institutions
Application
Fee
A fee paid by the borrower to the lending institution for obtaining
finance.
Bridging
Finance
A short term loan/facility that is often used when buying a new
dwelling previous to settling an existing dwelling.
Body
Corporate
The term ‘Body Corporate’ refers to a home owners association
charged with the administration of one or more housing units.
Owners of the individual dwellings pay a fee to provide for
maintenance of common areas and provide cover for repairs that
may arise in the future.
Capital Growth
The change in value of an investment. This is calculated by
subtracting the purchase price from the current value of the
investment and is usually expressed as a percentage. If the price of
the capital asset has declined instead, this is called a capital loss.
Comparison
Rate
A rate used to compare the borrowing costs from competing lenders.
The basis of comparison includes the interest rate and the majority
of fees and charges payable during the life of the loan. The figure is
expressed in percentage terms. It should be noted that some costs
including redraw fees or early repayment fees, and cost savings such
as fee waivers, are not included.
Deposit
Guarantee
A substitute for a cash deposit used to purchase a property. At the
time of settlement, the buyer is required to pay the full purchase
price.
Equity
The net value of the asset. This is calculated as the value of the
property less any outstanding loans secured by the property.
Gross
The complete amount before deductions for taxation, inflation, or
any other various fees that may be incurred. The term ‘gross return’
refers to the amount of capital growth and yield before taxation,
body corporate, fees, inflation and other expenses are taken into
account.
Infrastructure
Basic facilities required for a community or society to function as an
economy, including transportation, communication, provision of
water and power and the public institutions needed for security,
welfare, health and education.
Interest in
Advance
When interest is charged at the beginning of a period of time. For
example, charging the first years interest in the first month of a
loan. It is generally only available on fixed rate loans for investment
purposes.
Interest Only
Loan
A loan facility commonly used for investment loans where the
borrower only pays the interest component of the loan for a specific
period of time.
Price $/m2
A measure for determining the relative value of a given property
based on the internal size. This is calculated by dividing the
purchase price by the internal area (measured in m2) and expressed
as dollars per m2.
Real Return
The return on investment, less the reduction in its value as a result
of inflation. Real rates are important as they tell you what the
actual increase in value is, and how much of a return was less the
effect of inflation.
Rental
Guarantee
A guarantee by developers to pay an agreed level of rent should a
shortfall achievable in the market arise. This is usually based on a
percentage of the purchase price.
Valuation
The estimated worth of a project based on comparable sales with
projects of a similar type. This is conducted by a registered valuer.
Yield
An annualised rate of return for a given investment. This is
calculated as the annual achievable rent expressed as a percentage
of the purchase price (or current market value) of paid investment.
APPENDIX IX| FAQ’s
Short term bonds
To apply, clients need to complete an application form (available from their broker),
together with:
•
•
•
•
A loan approval
A copy of the Contract for property sold that will assist in the purchase of the
new property
Evidence of funds accessible prior to the completion date, such as savings, a
fixed term deposit, or share certificates
Evidence of other funds that will assist in the purchase such as the First Home
Owners Grant.
Long Term Bonds
To apply, clients will need to complete an application form (available from their broker)
and
provide
evidence
that
they
are
an
existing
property
owner:
•
•
Rate notice/s for residential property owned
Mortgage statements

PIR 1131 Property Investment Report

Transcription

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