AUSTRALIA MARKET UPDATE

17 April 2014

Australia has some excellent options for investors ready to look beyond Sydney

Although many investors have focused their attention on Australia’s most significant state capital, we think the country’s best opportunities lie in some of the other major cities that we believe still have their peaks ahead of them.


BRISBANE

The capital of Queensland has developed into a leading destination for business, investment, major events and international education in recent years, rapidly emerging as Australia’s new world city. The Queensland capital is set to host the G20 in November 2014, and was recently forecast to be the fastest-growing mature city in the world over the next eight years by Jones Lang Lasalle.

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A thriving capital on the coast

Contributing to this is the city’s rising status as a global resources and energy hub, with some AUD71bn in projects currently under construction. There’s also a vast amount of infrastructure investment going on, with an astonishing AUD134bn of work committed to go ahead in Southeast Queensland by 2031.

Brisbane also boasts the fastest growing population of any Australian city – by 2061, the city’s population is set to more than double to 4.8 million people. This population growth will be coming up against a significant shortage of housing stock, which contributes to BIS Shrapnel’s forecast of 17% price growth for property across Brisbane in the three years to 2016. Rents will also continue to rise in the face of high demand and a particularly low vacancy rate of just 2.1%.

Growth on the city fringe

Current trends are seeing people increasingly opt for inner-city, apartment-style living that offers proximity to where they work, play, dine and shop, although this doesn’t necessarily mean the CBD.

More and more employment nodes are moving out to the inner districts such as Newstead and Fortitude Valley, making these the focus of such demand trends, particularly among the young professional demographic. The Bank of Queensland has signed up to bring a cast of 1,000 staff into Newstead, while Energex and the Tatts Group have already established new headquarters in the same area, and corporate moves such as these appear to be the start of a continuing trend.

Projects such as the AUD2 billion Newstead Riverpark masterplan, which includes the regeneration of Brisbane’s heritage listed Gasworks, are lifting previously rundown areas into attractive leisure and residential destinations. This joins a further AUD8 billion currently being poured into improving the area’s transport and education infrastructure.

As we’re seeing in London, such urban renewal can be a major factor in driving capital appreciation and yield growth in local property markets. It’s one of the key reasons we’re backing Newstead in particular as a good call for investors with our recently launched Brisbane project, Newstead Towers


MELBOURNE

Victoria’s first city has now been voted the world’s most liveable city for the past three years, while between 2007 and 2012 it was also Australia’s fastest growing capital.

The Melbourne population is booming, and is expected to significantly outpace housing supply in the long term. This is particularly the case when it comes to the sort of inner-city apartment living that is becoming increasingly popular in Australia, as it has in many major cities around the world – apartments currently represent only 3.3% of total housing stock in the city, compared to 10% in Sydney, 35% in Greater London and 55% in New York.

This highlights the rarity of quality apartment housing in Melbourne’s surrounding suburbs, despite strong demand from rental demographics, particularly in the areas around the many first-rate educational institutions which play such a key role in the case for Melbourne property investment.

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Education in the driving seat

Total student enrolment in Melbourne is expected to reach 1.1 million by 2021, up from 980,000 in 2011. Around 75,000 of these were international students, giving the city the highest overseas student population in the nation. However, on-campus accommodation only meets around 20% of housing demand from international students in Melbourne, driving student demand into the undersupplied private rented sector.

High international student numbers are particularly prevalent at Monash’s Caulfield campus, where 5,900 of students are from overseas yet only 89 on-campus rooms are available.

All this means that price growth around Melbourne university campuses is outperforming that of the city centre and docklands areas, where rents have fallen 13.6% in the past year.

Victoria stamp duty savings

The current stamp duty system in Victoria offers excellent benefits unavailable in any other part of Australia that can mean big savings for investors in off-plan properties.

The state’s stamp duty rates are calculated based on the value of the property at the time of purchase rather than the value of the completed property. This means the further away from completion your property is, the lower your payment. The concession is always greatest if the property is bought before construction commences, in which case stamp duty is only paid on the value of the land.

When split between all purchasers at an apartment block-type development such as our recently launched Caulfield Heath project, this means significant savings, with a typical off-plan buyer paying as little as 10% of the expected stamp duty for a completed unit.

IP Global

Written by IP Global

IP Global’s full-service approach is built on extensive market research and analysis combined with a significant financial commitment to every investment we offer. We are able to manage the entire investment process end-to-end, from sourcing, financing, and management to those all important exit strategies, making investment in real estate as straightforward as investing in more traditional asset classes. Our expertise, experience and strong record have produced over USD2.8 billion in international real estate investments in over 30 markets worldwide.

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