Property Investment Reportpositiverealestate.com.au/wp-content/uploads/2012/... · to Perth CBD,...

Property Investment Report

PIR – 1288

‘Kwinana Central,’ Kwinana, Perth WA 6167

Positive Real Estate Pty Ltd

Suite 3, Level 2, 11 Albany St

St Leonards

NSW 2065

P: +61 1300 365 886

F: +61 2 8282 4432

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Table of Contents

PIR – 1288 ................................................................................................................................ 1 ‘Kwinana Central,’ Kwinana, Perth WA 6167 ........................................................................... 1 Table of Contents ..................................................................................................................... 2 Disclaimer ................................................................................................................................. 3 ‘Kwinana Central,’ Kwinana, Perth WA 6167 ........................................................................... 4 Statistics ....................................................................................................................................................................................................... 4

Investment Brief ....................................................................................................................................................................................... 4

Liquidity Meter .......................................................................................................................... 5 Property Overview .................................................................................................................... 6 Key Investment Indicators ................................................................................................................................................................... 6

Kwinana Economic/Infrastructure Overview ............................................................................................................................ 7

Property Expectations ............................................................................................................ 12 Price List ................................................................................................................................. 14 Tenancy Details ...................................................................................................................................................................................... 15

Terms & Conditions of Sale .............................................................................................................................................................. 15

Contract Process .................................................................................................................................................................................... 16

Rental Appraisal ..................................................................................................................... 17 Artist Impressions ................................................................................................................... 18 Completed Project Examples ........................................................................................................................................................... 19

Builder/Developer Overview ................................................................................................... 21 Related Media ......................................................................................................................... 22 Location and Surroundings ..................................................................................................... 27 Transport .................................................................................................................................................................................................. 27

Location Map .......................................................................................................................... 28 Google Earth Map .................................................................................................................................................................................. 28

Property Financial Details ....................................................................................................... 31 10 Year forecast– ................................................................................................................................................................................... 31

Financial summary– ............................................................................................................................................................................. 32

Appendix I | Plans ................................................................................................................... 33 Appendix II | Schedule of Finishes ......................................................................................... 37 Appendix III | Comparable Sales ............................................................................................ 39 Appendix V | Capital Growth Rates ........................................................................................ 40 Appendix VI | Demographic Details ........................................................................................ 41 Appendix VII | Risks ................................................................................................................ 42 Appendix VIII | Glossary of Terms .......................................................................................... 44 Appendix IX| FAQ’s ................................................................................................................ 45 Short term bonds ................................................................................................................................................................................... 45

Long Term Bonds .................................................................................................................................................................................. 45

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Disclaimer

Positive Real Estate Pty Ltd does not provide advice on investments. All interested parties must

rely on their own research before making any investment decision and should seek advice from a

qualified Financial Planner or similar professional.

The information contained within this document has been compiled from various sources to assist

you in conducting your due-diligence. Please ensure you validate all information contained within this

document. All sources for information contained within this Property Summary will be disclosed at

your request. Positive Real Estate Pty Ltd will not accept responsibility for inaccurate information

provided from external sources or third parties.

As part of your due-diligence, it is the Purchaser’s responsibility to seek a legal opinion of the

contract and any additional terms or clauses. You must adhere to the terms, conditions and subject

clauses contained within the contract of sale. We note that Positive Real Estate Pty Ltd has made a

number of assumptions when preparing this analysis – these assumptions have a material impact on

the financials and therefore should be assessed carefully by investors.

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‘Kwinana Central,’ Kwinana, Perth WA 6167

Property Strategy H&L – “National Hyper-Growth Area”

Property Type 3 bedroom, 2 bathroom, 2 LUG

Villa/townhouse

Price per m2 Approx. $1,188/m² (total build size)

Market Timing:

Internal Size 102-112m²

Property Age Built Brand New – Land registration

expected Jan 2013

Lending Category Max. 90% LVR

Total Purchasing Costs

From approx. $42,000

Deposit Types

Cash – 10% land, 5% build

Only $5,000 total deposit for both

contracts required up until land

settlement.

Av. Growth 10 years

Medina: 17% (SPI Oct 2012)

Parmelia: 13% (SPI Sep 2012)

* Suburbs surrounding Kwinana Centre

Peak of last cycle 2005/2006

Statistics Purchase Price Land from $151,600

Build from $167,400

Total From $319,000

Market Rent $335-365pw

Gross Yield 5.7%

Net Yield 3.9%

Yr 1 Pre-tax Cashflow -$7,125

Yr 1 Aft-tax Cashflow -$846

Investment Brief

Demographics Predominant population of young working families; typically a blue-collar working

environment with bulk of population working in surrounding industry. High

portion of renters; 30%. Very young population – median age 32

Infrastructure Kwinana Freeway providing direct access

to Perth CBD, Perth to Mandurah Rail line. Large Industrial areas surrounding

residential suburbs i.e. Kwinana Port. $11.5 billion worth of projects underway

or planned for the near future. Suburb Yield Estimated 5 - 5.5%

Supply And Demand

Limited supply at present. Increasing demand in line with affordability and

infrastructure improvements/planned spending. Supply to increase over the

next decade in line with HUGE anticipated population growth.

Population Approx. 30,000

Population expected to double over the next 18-20 years

Note: Completed on 100% finance. For more financial information see property

financial details. Buyers please be aware that all information has been

collected by third parties and buyers need to conduct their own further due

diligence on all aspects suggested within this report

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Liquidity Meter

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Property Overview

Positive Real Estate has sourced a fantastic investment opportunity well suited for any investors’

portfolio in the city of Kwinana, Perth. ‘Kwinana Central’ is an inner city land-fill subdivision involving

the construction of 67 attached villa/townhouses through a split contract H&L process. The estate

spans across 3 stages and stage 2 is now being sold. Stage 1 sold out very quickly and stage 2 is

expected to be much the same due to the popularity of the product.

Kwinana is approximately 40kms directly south of Perth on the west coast. Niche Living is a well

known development company in Perth who is responsible for the development, they have selected

the area based on its strong current and future growth aspects; the suburb is now officially a City as

of September 2012 and is one of a few areas referred to as a ‘Hyper Growth Area’ as part of certain

government initiatives. The development site is actually a JV between the developer and the council,

which shows the dedication of the council to provide a new and vibrant product into the growing area.

The site is in an excellent location right in the middle of the town centre. It is just metres away from

Kwinana shopping mall, the council chambers, schools, pubs, restaurants, and various retail/cafe

shops. Being built at Meares Avenue is a mixture of 3 bedroom villas and townhouses each featuring

3 bedrooms, 2 or 2.5 bathrooms and double LUG’s. The properties are also very spacious internally

ranging from 102-112m² plus double garages of 35m². They are being built to a high standard

including features such as stainless steel appliances, built in robes to bedrooms, fully tiled

bathrooms/kitchens/laundries, landscaped gardens and paved external areas.

Key Investment Indicators

Great investment product, well priced from $319,000

Split contract set-up, reducing risk and allowing for valuations up front

Strong rental yield of estimated 5.7% gross

Discount of up to $5,000 from market listing price

Great prospective growth area; “Hyper Growth Area”

Population expected to double over the next 20 years from 30,000 to 60,000+

Solid average annual growth rates to the area and its surrounds of 10% and over

Fantastic proximity to local amenities; schools, parks, council chambers, pubs/clubs etc

Great access to surrounding areas via Kwinana Train Station and Kwinana Freeway

Up to $11.5b of infrastructure spending underway or planned for the area

Strong surrounding industry responsible for total economic output over $15b pa

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Kwinana Economic/Infrastructure Overview

Kwinana is a thriving and expanding community, integral to the industry of Western Australia, yet

cushioned by natural bush and set on the Indian Ocean coastline.

Right now there's a sense of excitement in Kwinana. Massive redevelopment including new

residential areas, schools, retail precincts, community facilities and public transport has transformed

this once quiet residential suburb into a vibrant cosmopolitan city. It is interesting to note that

Kwinana officially became a ‘City’ on 17 September 2012.

PRE undertook a market valuation on the product, which gave some positive feedback and

understanding on the local dynamics. The text below is an extract from the valuation undertaken by

LMW and provides some insight into the condition of the market:

Population

Kwinana is known as a hyper-growth region and is part of the National Growth Areas Alliance, which

represents the fastest growing communities in Australia:

- Current population: 30,433

- Forecasted population 2018: 42,462



- In 2011 Kwinana recorded the fourth fastest growth in WA.

- Kwinana’s population is expected to more than double over the next 20 years.

Sourced: Kwinana Council website

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Kwinana is comprised of a very young community; 62.1% of Kwinana’s population is under the age of

40. The largest age groups are 25-29 years (9.2%) and 0-4 years (8.9%), with a median age of 32.

The population increase is also occurring as the result of major job creation in the area such as the

State Government's Latitude 32 project - itself anticipated to create 10,000 new jobs, expanded

educational opportunities, improved access and transportation, and the introduction of quality

community services and facilities. With all of this in mind, residential property values in new and

existing areas are likely to increase strongly.

More on latitude 32 can be seen by visiting the following website:

http://www.latitude32planning.com.au/Project-Overview/

Below is an extract from SPI Magazine Sep 2012

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Kwinana Industrial Area

Kwinana industry is a major contributor to the success of Western Australia at national and

international level.

The relationship between Kwinana industry and the local community is strengthened by a shared

environment and a desire to be good neighbours. Effectively balancing the needs of the community,

industry and the environment makes Kwinana unique in the metropolitan area.

The Kwinana Industrial Area (KIA) has been in existence for sixty years and has made, and

continues to make, a major contribution to the wealth of the state of Western Australia and its people.

The heavy and supporting industries of the KIA have added enormous value to the resources of the

state and have provided direct and indirect employment opportunities for tens of thousands of

Australians. The companies in the Kwinana Industrial Area:

- Generate a combined annual output valued at $15.77 billion per annum;

- Have direct sales of $8.51 billion;

- Directly employ approximately 4,800 people (64% live locally);

- Provide indirect employment to approximately another 26,000 people;

- Commit hundreds of millions of dollars to capital expenditure every year;

- Provide a wide range of employee services;

- Actively fund and contribute time and talent to community activities; and,

- Sponsor independent research to validate their own high standards and strict code of self-

regulation on health, safety and environmental issues.

- In order for the benefits of industry to be retained, the businesses concerned must have a

sustainable future. Such a future must allow for new investment in the KIA so that businesses

can grow. At the same time industry has a responsibility to the community to preserve the

environment for current and future generations.

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BP was the founder of the industrial area, in conjunction with the state government. The state

government ensured that port facilities were developed to enable the offloading of significant

amounts of oil. BP runs Western Australia's only oil refinery in Kwinana, and there are many other

associated petro-chemical companies nearby, for example Coogee Chemicals.

It is also home to the Kwinana CBH grain loading terminal. A cooperative owned by 12,000 farmers,

CBH Group is Western Australia’s leading grain storage, handling and marketing business. Grain

from the facility is also used to supply Primary Energy’s proposed bio-fuel facility in Kwinana

(Wikipedia.com).

Growing environmental expectations has seen industry respond with a dramatic influx of technology

and innovation. Many Kwinana companies demonstrate world's best practice - not just in production

but also in their environmental safeguards. Industry is moving towards a more dynamic and

innovative future with the community and the environment.

Another positive aspect of investing in Kwinana is the fact that the economy is very diverse i.e. the

economy isn’t dependant on any one specific type of industry. The graph below shows that mining,

manufacturing, construction and transport/postal/warehousing make up an estimated combined

portion of 50% of employment.

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Property Expectations

Socio-economic Assessment

Kwinana is an established residential area 40kms South of Perth CBD located on the coast. It is

inland from Kwinana Beach and just a few kms away from Rockingham. The majority of the

population works in local industry. Predominant make-up of households is young working families.

Predominantly a blue-collar working society.

Flood Zone

Not flood prone – elevated site. Please check with solicitor during contract review.

Zoning Risk and Assessment

Zoning caters for residential development. For further detail consult with your solicitor.

Vacancy Risk

As of 5/11/2012 there were only 11 x 3 bedroom properties for rent in the entire of Kwinana and the

suburbs surrounding the town centre. This shows that the level of vacancy is very low and gives an

indication that the product should rent very well. Also, the product available was old houses or villas,

which will give the brand new product a great point of difference.

Niche Living are offering a 12 month property management rental agreement on this development for

our clients (subject to varying conditions). This rental agreement offers clients a sound market rental

return with no vacancy risks for the first 12 months. Note: This is simply an option and is not

compulsory.

Valuation Attempts to Purchase

It is predicted that the 1 valuation attempt should be all. Given the valuation PRE undertook in Nov

2012, which came in at anticipated package price we do not envisage any low valuations.

Highest & Best Rental Returns

The highest and best rental returns of this product would be achieved through rentals on an ‘as is’

basis. Given the predominant demographic furnished properties would no doubt be in relatively low

demand.

Highest & Best Use of Land

The block sizes are relatively small and, as such, the best use of the land is for townhouse/villa

builds.

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First 6 Months Purchase Expectations

- The land is expected to be in a position to settle in Jan-Feb 2013. Once the land is registered

you will have 21 days to settle

- Once you have settled on the land the construction of your property will commence

- Throughout the course of construction you will receive monthly updates as the build

progresses

- The build is expected to take no more than 6 months

- Drawing closer to completion you will organize your rental management for the property and

the developer will organize strata management for the estate

Strata Synopsis

The development will operate under strata title. The strata will be established during the course of

construction and be operational by the time the product is complete. A strata management company

will be adopted at the first AGM once the properties are reaching completion.

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Price List

Note: The external area is estimated to be 16m². This is the average size that the courtyards are for

their developments. Some might be slightly smaller and some might be slightly larger. However, all

will be nicely paved and include landscaping. The exact size of the external area will be known closer

to the build getting underway, which will be provided to you through project management.

Lot NoHouse

typeLUG Bed Bath

Internal

Size

Garage

Area

Storage

Space

External

Area

Total

(m²)Build Price Land Cost Package Price

Advertised

Price

24 2 2 3 2 102 34 5 16 157 167,400$ 151,600$ 319,000$ 325,000$

25 2 2 3 2 102 34 5 16 157 167,400$ 151,600$ 319,000$ 325,000$

26 2 2 3 2 102 34 5 16 157 167,400$ 151,600$ 319,000$ 325,000$

27 2 2 3 2 102 34 5 16 157 167,400$ 151,600$ 319,000$ 325,000$

28 2 2 3 2 102 34 5 16 157 167,400$ 151,600$ 319,000$ 325,000$

47 10 2 3 2 112 33 5 16 166 169,958$ 155,042$ 319,000$ 325,000$

48 10 2 3 2 112 33 5 16 166 169,958$ 155,042$ 319,000$ 325,000$

51 3 2 3 2 108 34 4 16 162 172,300$ 152,700$ 325,000$ 329,000$

52 3 2 3 2 108 34 4 16 162 172,300$ 152,700$ 325,000$ 329,000$

53 3 2 3 2 108 34 4 16 162 172,300$ 152,700$ 325,000$ 329,000$

54 3 2 3 2 108 34 4 16 162 172,300$ 152,700$ 325,000$ 329,000$

55 3 2 3 2 108 34 4 16 162 172,300$ 152,700$ 325,000$ 329,000$

58 2 2 3 2 102 34 5 16 157 167,400$ 151,600$ 319,000$ 325,000$

59 2 2 3 2 102 34 5 16 157 167,400$ 151,600$ 319,000$ 325,000$

60 2 2 3 2 102 34 5 16 157 167,400$ 151,600$ 319,000$ 325,000$

61 2 2 3 2 102 34 5 16 157 167,400$ 151,600$ 319,000$ 325,000$

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Tenancy Details

Currently on realestate.com.au there are only 11 properties for rent in Kwinana Town Centre and

surrounding suburbs (5 Nov 2012), which shows how tight the rental supply is. With the expected

population growth to the area it is anticipated that this product in “Kwinana Central” will be of high

demand. The likely tenant being a small family that works in the surrounding industry i.e.

manufacturing.

Council rates are estimated at $2,000pa (Rates + Water)

Strata rates are estimated at $1,000pa

Niche Living are offering PRE clients a fantastic property management rental agreement, which

involves a set market rental amount from the day your property is complete and lasts 12 months. In

order to receive this rental agreement you are required to enter into a 3 year management agreement

with Niche Living. The rental amount is not set at this point in time as it is possible the current rental

market will not be a reflection of the one in the near future. It is anticipated that in today’s market the

properties will rent for $335-365pw, which provides scope for the rental agreement to be even higher

by the time the properties are complete as the rental market naturally grows. It is anticipated to be

approximately 6% gross. This agreement is based on doing business with the rental manager, not

based on the sale I.e. it is not compulsory with the sale.

It is important to note that the build package does not include AC units or a dishwasher. It is

recommended you organize to have the dishwasher and AC units installed through your chosen

property manager just prior to completion. This will assist in getting the strongest rent possible and

also be cheaper. If the AC and dishwasher are included in the build tender there will be a mark-up on

the price from the builder. However, if you purchase through the rental manager they will be able to

get a great price without any mark-ups involved.

Terms & Conditions of Sale

- $2,000 holding deposit submitted with EOI

- 10 day initial exchange period (offer and acceptance), which involves the signing and

returning of the land + build contract

- 21 day finance period used in order to ascertain conditional finance approval

- On or before 21st day of finance period you are required to unconditionally exchange and pay

the balance of the $5,000 deposit

- 21 day settlement from registration of titles or expiry of finance, whichever occurs the latter –

registration of titles expected Jan/Feb 2013

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Contract Process

1. Submit EOI with $2,000 holding deposit

2. Within 3-5 days you will be issued with your land and build contract. You can liaise with your

chosen solicitor on these documents

3. Within 7-10 days of receiving them you are required to sign and return both the land and build

contract to the developer

4. At this point in time it is essential that you work with your PRE project manager and get your

broker everything they need to begin processing your financial approval i.e. contract front

pages

5. Once the developer receives your contracts and counter-signs them you are conditionally

exchanged! This is referred to as ‘offer & acceptance’ in WA

6. From this point you have 21 days to ascertain your conditional finance approval, which will

involve a valuation by your chosen lender. It is possible with some lenders to ascertain a

formal/unconditional approval, which can last up to 6 months – this is preferable if possible

7. Unconditional exchange takes place on or before 21st day of finance clause. At this point in

time you will need to pay a balance amount of $3,000 on top your initial $2,000 which will take

you all the way to settlement of the land.

8. Land registration gets underway and you are called to settle. This is expected to take place in

Jan/Feb of 2013. At this point in time you will pay the remaining funds of your 10% land

deposit and a 5% building contract deposit.

9. It is estimated that once deposits are paid and the land is settled the construction of your

property will commence in roughly 4-6 weeks time.

From the time you receive your conditional approval it is very important that you don’t change your

financial circumstances as it may affect your ability to receive formal approval at the time when land

is close to being registered i.e. do not get any additional credit cards.

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Rental Appraisal

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Artist Impressions

House Design 2:

House Design 3:

House Design 10:

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Completed Project Examples

The following pictures are from a variety of developments that Niche Living have recently completed,

it shows you accurate examples of how their end product presents.

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Builder/Developer Overview

The Nicheliving Developments team delivers the projects. They design and implement a stringent

development process that involves identifying the right property to achieve the desired profit margins

and rate-of-return, and applying intensive due-diligence and feasibility assessments for each project.

The team researches a project’s demographics and the prevailing market conditions, as well as

analysing potential competition and potential purchaser profiles. Our developments always generate

a high level of interest through our reputation for delivering a highly competitive product.

Maximising returns for our clients is imperative, and our expertise and sound judgment allows us to

offer investor opportunities to suit all client needs.

We have spent considerable time developing and building successful, long term relationships with

stakeholders such as local and State Government and not for profit organisations in order to ensure

the success of every project we manage.

Our highly experienced project team manages the entire development process from inception to

completion, working tirelessly to build a solid future for all clients. With a long-range vision,

Nicheliving aims to minimise the risks associated with market fluctuations and nurture client

relationships with a diverse range of in-house services.

Nicheliving has an in-depth knowledge of the local property market, and is renowned for its skills in

property research and analysis, site identification and procurement, capital raising and tendering,

while having a commanding understanding and management of the approval process.

More can be seen on their website: http://www.nicheliving.com.au/

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Related Media

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Location and Surroundings

Kwinana is a thriving city some 40kms South of Perth CBD. It is surrounded by natural bushland and

also has a beach community further to the West of the town centre where it has its own beach;

Kwinana Beach.

Kwinana is comprised of the following suburbs:

Anketell; Bertram; Calista; Casuarina; Hope Valley; Kwinana; Kwinana Beach; Leda; Mandogalup;

Medina; Naval Base; Orelia; Parmelia; Postans; the Spectacles; Wandi; Wellard

Transport

Transport to and from Kwinana is made easy by existing infrastructure. The Perth to Mandurah

Railway has a stop just outside of Kwinana Town centre – Kwinana Train Station. This provides

regular train services to and from the CBD or to areas further South.

Access in and out of Kwinana by car is made possible via the Kwinana Freeway, which was recently

updated and allows for 30 minute commuting into the CBD.

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Location Map

Google Earth Map

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Property Financial Details 10 Year forecast–

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Financial summary–

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Appendix I | Plans

Stage 2 Site Plans:

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Floor Plans:

House Type 2

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House Type 3

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House Type 10

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Appendix II | Schedule of Finishes

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Appendix III | Comparable Sales

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Appendix V | Capital Growth Rates

Surrounding suburbs:

Sourced: www.homesales.com.au

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Appendix VI | Demographic Details

Sourced: Kwinana City Profile - http://profile.id.com.au/kwinana/highlights

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Appendix VII | Risks All investments involve risk. While drivers of growth and other attributes that have a positive effect on an investment have been analysed in depth, it is equally important to be aware of and understand the risks that could have an adverse impact on the investment’s performance. Following are some of the risks that investors should consider prior to investing in property:

1. Market Value Risk

This risk relates to the risk of the investment failing to achieve the expected growth. Much of the information we have used in our analysis is predictive and the rate of return may be affected by known and unknown risks and uncertainties. This in turn could result in the re-sale value of the investment not achieving what is expected if the vendor chooses to sell during or following depressed market activity.

2. Construction Risk

This is applied to properties purchased off the plan. Throughout such projects the developer may arrange finance facilities related to the land acquisition, development and construction of the project. This may result in issues arising in the delivery of the product on time and as specified on the contracted terms. Delays in the delivery period would result in opportunity costs as investors funds may not be able to be redirected to alternative investments.

3. Rental Yields

Rental yields fluctuate and are affected by other market factors. They may go up or down depending on factors such as supply, demand, employment, investment in the area and the state of the overall residential market.

4. General Risk

In addition to the risk factors specific to investment in property development projects, there are more general risks that can affect the value of the investment in the development, including:

The state of Australia’s and the world economies Movements in inflation and employment Changes in socio-economic factors Natural or man-made disasters.

5. Personal Risk

Investment strategies will often depend on the income of the investor. Should there be a reduction or loss in the flow of income from the investor it may present a risk in the future ability to hold the investment. These risks may be managed through the appropriate use of income protection insurance, life insurance and trauma insurance.

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6. Interest Rate Risk

Movements in interest rates can have a number of effects on an individual property investment. Specifically, an increase in interest rates may have an immediate effect on the costs of holding an investment property. Additionally, sustained interest rate rises may have a lagging effect in the form of reduced sales activity and property growth.

7. Policy Risk

Changes in government policy may affect both holding costs and the expected growth performance of specific property investments. This may result in additional expenditure in order to finance your portfolio and the expected returns.

8. Oversupply

An oversupply in property will have effects on both achievable rents and growth performance. Due to the length of time typically required to construct medium and high density developments, the short term supply curve is inelastic. This means that property supply has an inherent inability to adjust quickly enough to meet demand. A sudden reduction in demand or an unexpected increase in supply may result in oversupply. Typically this risk is most acute towards the end of the property cycle. We do not foresee any short term risk of oversupply in the current market.

9. Settlement Risk

Settlement risks may prevent the purchaser’s ability to settle on the property. Typically, these are related to difficulties in obtaining finance through valuation shortfalls at the time of settlement or changes in the purchaser’s personal circumstances that result in the refusal of the purchaser’s credit application. This may result in the loss of the deposit or any monies owed to the developer. This risk may be managed by obtaining pre-approval of finance (for completed property) prior to exchange of contracts.

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Appendix VIII | Glossary of Terms Common terms used by property Investors and Financial Institutions. Application Fee

A fee paid by the borrower to the lending institution for obtaining finance.

Bridging Finance

A short term loan/facility that is often used when buying a new dwelling previous to settling an existing dwelling.

Body Corporate

The term ‘Body Corporate’ refers to a home owners association charged with the administration of one or more housing units. Owners of the individual dwellings pay a fee to provide for maintenance of common areas and provide cover for repairs that may arise in the future.

Capital Growth The change in value of an investment. This is calculated by subtracting the purchase price from the current value of the investment and is usually expressed as a percentage. If the price of the capital asset has declined instead, this is called a capital loss.

Comparison Rate

A rate used to compare the borrowing costs from competing lenders. The basis of comparison includes the interest rate and the majority of fees and charges payable during the life of the loan. The figure is expressed in percentage terms. It should be noted that some costs including redraw fees or early repayment fees, and cost savings such as fee waivers, are not included.

Deposit Guarantee

A substitute for a cash deposit used to purchase a property. At the time of settlement, the buyer is required to pay the full purchase price.

Equity The net value of the asset. This is calculated as the value of the property less any outstanding loans secured by the property.

Gross The complete amount before deductions for taxation, inflation, or any other various fees that may be incurred. The term ‘gross return’ refers to the amount of capital growth and yield before taxation, body corporate, fees, inflation and other expenses are taken into account.

Infrastructure Basic facilities required for a community or society to function as an economy, including transportation, communication, provision of water and power and the public institutions needed for security, welfare, health and education.

Interest in Advance

When interest is charged at the beginning of a period of time. For example, charging the first years interest in the first month of a loan. It is generally only available on fixed rate loans for investment purposes.

Interest Only Loan

A loan facility commonly used for investment loans where the borrower only pays the interest component of the loan for a specific period of time.

Price $/m2 A measure for determining the relative value of a given property based on the internal size. This is calculated by dividing the purchase price by the internal area (measured in m2) and expressed as dollars per m2.

Real Return The return on investment, less the reduction in its value as a result of inflation. Real rates are important as they tell you what the actual increase in value is, and how much of a return was less the effect of inflation.

Rental Guarantee

A guarantee by developers to pay an agreed level of rent should a shortfall achievable in the market arise. This is usually based on a percentage of the purchase price.

Valuation The estimated worth of a project based on comparable sales with projects of a similar type. This is conducted by a registered valuer.

Yield An annualised rate of return for a given investment. This is calculated as the annual achievable rent expressed as a percentage of the purchase price (or current market value) of paid investment.

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Appendix IX| FAQ’s

Short term bonds

To apply, clients need to complete an application form (available from their broker), together with:

A loan approval A copy of the Contract for property sold that will assist in the purchase of the new property Evidence of funds accessible prior to the completion date, such as savings, a fixed term

deposit, or share certificates Evidence of other funds that will assist in the purchase such as the First Home Owners Grant.

Long Term Bonds

To apply, clients will need to complete an application form (available from their broker) and provide evidence that they are an existing property owner:

Rate notice/s for residential property owned Mortgage statements

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