'Growth' Property and the upcoming problems.
- Thread starter Aaron Sice
- Start date
Aaron, I have to spread it around.
But I didn't grab a coffee and still managed to read through it. Well constructed - thanks.
But I didn't grab a coffee and still managed to read through it. Well constructed - thanks.
Woop Woop Update:
My property investing is going well, IP's continue to increase in (comparable sales) value, my rents are increasing, and if I could buy property quick enough I could rent another 20 IP's tomorrow.
I am (investing) in regional Victoria.
To add to that I 'buy well' to begin with, 'instant equity'. Also I (where possible) add value, more equity.
The properties are either brand new constructions (fetching premium rents), or older type IP's presented very nicely, fetching premium rent and sometimes leased to research centres/businesses/corporations who are prepared to pay above and beyond market rent because they like to do business with 'me'. (Networking).
Instant Equity. (Kinda has a nice ring to it huh).
Where I am investing there is an ongoing shortage, scarcity of well presented IP's.
Investing in the sticks can be fun if you know what you are doing and who is up what and where.
I'm only limited by my funds to complete deals, or source and create the deals. And that hasn't really been an issue.
All is well in this neck of the woods.
My property investing is going well, IP's continue to increase in (comparable sales) value, my rents are increasing, and if I could buy property quick enough I could rent another 20 IP's tomorrow.
I am (investing) in regional Victoria.
To add to that I 'buy well' to begin with, 'instant equity'. Also I (where possible) add value, more equity.
The properties are either brand new constructions (fetching premium rents), or older type IP's presented very nicely, fetching premium rent and sometimes leased to research centres/businesses/corporations who are prepared to pay above and beyond market rent because they like to do business with 'me'. (Networking).Instant Equity. (Kinda has a nice ring to it huh).
Where I am investing there is an ongoing shortage, scarcity of well presented IP's.
Investing in the sticks can be fun if you know what you are doing and who is up what and where.
I'm only limited by my funds to complete deals, or source and create the deals. And that hasn't really been an issue.
All is well in this neck of the woods.
Over the short time I have been investing I have heard and read of people talk of 'markets' and "falls" and "rises" and---- lots of things really, my experience is; it's all..."business as usual".
They can go a little higher perhaps but not more than 1%.
The huge growth we're told to expect by the overpaid CEO's is imaginary so their lie won't last long.
They can't fool us forever. The truth will come out sooner or later and everyone's expectations will come down to earth again
I agree, and from the feedback I'm getting, investing out in the sticks can make you even more money than investing in the cities but you need to know what you're doing or you could end up with IP's which are not easy to sell
Now I would perceive that as an important thing for investing anywhere, any investing due diligence, not necessarily pertaining to woop woops.
A Deal is a Deal is a Deal. Is good buying.
'IP's not easy to sell' ...are....are...applicable anywhere, assuming you mean "houses" not as "IP's". There is a very real shortage of housing within regional cities, and of that we only ever get a certain percentage of rental properties, double whammy, not that many well presented houses, not that many well present/managed IP's.
What's your niche? (rhetorical).
Woop woop investing for me btw is Victoria's 3rd largest regional city
then smaller regional city, then some one horse carefully-good deal/buying-strategy-towns.It comes back to the person, the investor, there is profit to be made, business to be done under the oddest of rocks sometimes.
The aim of my game is to build an appreciating asset base, minimise my risk level thingy, and get best possible returns from those assets possible. Don't disturb the cashflow...
Country?
City?
Houses?
Units?
Commercial?
Residential?
What's your flavor and do it.
Country?
City?
Houses?
Units?
Commercial?
Residential?
What's your flavor and do it.
A lot of property commentators believe interest rates are at or near the peak. After reading these articles, it looks like the rise in interest rates will continue for some time to me. (I'd love to be wrong though!)
http://www.fbe.unsw.edu.au/cf/apnhr/papers/Attachments/Rowley.pdf
http://www.perthnow.com.au/business...ays-reserve-bank/story-e6frg2r3-1225956336687
http://www.perthnow.com.au/business...s-interest-rates/story-e6frg2qu-1225927710027
http://www.loansense.com.au/historical-rates.html
http://www.fbe.unsw.edu.au/cf/apnhr/papers/Attachments/Rowley.pdf
http://www.perthnow.com.au/business...ays-reserve-bank/story-e6frg2r3-1225956336687
http://www.perthnow.com.au/business...s-interest-rates/story-e6frg2qu-1225927710027
http://www.loansense.com.au/historical-rates.html
I wasn't talking about the new projects which are about to start up. I was referring to CEO's and their growth expectations in general
thanks for all the contributions, guys.
basically, yes - the 15% yield i mentioned is gross. everyone else talks in gross yields so it would be kinda silly for me to talk in net yields - that's a pretty high yield even for comm in net values - thanks for making me clarify.
i should point out, i see inflation coming from China, and to a lesser extent, India.
we get a lot of our product from, and a lot of our farms are now owned by, the Chinese. as their middle class grows and they expect better living standards, they will go from exporting net deflation to exporting inflation. how? through the cost of the their products rising to meet the rising demands of their up and coming middle class.
it's inevitable. it happened in every western country as the industrial revolution got to it's peak, unions got together and forced the wages up. Now China IS MOST DEFINITELY a different animal than 1800's Great Britain and United States - however, i would not want to be a government charged with controlling a 1bil strong workforce if and when they decide they want more.
and want it they will.
therefore, inflation is almost guaranteed. you can only sell the dream for so long until people EXPECT the dream, and that dream for most mainland city dwelling chinese is to 'live' like a westerner.
"find the niche" as mentioned previously is a perfect example of how to get it right. Emma71 has her LV properties, Nathan invests in CF+ properties, Rixter only picks properties with a 10 year timeframe in mind and many, many more and it all can work.
this is why i'm NOT a bear.
but just getting out there, and buying a house, and expecting it to perform well, and wearing $500pcm neg gearing is going to slaughter you in the upcoming few years.
just don't mistake activity for progress. know your goals.
basically, yes - the 15% yield i mentioned is gross. everyone else talks in gross yields so it would be kinda silly for me to talk in net yields - that's a pretty high yield even for comm in net values - thanks for making me clarify.
i should point out, i see inflation coming from China, and to a lesser extent, India.
we get a lot of our product from, and a lot of our farms are now owned by, the Chinese. as their middle class grows and they expect better living standards, they will go from exporting net deflation to exporting inflation. how? through the cost of the their products rising to meet the rising demands of their up and coming middle class.
it's inevitable. it happened in every western country as the industrial revolution got to it's peak, unions got together and forced the wages up. Now China IS MOST DEFINITELY a different animal than 1800's Great Britain and United States - however, i would not want to be a government charged with controlling a 1bil strong workforce if and when they decide they want more.
and want it they will.
therefore, inflation is almost guaranteed. you can only sell the dream for so long until people EXPECT the dream, and that dream for most mainland city dwelling chinese is to 'live' like a westerner.
"find the niche" as mentioned previously is a perfect example of how to get it right. Emma71 has her LV properties, Nathan invests in CF+ properties, Rixter only picks properties with a 10 year timeframe in mind and many, many more and it all can work.
this is why i'm NOT a bear.
but just getting out there, and buying a house, and expecting it to perform well, and wearing $500pcm neg gearing is going to slaughter you in the upcoming few years.
just don't mistake activity for progress. know your goals.
http://www.investing101.com.au/Club/Newsletter 8 July 2010 - Aust Housingb.pdf
this is an interesting link. worth a read IMPO.
this is an interesting link. worth a read IMPO.
I'm wondering what could possibly act as a driver to move house prices significantly upwards. The arguments for their rise are:
I'm not sure about commuting, and there's certainly scope for improving public transport in the major cities in Australia.
But I can't see any further effects that would be as dramatic as having two incomes in a family, or interest rates falling sharply. Which makes me think that price growth will be tapped out sooner rather than later. (i.e. Don't expect them to run ahead of wages for the next ten or twenty years.)
As for downsides, I don't see any to Australia right now. However, everything looked great in Ireland a few years ago, and it was ultimately the imbalances and excesses coming home to roost that wrecked the economy.
- Two income families, rather than one previously.
- Low interest rates and cheap credit.
- Longer mortgage terms. (Now 30 years as standard.)
- Buyers moving further out from the CBD.
I'm not sure about commuting, and there's certainly scope for improving public transport in the major cities in Australia.
But I can't see any further effects that would be as dramatic as having two incomes in a family, or interest rates falling sharply. Which makes me think that price growth will be tapped out sooner rather than later. (i.e. Don't expect them to run ahead of wages for the next ten or twenty years.)
As for downsides, I don't see any to Australia right now. However, everything looked great in Ireland a few years ago, and it was ultimately the imbalances and excesses coming home to roost that wrecked the economy.
ability to service debt has definitely peaked.
i just can't see the trifecta working unless serious wage growth returns.
i just can't see the trifecta working unless serious wage growth returns.
I can think of some others;
1. Underinvestment in infrastructure unlocking very little more land and that land it unlocks has the marginal amenity of a block in the Kalahari desert! not an issue for Perth and Brisbane as much now but definitely on the cards in Sydney and Melbourne.
2. Increased taxes on new builds as they (the govs) think about infrastructure and the costs of it. Of course they don't always go on and deploy the new funds in infrastructure around new developments but they don't mind slugging developers nonetheless. This all helps existing house prices.
3. For Victoria only; the cut in stamp duty if the libs get in by 50%. If labor gets in while I think better for developers it will be long term negative on property around Melbourne. Why the hell the HIA thinks it is better to have a 50% cut in stamp duty for all properties v the Labors cut to new homes in the regions only I have no idea! I would have thought Labors policy would give them a competitive edge against new stock. Longer term Labors policy would have a further negative effect on Mel prices though. Libs may get it kicking back into life.
4. The government buys RMBS for non bank lenders. Long term I think this could be disastrous as one good things about banks getting a bit gun shy on lending is that current owners over time should be getting in a stronger position to weather any economic storm thrown upon us. If the gov buys billions more in RMBS or guarantees NBL's funds then expect lending standards to erode dramatically. May only be short lived, i.e. a year or two and then we get the "Fannie May effect" but in the interim it will be positive. Why when they have perfectly good examples of the moral hazard brought about by government guarantees over mortgage debt they would even consider this I have absolutely no idea!
Electricians in VIC are apparently getting 5% wage growth each year for the next five years
Maybe the start of something
Well the wage growth from my job in the government will equal approx $12,500 over the next 4 yrs which equals about 60k in debt servicing abitlity. Say that was a couple with similar wages that = 120k extra in ability to service debt.
Wages growth isn't a one off event. Two incomes was and is now the norm.
Many people are already stretched with debt and need to rely on asset growth to move forward.
Graemsay was pointing out underlying factors that have allowed large and continuing growth over a longer than normal period.
Even if conditions continue to be favourable can it be be sustained ?
Very interesting link Aaron.
