so, it's 11:30pm at the moment....

[Aaron Sice]

and i'm still working.

why?

i just watched the special on Ireland on Lateline and had a bit of a freak out - IRE looks like Perth at present - cranes bluddy everywhere building big white elephants. Sure the jobs are there - but for how long?

so, their recession hit hard and fast. now people are staring down the barrell of 10% UE (!) and the BofE is looking to slash rates tomorrow by 50bp to 0.5%.

why am i still working?

i'm busier than ever - all i focus on at the moment is making sure my kids are being educated and my business and it's focus. it's 11:30pm and i'm no where near being ready for tomorrow - because i'm already three days behind.

people glaze over when i talk about the unit numbers i draw - but in all honesty - they're some BIG bluddy numbers!!!!

since Jan 1 i have drawn developments of

16 resi
5 resi
15 resi
17 resi
8 resi
5 comm
6 resi
3 resi

that's a hell of a lot of developments - and about half of them are 3 of my regular clients - with serious indications they have more to come. what's going on? i'm busier than all 5 of Perth's major unit builders COMBINED from a drawing side of things. builders have started sourcing me out asking if i can send them something to quote....!

now i'm not complaining - this is what i wanted my business to be and here it is. my competition know my name and cant compete with my yields or prices.

i don't knw if i'm worried or just plain amazed. how is it that if the proverbial s h i t is hitting the fan that i can be sitting here burning the midnight oil trying to keep up witht he constantly regenerating load?

can someone please explain the irony? because i'm honestly at odds.

 

[chilliaa]

and i'm still working.

why?

i just watched the special on Ireland on Lateline and had a bit of a freak out - IRE looks like Perth at present - cranes bluddy everywhere building big white elephants. Sure the jobs are there - but for how long?

so, their recession hit hard and fast. now people are staring down the barrell of 10% UE (!) and the BofE is looking to slash rates tomorrow by 50bp to 0.5%.

why am i still working?

i'm busier than ever - all i focus on at the moment is making sure my kids are being educated and my business and it's focus. it's 11:30pm and i'm no where near being ready for tomorrow - because i'm already three days behind.

people glaze over when i talk about the unit numbers i draw - but in all honesty - they're some BIG bluddy numbers!!!!

since Jan 1 i have drawn developments of

16 resi
5 resi
15 resi
17 resi
8 resi
5 comm
6 resi
3 resi

that's a hell of a lot of developments - and about half of them are 3 of my regular clients - with serious indications they have more to come. what's going on? i'm busier than all 5 of Perth's major unit builders COMBINED from a drawing side of things. builders have started sourcing me out asking if i can send them something to quote....!

now i'm not complaining - this is what i wanted my business to be and here it is. my competition know my name and cant compete with my yields or prices.

i don't knw if i'm worried or just plain amazed. how is it that if the proverbial s h i t is hitting the fan that i can be sitting here burning the midnight oil trying to keep up witht he constantly regenerating load?

can someone please explain the irony? because i'm honestly at odds.

First of all well done buddy, if there is demand for your services then obviously you are doing something right.

All i can say i say is be careful of trying to extrapolate the 'big world' into your own world. Your quote about explaining the irony basically is my whole investment philosphy. Look at the macro picture, look for changes in trends out there in the big bad world, but always think local.

The only suggestion i can think of is to make sure you have your risk strategies in place. Make sure that you are not being inundated with work because your credit terms are easier than your competitors. This is not the environment to be holding large account receivables or pay later 'good will' accounts, even with regular customers.

 

[BayView]

Chilliaa made a good point; it's no good having lots of accounts that pay down the track, right now.

The only other thing I can think of for your steady work in the face of a possible very bad year ahead for property developers is maybe they think the rates will continue to drop and therefore people will continue to buy?

It didn't work having very low rates in the USA, and I know we have a different economy here, but cheaper rates do not guarantee sales activity on it's own.

They either know something we don't, or are in complete denial.

I guess, if the population growth signs are still good, it means there is an ongoing market for sales, regardless of the economic and financial climate, so they are taking a punt.

I'm surprised they can still access so much finance from the Banks though.

 

[steveadl]

Great to hear BC. Little worlds can still power along amongst wider downturns. Yes the general economy at the moment sucks, but doesn't mean people like yourself won't come out the other side of it much better off.

Chillia raises a good point about your debtors though. Just becaue they're your good regular clients, don't let them get too far behind on payments (assuming they are at all).

 

[HiEquity]

Hi BC

I don't know if you saw this little snippet from BIS Shrapnel on the future of Perth CBD rents? It's not a pretty forecast at all...

I too am wondering about all these cranes and the future real demand for space.

Mind you, if those guys are as accurate in their view of the office market as they are for the electricity market then there isn't anything to worry about! Honestly, the level of analysis they (and other "esteemed consultants") provide for the future of electricity / renewable energy is truly woeful - it's not worth stuffing your toilet with. Unfortunately though it's relied upon by our policy makers....

Anyway, there will always be a demand for quality services and it sounds like your clients have found someone they are happy with. Very easy in that context for the total industry workload to go down while the "core" developers maintain their activities along with the workload for their trusted team.

Good luck in your endeavours...

 

[fmx_rider]

That BIS Shrapnel estimation seems fairly incredible. What is it with people's love affair with 40%. First Keen, now BIS.

By 2014 I expect the next 'up' cycle of the mining cycle to be starting...so 17% vacancies is huge.

I think residential vacancies are possibly more likely to suffer than commecial. There are a lot of apartment style developments happening in the inner suburbs.

 

[Dazz]

Hi BC

I don't know if you saw this little snippet from BIS Shrapnel on the future of Perth CBD rents? It's not a pretty forecast at all...

I too am wondering about all these cranes and the future real demand for space.

Mind you, if those guys are as accurate in their view of the office market as they are for the electricity market then there isn't anything to worry about!

You guys must be talking about a different Perth CBD to the one I invest in.

Don't know anything about these white elephants, everything I own is chock-a-blok and renting its little sox off.

Demand has slacked off from the tightest in the world at 0.3% vacancy, quintupling up to just a very tight market at 1.5% vacancy. This is still a very very low number.

I wonder if any of the BIS Shrapnel gurus own any real estate that they profess to be so expert in ??

One market rent review on one small leg of one of these white elephants was more than enough for me to retire on forever. Give me a whole herd of these white elephants anyday.

BC - once I finish negotiations with this grumpy 70 yr old, I'll give you another call.

On your original point - don't forget that you are in a long lag time industry. Your work comes up at the front of the queue. It's probably the ideal time to start projects off and pay for your consulting work to get the plans and yield diagrams sketched up and submitted.

 

[HiEquity]

One market rent review on one small leg of one of these white elephants was more than enough for me to retire on forever. Give me a whole herd of these white elephants anyday.

Hi Dazz

I have no doubt that properties bought prior to the spike in rents will still do very well regardless. However, at the moment rents seem sky high and yields very low on purchase, which is a difficult combination for a new investor, especially with a GFC in the background.

It's a bit like our RIP portfolio - would I buy it on it's current valuations and yields? The answer would have to be a resounding no... I just can't see the value. But now we have it would we get rid of it - absolutely not!

This is why I am intrigued by GR's 11%+ yields in this patch as I'm not seeing anything anywhere near 10% - it probably only goes to show I need to get out and do some more hunting!

On your original point - don't forget that you are in a long lag time industry. Your work comes up at the front of the queue. It's probably the ideal time to start projects off and pay for your consulting work to get the plans and yield diagrams sketched up and submitted.

This is a good point - I am seeing the same thing in my game (the power industry). Developers are working up their options while it's quiet, getting DAs and other approvals - lining up all the ducks so that whenever things turn around they can push the "go" button straight away. So for us, development work is picking up more than it's slacking off...

I understand it's a similar situation for the oil/gas/mining industries. Long lived assets with long lead times so do the cheap development work when it's quiet... and sit on the options to build until they come into the money.

 

[Aaron Sice]

thanks guys - it's just staggering and confusing sometimes. even my wife gets worried about what are we doing so right? or is it just dumb luck?

yes, i'm definitely at the front of the queue when it comes to seeing an industry turn around. i think this is why i'm still a glass half full person and why i'm trying my damndest to find god CF~ or CF+ resi deals.

all this work has to be extrapolated across to builders, which hold up trades. so i see no HUGE shift in labour markets out there - even builders have admitted the only change to labour rates have been brickies prices - everything else is still the same.

just picked up a whole heap of catholic school playground and donger drawings this morning while writing this - as part of the "stimulus package" spending. see what i mean....? it just KEEPS coming.

i'm doing my best to avoid expansion and avoid the monster that requires feeding, but i've HAD to invest in some office space now (halves of $10kpa rent) but now looking at needing a FT contractor (for the tax deduction) instead of an employee.

but i have a niche market i guess, and i bill VERY regularly with 28day terms so i *should* hopefully hold up alright - touch wood, praise jesus, ohm shantii et al.

it's just whacked out when you compare the macro and the micro. only last night there was another special on the whole notion of "recession? what recession?" as people wit niche market holds are shining through.

cross fingers this activity keeps up. on the ground sentiment is my gauge now, and it's full steam ahead.

sorry for the rant - i just get a bit worried and muddled sometimes - esp with sensationalist D&G stories on the telly when i'm sleep deprived and suceptible to actually buying that ab-cruncher they're advertising.