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The numerous voices screaming at us from government, media commentary and various industry analysts alike have left many people confused or unsure about step they should next take.

Do you have questions about buying, selling, or managing your existing debt… don’t despair; you’re not alone? Dissecting fact from opinion and protecting that which you have worked so hard to accumulate can be like navigating through a mine field. Many of my readers feel the same way.

To help you to understand where the property market is positioned right now and teach you ways to protect your asset base, I am hosting a property market briefing night next month in Melbourne.

This round table event will be held in the boardroom of my accountants office (on Tuesday 19th August) and only open to the first 18 people to register. Sorry, but space is very limited.

If you would benefit from participating in an open discussion that addresses those relevant questions most of us have right now simply click here or call 0424-144-103 to reserve your seat.

Subject to the popularity of this evening we may hold similar evenings in other capital cities. If you are from outside Melbourne but would attend something like this in your city, please send an email with your best contact details (including your address, email & mobile phone number); click here if outside Melbourne.

“Nothing travels faster than the speed of light with the possible exception of bad news; which obeys its own special laws.”
Douglas Adams, “The Hitchhiker’s Guide to the Galaxy”

Bad news surrounding the two largest U.S. mortgage companies has been circulating in recent weeks. Suddenly, Fannie May and Freddie Mac, have bust onto the global stage ‘branding’ themselves in places (such as Australia) where they were previously unheard of. Together these two companies own or guarantee about half of the U.S. $12 trillion mortgage market.

When you first heard the names Fannie May and Freddie Mac did you chuckle and think “who thought to call those companies such silly names?” They are types of acronyms:

• Fannie May: Federal National Mortgage Association (FNMA)
• Freddie Mac: Federal Home Loan Mortgage Corporation

The U.S. Government has recently announced plans to “prop up” these companies.

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If you read last weeks blog you would be aware of the ongoing debate as to whether property investors should chase stronger rental returns in their property purchases or stronger capital growth. Readers of this blog will know we are definitely in the capital growth camp.

In our never ending search for suitable properties we occasionally come across a property that delivers on our potential growth criteria but also has a strong rental return.

Varsity Lakes is a recently established area with a Market Village feel. Popular, trendy and nestled between Bond University and the Robina Town Centre, Varsity Lakes wraps around the magnificent Lake Orr and is home to many businesses. It could be said that the business precinct of Varsity Lakes is an extension of the Central Business District of Robina.

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Here’s something you don’t read every day in the finance section: Inflation has been running riot but the Reserve Bank isn’t lifting interest rates.

Luckily the RBA had given the markets plenty of warning that it would pretty much ignore today’s June quarter Consumer Price Index. Just as well - otherwise we could have had a bit of panic this morning as the CPI came in considerably worse than expected. And the market was expecting a bad number.

For the record, the headline CPI increase for the quarter was 1.5 per cent for the quarter, making 4.5 per cent for the financial year. Even the RBA’s preferred “trimmed mean” measure (which takes out the biggest swings) came in at 1.2 per cent for the quarter and 4.3 per cent for the year. Ouch. That’s a fair whack more than the RBA’s declared target band of 2 to 3 per cent.

They are the worst quarterly inflation figures since 1991, ignoring the one-off GST increase, but most of the better commentators are actually saying the next move in official interest rates will be down, albeit not until next year sometime.

Source: Michael Pascoe -Yahoo Money

When I purchase an investment property I will have costs (or outgoings); and these costs will be paid for by:

• My rental income
• My tax savings
• Top up from cash or equity (my shortfall)

A rough rule of thumb; and I say rough because there are many influencing factors that I use when considering an investment purchase; is that I look for a combined yield of 15% p/a. The 15% yield will be a combination of equity growth and rental return. This means that a property that offers a 10% rental yield will probably only deliver me a 5% capital gain (equity growth)… and vice versa.

So the next time someone espouses the virtues and benefits of ‘positive cashflow’ property… ask yourself: “Are they telling me the whole story”?

Of course there is nothing wrong with positive cashflow and within a handful of years from settlement I expect all my investments to deliver me positive cashflow; however…

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Angie Zigomanis, senior project manager with forecasting group BIS Shrapnel says he expects Australian residential properties to experience marginal price increases in the coming financial year as interest rate rises halt price growth rather than force a downturn.

He says that rising rents and improving credit conditions will be the key to the next upturn in prices in most capital cities. “As credit conditions recover over the course of 2009, we expect banks will gradually pass on lower borrowing rates to customers,” says Zigomanis. “This will enable house price growth to pick up in many centres during 2009-10 and 2010-11.”

But the strongest growth according to Zigomanis will be in Brisbane, the Gold Coast, the Sunshine Coast and Darwin as a result of “significant pent-up demand in these markets and strong employment and wages growth, particularly in Queensland”.

Migration is playing a key role in the pent-up demand for housing. Australia is experiencing record net overseas migration inflows, which are underpinning what is already strong underlying demand for housing.

QUEENSLAND Transport Minister John Mickel said taxpayers are `paying for the sins of the ’60s’ as he opened construction on the $25 million Varsity Lakes train station. The Minister said the station and the extension of 4km of rail from Robina, which will cost a further $300 million, is a sad indictment on previous governments.

The Varsity Lakes Station, which has been built on an old landfill site, is a further step along the way in the Government’s plan to eventually run rail to Coolangatta. The station, with its retail, commercial and residential areas, is expected to be completed by late 2009, with the first train to roll through in 2010.

Source: Nine News

Interest rates might be at the peak of the cycle after the Reserve Bank of Australia (RBA) talked up the prospects of a slowing economy, while leaving rates on hold. The RBA on Tuesday kept interest rates unchanged for the fourth consecutive month, leaving the official cash rate at a 12-year high of 7.25 per cent, after its board meeting on Tuesday.

RBA governor Glenn Stevens said high petrol prices, as well as tighter financial conditions, were working to “restrain” domestic demand.

Interest rates rises by the central bank and commercial banks have led to subdued spending by consumers, while there has been a fall in labour markets, Mr Stevens said.

“On balance, while the inflation outlook remains concerning, the board’s assessment continues to be that demand growth will be moderate this year,” Mr Stevens said in a statement.

“Looking further ahead, inflation in both CPI and underlying terms should decline over time, provided demand continues to evolve as expected.”

Source: Nine News

• 141 new homes are needed a week to meet demand in the Gold Coast
• Capital growth prospects are good over the medium and long term

WHILE the most enthusiastic and optimistic apologists for Gold Coast real estate accept that the market is doing it tough, most insist the outlook is bright.

It’s all about fundamentals, according to RP Data national research director Tim Lawless, one of the nation’s top property analysts.

“Despite the current soft conditions, the solid fundamentals are likely to remain a positive driver of capital growth over the medium and long term,” he told the Gold Coast Bulletin.

Over the past calendar year the population of the Coast increased by 18,000 new residents, creating a demand for 7360 new dwellings - 141 new homes a week.

“The centrally located suburbs positioned along the Pacific Motorway account for over half the total population growth,” said Mr Lawless.

“With such a strong rate of growth, demand remains exceptionally strong and is a positive sign for the market.”

Source: News.com

Good Morning St Kilda on Riverwalk Investors,

It is very exciting to see the progress of “St Kilda on Riverwalk” with completion still on track for October. Riverwalk as a precinct is almost complete and we have a number of close friends that have chosen to live and rent in Riverwalk because of its great location; including Wendy from our office.

I bumped into friends at Robina Town Centre yesterday that had moved into the Riverwalk precinct last week. They were loving the fact that they could simply walk over the bridge to the movies, shops, cafes. He commutes to Brisbane by train (a 5 min walk away) for work each day and prefers that then living in Brisbane.

When looking at areas for achieving capital growth, buying as close to the “bullseye”; as Nick describes it, is the key. While we do not recommend high density apartments in the heart of capital cities, your purchase into a medium density apartment in what has been earmarked as the Gold Coasts new CBD will be one that you will be very happy with. With 3 billion dollars of infrastructure and development unfolding in Robina alone and the vast majority of construction spending being disproportionately weighted to commercial buildings, the future will be encouraging for you with regards to values and rents. Nick and I settled on our Riverwalk property last November and have been very happy with it!

Naturally we don’t have a crystal ball but one plus one always makes two, and when you combine a large population increase that demands a roof over their head with good infrastructure, development and employment opportunity; we believe you will always be very pleased with the performance of this investment.

Please find below the progress of St Kilda for June. In the next month the rendering will be nearing completion and external painting will be well underway. Electrical and plumbing fit offs and carpentry fit outs of apartments as well as tiling, painting, screens, robes will all be much further advanced.

External Works

• Roof - nearing completion
• Windows and sliding doors - nearing completion
• External painting - underway
• Rendering - nearing completion
• Balconies - balustrades underway, tiling to follow

Internal Work

• Painting - underway and nearing completion
• Tiling - underway
• Joinery - kitchens and vanities installed
• Fixtures - baths, basins, toilets installed
• Shower screens, robes & mirrors - underway
• Airconditioning units - underway
• Whitegoods - underway
• Lift - underway

Happy Investing,

Katrina Lockhart