Property

Australia's shifting sands

It seems Hong Kong isn’t alone in its quest to control its property market. New South Wales targeted foreign buyers by doubling its Foreign Investor Surcharge Duty (FISD) and raising the annual land tax surcharge from 0.75% to 2% effective July 1 (Victoria raised its FISD to 7% last year). Meanwhile, banks have set new lending restrictions, and in Western Australia, strata title housing reform could potentially lead to a remaking of its property market. What’s an investor to make of all this?


Australia - Brisbane

Rules and regulations

All markets are subject to some measure of policy, and with geopolitics such as it is, banks have to become more diligent on lending. Last month, the Australian Prudential Regulation Authority directed that only 30% of all mortgages would now be interest-only loans, down from the current 37.5%. To shed that 7.5%, investor lending — domestic and international — is likely to be reduced. That could sting Sydney and Melbourne, but “Given the historic healthy returns, tax benefits and the limits placed on superannuation contributions, investing in residential property is likely to remain an aspiration for many,” says Sophie Chick, head of residential research for Savills Australia. In addition, Australia’s big four banks — Westpac, Commonwealth, ANZ, NAB — have halted lending to overseas residents, which Chick sees as already having an impact in the gateway markets. In May, national broadcaster ABC reported Chinese investors exiting the Melbourne market have prompted a downturn there.

>> Overseas Investment: Emerging markets for 2017

However, “The restrictions on lending are not government-led, they’re banking-led,” points out Guy Major, Crown Group’s director of sales and marketing for Asia. The restrictions are designed for bank self-protection. “It’s slightly more rigorous than it used to be. In reality if you set up with a bank in Australia, and you have evidence of [legal] income and start a regular relationship, I doubt there’d be a [lending] issue. I don’t see it as being overly restrictive,” says Major.

Frustration over un-leased flats in locations where vacancy is tight led to the 2017-18 federal budget including a charge for foreign owners on reasonably available properties vacant for six months per year. The charge will be at least AU$5,000 (or equal to the relevant foreign investment application fee) and will be in addition to the Victorian Vacant Residential Property Tax.

>> Will prices of Australian property continue to grow in 2017?

Go west?

The WA capital, Perth, is forging ahead with strata title reform in an effort to provide more flexible and sustainable housing. Perth is in a vastly different market cycle stage than Sydney or Brisbane, with prices falling on a lack of demand due to falling commodity prices. Despite commodities’ suppressive influence, “Perth is forecast to see strong population growth. This anticipated increase in demand set against a fall in building approvals is likely to slowly lead to prices bottoming out followed by low levels of price growth as the market moves into the next stage in the housing market cycle,” theorises Chick. “This presents a potential opportunity for investors with a long-term view on the market.”

Regardless of what policy comes down the pipe, Australia’s major markets are likely to sink immediately — and bounce right back. “We do not expect the long-term appeal of residential property in Australia to change,” finishes Chick. “Particularly given the additional stamp duty surcharges in other global cities.”

>> What should your Australian property strategy be in 2017?

A new destination 

Despite new investment controls, Brisbane still makes investment sense. The Queensland capital is economically- and demographically-sound. With apartment prices growing a healthy 7.6% between 2012 and 2016, median sales prices are roughly 60% of Sydney’s and a much more appealing 3% FISD, Brisbane is staying on investor’s radar.

One of the things pushing Brisbane up the ladder is its commitment to new infrastructure and lifestyle amenities. One of those is the forthcoming Queen’s Wharf, an AU$3 billion integrated resort that counts Chow Tai Fook and Far East Consortium as partners. The project at Roma Street Station, includes a casino, five hotels, three residential towers, entertainment venues, retailing and dining. “It’s an exciting development. We’ve been coming here for years and it’s influenced us in how people are comfortable in those kinds of developments; with the vertical living concept. It’s fairly new in Brisbane. It’s taken a little bit of getting used to, but it is catching on. Brisbane is really coming of age,” says Metro Property Development investment sales executive Joe Antonellis. “It’s going to be really iconic. The last iconic structure built in Australia was 50 years ago —
the Opera House.” Metro’s marketing director Ken Woodley is more to the point: “Queen’s Wharf is going to give Brisbane a real destination. I don’t think Melbourne or Sydney have anything like it.”


Broadway on Ann


Broadway on Ann


Broadway on Ann

Elsewhere, the riverside regeneration at Newstead will put over one million square-feet of commercial space a few minutes from the downtown core. Metro’s Broadway on Ann will have 247 one- and two-bedroom units ranging in size from 540 to 820 square-feet. Priced from approximately AU$375,000 (HK$2.2 million), the project is in a vibrant existing community near shopping, dining and entertainment. Crucially, its location, less than two kilometres from the CBD, makes the property a strong rental address, key to resale potential and leasing for investors. “The demand for rentals in Brisbane is incredible. Brisbane is becoming a lovely place to live, and young people are moving out of the suburbs and into the city. Our average [rental yields] are around 5%,” adds Woodley. In case you missed out on Broadway, there’s Metro’s Como, the fifth and final stage of the five-tower Newstead Central. Comprising 197 one- and two-bedroom flats, Como is scheduled to launch in July.

>> Take a peek inside Australia’s small homes

Eternal Sydney

Sydney mega-developer Crown Group is adding to its Sydney portfolio with Waterfall by Crown, located in burgeoning Green Square. Benefiting from an AU$8 billion regeneration, it will include a new train station making the CBD five kilometres away more accessible. Waterfall is also one of Crown’s most ambitiously green projects, starting with a welcoming bamboo pedestrian tunnel, the development looks to bring luxury resort living to the city.


Waterfall

Within Green Square, the Waterloo location for Waterfall is in a strong rental pool of young professionals and students; some of the city’s best universities, and primary and secondary schools are within 30 minutes away. Those are among the reasons rental growth for one-bedroom flats has been 18% each year for the last five, and prices have surged 40%. Compared to the rest of Sydney, “Waterloo has stronger yields and demographics as well. The transport is excellent, there’s great proximity to universities. This is an area that’s gaining momentum,” notes Crown’s Major.

With a June launch, Waterfall’s early buyers weren’t subject to the new NSW stamp duty laws, but Major doesn’t see the measure having a lasting impact. “Will we get the same situation as in London, where the city becomes unaffordable? I’m afraid that’s reality. With the global movement of capital and people, you can put in stamp duties and increase capital gains taxes but at the end of the day it doesn’t really stop the flow.”


Waterfall


Waterfall


Waterfall

Designed by SJB architects, Waterfall will comprise 331 homes spanning three seven-storey buildings and a 20-storey tower.
Studio to three-bedroom apartments and two-floor penthouses will be fitted with natural stone and timber. Key to the development is public art, gardens, lush landscaping, recreation deck, rooftop pool and cinema, and the highest manmade waterfall in Australia that lends the property its name.

Waterfall is scheduled for completion in 2020. Prices at the June launch began at approximately AU$650,000 (HK$3.8 million). Contact CBRE Hong Kong on +852 2820 6553, or ipm.hongkong@cbre.com.hk for enquiries.  

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