here come the drums of a global slowdown..

tubs said:
While our housing needs are going up by around 270,000 dwellings a year, and we're building around 210,000 a year, I can't see why the construction industry would be going down in a hurry.
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tubs,

it's very very very easy to go under in a hot market.

look at collier homes in the 80s. huge housing boom. took on a hundred contracts a month. slabs down. wait, too many slabs down. sh1t. quick, close the doors to new business. oh crap - um, where do we get the trades to finish these? uh oh - mum and dad lose their "land with slab" to the bank thanks to it taking 9 months after slabs down to get bricks on site.

or

average times. average builder potters along, 10, 15, 20 houses a month. doing well. interst rates cut. business picks up for all builders. land release in boondocks. 10 houses signed to build in boondocks. 10 more houses. slabs down. brickies won't drive out there. brickies that do, leave site because mortar sand is on opposite side of block to bricks and pick a site with "better conditions". brick prices jump. steel price jumps. brickie labour jumps 2 fold. builder signed buyer on fixed price contract, allowing room to move for price increases. price increase hit builder - erode margins from 35% to 5%. builder's profit eroded 60%. builder folds. homes sales still booming. new housing shortage. another builder folds.

while fixed price contracts are great for the home buyer, they are a deathknell for a builder if price rises get away from them. then the buyer is left with a half finished house and gets a spot on Today Tonight. so if the fixed price contract REALLY worth it?
 
the global slowdown have certainly impacting the real estate investment . now you will observe that the real estate prices will move down a bit over the next 1 year.
 
Blue Card! said:
tubs,

it's very very very easy to go under in a hot market.

look at collier homes in the 80s. huge housing boom. took on a hundred contracts a month. slabs down. wait, too many slabs down. sh1t. quick, close the doors to new business. oh crap - um, where do we get the trades to finish these? uh oh - mum and dad lose their "land with slab" to the bank thanks to it taking 9 months after slabs down to get bricks on site.

or

average times. average builder potters along, 10, 15, 20 houses a month. doing well. interst rates cut. business picks up for all builders. land release in boondocks. 10 houses signed to build in boondocks. 10 more houses. slabs down. brickies won't drive out there. brickies that do, leave site because mortar sand is on opposite side of block to bricks and pick a site with "better conditions". brick prices jump. steel price jumps. brickie labour jumps 2 fold. builder signed buyer on fixed price contract, allowing room to move for price increases. price increase hit builder - erode margins from 35% to 5%. builder's profit eroded 60%. builder folds. homes sales still booming. new housing shortage. another builder folds.

while fixed price contracts are great for the home buyer, they are a deathknell for a builder if price rises get away from them. then the buyer is left with a half finished house and gets a spot on Today Tonight. so if the fixed price contract REALLY worth it?
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BC,
based on this, would it be any advantage to go Owner Builder, and subby out all the work and manage the project yourself? (I am considering this for our next PPoR build at the end of next year).
 
if you've got the buffer behind you to wear the longer construction time, then yes.

most owner builders take 50 - 200% longer to finish a house - but that is "most", not "all".

if you have a number of trades in the family or your circle of friends then it may very well be feasible to build your own house. just don't expect them to do it for a cut price. pay them what they ask for and everything will run smoothly.

it also depends on your style of construction. ie owner builders and framed houses work well due to the fact there are less trades involved.
 
feihong said:
Chinese people have switched their money from stockmarket to cash savings
....
Yet to see the full impact of this on general Chinese economy, just raised as an alert
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It will be interesting to see whether the previous advantages of state control over the economy and financial system will backfire when things start going downhill. There are good reasons for free markets... whenever we do business there I just keep getting reminded of sovereign risk! The state has its hand in everything, everything is regulated and it's all about who you know.

It also annoys me how Sinosteel et al can come over here and buy whatever company they like (eg Midwest) - ever tried to get into a Chinese IPO? Another example of restrictive business practices - something has to give in that economy in the next five years. I reckon the share market crash is the start - just my opinion!
 
hi hiequity
no it won't
there will be a few things but a crash not likely.
most of the companies on the chinese exchange are chinese companies owned by chinese.
there is not alot of overseas investment buying chinese shares.
why
because you can't trust a chinese balance sheet or for that matter nay type of profit margin
the exchange is to raise capital.
but its chinese capital.
and you could not expect a booky to bet against himself and then try to run from himself.
not logical
the chinese exchange for me if secure what is not secure is the high flying investment stocks
now thats a very different matter and they will be a dot com
but that not a market correction.
my bet is that you will see that it will suck in as much cash and materials as possible.
it will have huge inflation
close off the markets and use the cash to buy what it needs and drive down prices because
it simply can
when nothing comes in and power comes from the barrel of a gun ( not sure who said that but he makes very good reading)
you can do alot.
china is not a free market its a communist regulated relatively free market.
and there is hell of a lot of difference.
all finance is regulated and so it any movement of money.
so a market crash I think you will be waiting until the sun freezes over.
for that draw bridge to be lifted I think well within my life time.
the chinese are great at finance but not very good at capitalism.
great at making things not great at taking risks.
great as workers not great at managing to make a profit.
good at micro but not very good at macro.
you are looking at a very interesting time
you are looking at three converging markets and they are all from different corners of the world.
the chinese driven by asia and using asian type of investing.
you have europe and the euro type markets (including australia and america) correcting and trying to find there foot hold.
and indian and the indian african markets.
comming of huge steel, coal and mineral markets and with the upper hand on the finance of the current world.
the world of 1945 had two large continents and really three major areas europe, america, russia
they have all but gone
europe is now euro and that takes in part of what was russia.
america is fighting to be on the stage never mind running it.
and russia has been split up into 1000 pieces all wanting a little bit.
now we still have 2
china, india,
and africa to take to the stage.
it could be pushed off by a couple comming out of europe but I think it won't be.
so if you are in durban in sth africa and you said here comes the drums of a slow down they would say its the drums of success.
I like to watch the flow of money its like the flow of a current around the world.
the drums are still beating
global slow down for me no
slow down in a market yes
if you want to see a hot market have a look at prague.
not a market I would buy in but just did a 45% increase this year.
and it the hotest investment market for european investors.
so is that drums or is it drums with whistles and a full piped band.
depends on which side of the fence you are on
 
grossreal said:
hi hiequity
no it won't
there will be a few things but a crash not likely.
...
so a market crash I think you will be waiting until the sun freezes over.
...
Click to expand...

Hi GR

Good post - I agree with a lot of points.

I was referring to the market crash that has already happened. SSE (Shanghai - their largest exchange) composite index was 6000 in Oct 07, today it is 2815. That fits my definition of a market crash, albeit one that has taken 7-8 months to get this far.... I guess I just have a fundamental belief (hope perhaps?) that free markets will win out over the heavily regulated Asian (in particular Chinese) style of investing.

By the way, I just read your sitloti thread and you mention you use 50% JVs in China. If you don't mind me asking I assume you actually mean 49% or have you found a way around that issue as well - we have only been able to get to 49% but with equal voting rights?

Thanks!
 
Was just thinking about iron price increases acheived by RIO and BHP together with increased copper and other metal prices would improve Australia's balance of trade figures. I had the same thought about higher costs for steel products (didn't think of steel for construction was thinking about cost of imported motor vehicles-with aluminium/steel/copper components).

Link to interesting interview/presentation with T.Boone Pickens (famous oil man) on the dependency of US on imported oil (US now imports almost 70% of its oil) and how this will continue to negatively impact on the US economy.

T. Boone Pickens is promoting more use of wind/solar and compressed natural gas as an energy source (he has made a substantial investment in wind-farms in the US mid-west)

http://www.cnbc.com/id/25582244/site/14081545/

How much of the oil Australia uses is imported?
 
Was talking to a friend this morning about a mutual friend of ours who is a blacksmith (of all things)

Anyway, the blacksmith had a great business supplying builders, archtitects and home owners with really nice, high end metal stair balustrades, gates, doors and light fittings etc (you know the really nice twisted steel hand made stuff)

The business has been booming since 2000 and he had moved into bigger premises i think 3 times.

His last move was a big one in 2005 to allow for future expansion without relocating again. With an loan and repayments to match. Which was ok as they were making money hand over fist.

Well the recent slow down has caught them out and they had put people off and had been trying to move to smaller premises but couldn't sell their existing factory for what they wanted (needed) and quick enough.

The lack of orders and resulting cash flow crunch has caught them out and they have closed down last week.

Such a great business caught out with the recent slow down. I think there are quite a few of these stories around. (and will be more)
 
Hi GR,

With all due respect GR, I enjoy your posts as much as the next guy, and you have a lot of knowledge. However, I dis-agree with some of your comments .. if u look hard enough you will even find positive investments even during the great depression.

When this thread was started, asx, dow, hang seng, sensex, shanghai index, ftse and other global markets had rallied back to the peak and were just starting to go down again .. but many were saying its all overdone and were pouring money into the markets … look now and you will find that since then markets have already CRASHED.

Most of these markets have already crashed (techincal definition 20% drop over a period), so there is no debate about if they will crash .. it has already happened. So using your analogy “the sun has already frozen”. Its not a correction, and anyone that believes that they are ‘in denial’. Shanghai down about 50% is close to NASDAQ crash territory in early 2000s.

You mentioned “global slowdown – No”.. again I differ. Its already here, the question in my mind is will it be a global recession next year (global GDP growth < 2%).

"I like to watch the flow of money its like the flow of a current around the world." Heres a hint, you only need to observe Vietnam, the small leader of emerging market, and you will get the pulse.. Also you have to observe the supply of money, not just flow of money..

Happy to discuss further..
 
hi all
couple of things siloti is a system not a structure and there is structure used with sitloti and not going to go into those here and yes there are ways of getting over the control issue but they are not for any board. with regards to vietnam and that whole area they have not even seen any slow down. nor will they for a long time is my guess
and yes we are guessing here not crystal balling.
crystal balling is working on whatyou see is happening and guessing to me is you think it will happen.
yes you watch the flow of money and from where is is going and from where it is comming from.
but you also watch where the big boys are investing in.
and then try to just jump a step in front.
 
it's so hard to expand evand - i'm not likely to expand no matter how hard i have to work because i know the minute i do, it'll all come crashing around my ears.

condolances to your mate.
 
The soft financial depression is knocking at the door

I have been saying for some time that we are entering into a world wide soft depression. The definition of a soft depression is one where people will not starve (at least not in the developed world) unlike the last "great depression". Instead credit in the financial markets will be rationed and most small business's will struggle with cash flow. It will take 10 years for the financial indigestion to resolve.

Below was an earlier post


25-02-2008, 09:13 PM
nonrecourse
Member
Top 500 Join Date: Apr 2007
Location: Melbourne
Posts: 155



Fitzpattrick's Law

--------------------------------------------------------------------------------

I'm amused that so many of you have tanked Alex on the 40% drop in property. Since last August 2006 I have been saying that I expect to see property prices drop 50% in Brighton Victoria.

Murphy's Law says if things can go wrong they will. Fitzpattrick said that Murphy was an optomist!

We have just lived through the largest asset bubble in living memory, 16 years of unbelievable growth. I am 54 years old and the one certainty of life is Newtons 3rd law in Physics for every action there is an equal opposite reaction............

Ladies and scally wags hang onto your hats in the next ten years your going to see so much red ink with shares and paper money that you'll have some idea what the dirty thirties were all about.

With the subprime fiasco and the credit crunch well on its way yet we still have people thinking that things haven't changed? We are headed for a soft depression full stop what does that mean? The cogs of finance are griding to a halt and finance is going to get very difficult to obtain. That means that new business's are not going to start up. It means people who want to purchase property are going to need very large deposits and that means fewer buyers which leads to falling prices.

I agree with you Alex about holding onto your property with two modifications. Sell one property so that you have some reserve and put it into gold bullion as a backup if you lose tenants in the wash up.

Why gold bullion because the aussie dollar like the U.S. dollar and the Euro money supply has exploded like all fiat currencies in order to prop up the deteriorating financial mess. hard assets like unencumbered property and gold bullion will hold some value in a market in free fall.

The rantings of a mad man you say? Have you spoke with your bank manager lately? They are like rats on a sinking ship at the moment. Things have gone pear shaped. How many times have you heard the banks here say that the subprime fiasco will not cause problems here...........
 
nonrecourse said:
I have been saying for some time that we are entering into a world wide soft depression.
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So, nonrecourse, with those views are you fully in cash?

How do you plan for a depression? besides gold?

I would guess if a depression were to occur, property would lose just as much percentage wise as shares. Most of the highly leaveraged share investors are already out of the game. Not so property.


If you were right, it's a case of he who loses least wins. People with no debt, will be able to take advantage of opportunities. Not sure if cash is the go though?

See ya's.
 

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