Posted to Herald Sun (9/10/2011) on 9/10/2011 at 12:56 PM
Commenting on “Home owners' $300m blow”
http://www.heraldsun.com.au/news/more-news/home-owners-300-blow/story-fn7x8me2-1226162101573
Where have all the overseas students, mainly Chinese and Indians, gone to? Melbourne CBD is no longer the same on weekdays and weekends.
Most apartment investors are not owner occupiers. In fact, many of the high rise apartments are refurbished or built for special purpose – student accommodation! The change of Federal Government policies on visas and international education kill off at least 50% of the lucrative $18.8b international education industry, and even Ted Baillieu is feeling the pinch for the state revenue!
End Part 1 of 2
The demand of accommodation was not generated from local students, but those from overseas coming to study in private colleges, TAFEs and universities. Many of the apartments were sold off-the–plan to buyers overseas through exhibitions or seminars conducted in their country of origin. Investors, local and overseas, were attracted to rental guarantee, which unfortunately translates to inflated purchase price. However, due to lower interest rates couple of years ago, the rental return was far too attractive to walk away from.
Local investors can also offset their loan repayment by negative gearing. However, if rental demand decline due to shortage of student tenants, negative gearing becomes a big financial loss. Compounding the problem is that parents of overseas students are allowed to purchase properties when their children are studying here, on condition that the properties have to be sold after their completion of study. With hardly any new students coming, the demand of second-hand properties has dwindled, and therefore sold at a loss.
End Part 2 of 2
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Commenting on “Home owners' $300m blow”
http://www.heraldsun.com.au/news/more-news/home-owners-300-blow/story-fn7x8me2-1226162101573
Where have all the overseas students, mainly Chinese and Indians, gone to? Melbourne CBD is no longer the same on weekdays and weekends.
Most apartment investors are not owner occupiers. In fact, many of the high rise apartments are refurbished or built for special purpose – student accommodation! The change of Federal Government policies on visas and international education kill off at least 50% of the lucrative $18.8b international education industry, and even Ted Baillieu is feeling the pinch for the state revenue!
End Part 1 of 2
The demand of accommodation was not generated from local students, but those from overseas coming to study in private colleges, TAFEs and universities. Many of the apartments were sold off-the–plan to buyers overseas through exhibitions or seminars conducted in their country of origin. Investors, local and overseas, were attracted to rental guarantee, which unfortunately translates to inflated purchase price. However, due to lower interest rates couple of years ago, the rental return was far too attractive to walk away from.
Local investors can also offset their loan repayment by negative gearing. However, if rental demand decline due to shortage of student tenants, negative gearing becomes a big financial loss. Compounding the problem is that parents of overseas students are allowed to purchase properties when their children are studying here, on condition that the properties have to be sold after their completion of study. With hardly any new students coming, the demand of second-hand properties has dwindled, and therefore sold at a loss.
End Part 2 of 2
Read related comment by clicking here