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AU 2014 property forecast: your guide to picking the next boom suburbs across Sydney

Property Here - Saturday, December 28, 2013

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Kensington ... the next real estate boom suburbs are closer than you think.

Kensington ... the next real estate boom suburbs are closer than you think. Source: News Limited

SYDNEY property had a stellar 2013, with the market recovering to the previous heights of 2010 and then surging forward in the second half of the year.

Some experts believe 2014 will bring similar success, as the city settles into the growth phase of a new property cycle.

The Daily Telegraph asked some of real estate's leading experts for their 2014 predictions:

John McGrath

McGrath Estate Agents CEO

Predicts 5-10% growth

Sydney will benefit across the board in 2014, with likely growth between 5 and 10 per cent. The best performing markets are likely to be beachside and inner city suburbs.

The inner west area south of Parramatta Rd will benefit, with Petersham, Stanmore, Dulwich Hill and Summer Hill performing well. Ironically, the best bargains will be in areas like Palm Beach and Whale Beach.

They have been oversold in recent years and there is a 12-month window to get value there.

A number of suburbs will also benefit from improving infrastructure. The new rail link to the northwest will boost the Hills district and suit suburbs like Rouse Hill, Castle Hill and Bella Vista.

The new inner east light rail will benefit Kensington and Kingsford, as will the influx in Chinese buyers looking to purchase­ close to major educational­ institutions.

Scroll down for NEW HOMES IN SYDNEYS' FIELD OF DREAMS Exclusive Alicia Wood

Bella Vista in northwestern Sydney.

Bella Vista in northwestern Sydney. Source: Supplied

Chris Mourd

LJ Hooker head of network

Interest in Sydney's west

The 2013 success was driven by a shortage of quality stock, post-election job confidence and record low interest rates.

None of these will change during 2014 and a large pool of buyers will be hungry after missing out in 2013.

People will look for inner city living opportunities and Paddington and Woollahra have opportunity for growth after being subdued.

The pressure on the inner west is likely to continue.

People will look for value in places like North Ryde, which offers a convenient location and more land.

There has also been strong interest further out in areas like Guildford, Granville and Merrylands, which offer larger family homes.

Guildford.

Guildford. Source: News Limited

Granville.

Granville. Source: News Limited

Chris Gray

Empire Property Portfolios CEO Beaches the big winners

What has happened in 2013 may just be the tip of the iceberg for the next cycle.

Properties under $1 million will still be in short supply and high demand and growth will spread to more properties in blue chip suburbs and affordable regional areas. Bondi Beach will perform as there are thousands who will pay any price to live near the beach. Coogee attracts a different demographic of city workers and beach lovers who like more of a village life.

Kirribilli has always been a favourite of city workers and a unit that ticks all the boxes will always be in demand.

Cremorne offers peace and quiet with easy access to the city, cafes and shops. Balmain is one of the best for the inner west lifestyle, still with access to harbour ferries and the city.

Balmain.

Balmain. Source: News Limited

Kirribilli.

Kirribilli. Source: News Limited

Adrian Wilson

Wilson Property Agents director

Prestige to rise

Lower and mid-level markets will continue to be popular due to positive economic factors.

The top end above $2 million will gain momentum throughout the year. Suburbs within 5km of the Sydney CBD will do well due to high demand but the beaches and coastal suburbs will also have a high performance rate in 2014.

A number of prestige properties that have been on the market for several months are now trading and achieving good results, showing renewed confidence at the top end of the scale. It is only a matter of time before momentum builds and the prestige section starts to pick up.

Bondi Beach.

Bondi Beach. Source: News Limited

Tim Lawless

RP Data national research director

Low rates continue

Growth rates in Sydney are likely to slow from the highs recorded over the second half of 2013. This does not mean there will be another price correction but that growth will slow to more sustainable levels, in line with income growth.

Population growth remains strong, which implies demand for housing and is a positive for the economy.

Mortgage rates are likely to remain low in 2014, meaning investment in housing should remain strong.

On the other hand, rental yields have fallen as values rose faster than rental rates.

The typical yield for a Sydney house is now just 3.9 per cent, which will send investors looking for better value in other high-yielding cities such as Brisbane.

Another factor is affordability, as the Sydney median price is now about $700,000.

Key market segments such as first homebuyers and low to average income families have struggled to find funds for a deposit as values have grown.

NEW HOMES IN SYDNEYS' FIELD OF DREAMS Exclusive Alicia Wood

MORE than 3000 homes will be built in Sydney's southwest next year, after the state government rezoned a swathe of land in the Catherine Field precinct near Campbelltown.

NSW Premier Barry O'Farrell will today announce the rezoning, which will see 3200 homes constructed in the new suburb next year.

Figures from the state government show there has been an 80 per cent increase in the take-up of first-home owners grants on last year - with 6000 people receiving the $15,000 grant for buying new properties.

Mr O'Farrell said releasing land for new developments was important to drive down the cost of home ownership.

"We are making homes more affordable and in the process western Sydney is being transformed into a tradies' paradise, with the creation of thousands of jobs in construction," Mr O'Farrell said.

"The rezoning of land at Catherine Field being announced today tops off a bumper year in NSW, with a massive number of home approvals and a huge increase in the take-up of the NSW government's First Home Owner Grants.

"The latest figures released by the Australian Bureau of Statistics show 44,628 new homes were approved in the 12 months to October 2013, the highest level since 2005."

Developers for the Catherine Hill project will pump $30 million of infrastructure funding into the region, including an upgrade for Oran Park Drive, land for a new primary school, and the construction of a main sewerage line.

Planning Minister Brad Hazzard said land will go on sale in 2014, and the houses will be complete by 2015.

It is a win for the government, which last year,the government failed to pass landmark planning reforms, after a stalemate in negotiations with the Labor Party and crossbenchers in the upper house.

The government has gone back to the drawing board on the legislation, and has until February to find a solution

 Coogee.

Coogee. Source: News Limited

AU Should you trust real estate agents?

Property Here - Friday, December 27, 2013

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News Corporation real estate columnist Andrew Winter.

News Corporation real estate columnist Andrew Winter. Source: Supplied

DO you trust your real estate agent? Do you really? If you are not selling right now, have you trusted your agent in the past?

Before I continue, I must establish I was an agent for 25 years - but now I am a free man and can truly comment without bias.

I also fully acknowledge that like any profession there are good and bad. In the world of real estate there is certainly very good, but then there are also a number who arguably should consider leaving the profession, as people and property are just not their thing (or maybe it was their thing back in 1993).

There are also a small number who flounder their way through a career path, by luck and the support of other more talented colleagues.

Real estate agents are generally normal people. They too are homebuyers, sellers, and investors just like you. Most are hard working, forced to answer the phone 24 hours a day, any day of the year, spend half or more of their working week totally unpaid, offering free advice, showing homes to people who don't buy, appraising homes that don't get listed, spending days negotiating a deal only to have a party withdraw.

They have so much legislation they have to adhere to, constant legal updates to be aware of and the chance of getting sued if they step out of line in so many facets of their working day.

It is no easy career option.

Big commissions do happen for some, but not most, and the volume and regularity of that income is unpredictable while the modern, hi-tech buying and selling public want their agents on line and on the phone now even if that is in the middle of an evening meal on the their day off.

One very common hurdle agents have to jump is the trust barrier. Agents get the best results for their clients when there is mutual trust.

I understand that you may be wary of agents, but how many times have you said you would call an agent back, or attend an auction, or inspection or want to reinspect only to never do that?

Or not even bother to let the agent know of your changed position, not replied to their calls or emails, leaving them totally confused and with clients asking them what went wrong?

You may have stated clearly you would happily sell for $500,000, you are offered that, then change your mind and change your agent thinking you can do better - only to resell with the other agents at $490,000 three months later.

It can be easily argued that trust is an issue for agents … they sometimes have difficulty trusting you.

It is vital to select and work with only agents you are comfortable with and feel you can trust, as you need sometimes to listen to their advice and act on it.

Imagine, they could actually be right.

The only reason you are not prepared to trust an agent is that you think they will trick you into taking a lower offer or they may let you down with levels of service. Concerns I fully understand, but did you know every agency has to have a written complainants procedure - a copy of which you can ask for?

Once you have selected an agent on the basis of their track record, character, knowledge and how you feel you will work together, then please trust them.

Now that doesn't mean sit back and do nothing, accepting everything you are told, you are supposed to be in a partnership.

Ask questions, express your concerns and complain if you feel you need to.

Good agents thrive on their positive reputation so selling your home for under market value or failing to provide the services you expected is not going to help their career enhancement.

Please choose your agent carefully, then allow yourself to trust them. But this will only work if you constantly communicate and always express your concerns in advance.

Stewing over issues that the agent has no idea about could result in miscommunications. Ask questions and if the answers are contrary to what you believe, ask for clarification. You are a team and a team without trust is not likely to head for success.

A final tip, if an agent feels he can trust you too, that mutual trust will make this potentially stressful process a lot easier.

AU Pros and cons of buying a holiday home

Property Here - Friday, December 27, 2013

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Understand how much stamp duty, land tax and other holding costs you are likely to add up on a holiday home.

Understand how much stamp duty, land tax and other holding costs you are likely to add up on a holiday home. Source:Supplied

HOLIDAYS are a time of rest and relaxation and, for some with a real estate brain, a chance to think about making some money.

You may consider buying a holiday home near your favourite spot, an apartment in a resort complex, or turning an existing holiday home into a rental money-spinner.

It's tempting while having fun in the sun, but it's wise to rip off those rose-coloured holiday glasses and look at the property from a financial perspective, because there are some traps and issues that can come back and bite you.

Any property is going to cost you money, so understand how much stamp duty, land tax and other holding costs you are likely to pay.

And will you want to keep visiting the same place every holiday, or does the variety of Australia's and the world's destinations appeal more?

Apartments in resort complexes can come with high management costs that erode your income, not to mention a bigger chance of boom and bust periods that are not for the faint-hearted.

A growing trend is for people to buy property in their self-managed superannuation fund, but this is a no-no for holiday homes.

Strict rules around self-managed super prevent property owners from gaining any personal benefit from their fund assets until retirement, and there are nasty tax penalties for breaking the rules.

If turning an existing holiday home into a rental earner, you will have to pay tax on the income and deal with risks of damage, theft and injury.

Landlord insurer Terri Scheer Insurance says even the most careful holidaymakers can take a more casual approach to caring for a rental property when in holiday mode.

"Risks may include malicious and accidental damage, theft and legal liability issues if a holidaymaker injures themselves at the property. Such events could also lead to a loss of rental income while damages are under repair,'' says Terri Scheer Insurance executive manager Carolyn Majda.

She says landlords should inspect holiday homes regularly to check lights, appliances and smoke detectors are in good working order, and a detailed condition report - with photos and videos of the property and its contents - can help with potential insurance claims later.

Anthony Keane is editor of Your Money.

AU Tenants and unit owners: A practical guide to barbecuing

Property Here - Thursday, December 26, 2013

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Not everyone has the luxury of a large yard to barbecue in over the summer season, however those with a balcony can still enjoy a good cook up provided they take care around certain risks.

Archers Body Corporate Management’s managing director, Colin Archer, warns that unit occupants should be careful when cooking on balconies to ensure gas cylinders are checked regularly. This should help avoid fire or injury.

LPG and barbecue fires are largely caused by wear and tear on gas hoses and burners, or unsafe use of barbecues, said Archer.

In confined spaces, the risks can often be maximised due to the consequences of fire and explosions in small areas.

“Every year the Fire Service is called out to fires in unit complexes caused by barbeques that are faulty or have been used incorrectly,” he said.

“These fires can cause extensive damage to the property, or worse, injury or fatalities.”

Bodies corporate should check communal barbecues, yet those on balconies are the responsibility of the tenant. They should still comply with by-laws.

LPG cylinders should never be used in confined spaces, and the gas always needs to be turned off after use.

Archer’s tips for barbecuing in the holiday season:

  1. Ensure smoke is not disturbing neighbours or damaging the walls or paint.
  2. Ensure smells are not excessive. Positioning the barbeque in an area where there is adequate air flow will help with this.
  3. Check to ensure the gas bottle and connections are safe, in good condition and checked by a professional regularly.
  4. Ensure noise from visitors is within an acceptable level and ceases at a reasonable hour.
  5. Ensure the balcony is not overcrowded and any rubbish from the BBQ and guests is not thrown over the balcony.
  6. Ensure the balcony and barbeque is cleaned after use and food scraps are disposed of, these can attract pests or rodents.

AU Holiday break ins: Protect your property

Property Here - Thursday, December 26, 2013

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The threat of burglary can often escalate at Christmas time, and in the days following up to New Years, when many are away holidaying or spending their nights at relatives homes, and property owners should be aware of the risks and potential mitigation, warns Angus Raine, executive chairman and CEO of Raine & Horne.

While surveillance has helped in recent times, there are still a number of precautions that often get overlooked by tenants and home owners alike.

Ensuring doors have high-quality locks, such as deadlocks, as well as ensuring windows have keyed locks or security grills, should be on your list, said Raine.

“If your home has sliding doors or windows, a simple metal or wooden rod wedged in the cavity can prevent them being opened from the outside," he said.

For those with the time, installing a security alarm and locking up the power box to prevent tampering with the system, including security lights and ensuring gates are locked and gaps in fences are repaired can help.

Also presenting an image that the home is occupied over the period can be a simple yet helpful deterrent.

“Leaving blinds or curtains in normal positions and installing a sensor light to flick on when someone approaches can ward off aspiring intruders,” he said.

“Set a timer to switch on your lights and a radio or television at different times, while hanging some old clothes on the line and leaving a pair of shoes at the front door are other ways to give the impression your home is occupied.”

He also said that home owners should turn down the ring tone on their home phone so that when it rings out, it won’t be obvious to those around. Leaving a message on the answering machine or voicemail telling those who call you are away is also not a good idea.

“You should also suspend newspaper or magazine subscriptions during your absence,” he said, for those gone for longer periods of time.

Trustworthy neighbours can also be good allies – looking out for unusual behaviour and also putting your bins out or moving your mail as necessary.

The following tips can be applied all year round, said Raine.

  • Don’t leave spare keys in obvious places;
  • Put small valuables such as cash or jewellery in a safe deposit box;
  • Mark or engrave valuables with your driver’s licence number and keep a list and photographs of them;
  • Keep home and contents insurance up-to-date.

AU Low interest rates fueling Sydney market, but elsewhere less so

Property Here - Friday, December 20, 2013

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With most mortgage holders on variable rate products in Australia, our housing markets are sensitive to interest rates, and all things being equal lower rates could result in dwelling prices being re-set higher (and vice-versa).

However, other things are rarely equal.

Over the past two decades I've watched Britain turn into a dramatically two-speed housing market comprising a booming London market (and its surrounds) and the rest, where prices have essentially been soft now since 2007.

London is a global city and The City has continued to thrive as a financial centre, but as a developed country Britain's manufacturing and other industries have floundered.

Property investors who chased yields investing in far-flung areas and the north of England got badly burned, and many never recovered, while London prices are at record highs and have risen relentlessly through UK downturns and recessions as we charted here and have reproduced below.

In particular, note the difference between the massive out-performance of prime-location London stock, the lower-demographic London boroughs and the stagnation of markets across the remainder of England and Wales.

Source: Land Registry

I've suggested for years that Australia could follow a similar path, with the major capital cities attracting a level of interest from domestic and international investors in their supply-constrained inner suburbs, but other locations struggling badly as households become disinclined to take on ever-increasing household debt levels.

Specifically, I've felt inclined to invest in Sydney's inner ring suburbs, but rarely to venture outside that zone.

Low interest rates have seen prices in Sydney growing fast: up by around 18% since their last trough.

The worst performing capital city continues to be Adelaide, where I've been this week for fire and brimstone of Ashes cricket...or in England's case, a rather dis-spirited imitation thereof.

It's no real surprise to me that Adelaide has been a lacklustre market in recent years. There is so much more land potentially available to be developed close to the South Australian capital, population growth is relatively moderate, investor interest is lower than elsewhere and overall there is less upwards pressure on prices.

New stock is being built, which can drag median prices higher, but existing dwellings have seen little in the way of capital growth for more than five years.

I noted a similar dynamic in Port Augusta on my South Australian travels this week: it was quite clear that there are acres of land for sale and zoned for residential development, although it may be doubtful as to how quickly it will be sold due to the lively whiff at that end of town.


Source: RP Data

RP Data's dwelling price index is currently a sea of green text, with prices rising almost everywhere thanks to Australia's presently low interest rates. However, don't expect increasing household debt to carry prices forward in future.

As the below chart clearly shows, household debt levels are no longer rising as a percentage of disposable income as they once did, with the percentage peaking out more than half a decade ago.

Household Finances graph

This chart should be of great concern to investors in certain areas. Times are tough, for example, in parts of South Australia following on from the shelving of BHP Billiton's planned $30 billion Olympic Dam expansion.

I drove down that way this week from Alice Springs and according to the local rag I read in Roxby Downs a decision might be expected on future expansion plans in approximately two years' time with BHP considereing new and cheaper designs for the expanded operations. However, you'd presumably want to see copper prices stronger than the lacklustre ~US$3.20/lb we've seen this week in order to see the proposed project expansion attract a definitive green tick.

While an expansion of Olympic Dam a few years down the track could certainly be a net plus for the state, any direct link with real estate prices in Adelaide which is located more than 500 kilometres of barren land away may be somewhat tenuous.

Meanwhile, businesses such as Holden are in a world of bother with closure threats and pleas being lodged for government support of the car industry. With Australia's dollar having been so strong for so long, manufacturing industries have been hurting, and some exporting companies have also gone to the wall. 

This article in The Conversation posed this week whether Adelaide's economy could be damaged beyond expectation by Holden's potential closure, which also raises serious questions for the outlook for dwelling prices in the city:

"A second part of the debate are the implications at a regional level – what impact is there on the economies of regions that depend heavily on the automotive sector, specifically Melbourne and Adelaide?

"Our study on the contribution that the GMH manufacturing facility in Elizabeth makes to the South Australian (and northern Adelaide region) economy was recently presented to the Productivity Commission inquiry. There are currently 1,750 jobs at GMH and the operations purchase A$530 million of supplies per year from core suppliers based in Adelaide. Through direct and first round (GMH and its direct suppliers) activities the operational spend of GMH in 2013 is estimated at A$750 million, contributing A$400 million to South Australia’s Gross State Product (GSP) and supporting 4,340 jobs.

"Then there are the full flow-through effects of this activity (such as the purchases of suppliers, and spend of wages and salary income). When modelled, the total economic activity linked to GMHs operations was estimated in 2013 to be a A$0.9 billion contribution to GSP, and 9,500 jobs and a contribution of $53 million per year to the state taxation base. (The model used a simple input output framework, which evidence supports as sufficient for order of magnitude long run modelling of impacts at the regional level). But if GMH were to cease activity, the impact would ultimately depend on how the local economy responds."

AU Land tax campaign launched

Property Here - Monday, December 09, 2013

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 Joe Lenzo, Executive Director WA of the Property Council of Australia in his offices in Perth.

Joe Lenzo, Executive Director WA of the Property Council of Australia in his offices in Perth. Source: News Limited

INVESTORS with big property portfolios will be celebrating if a new campaign to reduce land tax comes to fruition.

The Make Land Tax Fair campaign was launched by the Property Council of Australia's WA branch last week.

The campaign comes on the heals of an announcement that the State Government would look to secure WA's land tax revenue with new legislation in 2014, following a State Administrative Tribunal decision about land tax for a retirement village.

More WA Real Estate news

Property Council WA executive director Joe Lenzo said the current tax system was unfair as some property owners were hit with land tax while others didn't pay.

"The issue here is that the tax is lopsided and punishes some small businesses, but exempts others, and this depends on whether you rent or lease a premise or own the property direct," he said. "It must be fixed and made fair."

Mr Lenzo said land tax was paid by investors and big business owners - those with properties that were not used as their primary residence. Those with multiple properties were taxed exponentially more for each successive property.

Following this year's federal budget cuts, WA saw a 12.4 per cent land tax rise.

According to the Property Council, 6 per cent of land tax payers were paying 80 per cent of WA's $700 million annual land tax bill.

"The principal payers of land tax currently are property owners and investors who have large property holdings, such as shopping centres, office buildings, car yards and industrial warehouses," he said. "The key here is that these owners will pass their land tax costs on to the small businesses and tenants that rent or occupy these premises."

About 116,000 land owners will be subject to land tax in 2013-14.

AU What today's home buyers wants

Property Here - Tuesday, November 19, 2013

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Bidders at the auction in Concord, Sydney. Picture: Mitch Cameron

Bidders at the auction in Concord, Sydney. Picture: Mitch Cameron

WHAT those features are depends in part on the home's price, size and geographic locale as well as who the buyer is; owner-occupier, investor, or developer.

Some features are more beneficial than others, depending on those categories, and for every feature that appeals to one buyer, there will be another purchaser who wants the exact opposite

Land size: Owner-occupiers generally look for a relatively large block of land, especially if they are considering having a family. However, tenants hate it. A large block of land means more time that they have to spend maintaining the property. They don't want to spend their weekends mowing the landlords' lawn and watering her flowers. Investors generally don't want properties on large blocks due to the maintenance and upkeep issues. However, developers are very interested in the size and dimension of the block.

Size of house: Many tenants prefer larger homes and they are willing to pay more rent for it, where they won't pay more rent for a larger block of land. Owner occupiers try and buy as large a home as their finances will permit. Investors aren't interested in large homes with five and six bedrooms as these can be very hard to rent. For developers, they'd prefer that there wasn't a home on the site as they just want the land.

Period/character style: Owner-occupiers can fall in love with old style houses and pay a premium for them, especially if they are updated. It may seem remarkable that some people will pay more for a 140 year old house than a 40 year old house. Many tenants don't like old houses; they prefer brand new properties. Generally the condition of these properties is great and they have all the modern conveniences that people are looking for such as air conditioning, dish washer and two bathrooms. Commonly investors will also shy away from old properties due to the maintenance issues such as salt damp and cracking. Developers often aren't interested in period style homes for two main reasons. Firstly, they are regularly outbid by the owner-occupier who has fallen in love with the stone front, solid timber floors, fireplaces, high and ornate ceilings. Secondly, there is the risk that these properties might be heritage listed which restricts the development opportunities.

Views: Owner-occupiers love views, especially sea views. Tenants like them but won't necessarily pay extra rent for a view. Short-term/holiday renters are willing pay a huge premium for sea views. Some developers will also pay a premium for views, especially if they are views of water or the CBD. Investors aren't fussed by properties which have views as they realise they will have to pay more for a property with a view but tenants won't necessarily pay any extra rent.

AU SMSF property investors exposed to rule changes

Property Here - Friday, November 15, 2013

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Self-managed super has never had much exposure to real estate. File photo

Self-managed super has never had much exposure to real estate. File photo

THE $530 billion squirrelled away by mums and dads in self-managed super fund has never had much exposure to real estate, nothing they need to lose sleep over … until the government changes the rules.

Australian governments of all persuasions have long had a frustrating habit of changing the rules on superannuation as frequently as most of us change our clothes.

Well, they're at it again, but at least this time it's something that is positive for property investors.

The Coalition government's decision this month to axe Labour's plan to slap a tax on superannuation pension earnings above $100,000 appears on the surface to benefit rich retirees, but in reality is a nice boost for the growing army of self-managed super fund members who are buying real estate in their funds.

Financial advisers say the axed tax would have been extremely difficult to collect, and any high-earner with a decent financial planner would have been able to use advanced strategies avoid paying it, leaving the average Aussie who buys a property in their SMSF with the biggest financial hit.

That's because property is a large asset that can't be sold in pieces like shares can. So under Labor's system, someone who bought a $500,000 investment property in their SMSF and sold it for, say, $2 million 20 or 30 years from now would have been hit with a tax bill of around $200,000.

Axing Labor's plan, as the Coalition has done, means super pensions keep their tax-free status, so the property-investing SMSF member pays zilch.

There are now more than 500,000 SMSFs in Australia, holding more than half a billion of assets, and a fast-growing proportion of that is residential property.

The latest changes are good news for them, but are unlikely to be the last lot of changes we see to super, so it's worthwhile not putting all your eggs in one basket, especially if they are shiny, golden nest eggs.

People thinking about buying property within an SMSF have also been warned recently about the dangers posed by property spruikers, rip-off merchants and so-called advisers willing to "help" them out. That's probably just as big a threat than any government tax changes, as a bad property deal can cost a fortune.

The government will always change the rules. You will always change your clothes. Just be careful you don't lose your shirt.

AU Capital city house prices rise in September quarter

Property Here - Monday, November 04, 2013

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Capital city house prices rose 1.9 per cent in the September quarter.

Capital city house prices rose 1.9 per cent in the September quarter.

AUSTRALIAN capital city house prices rose 1.9 per cent in the September quarter, official data showed.

That followed a rise of 2.7 per cent in the June quarter.

In the year to September, the house price index rose 7.6 per cent, the Australian Bureau of Statistics said on Monday.

The gains are being riven by Australia's two largest housing markets, Sydney and Melbourne and may raise concerns that record low interest rates are fuelling overheating in the country's property market.

However, economists had expected a slightly higher rise of 2.2 per cent for the quarter.

Capital city house price changes for the 12 months to September

Sydney - 11.4%

Melbourne - 6.8%

Brisbane - 4.1%

Adelaide - 1.0%

Perth - 8.6%

Hobart - 1.1%

Darwin - 6.0%

Canberra - 0.6%

Source: Australian Bureau of Statistics