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Property investors should be considering the Sunshine Coast: Hotspotting’s Terry Ryder

Property investors should be considering the Sunshine Coast Hotspotting's Terry Ryder


I believe real estate markets are driven more by local factors than national ones. While many commentators are placing great significance on interest rate reductions as a prime driver of real estate markets, I’m much more interested in what’s going on the coalface of local economies.

And, in those terms, I put a high rating on the Sunshine Coast as a market that investors of all kinds should be considering. I regard the Sunshine Coast as the strongest market in Queensland at the moment and indeed one of the strongest in Australia.

I see events happening there as an economic revolution, which is shifting the Sunshine Coast from tourist destination to international city – a massive transition that’s happened in the past 2-3 years and continues to happen.

I recently completed a comprehensive 30-page report called The Sunshine Coast: Australia’s Most Compelling Growth Story, in which I note that the Sunshine Coast economy was no longer predominantly reliant on tourism because of the creation in recent years of strong health, education and technology industries – all part of an infrastructure program totalling more than $20 billion.

Economies reliant on tourism traditionally fail to deliver sustainable real estate growth. But the Sunshine Coast has diversified and strengthened and is now, I think, the nation’s most compelling growth story.

It has a $17.7 billion economy, making it one of the largest regional economies in Australia, and on infrastructure it’s outspending several of the nation’s capital cities.

The health, education and technology sectors – including the new $5 billion health precinct – are bringing new residents to the Sunshine Coast and this is providing strong impetus to the real estate market, notably at the Top End. The median house price for Noosa Heads has increased 40% in the past three years, while the median apartment price has jumped 25% in the past year.

In terms of becoming an international city, the Sunshine Coast will soon have an international airport and an international broadband network connection to Asia. Earlier this year the Sunshine Coast was named in the Top7 Intelligent Communities of 2019 by the global Intelligent Community Forum, alongside major international cities like Chicago.

Central to everything that’s happening in the region is the creation of a Sunshine Coast CBD from the ground up – a $5 billion enterprise which is now under way on a 53ha greenfield site in central Maroochydore.

The new city centre has attracted investment from local, national and international firms interested having an early presence in the growing region.

The Sunshine Coast is among the top 10 leading regions in the country for employment generation, adding more than 20,000 jobs over the past five years. The $1.8 billion Sunshine Coast University Hospital (SCUH) has created 5,000 jobs since opening in April 2017 and the new Maroochydore City Centre is forecast to provide 15,000 jobs over the lifespan of the 20-year project and inject $4.4 billion into the economy.

In addition, the Sunshine Coast International Broadband Network will deliver 800 new jobs once it’s operational next year and will deliver the fastest data connection to Asia from the east coast of Australia.

Part of the economic revolution of the Sunshine Coast in recent years has stemmed from the region’s growing reputation as an innovation and technology hub.

Demographer Bernard Salt has described the Sunshine Coast as “the entrepreneurship capital of Australia “because of the large number of knowledge-based start-ups and small businesses such as information technology, clean-tech, creative industries, aviation and education.

The population of the Sunshine Coast is forecast to reach 580,000 by 2041, an increase on the previous forecast of 558,000.

The Sunshine Coast is one of Australia’s fastest-developing economies, growing each year at rates well above national averages and is expected to expand to $33 billion by 2033.

As a consequence, our new Spring edition of The Price Predictor Index has found that the Sunshine Coast has more locations with rising sales activity than any other municipality in Australia. And that kind of outcome is likely to create sustainable long-term price growth.





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Lending restrictions could hit property investors

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Property investors are likely to find it harder to obtain the big mortgages often required to buy free-standing homes after regulators signalled they would likely act to tighten lending rules.

The Council of Financial Regulators says that with credit growth materially outpacing growth in household income, there is increasing medium-term risks facing the economy, even though lending standards remain sound.

The Australian Prudential Regulation Authority (APRA), which is a member of the council, is weighing up what measures it could take to curb riskier borrowing.

One of the tools APRA could use is to make lenders subject to a cap on mortgage lending to borrowers with a ratio of more than six times debt to annual gross income – the point at which it considers the lending to be risky.

CoreLogic data released on Friday show Sydney house prices are now up 25.8 per cent since the year began, with Melbourne prices up 16.2 per cent.

In September, Sydney’s median house price soared by $18,000 to $1,311,641 – a stunning gain of about $600 a day. In Melbourne, the median jumped by $7750 to $962,250 – up about $260 a day.

Nationally, the monthly growth rate in prices slowed to 1.5 per cent, compared to its peak rate of 2.8 per cent in March.

The CoreLogic figures show house values are generally rising faster than unit values, a trend that has been evident throughout most of the COVID-19 period, especially in capital cities.

“There has been a shift by investors from units to free-standing houses,” says Doron Peleg, founder of RiskWise Property Research.

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Buying an investment property in a boom can be risky

investment property

I am a 45-year-old nurse earning about $120,000 a year, with living expenses of $27,000 and superannuation of about $213,000. I used to salary sacrifice to the maximum but stopped in the past three years, since I filed for bankruptcy in February 2019, due to a disastrous property investment in the mining town of Newman, Western Australia. I will be discharged from bankruptcy in February 2022. After discharge at age 46, I plan to buy a house for about $650,000 with a $140,000 cash deposit. I wonder if I should continue to salary sacrifice to the maximum of $27,500 a year, or should I focus on fully paying off my mortgage? I plan to pay it off in 6.5 years, earning about $150,000 from July 2022 onwards. I am single and have no children. After I pay off my mortgage at age 53, I can finally stop working night shifts and my income will come down to $95,000 a year. I plan to retire at age 60 – when I’m still healthy. L.L.

I always set two main goals for retirement: to stop working with a fully paid-off house and enough money in super to produce the tax-free income you need for living expenses. It is hard when starting from scratch – and not always possible.

At the end of the day, if both goals cannot be achieved, there is always the safety net of the age pension. So, that’s why I suggest giving priority to paying off your mortgage before salary sacrificing to top up your employer’s 10 per cent super contributions.

That’s sad news about your bankruptcy.

I am aware that house prices in mining towns peaked in 2011-12 during the mining boom. An ABC news report indicates Pilbara median house prices later fell more than 80 per cent when the boom soured.

It is a good lesson that buying an investment property in a boom can be risky, even though prices in Newman have since turned up.

I am aged 46, earning $190,000 a year and my wife, 47, is working four days a week and earning $120,000. We are both relatively healthy and have two children aged 11 and 9, due to go to private high schools at a cost of $40,000 a year each in 2023 and 2025, respectively. We own our home valued at $2.4 million and have $955,000 in joint investments, plus $556,000 in my super and $358,000 in my wife’s super. We also have an investment unit valued at $450,000 with a mortgage of $400,000. Our combined monthly income is $17,000. Our monthly expenses are $10,000 (excluding private school fees). We would like to maintain this lifestyle, or close to it, for the rest of our lives, adjusted for future inflation. We have both earned relatively high incomes for most of our working lives and have a relatively modest but comfortable lifestyle, prioritising the needs of our children. We both would like to retire at age 50. Are we on track? P. L.

If you retire at 50, your wife would have a statistical life expectancy of some 37 years and, as always, I add five years to that, assuming she is healthy and will live longer than the average.

If you then plan to spend $120,000 a year, indexed to 3 per cent for inflation, you could expect to go through savings of about $2.7 million. On top of that, you would spend about $500,000 on school fees, plus significantly more on sports plus any private tuition and then tertiary education.

I suspect you should plan on working until your children finish their education – possibly longer – while maximising your super contributions.

I purchased a unit in 2001 for $432,000 and moved out in 2007. It has been fully renovated with a new kitchen, bathroom, flooring, laundry and garage door. The total cost was $33,105 and other costs include stamp duty is $29,191. Over the years, I have claimed all council rates etc. I would like to sell the unit this year. The agent estimates it will fetch as much as $1.2 million. What is the best way to calculate the Capital Gains Tax (CGT)? M.W.

Step 1: Hire a good accountant.

Step 2: Give them the original sale contract for the property, as well as receipts for all your renovations, plus tax returns to show what you have claimed. This allows the accountant to determine your “cost base” and also how much, if any, could have been claimed, but wasn’t.

Let’s say you have spent $500,000 up to now and that your selling costs come to, say, $30,000, including agent’s commission.

If you sell for $1.2 million, your capital gain would be $670,000, half of which, or $335,000, would be added to your assessable income.

It doesn’t sound as though the property is held in joint names, so assuming no other income in 2021-22, the CGT would be about $128,000. Ouch!

  • Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions. 


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Super a great way to invest as you near retirement


A relation aged 25 is earning $150,000 a year in a construction job. He and his partner will be paying for a new house-and-land package next year. He asked me if he should be salary sacrificing to save tax. I told him I did not think that was wise in light of his proposed house purchase and all the costs associated with that. Your often mention salary sacrificing to superannuation rather than paying off a home loan, but am I correct in thinking this would only be applicable to somebody approaching retirement?

You are spot on. It would be crazy to be piling money into super at such a young age when they are planning to buy a house in the foreseeable future.

In any event, salary sacrifice into super is not a massive tax saver in his situation. His employer should already be paying $15,000 a year into super, which leaves only $12,500 available to be salary sacrificed.

The sum of $12,500 in his pay packet would lose tax of $4937, whereas money contributed to super would lose $1875. The tax saving of $3062 is relatively small.

It is a different matter entirely for someone aged 50 or more who wants to pour money into super, to make sure they retire with no mortgage.

My partner and I live in Melbourne and bought a house on the south coast of NSW for my daughter to live in, and for us to use for holidays. She owns 40 per cent of the house and we own 30 per cent each. I plan to leave my 30 per cent to my daughter in my will and my partner plans to leave his 30 per cent to his daughter. Will my daughter need to pay Capital Gains Tax (CGT) when I die? Would it be better to transfer my share to her before I die?

If you give it to her now, you would be liable for CGT.

However, if you leave your share to her in your will, no CGT would be payable and until she disposes of the property. This could be many years in the future.

Furthermore, provided the property continues to be her principal place of residence, the impact of CGT should reduce over time.

Your daughter should be thinking about ways to buy out your husband’s share, because the situation could be unsatisfactory if he dies and 30 per cent of the property is then owned by somebody else.

I am aged 60 and work full-time. I am trying to plan my finances for retirement in six years. I have recently come into an inheritance of $170,000 and am in a quandary as to where to invest it. I would like to be able to grow the funds but also to be able to access the money relatively easily after my retirement. The money is for travel and possible small renovations, as my husband’s defined-benefit super scheme generates payments of $2415 per fortnight, which covers our living expenses. We own our home and have a $300,000 mortgage on an investment property, valued at $850,000. I am thinking about either buying and renting another property – although would need to get a large loan – or perhaps buying shares or putting the money into my super, which is now just $60,000. I am also not sure about the tax implications of shares vs super. I welcome your comments on how best to invest the money.

I do not think taking out a large loan at your age is wise.

Super is the perfect place for you to invest the money, as accessibility would not not be an issue.

You have turned 60, which means you can withdraw money from your fund as soon as you retire from your job, or at age 65 – whichever is earliest.

The money could be contributed as a non-concessional contribution and there would be no tax on it or on any withdrawals.

Keep in mind that shares are a type of asset, whereas super is a vehicle that lets you hold assets in a low-tax area.

You could have each way bet by having your money in super, with a large part of the selected fund asset mix in shares.

I have been reading with interest your comments on what happens if a couple are on the age pension and one of them dies, leaving the surviving spouse over the single asset cut-off means test of just $593,000. Does replacing worn carpets and blinds come under allowable ways of spending money on renovations?

Yes, there are a number of allowable ways for a pensioner to spend money. These include renovations, replacing household items and travel.

  • Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions. 


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