Forum Replies Created
The proviso being these statistics are valid, so my thoughts are that continued price rises are unsustainable.
Firstly I wonder how many properties are being bought by overseas residents, given that Rudd relaxed the rules for marketing to, & purchases by OS residents.
Secondly, I don't see incomes growing at the same rate. In fact wages in some industries have barely kept pace with inflation, & some have even gone backwards . Sure, the flip side is some industries are flying, like mining.
Thirdly, if banks are tightening credit rules, it should now be harder to get loans, & therefore harder to push up prices.
Fourth, the First Home Vendor's Grant is no longer helping to prop up prices.
Ok, lets consider migration & new dwellings not keeping up with demand. This will put upwards pressure on rents, but there comes a point where people can't pay any more for rent, unless they choose to starve or sell a kidney. Because for many, wages just aren't keeping up.
From a residential property investor perspective, as deposit interest rates increase & share market prices / returns improve, property will need to compete with these & other investment options, especially if you are investing using borrowed funds.
Finally, I can't but help paste part of a recent interesting commentary by PIMCO's Bill Gross. While it's a general observation on the causes of the GFC, I contend that some of it can be related to where we are with property today:' To begin with, let’s get reacquainted with the fundamental economic problem of our age – lack of global aggregate demand – and how we got to where we are today: (1) Twenty years of accelerated globalization incrementally undermined the real incomes of most developed countries’ workers/citizens, forcing governments to promote leverage and asset price appreciation in order to fill in what is known as an “aggregate demand” gap – making sure that consumers keep buying things. When the private sector assumed too much debt and asset prices bubbled (think subprimes and houses, or dotcoms/NASDAQ 5000), American-style capitalism with its leverage, deregulation, and religious belief in lower and lower taxes reached a dead end. There was a willingness to keep on consuming, there just wasn’t the wallet. Vigilantes – bond market or otherwise – took away the credit card like parents do with a mall-crazed teenager. (2) The cancellation of credit cards led to the Great Recession and private sector deleveraging, the beginning of government policy reregulation, and gradual deglobalization – a reversal of over 20 years of trade policies and free market orthodoxy.'
Food for thought.I think Westpac could be jumping on the Macquarie & B&B bandwagon:
– buy up something which earns income at a good price (negotiate
hard). Toll roads, commercial property, whatever.
– ‘sell’ them into a trust.
– flog units in the trust to the superfunds – earn income from sales.
– finally, earn ongoing management fees fees fees for as long as
the trust is alive.Super funds are just going to keep raking in the money. What if the superannuation minimum goes up to say 12 – 15 % ? Where are they going to put all that money ?
Explains why shares keep doing well ….
High DHA fees + Westpac management fees adds up to a pretty ordinary investment to me.
Just my 2 bobs worth ….Paul.
‘The main thing is to keep the Main Thing, the main thing’
… ok, I guess the next thing is to find out minimum residential block size allowed.
Have you considered townhouses ?Cheers, Paul.
‘The main thing is to keep the Main Thing, the main thing’
Hi Jobee,
The first thing you need to find out is what the current zoning is. This will set the limits as to what you are currently allowed to do with the property. Contact the council for details of what the zoning allows.
If the zoning doesn’t allow you to do what you want, you’ll have to go through the extra hassle of getting in re-zoned.
Don’t know the rest, never having done it myself (but planning to in future).
However I’m sure the development gurus here can help ….Cheers, Paul.
‘The main thing is to keep the Main Thing, the main thing’
I guess that’s always an option – if people want to invest in retirement villages or similar, you can always buy shares in those listed on the stock exchange.
Of course due dilligence, research etc needs to be done as for any investment.
There’s a couple of biggies who’s shares have made large gains in the last year or 2 – seems quite a few people are thinking along the same lines a-la aging population.‘The main thing is to keep the Main Thing, the main thing’
Well, here a little story some might find inspirational ….
In high school I started buying stamps & coins from other kids. Got to the stage where some of the more enterprising were stealing from relatives, housebreaking etc. Of course to fund their smoking habits & perhaps booze (no other drugs in them days). I’d buy collections for a song & flog some of the good stuff to stamp/coin dealers on Sat mornings.
Later in high school an older friend got into the army & started giving me cartons of condoms (sold @ 10c / condom) & porn (sold @ 20c / page). Profit was huge, since all my stock was free.
Unfortunately I eventually got into trouble for selling the condoms – kids were making water bombs out of them – so you can imagine the ruckus when there were dozens being thrown around the place each day. Most unfair that I should cop cane+detention for other’s misdeeds!
Never got into trouble selling porn but word got out – the tough guys would ‘rumble’ me (somewhere between the bus stop & entrance gate) to make off with them.
Anyway, at least I ended up with a great coin / stamp collection, most of which were sold off on ebay recently for big bucks, to fund other ventures!Disclaimer: in light of Derek’s comment below, I’d like to add that I do not advocate dealing in stolen or offensive material as part of a plan for long term wealth creation.
Cheers, Paul.
‘The main thing is to keep the Main Thing, the main thing’
Hi Nathan_b,
Can you email particulars please, I get delivery failure when I try to mail you.
Cheers, Paul.
‘The main thing is to keep the Main Thing, the main thing’
Originally posted by Nathan_b:Hey paul
the unit in parramatta i might be able 2 help u out there i am located in baulkham hills.Hi Nathan,
In what way are you offering to help out?
BTW, tried emailing you but got a delivery failure ….Cheers, Paul.
‘The main thing is to keep the Main Thing, the main thing’
To answer your specific questions:
Yes, if interest rates rise & all else stays the same (rents & other expenses), then a +geared IP can go -geared.
Same thing if rents drop.
If you’ve got 20 of these you could be in trouble!Rents are strongly influenced by rental property supply & demand, so just because interest rates go up, doesn’t mean rents will automatically go up. However over time the bottom line is that an investment has to provide a reasonable CG/return, otherwise people will (should!) invest elsewhere – factoring in the cost of selling/buying. So for arguments sake, if there’s fewer investors, there’s fewer available rentals, which should lead to higher rents (assuming no population decline). We come back to supply & demand.
Cheers, Paul.
‘The main thing is to keep the Main Thing, the main thing’
Hi everyone,
Many thanks for all your great ideas & suggestions. Will be proceeding on a more informed basis!
For those interested: the 2 IPs are in Sydney – Burwood & Parramatta. They are very nice units slightly better (only just) than hordes of similar built in these areas over the last 6 years. I’m expecting around 385 – 390k each.
Have independent valuers report & managing agent’s estimate which tally very closely.
Am persuing commercial IP with land/development potential in outer Sydney which I feel has much greater potential over the next few years than Burwood/Parramatta units. I’ll be putting all realised CG, COH, as well as finance into the new deal. Will leverage off retained IPs (all +geared, also in Sydney) & PPOR. I figure why leave large amount of CG in IPs which IMO will flatline for the next few years (better to double 500k than 250k, for example).
The new tax is a pain as the market may distort over the next few months, but shouldn’t influence me unduly.Cheers, Paul.
‘The main thing is to keep the Main Thing, the main thing’
‘Good’ television = (hopefully) lots of eyeballs = high ratings = more advertising revenue = …. you know the rest.
Nothing else matters.Hi there – would love to try this out but being on the rural fringes of Sydney precludes anything other than dialup.
Any chance of cutting discs for a small fee?Cheers, Paul.
