After The Bomb Went Off

"After The Bomb Went Off" is a recent QLD property investing book written by Barry Pickering.

I listened to Barry speak this morning and found a lot of useful insights. The following is from my written notes and his book which I bought today. The book has some interesting statistics which I haven't included here. Basically he is very positive on the QLD market (understandably) and not so keen on Sydney or Melbourne which I find interesting, he deals mainly with units.

Barry Pickering is the CEO of Onsite Direct, a Gold Coast based management rights and property investment group.

http://www.barrypickering.com.au/
http://www.onsitedirect.net/Black/index.cfm

* Onsite Direct has 140 staff and a turnover of $12 million last year.
* Barry is a statistical and a RE junkie, he is a member of RE anonymous
* 12k people currently recieve his free e-mail newsletter on property.
* He loves studying demographics and working out how trends will affect property.
* Only two things drive property. Supply and Demand.

1970:
Average house price: 12k
5.5% yield
$13/week rent
$55/week average income
Rent is 23.63% of average income
Kingswood's sell for 2k
Milk cost 8 cents

2000:
Average house price: 180k
5.5% yield
$190/week rent
$780/week average income
Rent is 24.35% of average income
Commodore's sell for 30k
Milk costs $1.19

2030:
Average house price: 2.7 million
5.5% yield
$2855/week rent
$11,700/week average income
Rent is 25% of average income
Kingswood's sell for 450k
Milk costs $18

The formula for an average weekly income for life:
5 x Investments of 200k = average weekly income for life.
* Investments can be anything, not just property.
* The 5th investment pays for the expenses of the first 4.

* Of the 12k subscribers to his newlsetter the most common question asked is "Where is the next hotspot?"
* You can identify your own hotspots using demographics.
* There has been a trend of "Bush to Beach" for the last 9 years or longer. In 1976 Junee had 5k people and Hervey Bay had 5k people. Now Junee has a population of 5k and Harvey Bay 45k.
* Eastern seaboard is a great place to invest. particulary SE QLD.
* If you created a "population central point" for Australia. This centre is moving 2 kilometres per year northwards!

* Demographics dictate demand for infrastructure and infrastructure raises price of real estate.
* Average people per house in QLD is 2.09, in Sydney it's 1.1. Sydney is oversupplied with houses.
* 82k people a year are moving to SE QLD
* More people are living alone. 1+1 units are potentially an excellent investment.

* Baby boomers (Born 46-61) are moving to the coast, seeking a "Manhattan" lifestyle.
* Gen X'ers are losers. They don't know what they want. Wandering aimlessly through life. The "Seinfeld" and "Sex In The City" generation. Trying to find themselves. The renovation generation. Younger X'gens are taking better control of their retirement planning, older X'gens aren't.
* Gen .com (Gen Y) are unique. Children of Boomers and X'ers. Very happy to "stick it up us" they are well educated and are dealing well with their own finances.

* 2006 will be a defining point in our history. 4 million people retired. X'ers and .coms will be trying to bump off the retiree's to save on their pension payments
* There is a forecast natural decline in the "births over deaths" figure for Australia. Currently we are +200k/year, by 2050 this will be neutral. Immigration will be a critical issue to be dealt with by governments.

*We live in the most beautiful part of the world in SE QLD. Barry is from Victoria and travels extensively and still believes this. For proof visit http://www.sunrays.kamloops.net/links/misc/tokyo/tokyo_water_park.htm and compare it to the Gold Coast beaches

This book also has an excellent links section which I will post seperately.

Barry Pickering finished with this quote:

"in times of change the learner shall inherit the earth, while the learned shall find themselves beautifully equipped for a world that no longer exists."

WaySolid

Interesting if not encouraging reading given that we've recently purchased a couple of IPs in QLD after deciding to give Syd and Melb a miss. However :

WaySolid said:

2030:
Average house price: 2.7 million
5.5% yield
$2855/week rent
$11,700/week average income
Rent is 25% of average income
Kingswood's sell for 450k
Milk costs $18

Click to expand...

450K for a Kingswood in 2030 ? Shouldn't that be 450c ?

Interesting post, WaySolid. I can't help but think his 2030 figures are way out though.

2030:
Average house price: 2.7 million
5.5% yield
$2855/week rent
$11,700/week average income
Rent is 25% of average income
Kingswood's sell for 450k
Milk costs $18
__________________

Given that around 6% of people will still be on some kind of benefit (many boomers who have pretty much no super to live on, and the usual amount of UE'ed people), how much is their benefit going to be? How much will they be able to contribute to rent?

A $608,400 median income? He's dreaming. Oh well, I guess we'll have to be around in 30 years time to see if he's right.

And I guess a Kingswood would be a vintage car by then, so it might be worth 450k- if there's any left

Cat

Barry has a lot of one liners.

Cat09Tails said:

Interesting post, WaySolid. I can't help but think his 2030 figures are way out though.

2030:
Average house price: 2.7 million

Click to expand...

And who in 1970 would have expected that by 2000 their house would have increased in value from $30K to well over 600K - not my folks that's for sure!

If the average house cost $350K & you work on a 7% average annual yield (ie: doubling in value every ten years)....

30 years - or three doubles - makes the house worth $2.8M in 2034.....which would be a little less than the $2.7M figure in 2030.

It may sound unbelievable for the average house to cost $2.7M in less than 30 years....

But based on the performance of housing over the past 100 years it's entirely possible and even could be considered likely!

Cheers,

Aceyducey

After The Bomb Went Off" is a recent QLD property investing book written by Barry Pickering.


Well Way,
Back off, after the bomb, lovley title,
Back off and get the hell out of here...... the bomb was real.... are you ??
ab

astroboy said:

After The Bomb Went Off" is a recent QLD property investing book written by Barry Pickering.


Well Way,
Back off, after the bomb, lovley title,
Back off and get the hell out of here...... the bomb was real.... are you ??
ab

Click to expand...

Astroboy,

"After The Bomb Went Off"

Thats the title of the book. The bomb being the RE boom 01-03 in SE QLD, it's a recent book, I think it was published earlier 2004. http://www.barrypickering.com.au/products.htm

It took me some minutes to work out what you might be getting at, is it the link to the recent Jakarta bombing? Tragic event. I hadn't even considered that when posting, I was considering RE only. Of course I wouldn't make light of that incident. Our language appears to have been attacked as well.

Now lets keep the discussion related to property!

Cheers,
WaySolid

median vs average

Cat09Tails said:

Interesting post, WaySolid. I can't help but think his 2030 figures are way out though.

2030:
Average house price: 2.7 million
5.5% yield
$2855/week rent
$11,700/week average income
Rent is 25% of average income
Kingswood's sell for 450k
Milk costs $18
__________________

Given that around 6% of people will still be on some kind of benefit (many boomers who have pretty much no super to live on, and the usual amount of UE'ed people), how much is their benefit going to be? How much will they be able to contribute to rent?

A $608,400 median income? He's dreaming. Oh well, I guess we'll have to be around in 30 years time to see if he's right.

And I guess a Kingswood would be a vintage car by then, so it might be worth 450k- if there's any left

Cat

Click to expand...

Cat,

Median should not be confused with average income. There was around a $200 difference for the 2000 example based on ABS data (median being lower) which says something about income distribution!

As Acey said it might seem impossible but it's actually likely that those figures will be close to the mark, amazing I think. $18 for some milk

And being a millionaire will certainly mean something different to what it does today.

The Kingswood was a joke by Barry as he thought they would come back into production

WaySolid

astroboy said:

After The Bomb Went Off" is a recent QLD property investing book written by Barry Pickering.


Well Way,
Back off, after the bomb, lovley title,
Back off and get the hell out of here...... the bomb was real.... are you ??
ab

Click to expand...

The bombs go off in the world every day, hundreds and thousands of people die horrible deaths every day. But I bet you wouldn't feel upset about the title of the post, if the latest incident didn't affect Australia and Australians. Why is it that people in the West (including Australia) think THEY have an undisputed right to safety and good life while the rest of the World languishes in poverty, disease and war? And according to this, albeit unconcious, point of view every attempt on life and health of westerners is a sacrilage, while if a similar event happens in other parts of the World, well - 'What do you expect? They are used to it!'

Sorry, just an old sore. Back to property discussion.

Nic

Hi all,

Before we all get too excited at the possibilities, a couple of points to consider.
INFLATION.
If the future inflation stays as it has in the recent past(15 years), it will average about 3% pa.
This would take the average income number to only around $1893 pw. following on from this, if we kept rent at 25% of income,
and if yield is to stay at 5.5%,
then the property value will only be $447,500!!

The whole premis of the wonderful numbers from "Barry" are that we get much higher inflation at some point in the not so distant future. Does he acknowledge the increased inflation we have to have??

bye

Thanks WayS

I'm a follower of demographics myself, so I'll check out the site/book.

GarryK

Prices are only relative

I lived in England in the 60's and remember seeing adds in the buses for jobs as drivers and conductors. Think the wage was about 15 pound a week , and I remember thinking ( as a child ) geee, that's a lot of money.

The First house my Parents bought in Warrawee for around 22K in 69 is currently on the market ( havn't seen it yet ) but will be comfortably over 1 mill.

See Change

WaySolid,
I owe you an apology, I realise your comment was purely coincidental. I have a friend who was in Jakarta and directly affected by the incident. It was quite a harrowing time while we couldn’t contact him and was unsure whether or not he had been injured. He is now back in Australia safe and well. I apologise for the over reaction, I realise it was not your intention to make light of the incident.
astroboy

Bill.L said:

Before we all get too excited at the possibilities, a couple of points to consider.
INFLATION.
If the future inflation stays as it has in the recent past(15 years), it will average about 3% pa.
This would take the average income number to only around $1893 pw. following on from this, if we kept rent at 25% of income,
and if yield is to stay at 5.5%,
then the property value will only be $447,500!!

The whole premis of the wonderful numbers from "Barry" are that we get much higher inflation at some point in the not so distant future. Does he acknowledge the increased inflation we have to have??

Click to expand...

If history is anything to go by "increased inflation" is not needed to fulfill his predictions.

In this thread I made mention of a block of land whose value had increased from $1350 (675 pounds) in 1958 to $500,000 in 2004.

A compounded annual increase in the vicinity of 13.75% over those 46 years, over which time compounded inflation was 5.50%. So as you can see the value of that particular piece of real estate far outstripped CPI (real growth of 8.25% p.a. compounded).

There is nothing to say that this real growth in value cannot be repeated.

For a $180,000 property in 2000 to be worth $2,700,000 in 2030 requires the equivalent of roughly 9.5% growth p.a. compounded for those 30 years.

If inflation does not go beyond 3% p.a., then we are talking about real growth of about 6.5% p.a compounded.

Given what we know, this does not seem to be too big a call (imho).


It also need to be remembered that real incomes tend to rise over time, so when we consider the future we should factor this in also.

Household Income and Income Distribution in Australia

MB

Hi all,

MB, I have to disagree with you on this point. The block of land scenario is going to be a lot different to the rentable house. The house will be depreciating in value over the 30 years while the block increases in value.

Let's say that median incomes increase at 1% pa above inflation for the next 30 years. The average median income will therefore have increased to $2529 pw, leaving (@ 25% rent) $632 pw. This translates to a property value of around $600,000. Yes that is higher than my earlier figure, but much lower than the $2.7m!!

Of course as the population ages, and more people retire, the chances are that median income growth will fall below the rate of inflation.

bye

Bill.L said:

MB, I have to disagree with you on this point. The block of land scenario is going to be a lot different to the rentable house. The house will be depreciating in value over the 30 years while the block increases in value.

Let's say that median incomes increase at 1% pa above inflation for the next 30 years. The average median income will therefore have increased to $2529 pw, leaving (@ 25% rent) $632 pw. This translates to a property value of around $600,000. Yes that is higher than my earlier figure, but much lower than the $2.7m!!

Click to expand...

Bill, sure buildings do depreciate but I could have used see_change's example of his parents house (which I will do now).

$22,000 in 1969 / over $1,000, 000 now = 11.5% p.a. compounded over 35 years.

Which is still well above the 9.5% required for $180k to become $2,700,000 in 30 years.

Bill.L said:

Of course as the population ages, and more people retire, the chances are that median income growth will fall below the rate of inflation.

Click to expand...

Ok....

So you are saying that as more people retire and the supply of labour falls that real wages will decline?

I don't think so.

Supply and demand dictates otherwise.

Real wages will increase in response to restricted labour supply relative to increased demand (someone will have to work to provide the goods and services demanded by retired baby boomers).

The only possible scenarios I can see (atm) for falling real wages in the long term is a massive increase in the supply of labour bought about by:

i) greatly increased immigration

ii) greatly increased birth rate

iii) changes to superannuation / pension rules that strongly encourage Australians to remain in the workforce longer

MB

Hi All

I went to his site and even signed up for the emails but I find it hard to believe all the assumptions he made will carry through.

Examples of what could change and stop/slow or change it a bit and therefore a lot:

Acey's post re changing demographics to single and dual only families. Personally, I am a card carrying DINK, my sister a widow + 2 kids and mum an elderly widow. All in three small homes. Myself an inner city terrace, 2 bed, no yard, no parking. No problem.

Qld growth, as I understand, it is based on lost cost of living and better climate.

At some point the growth in QLd will raise costs to a level where the cost diff will start to even out against Melbourne and Sydney? Will this mean another place will come forward? What about Darwin? OR the North West Shelf Coast with all that oil and gas? OR Tassie with green and clean energy and environment? Long way from terrorists!

Whilst on Climate. If global warming is right Qld is going to get hotter and wetter and cold old VIC and NSW warmer and wetter. Like QLD today. A wet season like Darwin in the Gold Coast may change the interest in the Sunny State?

Tax & Infrastructure. I understand Qld gets more of the GST pie than it earns. NSW and VIC are already not happy and will not sit by and let this go on forever. Especially if they are cross party governments.

So with these few examples of “what if” I find it hard to see how using only the past 20 years you can see into the next twenty years.

Case in point: Has history been a good judge of what to do in 1964 compared to 1984 compared to 2004 for inner city Sydney

1964 no-one wanted terraces in slums of the inner city at $3000. Full of students, wierdos, gays and ferals. Move to the new suburbs of Bankstown and Campbell town.

1984 inner city terraces were $65000 yet it was still slumish to live there. Most bought because of ease of location to CBD and cheap. Plan to move out to burbs when study over and kids come along, Gays in the shadows, feral’s now know as artists but still weird and not mainstream.

2004 trendy suburbs with cafe lifestyle worth $570,000 full of architects, designers, models ( not ferals anymore) and dinks. The place to invest and live. Derelict shops now funky emerging designer outlets. Gays are trendy with mardigras a tourist attraction. Emergence of DINKS means kids don’t arrive and those with kids have playstations, lessons and organized sport than parks and make your own fun.

2224 who knows? Could again be slummish as we all moved into security boltholes of mega complexes with screening of tenants before rental after explosion in home invaders ? equality riots (like redfern) ? no go zones?

Some thoughts, some scary, Peter 147

Hi again,

MB,
You talk wages, I am talking about incomes.

The retired have incomes, if the present bulge of the population are at their highest earning capacity now as they approach retirement, when they get there, their income is likely to fall.

Do you suggest that the increased wages of the x&y genners as they get older, will more than make up for the reduction in BB incomes??

Would not the only way that the x&y genners get far higher wages for the same jobs that the BB'ers did, be by the result of inflation??(or cause it if there is a labour shortage).

Even given the figures I came up with before allowing real incomes to rise at 1% above the inflation rate, can you explain how the $2.7m house will generate a 5.5% gross yield?? Where does the money come from??

My contention is that incomes will have to rise in the order of 9% pa(and hence inflation) for the figures to be true, just as they have from 1970-2000 according to Barry.

bye

barry's most correct one liner is that price is driven by supply and demand....

but of course his oversimplifications confound several contradictory trends unfolding currently.....

firstly i don't know why it is that real estate spruikers rarely examine RE figures before the 60s....maybe the data wasn't that detailed then....nor supportive of their neat little 30 year trendlines....
in doing so they neglect to expose the slow capital growth in the first half of the 20 century and late 19thcentury.....why was there little growth? partly because there was heaps of land for a small population.....in fact the govt gave it away to settlers and convicts (remember your history lessons?) wonder how many convicts got rich following a leveraged rental IP system???? .....the govt doesn't give land away anymore in case anyone is wondering......
it would also be interesting to compare the size of the rental market (ratio) in 1955 vs 2004...

barry also raises the paradox that RE will continue to rise at the rate it has over the last 30 years, but then recognises that the population will not increase indigenously, as it did post war.....thus immigration will play a greater role.....I have lived in the USA off and on a lot in the last 20 years, and they are ahead of us on this trend...immigration mainly consists of developing nation citizens coming up to the USA to do all the hard yakka the yanks don't want to do......sure there are a few uni professors wearing turbans, but for everyone of them there are 100 philipinos, latinos etc caring for aged americans in nursing homes and cooking fast food....

further, we ,like the yanks, are exporting more of our profits and employment to china......barry didn't comment on the growing balance of trade deficit....pharmaceuticals, telecommunications, IT and cars will continue to leak litres of milk and honey out of Oz.....sure china wants our resources...but how many urban renters are employed in the mining industry? concentration of wealth is a real phenomenon. i drove around eagleby on the weekend if anyone wants to compare and contrast.....

barry fails to highlight that wealth is now concentrated amongst baby boomers, so demand for housing from younger generations will be at a level they can service, as determined by banks (probably still 30% of gross income in 2030)....(also consider that employment data now categorises casual and part time workers as fully employed, many younger ppl will never be able to buy their parents' homes for the constant growth prices barry preaches)....
couples are buying homes later in life.....or renting forever....



there is a hell of a lot of social and economic change going on in the world at the moment. those who make a more careful study of these changes will help Australia and get wealthy...... change is opportunity.....

personally, i want to see less focus on property as THE way to get rich...residential property does is not smart. it doesn't produce sustainable employment....it is only one of the needs humans have....I want to see ox become a smart country, producing goods and services to the value of those we cosume.....growign trade deficits are unsustainable, as is growing consumer debt....

waysolid, i don't know barry....but you throw up some classic cliches many spruikers use......build on what barry is offering.....andn let us know what he really thinks if you get into his inner sanctum....

The First Bruce sums it up. Too many variables.

Also, with due respect to property gurus, teachers, etc.. out there BUT......

if I had a system/program/knowledge that I was so confident would make me rich in the future, (essentially a crystal ball) would I be selling it, to all, for $40 bucks? Would you?

Kerry Packer & Rupert Murdoch don't write books on "my secrets to making money!!!!" There a reason?

Regards, Peter 147