Sydney: A Tale of Two Cities?

Sydney is home to Australia's sharpest divide between rich and poor.

The harbourside suburb of Milsons Point was rated Australia's most advantaged and Claymore in the south-west the most disadvantaged in a new study by sociologist Scott Baum, based on 2006 Census data. Associate Professor Baum said the study, for Brisbane's Griffith University Urban Research Program, was not just based on real estate prices or household incomes.

It included a number of factors, including participation in the labour market, public housing, whether or not they spoke English well, the number of single parents and the number of elderly people in the suburb who required help on a daily basis.

"It's interesting that Sydney, the most global city and the one that is supposedly pulled along by the global economy, is also the most polarised," Prof Baum said.

"So, in a large sense, you've got this feeling that some suburbs have more in common with places in New York and London than they do with suburbs in their own city. "In Sydney's case, it really is a tale of two cities."

Researchers drew on the Census data to compare and overlay several indicators of disadvantage to come up with a rating, with "band one" being the poorest or most deprived and "band six" the wealthiest or least deprived.

Melbourne was rated the most liveable city, with its worst deprivation in the suburban industrial heartland of Broadmeadows and Sunshine.

East Melbourne and newly-gentrified inner urban areas of Docklands were least disadvantaged.
"While not suffering the extreme polarisation of Sydney, economic spin-offs (in Melbourne) ... don't flow evenly across the metropolitan area," Prof Baum said.

Neither Brisbane nor Perth had a band one area of highest deprivation, but Brisbane's outer suburbs of Inala and Logan Central were rated as band two, along with Perth's Karawara and Crawley.

MONOPOLY: Australia Vs the World

Vote your favourite town onto the first ever global MONOPOLY board! The world’s most popular board game is about to go global – with a world wide vote to decide which of the world’s 22 greatest cities will take pride of place on the first ever international MONOPOLY board – MONOPOLY Here & Now: The World Edition!

The new World Edition follows on from the hugely successful election campaign for the all new Australian Here & Now MONOPOLY in 2007, which attracted in excess of 17 million votes from MONOPOLY enthusiasts around the country. Australians are now being asked get on line and get voting again, to ensure Australia is well represented on the first ever global edition of MONOPOLY.

While Sydney and Melbourne are on the voting card together with 66 of the world’s best known cities, any other towns or cities, big or small can also vie for one of two wild card spots on the board to be nominated and determined by public vote. Hasbro are hopeful of not only getting both cities on the board, but even possibly securing the coveted blue position and becoming the new “Mayfair” and “Park Lane”. The most prestigious positions will be assigned to the cities that receive the most votes.

Size does not matter when it comes to winning a spot on the board, for example last year it was the Barossa Valley that secured the most votes in the Australian MONOPOLY elections. With other small towns like Kalgoorlie and Sovereign Hill attracting many more votes than the big cities, proving that community spirit and enthusiasm is the key to securing a spot on the MONOPOLY board.

Australia has already proven we’ve got what it takes when it comes to voting, clocking up more votes in the Australian national elections than either the USA, United Kingdom or Germany did for theirs.

Voting is easy and accessible to everyone from 23rd January 2008 – 28th February 2008 at http://www.monopoly.com/, where you can cast votes for up to 10 nominated cities daily, and nominate 1 wild card city each day. Voting for the top 20 wild card nominations will begin on 29th February and will close on the 9th March 2008.

The twenty cities that receive the most votes will be part of MONOPOLY history as the first cities selected to be on the World edition game board. However, two spaces on the board will be reserved for cities that are nominated through the wild card vote. Any city from any country in the world can be nominated for these property spaces, which means that anywhere from Condobolin to the “Back O’ Bourke” could make it on the board!

Simon Turner simon@marquetteturner.com.au

Best Countries To Retire To

Recent research compared the top ten locations for pensioners to retire abroad. The results saw Cyprus and Panama coming tops based on tax, ease of residency, healthcare and average property costs.

It is fact that Australia is seeing large numbers of it's people leaving the country to live overseas. Years of being in the Australian housing market has left many retirees with large amounts of equity in their homes and a desire for better things.

The report shows the vast differences in taxation, inheritance laws and the availability of healthcare. How many of us know that France for example has income tax rate of up to 40% plus.

Cyprus tops the list of destinations because it has an income-tax rate of just 5% on pensions for retired residents, as well as low property prices and no inheritance tax. It also scores highly on related issues such as ease of gaining residency, low property buying and selling costs and benefits for pensioners. Not only does Cyprus offer a warm, sunny climate, it also benefits from favourable taxation and healthcare policies.

Panama, now infamously the chosen destination of “back from the dead” British canoeist John Darwin and his wife Anne, comes a close second. This is largely thanks to its pensionado scheme, which offers attractive discounts for pensioners.

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

Is Property A Safe Haven Whilst The Stock Market Is Stormy?

As the stock market slumps into what is now technically a bear market, investor attention turns towards safe havens, particularly Australian residential property.

Historically, as sharemarkets fall, investors head towards bricks and mortar. This time around though, as stocks are falling, the latest property data indicates a further tightening of already chronically low rental stocks with the prospect of increases of between $50 and $100 a week in rents. If the projections are accurate, rental yields will continue to rise, particularly in outer suburbs.

Before you rush for the real estate sales guides, take a steady, deep breath and read on.

Monique Wakelin writes in the Eureka Report that the cardinal sin is to assume that all property is going to provide a short-term, safe haven of income and growth, and to buy quickly and indiscriminately!

The good news for investors is that record low rental vacancy rates and a growing housing shortage have pushed median rents up consistently throughout 2007 with the promise of more to come this year. Australian Bureau of Statistics figures show that in the year to September 2007, average dwelling rents showed their highest growth rate in 17 years. Separately, property group Residex’s measure of the growth in advertised annual rents shows a jump of 18% to 35%, depending on location, over the past 12 months.

Average weekly rent rose by $35, and Residex claims we could see increases of up to $100 a week this year. Further, ANZ's annual property outlook indicates that the long lead times on lease renewals (which prevent investors from raising rents) mean we won’t see true market values emerging until later this year, but we can expect upward movements when lease renewals start to bring the rental increases into the data stream.

Moreover, the latest report from property research agency RP Data says that rents in the outer suburbs have surged ahead of increases in capital values, whereas the opposite is the case for inner urban and coastal locations.

It is true that accurate market rates of rent require relatively long lead times to emerge. Investors can’t raise rents on existing tenancies until leases expire. What's more, there’s nothing uniform about when that occurs. Put simply, no two properties are ever created equal and rental properties are no different.

The tenant market, like the home buyer market, has only so much capacity to pay. Like the general housing market the tenant market has become multi-layered and multi-faceted and is being driven primarily by affordability issues. For instance, rent movements in the most sought-after inner-urban end of the rental market are less volatile because of perpetual demand. Already relatively high rents for the most sought-after properties tend to rise – over the longer term – in a slow and steady fashion, underpinned by higher demand for locations offering a particular lifestyle.

Even though it is owner-occupiers that drive price growth, the additional demand from tenants helps maintain values. Investors in these prime zones are focused (as they should be) on capital growth first and foremost and rental yields second.

Property investors need to understand where their “consumers” (tenants) come from. About 30% of the Australian population rents, both out of economic necessity and choice, in the short-to-medium term and most do not expect luxurious accommodation. Break this down and we find that outside of the largely lifestyle-driven inner urban areas, the rental “consumer” is in pursuit of comfortable, affordable accommodation. This core pool of renters includes first-home buyers excluded from the market for longer in the face of low housing affordability.

In the real world, irrespective of the data, to suggest that an average rental property that currently returns $320 a week is going to remain in hot demand if it is bumped up to closer to $370 or $420 a week in six months is to misunderstand the realities of market capacity.

The informed investor must instead strike a sensible balance between arriving at a reasonable and sustainable income level that will bridge the gap with loan repayments for an asset and avoid raising rents to a level that would effectively price them out of the market. Investors must look beyond the hype and the generalised data and assess their own assets very specifically.

When a lease is up for review, ask the managing agent what that particular property, in that specific location, with that tenant pool would realistically rent for if it was vacant and being offered to the market for the first time. It is critically important to weigh up the advantages of reliable, steady income from good tenants and moderate rental reviews against dramatic rent increases that lead to high tenant turnover, greatly increased wear and tear and potentially long and costly vacancy periods.

And, let’s not forget the bigger picture; greedy investors who adopt the “let’s raise the rent as far as we can, as quickly as we can” will add further to upward inflationary pressures. That can only bite them where it hurts the most – by way of increased interest rates.

The Global House Price Growth Decline: Except Australia!

House price growth across the world has slowed down slightly over the last year, and property values on a global scale rose by 8.2 per cent during the third quarter of 2007.

This is down from a 9.7 per cent increase recorded 12 months earlier.

However, Australia still managed to record a strong rate of growth during this period. During the year to September 2007, the nation's average property values rose from 9.5 per cent to 10.3 per cent.

Price growth has been driven by gains in Brisbane, Melbourne and Adelaide, where in each case, inflation over the year to quarter three of 2007 has been over 16 per cent.


Simon Turner simon@marquetteturner.com.au

Sydney's Losing...It's People!

Sydney is bleeding 22,000 citizens a year to all parts of Australia, and for the first time the people deficit covers all key groups, from students and young singles to families and retirees.

The nation's biggest city is the only capital to lose more people aged 15-34 than it gained from interstate migration between 2001 and last year, and is the only capital apart from Adelaide to go backwards for both professional and blue-collar workers.

But for every Sydneysider who is forced out by the cost of living, another two are replacing them from the overseas migration program.

New official data analysed by The Australian reveals a dramatic realignment in the nation's make-up as young and old alike criss-cross the continent from Perth to Melbourne and from Sydney to the "rest of" Queensland - everywhere outside the capital city.

Hobart is the surprise packet, rising to third place behind Brisbane and Perth as the most popular city destination for interstate migrants, while the rest of Tasmania has leapt to second behind the rest of Queensland on the regional growth ladder.

The rest of Victoria and the rest of NSW are also in the black - breaking the past pattern in which they gave up more people to Queensland than they received in seachange and treechange retirees from Melbourne and Sydney.

The bigger picture shows that the rest of Queensland has replaced the state's capital as the nation's top people magnet, gaining 14,000 people a year compared with Brisbane's 10,000 a year.

The customised tables were extracted from the 2006 census, and track interstate migration over the past five years by age and qualification.

Responding to The Australian's analysis, demographic experts said the cause of the drift away from Sydney could be explained in part by its high property prices but also by its slowing economy.

The director of Monash University's Centre for Population and Urban Research, Bob Birrell, said Sydney's population decline mirrored the decline of its economy relative to the rest of Australia.
"We're seeing a big change in Sydney's relative attraction since 2001 or, really, since the Olympics. Sydney's demographic fortunes have changed sharply," he said.

"It's a chicken-and-egg thing, but the actual fact is that job growth in Sydney has slowed relative to Brisbane and Melbourne since 2001."

Demographer Bernard Salt said Sydney had become a divided city, between those who lived the "globalised" lifestyle, close to the CBD, and those who lived in the outer suburbs and rarely saw the Sydney Harbour Bridge.

"We've got floods of people coming in through the front door, into Sydney through Mascot (airport from other countries), but the backdoor's wide open, and Gen Y and down-shifters are streaming out. You don't find that to the same extent in other capital cities," Mr Salt said.

The latest census shows 111,400 more people left Sydney than arrived from elsewhere in Australia between 2001 and last year. This is almost double the rate of defection between 1996 and 2001, when 59,700 people left Sydney in net terms. Every capital, state and territory is officially an importer of Sydneysiders, the data confirms. Four out five Sydney defectors moved to the rest of NSW (46,500), the rest of Queensland (27,800) or Brisbane (18,700).

But Sydney's loss is most acute in the youth belt, which is the group providing the best gauge of a city's health. Almost one in 10 departing Sydneysiders was aged 15-34 - 10,000 out of the total 111,400. Sydney had previously been a net importer of youth, with 14,000 recruits from the rest of the nation between 1996 and 2001. The reversal over the past five years suggests cost of living pressures are pushing out Sydney's young and discouraging others from settling in their place.

The top beneficiaries of Sydney's youth drain were the rest of Queensland (5900), Brisbane (4600) and Melbourne (1800).

Sydney has struggled to meet the infrastructure needs of its population, but growing cities such as Brisbane could face the same pressures.

The other telling deficit for Sydney involves its local workforce. Sydney lost 7200 professionals and 5100 labourers between 2001 and last year.

Sydney also suffered professional worker deficits with Melbourne and Canberra (600 each).
Traditionally, Sydney and Melbourne received more professionals from Brisbane than went the other way. But the tables flipped in the past five years, although Melbourne lost 400 professionals to Brisbane, compared with 1700 who moved north from Sydney.


Simon Turner simon@marquetteturner.com.au

Is 2008 Set To Be A Year To Forget?

Unemployment is now at 6.1% nationally - the second consecutive quarter that this has increased. Should we be blaming the new Rudd Labor Government? Should the knives be at the ready? Will interest rates reach the heights of the early 90’s and what does all this mean for property in 2008?

In the last few Marquette Turner e-magazines I have looked closely at what 2008 will bring for property owners and with only 10 days gone in 2008, we can already see the validity of the predictions I made for 2008 at the end of last year.

As interest rates increase and inflation stays above 3%, fuelled by the pressures of high oil prices it’s inevitable that unemployment will increase. Employers are tending to play a waiting game or are battening down the hatches and getting ready for what comes next. But what will come next?

At the end of 2007 I predicted interest rates to hit somewhere between 9-9.5% and with the Banks increasing rates even before the Reserve Bank announces its decision on official rates this is looking very likely.

Is the Rudd Government to blame? The answer to this is no. The Australian economy is now into its seventeenth year of growth which is remarkable and home owners have been able to cope on the most part (only just in many cases) with recent rate hikes. Interest rates increased 6 times under the former Coalition Government and it was inevitable that further increases would occur in 2008 regardless of which party formed Government. The price of oil filters through every area of the economy with the result being higher prices for consumers. Higher prices result in inflationary pressure which means higher interest rates.

What does this mean for property in 2008? Marquette Turner's first open home for 2008 was run in Neutral Bay last weekend and to our amazement we were inundated with over 30 groups of buyers all eagerly searching for property.

Buyers are still very much in the market, however the attraction to fixed interest rates has increased and I am urging all those that ask to lock in rates as quickly as possible - this is by far the best way to bullet-proof yourself and ensure that you are not feeling undue financial pressure as 2008 rolls on.

Rental demand is extremely strong and rental returns have increased but these gains will quickly be swallowed up by increased interest rates with the result being that many landlords will find the situation too tough, forcing them to sell. 2008 is going to be a year where property prices are steady and those that are willing and able to take advantage of distressed sales will benefit greatly.

The property outlook is mixed – rents will continue to be high, housing affordability is now at its worst point in over 20 years and this is likely to become even worse as interest rates and unemployment continue to increase.

The likelihood of a US recession is high and the sub prime (Lo Doc) mortgage market has caused significant damage in the US and this will likely result in tougher lending criteria for Low Doc products in Australia. The Australian economy has stood firm against the Asian Economic Crisis and we can get through a US recession.

With over 40% of our National exports coming out of mineral rich Western Australia and with demand for our natural resources greater than the rate at which we can supply them we may just sneak through when other countries stumble.

My advice for 2008 is lock in your interest rates and be sensible when spending. Ensure there is plenty of money in the tin for a rainy day and do everything possible to cut excess.

Michael Marquette michael@marquetteturner.com.au

The Outlook for Rental Propery in 2008

Increasing demand and lower vacancy rates will cause many rents to increase during 2008.

With the population growing and rising interest rates putting some investors off the residental market, vacancy rates, (currently running at an average 1.7 per cent) are unlikely to improve.

Increases in median rents can be expected in all states, the Real Estate Institute of Australia says in its 2008 real estate market outlook. The likely rise follow across-the-country increases last year with rents for three-bedroom houses increasing by an average of 12.6 per cent to September 2007.

Darwin is now the most expensive rental location in Australia (the median rent for houses is $440 per week and for other dwellings $340 per week) although Sydney and Canberra renters also pay $340 median weekly rent for two-bedroom other dwellings.

The cheapest rental location is Adelaide at $255 per week for a three-bedroom house and $205 per week for a two-bedroom dwelling.

Some investors are being turned off from the housing market as interest rates have risen and are seeking to take advantage of other investment opportunities which have more favourable taxation treatment.

On the upside, however, with a fluctuating stock market, residential real estate in Australia is looking decidely stable!

Simon Turner simon@marquetteturner.com.au