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LIC’s : yield around 8%, capital appreciation the rest. Some have done better eg WAM capital 25% this year to Sept. This still underperformance compared to the broad shremarket which appreciated 30% in the last year.
I am not sure what the difference between LIC’s and LPT’s is. I am just looking for something that tracks industrial RE. A share traded index stock would be ideal but I don’t think there is such an index. The next best I suppose would be a mutual fund or LPT devoted to industrial propr.
thanks robert, should not use acronyms. Although they are exchange traded, few retail share investors have much interest in them as they are percieved slow & low volatility. I suspect they are sold mainly on advice of investment advisors in a diversified portfolio strategy.
Except that they have been floating on air (and about to drop ?) in the last 5 years with 15-20%pa returns. Advantages are : diversification, good div yield, liquid.
Robert, Glebe is not a crime spot anymore. Or if it is it doesn’t matter. You cannot get a 2br terrace there for less than 600k. It is now a mega yuppie zone.
I used to live in Redfern, on Abercrombie street, in the 80’s. Crime was MUCH worse then, but even then it was over-rated. I enjoyed living there and had no major problems (ok, my car got broken into once). I had a look there recently and it has been significantly gentirfied with new appartment blocks and the bad zone is now considered to be just around the train station and some areas of waterloo. Whereas before it was considered the whole suburb. Young professionals are moving in and you are hard pressed to find a 2br terrace for less than 500k anywhere except within a few streets of the block.
It is obvious that it will be gentrified further. It is true that residences near housing commission areas are marked down. But you can get supranormal returns if you procur the propery before the housing commission flats go as the area gets re-rated. Of course if the HC places stay for longer than you expected then this is the risk you take. In the case of Redfern I don’t think anyone really expects the block to be around in a decade or two.
Even if the block stays it doesn’t matter all that much, the area will probably become like kings cross/darlinghurst – inner city, cool and a bit of crimey. I used to live in darlinghurst also and felt less safe there than in redfern as there were a lot of homeless people and druggies. That hasn’t stopped it from becoming a yuppie suburb with gentrification move spreading from paddington.
Canberra has good town planning and a higher average income I think (but check on this) then Sydney. Unfortunately it’s very cold and depressing in the winter.
For a period in the early 90’s there was a great fear that as it became self governing there would be less commonwealth subsidisation and it would also suffer economically with downsizing of federal agencies. Canberra property stagnated, went down or flatlined for over 5 years. Because this bearishness was not supported by the fundamentals of a growing population prices in this city have soared in the past 5 years. Prices although high are more sustainable than in sydney .
The population is not transient. People generally move to canberra and stay there as from what I hear it is a nice place to bring up your kids. The outflow is when the kids in their 18-25’s move out to goto uni in sydney or for the social scene in Sydney. This results in a larger proportion of 35-50 year olds (who are affluent). The best suburbs in canberra (eg yaralumla) rival some upper end Sydney suburbs in price. Canberra has reasonable fundamentals.
Also it has low crime rate, a very strong educational system which (unlike sydney the average public school there is pretty good), fantastic cycle paths, good transport, low unemployment, excellent social infrastructure. It is an ideal place to raise kids if you are middle class (except for the weather). I regret selling my IP there in the 90’s as it would be worth quite a tidy sum now, doh !
I am not so sure of some of the newer suburbs. If you can stick to ones where there are primary schools closing then you maybe more likely to do better. In the decade I invested the deakin/curtin/ middle ring areas did much better % wise than the what was then the upper ring (red hill, yaralumla) and the lower end (tugeranong, weston/belconen)
I have thought about this. I used to think buy the more expensive one. But actually it doesn’t matter. They are both cyclical.
It comes from us confusing return with value. A properties value depends on location, location, location. But actually the % return has little to do with this. If high end suburbs did better by only a couple of % then over a couple of cycles the expensive suburbs would be astronomical and unaffordable for anyone. I live in the northern suburbs and there is a perception that because it is an expensive area then the returns will be better. This is crap.
There is a good time to be in any asset but none of them do well all the time.
redfern has a prime inner city location near the uni, train station, CBD and will probably do better than the rest of sydney. It will slowly get gentrified like newtown, camperdown, glebe etc. I think most people who have lived in the area know this and it has run in the last couple of years a bit already. There are still some interesting terraces in carolyn street for mid 300k.
That being said, sydney property in general I think is a dog in the medium term (5-10 years). I would prefer to buy in a city with better fundamentals although if I had to buy in sydney at the moment I would be looking at redfern or sthe hills district as relatively undervalued suburbs (in the context of a massively overvalued city).
I read a funny article on top 10 stressful events rated by people. They had a stress index, 100 was spouse dying, next was child dying, next was being retrenched, then divorce and then…number 8 was christmas (with the whole family)!
Unfortunately it has become a big marketing thing for retailers and there is all this pressure on people. Well, if your relationship with your family or parents are has been no good for years then one day of the year of everyone smiling and giving each other consumer items isn’t going to change that.
I never found anything particularly insightful in AFR even when I was a trader. There is a whole lot of routine news which you get off bloomberg anyway. If you are a property investor you are going to find a lot of this very boring.
There are a lot of resources on the internet (cnbc, cnnfn, bloomberg, fiendbear, daily reckoning, motley fool, this website etc).
One essential australian magazine to read is personal investor. It is cheap and generally gives a balanced, long term perspective and covers all asset classes. It also discussesthings which seem to be an ignored like taxation management, estate planning, income protection insurance. I personally hate shares magazine with a passion.
it is indeed hopleless to try to save the world’s problems singlehandedly. But if you encounter someone who has a car accident on the street where they are unable to themselves call for help or in some other situation where there is an obligation to help someone else (as a decent human fellow being) then you should. There is no obligation to actually help her yourself, but to call for help for her. Same with someone being raped, assaulted, someone elses car being stolen. No obligation to put your wellbeing at risk, but you do have an obligation to get help. To walk away is a serious deriliction of moral responsibilty.
If you encounter someone with a serious mental illness who maybe a risk to themselves or others then you should ring the mental health service.
completion date late 05, Big E should send the top end of the market down. The bottom and medium range bottoms started to fall out already, but 700-1.5M appartments still holding up well. This should sort that out (along with domain, QV, vic point, milano, freshwater, all MASSIVE & sched for 2005 completion). Strata fees probably through the roof (with kinky elevators that go around corners) but not while prices are soft. They are starting to waive strata fees for a couple of years on some developments.
Estimates are the vacancy rate will top out in 2007 with 50% increase in dwellings in the inner city (44k cf 27k in 2006). This means there will be an additional 50k of tennants needed which in the short term will be young professionals and students (good luck in extracting cash out of them). With this amazing disaster Melbourne will take the mantle of commercial capital of oz from sydney. It will be cheap, young skilled labour who will have babies, low commercial and residential costs vs Sydney’s zero polulation growth clover moore fantasy. Melbourne is going to prosper and shoot ahead in a couple of decades.
Now I wonder how low a nice view on big E will get when they have to rent it out to uni students…
this baby bonus is a joke and the most inefficient handout ever.
A better way to encourage people to have babies is to have affordable housing. It would be interesting to know what the fertility rate in Sydney is and what it will be in the future. I reckon it will drop like a stone. Young paople cannot afford an average home in Sydney (or in fact any home), so home ownership gets delayed and having babies gets pushed back even further and then the women are in their mid-late 30’s and it’s too late to have more than 1 kid. It’s so simple Mr howard : people’s hierarchy of needs (food, safety, housing, then kids) is not consistent with wimmins biological clock (fertility drops off exponentially with increasing age after 30, even with IVF). If prices appreciate another 30% in sydney compared to average income, we will start to get into intergenerational loans, with the fertility rate through the floor and a Japan type situation.
Now how do I make money out of this unfortunate situation ? Buy IVF clinics !
tassie probably has had it’s run. Most of the inflow of funds is from melbourne but will be less as that cools down or even gets icy.
The scenery and resources will be worth something one day, but who knows how long that will take. Weather too cold to be a retirement mecca.
That said, there are still some +CF prospects like georgetown with alcoa thing nearby, but this is contingent on the resources cycle.
I was looking at queenstown a couple of weeks ago on the web. Property there is very cheap. I was thinking is there any way the mine around there will be operating properly again (I like ugly moon scenery) because houses there are going for well below replacement value.
Has anyone been to the tassie ski fields. Is there any development potential there or are the slopes too low altitude for decent snow ???
Canada has a 50% CGT rebate as in aust (for residents and non residents) but I thought there was no neg gearing deductability allowance. If this is not the case how do you account for the high relative yields compared to even the US ??
hrmmm… you may do well out of it, but what is your strategy ? It sounds like you will get no CG and it is a depreciating asset. The only positive is the +CF.
If you have small equity have you thought about a listed property trust type investment on a margin loan ? That too could be +CF (depending on the LPT you choose) and you would a) have some chance of CG (or loss) b) not have to worry about tennant or them excrementing in the home c) more diversified
also take a trip to the place, talk to the locals, why has pop growth been happening, is there a mine nearby ? Go for a drive. Also talk to people in your city who know the place as well. I meet a lot of people in my work, so when they mention they are from a place I am not famillira with my interest is piqued. Recently I met a guy who ahd just moved to Cobar, and I was wondering why that area had done well recently. In a 15 minute converstion I found out about the history of the place, recent changes and possible future changes. If you show an interest in people, they are usually very open about sharing information and their insights about a place.
Canada has no negative gearing tax deductability. Hence less speculative component. Funadamentals are strong. Nice ski fields too.
Overseas property is worth looking at but risky if you are not a local. Still a small foray can surprise on the upside. China and S/E asia have been going gangbusters recently. I visited Vietnam 10 years ago and was amazed that you could get a piece of CBD saigon for chips. I bought a bit of industrial property there through a local. There is a lot of legal risk so I only invested 30k. Simillar properties are now selling for 300k. So maybe it is getting a bit frothy there.
Don’t bet the bank on foreign property. But it can diversify your portfolio and be a nice little earner. And it is nice to see markets where the risk:reward is attractive and you do not feel like you are pushing sh*t up a hill with your nose with nosebleed rental yields
Cheap deals can still be had in Canada, Germany and eastern europe for the more risque. Also you learn interesting things about the locals and you get a wider perspective. I was in Germany last year so spent a day looking at the property market. After a looking at a few vacant properties I asked, hey why have these places got no light fittings ?? The guy said : light fittings are not included when you rent a place out. I thought what the fu ? They explained to me that most Berliners rent and you bring your own light fittings and take them with you when you finish renting there. That is pretty weird and may explain why the german economy is so stuffed up !
net debt per head underestimates the average mortgage as it includes people who rent (who have no debt)
gen x, far from being lazy layabouts are a hardworking group. I feel sorry for them that they are laden with debt from high prices.
The other half of the recent increase in debt hasw been BB’s. Far from being wealthy as supposed, they have taken out more debt to play catchup. This is perhaps why our net savings rate has been decling (and negative in the last couple of years) despite the demographics indicating that this should be a time of high savings.
Migration cannot possibly be a solution to the aging population. It would have to increase 1000% to make a dent. The only way the aging polulation can be arrested is if fertility rates increase significantly, but this is unlikely to happen anytime soon.
It is illogical to bid against the vendor.
You are giving away information (for free).
‘In 2002-03, average (mean) equivalised disposable household income for all persons living in private dwellings (i.e., the income that a single person household would require to maintain the same standard of living as the average person living in all private dwellings in Australia) was $510 per week (table 1). There were approximately 19.3 million people living in these dwellings.’ ABS
Assuming the best case scenario of both people working, none of them ever unemployed or sick, household disposable income with 2 average wage earners is $1000/week. This accords with AWE of 2, 100k, after tax take home about 60k/year.
Assume they buy the average home in Sydney. 500k, 420k loan. Monthly repayments are 3025/month (7% interest, 30 years). My god, this means they only have $250 per week between them to spend on food, transport and anything else. And they have to do this for 30 years !
This means that at the margin, people cannot buy more homes or get into the average home without dipping into their savings or being subsidised by their parents. If things are this bad for owner occupiers, then they are worse for investors. The fundamentals of the sydney market stink.
The problem is that any buyers in the last 2 years in sydney are at the margin (investors and owner occupiers). We will need conditions to remain ideal for another decade for prices to remain static. Economies tend to experience shocks and economic distributions are ketokurdic. But the way new entrants are levered at the moment we do not need a 2 sigma event like a recession to wipe them out. We just need the economy to hiccup or fart for these people to keel over.
Once you get into multigenerational mortgages, things become inherently unstable – just look at japan or holland.
People cannot see how the market will move back to equilibrium. They are still focussed on missing out on profits at the turning point rather than preserving capital. It is inconceivable that prices correct in a big way, and yet in the back of their minds they know they cannot remain here. I think their will be some more treading of water, anyone who missed out on the upswing will buy on this dip. There will be a dead bounce, more entrants will enter who have missed out. Until there are no buyers left. People will also continue to move further afield to buy +CF in the few remaining pockets to reduce their cognitive dissonance. This will continue the ripple for awhile but they too will die as the economy craters.
The market when it does recover will be in melbourne rather than sydney as they seem to be about 2 years ahead in the cycle. I do not expect prices to trough in Melbourne until at least 2007 and in Sydney until 2009. I expect that prices will correct and go below the historical averages. At the next turning point people will be fixated on preserving gains, they will be vomitting at the thought of property and wondering, how can it possibly go up in the next 5 years ?
A bubble breeds many geniuses, the children of the bubble will need to die in the wilderness before another one can emerge.
Not sure whether your property is retail or industrial but both are hot at the moment, particularly indutrial. The agent probably doesn’t need to be keen on you. It is not uncommon to lob in very low offers as some of these proprties are on the market for ages. I spent years negotiating to buy out my next door neighbour. But the market was not so good then.
You should be able to find a positive CF commercial relatively easily. The main risk is economic, as it can remain untenanted for a long period in a downturn and is often specific to a tennant type. On the positive side, leases are also long.
If you cannot buy a property, you can try renting on a short term lease, I did that for a few years. Although it eats into your cashflow it leaves you with more working capital which is what people often underbudget in startup. It is wasteful specifying a property to your needs then having to do it again but you also remain more flexible. If you can keep your costs down (specify) at lowest possible budget this is often useful. Building a industrial site can be very profitable but you need to have >1M capital to play this game on a small scale. It also helps to have building expertise or associates with this. Everything seems to go over budget so have enough working capital.
