Australian Property Market Update

Disclaimer

This presentation is not to be considered legal or

financial advice. The advice provided on this presentation

is general advice only. It has been prepared without

taking into account your objectives, financial situation or

needs. Before acting on this advice you should consider

the appropriateness of the advice, having regard to your

own objectives, financial situation and needs.

Australian Property Market Update

• Purchase Process

• Changes to Stamp Duty for Foreigners

• Changes to FIRB

• Australian Dollar vs. Malaysian Ringgit

• Australian Property Bubble?

• New Project Launches

Reserve Lot & Booking Fee

Issuance of Contract of Sale

Contract Signed 10% Deposit PaidExchange of

Contract of Sale

Pre-Settlement & Inspection

SettlementKeys Handed To

Client

Engage Conveyancer If Required

Apply FIRB If Required

Apply For Loan If

Required

The Purchase Process

Stamp Duty For Foreigners

• Latest budget update• State of Victoria only

(Melbourne)• 3% surcharge of total

property price• Includes off-the-plan

projects• Comes into effect July 1

2015 based on unconditional contract date

Stamp Duty For Foreigners

• May apply to residential property purchased by developers who have majority foreign ownership (and will again apply in relation to residential property sold by those developers to foreign buyers)

• It may also apply to indirect acquisitions, such as the acquisition of shares or units in companies or trusts that hold residential property in Victoria

• It is expected also to apply to vacant land zoned for residential use.

Stamp Duty For Foreigners

OFF THE PLAN PURCHASE Before July 1 After July 1

Price 403000 403000

Stamp duty 1984 1984

Stamp duty surcharge (3% property price) 0 12090

TOTAL 1984 14074

Why The Increase?

• State Treasurer Tim Pallas said it was justified because nonresident foreigners had not paid their fair share of taxes towards services and infrastructure.

• the “modest surcharges” are a fair way to ensure foreign property investors contribute to the state’s infrastructure.

• “Foreign investment is good for Victoria and it ultimately creates jobs,” he said.

• “But we do need to recognise there are pressures upon our property market.”

What Analysts Say

• Property Council of Victoria deputy executive director Asher Judah said that foreign developers who bought land for housing would be forced to pass on the extra costs to ordinary Victorians.

What Analysts Say

• “Increasing these taxes will only serve to hamper investment in Victoria’s housing stock and in turn affect Victorian jobs.”

What Analysts Say

• Housing Industry Association executive director Gil King said the rental market would be hit because foreign investors would either be discouraged by the move or put up prices to recoup their costs.

Developers vs. The Government

• Property developers are railing against the Victorian government's plan to levy higher taxes on foreign buyers

• “Double dip” taxation on land acquisition by these developers

Developers vs. The Government

• “The Victorian government is yet to come out with its final definition of what constitutes a foreign investor but we expect Mirvac will be caught in the net, as will all our major peers,” the chief executive of Mirvac Group's development business, Brett Draffen, said.

Changes To FIRB

• Foreign Investment Review Board

• Protect Australian citizens and residents

• Foreigners can only buy:• Off the plan• Extensively refurbished buildings• Land to build on (within 24 months)• Knock down and rebuild

• All subject to FIRB approval

Changes To FIRB

• Property < AUD1 million : AUD5000

• Property > AUD1 million :AUD10,000

• AUD10,000 for ever additional AUD1 million

• New fees will come into effect starting December 1 2015

OFF THE PLAN PURCHASEBefore July 1 After Dec 1

Price 403000 403000

Stamp duty 1984 1984

Stamp duty surcharge (3% property price) 0 12090

FIRB application fee 0 5000

TOTAL 1984 19074

Why The Changes To FIRB?

• AUD39 million mansion bought illegally by Chinese billionaire

• Forced to sell within 90 days• FIRB getting more strict on

foreigners• Currently when a property is

purchased and an FIRB application is submitted the Australian government carries it out for free.

New Land Tax For Foreigners

• Victoria only• 0.5% value of property/ year• Foreign nationals who

purchase real estate in Victoria, but do not “ordinarily reside” in Australia

• Details still being worked out

• Comes into effect 1 January 2016

Australian Dollar vs Malaysian Ringgit

Australian Dollar vs US Dollar

Iron Ore Prices

Iron Ore Prices

Interest Rates

• HSBC• Aussie dollar still over valued• At 2% cash rate, AUD should be trading around US70 cents• Currently trading at US80 cents• Caused by recent weakness in USD as markets price in later

start to US interest rate increases• “10% to 15% too high for the RBA”

• RBA can decrease AUD by:• Further reducing interest rates• Publically declaring that AUD is overvalued

Interest Rates

• US Interest rates• US interest rates will definitely go up in the near future• AUD and MYR will fall• AUD most speculative currency so could fall more than MYR

• Bank lending rates• Variable and fixed rates almost the same• Same 3 year fixed rates same as variable rate• Good for investors who think the interest rate will increase

Australian Property Bubble?

• What would cause a big crash?• Economic crash• Unemployment rate

increases• People rapidly start selling

homes

Australian Property Bubble?

• A housing bubble doesn’t just mean high prices — prices can just be high in response to basic supply and demand

• A housing bubble is defined by rapid rise in property prices, where house prices are a long way away from what is fundamentally considered justified and generally occur when highly leveraged speculators enter a market for short-term growth.

Australian Property Data

Australian Property Data

Australian Property Positives

• Population growth• Australia importing people

to replace retiring baby boomers

• Population growth expected to grow 10% in next 5 years

• Wealth of the nation• Foreign investors pouring

money into Australia• Economical and political

stability• Among one of the

wealthiest nations in the world

Investor Benefits

• 5-8 minutes walk from main train station

• 5-8 minutes walk from shopping mall

• Rental guarantee

• Near potential tenant pool

• Low AUD

• Low interest rates

Thank YouPlease see one of our sales consultants for more information

on any of our projects

William.lee@australproperty.com

+6 018 2388 972