In the October 2008 issue of the Australian Property Investor (API) magazine, the editor examined the reasons why investors chose to rent instead of having a mortgage over their heads for a place they would own. Personally I felt this is a very important issue, especially for non-resident Aussie property investors to understand. Under the Foreign Investment Review Board (FIRB), non-resident property investors can only buy new off-the-plan or previously unoccupied established residential homes. If resold, they can only resell their properties to Australians or permanent residents in Australia.

Lots of non-resident investors are confused whom they would be reselling to should they need to resell their investment properties in future. One group of people whom they can resell to is property investors who are seeking to increase their portfolio of investment properties. These investors, residing in Australia may be renting but are seeking to expand their portfolio with a good mix of investment properties.

Why would investors themselves rent why they could afford to possibly own a home themselves?

Well, renting gives them the flexibility to live in a suburb they may not be able to afford at this point of time. Rental for residential properties is about 4.5% to 5% but mortgage repayments prior to rate cut in Oct ‘08 are over 9% per annum. Renting needs no maintenance and hence renters need only move their furniture into the newly renovated home and start leading the lifestyle they desire from day one. Besides that, renting does not require a deposit, hence the money saved can be used to increase one’s property portfolio instead of owing a home that doesn’t gives any tax breaks. If a couple works from home, renting also allows them to gain significant tax breaks, allowing them to slice their rent and electricity bills in half and reduce their overall income tax bill. Hence renting does have its clear advantages.

I have witnessed many successful property investors who have in excess of $5million or more in their portfolio but are currently renting. My business partner, Steve is one of them. He rents a 3-bedroom unit in the Docklands along Lorimer Street in Melbourne. For many Asian investors who have acquired properties in Australia this is something they cannot come to terms with. However the reality is that this is the way and it is a common phenomenon Downunder and with concerns of recession looming, more would choose to rent instead of having a mortgage that they would have to pay themselves. So for non-resident investors, hope this is some useful information to you…

Australian bank deposits will be protected during the global financial crisis, Prime Minister Kevin Rudd said, while Opposition Leader Malcolm Turnbull called for an expansion of the proposed government-backed deposit guarantee scheme.

The Australian Prudential Regulatory Authority (APRA), which supervises deposit taking institutions, would ensure bank balance sheets were in good condition, he said.

“We are different to banks around the world, our banks are in a strong position,” Mr Rudd told reporters in Sydney today.

He said Australians had long had access to a “depositors first scheme”.

“If ever any bank got into trouble at any time, the depositors would have first recourse,” he said.

Mr Rudd said the Australian government put forward a proposal for a new financial claims scheme some months ago, before the financial crisis.

“Once that’s concluded, very soon we will be introducing legislation for a new financial claims scheme,” he said.
Mr Turnbull said the government should expand a proposed government-backed deposit guarantee scheme to cover savings of up to at least $100,000 per depositor - up from the planned amount of $20,000.

He also wants investment in AAA-rated Residential Mortgage Backed Securities to be raised to at least $10 billion, more than double the government’s proposed $4 billion investment, to boost confidence in the local housing market.

“We are dealing with great economic changes, and they call for leadership and they call for action and they call for decisions,” Mr Turnbull told reporters at his Sydney office today.

“We are proposing three actions the government can take immediately which will strengthen the Australian economy in the face of this economic crisis and add confidence to Australian householders and Australian business.”

One of those steps would be to announce a delay to the start of an emissions trading scheme in Australia, he said.

Article extracted from Sydney Morning Herald, www.smh.com.au

The Aussie dollar gave me a big heart attack today. The AUD nose dived against SGD by at least 1000 basis points from yesterday. My phone was flooded with calls from investors who are on SGD loan. They were all concerned about banks asking for ‘top-ups’.

My advice is first calm yourself down. If you have some spare cash, buy some AUD. If you are asked for top-up, take it as a sum of money tucked away for fixed deposit (interest rate is still pretty good). Given the financial turmoil, lots of ‘technical analysis’ went beyond logical explanation. Supports and resistance may no longer be effective indicators right now. Brace yourself and see the ‘opportunities’ availabe instead of focusing on what went wrong.

It will take a while before the market ‘decides its direction’. I would have posted the 1hr AUD/SGD candle if I have access to it. You will see the the ‘dramatic dive’. In any case, property is a long term investment, so to all Aussie property investors - don’t panic and stay cool…I’ll be buying more AUD if the rate stablizes tomorrow.

What a week it has been for the world at large. Australia reported a drop in $63bn worth of shares since the request by the US government for a $700bn bailout for all its troubled entities has been rejected.

Analysts have expected the RBA to cut rate by 50 basis points as soon as next Tuesday. However Treasurer Wayne Swan has warned homeowners that banks may not follow suit following a global credit crunch and increased borrowing costs. The bank of England is also tipped to cut rate the current 5% when it meets next week.

How the rate cut is going to impact the Australian economy remains to be seen. Whilst the tight financial market, share market losses and low housing affordability were spurning a downturn in the Australian housing market, the fundamentals remain strong with population growth in capital city like Melbourne experiencing unprecedented levels of population explosion. In the year to August, building approvals fell 8.6%, which was the biggest annual decline since May 2006, one can expect the rental market to remain strong.

I am excited by the opportunities that is coming up. Keep yourself updated by bookmarking this page or subsribing to RSS feeds. The challenge is to be able to spot opportunities others can’t see…don’t get to cloud out by negative sentiments…

I was very glad my good mate and pal, Mr. Alex Wong has agreed to be on the panel of contributors for this blog. A New Zealand born Chinese, Alex has worked in Melbourne for a large part of his working career and specializes in financing planning as well as tax planning for individual and corporations in Australia, residents and non-residents alike.

He is often invited as a keynote speaker for seminars and workshops and he is also actively involved in teaching with the Singapore Institute of Management as Adjunct Lecturer on topics pertaining to tax in the region.

I met Alex in Melbourne in 2005 during one of my trips to Australia. He came across to me as a very down-to-earth person and is extremely humble. He has no airs and is very passionate about the work he does for his clients. 

In the last two and the half years, I have received very good feedback from clients who have engaged his service. His unselfish and kind support to investors here and the region are well appreciated and I am pretty sure he will be a very valuable contributor to this wonderful blog.

Alex currently resides in Melbourne, Victoria, Australia. He lives in a house in Camberwell, a suburb east of Melbourne CBD with his wife and two grown-up children. He travels to Singapore twice a year for work and is definitely a lover of our very own hawker food.

You can read more about his profile here.

Welcome on board, Alex!

A friend of mine asked me the other day while we were having lunch why I am into Australian properties when the property market here is booming. My natural reaction was to tell him I am not that kind of person who jumps on the bandwagon when everybody else does… Deep in my heart, I had a very compelling reason why I am into properties Downunder, however I wasn’t going to give him a 2-hour presentation…

‘It’s the banking system in Australia. It allows investors better leverage to build a property portfolio.’ I said.  

Looking a bit amused, he went to comment that the banking system in Singapore is just as good…Feeling a bit flustered, I threw a question back at him.  ‘How many people do you know have more than 5 properties in their portfolio?’ I asked. He pondered for a while and said, ‘virtually no one here he knew in Singapore.’…

Well, I gave him that arrogant smile and said, ‘All my partners in Australia, every single one, have more than half a dozen of properties…’ I am sure he could sense the arrogance in my answer… 

Dreams or dreamers, you choose the way you live. I have begun building my portfolio at age 30. Not too late to start but I am happy I have started…have you?

It took me a while to set this blog up. Just a quick note to readers, bloggers, investors and would-be investors, this blog is set up to provide you with free research information, facts and figures from the various institutes in Australia and around the world as well as opinions of the contributors of this blog.

Property investing in Australia is my passion and will be the main focus of this blog but we do appreciate comments from fellow industry professionals sharing their ideas, expertise, and contacts in this box.

Can’t wait to get started mate…