There are a number of factors, both specific to property investing and an individual property and of a general nature relating to the economic climate which may affect the future performance and/or the value of the property capital growth and rental yield.

There is no guarantee that an Investment Property will achieve the investor’s objectives that targeted returns will be met or that future strategies will be realised. Prospective investors are advised that this list of risks (attached) might not be exhaustive, and prudent decision making on behalf of the potential investor is required to ensure all considerations are taken into account.

Prior to deciding whether to invest in investment property, potential investors should read the following risk and, in particular, consider the risk factors that could affect the financial performance of the investment property.

Potential investors should specifically consider the factors contained to fully appreciate the risk associated with an investment property. You should carefully consider these factors in light of your personal circumstances and seek professional advice from your accountant, financial adviser, lawyer or other professional adviser before deciding whether to invest.

Blue Sky Private Real Estate (and its associated entities, employees and representatives) do not provide financial advice.

GENERAL INVESTMENT PROPERTY RISK

The factors which may affect the value of the Investment Property include:

• General economic conditions such as inflation, inflationary expectations, unemployment and general movements in
wages and salaries, which result in a general downturn in the property market

• Movements in interest rates which may impact on the attractiveness of property compared to other investment opportunities and may impact upon the new returns achieved by the investment

• Demand for facilities offered by the site

• Competition from new developments and/or refurbishment of other properties could potentially affect the demand for the investment property and thus the returns generated

• Natural disasters, social upheaval, events of terrorism or war involving Australia or events causing global disruption

• Changes in the law or government policy which may affect the investment or the attractiveness of an investment

GENERAL ECONOMIC CONDITIONS

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.

Potential investors should be aware that general economic conditions can impact the value of the investment property
and the ability of investors to divest or sell their Investment Property at an acceptable price.

COMPARABLE SITES

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.

RENTAL RETURNS

Rental returns and/or the resulting yields can fluctuate as they are affected by several market forces. Rental returns may increase or decrease as a result of income, employment, inflation, investment in a given area, demand and supply.

TENANT RISK

While rental leases impose legally enforceable obligations on the tenant, it is possible for them to default on their obligations and thus for costs to be incurred in enforcement proceedings and, if necessary, the re-leasing of the tenancy. To mitigate some of these risks and/or reduce their severity, an investor should apply for Landlord Insurance.

VACANCY RISK

An investment property may incur vacancy from time to time. There is no guarantee that a tenant will be readily found at settlement or that a tenant will renew their tenancy.

TIMING RISK

If market conditions are depressed when an investor chooses (or is forced to) sell their investment property, the investor may realise a loss.

RE-SALE MARKET RISK

There is no guarantee of an established external secondary (or re-sale) market for the sale of the investment property. The investor may arrange for their own private sale by traditional means (via a local real estate agent). There is no assurance that an active market will develop or that the value of the investment property will not fall below the original purchase price.

TERM RISK

Investing in property is a long term investment and should be treated as such. While the proposed life of investment property is expected to be at least one cycle (seven to ten years), this ultimately depends on the ability to sell or refinance the investment property, in accordance with the investors planned strategies.

INTEREST RATE RISK

There is a risk that unfavourable movements in interest rates lead to increased interest expenses.

SETTLEMENT DEFAULT RISK

If an investor is unable to fulfil their obligations (as per the contract of sale signed) and settle the property after an unconditional exchange for whatever reason, the investor puts themselves at risk of incurring penalty interest, forgoing their 10% deposit and (in extreme cases) being sued by the vendor for loss and damages (as per the terms and conditions outlined in the contract of sale).

FEDERAL, STATE AND/OR LOCAL GOVERNMENT RISK

Changes in government policy, such as legislation, negative gearing, 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.

MAJOR SOCIO-EVENT RISK

Terrorism, war, other hostilities, civil unrest and other major catastrophic events can adversely affect Australian and International markets and economies, which may have direct and/or indirect effects on the investment property, its ability to meet the Investor’s targeted returns and its ability to execute further growth strategies.

DEVELOPMENT RISK

Development and construction involve higher risks than traditional direct property investment. These activities involve the Developer or Vendor actively taking and managing a range of risks including rezoning, planning approval, construction, leasing and sales. Each activity can have significant positive or negative impacts on the Developers returns due to factors such as changes to forecast income, delivery and finance costs and programs to sell or lease investments.

Developments may also involve the following additional risks:

• Planning approvals may be delayed, denied or granted in a modified form, thereby causing delays or preventing the project form proceeding.

• Cost overruns on the budgeted construction works or other anticipated project expenses.

• Delays in completion of works due to unforeseen circumstances.

• Inability of contracted builders to complete the works due to dispute, industrial action or insolvency.

• Increased costs due to environmental issues such as land contamination.

INSURANCE RISK

Damage to the Investment Property as a result of fire, storm, malicious damage, earthquake etc. can be covered by insurance, where feasible. The full extent of the coverage available from insurance is subject to the specific terms and conditions of the insurance policy entered into by the body corporate manager on behalf of the investor. However, as the investor you should verify that this has occurred.

VALUATION RISK

This valuation is current as at date of the valuation only. The value assessed herein may change significantly unexpectedly over a relatively short period (including s
a result of general market movements or factors specific to the particular property). We do not accept liability for losses arising from such subsequent changes in value. Without limiting the generality of the above comment, we do not assume any responsibility or accept any liability where this valuation is relied upon after the expiration of three months from the date of the valuation, or such earlier date if you become aware of any factors that have any effect on the valuation.