Copyright This special report is brought to you by Metropole Property Investment Strategists and its associated company Metropole Finance

Transcription

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2 Copyright 2010 All rights reserved, Published by Metropole Property Investment Strategists Level 2, 181 Bay Street Brighton Victoria 3186 Phone Web site: This special report is brought to you by Metropole Property Investment Strategists and its associated company Metropole Finance

3 This special report is the transcript of a Tele Seminar conducted in December 2009 with 7 leading Australian property experts. Your Experts: Michael Yardney Michael is a best selling author and a successful property investor and developer. His opinions as a property commentator are highly sought after and frequently quoted in the press. Many consider Michael as Australia s leading expert in wealth creation through property and he has probably educated more successful property investors than anyone else in Australia. Gavin Taylor Gavin trained as an architect, has an MBA in property law and finance and has worked with major property developers in both South Africa and Australia. This gives him the background to understand property and in particular property development from all angles. George Kafantaris George holds a Bachelor of Business in Accountancy from the Queensland University of Technology and became a member of the Institute of Chartered Accountants in He also holds a full Real Estate License in Queensland and is a member of the Real Estate Institute of Queensland.

4 Rolf is widely regarded as one of Australia s leading finance strategists and has a wealth of knowledge about property investment, property finance and complex structures. His can do approach has helped many property investors through the finance maze. Rolf has rated among the top 100 Australian Mortgage Brokers for the past five years. George Raptis George brings over 20 years of Sydney property experience to Metropole. His knowledge as a successful property investor and his vast range of contacts in the property market together with his professional and friendly approach enables him to assist Metropole clients in acquiring top performing investment properties, that outperform the general market. Lucas McArthur Lucas McArthur has over 20 years experience in Residential Real Estate with specialist skills in Residential Property Management. Lucas is the General Manager for Metropole's Property Management Department and as a property investor himself, Lucas can show you how to gain maximum profit and growth for your investment property with minimum outlay and stress. Eddie van Pamelen Eddie is a Property Investment Strategist and heads up the Buyer Advocacy Team in Melbourne. He brings a wealth of experience in the Real Estate Industry as a buyer advocate, vendors advocate, auctioneer and sales consultant.

5 Your host Pamela Yardney Pamela is a director of Metropole Properties and an accomplished property investor and developer. Pam was the founder of Metropole Property Management and has authored many articles on maximizing property investment returns and is co-author of the top selling book "All You Need to Know About Buying & Selling Your Home" Read on and eavesdrop as Pam asks our experts some probing questions FIND OUT HOW MUCH YOU CAN BORROW: CALL US NOW ON for your obligation free consultation or just a quick phone chat. With one 10-minute phone conversation we can normally tell you whether or not we can help you obtain finance or restructure your loan portfolio. There is no charge and no obligation.

6 Pamela: Welcome to our 2010 Catch the Next Property Wave webcast. My name is Pamela Yardney. This webcast is being brought to you with the compliments of Property Update Australia s leading property investment e-magazine and the multi award winning team at Metropole Property Investment Strategists Australia s leading independent unbiased property investment advisory firm. We are into a new year, in fact, a new decade and a time of great opportunity for property investors. Yet, I clearly remember the year 2000 the beginning of the last decade for some were celebrating a new millennium, others had concerns. Some were worried that the millennium bug would melt down our computers; I remember it very, very well. And others were uneasy about our property markets. We were moving out of a difficult decade which ended with a property boom and many people had concerns that property values could not increase any further. At the time, we were paying less than $300,000 for an average house in Sydney, $245,000 in Melbourne, $144,000 in Brisbane, $149,000 in Perth, $188,000 in Darwin, $128,000 in Adelaide and $113,000 in Hobart. Fast forward ten years to today and look what we re paying for the average house. In many cities, property prices have increased over 200% despite a recession in 2001; a change in government, periods of high interest rates and global financial crises. I m sure more Australians would ve properties back in 2000 if they knew what would happen to values in the next ten years. To safely steer you through the next decade and the next property cycle, we have assembled a panel of six property and finance experts to give you their thoughts. They ll be discussing the Australian property market in general and then give you a state by state run down. And we ll also talk about the changes happening in the world of finance, a little bit about property renovations, and development and also about what s going to happen to rents over the next few years. So, there s a lot for everyone to take in. Our guests have so much information to share with you, so I really suggest you quickly grab a pen and paper if you don t have it handy and take plenty of notes. Last time we had a session like this, the amount of information that was conveyed was tremendous and we ll try and cram all this information in 60 minutes.

7 I will introduce our guests to you in a moment. But, before I do, I want to remind you that even though you ll be hearing from some of Australia s leading property experts, this webcast is not financial advice because we don t know your individual circumstances. If you want to speak to these experts about your own personal investment strategy, we will let you know how you can contact them during the webcast. Our first guest is Michael Yardney, the founder of Metropole Property Investment Strategists. Many consider Michael to be Australia s leading expert on wealth creation through property. Michael is a top selling author and a property commentator whose opinions are frequently quoted in the press. Michael has arguably educated more property investors than anyone else in Australia. When the national media wants an unbiased look into what s happening in the Australian property market, they call Michael for his expert opinion. In fact, Michael was one of the very few property experts who got it right this year. While most people were saying we were going to have a property crash, Michael went on public record with his thoughts which proved very accurate, so it will be interesting to hear his thoughts today. So, welcome Michael. Michael: Hi, Pam and welcome listeners. Pamela: Michael, there seem to be two schools of thought that we hear about all the time. One group of commentators are suggesting that it is the best time to buy property in years and others are saying rising interest rates and decreased affordability will stifle property price growth. Would you like to start off with your thoughts about the property markets, the opportunities ahead for our listeners and what they should watch out for? Michael: Sure. Thanks, Pam. It has been an interesting year and actually, as you said, an interesting decade. But, I think when you look back 2009 is going to be remembered as the year that the property market snuck up on us. In fact it's actually a bit of a property boom that snuck up on us. We've had a mixture of booming population growth, an under supply of new dwellings, record low vacancy rates, low interest rates, increased affordability and an improving economy. This was a really volatile mix that ignited a property boom in many of our capital cities. No one would ve dreamed that these type of increases at the beginning of 2009 when we were worrying about a global financial crisis. Even going back to Easter in 2009, there was a threat that Australia was going to fall into a recession and many economists were predicting property values would plummet. Now, I ve actually just had a quick look in preparation for this and I ve got the statistics for the first ten months of the year in front of me and Melbourne was the star performer. So, this was the first ten months of 2009 where Melbourne had gained median prices about 15%. The Sydney market is finally moving. We even had prices climb almost 10% in the first ten months of the year Over the same period, Darwin property increased by about 12.7%,

8 Canberra about 11% and in Brisbane, Perth and Adelaide, the average prices were 6.9, 6.1 and 4.6% respectively. So their property markets are moving on. But, it s important to understand that these statistics are just averages, which actually don t show the true strength of some areas of our property market in some parts of Australia where values have increased substantially more than those quoted. They are averages which means some properties have done better and some properties have done worse that s the way averages work. But, these gains have occurred despite us starting the year in the doldrums with a threat of recession hanging over us and despite a couple of interest rate rises. So, I m sure some of our listeners are wondering, Well, can property prices keep rising? And my answer is yes and no. Like most things, it depends. You see there s not one housing market, so it s impossible to make a blanket statement about whether we re going to have property prices rising and where there s a housing shortage. Like most things in property, it really depends upon supply and demand. So, while many first home buyers are looking at setting up home in the new outer suburbs, in 2009 a good proportion of them went on to buy apartments in what I call the aspirational suburbs of our capital cities close to where they work, close to entertainment, close to transport and close to the CBD. And this also happens to be the same market that many investors are looking. At the same time, established home owners were also looking to upgrade their homes in these inner and middle ring suburbs. With more buyers wanting the same sort of properties in the same suburbs, fewer properties on the market than a year ago, we ve got a shortage of supply in the locations where most people want to live. This means property prices are going to keep increasing and at the moment, we re seeing really very little medium and high density dwelling construction; that s apartments and townhouses. There s a real shortage of these properties to buy or to rent and this is unlikely to change for some time. You see, currently banks are reluctant to lend to developers and when they eventually do turn on the taps and they will and that will probably be some time in middle to end of 2010, there s going to be a lag of a number of years before new developments are completed. And these new developments will have to come on stream at a considerably higher price than currently achieved to allow developers to make the kind of margins the banks want to see.

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10 What about all those high rise apartments some of you are saying probably in the CBD, there s all these high rises. Well, there is a surplus in some areas, but, in general, these buildings are they type I would avoid. They are mainly owned by investors and over 80% of them are inhabited by tenants. There are only few home buyers intent on living in the center of the city. I think somebody who has a high rise building on the drawing board is unlikely to change that ground swell of unmet demand from home buyers who are going to head for the suburbs. So, property values will keep increasing in these inner and middle ring suburbs. However, if you look at the outer suburbs of their major capital cities, there s no shortage. In fact, that s where building is currently occurring. They re building houses out there and there s lots of land and that results in subdued price growth. And it s much the same in the regional and rural areas of Australia. Demand is low and housing is plentiful, meaning there can only be modest price growth there as well. So, we do have a shortage of housing in some areas and not in others. And yes, property prices will keep increasing in these inner and middle ring suburbs where the demand is strong and supply is short. However, there s no shortage in the outer suburbs of all our capital cities where the builders are busy building, and as I said, there s lots and lots of land out there. So, will property prices keep increasing? Yes, but significantly more in some suburbs than others. And as homeowners, and investors and I guess tenants for that matter head for those inner and middle ring suburbs areas where the land is already built out in proximity to work places, schools, public transport, shopping, entertainment, rents are going to go up, property values are going to go up, properties are going to remain scarce. Now, if you re thinking, Well, what about affordability? Let me remind you, there s always going to be cheap properties around. Just look in the outer suburbs, just look in regional Australia, just look in the rural areas the properties most people don t want to live in. So, Pam, I ve actually got some strategies for this cycle I d like to share with our listeners. But, if it s okay, can I come back at the end of the webcast and go through my strategies for the next property cycle? Pamela: That would be great, Michael, and I can t wait to hear what you ve got to say. Our next expert is Lucas McArthur, a director of Metropole Property Investment Strategists in Melbourne. Lucas heads our property management division and has over 20 years experience in real estate specializing in property management. Welcome, Lucas. Can you please tell our listeners what s in store for rentals?

11 Lucas: Absolutely. Thanks, Pam. We ve got good news for investors. All our research suggests that rents are going to continue increasing throughout the next year. Over the last few years, many property investors throughout Australia enjoyed rising rentals as rising house prices, a lack of new home construction and sharply low vacancy rates have caused rentals to increase in all our capital cities. We ve had strong rental growth in 2007 and But then, in 2009, things did slow a little. In fact, rents for higher valued properties fell as the global financial crisis made renters more cautious. But, the cycle is moving on and I m optimistic that rents are on the way up again. In fact, a recent report by economists BIS Shrapnel confirms our research. They re expecting rents to rise strongly over the next three years. Sydney was expected to experience the highest average annual increase in rents at 7.1% from 2010 to BIS Shrapnel predicted that Melbourne rents would increase around 5.6% per annum and Brisbane 5%. All these were forecasts to be above the 4.4% average annual increase experienced between 2002 and Rent increases in Adelaide may rise 3.4% and Perth 3.2%. This is because housing construction in these states kept pace with underlying demand. So, rental increases were tipped to be below the national average. Having said that, I know a lot of investors are asking, Can rents keep rising? Will renters be able to afford more? Well, the simple answer is yes. The latest figures from the Real Estate Institute of Australia show vacancy rates in all capital cities being at historically low figures. Typically, it is said that a vacancy rate below 3% is regarded as an undersupply. Interestingly, the average vacancy around Australia for the 20 years prior to September, 2007 was 3.6%. However, for the last few years, the vacancy rate in all capital cities has been below this industry norm and in many areas, is now around 1%. By the laws of supply and demand, this means rents must move up. There s no new rental stock being built by developers and as Michael has already mentioned, it s going to be a number of years before we see a significant amount of new rental properties coming onto the market. At the same time, first time buyers have recently been buying many of the inner suburban apartments that would normally have been bought by investors, so this means even fewer properties available for tenants and this is happening at a time when there are more tenants out there looking for accommodation. At Metropole, we have around 500 inquiries per week from prospective tenants looking for a suitable accommodation. Having said this, it is important for our listeners to understand that it still does not mean that property investors can ask whatever rent they like. At Metropole

12 Property Management, we are seeing well-priced rental properties leasing quickly and the landlord has a choice of quality tenants. On the other hand, if rentals are set at unrealistically high levels properties do remain vacant longer, costing their owners precious lost rental. I really don t believe it s worth chasing the extra $10 or $15 a week when you take into account the cost of a week to a vacancy. Pamela: Thank you very much, Lucas. So, it sounds like 2010 will be an exciting time for investors and I guess can look forward to higher rents to compensate for rising interest rates. Lucas: Absolutely. Pamela: To our listeners who want top property managers to look after their properties in Melbourne, Brisbane, or Sydney, why don t you give Lucas a call on or check out the Metropole website at Our next guest is Rolf Schaefer, a director of Metropole Finance. Rolf has a wealth of knowledge about property investment, property finance and complex structures. His can do approach has helped many property investors through the finance maze. Rolf has rated among the top 100 Australian mortgage brokers for the past five years. Welcome, Rolf. Rolf: Hello, Pam and hello listeners. Pamela: Rolf, one of the biggest challenges for property investors currently seems to be finance. I remember that not long ago, banks would lend you 80, 90, or even 100% of the value of your property. But, clearly the days of easy credit are over. I know some investors are finding it takes a long time to get a loan approval. Others can t seem to get enough finance or finance at all, while other investors are worrying about what s going to happen to interest rates. So, let s start with that question, Rolf. What is going to happen to interest rates over the next year or two? Rolf: Well, Pam and listeners, we have just experienced three rate rises from the Reserve Bank. And on top of this, some of the banks have added their extra little bit to maintain shareholder value. Up until now, all experts were predicting further rate rises through the next two years leading up maybe to a standard variable rate of around the 7.5% mark. We are currently at about 6.6% give or take 0.1% depending on the banks. So, we could actually anticipate rate rises of another 1% over the next months, if the economy keeps going the way it is going. However, this month there have already been some signs that the US dollar is improving and the US economy is improving for that which would mean that the US may lift their interest rates much sooner than predicted. The US were predicting interest rates to stay as low as 0% for the next two years. But, if the US stock market and the US economy improves faster than everybody anticipates, that would mean

13 rising interest rates for the US and that could mean that Australia may not have to raise their rates as high as everybody is predicting right now. So, that s basically the outlook for the next two years. Pamela: Wow. That sounds pretty good, Rolf. Something to think about, isn t it? Rolf: Yes. Pamela: Rolf, as we ve already mentioned, many investors are being challenged getting finance or more finance to help take advantage of the new property cycle. Are the banks still keen to lend and can you give our listeners a few tips about how to get more finance? Rolf: Yes. The banks are certainly in the business of lending out money. That s how they make their money, however they re keen to give out money to the right clients and the right clients are what they determine now to be blue chip clients. So, some of our listeners may experience problems while the majority of our listeners will have no issues in getting money from the banks, be that for a purchase of an investment property, or a refinance, getting equity loans, or just getting a better rate even by negotiating through an experienced finance broker. Pamela: I m sure our listeners would love to know how to get the banks to say yes more often, Rolf. Can you tell us a little more about that? Rolf: Yes, Pam. There are a few points that listeners may want to be aware of in applying for finance and I ll just go through them quickly. One of the points is you or your finance broker needs to understand which banks to use in which order. Some banks are still very investor friendly and some banks are not. So, if you start off with the wrong bank, maybe being the investor friendly bank first, which would be the easier loans to get, and then you go to a bank which is not so investor friendly, this means you do the harder loans last. It s contrary to how most people think, but doing it the wrong way means you will find it harder to move forward and expand on your property portfolio, because the banks have been approached in the wrong sequence. So, understanding which banks to use in which sequence is quite important. The other point is to purchase the right type of properties, as Michael has mentioned before. Go for properties in blue chip locations. Go for properties that are not exotic such as small apartments or student accommodation or bedsitters. Go for the properties in better locations, not in rural locations, for example. Often, clients get stuck by buying good property for a good price and a high rental yield but in the wrong location. So the banks may only lend them 60% LVR rather than 80% of the value of the property.

14 So, purchasing the right property in the right location is very important. The next point would be to maintain and watch out on your credit rating. The credit rating is influenced by the number of loan inquiries that you have. Each loan inquiry results in an entry in your credit file and also if you have defaults or judgments against you, that will all be pointed out on your credit file. Each lender you approach will have looked at your credit file. It s basically the first step in the lending process for the lenders to have a look at your credit file. You, too, can have a look at your credit file and see what s on there. You need to go to and you can request a copy of your credit file. It takes up to 14 days. That s the fee free service, or you can request an response within 24 hours and that costs you $30. Again, that website, that s Another area that some of our clients need to watch out for is: don t have multiple applications in with multiple banks or multiple mortgage brokers. Of course this will result in multiple entries on your credit file and could mean that you lower your chances of getting your loan approved. The banks will look at how many inquiries have there been on your credit file in the past six months and, at a certain level, they will just by default decline your loan application because they say if you had, let s say, six inquiries in the last six months, then there s got to be something wrong with you. They think other lenders have most probably declined your loan for reasons that they haven t been able to find yet, so instead of looking for too long, they d rather decline your loan application. So, don t make multiple applications. Instead use an investment savvy and experienced mortgage broker who can help you through the maze, through all the red tape. One who understands what I pointed out before: which banks to use and in which order. And also, this broker should be experienced enough to avoid unnecessary applications. In other words, just launch an application when the broker thinks the success rate is close to 100%. The final point that I would like to mention is cross collateralization. You should try at all costs avoid cross collateral. Cross collateral is when the bank uses two or more properties as security for a loan. That means they tie up all the properties against one loan. FIND OUT HOW MUCH YOU CAN BORROW: CALL US NOW ON for your obligation free consultation or just a quick phone chat. With one 10-minute phone conversation we can normally tell you whether or not we can help you obtain finance or restructure your loan portfolio. There is no charge and no obligation.

15 This gives the bank more control. It usually gives them more security and it definitely puts the bank in the driver s seat and it takes away control from you. So, avoiding cross collateral is very important. There s only a very few circumstances where a cross collateral is required or helpful to the clients. In many, many cases, it is not required. It just puts the bank in a stronger position. So, these would be my top six points. If you look out for those and speak to your finance broker, and he or she will understand most of the times what you mean and guide you in the right direction. Pamela: Thanks for that great information, Rolf. Obviously, it s critical to have a finance strategy as well as a property strategy and there is clearly a lot more to know about how to get the banks to say yes. If you want to speak to Rolf personally about your own circumstances, to review your finance strategy or just see how much you can borrow, please call him on or go to the Metropole website at and click on the finance inquiry form. Now, let s do a zip around Australia and see what predictions are for next year or so. Let s start off with Queensland and see what s happening up there. I d like to welcome George Kafantaris who is Brisbane director of Metropole Property Investment Strategists. Welcome, George. George: Welcome, Pam. How are you? And hello to all of our listeners. Pamela: Thank you, George. Lovely to have you join us tonight. For those of you who do not know George, he was a Chartered accountant, and holds a full real estate license in Queensland and is one of the few advisors who is a fully qualified property investment advisor through P.I.P.A. His knowledge as a property investor and his accounting background help his clients become high net worth property investors and George was voted your Investment Property Magazine s top buyer s in Australia for two years in a row. Congratulations, George as well as the Reader s Choice for Best Property Consultant in Australia. That s great news. So, welcome again, George. George: Thanks, Pam. Pamela: George, could you let our listeners know what is happening in the property markets in Queensland? George: Thanks Pam, and thank you for the introduction. Queensland is a very large market and when you have a very large market, you have a very mixed market. So, to answer your question, it really depends on what property market you are in. It depends on what property strategy you have which will then ascertain what market you re in.

16 But, in order to answer your question, Pam, if we look at Brisbane, the markets are very, very strong with lots of growth, lots of demand and the supply is low as we ve touched on previously. The supply can t keep up with the demand. There are other markets in Queensland, though, where it s the complete opposite and you have sellers virtually giving their properties away because they can t sell them. But, could I explain about my first comment about Brisbane? That does not mean, that you can go and buy any property in any suburb and then go, Well it s Brisbane, it s going to make money. It may not. So, you have to understand what type of property strategy you want to have within the market segment that you re in. Pamela: What sort of properties are you buying for your clients at the moment, George? What type of properties would you recommend? George: Pam, all of the properties are high growth properties. We only buy properties within kilometers from the Brisbane CBD and we also focus on two specific water locations about 17 kilometers southeast of the CBD. The entry level for us is a two bedroom unit in a small complex and the complex would not to have pools, lifts, gyms, spas. The next property up from that is a house that we can renovate and those houses that we buy are going to be in an owner occupier market. The next step up from that, depending on what level of investor you are, would be a property which we would buy and which can be developed into a two, three, or four brand new townhouse complex. And if you want to go a little bit more than that, you can, buy a complete block of units. We ve actually bought two in the last two months where the one client purchase all four, or six, or eight units in the block. One thing that the Metropole strategy has always said is we can always turn a high growth, low yield property into a high growth, high yield property. But, what can t be done is to turn a high yield, low growth property into a high yield, high growth property. Pamela: Thank you, George. George, you ve more or less answered my next question. But, can you invest anywhere in Queensland or anywhere in Southeast Queensland? George: That s a good question, Pam, and unfortunately that s one of the biggest mistakes that naïve investors make. The answer is no, you can t. Some areas are booming and others aren t performing as well. If you look at Brisbane specifically, it s where the majority of the migrants and immigrants are moving to. It s not the only place where properties will go up in value, far from it, but it s the safest bet for most investors unless they have specialized knowledge in the particular area which they want to invest.

17 But, being a big city, there is less volatility and there will be continual strong growth as history has shown us over many, many, many years. Pamela: Thank you, George. Maybe you should explain to our listeners what the team at Metropole Property Investment Strategists does and how it could help our listeners. I know that lots of people who suggest you should invest in Queensland are project marketers or represent developers even if they call themselves property searchers or finders. I also know you don t have any properties to sell, George, so maybe you could explain to our listeners what you and your team do. George: Thanks, Pam and you re right. At Metropole, in all of our different state offices, we do not have any properties to sell. It s one of our unique differences. To put it simply, we help Australians become financially free through independent, unbiased property advice. Whether our listeners are looking to buy, invest, refinance, rent, renovate, or build, chances are they will benefit from our services as we have no vested interest or any hidden agendas. Pam, the Metropole approach to building residential wealth is unique. While other companies are out there and they call themselves property searchers or property buyers, this relates to buyer s advocacy which is only one part of the Metropole investment process and only a small part of what we do for our clients. It s usually one of the last parts of the whole cycle that they have with us. We are a full service property investment advisory organization which is focused on helping our clients create financial independence and building lasting wealth through growing a high performance property portfolio. Over the years, the multi award winning team at Metropole have bought, sold, financed, developed, advised, negotiated for and project managed hundreds and hundreds of millions of dollars worth of property transactions to create substantial wealth for their clients and we can do the same for our listeners. While Metropole provides a full range of professional services designed to assist them in all aspects of property investment, they can choose to use only some of our services or a complete one stop shop. We always customize a solution to meet a client s specific investment needs. We do not have a cookie cutter approach. I would suggest is listeners call us on or go to our website at make a booking to see one of the team or attend one of the free property briefings we regularly hold at our offices in Brisbane, Melbourne and Sydney. Thanks, Pam. Pamela: Thank you very much, George. I now want to introduce George Raptis. We re now travelling down the east coast to Sydney. George is the director of the Sydney office of Metropole Property Investment Strategists and brings almost 25 years of Sydney property experience to the table. George, thank you for joining us today.

18 George: Thank you, Pam, and hello to all the listeners who have joined us today. Pamela: George, it looks like the Sydney property market is starting to turn finally. Am I right in that? George: Thanks, Pam. Well, 2009 was a great year for property in Sydney and 2010 is likely to be even better. Looking back at the last few years, the Sydney residential property market was stagnant for over five years from late 2003 with little change in its median house price over that time. However, during that same time, most of Australia enjoyed periods of property boom. During this time Sydney s population has been increasing, but there's been very little construction and this created huge pent-up demand causing rents to rise strongly over the last few years. And finally, in early 2009, first home buyers came back to the Sydney market starting to push prices up. They were followed by existing home owners upgrading their homes and then by investors. I ve been involved in Sydney property for over 20 years Pam, and I can t remember a time when there was so much pent-up demand. That s why I m really looking forward to our markets in There have been a lot of people waiting on the sidelines, just waiting for signs that the timing is right to get back into the market. Looking back, Sydney properties had a ripper year in 2009 with median house prices climbing well above the $600,000 figure. Apartments also showed strong capital growth. In fact, a little more growth than houses with the median apartment price increasing to $435,000 in October, I believe this trend will continue and apartments will increase in value as fast as or even more than houses in the future. This will be partly because of affordability and partly because of our changing lifestyles. In fact, it s a trend that I ve noticed in many major metropolises around the world as the cities mature. Pamela: George, with the Sydney property values rising strongly this year, does that mean investors have missed the boat? George: Pam, that s a great question one I know a lot of investors are asking me and my first answer to that is definitely not. The Sydney property market has a long way to go. Remember, Sydney property values have been flat for over five years. So, even though property values are hitting new highs, these are compared to previous highs of At the same time, the other states have topped their previous values of What all this means is that Sydney has got a lot of catching up to do. In fact, according to BIS Shrapnel s September market forecast, Sydney s housing market is the one to watch in 2010 and they suggest our rentals are going to soar also.

19 So, to answer your question Pam, our listeners can rest assured that they have not yet missed the boat as there are still good buys to be had. Of course, they need to be very selective about where they buy. I would encourage purchasers to look at areas that have good public transport, established infrastructure and amenities, and services that attract tenants and owner occupiers like shopping, restaurants and cafes, schools and recreational venues. I can tell you that a number of suburbs have outperformed the average in the last three years with up to 20% growth per annum in some areas despite the overall recorded median house prices flat-lining, and much the same will happen in The inner and middle ring suburbs will increase in value at a greater pace than the outer ring and cheaper suburbs. I m sure some of our listeners would like to know where to look in Sydney. Some of the better areas that I suggest currently investors should consider around Sydney for an investment right now are in the eastern suburbs, the inner western suburbs and lower north shore suburbs where there s been a consistent up performance and it s expected this will continue in the medium term. Pamela: That s an interesting overview, George. Now, I have to ask this question because I know a lot of investors are very keen to know. With relatively cheap property values in some of Sydney s outer suburbs, are there some good investment opportunities out there? George: No, Pam. I don t think so. I know it is said that you make your money when you buy your property. But, that doesn t necessarily mean buy a cheap property. You make your money by buying the right type of property, one that will go up in value and one to which you can add value. Those cheaper outer suburbs will be struggling as interest rates move up. There are better places to invest, Pam. Pamela: So, what type of property would you recommend to our listeners? What would you suggest they buy? George: Well, Pam, we re really talking about the same type of properties that George mentioned earlier. Properties below their intrinsic value in a suburb that has always outperformed the averages and the type of property to which you can add value. Currently, we are buying many established apartments and some freestanding terraces in the areas I mentioned a few minutes ago. We are currently very selective about where we buy properties for our clients. FIND OUT HOW MUCH YOU CAN BORROW: CALL US NOW ON for your obligation free consultation or just a quick phone chat. With one 10-minute phone conversation we can normally tell you whether or not we can help you obtain finance or restructure your loan portfolio. There is no charge and no obligation.

20 Of all the suburbs in Sydney, we re only prepared to recommend a handful of those suburbs that are likely to outperform in the near future. Then, we look for properties in those suburbs that will remain in continuous strong demand by owner occupiers as well as investors if they have enduring appeal that will keep going up in value and, as I said, I like properties with a twist; a property with something special, unique, or scarce. Maybe one that is right for renovations so we can supercharge our client s capital growth. Pamela: Well, George, do you recommend houses or apartments? George: Pam, I get asked this question quite often. It s a good question. I understand why people would like to own a home because of the land component underneath it. I guess it s also the Australian dream. But in Sydney s built up suburbs, apartments have similar capital growth, in fact, better capital growth than houses and currently with low vacancy rates, we re achieving high rentals for apartments. Of course the rental is not the most important factor, Pam. We want properties that are going to grow in value significantly. Pamela: That s a very important point, George. Thank you. If listeners want to know how to take advantage of opportunities of the property market in Sydney, how do they contact you? George: Well, the Sydney office in Metropole is conveniently located in Edgecliff quite close to the city, to rail and transport and I'd be happy to have a quick chat with investors over the phone or personally to discuss their property options. We can be contacted in our Sydney office on or on Pamela: Thank you very much, George. George: Thank you, Pam. Pamela: I m now going to move a little further south into Melbourne and we d like to have a chat with Eddie Van Pamelen who heads the buyer s agency division of Metropole Property Investment Strategists in Melbourne. Eddie has a long history in the property industry and his professional and friendly approach has seen him assist Melbourne clients in acquiring properties with a twist for investing, renovating, or developing. Welcome, Eddie. Eddie: Hello, Pam. Thanks for your invitation this evening and hello to all our listeners. Pamela: Now Eddie, I know your team has helped hundreds of clients successfully invest over the last year or so and the Melbourne markets have really moved well. I also know that some have had outstanding growth in the value of their properties. So, maybe you could tell our listeners why they should consider investing in Melbourne.

21 Eddie: That s a very good question, Pam, and I m happy to elaborate on that. One of the things we ve discussed this evening and probably a key point from Melbourne and property values is that we have a real shortage of supply at the moment. We re seeing some pretty hotly contested results at auctions. One of the biggest factors that has affected our market is Melbourne s strong population growth. Down here we ve had an increase in population of over 150,000 over the last two years. So, it s a pretty exciting time for the southern capital and it s certainly adding a lot of pressure on the property values because all of these people have to live somewhere, either to rent or to buy and there s a lot of pressure on our existing stock levels. One of the factors that s making this even worse is that building approvals have been relatively low for some time now which is quite typical in an economic downturn and this is further adding pressure on the supply levels of property at the moment. Our local economy is doing well. There s been some major spending on big infrastructure projects and this has been good for job creation. We re really seems some successes with many clients who have already purchased investments as recently as 12 or 18 months ago, their properties have gone up in value, and we re seeing them coming back and utilizing their new equity to find a deposit for their next investment. So, the exciting time are here again in Melbourne, Pam. Pamela: It certainly is. But, can you invest anywhere in Melbourne? Eddie: You definitely can t just invest anywhere in Melbourne. We do focus on the properties in the areas that have outperformed the median growth, Michael commented earlier about averages. Some areas do outperform and some others don't perform as strong. We can look at all our analysis and our research and all this is tied back to supply and demand. If properties are scarce, there s certainly an increased demand on these properties and we also look very closely at demographics. Who s renting them? What are they paying in rent? Where are they competing for these rental properties? We ve noticed some distinct trends. Here in Melbourne, we do have a distinct focus on the inner south eastern suburbs. With a higher proportion of higher income earners in those areas leading to a higher demands for these rentals, meaning higher rents. We ve had a look at all these factors. It s been an area of focus for us because we ve got to focus on properties that have high capital growth which create opportunities for our clients to grow their wealth through their portfolios growing in value and these areas continue to outperform. But, it s not always easy finding them. So, we re very resourceful. We get out there and certainly do look into a lot of properties that aren t advertised.

22 Pamela: Interesting. I see a lot of interstate people looking at the Melbourne markets saying, Yeah. Those inner western suburbs are so close to town, they ve got to take off because they haven t for a long time. So, isn t it time now for those suburbs to move and shouldn t we invest there? Eddie: That s a good question. At Metropole, we don t want to speculate on these properties. So, we do look at historic growth. We ve got to see these properties perform on a consistent basis and understand why that s the case. Now, there is always speculation about those units with proximity to the city. But historically, we haven t seen that growth yet. Will it happen? Who knows, maybe? But, at Metropole we don t want to speculate on that albeit so close to the city. So far, I haven t seen that sort of performance, and we ve focused on areas that have continued to perform and they tend to be in the inner southeastern areas. Pamela: Okay. Well, what about the outer suburbs, Eddie, because they can buy land there. We ve all heard that land goes up in value and houses go down. So, what s your take on that? Eddie: Yes. It s an important point with land. It was always common that land appreciates. The key thing to focus on is the land to asset ratio. When we re looking at a prospective property for a client, we look at the unimproved value of the land and have a look at who that compares with the overall price that the property. If you have a look at the outer areas, you ll see some blocks of land can be purchased for around the 140, 150, 160,000 mark and the overall price of that property is in the low 400 range. Which means the land to asset ratio is roughly around 30-35%. The properties that we re looking at when we buy investments tend to be medium density apartments in the inner suburbs and when we have a look the land to asset ratio, in some cases it's much higher. We recently purchased one apartment where the value of the land was $402,000 against a contract price at $521,000. So, the land component was nearly 80% of the total value of the property. So, certainly, the focus is on land, but we have a look at the value of that land. We also focus on demographics. The outer suburbs are mainly younger families, more owneroccupiers it s not where as many tenants want to live. And another key point is scarcity. We always look at supply and demand and if you look at those outer areas, as soon as a subdivision is completed, sure enough there s another one coming on the market. So, the scarcity isn t quite there, Pam. Pamela: You re right. There s lots of things to go consider when looking for a top performing investment, aren't there Eddie. Now, if our listeners want to take this further and ask you some other questions as well and understand what the team at Metropole can do for them, particularly

23 in Melbourne, but I know you ll help clients from all states, Eddie, with investment options, how can they contact you? Eddie: We look forward to speaking with them. Our number is or you can book in for a property briefing on the Metropole website: Pamela: Thank you very much for your time, Eddie. Eddie: It s a pleasure, Pam. Pamela: We ve now had an overview of the rental market from Lucas, found out a bit about Melbourne from Eddie. Brisbane from George and the Sydney market from our other George. We ll discuss the other states in just a moment. But, before we do, I d like to ask Gavin Taylor a few questions about property renovations and development. Gavin trained as an architect, has an MBA in Property Law and Finance, and has worked with major property developers both in South Africa and Australia. This gives him the background to understand property and, in particular, property development from all angles. As a director of Metropole based in Melbourne, Gavin has helped the company become a leader in property development. As a property investor himself, he applies the lessons from his personal experience to achieve maximum benefit for his clients undertaking similar investment strategies. Welcome, Gavin. Gavin: Hi, Pam. Hello, listeners - delighted to be with you. Pamela:, Gavin, we're now in the upturn stage of the property cycle. Property prices are rising. Do investors really need to add value to do well in their property investing? Gavin: Pam, the whole point of adding value is to be ahead of the market, not just moving in step with it. Adding value is just that. You get more back than you put in. So, the advantages to adding value are that it is relative to the end value at the time of completion, not just to today s value. You get increased rental income and that does really good things for your cash flow. You get increased depreciation allowances and that does really good things for your tax situation. It s actually an ideal time to get involved in a rising market. You buy the land now, you do what you have to do in terms of development approvals, let the rising market work for you to create the equity you need for the construction stage. Pamela: Thanks Gavin, would you explain the various options available for adding value? Gavin: Pam, yes. And to pick up on a point that was made earlier, you can add value without actually doing any physical work. You look for a twist; maybe getting the sole use rights for a court yard in a block of flats, for example, or securing a parking bay that wasn t on title and put it on title.

24 But, more commonly, adding values on the physical side so you have refurbishments which is breathing new life into something; giving it carpet, painting and sprucing it up increasing your rental, increasing your equity in it through those activities. You have renovations which is replacing the old with the new; getting rid of the old bathroom and the old kitchen together, putting in a new bathroom and a new kitchen giving it a total facelift so it becomes something which is bright and sparkling in a well located environment. You have alterations and additions as well. That s taking a terrace house for example and giving it a wonderful, spacious and bright interior with a lovely courtyard; out of a dark place that it used to be, giving an old house a new lease of life. Or, there is the traditional development which is increasing the number of dwellings on a property and subdividing the original block into that number; two townhouses where there was once a house, three townhouses where there was once only one house. Those are the range of options that we have at our disposal. Pamela: But, aren t some of these strategies risky? Gavin: There are risks, I agree. But, it is not risky as such. Risky is when you do not know what you re doing. Risk is a knowledge thing and the biggest risk in this is knowledge risk. So, in that situation, get someone such as Metropole Projects to manage that knowledge risk. The other risks that we re looking at the development risk, market risk and finance risk we can deal with arising out of our experience. We know what we re handling things like; development risk, delays in side acquisitions, delays in getting your development approval, cost overruns and time overruns, unexpected weather condition during construction. Years of experience teach us how to deal with these; offsetting that risk, minimizing it and sometimes turning it to our advantage. There is market risk, whichis a downturn in demand and uptake, or new developments increasing competition. All of these are handled through market intelligence, and understanding and market connections and we deal with these in managing the product. And of course, as Rolf spoke to a little earlier, there is finance risk which is changes in interest rates, lending policies and tax legislations. FIND OUT HOW MUCH YOU CAN BORROW: CALL US NOW ON for your obligation free consultation or just a quick phone chat. With one 10-minute phone conversation we can normally tell you whether or not we can help you obtain finance or restructure your loan portfolio. There is no charge and no obligation.

25 Obviously, these can be managed by getting yourself the best possible advice. Some of them do have to be managed by the developer themselves, but they are managed as part of a team approach. Pamela: Gavin, can you just buy any property and renovate it or do a development on it? Gavin: We re talking about adding value to investments. So, the fundamental criteria is that the investment has to be sound. It s the quality of the investment that underpins the value that is netted. So, the right areas for investment are the areas that were spoken to by George Kafantaris from Queensland, George Raptis in Sydney and Eddie Van Pamelen in Melbourne. They are the right areas for adding value through renovations and developments as well. Simply put, the fundamentals have to be right; otherwise it is throwing good money after bad. Pamela: Gavin, I ve seen some property renovation or development courses advertised. How easy is it to learn these advanced concepts from a DVD? Gavin: Pam, it s a bit like learning to drive or learning to fly a plane from a DVD. It s often said that when a student graduates, they are finally ready to learn because the best learning is done by doing. The second best learning, I think, is by doing it with a mentor. In fact, that s probably the best way of learning. I believe that learning these processes, these techniques from a DVD actually increases the risks rather than decreases them because you cannot really learn to handle the real life situations from a DVD, but you think you can. So, your knowledge of your own limitations is a bit of an illusion. I don t believe there is much benefit in learning these advanced concepts from a DVD in front of the television having dinner with a glass of wine in the evening. Pamela: It sounds nice and simple, but it doesn t always work, does it, Gavin? Gavin: Oh, absolutely, not. Pamela: Okay. I d like to invite Michael back onto the line to give us his thoughts on the other property markets in Australia. Michael: Thank you very much and it s been interesting listening to everybody and their thoughts. So, let s go onto the other states and then I will be able to finish off with my strategy for Let's start with Adelaide.The median house price in Adelaide increased by about 4.6% in the first ten months of that s the latest figures I ve got as we re recording this webcast. But, looking over the last few years, Adelaide really has been a surprise performer. Now, in its recent forecast, BIS Shrapnel suggest Adelaide house prices, will again continue increasing and they re saying they ll go up by about 23% over the next three years.

26 That's about 7% a year. Looking back though over the last ten years, Adelaide s median house price increased on average about 10.5% per annum and despite that, the current median price is still under $400,000. I d suggest that Adelaide s affordability in comparison with many of the other capital cities has been a big driver in property values in the City of Churches. And not surprisingly, Adelaide s also been very popular with the first time buyers and some investors looking for cheaper housing alternatives. Again, my feeling is unless you re an Adelaide expert, unless you know Adelaide and know it well, you re money is going to run out before the opportunities are so I d rather go for the opportunities in the larger metropolises in Australia because looking into the future, if you look over the next ten years, we re going to have another recession. We re probably going to have another property boom and a property bust and we re also going to have a depression somewhere along the way. I m not suggesting in the next ten years. But, if we hang around long enough, it s going to happen. So, I d rather invest in the big metropolises where there s a larger group of industries and bigger population base to keep things going. Let s look at Perth. Well, Perth was undeniably the star performer over the last ten years outshining all other cities and it has a remarkable average capital growth of 12.29% over the last ten years. This was, of course, largely driven by the resources boom that peaked in the middle of the last decade. We know how real estate cycles work: what goes up must come down and Perth s property market has been in decline for a while, but it now seems to be turning around and there s been some positive growth in the last little while, so it s starting to pick up. Prior to this decline, house prices in Perth increased as much as 90% in the previous five years. So, it s only natural things have to come off the boil. In fact, when you look at the overall picture of Perth, it s really only those who bought at the end of the cycle or those who over committed themselves, borrowed too much so they re going to be suffering now. But those who bought a while ago, they re still enjoying great capital growth in Perth. So, the big question a lot of investors are asking is, is it time to get back into the Perth market? We ve done some homework, we ve done some research, we've looked at the economics, we ve looked at the supply and demand and my response would be not just yet not quite yet. It looks like the local economy in Western Australia could still be having a bit of a rough time, maybe even in a recession for over the next year or two. So, while the long term prospects in Perth are good, with the resources sector picking up. And we know about all the fantastic exploration that s going to happen up north. But it s a while off before that happens.

27 So, I currently see better opportunities in the eastern seaboard and, yes, there is going to be a time for Perth again. But, maybe not just yet. Let s look at Darwin, which really has outperformed all other markets over the last year. Somehow, Darwin s property sector seems to be insulated from the global financial crisis. Locals and investors just showed continuous confidence in the Darwin property market. It seems to be a bit of an anomaly because the local economy really wasn t going so gang busters. The population growth wasn t so fast. But, somehow, Darwin seems to have gotten through this. I d be suggesting it represents what I d call a bit of a bubble in the property market. Darwin is probably around the same stage of its property cycle as Perth was a couple of years ago. It s come off a very low base, but has now risen to such heady heights that I think we re looking at the peak of a cycle and I d tread really carefully if you're an investor considering buying in the Darwin market right now. So, having looked at the property cycle in Australia and in the various states, I d like to end up with my strategy for the new cycle and it s actually no different to the strategy used by most of us on this webcast because we ve all got grey hair or some of us are covering it up really well. We ve all been in the property market a long, long time and we found that those who stick to a strategy that works, and keep using it, and doing it over and over again become wealthy rather than those who keep swapping and changing. It s really interesting as the cycle moves on to hear various property educators or commentators, talking about their different strategies. A year or two ago they were talking about cash flow positive properties and of course those disappeared, and then they were talking about buying in New Zealand and that market crashed and some talked about buying in America. We know what happened to the American property market. Then they were saying sell your properties, and now many are coming around to what we have been recommending for a long time - buying high growth properties that outperform the market and add value to achieve better returns. We ve stuck to the same story for a long time and it s not just because it s worked well for me, but it s worked for our clients allowing them to achieve substantial wealth. It s what I call a top down approach... You look for the right time in the economic cycle and I don t think anyone would disagree that the timing is good now. Then, you look for the right state, one that s at the right stage of the property cycle because as we ve just heard - different states are at different stages of the property cycle.

28 Within that state, you look for the right location; one that s always outperformed, not one that s speculatively one that will maybe pick up. And then in this location we look for the right type of property the type that has already been discussed on this call and then we pay a fair price for it. In today s markets we can t find any bargains. You make your money when you buy your property but you make it by purchasing the right property - not by buying the wrong property cheaply. Only this afternoon, I received an from somebody who said, I want to invest in property, and she nominated somewhere in northern Queensland because she thought all the development would start there and she wanted my opinion. She explained that she and her husband are getting on a bit in years and have left their investing pretty late in life and now they re in a rush to get good capital growth fast. So, she was going to try and do something that I would call speculative. But, that s where I ve seen people fall down. They ve either bought in the wrong location on speculation that it s going to go up or they buy a property in the right location but at the wrong time of the cycle. I know others looking for capital growth are asking, Maybe I should buy off the plan now. I ll buy now and settle in the two year s time when it will have gone up in value. The trouble is that currently you are paying too much of a premium when buying off the plan. So, when you settle in two or three year s time, you don t get the capital growth you hoped for. If you re lucky you property may even value up to the price you paid for it. But that s another whole discussion and if you d like to understand about the benefits of what sort of property to buy, please give the team at Metropole a call on or come along to one of our property briefings in your own state where we can actually have a bit of a talk about what s going on and why. But, avoid off the plan at this stage of the cycle because you d be paying too much of a premium and there s too much uncertainty with that type of property. Instead buy properties below their intrinsic value and ones to which you can add value. And then lastly, my strategy is to buy at the right price. But, I said lastly on purpose, because it really is the least important of all those things. We sometimes have to pay full price for certain properties and I have no issue with that as long as it s the right property. As I said, you make your money when you buy properties, but you make your money by buying the right property, not buy buying a property cheaply because if you buy the right property, it s going to outperform in the long term. So, Pam, that s my longwinded strategy for 2010 and in fact, for 2011, 2012 and 2000 whatever because if you buy the right property, and hold on, and then add value and borrow against

29 increasing value, our listeners will be able to do the same thing many of the clients at Metropole have been able to do and we ve personally been able to do and that s to grow a substantial property board for you. Pamela: Thank you, Michael, and it was well worth going over our time limit on this one. Well, we re almost at the end of the webcast. So much information has been given by our experts that I urge you to listen to it again, and again and again next year. It looks like 2010 will be a fantastic year for those property investors who have a strategy that is know, proven and trusted and get a good team of experts around them. I want to take this opportunity to thank my guests on this webcast today; Lucas McArthur from Metropole Property Management. Lucas: Thanks, Pam. Pamela: Rolf Shcaefer at Metropole Finance, George Kapantaris from Brisbane. Rolf: Thank you, Pam. George: Thanks, Pam. Pamela: George Raptis from Sydney. George: Thanks, Pam. Pamela: Eddie Van Pamelen from Melbourne. Eddie: Thank you. Pamela: Gavin Taylor who gave us some great ideas about adding value and, of course, Michael Yardney. And I d like to thank you, the listeners, who spent this time with us. I hope you take advantage of the property market in If you don t, it s likely you re going to look back at the end of the year and say, Gee, why didn t I take advantage of the property markets? Or, Why didn t I listen to those guys? So, why don t you go to and book in for an obligation for a chat or to come along to a boardroom briefing. These aren t sales presentations. They are just informal education sessions where you ll be updated on what s going on in the property market and you ll be shown a lot of case studies of how others took advantage of the property market. I want to thank you for being with us this Webcast and I look forward to your company on future webcasts. We host these each month. Watch out for future notifications in your Property Update Magazine. Goodnight everybody!

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