Investment Strategies

DHA – By Terry Ryder
January 2007:

There has always been a ready market for Defence Housing Australia products .
Defence Housing Australia (DHA) is a branch of the Federal Government’s Defence Housing Authority, which builds homes for Australian Defence Force personnel.
The DHA sells the homes to investors on leaseback. This means they must be rented to Defence Force tenants for a specified term – anywhere from three to 12 years. There are 17,000 of these houses, apartments and townhouses around Australia.
Marketers extol the long leases to government tenants and the property management service offered by DHA (some properties are re-painted and re-carpeted at the end of the lease). They’re considered a safe, hassle-free form of property investment.
But capital gain is a primary property investor motivation, which means investors need to buy at the right price and get a property that will grow in value. DHA properties fail that test on two counts: they’re invariably sold at above-market values and they’re usually in locations (close to military facilities) unlikely to deliver good growth.
DHA houses are priced well above what you would pay for an equivalent house in the same area. The DHA admits this is true but claims that the security of the long-term lease covenant warrants the higher price.
Brisbane buyer’s agent Scott McGeever of Property Searchers says he found DHA properties were priced above normal market levels when he worked previously as a valuer. “None of them ever stacked up on the asking price,” he says. “They were always 5% to 10% above market value.”
DHA conditions include restrictions on how the property can be marketed, to “protect the privacy of Defence tenants”. This means inspections by buyers need to be co-ordinated with the DHA.
The issue for investors is selling during the lease period. The property must be sold with the balance of the lease term and conditions intact. This limits the selling options for the owner by eliminating owner-occupiers (who comprise the bulk of the market).
Gavin Hegney of Hegney Property Group says investors are only 25-30% of the buying market. “That security of tenure can be great for an investor but when it comes to selling it limits your market for buyers – so what you gain with one hand you more than lose with the other. It’s just too limiting.”
ENDS

Peter Campbell Notation:
Peter Campbell delivers via Pine City Properties “Rent Back” on any property in any Northside Brisbane suburb without any commissions involved for purchase or on going market.

Click here to return to Yarns of Yesteryear