We focus on the fundamentals of property investment with particular reference to a property investment project: Woodvale.
Transcript: Woodvale investment property opportunities
Hi, this Peter Gianoli, and I'm from Investor Assist. Thank you for taking the time to watch this video. And in this video, we're going to explain to you the fundamentals of property investment and, in particular, focus on a project that we're working on called Woodvale. This Woodvale project is brought to you by the ABN Group. As you can see from this slide on the screen, the ABN group has a range of housing companies. In actual fact, ABN have been building for 35 years in Western Australia. It started with Webb & Brown-Neaves at the top end of the market, then moved into the market with the Dale Alcock Home brand, and then, to encompass first home buyers, moved into Homebuyers Centre. In later years, it started APG and then Celebration Homes.
So in the last 35 years, the ABN group, in total, has built around 40,000 houses. In order to deliver 40,000 houses, the ABN Group has felt it necessary to bring in a number of other businesses both in support, and therefore, you can see ABN Developments, Resolve, Bluebay finance, and Axiom Settlements and some supply businesses, such as The Maker, which produces kitchens and cabinets, High Point, which does roofing, Boeing Plumbing, Ceilings, and Concretus. So as a consequence of that, the ABN Group can continue to supply and produce houses as required. Now, all of this experience has led to the ABN group being able to identify good developments and, as such, flow good value on to you, the property investor.
For those of you that are interested in property investment, you will know that there are three key ingredients of any decent property investment. They are land plus build plus finance and legal.
Specifically on land, there's a well-known adage that land appreciates. Land appreciates mainly because of scarcity. Obviously, as land starts to dry up in certain areas, the price of land goes up as a consequence. Replacement costs, if you wanted a block of land in Cottesloe, you'd have to buy a house, knock down the house to get a block of land. Hence replacement costs are dearer. And the quality of amenities and infrastructure, so obviously, if it's well-surrounded with schools, family security, transport, shops, then normally, land will go up in price. And timing is also very important, because obviously, if you bought land last year, in 2010, the chances are it hasn't increased in value in 2011. But if you took a longer view over life and the land had the ingredients of scarcity and replacement cost and quality of amenities, then timing ultimately, would get into the favor of the land appreciating.
So specifically, the project Woodvale, you can see that Woodvale obviously is a northern corridor suburb. It is well-located. It's an infill project, meaning that there isn't land generally available in those areas. But the parcel of land that we're dealing with in this particular project was formerly a market garden, which has now been transformed into a residential development. The reason Woodvale is deemed a great project is because of its proximity to the beach, 5 kilometers, 15 kilometers from the CBD, and 18 kilometers to the airport. Airport proximity, we feel, is quite important for a Woodvale project because we think this project will attract fly-in fly-out miners and mining/engineering executives. And of course, Woodvalve is only six kilometers to Joondalup. So, all the necessities, such as education, shopping, hospitals, are available in centers such as Joondalup.
But don't just take our word for it. If you have a look at this slide, which shows historical migration flows into Woodvale. And this was sourced from the city vision of Wanneroo back in 2006. You can see that lots of people have been moving into Woodvale over the years. What this slide is showing us is that predominantly, people have been coming from the south, Stirling and Bayswater, South Eastern. They've been moving up into Woodvale. People have been coming from overseas. And also there's been migration from Melbourne and Sydney. So, we think Woodvale is a well-located location. But don't just take our word for it. People have been moving to Woodvale of their own volition over the last couple of years or ever since 2006.
So specifically on the Woodvale Private Estate, this is the layout of lots that we have constructed. The lots range in size from 319 meters squared up to around 400 meters squared. As you can see, it's well-located to transport networks. It's on a reserve. And most of the lots have been orientated so that they benefit from a north-south orientation. The beauty with buying into an estate, such as Woodvale Private Estate, is that we've controlled the architecture. As a consequence of that, we can ensure that the streetscapes look and feel like the prestige that we're trying to create in this particular area. We like to call it door to door architecture.
Whilst most property investors will agree that land appreciates, our property investors also think that buildings depreciate. In fact, the ATO, the Australian Taxation Office, also agrees that buildings depreciate. And as a consequence of that, they'll allow you to depreciate structure of buildings over 40 years and the fit out of the building, over five years. So obviously, as an investor, you're encouraged to buy new buildings, because then you get 40 years worth of depreciation as opposed to buying a second-hand or an older building where some of the depreciation's already been used.
The other thing to consider with depreciation is suitability of purpose. Even though you might depreciate a property in the eyes of the tax office, if the property still has a useful life, well beyond 40 years, well, then obviously as owner, you can still benefit from that. Who'd tell us that a house in the center of Rome, which is hundreds of years old, isn't worth any money? Of course, it's worth a lot of money because it still has suitability of purpose.
The other thing to consider is whether the home's being developed with renovation potential. If it has renovation potential, then even though a building depreciates, it still has a good opportunity to maintain its value over the years. In this next slide, you can see what the projections are for availability of lots in the Woodvale area. From 2011 through to 2020, roughly, there's very limited numbers of lots that can be produced to complete what is available in Woodvale. So therefore, a purchase in this estate today basically gives you one of the last chances to purchase a lot with a brand new house in an established suburb such as Woodvale.
The following slide goes even further. Couples without dependents, couples with children, and then ultimately lone-person households being the likely use of houses as Woodvale starts to fill and opportunities start to get scarce. So what does all this mean to a property investor? What it tells us is if we focus on the proper core audience as a property investor, we're going to basically get ourselves a good property investment. So specifically for Woodvale, we're encouraging you to focus on houses. They're going to focus on lifetime DINKs, DINKs pre-kids, empty nesters, or families with older children. If we get our housing development correct for these people, then as a property investor, everything else will be fine.
So if we start looking at our empty nesters, these guys have worked hard all of their life. They're now at a point where lifestyle is particularly important to them. They like the notion of locking up and leaving. They like the idea of going to visit the kids overseas or going to take time off to follow the sun. So security is particularly important to them. If you're developing a house for empty nesters, you have to think about security. You have to make sure that they're not vulnerable to the surrounds. They also want lock-up-and-leave. So therefore, they don't want large backyards, so when they get back from their holidays, they have to spend hours getting their house back in order. There's also a need to have high-end kitchens. Nigella Lawson and Jamie Oliver have got a lot to answer for with our empty nesters. They really do think the kitchen is the center of their house. So if you're trying to future-proof your house for empty nesters, you need to keep these things in mind.
Double income-no kids, somewhat similar to empty nesters, but they're more interested in being connected. They haven't worked all their life, but they are ready to earn money. But they don't want to compromise their lifestyle. So really, what we're trying to do is provide an offering that has limited maintenance, has the best of appliances in kitchens, and has great opportunity for entertainment, and, most importantly, makes sure that it's located in the suburb where they feel connected and well-located to both work, travel, and recreation.
Families, on the other hand, because let's not forget in the Woodvale project, the likelihood is for families with older children, they are interested in the amenities that surround their house. They're particularly interested in what the quality of the schools are, what the quality of the recreation are, whether there are shopping centers close by. As we've already shown, Woodvale displays this. And if you develop a home that has the ability for flexibility, three, four bedrooms, one that could be used as a study or one that could actually be used as a bedroom for a child, then you're future-proofing your home for these families.
So, as indicated, if you adopt a development such as this one in Woodvale, you build a house that is appropriate to empty nesters, double income-no kids, or families, then you the investor should be able to relax and reap the benefits of your property development.
So what's the market doing, Peter? We've heard what you've had to say regarding Woodvale and an infill development. But is it a good time to buy in Woodvale? The reason I've put this slide up in this presentation is to give you an indication of where we think the market is today. If you have a look at the top left-hand corner, stock markets go up, and stock markets go down. Well, that's obviously what's been going on in today's environment. So share market volatility has an effect on people's savings. The more volatile the share market, the more likely investors will leave their money in the bank.
If you go to the right-hand side of the slide, you'll see that bank savings really is the determinant of whether the reserve bank raises interest rates or drops interest rates. If interest rates have dropped sufficiently, then more people will move into the property market. We think at the moment that we are about here in the cycle. We think that because of the volatility of stock markets, because of the fact that bank savings are down, that the reserve bank will lower interest rates. If it lowers interest rates to a point that is very attractive for people to enter into real estate investment, that's exactly what they'll do. We feel we're probably on the precipice of that starting to occur now. Unfortunately, it doesn't always stay that way. Ultimately, the stock market will start going up in value. As the stock market goes up in value, people will flood from real estate into stock market, and so the cycle repeats.
So if you're looking for a time to enter the market, we can't guarantee that now is a great time. But from all indications, it looks like now is about the time.
Another important consideration with your property investment is whether it has connectivity or the potential for connectivity to the National Broadband Network. The National Broadband Network is a major government initiative that's going to roll out across Australia over the coming years. As a consequence of that, it has the real risk of making houses distinct as to whether they can connect to the network or not connect to the network. Our feeling is that houses that are unable to connect to the network will diminish in value. So as a property investor, we would certainly encourage you to make sure that any investment you get involved in has the ability to connect to the National Broadband Network when it is rolled past their front door.
In the case of Woodvale, each of these homes will be future-proofed to that effect. They've all been wired accordingly so that as the National Broadband Network passes the front door, then each of these homes can connect on to the network and enjoy the benefits. Obviously, the benefits that can be enjoyed with the network will be appealing to future tenants. Double income-no kids want connectivity. Empty nesters want to be able to connect to their friends and to their relatives. Families will find it essential to be connected to the National Broadband Network, not only for education, but also for recreation. So as National Broadband arrives, make sure your property investment can connect to it.
Same to sustainability. It's particularly important to make sure that your property investment is as sustainable as possibly can be. Your tenants in time will certainly be requesting this. If we have a look specifically at our Woodvale project, well, the ABN Group is carbon neutral. There has been native revegetation programs planted in the regional park alongside Woodvale. There's a dual use pathway network, rain gardens in verges, native planting in public open space. We've thought about most things pertaining to sustainability. We also have our houses orientated so that the benefits of northern sun is going to be achieved during winter time.
Now, lets focus on our finance and legal aspects of our property investment. As indicated at the beginning of this presentation, the ABN Group has implemented a range of support companies. Two very important companies, Resolve Finance and Bluebay, specifically focus on the finance aspects of ABN investments. Resolve Finance is specifically the mortgage broker, whilst Bluebay generates products that better suit property investments. So important considerations for a property investment is the type of finance and the type of obligations that you get yourself involved in. It's difficult in a presentation such as this to give a one-size-fits-all. Each of you have specific requirements. Each of you have specific needs. Each of you have specifics pertaining to your finance requirements. And so it is best that these are handled on a one-to-one situation.
But nevertheless, important things to consider, does your finance allow a condensed approval time? Does your finance offer you the opportunity of home-to-home finance. For example, if you're wanting to move out of your current house and buy into one of our new offerings at Woodvale, do you really want to sell your current house today in the current market? Or would you rather have home-to-home finance that whilst your brand new home is being built, you can be looked after in terms of your financial requirements and sell you're home later when, perhaps and hopefully so, the market's in a better situation?
If you're an investor outright, do you want to tie up your own home that you've got your family in with regard your investment property? You need to sometimes consider whether limited recourse is what you want or what you shouldn't get. Does your current bank count the rent that you'll achieve from your investment property as part of your income? Not all do. But certainly, Bluebay and Resolve can find you that sort of product, if that's what you require. If you're not that interested in any form of risk and want income protection or rent guarantee cover, they're the sorts of things that certainly we have access to through Resolve and Bluebay that we can help you out for. But finance and legal are specific things. And finance and legal are things that you need to have your own questions answered on a one-to-one situation.
Recently, we've been conducting our own analysis of what the likely rental demand is for Woodvale. And the answer is strong rental demand. Even around the surrounding suburbs, there is strong rental demand. But in, obviously, these cases, all of the properties are older properties. So the feeling is that a brand new property in this area, one such as Woodvale, is likely to attract very strong rental demand. There is very limited availability on the market, in particular, limited availability of brand new houses. The interest is coming from downsizers and from professionals looking to rent. And as you can see, the likely rental is in the order of $450 to $520 per week for a four-bedroom, two-bathroom offering.
So where to from here? My advice to you is to seek a one-on-one appointment. At a one-on-one appointment, we can actually sit down and devise the best property investment strategy for you. We can consider with you which of the blocks at Woodvale are the best for you to select. Once selected the right block, we'll find which is the appropriate house to put on that block. Once we've got house and land, we'll also consider the best finance consideration. We'll take into account your legal and tax positions. And we'll be able to produce for you a indicative property investment analysis. And at the end of all this, if indeed, this particular offering doesn't suit you, that's exactly what we'll tell you. We'll place you on our VIP list, and we'll try and find another opportunity that better suits your needs. But really, when all's said and done, unless we sit down and do a one-on-one, it is difficult to actually work out what the best property investment is for you.
I hope you've found this presentation informative, and it's whetted your appetite sufficiently to get in touch with Investor Assist. Please see our contact details on the screen. And we look forward to helping you in the future. Thank you very much.
18 min 44 seconds
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