Investors Direct Seminar- will there be a recession?
Did anyone else get to the seminar in Sydney Yesterday. (Sat)
Totally worth it, I could not write notes fast enough.
I will post parts of my notes. The numbers and percentages are verbatum, the rest are filled in words from my notes and memory.
Happy reading.
John Edwards – Residex – nearly 20 years experience predicting markets.
~ Doesn’t think the resources boom will slow for another 2-3 years.
~ Thinks we are at the highest part of the cycle for interest rates, don’t fix now.
` Consumer confidence is at it’s weakest for 15 years.
~ China is exporting its inflation and has been closing factories. We can expect goods from China to go up to a higher price. China is sourcing labour from Vietnam as it is cheaper.
~ Growth for GDP was 3.9% in 2007.
~ Predicted to be 4.7% in 2008.
~ Interest rates are still lower than in crisis years previously.
~ Migration is the highest it has been in 19 years.
~ Dwelling approvals are up by 5% in past 12 mths.
~ Housing finance has increased.
Long Term
There is no correlation between interest rates and house prices.
Short Term
If interest rates go up, then it’s a great time to buy.
~ Believes there is no rational in predicting the market for upper socio-economic classes because they can afford to be unpredictable and buy what they want.
~ No recession for Australia.
~ Queensland has seen its peak and is grinding to a halt with 18.22 % growth last year. 2007.
- Infrastructure problems (but then so has Sydney)
Thinks QLD has very slow growth in long run for next 5-7 years.
~ Darwin is where the growth is in next few years.
- Darwin units high rent but higher risk. Median $333k, yield 6.4%.
~ Sydney growth will be around 8%
-Sydney Units – low risk
~ Melbourne stagnant and then about 5%+ fro 2009
` Tasmania short term high growth but this is a high risk market. He believes as QLD is becoming unaffordable for retirees they are heading to Tasmania. Don’t put all your eggs in this basket.
- Kings Meadow median $232k yield at 5%.
Biggest thing to thing about when buying your next investment property in today’s market:
~ How available is money?
~ How easy is it for people to buy your property?
~ How easy is it to rent your property?
Bill Zheng- Investors Direct (This is the most interesting part for me, however i have loads more info!)
1-3 years we will peak at 10-20% then we will see a drop in prices of 20-40%.
Technology has allowed for a greater percentage of our income to go into financing our mortgages.
The technology age has matured. Because our wages have increased and technology has made life a lot easier for us as consumers, we have been able to afford to put a higher percentage of our incomes into our mortgages than our parents.
Houses are unaffordable now and they were for our parents. Ask your parents if they thought houses were affordable in their day.
Gen Y are the biggest consumers of our time. They are renters and not home owners. When the Baby Boomers retire, they will be supported by Gen Y. There are not enough Gen Y’s to take the places of the Baby Boomers. Gen Y’s will not be buying houses and therefore prices of houses will not go up as they have done in the past.
Bill believes we “may” see the biggest struggle we have had in our economy since the last recession 80 yrs ago. He believes it will be something between a normal bottom of the cycle period to a recession. How big or small it will be depends on a few factors.
Unlike America Australia is a small country of @ 20mil people. We rely mostly on rising economical markets of China and India for the prosperity of our economy. If we can hold on to the ‘tails‘ of these markets we will ride the storm out. He believes we will see a steady increase in housing prices for 2-3 years where they will peak, before the fallout from the American ‘recession’ will effect us. He also believes, like John, that the American crisis has not reached the bottom and they still have 1-2 years to go. Therefore we will see the full impact of the sub-prime crisis in 2-3 years.
If anyone can avoid a downturn, we can. We have room to drop our interest rates to fix a falling economy.
Australia going into a recession is the worst case scenario however, like any property or car, we need to ‘take out insurance’. Be prepared for the worst case to be sooner and longer.
If Recession:
Properties can fall 40% in 5-7 years.
Remember:
Money follows Money.
Money follow's Return. (Profit or/and Interest)
The more money that is invested in Australia the more the AUS dollar will rise and interest rates will go up. This is a good thing. Property should follow.
Money’s will only leave when humans can’t produce more ‘returns’ to feed them.
The Economy Now
We need interest rates to stay high and the dollar to rise.
Insurance and Money Strategy
1. Cover the next 7 years of interest shortfall.
2. Don’t rely on tax returns/ benefits.
3. Create a cash reserve now
Consolidate from more sources.
Create a facility to max your LVR against properties but try and stick to 70% LVR.
Use it as a redraw offset account against the property.
Finance to safer banks.
4. Manage Lenders Risk.
Reduce debt exposure to a single lender
Use Discretionary Hybrid Trusts to hold property.
Avoid high risk property. (Industrial, Commercial, Holiday Let, etc.)
5. Lower Gearing on Properties.
Do not lower your credit facility.
Add equity to your properties.
Allow your property to grow more in value before purchasing more.
6. Manage people risk.
Reduce or stay away from Joint Ventures with family or friends and stop lending them money – you may not get it back when you need it.
7. Manage your money with more discipline.
Cashflow will be more important than equity.
Reduce unnecessary ongoing expenses.
Did anyone else get to the seminar in Sydney Yesterday. (Sat)
Totally worth it, I could not write notes fast enough.
I will post parts of my notes. The numbers and percentages are verbatum, the rest are filled in words from my notes and memory.
Happy reading.
John Edwards – Residex – nearly 20 years experience predicting markets.
~ Doesn’t think the resources boom will slow for another 2-3 years.
~ Thinks we are at the highest part of the cycle for interest rates, don’t fix now.
` Consumer confidence is at it’s weakest for 15 years.
~ China is exporting its inflation and has been closing factories. We can expect goods from China to go up to a higher price. China is sourcing labour from Vietnam as it is cheaper.
~ Growth for GDP was 3.9% in 2007.
~ Predicted to be 4.7% in 2008.
~ Interest rates are still lower than in crisis years previously.
~ Migration is the highest it has been in 19 years.
~ Dwelling approvals are up by 5% in past 12 mths.
~ Housing finance has increased.
Long Term
There is no correlation between interest rates and house prices.
Short Term
If interest rates go up, then it’s a great time to buy.
~ Believes there is no rational in predicting the market for upper socio-economic classes because they can afford to be unpredictable and buy what they want.
~ No recession for Australia.
~ Queensland has seen its peak and is grinding to a halt with 18.22 % growth last year. 2007.
- Infrastructure problems (but then so has Sydney)
Thinks QLD has very slow growth in long run for next 5-7 years.
~ Darwin is where the growth is in next few years.
- Darwin units high rent but higher risk. Median $333k, yield 6.4%.
~ Sydney growth will be around 8%
-Sydney Units – low risk
~ Melbourne stagnant and then about 5%+ fro 2009
` Tasmania short term high growth but this is a high risk market. He believes as QLD is becoming unaffordable for retirees they are heading to Tasmania. Don’t put all your eggs in this basket.
- Kings Meadow median $232k yield at 5%.
Biggest thing to thing about when buying your next investment property in today’s market:
~ How available is money?
~ How easy is it for people to buy your property?
~ How easy is it to rent your property?
Bill Zheng- Investors Direct (This is the most interesting part for me, however i have loads more info!)
1-3 years we will peak at 10-20% then we will see a drop in prices of 20-40%.
Technology has allowed for a greater percentage of our income to go into financing our mortgages.
The technology age has matured. Because our wages have increased and technology has made life a lot easier for us as consumers, we have been able to afford to put a higher percentage of our incomes into our mortgages than our parents.
Houses are unaffordable now and they were for our parents. Ask your parents if they thought houses were affordable in their day.
Gen Y are the biggest consumers of our time. They are renters and not home owners. When the Baby Boomers retire, they will be supported by Gen Y. There are not enough Gen Y’s to take the places of the Baby Boomers. Gen Y’s will not be buying houses and therefore prices of houses will not go up as they have done in the past.
Bill believes we “may” see the biggest struggle we have had in our economy since the last recession 80 yrs ago. He believes it will be something between a normal bottom of the cycle period to a recession. How big or small it will be depends on a few factors.
Unlike America Australia is a small country of @ 20mil people. We rely mostly on rising economical markets of China and India for the prosperity of our economy. If we can hold on to the ‘tails‘ of these markets we will ride the storm out. He believes we will see a steady increase in housing prices for 2-3 years where they will peak, before the fallout from the American ‘recession’ will effect us. He also believes, like John, that the American crisis has not reached the bottom and they still have 1-2 years to go. Therefore we will see the full impact of the sub-prime crisis in 2-3 years.
If anyone can avoid a downturn, we can. We have room to drop our interest rates to fix a falling economy.
Australia going into a recession is the worst case scenario however, like any property or car, we need to ‘take out insurance’. Be prepared for the worst case to be sooner and longer.
If Recession:
Properties can fall 40% in 5-7 years.
Remember:
Money follows Money.
Money follow's Return. (Profit or/and Interest)
The more money that is invested in Australia the more the AUS dollar will rise and interest rates will go up. This is a good thing. Property should follow.
Money’s will only leave when humans can’t produce more ‘returns’ to feed them.
The Economy Now
We need interest rates to stay high and the dollar to rise.
Insurance and Money Strategy
1. Cover the next 7 years of interest shortfall.
2. Don’t rely on tax returns/ benefits.
3. Create a cash reserve now
Consolidate from more sources.
Create a facility to max your LVR against properties but try and stick to 70% LVR.
Use it as a redraw offset account against the property.
Finance to safer banks.
4. Manage Lenders Risk.
Reduce debt exposure to a single lender
Use Discretionary Hybrid Trusts to hold property.
Avoid high risk property. (Industrial, Commercial, Holiday Let, etc.)
5. Lower Gearing on Properties.
Do not lower your credit facility.
Add equity to your properties.
Allow your property to grow more in value before purchasing more.
6. Manage people risk.
Reduce or stay away from Joint Ventures with family or friends and stop lending them money – you may not get it back when you need it.
7. Manage your money with more discipline.
Cashflow will be more important than equity.
Reduce unnecessary ongoing expenses.
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