READ THIS! A friend recently shared a simple story with me that cleverly explained the power of compounding… and the dramatic effect this has on our “opportunity window”. He called the story “Lilies in the Pond”. It is so powerful I thought I’d pen my version for you.
A water lily planted in a pond will continue to multiply until it eventually covers the entire surface of the pond. For the sake of this analogy, let’s assume a water lily doubles each month. A month on, our lone water lily becomes two. After another month, the two become four, then eight and so on.
Assuming it takes the lilies forty eight months (or four years) to cover 12.5% of the ponds surface, it will take another month to cover 25%, then just two more to completely cover the entire surface of the pond; 51 months in all.
What is mind blowing about this is that in the very last month the increase was equal to all that of the first 50 months totaled! That is, it took 50 months to cover half the pond and just one more to cover the other half.
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The Fundamentals That Support Long Term Capital Growth
When researching an area in which to invest, the fundamentals that support its long term capacity to grow; and by grow I mean double in value every 7 – 10 years at least, is vital when making a well informed low risk investment decision.
Population growth is one of those factors that underlie and sustain an area’s price growth potential. Supply and demand will always be the major determining factor for price movement. So what we want to see is a place people want to live and are moving in droves creating a problem for councils and governments! New planning needs to take place, infrastructure spending is required and managing the growth in relation to urban development, transport, environment etc. is critical.
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As long as we breathe we will be planning for our tomorrow… knowingly or otherwise!
There is no escaping the truth that tomorrow’s harvest will be a by-product of the seeds we plant today.
Once we understand this we can do one of two things… something or nothing! It’s sort of like gardening… regardless of what we do, or don’t do… stuff will grow. The issue is… will the right stuff grow?
- Weeds by default… flowers through effort
- Loneliness by default… happy relationships through effort
- Poverty by default… financial prosperity through effort
- Failure by default… success through effort
It is almost as if the world was created to provide opportunities and challenges. By grasping these opportunities and facing the challenges we not only reap success but also character.
Anyone CAN change their financial status (not overnight and not by default)… it’s just most WON’T. The $64,000 questions are:
Do we WANT to (change our financial status) and…
…Are we prepared to DO something about it…
…I am sure that like me… you’re answer is a resounding YES!
You may have failed in the past as we all do from time to time. You may have sown your seed but the expected harvest failed to materialise. Even the farmer gets times of famine, storm and pest…but he simply continues to sow for the next harvest. It is a truism that…The season of failure is the best time for sowing the seeds of success.
Happy Investing,
Nick Lockhart
© 2008 – mrd your investmentmentor.com.au
GOLD Coast house prices are tipped to rise by a nation leading 22 % over the next three years as Australia’s fastest population growth in two decades fuels a ferocious demand for housing. The Brisbane Inner City along with Brisbane, the Sunshine Coast and Darwin. it’s expected 2010 will have the strongest price growth in the country through to 2011, according to leading independent economic forecaster BIS Shrapnel.
The Residential Property Prospects 2008-2011 report also predicts another interest rate hike in the September quarter this year. But this would do little to slow the need for housing on the Coast thanks to continued interstate and overseas migration. Significant pent-up demand and strong employment and wages growth.
The Gold Coast’s median house price is expected to rise from $475.000 to $580.000 by 2011, according to BIS Shrapnel senior project manager and study author, Angie Zigomanis.
“The shortage of new properties being built, the strong demand from population growth, both interstate and overseas and the very low vacancy rates on the Gold Coast are all the factors bubbling away beneath the surface and fuelling housing demand,” said Mr Zigomanis.
He said housing price growth would be slower in the 2008-09 financial year as the market recovered from a series of interest rate hikes and the global credit crunch and should then pick up pace towards 2011.
Mr Zigomanis said that despite a further predicted rate hike the average cost of renting was set to rise much more than the cost of buying in 2008-09 and 2010-11.
The national population is expected to grow by 1.5 per cent through 2008-09, the highest since the late 1980s. “Australia is experiencing record net overseas migration inflows, which is underpinning what is already strong underlying demand for housing,” he said. “With construction of new dwellings below previous peak
Levels. A rising deficiency of dwellings is also evident in the extremely low vacancy rates which will drive strong rental growth in most cities”.
A leading economic forecaster says house prices on the Gold and Sunshine Coasts in Queensland’s south-east have risen in line with Brisbane.
BIS Shrapnel expects prices will increase by 22 per cent over the next three years.
Growth slowed in Townsville and Cairns in the second half of last year, suggesting affordability is emerging as an issue in regional Queensland.
The Queensland State Government has pressed the go button on Australia’s largest road infrastructure project to cut congestion and fix one of Brisbane’s most notorious bottlenecks.
Premier Anna Bligh and Deputy Premier Paul Lucas announced BrisConnections as the preferred bidder to build Airport Link, the next section of the Northern Busway and a new fly-over road to fix the gridlocked airport roundabout.
Airport Link – which is the most complex road and tunnel engineering feat in Queensland’s history and the longest road tunnel in Australia, will cost over $3.4 billion to build – but a landmark finance deal means it will cost tax payers just $47 million. In total the three projects will cost $4.8 billion, including land.
A leading economic forecaster BIS Shrapnel, says escalating rents and easing credit conditions will help drive a recovery in house prices in most capital cities over the next three years.
BIS Shrapnel expects Australia’s residential property markets to experience only marginal price increases over the next year.
But in its Residential Property Prospects 2008 to 2011 report the forecaster says an undersupply of new housing will see the average cost of renting rise much more than the cost of buying.
The report says record migration is underpinning what is already very strong demand for housing, and further population growth of 1.5 per cent is expected in the next year.
BIS Shrapnel says the ongoing demand for rental properties and better credit conditions will be the key to the next upturn in house prices, expected towards the end of 2010.
source: ABC news
AUSTRALIA is experiencing a chronic shortage of housing, a property expert has said following the release of recent population figures.
RP Data national research director Tim Lawless said the nation was experiencing the highest population growth in almost 20 years.
Mr Lawless said the latest Australian Bureau of Statistics (ABS) data showed a growth of 300,000 new residents (1.6 per cent) last year.
He said it had not been this high since 1989.
“The number of dwelling completions isn’t keeping pace with the demand for housing,” Mr Lawless said. “Australia is experiencing a chronic shortage of housing, estimated to be around 30,000 too few dwellings being constructed each year.”
He said ABS data showed record overseas migration and rising fertility rates were creating the population boom.
Source: News.com.au
“Man was born to be rich, or grow rich by use of his faculties, by the union of thought with nature. Property is an intellectual production. The game requires coolness, right reasoning, promptness, and patience in the players.”
(Ralph Waldo Emerson – philosopher: 1803 to 1882)
Yes; the “game” requires coolness and right reasoning. Several months ago I had someone tell me that they would not consider an investment property in the Cairns or Townsville area, “because it was too hot and sticky”. Understandably, my response was “but you are not going to live in it, and there are thousands of people moving into the area who will want to live there!”
It is too easy for investors to allow their emotions, likes and dislikes to affect an investment decision. My opinion, however, is that I’m looking for the best opportunity for capital growth. With this focus in mind, I concentrate on those areas showing fundamental reasons for increasing, ongoing demand (population growth); yet with a limited supply of available land.
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The current state of the market, interest rates, credit squeeze and the bombardment of voices through friends, media and politicians trying to score points against their opponents, scare many investors out of the property market. I say many; because those who are solid in their long term investment strategy can separate the ‘noise’ from reality (see Nick’s blog from last Friday 6th June).
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