The Reserve Bank of Australia meets on the 1st Wednesday of every month to determine if they should raise or lower the federal cash rate based on inflationary figures as well as the performance of the economy. To keep inflation in check, the RBA will tend to increase interest rate by no more than a quarter percent each time. Banks will follow suit to increase the mortgage lending rates to investors or homeowners that are on standard variable rates. The norm is for bank to increase lending rates in tandem with the increase in interest rates by RBA.

For investors who are looking at entering the market, the high interest rate might not necessarily be a deterrent. The rationale is simple, with exceptionally high inflation due to high oil prices throughout the world, raw material prices have increased. The costs of construction have risen significantly due to those increases in their individual components. It means that the cost of building would have risen as well. The fundamental for real estate is that prices of real estate very seldom go below replacement costs.

What exactly is replacement cost?

It is the cost of land component and the building component combined e.g. if the land costs $400 per sq ft and the building is $350 per sq ft, the basic costs excluding financing and all other costs is $750 per sq ft for the piece of real estate (in this case, an apartment is calculated this way), a selling price of $800 per sq ft can rarely go wrong.

In the current market facing high inflationary pressures, most off-the-plan projects would have the buffer for increase in costs built-in in the prices. It means that if a property is sold to you at $450,000 today for a project that will be completed in 2 years’ time, it means that it is really worth $450,000 in 2 years’ time taking the rise in the built in. It is perfectly all right when you are on the right side of the cycle, meaning on the up trend property cycle. However, things might go pear-shaped if the property market took a turn for the worse come settlement when valuers do a valuation for your property in 2 years’ time.

Things will be different if you are buying a completed property or a property that is under construction with a few more months to settlement. The logic is simple.

When everyone shuns the property market because of high interest rates, they resort to renting. Rental yields in most residential units are 4.5%-5% per annum as compared to current mortgage lending rates of 9.35% (at the point of writing this article), therefore renting is a more viable option than buying a place to stay. The demand for rental properties drove the vacancy rates to an all time low. That doesn’t mean nobody’s buying! It means that people are buying as investment properties but not really for them to live in.

If you can get into the market today, you stand to enjoy high rental yields today. Most of the projects are off the plans and will only be completed in 2010 or 2011, getting into the market today ensures you are not competing with those rental properties when they settle in 2-3 years’ time.

The issue of high inflation will not impact you that much because you have secured a rental property at today’s price and in 2-3 years’ time, should things stay status quo, you can expect your property to rise in value because everything else would have risen. The price that you pay can never be replicated, at least that is the rationale for buying a completed property today.

Ask any seasoned property investors who have accumulated quite a sizeable property portfolio and it is no surprise they are rooting strongly for completed stocks instead of off-the-plan ones.

However, the financial circumstances of individuals are vastly different. The best option is to determine your goals and objectives first before embarking on the journey to financial abundance through property investment.

In a move that is widely anticipated, the Reserve Bank of Australia adjusted the interest rate by 25 basis points to 7%. It is certainly good news for Australian property investors.

For more information, click on the link below.
http://www.news.com.au/business/money/story/0,25479,24281681-5016110,00.html

The Reserve Bank left interest rates on hold at 7.25 per cent in August for the fifth consecutive month.

There is a widespread speculation that the RBA will make the move to cut rates by 50 basis point instead of two consecutive cuts of 25 basis points each.

The irony is that property investors are shunning away from the property market and rents are set to climb. Given the inflation levels and high costs of living coupled with the highest interest rate in last 12 years, housing affordability is not going to get any better. Property investors should see a healthy rise in rents with their investment properties over the next 12-18 months as more would-be investors are sitting on the fence, adopting a wait and see attitude.

See beyond what the masses see and sometimes you will see great opportunities come your way.

For the fully story, go to http://www.news.com.au/business/money/story/0,25479,24211703-5016110,00.html

Well, for all my blog readers out there, if you need any info or feedback from me, do drop me a note. The Bank apartments is located near 109 Clarenden Street, another high rise development built by the same developer.

Sydney road is one of the most prominent roads in Brunswick, a suburb next to Princess Hill, Fitzroy North and Parkville. It is populated by yuppies who embraced the Australian coffee culture. Sydney road has been designated by its LGA as one of the roads to be converted to a promenade - a pedestrain walking strip with trendy cafes, restaurants and also shopping outlets. It is set to be the ‘chapel street’ of the North.

There’s a limited opportunity to get into a boutique development along union street, beside the RMIT(Brunswick campus). With a 2-minute walk to Jewell train station, and being close to Barkley SC coupled with its proximity to Sydney road, this is as good as you can get being close to ‘action’.

There will be no lack of tenants wanting to rent close to the city. The lure of Italian restaurants along Lygon street is hard to resist; and if you wish, take a tram along Sydney road to the city. It only takes 10 minutes and you will be swarmed by more restaurants at the Crown Casino. Walk along the Yarra river and look back to the city; it is a stunning sight in a class of its own.

Opportunities are limited! It may or may not suit your portfolio requirements. Call me today for a no-obligation consultation…

It was winter in Melbourne when I arrived on the 7th June after a stopover at Darwin. It was not until I step into my business partner’s apartment at 80 Lorimer Street that I realized how beautiful the views over Victoria Harbour can be. It’s stunning, particularly with the sun glazing down over the chilly wind in winter Melbourne, voted as one of the most liveable cities in the world.

Nested in Lorimer St are five towers built by one of Australia’s biggest developer. You could see the standard of the finishing once you walked into the apartment. Nicely laid quality carpets, stone benchtops, exclusive vanities used in all the toilets/bathrooms and not forgetting the huge 42′ LCD TV in the living room for pure entertainment. It’s city living at its best!

It just cannot get any better, being so close to the CBD; in fact just 2 minutes away and close to water.

There is a freeway running parallel to Lorimer St but mate, I could hardly hear anything when the windows are closed. Windows are double-glazed and strict building standards says it all.

To put it simply, I wouldn’t mind going back there in September again…oh..how I missed the excellent weather.

Being close to Victoria Harbour, the Docklands offer residents who wants a combination of both city living and close to water. To me, it is a dream come true. As a city boy, it is not easy to be close to water and yet in the city. People pay a lot to be close to water but if it is right in the heart of the city, you can’t get any better.

While at the restaurants and cafes in the Docklands, I marvelled at how the city skyline has changed in the past few years. More quality developments emerged. Iconic building start to dominate and fancy yachts are founds parking right on the waterfront, beside the restaurants. To say it is a beautiful scene is really an understatement.

With city living becoming popular amongst the generation Y, Z and the seachangers, developments around and in the Docklands are in great demand. Pan Urban is developing the Lacrosse after a successful spell with Watergate. Lend Lease is building Mosaic etc…

With Suncorp, the insurance giant relocating from the Melbourne CBD to the Docklands, the Docklands have its own commercial appeal. It can only be good for property investors. With only a limited amount of space for development, every inch in the Docklands will be utilized to realize its fullest potential.

Like my property guru said, ‘you cannot go wrong if you hold it for the long term’. I am sure many seasoned investors will agree with me the same can be said for the Docklands.

The project was marketed over the weekend in Singapore by another marketing company. I have gotten the price list directly from the developer and the developer is paying full stamp duties for purchasers.

If anyone wants to have developer’s price, contact me at 98344408 immediately.

The primary reason behind this increase is the RBA’s commitment to keep inflation under control.

This means that the average standard variable rate will change shortly to 9.02%pa. For each $100,000 of your mortgage this will increase repayments by approximately $4.80 per week.

Indicatively the best fixed rates as of today will be about 8.20% fixed for two (2) or three (3) years.

For an article in The Age about the increase please click_here

Investors are very much influenced by the advice of real estate agents. They rely on the inputs from real estate agents to provide them with the general sentiments of a certain suburb and the social stigma associated with the suburbs. Hence never underestimate the power of estate agents!

For overseas investors, your best bet is to ask a local real estate agent about the suburb that you are buying into; that way you can never go wrong with your investment property!