Forum Replies Created
- trakka wrote:But how high do you think interest rates will go?
You need to look at our terms of trade. The price of our key exports, thermal coal, coking coal and iron ore have doubled or tripled. Thats the mining boom.
But also we are looking down the barrel of an agriculture boom as well. Price of rice has tripled in China last year. Meanwhile the US is grain production to ethanol production. Australia is about to get another massive influx of foreign currency. That will result in significant supply side shocks to the economy.
Im calling for 12% interest rates by 2010 with inflation holding steady at 4 – 5%. Lock now. Given the rosy economic outlook there is about a 0% chance of an interest rate fall in the next 24 months.
Interesting thread.
One of my relatives has just gotten a Sing dollar mortgage for an Australian property. We check the Australian dollar every day twice a day or more but have no hedging in place. Would be interesting to see if anyone has been able to hedge (but basic economic theory says the cost of hedging should at least equal the interest rate advantage due to arbitrageurs).
I have looked into this.
The requirement of NAB or ANZ is that you must be a tax resident and earning an income in the offshore jurisdiction (ie Japan or USA) where the mortgage is taken out. I am not aware of any financiers that will allow you to take out a multicurrency mortgage (ie a loan denominated in USD and using a US rate of interest but secured against an Australian property) if you are an Australian tax resident.
Things can get a bit scary pretty fast if the Australian dollar declines. The lenders require you to maintain a minimum LVR of 25% and recommend an initial deposit of 30%. So if the Aussie dollar drops by 10% and you are on the wrong side of your LVR you will face a margin call for the difference (ie 5% of your property value). A 20% drop would be a 15% margin call. So this is not a product for the faint hearted and you have to be pretty confident about Australian inflation remaining a threat to prop up interest rates and therefore supporting the dollar.
All that being said you can get some pretty amazing rates offshore. I would be interested in talking to anyone that has been able to work a way through the tax residency issue – because if you use a foreign national to hold the property you will never get through the Foreign Investment Review Board.
Im in Shanghai, China on a business trip. I picked up a copy of the local newspaper and it has a large ad for Vision Brisbane.
This suggests to me that Vision has a large advertising budget if they are advertising in China. Someone has to pay for those ads and we all know who that person is going to be.
What you have just described is exactly how a ski resort developer like IntraWest operates.
They buy large tracts of land on the side of a mountain – build a ski resort and lose money on operation of the ski resort. However they make a killing on the condos and commercial property in the village at the base of the hill.
What you are talking about is the same principle on a smaller scale. What needs to be taken into consideration though is the financial viability of the star attraction. How much money do you stand to lose on the cafe etc in the hopes of pulling up the value of the surrounding property.
Of course its much easier if you can convince the council to build / operate the star attraction for you.
