Safe As Houses

Posted by Dominic Cavagnino

As the end of the year approaches, I’d like to reflect on an important decision the research team made at the beginning of 2016. Many of you reading this would be aware that we are now recommending new house and land opportunities in the growth corridors of both Brisbane and Melbourne. In mid-2014, a number of once rural regions were opened to development. With some of the relevant infrastructure now in place, these regions became a significant research focus.

The strength of the owner occupier market and population growth in excess of state and city levels were the key indicators of growth potential in regions assessed. Beyond growth potential, we recognise that an additional asset class adds diversity to those of you who have already invested in a Blue Wealth approved property. The investment process for house and land differs from that of an apartment:

The land owner and the builder are two different parties, meaning you sign two individual contracts. Speed of action, particularly in securing land, is paramount
Generally speaking, you pay two deposits, one for land (10% of land cost) and the other for the build (5%). This equates to around 7% of the package price
Given the demand for land, there tends to be a lag between when land is released and when council gets around to issuing titles. This lag can vary anywhere between 3 and 12 months
On land title, the remaining 90% of the land is paid, together with stamp duty (only on land – one of the benefits of buying new)
Construction will commence four to six weeks after land is titled
26 weeks later, you have a house

Diversity is key. Over the long term the housing and apartment markets have largely had synchronous performance, with the marginal housing outperformance made up by the higher yields of apartments.

Posted by Dominic Cavagnino, on 29th Nov 2016