Bill Zheng Newsletter

[Intrinsic_Value]

Well I doubt it will be that dire, but I don't think it's likely there will be many around shelling out $2m for a townhouse/apartment in Melbourne

i think exchanges rates will have a major determining factor.

If AU$ goes down significantly this will support and possibly increase property prices once the inflation wash through passes.

 

[VYBerlinaV8]

i think exchanges rates will have a major determining factor.

If AU$ goes down significantly this will support and possibly increase property prices once the inflation wash through passes.

Hi IV - any chance you could elaborate a bit for the slow people like me? Cheers!

 

[buzzlightyear]

From March 2000 for the next three years the AUD/USD was sub 60cents and inflation (excl the impact of GST) was between 2.4 to 3.4% in the same period. This is data from the RBA website.

The direct impact of a depreciating AUD doesn't automatically imply inflation.

If the exchange rate was to significantly depreciate, in the current environment today, what power do have retailers have to pass on price increases without affecting their business. And the affect on increased raw materials pricing would have on an already depressed construction industry outside of WA.

 

[sash]

Yep....this end of the market ($1.5m-2.5m) was severely weakened by the first GFC.

This end of the market is where people are finding most difficult to sell. The buyers are wealthy but not welathy enough...if you get my drift. Lots of highly paid professionals or business people who are exposed to GFC mark 2.

The interesting thing to see is if the lower quadrant of the market performs when rates are cut further. By low end I mean anything below 500k. I see this market the most likely to perform.

Why? Well when you are people are paying say $500 rent per week for a 2brm unit worth 450k when IR hit say 5.25%. There is very little difference between renting and buying to live.

Should be interesting when this happens. But this also assumes the banks have not tightened lending also.

Well I doubt it will be that dire, but I don't think it's likely there will be many around shelling out $2m for a townhouse/apartment in Melbourne

 

[Aaron_C]

sash, there is always people with money. You might not see them on a regular basis, but there are plenty of them. It is a completely different market to selling a small Porter Davis home on a 500 sqm block of land in Point Cook...these people do not buy on a regular basis, but when they do, they only buy good quality.

 

[Intrinsic_Value]

Hi IV - any chance you could elaborate a bit for the slow people like me? Cheers!

Firstly let me emphasise that this involves probability and 'push and pull factors'.
(ie like a casino increasing its odds slightly, it doesnt mean it WILL happen, it just changes the odds)

If AU$ decreases, then the first 'wave' is potentially higher inflation, which is negative for property through its impact on higher interest rates.

However once the 'wash through period' occurs (remember inflation is a consecutive process), then one has to give consideration to international buying power.

If the AU$ comes back significantly then
(a) Australian property in terms of international players becomes proportionately cheaper.
(b) australian industry is better able to compete on an international level
(c) substitution industries start to kick in.

Look at Queensland for example, why is it doing so hard? Could it be because Queensland is a traditional holiday destination for Australians. Yet with the high AU$ why go to Queensland, why not travel internationally (and this a double whammy because not just less australian travelers, but less international travellers) Using an extreme, if the AU$ came back to US$0.5, would australians on the margin be so interested in travelling overseas.

 

[sash]

Agree..there are people with money.

But in times like these people with money will also be asking for huge discounts. The reason they have money is because they are not silly to pay $2m for a house they could possibly pay $1.6m.

This is happening a lot at the moment as the high end is pretty dead!

sash, there is always people with money. You might not see them on a regular basis, but there are plenty of them. It is a completely different market to selling a small Porter Davis home on a 500 sqm block of land in Point Cook...these people do not buy on a regular basis, but when they do, they only buy good quality.

 

[DavidMc]

Ahhhh good to hear from Bill Zheng.

He kinda went quiet the years following his predictions that Australian property will crash 20-40% over a period of 3 years post GFC. I heard it caused a bit of a falling out with other seminar circuit guys.

I did actually like his stuff though and have used his ideas on finance with great success.

 

[Aaron_C]

Agree..there are people with money.

But in times like these people with money will also be asking for huge discounts. The reason they have money is because they are not silly to pay $2m for a house they could possibly pay $1.6m.

This is happening a lot at the moment as the high end is pretty dead!

Definitely not easy at the top end, that's for sure. But that's how I bought my land cheap.

 

[Rockstar]

I did actually like his stuff though and have used his ideas on finance with great success.

Yeah he is a good read but has definitely got a few predictions wrong - but doesn't everyone!

It's steady as we go for me but definitely no H&L packages from boomtime Bill. He may be proven to be over the top on the scale of his boom prediction but, as an investor, if feel I am in the box seat as long as my cashflows can be sensibly managed in order to hang on to (and accumulate) as much property as possible.