Latest news with #PaliseProperty
News.com.au
4 days ago
- Business
- News.com.au
A beginners guide to commercial property investing
In the world of property investing, commercial property has its own set of unique opportunities that sets it aside from residential property – but it may not be the best strategy for everyone. WHO IS IT SUITED TO? 'I often find people get started after having an existing residential portfolio,' says REBAA buyers agent Zoran Solano from Hot Property Buyers Agency. While residential property investing usually requires a deposit size of about 20 per cent, or possibly less with LMI, commercial property is different, says Solano. 'The barrier to entry with commercial property often requires a larger deposit – often 30 per cent or more depending on the style of the property,' he says. Often, investors will use some of the equity they have built up from investing in residential property over time to fund the deposit for their first commercial purchase. BENEFITS OF COMMERCIAL PROPERTY It's a purchase that appeals to many residential investors because of its potential for stronger yield – both gross and net, Solano says. 'Often a lot of your outgoing costs as a commercial landlord are passed on to the tenants themselves, depending on the lease agreement,' he says. 'Outgoings, even down to the rates, insurance and even land tax, potentially, can be charged to the occupant of the commercial property rather than the landlord themselves.' Buyers agent Steve Palise from Palise Property says commercial property tends to drive much greater returns than residential property when it comes to cash flow. 'Five years ago there were no books or podcasts about it. It was only known by business owners and high net worth,' Palise says. 'Now that people realise you can get three times the cash flow and the same capital growth it is becoming popular.' There is also the potential for longer lease terms, which can create more stable income, as well as higher depreciation tax benefits, he says. POTENTIAL PITFALLS But with any investment, there are also negatives – and risks. 'Vacancy is the biggest killer when it comes to the commercial property sector,' Solano says. 'All we need to do is look at Covid in the last few years and how it's dramatically changed the way people invest in commercial property.' Vacancy rates rose in CBD locations as people relocated to home-based businesses during the pandemic. Industrial property has also seen a rise with the need for warehouses due to online shopping, he says. Investors need to have a clear understanding of who their tenant is and how stable their business is as well as wider economic factors at force, he adds. 'People can run reasonably large and successful businesses remotely or from home as well these days, so that is potentially a bit of a disrupter or a risk that commercial investors need to consider,' he says. There are 'more moving parts to understand' when investing in commercial property, says Palise, which means there are more things you might get wrong. 'There are also different types of property with their own intricacies,' he says, listing retail, industrial and office as three distinct examples. It's also worth noting that zoning and regulations can change over time which makes it hard to forecast how your property will perform, he says. 'Commercial investing needs to be done only once you are educated or using a reputable buyers agent,' he says. RESIDENTIAL VS COMMERCIAL Steve Palise from Palise Property says there are several things that set residential property investment and commercial property investment apart. Here are some of the main differences: * Deposit size – You usually need a deposit of 20-35 per cent for commercial property compared to a deposit of 10-20 per cent for residential property * Yields – Commercial yields tend to come in at a much higher average of 5-8 per cent net, compared with the 3-6 per cent gross yields of residential, according to Palise's calculations * Lease terms – Commercial leases are usually much longer than residential leases, and can be as long as 30 years depending on the contract * Outgoings – While the landlord pays most outgoings, such as repairs, renovations and council rates in the world of residential property, the occupant pays for a lot of these things in commercial leases * Vacancy – Vacancies can be much more drawn out in commercial investing, as long as two years, while residential tends to be one to two weeks on average
Sydney Morning Herald
01-07-2025
- Business
- Sydney Morning Herald
How far house prices have jumped above fair value
'It leads to the same conclusion as price-to-income ratios, which is that house prices have to come down a lot to bring them back to more affordable levels, or in this case, bring them back to fair value,' he says. Sydney houses are 41 per cent above fair value, the highest in the nation, although units are more reasonably priced, at 3 per cent above. Brisbane is the second-most overvalued city for a house, at 38 per cent. The future Olympic city ranks third nationally for unit overvaluation (19 per cent). Hobart offers the worst value in the country for units (27 per cent). Rental growth in Melbourne has been strong next to slowing house prices, resulting in a 15 per cent overvaluation. Only Perth is more equitable, at 10 per cent. Loading 'Melbourne is complicated for investors,' Oliver says. 'It's got high debt levels and then the government announced those property taxes, which encouraged investors to go elsewhere.' Oliver thinks two-thirds of Australians who own their property outright or have a mortgage would probably prefer prices to rise. 'From the point of view of social harmony, it is better to get property prices to a point of greater affordability. That doesn't mean you have to crash them,' Oliver says. 'That would probably cause a recession. The better outcome is where we go through a decade or so of house prices putting in very modest gains, or no gains at all, at least falling relative to people's wages.' Independent economic futurist Evan Lucas says many factors go into a real-life, fair value assessment. 'Fair value is also location, land size, condition, the age of home, prices of comparable properties, market conditions, interest rates and employment opportunities, and then the one more existential, emotional value,' he says. He says 55 per cent of Australians' wealth is in their home. 'The average growth of Australian housing is about 7 per cent per annum,' Lucas says. 'And then if you applied compounding to that over 30 years, you can explain why we got here today. 'If, as the data suggests, to get back to fair value Sydney would have to fall by 30 to 41 per cent, the impact that would have economically would be catastrophic. 'And I don't use that word lightly, because if your property value fell by a third, your household economics would completely upend themselves. You would stop spending and you would find yourself in mortgage jail.' Lucas says it is possible for young Australians to buy a home, but it will not resemble the property of their childhood. Also, the subjectivity of value changes over time, buyers' agent Steve Palise, founder of Palise Property, says. 'I advise clients how much they should spend based on their risk profile,' he says. 'How stable is their job, how much buffer they have for varying interest rates, and how much cash reserve they have for unexpected events.'
The Age
01-07-2025
- Business
- The Age
How far house prices have jumped above fair value
'It leads to the same conclusion as price-to-income ratios, which is that house prices have to come down a lot to bring them back to more affordable levels, or in this case, bring them back to fair value,' he says. Sydney houses are 41 per cent above fair value, the highest in the nation, although units are more reasonably priced, at 3 per cent above. Brisbane is the second-most overvalued city for a house, at 38 per cent. The future Olympic city ranks third nationally for unit overvaluation (19 per cent). Hobart offers the worst value in the country for units (27 per cent). Rental growth in Melbourne has been strong next to slowing house prices, resulting in a 15 per cent overvaluation. Only Perth is more equitable, at 10 per cent. Loading 'Melbourne is complicated for investors,' Oliver says. 'It's got high debt levels and then the government announced those property taxes, which encouraged investors to go elsewhere.' Oliver thinks two-thirds of Australians who own their property outright or have a mortgage would probably prefer prices to rise. 'From the point of view of social harmony, it is better to get property prices to a point of greater affordability. That doesn't mean you have to crash them,' Oliver says. 'That would probably cause a recession. The better outcome is where we go through a decade or so of house prices putting in very modest gains, or no gains at all, at least falling relative to people's wages.' Independent economic futurist Evan Lucas says many factors go into a real-life, fair value assessment. 'Fair value is also location, land size, condition, the age of home, prices of comparable properties, market conditions, interest rates and employment opportunities, and then the one more existential, emotional value,' he says. He says 55 per cent of Australians' wealth is in their home. 'The average growth of Australian housing is about 7 per cent per annum,' Lucas says. 'And then if you applied compounding to that over 30 years, you can explain why we got here today. 'If, as the data suggests, to get back to fair value Sydney would have to fall by 30 to 41 per cent, the impact that would have economically would be catastrophic. 'And I don't use that word lightly, because if your property value fell by a third, your household economics would completely upend themselves. You would stop spending and you would find yourself in mortgage jail.' Lucas says it is possible for young Australians to buy a home, but it will not resemble the property of their childhood. Also, the subjectivity of value changes over time, buyers' agent Steve Palise, founder of Palise Property, says. 'I advise clients how much they should spend based on their risk profile,' he says. 'How stable is their job, how much buffer they have for varying interest rates, and how much cash reserve they have for unexpected events.'
