What effect on the property market does shares

[Property Meister]

well everyone,

For those who have been involved since the early 90s.

Ihave a question, today and yesterday, shares have gone down like crazy, especially the Contro property group, which lost like 90% in 48 hours...

my predictions for shares is that most of them will recover to the previous prices, eventually,

how will this effect property in general espceially since that the Contro property group which is property related has taken the biggest beating I have ever seen of any property???

I would be interested to hear opinions!

 

[alexlee]

I think in the long term share prices trade at a level based on their fundamentals. That's assuming the companies survive for the long term. Right now Centro has going concern risks.

Centro isn't falling because the value of its properties are falling. It's falling because it's having cashflow problems. In the same way, you can buy a property cheap from a seller who is desperate because of bankruptcy, other debts, etc. Nothing wrong with the property: the problem is with the seller. I haven't read all the articles but I'm suspecting Centro needed to roll some shorter term debt and found the interest costs are going up, if they can refinance at all.

What does it mean for residential property investors? Not much. We generally use long term funding (20 year mortgages). Of course, interest rates are going up, but as long as you can handle those you're ok.

Imagine Centro is the guy who over-borrowed on a property, and now he has to refinance because he short term to buy a long term asset. If he can't refinance or can only refinance at a higher rate, he's in trouble if he can't handle the higher costs. While other LPTs (like Stockland and Westfield) are also being marked down, they're not falling to the same extend because the market isn't concerned they're going to go broke.
Alex

 

[Property Meister]

thansk alex.

although I think sometimes your comments are harsh (not this one), they are realistic... so I like them..

no point in beating around the bush!

 

[willair]

I would be interested to hear opinions!

I know a few investors that are still holding Centro it all happened that fast if no one wants to buy then the price can only go one way very quickly, personally i don't think it will worry resi property in any way ,not yet?,take 1974,1982,1990,and the period that follows those years when property prices went backwards, demand for property slowed for many years with high interest rates,growing unemployment,lack of consumer confidence, and the start and failure of many small businessess,the part that i still can't understand is the real estate upward cycle in Queensland has lasted for the past 7 years,who knows what next year will bring...IMHO..willair..

 

[sue78]

While other LPTs (like Stockland and Westfield) are also being marked down, they're not falling to the same extend because the market isn't concerned they're going to go broke.
Alex

But with the liquidity problem...I'm sure there will be more surprises in the New Year.