Forum Replies Created
- ajago5 wrote:Thanks guys you’ve been a great help .. I had a look at the links, very interesting stuff and Im in the process of setting up a spreadsheet to help me with risk analysis and other issues. It is a bit tricky though but Ill keep at it.
Thank again
adamKeep us updated on your progress. I’d be interested in whatever you develop just out of curiosity
Jack
<moderator: some previous comments have been deleted. Abusive and/or insulting comments are not welcome on this site>
kong71286 wrote:What Lies Ahead for the Australian Residential Property Market? Quite an interesting article by Bill Zheng, who believes Australian Residential properties will do quite well during the next 10-20years, for the following reasons: Money supply will increase. Australia is more aligned with Asia (and will benefit from its growth), than with Western Countries. Australia will become wealthier as a nation, and most of the wealth will reside in residential propertiesBill is no messiah or guru. Infact he's just another self interested property spruiker promoting his property centric business with considerable bias. His article wouldn't make the grade on a 3rd rate economics 101 course.
Money supply will increase: of course it will. Fractional reserve banking and inflation guarantee M1/M2 money supply will grow exponentially See here: http://en.wikipedia.org/wiki/Money_supply
Aus aligned with Asia: has been for years however our big customer is China. The rest hardly rate by comparison. Problem is after 20+yrs we still only export minerals, education and tourism. The idea that we can diversify our exports to broaden our income base is yet to be proven. Resources (and Banking) underpin our trade surplus. (The rest of the economy under performs and is technically retreating.)They retreat and things won't look so rosy. Iron ore recently dropped from $180/t to $116/t and is predicted to go below $90/t next year. China is slowing and has substantial structural problems. It's growth rate is predicted (by credible inside commentators) to decline to 3-5% by 2013. That makes our economy look vulnerable to the impending global recession/depression from 2012/13 onwards. The common fear for the Aus economy is that we will develop the Dutch Disease – http://en.wikipedia.org/wiki/Dutch_disease
Aus becomes wealthier and that wealth will reside in property. Post war the Aus economy ran deficits for 50 years. In the last 20 we've seen the biggest credit bubble in history. Serious and credible economists see the next 10-20 years of global austerity as it deleverages (and defaults) out of the massive debts that have accumulated over this time. We may see the end of FIAT currenceies and fractional reserve banking or at least a unsubstantial modification to these systems. Once the correction begins to occur for real we're likely to see property depreciate and not reappreciate back to current levels for decades. You only have to look at how property values behaved in the 1930's depression to get a feel for a likely model of property and wealth this time around.
Bill is just another property spruiker adding to the background noise in the hope of lining his own pocket at your expense. <moderator: delete language>.
Risk analysis is fairly high end modelling. There are a number of software providers that have products to achieve this but its generally in the range of 1000’s of $$$.
Unless you have a tertiary qualification in maths or economics my guess is you will struggle with the formula. It’s certainly out of my league. However a few links that may interest you
http://www.zenwealth.com/BusinessFinanceOnline/RR/RiskAndReturn.html
http://www.investopedia.com/terms/c/capm.asp#axzz1dUJQ8fb3
http://www.kingdomventures.com/pdf/Seeking_Alpha.pdf
http://www.sans.org/reading_room/whitepapers/auditing/quantitative-risk-analysis-step-by-step_849 (includes formula)
Free spreadsheet (over 100)
http://www.exinfm.com/free_spreadsheets.htmlLatest Research on Investment Strategies, Asset Allocation Methodologies and Risk Management Techniques
http://www.lyxor.com/publications/white-papers.htmlHave fun.
Jack
luke86 wrote:Did you read the ANZ property report as well? That is probably a little less biased/one sided.Yeah I had a quick look thru it. Your typical bank drivel. Now that they’re faced with irrefutable evidence property is falling they’re taking a more neutral position and trying to sound as if they know what they’re talking about. They’re in the “yes but” phase at the mo’. You get better info from kindergarten kids than the so called bank economists. The kids may not know what they’re talking about but at least they’re honest.
Jack
PS If you want a good source of hard and reasonably unbiased comment/data tryHouses & Holes (blogger) writes fairly good stuff on the property market.
mafarelly wrote:It's been written by Bill Zheng, founder of Investors Direct.He's renowned for having his own independent view of the market and doesn't alway agree with other commentators
Another pump and dump thread from an industry insider.
Things a bit slow at the office Mark
If his views are independent I’m a monkey’s uncle. The guys just another property spruiker running a property centric business.
His conclusions are based on airy fairy assumptions that an amateur economist would pull apart in seconds.
Jack
Catalyst wrote:Our banking system is VERY different to the US. I don't think it's feasible to make comparisons.I’m not comparing banking systems. The comment I made reflects sentiment in some areas that poor lending policy by banks IE lending at 100% in some cases, is similar to the US toxic mortage scam.
PI’s here still don’t understand (in many cases) how our banks operate and the risks they present. The ratio of mortage money sourced from local deposits vs international money markets varies from time to time however over all Aus property is substantially funded by short term international money market borrowings. We may see interest rates decline in the short term but given that money market liquidity is seizing up and the price of money increasing it is far more likely we will see interest rates rise in the medium term.
This presents the potential for a similar scenario like the US toxic mortgage scam as property holders see falling prices/values as interest rates rise pushing more into negative equity coupled with higher repayment costs.
Jack
Let me get my head around this.
You’re going to buy an IP (wrong term I think) that will cost you $15k/yr approx to hold onto. You think if you can get away with a 10% rent increase year on year for 5 yrs it may get to be cash positive. Meanwhile its cost you around 70k to achieve this.
Then we’ve got a property market with more downside risk than the last depression and I suppose somehow you think this property may appreciate rather than depreciate.
Tell ya what. You give me $15k/yr. I’ll keep half and bet the rest at a casino for you and give you any winnings. They’re way better odds than you’ve got right now!!
Jack
DetroitDan9 wrote:Jack,I’m not sure what you mean – can you elaborate for me? The site was just redone a few weeks ago.
The domain name is listed at WOT (Web of Trust) as malicious.
Enter your URL in the search box and you’ll see your WOT rating.
Jack
Mosqui wrote:even if you build a camp for FIFO and for construction all the staff will move their family to town and will require a place to live.Who told you that rubbish. FiFo’s tend be temporary workers on contracts to particular projects. Their families would prefer to live anywhere but the Pilbara. FiFo’s can’t wait to get out of the place when they rotate and I don’t know of one FiFo I’ve worked with over the last 4 years who has ever considered moving their family here. The opposite actually.
The drivers of property demand here are speculators and companies buying or renting houses for staff. A rental per person is half the price of putting staff in camps. Note this only applies to small companies with few options to house staff.
Rents are high because of the transient nature of renters and those let to businesses to house personnel often end up in arrears and or damaged. Damage and burglary are rife in South Hedland. Crime is a major problem here amongst indigenous locals.
Only a tiny portion of the property market here is for people who actually want to settle and live here. It’s 90% commercially driven. When (not if) that commercial pressure reduces the property investment profile will change substantially.
Jack
WOT has the site listed as malicious. 3 comments. The comments are bogus and the comment that you are on HPHost’s blacklist is untrue. I checked!!
Jack
Corie you sound like your typical avid investor blinded by dreams of vast profits in boom time towns.
Karratha has minerals and more importantly energy as the drivers of that locality. Energy is the key there to long term sustainability however a downturn in ore will could see it pull back from boom time highs.
Port Hedland is a whole different kettle of fish. It is almost soley driven by minerals expansion projects. Stop those and you won’t be able to give property away here.
BHP wants to ramp up output from 150mt/a to 450mt/a. One of the big projects penciled in for here is the offshore loading facility. For that one to go ahead they need to get $200/mt to make it pay. The market is at around $180 and the big question is how much will China slow down and how fast. My bet is that it doesn’t get built in my lifetime.
http://www.smh.com.au/business/bhp-reveals-its-iron-ore-target-450m-tonnes-20110927-1kvhi.html
http://www.smh.com.au/business/bhp-reveals-wa-ambitions-20110927-1kvdw.html
I believe most of this to be hype for the media and analysts.The problem (or opportunity) in the Pilbara is that infrastructure and housing lag demand because demand has grown exponentially over the last 10 yrs. Two things will happen
a. demand will decrease due to completion of expansion projects. They can’t go on indefinitely. At some point demand will be met and once it is I actually expect to see demand decrease as the big boys increase automation and scale down their expansion plans . It takes fewer and fewer ppl to operate these big processing plants than at any other time in history.
b. demand for many minerals will be diluted (less demand on Australia) as new supply capacity comes on stream from around the world.
Like most boom towns many will be overbuilt. I expect that to happen around the 2012/13
The driver up here is construction of resource infrastructure not resources themselves. It takes 6000 workers to build a project and less than 300 to run it. Your typical big project takes around 2 years (some longer). I believe we’re getting near the end of the build out here in Australia. Even if the expansions continue my guess is the rate will decrease by at least 50%. A slow down in expansion will kill property in Hedland overnight.
Commercial property in Hedland takes months if not years to sell. I reside at one that’s for sale and they’re doing well if they can get one buyer per 2 months to look at it. The last industrial sell off was balloted. It was bought by speculators after a fast buck. Only a few have on sold so far and its been nearly a year. There’s more commercial property for sale here than you can shake a stick at.
Karratha’s a better bet than Hedland due to energy but I think the market there has topped out for the time being.
The new opportunity is Onslow I believe. Broome might not be as good a deal as some might think. Still a long way to go there.
Jack
PS: China is the unknown quantity. Everything in our economy is reliant on a fast growing China. When (not if) it slows down lookout.
This guy writes some interesting stuff;http://www.alsosprachanalyst.com/economy/china-economy-more-worrying-signs.html
Some perspective:
We face a bigger problem now and we will pay a higher price” than in 2008, says Nassim Nicholas Taleb, author of Fooled by Randomness .
“The structure of the problem has still not been understood,” Taleb said today at a press conference in Ukraine. “We haven’t done anything constructive in 3½ years. Nobody wants to do anything drastic now.”
And no wonder: The big U.S. banks’ eurozone exposure totals $2.7 trillion.
When Greece defaults — is it really a matter of “if” anymore? — investors will run for the exits from the rest of the PIIGS countries too. That’s big trouble for the big French banks. And the big German ones. And those banks alone account for nearly half of that $2.7 trillion total.
Imagine if one of those French or German banks collapses… and the knock-on effects on U.S. shores.
This is one key to the “mother of all financial bubbles” scenario.
“This new bubble started years ago,” he says, “with the government’s response to the Internet stock crash in the early 2000s. Then it morphed into the bigger housing bubble… And eventually into the even bigger credit crisis of 2008.”
“Now, due to the aggregate of those government actions, we’re in the middle of the largest financial bubble in history.”
Good to see you got a job Josh. The sub contract thing is likely to be illegal under ATO rules (unless you do work for other design houses as well). Talk to an accountant about it. That said self employed vs employed has its pro's and con's. Big tax advantages in being SE but the one I like is I don't have to give those super fund <moderator: delete language> any of my dosh because they <moderator: delete language> don't know how to invest it. The only real downside to SE is the ability to borrow. Once your SE'd you're seen as higher risk so you get put through the grinder every time. Fact of life so use the time to build good solid financial records.
Quote:I do not want to wait 2 years to be able to buy an investment property.I could slap you young fellas sometimes. You're in a property bear market!!! Price pressure is down!!!! Globally financial Armageddon may be on the way!!!!
Why oh why would any investor in their right mind be in a rush to buy into a falling market?
charlitayla wrote:I have always been worried about getting something before the next boom. as I watched it boom over night last time. Good advice patience is something I lack.It is highly unlike you will ever see in your lifetime a boom like the last few decades. We’re coming out of one of the largest credit bubbles in global financial history and boy is it gonna hurt!!
Jack
charlitayla wrote:Thank you for all your help, it has really made me think. I need to gain more knowledge and more money.Patience!….. the most important skill you’ll ever learn in investing.
charlitayla wrote:Thats interesting that you think houses are still going down in priceWhat you’re seeing at the moment is just the beginning. It’s the consequence of a very nervous public who see big trouble on the horizon. The slow side of our 2 speed economy ie; anything not related to resources, is under mounting pressure. Our high dollar has kept inflation at bay but hampered exporting (except resources). As the dollar comes down expect to see inflation rise and consequently more pressure on household budgets with an accompanying rise in mortgage stress. Everywhere you look all you see is downward pressure on property prices. There is nothing out there that indicates that pressure will ease anytime in the next few years. If anything things will get a lot worse before they get better.
Quote:maybe I should wait.Good idea
It’ll give you time to better assess the landscape, improve your knowledge and increase your financial firepower.
Jack
Shape wrote:umm with a low borrowing capacity, i would personally wait till you can borrow a bit more, no point rushing; there are “cheap ” properties out there but it doesn’t mean it’s worth it…Regards
MichaelMichael’s right and you have all the time in the world. The global economies are in a real mess and cash is king. The big crash hasn’t started yet but when it does don’t expect Aus property to be exempt. We’ll cop it just like the rest.
Now’s not the time to buy anything especially if you’re a newby. Very few here know how to play a falling property market simply because we’ve not been down this road since the 30’s. The new paradigm in PI will not be about capital gain but cash flow positive investments.
ROI through positively geared property will be the new focus because the settings for high capital gain returns will have been reset back to pre boom time parameters. The likely future scenario is for property to correct back to long term trend values. Initially we’ll get an over correction which will in all likelihood take around 5 yrs to wash out. That will be your buy in time when property values have overshot to below trend. Long term capital gain growth is not likely to exceed the inflation rate (which is the long term trend line) for some decades. It took property almost 20 yrs to regain pre 30’s depression values.
Another elephant in the room is how interest rates will play out. It doesn’t look good for property. The EU, US, China and now the UK are getting ready to print more money. That’s a major problem for us in terms of inflation and is a double whammy as our dollar falls. It’s going to be hard for the RBA to cut rates to stimulate our economy when inflation is rising to what may be relatively high levels.
There is absolutely nothing on the economic horizon that even remotely looks positive for property. Quite the contrary.
Jack
Hi Derek
On top of this BHP require 6000 beds in Hedland over each of the next three years to house their workers with major expansion projects planned to the Hedland port facilities and a commensurate increase in rail operation into the town of Hedland. At the same time there are plans for only 200 additional beds in Hedland at the moment. (when I last checked
BHP are currently building a 5000 man camp 20k up their access line to accommodate these workers which are at best temporary. beware of Press reports they’re highly inaccurate and misleading.
The so called tripling of the population may come but the current investment is focused on infrastructure (water, sewerage power) to support any future growth. It’ll take several years to get this infrastructure in place if at all. Much of this stuff has been promised by various governments since the 60’s. Given there is global recession if not depression coming expect to see State funding shrink considerably as their income sources take a hit.
Most of the major mine infrastructure projects are well into their life cycle already and demand is being met. The bulk of these projects will finish within the next 2 years. You could see a vacuum up here as they complete coupled with a global slowdown.
My bet is that within 5 years property could loose half its value here. I think the pressure on housing will stay on for another 2 years at most then come off over the next 3.
Jack
Blimey it scares me the way people do investment analysis in here sometimes.
So lets look at some REAL figures not airy fairy BS stuff plucked out of thin air.
Your real buy cost is closer to $350K
Your real sell cost less expenses 460 – 45 = $415k
Leaves approx $65k gain over 5 years.
You haven’t stated if its positive or negatively geared!!
Your actual REAL net CG return is 3.5% compounded pa
So lets summarise; you have an old beach side banger that has a net return on capital of around 3.5%pa. The 4% rent yield is probably a mirage as well.
I don’t know about you but that’s somewhat of a dud investment in my book.
ummester wrote:Difference as I see it is that American confidence in the housing sector is shot. It isn't shot here yet.Yes it is. It’s in the declining house prices, the doubling of properties for sale and the low turnover.
Anyone with half a clue knows that this is something different…. you can almost feel it.
Jack
