helps property investors gain financial independence through Smart Property Investments across Australia. We educate and mentor investor clients through seminars, face-to-face meetings and regular information updates.
Hot on the heels of the Coalition’s win at the recent Federal Election, APRA has now indicated it will look to potentially lower serviceability requirements for new home loans.
The Coalition victory has removed uncertainty around negative gearing and capital gains tax changes, which is expected to bolster the wider market, and according to Goldman Sachs, deliver a “moderate positive shock to sentiment in the corporate sector, and a more meaningful one in the housing sector.”
A further boost to market sentiment was delivered by APRA this week, proposing to remove its guidance that lenders should assess whether their borrowers can afford their mortgage repayments using a minimum interest rate of 7%.
“With interest rates at record lows, and likely to remain at historically low levels for some time, the gap between the 7% floor and actual rates paid has become quite wide in some cases – possibly unnecessarily so,” APRA chair Wayne Byres said.
APRA is now proposing to change the 7% serviceability assessment, to instead apply a 2.5% buffer on top of the loan’s actual interest rate. For example, if a loan’s actual interest rate is 4%, the bank will assess the customer based off a 6.5% interest rate.
Most banks assess borrowers at 7.25% so this change, if approved, would have a significant impact on many Australians looking to secure finance for a home or investment property.
On top of this, borrowers will also potentially benefit from expected rate cuts as early as next month. The RBA is poised to explore cutting rates in next month’s meeting, with RBA Governor, Dr. Lowe commenting that “a lower cash rate would support employment growth and bring forward the time when inflation is consistent with the target.” Earlier this year, one of Australia’s biggest banks, Westpac, forecast the RBA to cut rates twice later in the year, effectively trimming the official cash rate to only 1%.
First home buyer increase
First home buyers are not only set to benefit from the potential easing of serviceability restrictions, they will also receive a helping hand from the Coalition’s proposed ‘First Home Loan Deposit Scheme.’
The Scheme will offer loan guarantees for first home buyers to allow them to buy a property with a minimum deposit of only 5% instead of 20%. It will also save them around $10,000 by not having to pay Lenders Mortgage Insurance (LMI).
First home buyers have already returned with force to the market and this number is likely to increase further once the ‘First Home Loan Deposit’ scheme is implemented.
In the 2018 financial year, 115,000 new home buyers had loans approved; the highest number since 2009-10. More than 110,000 Australians bought their first home in 2018 – the highest level in nine years.
The First Home Loan Deposit Scheme, if confirmed, will start on 1 January next year and will be targeted towards first home buyers earning up to $125,000 annually or $200,000 for couples. The value of homes that can be purchased under the Scheme will be determined on a regional basis, reflecting the different property markets across Australia.
The National Housing Finance and Investment Corporation will partner with private lenders to deliver the First Home Loan Deposit Scheme, prioritising smaller lenders to boost competition.
With the Coalition looking having now secured a majority government, pre-election legislation promises are more likely to be passed, including smoother implementation of what has been promised in the recent Federal Budget.
Tax relief was the headline of the recent Federal Budget, with tax cuts promised to low- and middle-income households, designed to boost savings, consumption and consumer confidence with broader positive implications for the economy.
Assuming the proposed cuts pass through Parliament, from 1 July 2020, more than 10 million workers will receive a tax offset; with around 4.5 million receiving the full $1,080 offset for 2018-19.
By the time the tax relief plan is fully implemented, 94% of taxpayers will pay no more than 30 cents in the dollar.
The top 5% of taxpayers will continue to pay around one-third of all personal income tax.
Infrastructure pipeline: a $100 billion 10-year plan
Also expected to positively impact the market is the continuing $100 billion infrastructure pipeline which includes:
Brisbane Metro, Gold Coast Light Rail in Queensland.
Western Sydney Rail in NSW.
Melbourne Airport Rail Link, Monash Rail upgrade in Victoria.
Gawler Electrification Project in SA.
METRONET in Perth.
Removing traffic pinch points through a $4 billion Urban Congestion Fund.
This massive infrastructure commitment combined with greater collaboration between federal, state and local governments via City Deals will drive further growth in jobs, economy and population; especially to major capital cities.
City Deals ensure all levels of government work together, with investment coordinated to benefit taxpayers.
City Deals are already up and running in Western Sydney and Adelaide. The Government is also actively engaging with the West Australian Government on a Perth City Deal, and with the Queensland Government on a South-East Queensland City Deal.
Despite global uncertainty, the Australia’s economy has been resilient under the current government.
More than 1.3 million new jobs have been created since 2013. More than 100,000 new jobs were created for young Australians (aged 15-24) in 2017-18.
This is the highest number of jobs in a financial year on record. Australia now has the lowest level of welfare dependency in 30 years.
Further, after more than a decade of Budget deficits, the Coalition Government delivered a welcomed $7.1 billion surplus in this year’s 2019/20 Budget.
With certainty around housing/tax policy, ongoing and strategic spending in developing capital city infrastructure, boosts to first home buyers and tax cuts for middle-income earners – all set against a wider backdrop of easing lending restrictions and low interest rates, we expect positive signs for the property markets nationally. We will continue to monitor these changes closely and provide updates for investors as they are released.
The differences in housing/property related policy between the two major parties have been well publicised – namely negative gearing and capital gains tax.
But what about all the ways both parties are actually aligned?
We took a look at four key areas where both Labor and Liberal federal governments largely agree on policy decisions, and why these areas are fundamental to the long-term performance of residential property.
Australia’s population has been growing well ahead of previous forecasts, with most of the population choosing to live in our capital cities.
In the 2018 financial year, Australia’s population grew by 391,000 people, with 79% of this gain concentrated in the major capital cities.
Both Labor and Liberal governments largely agree on population growth. Overall no change is expected in overall population growth with overseas migration remaining consistent.
The Liberal party proposed to cap permanent migration levels from 190,000 to 160,000, which Labor agreed to implement also. However, this would reflect no real change, as in practical terms, Australia only took in 162,417 migrants (over the 2018 financial year), regardless of having a higher cap in place. As a result, were the proposal to be implemented, it’s expected to have little to no impact and population growth in Australia, particularly in major capital cities, will continue to remain strong.
Both governments, including at state levels, have been prioritising and accelerating delivery of major infrastructure programs across the country, to support population growth.
As a result, both parties at federal government level have committed significant investment into major transport and city infrastructure.
This includes the continuation of a $100 billion decade-long infrastructure plan, which not only contributes to ongoing jobs creation, but also directly impacts property in areas which are set to benefit from new infrastructure projects once built.
The Federal Budget revealed that most of the infrastructure spending would be concentrated on rail and roads. Some of the headline projects included New South Wales’ $3.5 billion Western Sydney North South Rail Link (first stage) and Victoria’s $2 billion fast train between Melbourne and Geelong. Also, nationally the Urban Congestion Fund increased from $1 billion to $4 billion to fund projects aimed at reducing congestion in urban areas. Labor has agreed to match this level of funding and has highlighted a greater need for centralised decision making for the independent Infrastructure Australia body.
Income tax cuts
Labor and Liberal have both proposed to deliver income tax cuts in a bid to boost savings and strengthen household finances.
Both are proposing to increase a tax offset for low- and middle-income earners. Both parties are offering an increase in the 37% tax-bracket threshold to $90,001 from $87,001 currently. However, the main difference is that Labor has promised to increase the tax offset for people earning less than $48,000 a year whilst taxing people who earn over $180,000 a year a little higher than the Liberal party.
The promised tax cuts from both parties come at a time of very low unemployment levels and where the market is now seeing some positive signs of wage growth.
The ABS recently reported 0.5% wage growth in the March quarter and 2.3% wage growth per year.
“The Australian labour market remains strong. There has been a significant increase in employment, the vacancy rate remains high and there are reports of skills shortages in some areas.” – Reserve Bank of Australia
First home buyer incentives
Both parties have also agreed to adopt a first home buyer policy in an effort to improve housing affordability. The government proposes to set up a scheme to offer loan guarantees for first home buyers, so they could buy a property with deposits of just 5% of the purchase price.
This is expected to add some pressure to property, particularly at the affordable end of the market.
Federal election results – impact on property investors
With the election only a day away, it’s no surprise that both parties are loudly broadcasting their differences, particularly around negative gearing and CGT.
However, population growth, infrastructure investment, tax cuts and incentives such as first home buyer guarantees are key policy areas where both parties largely agree. And these are important fundamentals which contribute to ongoing demand for residential property.
Other market factors, outside of political forces, remain relatively buoyant also. For example, the very low unemployment rate of 5.1%.
That said, without discounting the role of politics in influencing the market, historic data shows that whilst parties and Prime Ministers may come and go, longer-term demand for residential property has remained strong.
For example, over the past 26 years, we have had shifting Labor and Liberal governments and a total of seven changes in Prime Minister and the property market long term trend has been up. Houses have grown from $130,893 to $640,174 and apartments from $111,418 to $460,327 reflecting an average compound annual growth rate of 6.30% and 5.61% respectively.
We will continue to monitor what’s happening in the market after Australia heads to the polls tomorrow. Stay tuned for our post-election update.
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According to research by the Reserve Bank of Australia (RBA), approximately 30% of home loans are two or more years ahead of their scheduled repayment date.
The vast majority of remaining loans are estimated to be at least one month to 24 months ahead.
On the other hand, the percentage of mortgages that are ‘impaired loans’ – ie when a borrower is 90 days behind payments and their loan is in negative equity is only a ‘very low 0.2%.’
This positive financial behaviour has been consistent over the last several years, with banks and brokers largely reporting the same.
Resilient housing market
The RBA’s research reveals that the housing market in our capital cities is more sound than people think. Despite the market pullback in Sydney and Melbourne, the RBA points out that loan to value ratios (LVRs) are strong, with strong positive equity for capital cities. Most of the risk appears to be concentrated in mining towns where a higher percentage of home owners have negative equity.
“The continuing low rates of negative equity outside the mining exposed regions reflect three main factors: the previous substantial increases in housing prices; the low share of housing loans written at high LVRs; and the fact that many households are ahead on their loans, having accumulated extra principal payments,” the RBA report states.
Pay your mortgage off faster
So how are 30% of borrowers managing to get ahead on their mortgage repayments?
Better affordability means more Australians are able to pay additional amounts on top of their minimum mortgage repayments. For example, many Australians secured a mortgage years ago when interest rates were 7%+. By maintaining their repayments at the same monthly amount whilst interest costs reduced as the cash rate dropped, the amount of debt they paid off increased. Over the course of many years this adds up to a considerable reduction in debt, meaning many households are now well ahead of their repayment schedule.
A further section of borrowers are saving money in their offset account.
If you’re looking to get ahead of your own mortgage repayments, here are some additional tips to consider.
Interest rates are at record lows, and banks are vying for the business of people with strong financial profiles. If it’s been a while since you looked into your mortgage, it’s worth shopping around for a lower rate and a good mortgage broker.
A carefully structured loan can help you to increase the tax effectiveness of your loans, increase your interest savings, target specific timelines for paying off your debt and perhaps most importantly, provide you with the flexibility of offset or draw-down facilities. It’s tempting to seek out the lowest interest rate, however a loan with a seemingly higher interest rate and better structure could outperform a loan with a lower rate.
Pay more – and more frequently
If interest rates go down, and your minimum payment goes down you could still keep your payments steady. Another example is instead of paying monthly repayments, pay fortnightly. Interest is calculated daily so paying more frequently can reduce the amount of interest paid. If you’re on a P&I (Principal and Interest loan) most of your interest is paid in the early years, so paying higher amounts early on can help you start paying off the principal.
Some people swear by small financial / budgeting hacks that make a difference to their mortgage balance at the end of the year. For example, when switching from monthly to fortnightly payments, some people make half their monthly payment each fortnight. This takes advantage of the fact that there are 26 fortnights in a year but only 12 months. Effectively, this means that by the end of the year you’ve made two extra ‘half-payments’ on your mortgage – that’s one whole month extra!
“I had a poor experience with a previous investment property/property company, so I was extremely cautious about investing again with a new company. I had my cynical hat on and checked and double checked everything Ironfish told me. Ironfish was so patient and really good with finding answers and solutions to reassure me.”
CASE IN PROFILE
Wine educator working for major national company
Close to retirement age
Extremely nervous and cautious about investing
Keen to add to her portfolio to supplement retirement income
When a property investment goes wrong
Buying an investment property is a big decision and serious commitment. So, it makes sense to want to do your due diligence and make sure you feel 100% confident before making a decision to invest. But for Ironfish North Sydney customer, Christine Ricketts, it was even more difficult to invest again due to a bad past experience.
“Before investing with Ironfish, I already had two other investment properties. The first was really good, not brilliant but steadily growing and performing. The second went very poorly. I was rushed in to it by a dodgy financial advisor. My gut said not to do it; but I allowed myself to be rushed into it. This experience really put me off investing in property again.”
5 years from retirement
Christine is lucky enough to have possibly one of the most fun jobs in the world. As Cellar Director of Cellarmasters, she gets to travel around Australia, tasting good food and wine for a living. As much as she loves her work, she is now at a point where she is thinking about retirement, and investing in property has always been part of her retirement plan.
“I’m 60 now, and I’m not retiring for another 5 years – although I doubt I’ll retire completely. But I want to retire comfortably. I don’t want to be living on the pension; I want to make sure I have enough to retire on.
“But I was very nervous about investing again after the last property. I’d also heard from the bank that at my age I wouldn’t be able to get a loan.”
A better mortgage structure
Christine knew one of our new North Sydney strategists Tony, from his former career at Woolworths, working in finance. After joining Ironfish, Tony reached out to Christine, because he knew she was an investor, to see what her plans were next and if she needed any help.
“When Tony approached me, I said no, initially. But he’s quite persistent! I trusted him, as we already knew each other previously. I knew he’s trying to make good in his career change to property, and he wouldn’t recommend a bad investment to me – especially if he wants me to recommend him to others!
“He invited me to a seminar run by [Ironfish CEO] Joseph Chou. This is where I asked the question about finance – how I had spoken to the bank and told I’m too old to borrow money, since I’m turning 60 and mortgages are 30-year mortgages. I was a bit miffed with the bank, because I own my own home outright, and had a very healthy deposit ready for a third investment property. Joseph explained how that is not necessarily the case. It could be that you can borrow money for an investment, but not for a personal mortgage and it’s worth talking to a good broker to find out.
“Tony then introduced me to a mortgage broker, Jordan. Jordan isn’t a financial advisor, so I was happy about that, especially after my last experience! He explained that I would only get a five-year mortgage for a personal property but could get a loan for an investment property as long as I had collateral.
Once I had a property in mind, he could show me a lot of financial scenarios, for example, if interest rates went up, strata fees went up, if it went un-rented for a long period of time etc. He also suggested that to sell my second property now would lose me a lot of money, so it would be worth trying to hold it for longer. He also showed me what would have to happen for me to lose everything – but I don’t think that’s happening. It made me more relaxed – although I’ll never be completely relaxed!
“The broker was separate to Tony and Ironfish, so that helped me have more confidence in him, though I still had my cynicism out, since he’d been recommended by them. But Jordan worked very, very hard for me. Both Tony and Jordan knew I’d been burned in the past, and I wouldn’t be quiet if they weren’t good! They’re both starting out in building up their business/careers and don’t want any bad press; they both worked very hard to ensure I was happy!
“Ultimately, when I decided to go ahead with an investment, my broker restructured all my loans; he’s made my deposit into an offset and developed a structure for all my loans in a way that’s beneficial for each one, and I can afford them.”
Christine eventually settled on an apartment in Docklands, Melbourne, which settled a couple of weeks ago, and Ironfish Real Estate (our Melbourne property management team) found a tenant for her the same week. Her yield on the apartment is a healthy 6.2%.
“I stay in Docklands often when I travel to Melbourne for work. So I know the area pretty well. I can walk to the CBD, and if I didn’t want to walk, there’s a tram. I just thought it’s a good area in that way – for professionals who want to live close to town. It made a lot of sense. There’s restaurants and bars there too now. It’s not hip like Brunswick and Fitzroy but it’s an upcoming area. I checked everything I was told by Ironfish or my broker with a friend of mine who works at CoreLogic – which helped me feel better as well.
“The other factor was stamp duty, which was really low. Also, the rent is good. My other properties don’t have such a good rental yield! Everything is so far so good with Ironfish property managers – I checked their rates too against the market before I signed on with them. I’d had a bad experience with the managers who the other company had recommended to me on my other investment property, so I wanted to make sure.”
Patience, service, peace of mind
When asked what Christine appreciated most about her experience investing with Ironfish, she laughed.
“I think looking after somebody like me takes a lot of patience! I was so very nervous, and cynical and very vocal: ‘No I’m not doing it!’ ‘What’s going on with this?’ For example, I told Tony I’d find my own insurance, and he said: ‘Sure. But compare it to this insurance, which I’ve found for you, I think will be better coverage’. So, I did compare it and turned out he was right. I compared and checked pretty much everything, and it was all right!
“I really appreciated Tony’s absolute patience with me: changing my mind, finding solutions, finding answers that could reassure me. I also met his aunt, Priscilla [one of our most experienced strategists at Ironfish]. She explained a lot of things to me and completely understood my nervousness as well. Throughout the process, while I was considering properties, Tony would reassure me that if it wasn’t going to happen with one particular property, he could always find me something else. With Ironfish and with Tony, the service was just very, very good and so patient with someone like me.”
Christine’s property investment tips
Do your due diligence – feel free to check with someone independent from Ironfish about the property or what’s happening in the market
Make sure you can afford it – find a good mortgage broker to work it out for you. Tony introduced me to my broker as well as my solicitor (before taking up her services I checked her against my usual solicitor. He said she’s fine, very experienced.)
Look at what’s changing with legislation – for example, in Victoria there are specific legalities around inclusions – e.g. blinds are not included. Know exactly every part that you’re in for to avoid surprises.
Make sure you’re investing in a growth area – you can maybe pay for a data report. I had a friend in the industry, so I was able to double-check that way.
If you’re young, just do it! I wish I’d started younger. Try to diversify across different cities if you can afford it and have other investments too!
Read more Ironfish reviews from our customersAre you thinking about investing; unsure about how much you need to retire; or just feeling uncertain about taking the plunge? Have a read of some more Ironfish reviews from our customers, to learn how others are investing.
Despite some market anticipation around a potential rate cut today, the RBA has kept the cash rate on hold.
The cash rate has remained at a record low of 1.5% for 32 consecutive months.
Arguments for the bank to cut rates ahead of the Federal election later this month were largely centred on Australia’s very low underlying inflation rate of 1.6% which is current below policy targets.
“Inflation targeting” traditionally has been motivated by a need to set some stability in expectation for consumers and businesses.
But on this point, RBA noted that the labour market remains strong, with a national unemployment rate trending at 5%. This is considered ‘full employment’ and would likely assist with upward pressure on inflation.
“The unemployment rate has been broadly steady at around 5 per cent over this time and is expected to remain around this level over the next year or so, before declining a little to 4.75% in 2021,” said RBA Governor, Philip Lowe.
Governor Lowe said that he expects inflation to be within the range of 2 to 3% by 2020.
Rate cuts or lower unemployment – which would you prefer?
Although the cash rate remains on hold today, many analysts are tipping a rate cut to come soon, and some suggest two cuts are likely before the end of the year.
If this were to occur, it is expected the Sydney and Melbourne housing markets would stabilise faster, and obviously affordability would increase across the country – that is, providing the banks pass on the full interest rate cuts to customers.
However, insights from Mr Lowe suggest that future rate cuts would be dependent on the outcome of the labour markets. If the unemployment rate were to drop further, the argument for a cash rate cut would decrease.
“These insights from Mr Lowe are telling, and ultimately good news despite the cash rate remaining unchanged. The RBA is monitoring the unemployment rate very closely, and any further decreases would be a positive indicator for the economy and lead to potential wages growth in the future. On the other hand, if the unemployment rate does not decrease there is an argument, and room for further rate cuts. Both scenarios have positive impacts.” said Ironfish Head of Property William Mitchell.
Want to find out more or how this may impact your property investment portfolio? Book a free appointment with one of our property investment strategists. Stay up to date on the latest property investment and market news by subscribing to our monthly newsletter.
Sydney, Melbourne, Brisbane, Perth, Adelaide: is it really possible to get into the property market with a budget of only $400,000?
Whether affordability is your top priority or you’re just looking to snap up a ‘bargain,’ we look at which city can deliver more bang for your buck, and explain the typical costs associated with buying a property at this price point.
Each capital city has varying levels of housing affordability. A budget of $400,000 isn’t going to go as far in Sydney as, for example, Perth or Adelaide property. You will likely have to compromise with a smaller property, likely an apartment, that is relatively far from the CBD.
Number of suburbs with an average housing price of under $400,000
According to CoreLogic data, Adelaide is the city where you’ll find the most suburbs with apartments or houses with a median price of $400,000. Brisbane comes next, followed by Perth. Melbourne has only two suburbs: Powelltown and Melton. Sydney has only one suburb with a median house price of $400,000: Mellong in the Hawkesbury, about 110km away from the Sydney CBD – which by all practical purposes can hardly be considered as part of Sydney!
The affordable middle
What the CoreLogic data doesn’t account for is the increasingly popular ‘middle option’: townhouses.
The latest Census data revealed that more Australians are choosing townhouse living; with townhouses accounting for 12.7% of resident homes in Australia, up from 9.9% in 2011.
Typically, townhouses provide a more affordable alternative to a detached house, with more indoor and outdoor space and privacy than an apartment, but without the cost and upkeep of a larger home on a big block. They also tend to be positioned in closer proximity to transport hubs, retail and other amenities compared with new house & land developments.
As an example, in Brisbane, investors can currently purchase a a brand-new 4-bedroom, 2.5-bathroom, 2-car space townhouse that is less than 20km from the Brisbane CBD for only $407,000.
What does holding a $400,000 property look like?
Once you have identified your property, it’s important to understand and factor in your property purchasing and holding costs.
For example, the ‘buy-in’ cost for the $407,000 new townhouse in Brisbane would be approximately $61,000. This includes your 10% deposit ($40,700), stamp duty ($12,670), solicitor fees ($1,500) and Lenders Mortgage Insurance (LMI) ($6,500).
This townhouse could achieve $415 per week in rent (an estimated 5.3% rental yield). For someone earning the median Australian household taxable income of $75,000 per year, this investment property would cost you about $31 per week, factoring in the assumptions below.
After tax benefits such as negative gearing and tax depreciation, the property would return a positive cashflow of $44 per week.
Interest only loan rate
Council and water rates (estimates using Brisbane City Council data)
Vacancy rate (SQM Research data March 2019)
Property management costs
“We know that it is possible to buy a quality property at the $400,000 mark, as we have a number of properties at this price point that we are currently recommending to our customers in each of the five major cities. But it’s important to make sure that property represents genuine value, is in the right location and has all the right ingredients for long term growth.”
Ironfish can recommend properties priced at the $400,000 mark in each of our major capital cities. Ironfish works exclusively with developers who have a legacy of delivering quality properties. Each Ironfish recommended property is subject to a rigorous due diligence process. To access our recommended properties list, register your interest here.
Here at Ironfish, we are proud to practice what we preach. Many of our staff are property investors themselves, and have kindly agreed to share their individual stories and their own personal property investment tips. Chen Chen
Property Investment Strategist, Ironfish Melbourne Box Hill
“Before Ironfish, I always thought property investment was something only wealthy people could do. Now I am an investor myself, and I know this is simply not true. It’s something I love to advocate.”
CASE IN PROFILE
Former advertising executive
Migrated from China with little English
Joined Ironfish Box Hill as a Strategist in 2015
Purchased 6 investment properties
Starting a new career
Back in China, Chen Chen owned her own business – an advertising agency – which she started at age 28. Love brought her to Australia, after meeting and marrying her Australian husband, she moved to Melbourne’s western suburbs.
“Having a great career has always been important to me. But in Australia, as an immigrant with limited English skills, I didn’t have a lot of confidence in finding a decent job. By chance, I heard about Ironfish from an acquaintance, who informed me that it’s Melbourne’s largest property investment company. So I went along to a seminar and listened to Joseph Chou talk about career development and his experience of building a property portfolio. I found it very inspiring.”
“When Joseph came to Melbourne again, he held a big seminar at Deakin University. I arrived early and sat right up in the front row. Before the presentation even started, I picked up the pen and paper that was on my seat and on the spur of the moment, wrote down my wish to join Ironfish and my name and phone number, and handed it to the staff on the stage. The next day I got a call for a job interview – and the rest is history!”
At Ironfish we’re proud to be able to service our customers in multiple languages so Chen Chen’s lack of confidence in English was no barrier to success here. In fact, last year, Chen Chen was awarded Ironfish’s “Strategist of the Year.”
“It’s hard to achieve success in your career if you don’t have ambition. Without ambition it’s hard to push forward. Ironfish has given me a platform on which to help myself, help my customers, and have the satisfaction that comes from having my own career, being financially self-sufficient, paying taxes – making a contribution to my new home country.
“But when I first joined Ironfish, I didn’t know much about property investment, so I made up my mind to study harder than others. At the time, I lived in Melbourne’s western suburbs – a 100km round trip from the Ironfish office. I went in to the office 6 days a week studying and working at the same time. Later, I rented a house nearby to be able to focus on my career, and I haven’t had a holiday in four years!”
I practice what I preach
Chen Chen is proud of how far her hard work has got her in her career, and of her many customer success stories.
“But what I’m most proud of is that I ‘practice what I preach’ to my customers. The second day I joined Ironfish, I bought the first investment property in my life. I bought my second in my second month. I bought my third after 12 months, and now I own a total of six investment properties, with a portfolio value of over $4 million – with strong rental returns. Some of which are so highly sought after and tightly held that I’ve had industry peers ask me if I’ll sell onto them.
“Since I have greatly benefited from Ironfish’s investment strategy, I have drawn a strong belief and love for my career through my own investment success. It makes me more eager to pass on this knowledge to others, as it can truly change your life – it’s changed mine!”
Investment can work for someone ‘ordinary’ like me
Although Chen Chen has a solid portfolio now, she admits that she had never even considered investing in property before joining Ironfish.
“What I previously thought was property investment was just for the mega-rich. For ordinary people like me, it seemed like something I could only dream about. After hearing Joseph’s presentation and later joining Ironfish, I started to understand investment concepts and strategies and after gaining this knowledge, I realised it was something many people can do. This helped me to overcome my lack of confidence and plan out my next steps.
“I was lucky that my first two investment properties built up some equity relatively quickly, which allowed me to refinance and purchase the third and fourth properties. Building a portfolio has become my first ‘bucket of gold;’ helping me to grow my assets and wealth over the long-term in Australia. If Ironfish hadn’t shown me how it was possible, I wouldn’t have the portfolio that I have today.”
Chen Chen’s property investment tips:
Through my work, I’ve found most people’s obstacle when it comes to property investment is a lack of knowledge. In my opinion, the best way to solve this is to talk to experienced professionals – and just learn and learn more!
I’ve also found that once people have decided to invest, they go straight to a real estate agent. A typical agent doesn’t really care whether this is the right property for you – they’re just there to ‘sell their goods’ – as a result, people can have a negative experience and get put off from the whole thing.
But if you sit down with an Ironfish strategist, you will find that at Ironfish, we really care about your future. We will listen to your financial situation and goals. We’re happy to explain the investment process for you and identify a strategy to work towards your goals and budget.
Want to learn a little more about Ironfish’s investment strategies? Or simply have investment concepts and jargon explained clearly and simply? Book a free appointment with one of our experienced property investment strategists like Chen Chen in your city.
Ironfish property investment - CEO & Founder Joseph Chou - Vimeo
The interesting thing about property investors is that so many do not associate buying a property with becoming financially independent.
So many investors let emotion guide their purchases, rather than making a strategic decision on what’s right for their portfolio.
Some bought in Sydney after the horse had all but bolted and are now worried about their investment after reading negative headlines in the newspapers. Others were in a position financially to invest, but didn’t, and therefore missed out on making any money in the last Sydney boom.
So many investors lack goals, planning, strategy, support, and ultimately – lack execution. Either because they spent weeks or months in researching without making a decision, or because they didn’t have the capacity to hold their assets for long enough.
These mistakes are all too common in my experience, both as an investor and from what I’ve observed in my years of working in the industry. And all these mistakes essentially boil down to one thing: having the wrong mindset when it comes to investing.
Your attitude and your approach to investing will have a significant impact on your long-term success as an investor. Without the right mindset, you’re likely to fall victim to one of the following five mistakes that I’ve seen so many other investors make.
Lack of strategic thinking
Many people think: “this is how much I earn, and this is how much equity I have, so this is how many properties I can buy.”
Few people think: “I want to earn X amount of income per year from a portfolio of assets with a value of X” and work backwards from this goal to develop a strategy to achieve it.
On the other hand, there are many investors who do not acquire their assets strategically, but simply buy because of a perceived ‘bargain’ or discount on offer. With the current lending squeeze, you’ll find some developers offloading properties at a discount. But maybe those properties were wrongly priced to begin with – and even at a discount still don’t represent value. If you want to achieve long term capital growth, the key is to think where affluent people will want to live – a poor quality, cheap apartment next to a railway line is probably not the one!
It’s also important to have the right strategy in place for you. For example, I know there’s many people who do small property developments and renovations.
But many investors aren’t cut out for DIY – either because they’re not passionate about it, they don’t have time to do it or they have no expertise.
Many don’t want to get their hands dirty or have the project management experience to manage tradies and stick to a budget. DIY also requires cashflow upfront to do it.
With investment, you don’t need to be an expert; and you can’t be if you are working at the same time at another career. I’ve been in the industry a long time, but I still rely on the expertise of others – our Ironfish Managing Directors, our Property & Research team. I also have my own team of solicitor, accountant and broker as well.
Think strategically about how you are spending your time and money, what you are buying and why is this going to add value to you over the longer-term. If you’re unsure, look to a specialist for help and build the right team around you.
In my experience, property is a forgiving asset – if you give it enough time. If you paid ‘too much’ for a Paddington [Sydney] terrace back in 1964 – say $11,000 instead of $10,000, would you really be too worried about that today?
The key to successful investing is to turn a short-term property purchase into a long-term asset. Yet, many people fail to realise this is easier said than done.
What many investors expect or want is a nice cheap property, quickly rented out, no bad tenants and fast growth. But it doesn’t work this way. The journey to wealth is meant to be bumpy – and it takes time. If it were easy, it wouldn’t have value and everybody would be wealthy.
The other problem is most people around you, including the media, will be judging property by its short-term performance. I got asked by an investor magazine to provide an example of a property that’s provided a 300% return in six months. While it may be possible to produce such an example, the truth is you need to be holding that property well before the market starts heating up. Because I can assure you that by the time you hear that the market’s heating up, you’ve already missed the boat on achieving the biggest results.
I had a customer, a Qantas pilot, who is a long-term investor, who owned seven properties, including a 1-bedroom in Bondi Beach which he bought in 1991. For five years there was zero growth, most people told him that he’d paid way too much for it and that it was a bad investment. During these times, many lose faith, and sell at a loss. But my friend had a long-term mindset, so he held it. In 1996, the property doubled in value. People may say, well why not just buy it in 1995? But the truth is no one can predict these things so precisely, and by the time you read about it, it’s already too late.
Buying a property is relatively easy, holding it is the hard part. Many investors, when they experience longer than expected vacancy, a bad tenant, no growth – they give up too soon. Short term growth is great for confidence, or for building up your equity but it’s not always going to work that way. Professionals can help you keep the faith during challenging periods.
Listening to the wrong people
People tend to listen to the people closest to them because they trust them, such as friends or family. But if these people have no experience in investing and no results to show you, then there’s little value in seeking their opinion or advice.
People also tend to listen more to negative people or the media. But I’ve never met one person who became successful from following the media!
Property is a big-ticket item, it makes sense that you want to do your research and due diligence to ensure you’re confident about your decision. But just make sure that you’re not taking financial advice from a financial planner who hasn’t got his/her own finances in order!
If you’re looking to build wealth through smart, structured property investments, learn from someone who has done it before. Only listen to people who can help you learn more, grow and pull you forward towards your goals.
Saving vs earning mentality
Some people have the ‘saving’ mentality – rather than an ‘earning’ mentality. This group of investors look to save a few pennies by self-managing their property or do a renovation to add a little bit more to the rental price.
Think of property investment as a business you’re building, and you are the CEO. Get other people, the ones with the expertise to do the work for you. While you’ve got your team managing your business, this leaves you free to focus on your own work. Better to spend that time growing your own career, increasing your value at work and your income.
I had a lady meet up with me recently, who came along to one of my seminars 10 years ago. Since then, she’s built a portfolio of four houses which have doubled in value. She did this on her own; she didn’t purchase with us. She did all the inspections and searching herself and has managed to achieve a lot more than most people.
But recently, she’s had to sell one of those properties, because whilst she’s now ‘asset-rich’, she remains ‘cash poor’ and has low serviceability.
I said to her, “You’ve done a great job, but I think if you’d sought our help you could have done a lot better. You could have leveraged our time to build and manage your portfolio, leaving you free to focus on growing your own income and career to improve your serviceability and potentially even build up more assets.”
There’s no point winning the battle only to lose the war!
Knowledge without action
Over the years, I’ve met many people who have been to every seminar, done all the research, read every report – and yet, have done very little, or perhaps even nothing with their knowledge.
Knowledge is there to be applied, otherwise what’s the point of knowing?
Some people tell me proudly that they’ve personally inspected hundreds of properties or talked to hundreds of agents. But frankly, this tells me that this person has no respect for their own time.
It also tells me that while they may think they know everything, they’re scared to make a decision. Once you make a decision it’s easier to move forward. Successful people tend to make decisions quickly and change their minds slowly.
While some may not buy anything, others may buy too much – jumping on the bandwagon because everyone else is. Then later they are faced with the problem of being unable to service their mortgage and hold onto it.
In the last 13 years, we’ve helped many investors build their portfolio, and in the meantime, they have doubled their income – increasing their cashflow for today and tomorrow. Many of these investors managed this achievement simply by having the seed planted that it could be done.
Because it’s not that people don’t want to grow their income – either through their career or through building a portfolio – they just don’t know how to. So they go with the flow, do what everyone else is doing and encounter the inevitable pitfalls.
Based on my personal experience, I can say unequivocally that if you harness the right mindset or mentality as an investor then this is the one thing you can do to set yourself in good stead for longer-term success.
Joseph Chou is the CEO & Founder of Ironfish, a qualified financial planner and highly experienced investor. He writes monthly for the Ironfish blog, shares his property investment tips on Ironfish Insta and Facebook, and presents regularly around Australia. See where he’s speaking next in your city.
A new City Deal has been announced for the South East Queensland (SEQ) region which could contribute up to $58 billion for the local economy.
The SEQ City Deal is a partnership between Federal, State and Local Government to align planning, investment and governance of the region to deliver better transport connectivity, more jobs and liveability to support the region’s population growth. Once negotiated, the SEQ City Deal will be the largest City Deal in Australia.
Modelling by KPMG has shown an SEQ City Deal could stimulate an increase of up to $58 billion by 2041 for the regional economy by improving its productivity and competitiveness.
One of the fastest growing regions
According to the Australian Government, SEQ is experiencing one of the highest rates of population growth in the country.
South East Queensland’s Population Growth
In March this year, Minister Tudge, Deputy Premier Trad and Lord Mayor Quirk agreed on governance arrangements for the deal negotiations and signed a Statement of Intent.
The Statement of Intent outlines a shared vision from all three levels of government for the SEQ Deal, centred on six priority areas: Connecting Infrastructure; Jobs and Skills; Liveability and Sustainability; Housing and Planning; Digital; and Governance and Leadership.
“South East Queensland is already home to over two thirds of the state’s population and is expected to accommodate 5.3 million people within 25 years’ time,” said Minister for Cities, Urban Infrastructure and Population, Alan Tudge.
“We need to cater for this rising population and the SEQ City Deal will be a huge step forward in making sure the people of South East Queensland get the most out of living in this beautiful region.”
Image source: Queensland Government
Some of the propositions for the SEQ City Deal, put forward to the Commonwealth Government by the Queensland Government and Council of Mayors (SEQ) include six ‘game changers’ for the region:
Build on Cross River Rail and Brisbane Metro to move SEQ towards a 45-minute region by delivering the next wave of Rail and Metro projects to connect key activity and growth centres.
Supercharge an SEQ Trade and Enterprise Spine between the Toowoomba Trade Gateway and the Australia TradeCoast by connecting Inland Rail to the Port of Brisbane and unlocking new jobs in the south-west and western growth areas.
Ignite nationally significant Innovation Precincts to deliver more high-value, knowledge-intensive jobs through enabling-infrastructure and a culture of innovation and entrepreneurship.
Establish SEQ as Australia’s leading Smart Digital Region by leveraging the new International Broadband Submarine Cable to deliver a Digital Trade Hub and taking a region-wide approach to data and digital connectivity.
Deliver and secure better recreational spaces and landscapes for the growing region, including through a new tripartite Liveability Fund to co-invest in critical blue and green infrastructure.
Deliver greater coordination and collaboration between federal, state and local governments, including a new tripartite Regional Coordination Board to support strategic governance for the region.
The next 12 – 18 months will involve negotiations between the three levels of government and community to finalise the SEQ City Deal.
Keen to invest in South East Queensland? Register to access our Ironfish recommended properties in SEQ.
Parents can save up to $750,000 in school fees for choosing public education over private a new study has shown.
A study on the typical costs for a public education versus a private education across Australian metropolitan regions was conducted by the Australian Scholarships Group (ASG) in collaboration with Monash University in early 2019.
The study factored in tuition costs, uniforms, transport, devices and other related education expenses over a full 13 years of primary and secondary schooling if a child were to start school in 2019.
Based on Census data for the average number of children per family in Sydney (1.9), Brisbane (1.9) and Melbourne (1.8), the total savings for choosing public over private schooling were $751,505 for Sydney families, $662,018 for Melbourne families and $254,617 for Brisbane families.
Total education costs for public vs private school
Of the eastern capital cities, for private education, Sydney was ranked as the most expensive per child with a total education cost of $461,999; followed by Melbourne ($438,391) and then Brisbane ($209,609).
Comparatively, for public schools, Brisbane recorded the highest overall public education cost ($75,600), followed by Melbourne ($70,603) and then Sydney ($66,470).
The study was based on data sourced from 2,300 members from the ASG regarding education costs, as well as publicly available information on school fees from the Good Schools Guide and My School online resources.
Strong demand for a good school catchment area
With the cost of schooling representing such a significant portion of household expenses, it comes as little surprise that properties located in top public school catchments are highly sought after.
Strong demand can add pressure to property prices in desirable catchment areas and factor into investor decisions.
“Buying in the right public school catchment zone can be a top priority for many families who either can’t afford or prefer not to send their kids to private school,” said Ironfish Head of Property, William Mitchell.
“It’s interesting to see how a property’s investment performance may be influenced by the public school catchment zone it falls in – and the relative demand for properties situated in a preferred school catchment area.”
‘If a family knows they’re going to save $750,000 for Sydney school fees– how much more will they be prepared to pay to get into a top quality public school catchment suburb over an adjacent suburb not within the same catchment zone?”
Want to learn more about the fundamental drivers for property performance in Sydney, Melbourne, Brisbane, Perth or Adelaide? Download our latest quarterly market report.