What does it mean by ‘returns of over $163,000 per year’? Is this rental yield or capital appreciation?

“The $163,000 per year is rental return only and they divide that $163,000 by 9 units that would equal the rent that is available from each unit of x divided by 52 weeks a year that much for a week which is your 350 or 3 55 week capital appreciation anticipated for the next 3 years in Brisbane would be 10% per annum

Capital appreciation could exceed $300,000 per year based on current trends of potential 10% growth per year in Brisbane over the next 3 years that is on top of the rental return of 163000 per year plus any increases with the marketplace growth”.  Brisbane – Suburbs with 5%Plus Yield

September Property Snapshot Infographic

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While the headline rate of growth remains positive across most cities, the majority of capital cities have seen their growth trend moderate compared with a year ago. The only capital city markets where the current quarterly rate of growth was higher (compared with the September 2015 quarter) was Hobart, Canberra and Adelaide. The quarterly pace of capital gains in Sydney peaked over the June quarter of 2015 at 7.4% and, similarly, Melbourne’s quarterly rate of capital gain peaked at 7.9% over the same quarter. Although value growth in Sydney and Melbourne is not as strong as it was at its peak, growth continues to be supported by high auction clearance rates which are now at their strongest levels since the June 2015 quarter. In Sydney, clearance rates remained above 80% throughout September, while Melbourne clearance rates have consistently been above 75%, albeit on substantially lower volumes than a year ago. The top three auction markets for spring activity have been: Inner Melbourne (780 auctions over the four weeks of September with a clearance rate of 75%), Melbourne’s Inner South (560 auctions with a clearance rate of 82%) and North Sydney/Hornsby (545 auctions with a clearance rate of 85%). The most successful auction markets have been Sydney’s Eastern Suburbs where 89% of auctions were successful during September, Melbourne’s Mornington Peninsula (88% of auctions cleared) and Sydney’s Ryde (87% of auctions cleared).


While we’ve seen values remain relatively strong, in contrast, rental yields have been in the doldrums due to the fact that residential property values are rising at a faster rate than weekly rents. The average gross rental yield across the combined capital city dwelling market has held firm at 3.3% over the month, which is at an historic low.By a large margin, the lowest yields are now in Sydney and Melbourne where value growth has been the most extreme and caused yields to compress. The typical gross yield on a Sydney and Melbourne house is now 2.8%, while the gross yield profile for a Sydney unit is the lowest of any capital city, averaging 3.9%.

The latest CoreLogic Hedonic Home Value Index reveals further gains across most capital city housing markets last month, taking the current growth phase into its 52nd month.

Capital city dwelling values continued to show a strong headline rate of growth over the September quarter, with the CoreLogic Hedonic Home Value Index rising 2.9% over the past three months. The combined capital city index, which is heavily weighted towards the Sydney and Melbourne markets, recorded a 1.0% month-on-month gain, taking capital city dwelling values 41.3% higher since the growth cycle commenced in June 2012.

Growth conditions were substantially different from region-to-region. The top performing market was Melbourne where dwelling values pushed 5.0% higher over the third calendar quarter, due largely to a strong rise in house values (+5.2%) which balanced a softer result for the unit market (+2.9%). Canberra showed the second highest rate of growth over the quarter with values up 4.5%, followed by Sydney at 3.5%.

In contrast, the weakest housing market over the quarter was Darwin where dwelling values declined by 4.5%, to be 11.1% lower than the most recent 2014 peak in property values and 13.9% lower than the previous 2010 peak in dwelling values. Perth dwelling values also slipped 3.2% lower over the quarter to take the cumulative decline in values to 10.4% since their December 2014 peak, and 5.2% below the previous peak in 2010. Brisbane dwelling values also slipped lower over the quarter falling by a marginal 0.3%, attributable mostly to larger declines across the unit sector.

Index results as at September 30, 2016

2016-10-3--indices

Darwin dwelling values are now roughly equivalent to what they were seven years ago, while in Perth, dwelling values have retraced back to 2007 levels.

The combined regional markets of Australia, where the measure of value growth lags by one month, saw house values slip 1.1% lower over the three months to the end of August. While modest declines were recorded across most of the ‘rest of state’ housing markets, the weakest conditions continue to be experienced in regional Western Australia, where house values have fallen 12.4% over the past twelve months. The weak housing market conditions across the regional areas of Western Australia were also highlighted in the recent CoreLogic Pain and Gain report, which showed one third of houses which resold over the June quarter did so at gross loss.

While the headline rate of growth remains positive across most cities, the majority of capital cities have seen their growth trend moderate compared with a year ago. The only capital city markets where the current quarterly rate of growth was higher (compared with the September 2015 quarter) was Hobart, Canberra and Adelaide.

The quarterly pace of capital gains in Sydney peaked over the June quarter of 2015 at 7.4% and, similarly, Melbourne’s quarterly rate of capital gain peaked at 7.9% over the same quarter.

Although value growth in Sydney and Melbourne is not as strong as it was at its peak, growth continues to be supported by high auction clearance rates which are now at their strongest levels since the June 2015 quarter. In Sydney, clerance rates remained above 80% throughout September, while Melbourne clearance rates have consistently been above 75%, albeit on substantially lower volumes than a year ago. The top three auction markets for spring activity have been: Inner Melbourne (780 auctions over the four weeks of September with a clearance rate of 75%), Melbourne’s Inner South (560 auctions with a clearance rate of 82%) and North Sydney/Hornsby (545 auctions with a clearance rate of 85%). The most successful auction markets have been Sydney’s Eastern Suburbs where 89% of auctions were successful during September, Melbourne’s Mornington Peninsula (88% of auctions cleared) and Sydney’s Ryde (87% of auctions cleared).
Blog: LJ Gilland Real Estate
Post: Brisbane Asking Rents Sept 2016
Link: http://ljgilland.blogspot.com/2016/10/brisbane-asking-rents-sept-2016.html

septvacancy

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Methodology: The CoreLogic Hedonic Home Value Index is calculated using a hedonic regression methodology that addresses the issue of compositional bias associated with median price and other measures. In simple terms, the index is calculated using recent sales data combined with information about the attributes of individual properties such as the number of bedrooms and bathrooms, land area and geographical context of the dwelling. By separating each property comprising the index into its various formational and locational attributes, differing observed sales values for each property can be separated into those associated with varying attributes and those resulting from changes in the underlying residential property market. Also, by understanding the value associated with each attribute of a given property, this methodology can be used to estimate the value of dwellings with known characteristics for which there is no recent sales price by observing the characteristics and sales prices of other dwellings which have recently transacted. It then follows that changes in the market value of the stock of residential property comprising an index can be accurately tracked through time. CoreLogic owns and maintains Australia’s largest property related database in Australia which includes transaction data for every home sale within every state and territory. CoreLogic augments this data with recent sales advice from real estate industry professionals, listings information and attribute data collected from a variety of sources. For detailed methodological information please visit http://www.corelogic.com.au

Recent updates to the CoreLogic Hedonic Home Value Index – April/May 2016
CoreLogic’s periodic audits of analytic methods and algorithms identified an improvement to the Hedonic Index sampling methodology in early 2016 which was applied throughout April. CoreLogic implemented a dynamic mechanism for excluding extreme (outlier) transactions. After rigorous back testing and validation, it was determined that dynamic price filters would deliver a more robust and precise output. As a result of these changes, the CoreLogic Hedonic Index recorded higher than normal intra-month volatility in the capital city index readings throughout April and May. This improvement will ensure that the Hedonic Home Value Index will continue to represent the timeliest and most precise measurement of housing market conditions available.

With a record-high number of units currently under construction nationwide, the capital growth performance of units is weaker than houses in certain cities and we anticipate that this trend will continue.

The CoreLogic Home Value Index shows that over the 12 months to August 2016, combined capital city house values have increased by 7.2% compared to a 5.5% rise in unit values.

Rolling annual change in house and unit values,
combined capital cities

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The first chart shows the annual change in combined capital city house and unit values over time.  The chart shows that typically the change in house values is greater than units.  What is interesting though is that during the past two instances of value declines nationally, house values have actually recorded greater annual falls than units.

While the rate of annual growth for units has been only slightly lower than that of houses across the combined capital cities, across individual cities the trends vary significantly.  Hobart and Darwin are the only two capital cities in which the change in unit values over the past year has been greater than the change in house values.

Annual change in individual capital city house and unit values
12 months to August 2016

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In Melbourne, Brisbane, Adelaide and Canberra, the change in unit values over the past year has been less than half that of houses.  This in itself is interesting, particularly when you consider that Melbourne and Brisbane in particular are currently experiencing historic high levels of new unit construction.  The fact that in many of these cities substantial increases in unit stock is expected over the coming years, it is reasonable to anticipate that the gap between the annual change in house and unit value will persist and potentially grow larger.

Taking a longer-term look at the change in house and unit values since December 2008 shows clearly that overall value growth has been much stronger in Sydney and Melbourne than anywhere else.  Over the period, both house and unit values are higher across each capital city however, houses have outperformed units in all cities except Hobart and Darwin.  In Brisbane, Adelaide, Perth and Canberra, the cumulative growth in unit values has been less than half that of houses over the period.

Total change in house and unit values,
December 2008 to August 2016

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The data shows that we’re already seeing the growth in unit values generally underperforming houses values.  Of course, over recent years the overall supply of units, particularly in inner city areas has increased substantially with even more new stock to come.  The most recent data from the Australian Bureau of Statistics (ABS) showed that nationally there were 152,449 units under construction at the end of the March 2016 with an additional 41,548 units approved for construction to July 2016, many of which would have already commenced construction.

While demand for inner-city housing, particularly units, has increased significantly over recent years the heightened level of unit construction has the potential to create problems for the housing market.  While an increase in housing supply is important, much of the new unit stock to-date has been targeted at an investor market.  From an investors perspective units offer higher yields and lower prices than houses however, in many cities recent growth has underperformed while the rental market is the weakest it has been in more than two decades.  With additional unit stock under construction, there is the potential as this stock enters the market the rental market will become even more depressed.

Quarterly number of houses and units under construction,
National

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Over the coming years we anticipate that the performance of houses and units could diverge even further.  While units offer a much more affordable purchase price than houses, as the supply of units relative to houses increases, we would expect demand for detached houses to hold-up much better than demand for units.  Especially considering much of the new unit stock has to-date been one or two bedrooms, of a similar internal size and design and very much targeted at a similar market segment.

For those people who are looking to purchase a unit at a time when supply levels are moving through record highs, projects which are differentiated from the broader market, based on their location, design, owner mix or quality of the developer may provide some safe haven from the weaker unit market conditions.

 

 

Please see the following links of interest:-

 

 

https://www.qld.gov.au/education/schools/find/enrolment/pages/catchment.html

 

A yield is only based on income, whereas a return includes capital gains https://ljgillandrealestate.wordpress

 

http://ljgrealestate.com.au/rental-yield-calculator/

 

“The $163,000 per year is rental return only and they divide that $163,000 by 9 units that would equal the rent that is available from each unit of x divided by 52 weeks a year that much for a week which is your 350 or 3 55 week capital appreciation anticipated for the next 3 years in Brisbane would be 10% per annum

Capital appreciation could exceed $300,000 per year based on current trends of potential 10% growth per year in Brisbane over the next 3 years that is on top of the rental return of 163000 per year plus any increases with the marketplace growth”.

Property id: 123718606

Property address: 6-8 Greenmeadow Road, Mansfield Qld 4122

http://ljgrealestate.com.au/property/6-8-greenmeadow-road-mansfield-qld-4122/ Property URL:  http://www.realestate.com.au/123718606

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Removing the Hassle from Sales and Rentals across South East Queensland. Aim to Empower other like minded Property Investors. L J Gilland Real Estate is a prestigious boutique agency specializing in Property Investment Management Services and the Sales of Investment Properties with tenants in place. Comprised of a top performing group of handpicked specialists, our Agents proudly serve Property Investors in Queensland. Since 1996 our Agency has demonstrated a genuine enjoyment of working with people, developing long-term relationships and delivering on the promise of great service. Carlos and Linda Debello offer property investor's the confidence to sell and lease in any market. We provide comprehensive market appraisals, exclusive multimedia marketing campaigns, and knowledgeable, highly personalized counsel on all aspects of real estate. Our Property Management Team is equally considerate, offering investors with in-depth advise, well-researched rental valuations, and highly professional rental management services. http://goanimate.com/movie/0M4bvcZzgIbI?utm_source=linkshare&uid=0u6RGtWsmlVc Carlos’ direct mobiles are 0400 833 800 & 0413560808. Linda’s mobiles are 0409995578 & 0414978700 (prefer email contact for Linda). Office 07 3263 6085. http://www.ljgrealestate.com.au http://www.yellowpages.com.au/qld/aspley/lj-gilland-real-estate-pty-ltd-14091356-listing.html http://au.linkedin.com/in/lindajanedebello http://twitter.com/GillandDebello http://www.facebook.com/pages/ljgrealestate
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