Australia's Property Scandal: Town Planner Seeking "Approvals"

A sex-and-property scandal involving a female city planner on a "mission for sex" in return for approvals of high-rise buildings is threatening to engulf the beluigered New South Wales State Government.

An undercover sting by anti-corruption investigators uncovered a web of affairs involving 32-year-old town planner Beth Morgan in the steel-and-surfing city of Wollongong, south of Sydney, with three prominent building developers. Morgan, said by one of the three men to be "on a mission for sex", gave approval for millions of dollars worth of unlawful city building developments in return for gifts and affairs, the powerful Independent Commission against Corruption(ICAC) heard.

Morgan gave testimony to the commission about the affairs, admitted to by two developers, while a third denied the pair actually had a sexual relationship. The scandal, however, also threatens several ministers in the state government.

Australians generally believe their country to be largely corruption free and we rank well on the international index prepared by Transparency International.

Amid the public ICAC hearings, state Premier Morris Iemma promised to sack a senior minister if he was found to have improperly given a job to a Wollongong city councillor linked to the scandal. Four other state ministers have also been indirectly linkedby the ICAC to central figures in the furore.

The ICAC hearings have been given front-page treatment,with corruption investigators documenting lurid details of emails and phone messages between Morgan and her alleged lovers, which in turn have run in newspapers nationally. Adding to public shock are photographs of the stylish Morgan and the men she pursued, receiving from them cameras, cash payments, a China holiday and designer handbags, the ICAC heard.

Simon Turner simon@marquetteturner.com.au

World's Top 3 Most Expensive Cities for Real Estate

London, New York and Moscow are now the world’s most expensive cities for residential apartment buyers, according a survey by the Global Property Guide (http://www.globalpropertyguide.com/), an international property research firm.

Residential apartments in Prime Central London are among the priciest in the world, at US$21,800 to US$36,200 (£10,960 - £18,214 or €16,305 - €27,095) per square metre (sq. m.). Prime Central London includes Belgravia, Chelsea, Mayfair, Notting Hill, Knightsbridge, Regent's Park, South Kensington, St. John's Wood, and St. James.

Prices in other luxurious areas in London such as Wimbledon, Hampstead, Richmond, and Wandsworth range from US$14,142 to US$19,361 (£8,675 - £9,719 or €10,560 - €14,458) per sq. m., also among the highest in the world.


New York comes in second place with property prices in Upper Manhattan ranging between US$13,270 and US$22,923 per sq. m. Apartment prices in Lower Manhattan are around US$12,510 – US$20,456 per sq. m

Moscow comes in third place with central Moscow apartment prices ranging from US$10,764 to US$20,506 per sq. m

Other cities in Europe that are among the top ten most expensive cities for apartment buyers are Paris, Barcelona, and Geneva. Condominium prices in Paris are around US$12,930 to US$18,070 per sq. m.

In Spain, prices of flats in Barcelona are between US$9,160 and US$9,870 per sq. m. Prices of apartments in Madrid are lower than Barcelona, at US$6,535 – US$ 8,000 per sq. m

In Switzerland, prices of flats in Geneva are around US$6,870 - US$10,400 per sq. m. Prices in Geneva are higher compared to Zurich, US$5,900 – US$9,830 per sq. m

Of the three German cities included in the study, Munich is the most expensive with prices of flats at US$3,485 – US$3,700 per sq. m.; followed by Frankfurt at US$2,360 – US$3,300 per sq. m. Property prices in Berlin are still relatively subdued at US$1,840 – US$2,600 per sq. m.

Residential apartments in Istanbul, Turkey are among the cheapest in Europe, at around US$1,850 to US$2,500 per sq. m.

Most Expensive Asia-Pacific Cities
Among the top ten most expensive cities, four are in Asia: Hong Kong, Tokyo, Singapore, and Mumbai.

Residential apartment prices in Hong Kong range from US$10,490 to 14,780 per sq. m., in Tokyo from US$7,600 to US$11,870 per sq. m., and in Singapore from US$11,500 to US$13,340 per sq. m.

Mumbai is a notable exception among the ten most expensive cities; it is located in a poor country, albeit rapidly growing. A mix of high population density, archaic land laws, rapid urbanization and strong economic growth contributes to the surprisingly expensive property prices in Mumbai.

Property prices in Mumbai are around US$8,600 to US$10,300 per sq. m. This is significantly higher than New Delhi (prices at US$1,970 – US$3,260 per sq. m.) or Bangalore. Despite equally rapid economic expansion, property prices in Bangalore are still among the cheapest in the world at US$950 – US$1,900 per sq. m..

Compared to Mumbai, Chinese cities are significantly cheaper. Prices of flats in Shanghai are around US$2,870 to US$3,540 per sq. m. while those in Beijing are priced at US$2,100 to US$2,330 per sq. m.

Properties in Australia are near the top of the scale, with apartment prices in Sydney at around US$6,290 to US$9,690 per sq. m. New Zealand is significantly cheaper than Australia, with apartment prices in Wellington at only US$4,360 – US$4,500 per sq. m.

Do you feel better for now knowing what an expensive city Sydney is!

Simon Turner simon@marquetteturner.com.au

The Most Expensive Street in the Country

Wolseley Road, Point Piper, is the most expensive street in the most expensive suburb in Australia. It's also a who's who of Sydney real estate.

Wolseley Road is the dress circle where the rich and famous sit high on a thin-necked peninsula jutting deep into Sydney Harbour with mega-million-dollar views back to the bridge, the Opera House and the silhouetted CBD skyline.

Established in 1890 and named after British field marshal Garnet Joseph Wolseley, this wide, hooked street is a row of lavish estates, deluxe apartments and theme-park palaces.

Of the 10 highest-priced house sales in 2007, it is the only street with multiple listings, including $25 million handed over in December by stockmarket trader David Trew for a 1921 harbourfront mansion.

24 houses have traded in the past five years on Wolseley Road at an average $12.33 million - including the $21.5 million recruitment queen Julia Ross paid in 2004 for Villa del Mare, still a non-waterfront Sydney record.

It is also a place where construction never stops, with many residents wanting to display “their legacy”, say Michael Marquette, Director of Marquette Turner. Ultimately, “the more it costs and the more people that know how much it costs, the better”.

Take a stroll and and have a look to see who you can recognise (that is if you're tall enough to catch a glimpse beyond the high security walls and fences!).

Simon Turner simon@marquetteturner.com.au

How to Build a Property Portfolio

If your long term strategy is to build a portfolio of investment property then it is important to have a long term finance strategy to match.

Investors frequently hit a brick wall with their lending and can't move forward to the next property. It is often their current loan structure that is holding them back. Incorrect structuring usually results from short-term planning with a focus on completing the immediate purchase rather than asking "How will we do the next one?"

Understanding lender differences

As you acquire more property you also acquire more debt. In most cases lenders will be looking for evidence that you have the capacity to meet this increased commitment. Where you are acquiring high growth property that may be cashflow negative in the early stages this becomes more challenging. Each additional property will effectively eat into your income reducing the loan capacity.

Each lender has their own method of assessing serviceability. This means the amount you can qualify for can vary significantly from lender to lender. Even between the major banks there can be significant variations.

eg. across a panel of over 30 lenders, a couple earning $75,000 per annum could potentially borrow anywhere from $308,879 to $522,124, based on the same information. Therefore you can actually rank your potential capacity across these lenders from lowest to highest.

In building a portfolio you would start by using the lower rank lenders first. As you reach capacity with these lenders you then place your next purchase through the next lowest lender where you can qualify. And so on moving up through the rankings.

Avoiding cross-securitization

Cross-securitization is where more than one property is used to secure a loan. If you have a property with a lender and buy another property, in most cases that lender will secure the new loan against both properties.

This can present a number of complications going forward:
1) By linking all your properties together you have probably limited your loan options to that lender. As highlighted above if this lender has a more restrictive servicing test then your future investment plans may be slowed

2) The lender will generally assess any future borrowing plans on the aggregate value of the properties. Let's say one of the properties experienced strong price growth but the other property was located in an area that was experiencing a down turn in value. The loss on one would cut into the gain on the other, reducing the amount of additional equity that could be released. If the properties were separated then you could take full advantage of the property with the gain to release additional equity and acquire further property.

3) If you want to change things with either property or the loan structure it is likely to involve more costs in terms of additional documentation and valuation fees.

4) Having your properties separated gives you greater flexibility. It means if you need to make changes to your portfolio or your loans going forward you can do so without significant complication. If you find that there is a better option for you with another lender you can move one of your properties without disrupting the rest of your portfolio.

It must be remembered that these are general principals only and will not be practical or apply in all situations. The range of options available to you will depend on your specific situation.

This article is not a substitute for independent professional advice. Marquette Turner does not warrant the accuracy, completeness or adequacy of this information. We disclaim liability to all persons or organisations in relation to any attraction(s) taken on the basis of currency or accuracy of the information or material, or any loss or damage suffered in connection with that information or material provided. You should make your own enquiries before entering into any transaction on the basis of the information or material provided.

Simon Turner

simon@marquetteturner.com.au

How to Have a Hassle-Free Christmas

Entertaining friends and family during the festive season is a lot of work.

Aside from the planning that goes into a festive event, post-party cleanup can be a full-time job. If you feel the holiday tension, you aren’t alone: Nearly half of Australians report experiencing stress during the holidays, according to a Gallup survey.

Help keep your Christmas hassle-free with Marquette Turner's time-saving party-preparation and clean-up tips:

House Guests:
Resist the temptation to wait on out-of-town guests hand and foot. As the host, you need to relax and enjoy the spirit of the season and the cheer that comes with houseguests.

When your houseguests offer to help with meals, graciously say “yes” and allow them to prepare their favorite side dish or dessert. Take them up on offers to help set the table or clean dishes. This offers extra time to catch up with your guests while you’re all in the kitchen and dining area contributing to a great celebration.

Highlight your home’s best assets:
Instead of tirelessly trying to make every room of your home spotless, concentrate on the areas where guests will spend the most time.

Focus on the bathroom:
Your guests will likely visit this room before they head home. Pay attention to little details like refilling soap dishes and having fresh hand towels.

Have a solid plan:
When creating a guest list, consider your options ahead of time. Buffet-style meals are easier for larger groups, while you can better host a sit-down dinner with six or fewer guests.

The holiday feast is not a time to try out an all-new recipe. The key to being a less stressed hostess is building your menu around foods you are comfortable making.

Cook ahead:
Make dishes in advance of the big celebration to cut down on the time spent in the kitchen when your guests arrive. Many hors d’oeuvres, desserts and side dishes can be made and frozen until ready to serve.

Control mishaps:
A good host handles disasters with grace. Do not fear the dreaded gravy stains on the white linens or the cranberry sauce spilled on grandma’s white blouse. Use the internet to find the quick solution.

Good luck and happy holidays!

Simon Turner, Marquette Turner

Interest Rates Remain Unchanged

Yesterday morning the Reserve Bank of Australia (RBA) announced that the official cash rate will remain at 6.75%.

The renewed volatility of international financial markets, concerns about the US economy and uncertainty about the likely path of fiscal policy and labour costs here in Australia are acceptable reasons for delaying any further rate hike.

The RBA Board warned, however, that rates may rise early in the new year, due to its concern about the outlook for inflation

Recent information continues to indicate strength in demand and output in Australia, with the economy having relatively little surplus capacity. Inflation on a year ended basis, as measured by the CPI and underlying measures, is likely to be above 3 per cent in the first half of 2008, and to decline somewhat thereafter. Simon Turner

Property Vs Shares: And The Winner Is...?

I was talking to a friend in the last week who has just purchased a great 1 bedroom apartment in Surry Hills. I visited him there just after he moved in and while showing me around asked the BIG question - which is a better investment for me, shares or property? The question took me back a little as he had just purchased his first home and yet still felt uncertain enough to ask the question. We then sat down and discussed what it had cost him to purchase his first home.

He had $50,000 to invest and he could have chosen property or shares. The property cycle and share trading cycles over the last 100 years or so have shown study after study that similar returns are achieved in the long run by investing in either area. Property prices typically double every 7-10 years depending on where you are in the country and share prices tend the same way over a similar period. The issue for the person with $50,000 to invest is gearing.

Gearing is what I believe makes the big difference for the average long term investor. Given that no stamp duty is payable up to $500,000 for a first home buyer, combined with the first home owner's grant there is an immediate incentive of up to $30,000 approximately. The big deal is financial institutions of all types will lend you up to 100% of the purchase price of property and most will lend at or above 90% LVR (Loan to Value Ratio). What this means is that you can take advantage of the capital growth of a property worth $500,000 with no stamp duty payable and legal and mortgage fees all paid with the first home owner's grant. At an LVR of 90% you would owe $450,000 to the lender and the property should be worth around $1 million in 7 to 10 years following on from past trends.

This sort of capital gain would simply not be possible for those investing in shares without significant security such as existing property or other assets. Few if any financial institutions would lend at such a high LVR to anyone purchasing shares and therefore I have to say that property comes out on top well and truly for the average Australian. Of course we have seen some huge success stories with people making millions from shares and it would be unwise to ignore shares as part of your total investment portfolio when you have the means to do so. Shares are cheap and easy to trade and if traded well can return enormous sums of money. The winner for the average Australian starting out their financial life in 2007 is property! Michael Marquette

Education Revolution: School Visit Update

Last week each of us at Marquette Turner committed ourselves to visiting one Public and one Private School within the week. We are awaiting confirmation of the times from the schools and will let you know more as soon as we can. Michael Marquette

Buy Low to Make Big: How To Find a Bargain

Finding a bargain property, one that is being sold well-below its worth or potential worth, is not as easy as riding a bike or watching T.V. Not that it is that difficult either, but the task of getting a good deal on an investment property can at times be cumbersome.

In the brief list below, four methods for finding and grabbing that good deal are explained, and although the descriptive nature of the list is brief, it will give you just enough to ignite your thought.

1.) Distressed sellers – These are people who are eager to sell due to personal reasons, such as changing jobs, upsizing or downsizing, family issues.

2.) Vacant Properties – Here’s a simply one: drive around an area and look for homes that have tall grass and a crummy exterior. You can then go to the Land Titles office to search for the owner, get in contact with them and see if they are open to an offer being made. Often it is a case of the owner not having the time, means or inclination to renovate the property, which is a prime opportunity for someone with all three! Win-Win is the best!

3.) University Towns - Here there are often an abundance of rentals and a plentiful stock of professors and students to rent the properties. In these areas, there are always landlords wanting out of the game for various reasons. Not only can you get a property that is already a rental, but often you can buy them with a tenant under lease, lessening the risk of an upfront vacancy. Usually these properties are priced around their actual value, but the bargain is the fact that they usually demand a higher-than-average rent because of the continuous demand for housing.

4.) Repossessions – Homes that have been repossessed by banks due to mortgage defaults will almost certainly be auctioned by a real estate agent, and clearly advertised. Simply search the internet, or ask agent’s to keep you informed of any upcoming repossessions.

Whilst these options may seem somewhat unconventional, remember that you generally make money when you buy a property rather than when you sell. Good luck. Simon Turner

Bleak House

It is widely known that houses prices in Australia, particularly Sydney are becoming increasingly unaffordable to an increasing number of the population. Higher interest rates have begun to limit the extent to which demand for housing can be financed. Rates have risen six times in just a short space of time.

Given that household debt now exceeds approximately 150% of disposable income (a historical high), and that the mortgage interest burden stands at 20% of gross income (up from 11% in 2003), even if demand were strong enough to continue to push up house prices, the recent credit crunch has reduced the funds available to potential house buyers as lenders have reined in borrowing.

Increased mortgage repayments are set to deal current homeowners a further blow.
Given the current credit squeeze and sup-prime mortgage crisis in the US, Australian banks will feel the pinch.

From a consumer’s point of view, this will mean that there will be few attractive offers from banks to refinance for a better deal. Indeed, many lenders have tightened their lending criteria as a result of the problems in the US subprime mortgage sector.

These trends will inevitably lead to an increase in the number of defaults in Australia —although it is unlikely that there will be a surge in defaults to the extent witnessed in the US, where many subprime mortgage holders are being hit by higher "reset" repayment rates.

Faced with higher mortgage repayments, Australian homeowners will be in less of a position to release their equity to purchase additional homes. Simon Turner

Australia's Mortgage Blackspots

NSW home owners are the most stressed, and WA by far the least, according to a new study by Fitch Ratings, with home owners in south-west Sydney are by far the most likely in the country to miss more than one mortgage payment.

The Sydney suburb of Guildford topped the list, with 5.65% of mortgagees there missing more than one mortgage repayment. The NSW areas of Granville, Wetherill Park, Cessnock, Belmore, Greenacre and Punchbowl take up the next six spots on the list, all with payment default rates of between 4.63% and 4.91%.

Fitch managing director Ben McCarthy states that “This report, for the first time, confirms the anecdotal evidence that south-west Sydney is the most stressed part of the country in terms of residential mortgages. In south-west Sydney, mortgages that have missed more than one payment at 30 September were almost twice that of the national average.” Simon Turner

Latest Market Round-up

The latest figures just released by the Australian Bureau of Statistics for the month of October, reveal the following:

· Growth in retail sales revenue dropped to just 0.2% in October
· New dwelling approvals also disappointed in October, although the 2.8% decline followed on from an unusually strong 6.8% jump in September.
· The volatile apartments sector was behind the fall, dropping 5.5% after a 17.8% hike in September.
· But in good news for the housing sector, new private house finance increased 0.9%, a result that Westpac economics says points to an “unambiguous upturn” in the broader housing sector.

Simon Turner

All Hands on Deck: How Safe is Your Balcony or Deck?

A Melbourne balcony rail collapse that injured three people has prompted a pre-festive-season warning from architects about the safety of Australia's balconies and decks.

Pre-purchase inspections conducted by the Royal Australian Institute of Architect's buyer inspection service revealed that 6per cent of Australian homes had a timber balcony, and 2 per cent of these had the potential to cause life-threatening injuries.

These figures indicate around 8000 balconies in Australia could be life-threatening, and last week 3 people were injured when they fell 7m after a balcony rail collapsed. And this is not the first time: balcony collapses in several states in recent years had resulted in several injuries and deaths.

Coastal properties had the greatest risk because of the harsh environment and corrosion caused to metal fittings.

Clearly, people need to inspect their balconies and decks for rotting timbers and rusting fittings.

Particularly given the approaching festive season, these areas would be used for Christmas drinks, lunches and dinners, and many are likely to be overloaded, with people leaning on balustrades or balcony rails.

Clearly apart from possible injury or death to family members or friends, home owners would be foolish to ignore the legal liability which could arise from a collapsing deck which is proven to be in poor repair.

While balconies and timber decks had become important parts of Australian homes, many timber decks built in the 1960s and 70s were illegal because they had been built using inappropriate timber, some of which was now rotten and unsafe.

Whether you have a balcony or raised deck, whether timber, concrete or steel, please inspect the structure for shaky hand rails and balustrades, rust stains and cracking. If you find faults please take immediate action to repair them or seek professional advice if you are unsure. Simon Turner

2008: The Real Estate Year Ahead

2008 is set to be an interesting year in so many ways. We are looking at further interest rate rises as inflationary pressures force the Reserve Bank to tighten monetary policy. Further increases in the cost of oil and grocery's are likely to put pressure on prices for consumers and low unemployment will continue to fuel spending.

The big questions are how high will interest rates go and who can we blame for the increase? There is no simple answer to the question, however I believe interest rates will increase to 9-9.5% and it would be unlikely to reach double digits. The Reserve Bank’s independence means that increases in rates will be made without political bias and will be in the best interests of the country as a whole.

The Australian economy has enjoyed 16 years of consecutive growth which means the first 5 of those were under a Labor Government, followed by 11 under the Coalition. Regardless of which party is in power after Saturday interest rates will increase in 2008 and Australians should be tightening their belts and avoiding excess.

The top end of the market is booming and will continue to boom in 2008. The top end of the market has come through 2007 unaffected, with units and low-end property prices steadying, although many buyers are carefully considering their decisions and taking their time to make offers.

This leads us to yet another question – Will 2008 be a good time to sell? In 2007 most vendors have made the decision to move based on lifestyle factors and financial pressures rather than the realization of capital gain. 2008 looks like continuing that trend.

There are buyers at every level of the market, however, prices are steady and should continue to be the same over the next 12 months. Top end property and those in the Sydney’s West will be the exception in 2008. We will continue to see records set in Sydney’s beachside and harbourside suburbs and suburbs in Sydney’s “mortgage belt” like Glenmore Park, Blacktown and Liverpool will struggle under the weight of further interest rate increases. This should provide some excellent buying opportunities for those with the capacity to purchase with foreclosures likely to reach levels not seen since the early 1990’s. Rental prices will continue to increase in 2008. Increased yields will please investors who have struggled for so long and chosen shares over property. This could mean further movement into bricks and mortar which is a positive thing for those selling in 2008.

All in all the year looks like being a tough one for those already feeling the pinch and the rich will continue to get richer. The need for an immediate solution to housing affordability will become even more apparent and investment in infrastructure to connect the regional cities to our capitals will require a solution that involves full co-operation between the State and Federal Governments. Maybe a Labor Federal Government will be able to better co-operate with the State Labor Governments? Michael Marquette

The Great Land Sale

Commonwealth Sell-Off of Land to Help Housing Affordability Crisis

The Federal Government has announced its long-awaited plan to sell off Commonwealth land to address the growing housing affordability crisis. It has promised to speed up the sale of enough blocks for 10,000 houses across the country by 2010.

For the cynical amongst you, it may be interesting to know that the first property that will be available in Sydney is part of an estate in the John Howard’s wobbly seat of Bennelong. For those less cynical but nonetheless concerned about housing affordability, such houses are already on the market for $790,000.

A further 700 dwellings on the banks of the Parramatta River in Ermington will be disposed of by the Government in 2008 as part of the plan that would provide enough land for 6000 dwellings in western Sydney.

Prime Minister John Howard announced plans similar to those of Opposition Leader, Kevin Rudd, to spend $500 million on infrastructure for community facilities such as playing fields and libraries around new housing on the city fringes and in urban areas.

The most likely area to be sold first is the former Naval Stores Depot in Ermington, which lies in Bennelong, where the developer Stockland has four-bedroom "manor homes" on the market.

Additional sites include the Ingleburn Army Camp in South West Sydney and the Schofields aerodrome in North West Sydney. The Ingleburn site would provide enough land for 4680 dwellings and would require $75 million worth of remediation to be covered by the Commonwealth.

The final two sites in Sydney are West Wattle Grove in south-western Sydney and Bringelly Radio Receiving Station. Simon Turner