RESEARCH REPORT 2018
CONTENTS 4 MARKET ANALYSIS 26 PROPERTY ANALYSIS 44 FINANCIAL ANALYSIS
MARKET ANALYSIS
7. WHY INVEST? The Paper Mill is positioned in Liverpool, the capital of South West Sydney, just 35km from Sydney CBD and 15km to Parramatta CBD. As the centre of one of the nation s leading economies, Liverpool is fueled by unprecedented development, and the region and city play a key role in providing the necessary jobs, homes, services and recreational options for a growing population. The Great South West 2.3% annual population growth is twice the NSW average 1in is positioned 3 in Liverpool, the capital of South new residents of NSW will live in the Great South West by 2036 There are several major transport projects underway including the South West rail link and WestConnex Sydney s second airport at Badgery s Creek will generate 35,000 jobs when it opens in 2026 700m to Liverpool train and bus station, where buses depart every 10-20 minutes HOME TO 43,000 businesses, which contribute $22 billion to the national economy The area has 400+ preschools, primary schools, secondary schools and university campuses
9. INVESTOR REPORT MEET THE NEIGHBOURHOOD While The Paper Mill on Georges River features an incredibly convenient location in terms of transport connectivity and access to schools and hospitals, it is the immediate access to a wide variety of parks and recreational facilities, shopping and entertainment precincts that makes the development such an inspiring place to live. TRANSPORT Access to Liverpool train station is a pleasant 10 minute walk along the riverbank through the historically significant Light Horse Park. Combined with M5 access just a few blocks from the development, this ensures travelling to other parts of Sydney couldn t be more convenient. SPORT & RECREATION With the river stretching along its eastern border and with several parks to the north, south and west, The Paper Mill is perfectly situated for residents wishing to enjoy a wide variety of recreational pursuits, ranging from gentle walks along the river s edge to competitive team sports. Three minutes drive away is a large sport and recreation centre, set in the middle of Barbara Long and Woodward Parks. The Whitlam Leisure Centre includes indoor and outdoor swimming pools, spas and saunas, netball courts and gymnastic facilities along with a 3,000-seat indoor stadium. The NSW Government will spend more than $3.6 billion on road improvements in the next decade, with projects such as the WestConnex, M5 expansion and M12. The new M12 motorway will provide direct access to the Western Sydney Airport at Badgerys Creek and also connect to Sydney s other motorway connections the M7, M4 and M5. MEDICAL & EDUCATION Medical facilities are also near at hand with two hospitals within a four minute drive; Liverpool Hospital and the Sydney South West Private Hospital, which employ more than 24,000 skilled health professionals. Educational facilities in the immediate vicinity include Liverpool Public School, three different high schools and the South West Sydney Institute of TAFE s Liverpool campus. ENTERTAINMENT For those who prefer to shop or go to the movies, there are plenty of choices on offer just minutes away. Westfield Liverpool shopping centre is just 1.5km to the north-west of The Paper Mill and houses over 300 retail stores, restaurants, cafes, banks and other services. One stop beyond Liverpool train station is the Casula Powerhouse Arts Centre a contemporary arts centre housed in a former coal-fired power station. This cultural landmark is also accessible from The Paper Mill, by way of riverside paths that run through extensive council owned parkland. DEMOGRAPHICS Liverpool has a strong economy with a skilled workforce. Over one quarter of the available workforce have a TAFE accreditation The 330,000-strong labour force is growing, with nearly half leaving the region each day for work Liverpool s residents are a young, dynamic population with nearly 53% aged 34 or younger three years below the Sydney average
11. A SNAPSHOT OF THE MARKET NOW AND IN THE FUTURE Liverpool LGA has experienced considerable population growth over the past decade. Demand for new house & land products has led the way, but now demand is shifting towards apartments as the format of choice. The progression of a number of residential developments within the region, including Edmondson Park, Leppington, Austral, Prestons, Oran Park and Ingleburn are changing the socio-demographic structure. It is likely these developments have attracted workers with higher average per capita incomes. Economic activity in the south-west region surrounding the Liverpool CBD is currently in boom stage, which is driving jobs and population growth in the region. The new Western Sydney Airport is due to open in 2024 and this project is changing the nature of business around The Paper Mill in all directions. Growth in the transport and logistics industry will be a major factor, as industrial development in the M7 corridor gathers pace and the Western Sydney Priority Growth Area defined and implemented. The improvement in economic growth conditions is having a positive impact on unemployment across western Sydney with the unemployment rate falling below 4% in the outer west. With low unemployment, the local economy is attracting new households with professional skills, as well as contract workers looking for rental accommodation. The improvement in employment has had an impact on Liverpool s short term accommodation market as Liverpool has seen greater growth in hotel room occupancy than that of Sydney s CBD. Liverpool CBD provides an ideal residence for people working across western Sydney only 15 minutes from the M7 and about 25 minutes from the Western Sydney Airport once the new M12 is constructed. The Paper Mill is located on the doorstep of two of the new campuses of NSW s well recognised universities in the Liverpool CBD. An extra 8,000 students will be based out of the Liverpool CBD, which will boost demand for cafes, restaurants and broader retail services. New university students will greatly enhance the CBD night-time economy. There is even more to come. The Moorebank IMT is set to commence operation in 2018. Over the following six years, the Western Sydney Airport will be constructed. A combination of container freight (IMT) and airport freight (WSA) will drive growth of the logistics functions along the M7 corridor. As part of the Western Sydney Infrastructure Plan the NSW government plans to build a new motorway, the M12, to connect the Western Sydney Airport to the M7 and The Northern Road. Over the long term, there are plans to extend a new metro rail service to the Liverpool CBD, which fits into plans for more extensive services to the WSA. Rental demand for apartments has remained strong over the past four years. Thre have been consistent increases in the demand for apartments in the Liverpool LGA. Our research indicates that the Liverpool CBD will be highly attractive as a place to live, with ample retail, consumer services and access to a relaxing riverside lifestyle. A core component of demand for new apartments in Liverpool is coming from first home buyers who either do not have children or have very young children. This is partly due to first home buyers being priced out of housing markets in other regions of Sydney. POPULATION GROWTH IN LIVERPOOL IS ABOVE THE SYDNEY AVERAGE Demographic profile by age cohort, Liverpool LGA Age Cohort 0-19 20-34 35-49 50-64 65+ Total Local housing affordability has been reasonable by comparison to the inner west, resulting in a significant increase in the 20-34 age bracket as younger people look further afield to purchase their first home. Prices for new and established houses have surged, and new apartments have become a more affordable point of entry for first home buyers. Although living space size is typically reduced when moving from an established home into an apartment, The Paper Mill offers access to quality living space, secure parking and a view. This trade-off will be highly desirable at the riverside location of The Paper Mill. It is important to note that government population projections do not yet consider the impact that Western Sydney Airport and its associated economic activity will have on future population growth. Downsizers are set to become a key cohort in the housing market. Population projections show that retirees are the fastest growing cohort. Many local retiree households have not accumulated efficient saving on superannuation to fund a desired lifestyle in retirement. For many retirees sale of the family home and releasing capital growth by downsizing is a key strategy. Not many retirees have housing equity to fund the purchase of an apartment but those that do are likely to favour apartments that are in quiet areas with pleasant views and opportunities for retail and recreation. The Paper Mill fits this criterion well. Prices for new and established houses have surged, and new apartments have become a more affordable point of entry for first home buyers. Jason Anderson MacroPlan Dimasi 2011 57,200 42,400 41,500 29,700 17,250 188,050 Source: ABS, MacroPlan Dimasi (2017) CAGR*: Compound average growth rate 2016 63,000 48,450 44,700 35,200 22,800 214,150 2021 70,550 52,250 50,300 39,950 28,850 241,900 2026 79,900 57,000 57,000 44,450 36,500 274,850 Avg Change (2016-2036) 1,513 973 1,033 983 1,283 5,787 CAGR* 2.3% 2.0% 2.1% 2.7% 5.1% 2.6% The Liverpool area has experienced a substantial increase in its median house prices as like much of Sydney has over the past 5 years. This is largely attributed to substantial increase in demand for housing which has been influenced with low mortgages rates resulting from a historically low cash rate. A higher median house price is resulting in first home buyers seeking out apartments as a place to call home.
13. WESTERN SYDNEY ECONOMY IS DEVELOPING QUICKLY LOW UNEMPLOYMENT WILL BUOY WAGES Construction work, Sydney ($m constant prices) Unemployment rates (%) CONSTRUCTION WORK, SYDNEY ($M CONSTANT PRICES) $40,000 9.0 $35,000 $30,000 $25,000 8.0 7.0 $20,000 $15,000 $10,000 6.0 5.0 $5,000 $0 4.0 3.0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Engineering Construction Building (res. & non. res) Sydney Outer South West Sydney Outer West Sydney Source: ABS, Cordell Connect, MacroPlan Dimasi (2017) Source: ABS, MacroPlan Dimasi (2016) Economic activity in the south-west region surrounding the Liverpool CBD is currently in boom stage, which is driving jobs and population growth in the region. The new Western Sydney Airport is due to open in 2024, and this project is changing the nature of business around The Paper Mill in all directions. A considerable set of road and logistics infrastructure projects in the area will bolster employment within the Liverpool CBD. Growth in the transport and logistics industry will be a major factor, as industrial development in the M7 corridor gathers pace and the Western Sydney Priority Growth Area defined and implemented. Upgrades to Camden Valley Way, Bringelly Road and Elizabeth Drive, and construction of the Moorebank Intermodal Terminal will raise the profile for industrial projects and are already boosting demand for workers beyond available capacity. This shift is evident in the local demand for hotel rooms, which is demonstrated in a subsequent section. The broader increase in major projects across this region is likely have a positive impact on income growth, so that Liverpool property outperforms, and the current price discount to Canterbury-Bankstown is eroded. Liverpool will benefit from retail spending and an increase in other business activity associated with improvements in the scale of household demand. JASON ANDERSON, MACROPLAN DIMASI The improvement in economic growth conditions is having a positive impact on unemployment across western Sydney with the unemployment rate falling below 4% in the outer west. The Outer South West Sydney region has seen unemployment drop below 5% for 2016 bringing it in line with the trend seen for Sydney. The reduction in unemployment can largely be attributed to the jobs created by construction and infrastructure projects. Such improvements in employment in the outer west can be felt largely in its urban centres such as Liverpool, which will benefit from retail spending and an increase in other business activity associated with improvements in the scale of household demand. Over the next five years this low rate of unemployment is likely to be sustained by major construction projects and commencement of the Moorebank Intermodal Terminal (located directly south of The Paper Mill). Liverpool CBD provides an ideal residence for people working across western Sydney it is only 15 minutes from the M7 and about 25 minutes from the western Sydney Airport once the new M12 is constructed. Beyond 2020, the Liverpool CBD retail sector will mature and gentrify, as expansion of health and professional services continue and the UOW and WSU Liverpool student enrolments grow. In turn, the average household income is likely to rise, with The Paper Mill appealing to the emerging professional class. The residences will be positioned close to the action, but in a quiet location with river views that attract a premium client base.
15. LEADING SECTORS BEHIND JOBS GROWTH BOOMING DEMAND FOR HOTEL ROOMS Employment growth in Liverpool LGA by sector from November 2011 - November 2016 40% 36% 35% Hotels and serviced apartments in Liverpool region Room Nights Occupied June Quarter 35,000 Percentage change in Employment 30% 25% 20% 15% 10% 17% 13% 27% 27% Number of Rooms 30,000 25,000 20,000 15,000 10,000 5,000 Growth of 5% over 3 years 1,360,000 1,310,000 1,260,000 1,210,000 5% 0% Retail Trade Transport, Postal and Warehousing Financial and Insurance Services Administrative and Support Services Education and Training 0 2014 2015 2016 Liverpool Sydney CBD 1,160,000 Source: Department of Employment Source: ABS and MacroPlan Dimasi The chart above displays the industries that contributed most to improvements in employment within Liverpool over the course of 2011 to 2016. The top three industries provide evidence of an improvement in business activity which can be attributed to population growth and a boom in regional freight and logistics businesses. As a result, associated increases in household spending have improved retail employment. The substantial growth in education and training is largely the result of an increase in the provision of educational services in Liverpool, which will grow further as the two universities complete their new campuses. With low unemployment, the local economy is attracting new households with professional skills, as well as contract workers looking for rental accommodation. A new airport will require specialised skills in design, engineering and construction. An increase in the provision of educational services in Liverpool will grow further as the two universities complete their new campuses. JASON ANDERSON MACROPLAN DIMASI Quest Liverpool Hotel occupancy in Liverpool has seen greater growth than that of Sydney s CBD. Although in total volume of rooms Sydney CBD greatly surpasses that of Liverpool, the percentage change in room nights occupied in Liverpool has been far greater. Such a change is symbolic of the way Liverpool is growing. It is important the note that differences in the Liverpool and Sydney CBD short-term accommodation market. Those seeking out shortterm accommodation in Liverpool would be more likely travelling for work where as those staying in Sydney s CBD have a greater tendency of just being on a recreational holiday. Demand for hotel rooms in Liverpool is booming. The rate of growth is far greater than the trend for the CBD, which is benefiting primarily from overseas tourists. Anecdotal evidence is that demand in Liverpool is being led by white-collar workers, who have business across the broader wvestern Sydney area and are seeking to save time lost to transport. Many of these workers are travelling regularly from interstate, due to the lack of skilled workers in Sydney. A very strong hotel market underlines the strength of the regional economy, and also the tightness of the local rental market. It shows that the local industry base is diversifying, and drawing more jobs into the Liverpool CBD.
17. LIVERPOOL IS NOW A UNIVERSITY TOWN WESTERN SYDNEY UNIVERSITY LIVERPOOL CAMPUS Western Sydney University is adopting a 10-15 year expansion strategy in which it will seek to add several thousand square meters of space in an effort to make significant presence in Liverpool s CBD. Western Sydney University is creating a high quality, modern, technology rich and highly flexible space which will include the Universities Launch Pad Smart Business Centre. The Higher Education Centre will incorporate a smart business centre catering for business and technology students, with a focus on research. The overall site will be more than 3,000sqm + facility and will accommodate over 1,000 students plus staff, coupled with corporate partners in a flexible and highly-innovative workspace within the Business Centre. The campus will leverage on Liverpool s strengths in education and health (Liverpool Hospital), offering courses within these disciplines and across the other core offerings of WSU. Concept design of University of Wollongong Liverpool campus The Paper Mill is located on the doorstep of two of NSW s well recognised universities in the Liverpool CBD. An extra 8,000 students will be based out of the Liverpool CBD, which will boost demand for cafes, restaurants and broader retail services. New university students will greatly enhance the CBD s night-time economy. The University Of Wollongong (UOW) has recently opened a campus at 33 Mount Street in Liverpool. The campus offers degrees in the arts, business, IT and health management. UOW is also establishing its well-regarded Bachelor of Nursing which will be offered in 2019. Western Sydney University (WSU) also announced in May 2015 that they will be opening additional campuses in Liverpool which will further bolster the tertiary student population in the Liverpool area. UNIVERSITY OF WOLLONGONG LIVERPOOL CAMPUS The University of Wollongong is on track to open a campus in the heart of Liverpool, continuing its expansion into the Greater Sydney regions. The campus will primarily focus on nursing (with the inclusion of the Western Sydney Nursing Education and Research Centre), business, humanities and arts, engineering, science and health disciplines. UOW is set to start classes in March of 2017, catering for 1,000 students initially. The new campus is set to open in 2019 and is expected to reach a capacity of 7,000 students by 2030. The current South Western Sydney UOW is currently located 500m from Liverpool train and bus stations and 1.5km from The Paper Mill. The University s CBD s presence strengthens its relationship with the local business community in addition to enabling opportunities for students to integrate studies with work placements at the local Liverpool hospital. Construction of the main Liverpool campus is set to start in 2017. Concept design of Western Sydney University Liverpool campus
19. A GROWING EDUCATIONAL HUB MOOREBANK INTERMODAL TERMINAL (IMT) There are a number of primary and secondary schools located within close proximity to The Paper Mill. With low unemployment, the local economy is attracting new households with professional skills, as well as contract workers looking for rental accommodation. A new airport will require specialised skills in design, engineering and construction. James Bubsy High School Ashcroft Public School Ashcroft High School Marsden Road Public School Liverpool West Public School Liverpool Boys High School All Saints Catholic Primary School Liverpool Girls High School Liverpool Public School Newbridge Heights Public School Moorebank High School This project involves the development of freight terminal facilities at Moorebank (south of the M5), which allow containers to move from Port Botany by rail instead of road. The Moorebank IMT will eventually handle up to one-third of the Port Botany container freight that currently travels by road. The IMT is located next to the M5 Motorway, near the M7 Motorway and Hume Highway - key freight corridors, which are set to accommodate more businesses moving from Port Botany to manage freight out of the IMT facility. Aside from taking thousands of truck trips off Sydney s roads every day, Moorebank will showcase the future of automated freight logistics, create around 7,000 new jobs and simplify the way imported goods are transported. The Moorebank IMT is set to commence operation in 2018. Over the following six years, the Western Sydney Airport will be constructed. A combination of container freight (IMT) and airport freight (WSA) will drive the growth of the logistics functions along the M7 corridor. Facility managers and technical operation staff will become much more prevalent in this region. Liverpool CBD is an ideal location for employees to live, given close proximity to the IMT and the new airport. Lurnea Public School St Francis Xavier Primary School St Josephs Catholic Primary School Nuwarra Public School Moorebank Intermodal Terminal (IMT) Lurnea High School WESTERN SYDNEY AIRPORT CHULLORA ENFIELD CENTRAL Casula Public School LIVERPOOL BANKSTOWN CAMPSIE BANKSTOWN AIRPORT The Paper Mill Primary Schools Casula High School Holsworthy High School SOUTH WEST LEPPINGTON MOOREBANK SOUTHWEST MOTORWAY WESTCONNEX HURSTVILLE SYDNEY AIRPORT KOGARAH Secondary Schools Aside from taking thousands of truck trips off Sydney s roads every day, Moorebank will showcase the future of automated freight logistics, create around 7,000 new jobs and simplify the way imported goods are transported. JASON ANDERSON MACROPLAN DIMASI
21. WESTERN SYDNEY AIRPORT ABOUT TO TAKE-OFF A FUTURE TRANSPORT INFRASTRUCTURE CENTRE Wentworthville Station Parramatta Station Harris Park Station Merrylands Station PROPOSED M12 WSEA Proposed Extension (Lots) Yennora Station Fairfield Station Guildford Station Auburn Station Lidcombe Station Berala Station Badgerys Creek Airport Precinct Industrial (p)(lots) Kemps Creek (Lots) PROPOSED M12 Bonnyrigg Living Communities (2,330 Lots) Cabramatta Station Regents Park North Rossmore (6,500 Lots) Middleton Grange (2,750-3,000 Lots) Warwick Farm Station POTENTIAL RAIL LINK Bankstown Station Liverpool Station Bringelly (5,000 Lots) Georges Fair (950 Lots) Lowes Creek (2,000 Lots) Marylands (9,000 Lots) Rossmore (9,500 Lots) Catherine Fields (5,000 Lots) Leppington Station East Leppington (4,000 Lots) Edmondson Park (7,500 Lots) Edmondson Park Station Casula Station Glenfield Station Macquarie Fields Station Moorebank Intermodal Station Holsworthy Station East Hills Station Padstow Station The Western Sydney Airport will be one of the largest infrastructure projects to be undertaken in NSW in terms of scale, global impact and generation of economic activity. Western Sydney Airport is the centerpiece of the NSW Government s Western Sydney Prioirty Growth Area Plan. The strategy aims to create new jobs in areas situated between the airport, and the Liverpool CBD with scope for an additional 21,000 office jobs and 36,000 industrial jobs. The strategy includes investment in new infrastructure to improve connectivity to Liverpool. In particular, the M12 is a new motorway running parallel with Elizabeth Drive, which will make it even easier for Liverpool CBD residents to access the WSA precinct. The NSW Government will integrate the airport into Western and Greater Sydney through the $3.6 billion Western Sydney Infrastructure Plan which will see existing transport infrastructure upgraded with the addition of new motorways and the extension of rail lines. Western Sydney Airport is at the center of NSW Government s development plan for the Western Sydney priority growth area. The economic benefits of the new airport will be experienced in Liverpool and it s surrounds itself and will come in the form of improved employment through the migration of new businesses within industries relating to transport logistics and aviation. The broader investment in infrastuructre to accommodate the new airport will further the economic growth experienced in the area firstly through it s construction followed by intended improvement to the flow of traffic and commuters in the area. As part of the Western Sydney Infrastructure Plan, the NSW Government plans to build a new motorway, the M12, to connect the Western Sydney Airport to the M7 and The Northern Road. This new motorway will direct traffic to the airport along the existing motorway network (the M4, M5 and M7), and greatly reduce the incentive for travel through Liverpool town centre. The residents of The Paper Mill will be able to access the airport directly from Liverpool town centre along Elizabeth Drive. In addition to this, residents will benefit from the extension of the south-west rail line from Leppington to the new airport. The Sydney metro project is one of the largest transport infrastructure projects currently occurring in Australia. Over the long term, there are plans to extend a new metro rail service to the Liverpool CBD, which fits into plans for more extensive services to the WSA. The train line from Sydenham to Bankstown will soon be undergoing an overhaul of 11 stations. The upgrade is forecast to reduce bottlenecks affecting others lines such as that of the T2 Airport, Inner West & South Line which run through Liverpool train station. As part of the project the NSW Government is currently in the preliminary stages of generating a concept plan for a metro line from Liverpool to Bankstown which could potentially reduce travel times by 15 minutes. These rail upgrades will improve connectivity between Liverpool, Western Sydney Airport and Sydney City.
23. LIVERPOOL CBD RENTAL DEMAND IS SET TO BOOM Apartment rentals - annual growth rates (2012-2016) MORE APARTMENTS ARE COMING, AND ARE DESPERATELY NEEDED Apartment approvals, Liverpool town centre 6.00% 1200 Growth of weekly rental rate 5.00% 4.00% 3.00% 2.00% 1.00% 5.00% 3.78% 4.03% 4.35% Liverpool LGA Greater Sydney Number of Approvals 1000 800 600 400 200 0 994 960 804 803 682 708 699 241 252 166 197 174 102 75 93 62 43 68 0 2002 2003 2004 2005 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017* 2018 2019 2020 Year ended June Source: Department of Employment 0.00% One Bed Two Bed 2017*: July 2016 to Jan 2017 Source: NSW Government Rental demand for apartments has remained strong over the past four years. There have been consistent increases in the demand for apartments. This trend is identifiable when looking at the rental growth for Liverpool. The chart above shows increases in weekly rents for one and two bedroom apartments in Liverpool LGA. Weekly rents have increased by $50 for both one and two bedroom apartments in Liverpool LGA over the past four years. One bedroom apartments have seen a cumulative 20% increase in median weekly rents. Two bedroom apartments have seen around 14% growth in median weekly rents. Such growth rates are very solid and our analysis points to much higher demand for rental properties over the next five to ten years. The local economy is in a state of flux, with contract workers looking at permanent relocation to Sydney, and facing traffic congestion and very high rentals by living in the inner west. Our research indicates that the Liverpool CBD will be highly attractive as a place to live, with ample retail, consumer services and access to a relaxing riverside lifestyle. Sharing a 2-bedroom apartment at this location is likely to be a compelling value proposition for many workers and students. This trend provides evidence that Liverpool s apartment market is responding to the same affordability pressures across Sydney so that more people are opting to rent out apartments in the short term. This is evident in Liverpool, which is experiencing strong demand for smaller sized rental properties. This evidence is consistent with our analysis which points to greater demand from workers who are now based in western Sydney but are yet to commit to buying a property. Young single workers or couples will be driving demand for 1 bedroom apartments. Looking forward, demand from university students will supplement the worker demand for rental properties, as new campuses begin operations in the Liverpool CBD. There have been more new developments over the past few years; however the numbers are not substantial. There are more apartment developments on the horizon; however the scale of supply is not out of kilter with the past few years. From here, demand will also pick up in concert with the regional economy. Moreover the market is not simply defined by the number of stock. There is likely to be a shift towards higher quality apartments, as more professionals choose to live closer to work. Currently, most apartments are located on the western fringe of the CBD, away from the Georges River and Liverpool train station. There is likely to be a shift towards higher quality apartments, as more professionals choose to live closer to work. JASON ANDERSON MACROPLAN DIMASI
25. FIRST HOME OWNER GRANT LIVERPOOL HOUSING MARKET HAS OUTPERFORMED 250 238 Housing measures for Liverpool and surrounding LGAs Detached houses median prices 200 182 198 $1,200,000 Number of grants paid 150 100 $1,100,000 $1,000,000 $900,000 $800,000 $700,000 $600,000 $500,000 50 $400,000 2012 2013 2014 2015 2016 0 2013/14 2014/15 2015/16 Source: RP Data, MacroPlan Bankstown LGA Liverpool LGA Canterbury LGA Liverpool 2170 Source: Office of State Revenue A core component of demand for new apartments in Liverpool is coming from first home buyers who either do not have children or have very young children. First home buyers are eligible for a $10,000 grant where the value of the new home purchased does not exceed the First Home Owner Grant cap of $750,000. The increasing trend in the number of grants approved for first home buyers in Liverpool shows that the Liverpool housing market is becoming ever more attractive to first home buyers. This is partly due to first home buyers being priced out of housing markets in other regions of Sydney. It is also tied to the upward trend in suburban development in the south west and west in general as infill development in former rural urban fringe development. Rising demand form first home buyers reflects the growth in local employment as professionals move into the city centre. The availability of the First Home Owner Grant coupled with the different apartment size options available at The Paper Mill make this development an attractive option for first home buyers. The increasing trend in the number of grants approved in Liverpool shows that the market is becoming ever more attractive to first home buyers. JASON ANDERSON MACROPLAN DIMASI Residential property prices across Sydney have surged since 2012, with an annual average growth rate of 11.6% across the city. There have been similar rates of growth across the Canterbury, Bankstown and Liverpool LGAs. Houses in the suburb of inner Liverpool have shown above average growth of 15.9%. These properties sit at the fringes of the Liverpool city centre, including Moorebank. The strong growth in demand for central Liverpool is partly due to affordability. It also speaks to the CBD s proximity to the region s rapidly expanding economy. The Liverpool area has experienced a substantial increase in its median house prices as like much of Sydney has over the past 5 years. This is largely attributed to substantial increase in demand for housing which has been influenced with low mortgages rates resulting from a historically low cash rate. The increase in median house prices in Liverpool is likely attributable to the substantial increase in demand for new homes in Liverpool as evidenced by the increase in First Home Buyer Grant volume. Houses in Liverpool have now moved to a medium of $700,000, up from $600,000 in 2014. Nevertheless, there is a considerable price attraction when compared to Bankstown, despite the fact that Sydney households have become used to paying more for houses that are closer to the CBD, to the extern that this has been perceived as moving up a rung in the property market. Our view is that these perceptions are set to gradually change, once the new airport is operational and the balance of growth moves to the west of Parramatta. New transport infrastructure will be a major feature in this adjustment. Liverpool will become a more central location within the Sydney economy, with the new commuting routes and travel patterns.
FINANCIAL ANALYSIS
47. INVESTMENT CASE STUDY The following Property Investment Analysis was prepared for Ty Halliday by his financial advisor. Ty is a NSW Police Officer that earns $72,000 a year. He was looking to buy a property for investment purposes. The two options below were laid out for Ty to consider, either simply saving his money in an interestbearing account or investing in property. Whilst the figures below are tailored to Ty s personal situation, this Property Investment Analysis demonstrates how it could be possible for you, whether you re buying your first investment property or expanding your property portfolio. We strongly advise and insist you seek financial advice before making any decisions. OPTION 1: SAVING CASH OPTION 2: INVESTING IN PROPERTY CLIENT DETAILS PROPERTY DETAILS Occupation NSW Police Purchase Price $475,000 Income $72,000 Deposit $95,000 Expenses $36,000 Loan Amount $380,000 Stamp Duty $17,157 ASSUMPTIONS Interest Cost 4.30% Capital Growth 6.00% CPI 2.50% AWOTE 3.50% Interest Earned 2.50% Marginal Tax Rate 32.50% INCOME AND EXPENSES Weekly Rent $440 Rental Income $22,880 Gross Rental Yield 4.82% Quarterly Levies $595 Annual Levies $2,380 Net Rental Income $20,500 Net Rental Yield 4.32% Occupation CLIENT DETAILS NSW Police Officer Income $72,000 Expenses $36,000 CASH FLOW ANALYSIS ASSUMPTIONS AWOTE 3.50% Interest Earned 2.50% Marginal Tax Rate 32.50% Inflow Year 1 Year 2 Year 3 Year 4 Year 5 Income Earned 72,000 74,520 77,128 79,828 82,622 Investment Income 2,875 3,412 3,977 4,571 5,195 Total Inflow 74,875 77,932 81,106 84,399 87,817 OUTFLOW Lifestyle 36,000 36,900 37,822 38,768 39,737 Tax 17,379 18,434 19,528 20,665 21,881 Total Outflow 53,379 55,334 57,350 59,433 61,618 Net Cash Flow - per annum 21,496 22,598 23,756 24,966 26,199 Net Cash Flow - weekly 413 435 457 480 504 TAX ANALYSIS Income 72,000 74,520 77,128 79,828 82,622 Investment Income 2,875 3,412 3,977 4,571 5,195 Assessable Income 74,875 77,932 81,106 84,399 87,817 Allowable Deductions 0 0 0 0 0 Taxable Income 74,875 77,932 81,106 84,399 87,817 Tax Payable 15,881 16,875 17,906 18,977 20,124 Medicare Levy 1,498 1,559 1,622 1,688 1,756 Net Tax Payable 17,379 18,434 19,528 20,665 21,881 Average Tax Rate 23.21% 23.65% 24.08% 24.48% 24.92% ALLOWABLE DEDUCTIONS nil nil nil nil nil nil nil nil nil nil nil nil nil nil nil Total Deductions 0 0 0 0 0 SAVING Net Assets Year 1 Year 2 Year 3 Year 4 Year 5 Cash Account 115,000 136,496 159,094 182,850 207,816 Total Net Assets 115,000 136,496 159,094 182,850 207,816 CASH FLOW ANALYSIS Inflow Year 1 Year 2 Year 3 Year 4 Year 5 Income Earned 72,000 74,520 77,128 79,828 82,622 Investment Income 22,880 24,227 25,680 27,221 28,855 Total Inflow 94,880 98,747 102,809 107,049 111,476 OUTFLOW Stamp Duty 17,157 0 0 0 0 Lifestyle 36,000 36,900 37,822 38,768 39,737 Levies 2,380 2,440 2,500 2,563 2,627 Interest Expense 16,340 16,340 16,340 16,340 16,340 Tax 13,932 15,765 17,533 19,236 20,828 Total Outflow 85,809 71,445 74,195 76,907 79,532 Net Cash Flow - per annum 9,071 27,302 28,614 30,142 31,944 Net Cash Flow - weekly 174 525 550 580 614 TAX ANALYSIS Income 72,000 74,520 77,128 79,828 82,622 Investment Income 22,880 24,227 25,680 27,221 28,855 Assessable Income 94,880 98,747 102,809 107,049 111,476 Allowable Deductions 29,936 28,550 27,487 26,790 26,604 Taxable Income 64,944 70,197 75,322 80,259 84,872 Tax Payable 12,652 14,361 16,027 17,631 19,130 Medicare Levy 1,299 1,404 1,506 1,605 1,697 Net Tax Payable 13,951 15,765 17,533 19,236 20,828 Average Tax Rate 14.70% 15.96% 17.05% 17.97% 18.68% ALLOWABLE DEDUCTIONS Interest Expense 16,340 16,340 16,340 16,340 16,340 Levies 2,380 2,440 2,500 2,563 2,627 Depreciation 11,216 9,770 8,647 7,887 7,637 Total Deductions 29,936 28,550 27,487 26,790 26,604 PROPERTY INVESTMENT - NEW Net Assets Year 1 Year 2 Year 3 Year 4 Year 5 Cash Account 5,000 14,075 41,371 69,979 100,114 Investment Property 475,000 503,500 533,710 565,733 599,677 Less Investment Loans 380,000 380,000 380,000 380,000 380,000 Total Net Assets 100,000 137,575 195,081 255,711 319,790 Disclaimer: please note that the projections listed above simply illustrate the outcome calculated from the input values and the assumptions contained in the model. Hence the figures can be varied as required and are in no way intended to be a guarantee of future performance. Although the information is provided in good faith, it is also given on the basis that no persons using the information, in whole or in part, shall have any claim against Coronation Property Co Pty Ltd, its servants, employees or consultants.
49. SAVING VS. INVESTING SUMMARY OPTION 1: SAVING CASH CASH FLOW ANALYSIS Inflow Year 1 Year 2 Year 5 Income Earned 72,000 74,520 82,622 Investment Income 2,875 3,412 5,195 Total Inflow 74,875 77,932 87,817 Outflow Lifestyle 36,000 36,900 39,737 Tax 17,379 18,434 21,881 Total Outflow 53,379 55,334 61,618 Net Cash Flow - per annum 21,496 22,598 26,199 Net Cash Flow - weekly 413 435 504 239 (90) (110) TAX ANALYSIS Income 72,000 74,520 82,622 Investment Income 2,875 3,412 5,195 Assessable Income 74,875 77,932 87,817 Allowable Deductions 0 0 0 Taxable Income 74,875 77,932 87,817 Tax Payable 15,881 16,875 20,124 Medicare Levy 1,498 1,559 1,756 Net Tax Payable 17,379 18,434 21,881 Average Tax Rate 23.21% 23.65% 24.92% ALLOWABLE DEDUCTIONS nil nil nil nil nil nil nil nil nil Total Deductions 0 0 0 Net Assets Year 1 Year 2 Year 5 Cash Account 115,000 136,496 207,816 Total Net Assets 115,000 136,496 207,816 OPTION 2: INVESTING IN PROPERTY CASH FLOW ANALYSIS Inflow Year 1 Year 2 Year 5 Income Earned 72,000 74,520 82,622 Investment Income 22,880 24,227 28,855 Total Inflow 94,880 98,74 111,476 Outflow Stamp Duty 17,157 7 0 0 Lifestyle 36,000 36,900 39,737 Levies 2,380 2,440 2,627 Interest Expense 16,340 16,340 16,340 Tax 13,932 15,765 20,828 Total Outflow 85,809 71,445 79,532 Net Cash Flow - per annum 9,071 27,302 31,944 Net Cash Flow - weekly 174 525 614 (239) 90 110 TAX ANALYSIS Income 72,000 74,520 82,622 Investment Income 22,880 24,227 28,855 Assessable Income 94,880 98,747 111,476 Allowable Deductions 29,936 28,550 26,604 Taxable Income 64,944 70,197 84,872 Tax Payable 12,652 14,361 19,130 Medicare Levy 1,299 1,404 1,697 Net Tax Payable 13,951 15,765 20,828 Average Tax Rate 14.70% 15.96% 18.68% ALLOWABLE DEDUCTIONS Interest Expense 16,340 16,340 16,340 Levies 2,380 2,440 2,627 Depreciation 11,216 9,770 7,637 Total Deductions 29,936 28,550 26,604 Net Assets Year 1 Year 2 Year 5 Cash Account 5,000 14,075 100,114 Investment Property 475,000 503,500 599,677 Less Investment Loans 380,000 380,000 380,000 Total Net Assets 100,000 137,575 319,790 BY YEAR FIVE, TY IS $111,975 BETTER OFF! Note: the above figures do not include any government incentives. Stamp duty is included in the above calculations. After Tax Cash Flow - expressed as - your cost (income) per week. These are all the monies that flow into or out of your pocket AFTER tax is taken into account. It is normally calculated for you as the pre-tax cash flow less any tax credits. (Note that the program assumes that you have applied for and received a Tax Variation and that the tax refunds are then credited for the same year in which they are based). When the loan is substantial (negatively geared), the after-tax cash flows are usually negative but gradually become positive as rents rise with inflation. It is possible to specify that the tax credits be used to reduce the investment loan (i.e debt reduction). This would mean making additional loan repayments in line with what you would have been paying in tax without the negatively geared investment.
51. INVESTMENT RISKS INVESTMENT PARTNERS There are a myriad of influences that affect the value of capital growth and rental yields in property investments. There is no a guarantee that targeted returns will be met. A prudent investor would consider the following non-exhaustive list of factors which could affect the financial performance of the investment property. The non-exhaustive list of factors which may affect the value of the investment property include: a) Changes in legislation or government policy such as stamp duty, grants, and general taxes, with respect to property may result in the investor incurring unforeseen expenses, which in turn may affect rental returns and capital growth prospects; b) Natural disasters, events causing global unrest such as war or terrorism, other hostilities, civil unrest and other major catastrophic events can adversely affect Australian and international markets and economies; c) New developments in the vicinity providing competition/alterations in demand- a sharp increase in the number of sites under construction within close proximity of the subject site may have an adverse effect, resulting in an oversupply from comparable properties, which in turn could have a negative impact on the ability of Investors to divest or sell their investment property at an acceptable price; d) Interest rate movement - investors should be aware that the performance of any investment property can be affected by the conditions of the economy (or economies) in which it operates. Factors such as interest rates, inflation, inflationary expectations, changes in demand and supply and other economic and political conditions may affect the investment property s capital growth, value and/or rental yield; e) Potential investors should be aware that general economic conditions including inflation and unemployment can impact the value of the investment property and the ability of Investors to divest or sell their investment property at an acceptable price; f) Tenant risk - there is the risk of tenant s defaulting on their obligations and costs to be incurred in enforcement proceedings and often costs in re-leasing of the tenancy; g) Insurance risk - where feasible, damage from fire, storm, malicious damage etc can be covered by insurance. However, the full extent of coverage is subject to the specific terms and conditions of the insurance policy entered into by the body corporate manager on behalf of the Investor; h) Vacancy risk - there is no guarantee a tenant will be readily found at settlement or that a tenant will renew their tenancy; and i) Timing risk - market conditions change, if at time of selling investment the market is depressed, investor may realise a loss. Established in 2012, Coronation is a familyowned property development company with more than $5.3 billion in mixed-use developments in the pipeline. Committed to developing genuine communities by utilising their greatest minds in the development process, Coronation s mission is to create urban precincts that people are proud to call home. MacroPlan is Australia s first choice when seeking solutions which add value to important property, planning and economic development projects. Their experienced team of senior economists, consultants and analysts utilise the latest information, technology and statistical applications to bring you the most accurate economic analysis. Professional advice should be sought from your accountant, financial adviser, lawyer or other professional adviser before deciding whether to invest. Coronation Property Co. Pty Ltd (and its associated entities, employees and representatives) do not provide financial advice.
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