Forum Replies Created
I think you will find that in a housing crash, rental returns are much higher just because the house price is so much lower. The nominal rent however doesn’t change much.
btw I was also recommending silver as an investment this time last year here https://www.propertyinvesting.com/forums/community/opinionated/4331698?highlight=mattnz%2Csilver#comment-208893
Since then the price of Silver has doubled!!
ALF1 wrote:NO, you are wrong again Matt! Cash is NEVER king. During WW2, when the proverbial hit the fan a whole suitcase of cash in Germany wouldn't buy you a loaf of bread. GOLD and precious metals are truly king my friend and I guess this does prove that a single post grad in Finance doesn't make one the Master Guru of Australian and World Economics. Oh, I forgot, you didn't do economics, just finance. Perhaps a PhD might be of benefit Matt?It actually wasn’t during WWII. Hitler only came to power after hyperinflation in 1923. He promised to solve their economic problems.
In a credit shortage crisis, causing deflation of asset prices, cash is definitely king and the last thing you want is debt against those assets. Just ask a person living in Florida, if they had the chance to sell their house in 2006, clear the debts and retain their equity and then buy back the same house in 2011. They would jump at the chance. Houses have declined by as much as 80-90% in many areas!! This is the event we are discussing, even though it may be on a lesser scale. This also applies in every other country i have mentioned, Ireland, Spain, Portugal etc.
In a crash like this, cash is king. Opportunities willl present themselves in property if you have no debt and are cashed up. Such opportunities exist in USA today.They are in step 12 – QE2.
btw Masters is a post-grad degree.
Here is an article which explains the situation and clearly demonstrates NAB think Australian house prices don’t represent fair value using the words of their CFO.
http://macrobusiness.com.au/2011/04/did-nab-just-give-up-on-housing/
It is interesting to note the similarities to this post of mine last month https://www.propertyinvesting.com/forums/property-investing/general-property/4335857?&page=1#comment-232198. Nice to know the CFO of NAB was listening. Here was my post then before he said anything in public….
Rents reflect the supply and demand for accommodation and what the average household can afford to pay for it. The significant premium of 8% per annum holding cost vs 3% rental return of the average house reflects SPECULATION that a greater fool is willing to pay even more than you did for a poor investment.
When the USA market dropped in 2006-7 everyone on this forum was saying “its different in the USA, they have non-recourse loans”. Since then we have seen collapses in Ireland, Portugal, Spain, UK, all markets that have full recourse loans. Don’t forget that Japan in 1990 had house prices that were higher than they are 21 years later, due to property speculation, the same as is currently happening in Australia.
NAB’s subsidiary BNZ recently advised that they were aware that NZ house prices were overvalued by 30% in 2008, based on a house price to income ratio of 6 in NZ. You have to wonder what NAB are saying behind closed doors about the even higher ratio in Australia, which must reflect closer to 50% overvaluation.
If you think that house prices in Sydney are realistic, have a look online at what you could purchase in a similar sized US city like Houston. It will really put things into perspective of what a gamble you are taking, loading up with debt on overvalued “investments”.
xdrew wrote:Take a good look at where most of our money .. trade and income comes from .. its not the US .. which accounts for less than 10% of that. Most of our business is done with east Asia and provinces. We have little to no exposure to most of the countries that are suffering at the moment.Our relationship with USA, Ireland, Iceland etc isn’t in a reliance on trade with each other, it is that we are equally reliant on funding outstanding debt. For our big banks, they rely on refinancing debt in these related markets. If they can’t refinance, they cut lending to customers, and reset the risk parameters under which they will lend. Restricted credit guarantees the debt driven bubble will burst.
Btw I have a Masters in Applied Finance, work in middle management for one of the big 4 banks and have spent hundreds of hours researching to get to these conclusions. I have a very good idea of how everything works.
xdrew wrote:Our current finance issues are compounded by the reality that the big four have hammered down on lending criteria to almost ridiculous levels. I had a friend who has over 20 million in assets and was lending on a property worth 5 million for 60% of the total value (unencumbered previously). The banks actually turned around and asked for more security !!!The reality is .. unless you got a solid job situation .. zero issues with repayments and a saved deposit, banks arent lending anywhere near what they used to. So .. EXPECT that to affect your housing situation in the near term. Less available money means less buyers. Its really that simple.
It seems you clearly believe we are at step 4 already then!! It may be worse than I originally thought. Thanks for your contribution.
Just the result of a huge amount of research and an understanding of what is happening internationally.
There is no point making predictions of a sequence of related events after they have occurred.
$2.6 million unrenovated property, that cant rent for $400 per week!! Surely they haven’t purchased to rent out anyway. I bet you don’t see any advertisements for renting the property coming up. They must plan a development themselves and are just trying it on.
Gladstone market hasn’t moved much in the past 3 years. There are plenty of properties available to choose from and huge rental demand already, with thousands of employees still to arrive. Hard to go wrong with $40 billion + being invested in a town of 40,000 people. It is my number one pick in Australia.
Hi Troy,
Does that include cheaper properties i.e. the $20k-$50 bargains out there at the moment?
Also, what sort of interest rate and term?
I don’t even feel safe in that area at night. really poor lighting, no character.
You would have to be crazy to expect rents to increase just because landlords overpaid for properties.
Rents reflect the supply and demand for accommodation and what the average household can afford to pay for it. The significant premium of 8% per annum holding cost vs 3% rental return of the average house reflects SPECULATION that a greater fool is willing to pay even more than you did for a poor investment.
When the USA market dropped in 2006-7 everyone on this forum was saying “its different in the USA, they have non-recourse loans”. Since then we have seen collapses in Ireland, Portugal, Spain, UK, all markets that have full recourse loans. Don’t forget that Japan in 1990 had house prices that were higher than they are 21 years later, due to property speculation, the same as is currently happening in Australia.
NAB’s subsidiary BNZ recently advised that they were aware that NZ house prices were overvalued by 30% in 2008, based on a house price to income ratio of 6 in NZ. You have to wonder what NAB are saying behind closed doors about the even higher ratio in Australia, which must reflect closer to 50% overvaluation.
If you think that house prices in Sydney are realistic, have a look online at what you could purchase in a similar sized US city like Houston. It will really put things into perspective of what a gamble you are taking, loading up with debt on overvalued “investments”.
Try Russell Island, land starts at $27k. Houses sell in the 150-170k range http://www.realestate.com.au/property-house-qld-russell+island-107204476
It definitely sounds like you are trying to get maximum potential upside while exposing your parents to huge potential downside. You should make your first priority removing your parents risk in your investments before even looking at expanding your own empire.
Also note that when your Aunt started building up a portfolio, conditions and prices were very different. What was working then won’t work now.
The more they have to invest to fit out the space the longer they are likely to stay at the premises.
Scott No Mates wrote:I'll disagree, the only way is up & that'll help pull the AUD down creating upward pressure on inflation as the cost of imports rockets upwards.Hi Scott,
Increasing interest rates will make AUD stronger, not weaker and the cost of imports would drop as a result.
I'm still waiting for the special forum for the 250k club, which I joined a year ago!!!
I have 3 investment properties, but I am planning to sell 2 of them this year. The third I intend to develop using the proceeds of the other 2.
I don't have a desire to manage 130 properties and see it more likely as a road to bankruptcy in Australia. The market here is ridiculously overpriced.
If I was inclined to try anywhere, I think the best market by far would be USA.
I bet Nathan Birch could do it in Australia if he set his mind to it. He is the most creative property investor I have seen.
http://www.nathanbirch.com.au/index-1.html
