Hi Guys
We have just done our last ever live reno workshop last week-end ...and it was an absolute blast ...so being my last reno workshop I feel it is safe to put my toe in the somersoft door again after all these years.
What year was it when I had my 'hand smacked' for telling people I was doing reno workshops?
Maybe it was 2000?
'The Wife' was a force in the market at the time.
There is a paradigm change coming...I am asking for comment on the massive boom in commodities that is coming...it has the potential to change the face of our industry and has to affect our property market in a number of ways.
There is a wave on the horizon ...it's...its ...a super...commodity boom or energy wave.
there is a massive energy boom coming to Australia....the likes of which we have never seen before ...and according to Alan Kohler ABC news ....its bigger than the Gold rush in early Australia.
We all need to get ready for this so I am thinking of some of the effects in the near future.
Currently committed there is over $140 billion of projects.
Never before have we gone into a boom with unemployment of about 5%. Where are the workers going to come from ...the geologists, drillers, drivers, operators, miners, support people, clerks, computer people, medical staff and so on the list goes.
We basically have full employment so lets look at the options.
The Fed Govt (and the opposition) are still talking about small Australia...they have cut 457 temporary visa numbers... they have cut the student visa numbers in various categories... the Unions are resisting any increase in overseas workforce and saying it has to come from existing workers...if it does...and it can't totally ...(there is already talk about a 'energy visa') then there will be a wage push from the energy companies to get in first to secure the best and the brightest and ... eventually .... anyone with half a brain that can work...even from other trades
eg construction industry...or tourist industry...this has to push up wages and inflation ...and with an RBA target still set at 2-3% inflation ... so pressure on interest rates is inevitable.
We had a taste before the GFC where interest rates were nudging 9% ...but what is coming will dwarf that boom.
So everyone should now be considering their position on managing what will soon hit us.
My strategy to handle it is to pretend I am already paying 2% above current rates and that creates a 'buffer' if and when it (interest rate rise) happens.
I put my buffer into an offset account against my loans so it effectively lowers the interest by 2% and creates a buffer of cash should that be necessary.
It also will make you aware of what you have to do to handle such a rise should it happen...a bit like squirreling away nuts for a tough winter.
So if interest rates get to say 9% and you are absolutely stretched to the max ...the buffer will help get you through.
My opinion is at 9% the first home buyers who the Govt 'helped' to enter the market with the FHOG will start falling over as they entered the market at 5% interest and little deposit which means there outgoings have risen by 4% above their original 5% thats an 80% increase...very few could withstand that hit without further govt help or family welfare.
So those areas of FHOG'ers will have intense selling pressure and...they will be all selling at the same time in the same areas... and that is a recipe for a big dip in prices in those areas...some cashed-up investors see this as an opportunity & will be ready for this ...so let's see?
The FHOG'ers must be under big pressure even at todays rates.
Don't be suprised if it gets really nasty that the Feds bail them out with a low interest loan of some type or even pressure on the banks to quarantine interest rate rises for FHOGers.
I have seen it done before in a previous boom!
The discussion I would like to initiate is... what other risk management strategies could property owners/investors take ...maybe fixing part or all of their loans?
I have done this (fixing) in the past without great success but maybe this time is different...what do you think?
Geoff Doidge
Reno Kings
www.renos.com.au
We have just done our last ever live reno workshop last week-end ...and it was an absolute blast ...so being my last reno workshop I feel it is safe to put my toe in the somersoft door again after all these years.
What year was it when I had my 'hand smacked' for telling people I was doing reno workshops?
Maybe it was 2000?
'The Wife' was a force in the market at the time.
There is a paradigm change coming...I am asking for comment on the massive boom in commodities that is coming...it has the potential to change the face of our industry and has to affect our property market in a number of ways.
There is a wave on the horizon ...it's...its ...a super...commodity boom or energy wave.
there is a massive energy boom coming to Australia....the likes of which we have never seen before ...and according to Alan Kohler ABC news ....its bigger than the Gold rush in early Australia.
We all need to get ready for this so I am thinking of some of the effects in the near future.
Currently committed there is over $140 billion of projects.
Never before have we gone into a boom with unemployment of about 5%. Where are the workers going to come from ...the geologists, drillers, drivers, operators, miners, support people, clerks, computer people, medical staff and so on the list goes.
We basically have full employment so lets look at the options.
The Fed Govt (and the opposition) are still talking about small Australia...they have cut 457 temporary visa numbers... they have cut the student visa numbers in various categories... the Unions are resisting any increase in overseas workforce and saying it has to come from existing workers...if it does...and it can't totally ...(there is already talk about a 'energy visa') then there will be a wage push from the energy companies to get in first to secure the best and the brightest and ... eventually .... anyone with half a brain that can work...even from other trades
eg construction industry...or tourist industry...this has to push up wages and inflation ...and with an RBA target still set at 2-3% inflation ... so pressure on interest rates is inevitable.
We had a taste before the GFC where interest rates were nudging 9% ...but what is coming will dwarf that boom.
So everyone should now be considering their position on managing what will soon hit us.
My strategy to handle it is to pretend I am already paying 2% above current rates and that creates a 'buffer' if and when it (interest rate rise) happens.
I put my buffer into an offset account against my loans so it effectively lowers the interest by 2% and creates a buffer of cash should that be necessary.
It also will make you aware of what you have to do to handle such a rise should it happen...a bit like squirreling away nuts for a tough winter.
So if interest rates get to say 9% and you are absolutely stretched to the max ...the buffer will help get you through.
My opinion is at 9% the first home buyers who the Govt 'helped' to enter the market with the FHOG will start falling over as they entered the market at 5% interest and little deposit which means there outgoings have risen by 4% above their original 5% thats an 80% increase...very few could withstand that hit without further govt help or family welfare.
So those areas of FHOG'ers will have intense selling pressure and...they will be all selling at the same time in the same areas... and that is a recipe for a big dip in prices in those areas...some cashed-up investors see this as an opportunity & will be ready for this ...so let's see?
The FHOG'ers must be under big pressure even at todays rates.
Don't be suprised if it gets really nasty that the Feds bail them out with a low interest loan of some type or even pressure on the banks to quarantine interest rate rises for FHOGers.
I have seen it done before in a previous boom!
The discussion I would like to initiate is... what other risk management strategies could property owners/investors take ...maybe fixing part or all of their loans?
I have done this (fixing) in the past without great success but maybe this time is different...what do you think?
Geoff Doidge
Reno Kings
www.renos.com.au