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Saturday, March 17, 2012

Investment choices in Melbourne

AUS Property Corp co-founder Steve Galanos says that foreigners investing from abroad should focus more on buying landed residential units.

He says foreign property buyers should note that many Australians do not buy apartments.

“They want space for their families, kids to play and to entertain friends.”

AUS Property Corp is a medium-sized boutique property developer that specialises in landed property in Melbourne.

Galanos says the company has delivered 500 houses in nine developments with a combined gross development value of more than AUD$200mil (RM639mil) over the last three years.

He says the majority of apartment units in Melbourne are sold to foreigners.

“When it comes to landed residential properties, most of the buyers are owner-occupiers.”

In his opinion, buying landed residential units in Australia is a secure investment due to the annual supply and demand situation concerning new properties.

“We don't have a huge population or labour force. Our actual construction rate in terms of dwellings built annually has not increased since the 1980's.”

Australia has a population of about 22 million.

However, Henry Butcher Marketing's international projects director Jazmine Goh offers a different opinion. She says that high-rise residential units in and around the city are still in demand.

“We have parents buying for their children who are studying in the city, empty nesters who prefer smaller units as the kids have left home, and migrants who work in the city and prefer a more vibrant lifestyle.”

According to Goh, the rental returns are typically between 4% to 5% per annum as the market is established and enjoys very low vacancy rates.

“Compared with landed property within a 10km radius of the city, a high-rise residential unit has a lower entry cost.”

Goh points out that landed properties benefit from more long-term capital growth. She says landed property within a 10km radius of the city are more expensive, with the average price for a three-bedroom/two-bathroom house being more than AUD$550,000 (RM1.76mil), depending on how prime the location is and its built-up area.

Jalin Realty International Pte Ltd chief executive officer Ian Chen says investors should look at demographics and location to determine the type of property (apartment or landed) to invest in.

“We need to understand buyers' needs and requirements. If they prefer single tenants and do not mind paying a higher premium, then an apartment in the city may be the investment for them.

However, for the same dollar value of a city apartment, one can also opt for a three-or-four-bedroom home in the suburbs of Melbourne (depending on the location) with a family as a tenant.”

Meanwhile, CB Richard Ellis (Malaysia) executive director Paul Khong says that demand for apartment units is likely to rise as Melbourne consolidates, and becomes more dense. According to him prime land in the city is being re-developed with high-rise projects.

“Affordability pressures would mount on conventional housing forms. However, investors who sell within the short-term, without accumulating sufficient losses, will incur large capital gains tax which is currently 29% in Australia. By investing long-term, an investor is able to accumulate tax losses to minimise the capital gains tax,” says Khong.

He opines that landed properties are usually for owner-occupiers and are located away from the city.

By The Star

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