The property market is subject to cycles of activity! The term property cycle refers to the time it takes a property to double in value.
Assuming a 7 Year property cycle; expect a time of no growth followed by a time of of little growth (totalling about 5 years). Depending on how far prices rose during the previous 2 boom years; the first 2 years of the new cycle may even see a softening or correction of prices from off the back of the high point in the last boom.
Talk of Recession has been a fantastic opportunity for investors who are ready to move quickly.
You would have seen the great deals that one of our highly respected developers in Cairns put to us recently. He was desperate to clear his remaining current completed stock before his lender would fund his next projects.
Some race horses staying in a stable. One of them starts to boast about his track record. “In the last 15 races, I’ve won 8 of them!”
Another horse breaks in, “Well in the last 27 races, I’ve won 19!!”
“Oh that’s good, but in the last 36 races, I’ve won 28!”, says another, flicking his tail.
At this point, they notice that a greyhound dog has been sitting there listening. “I don’t mean to boast,” says the greyhound, “but in my last 90 races, I’ve won 88 of them!”
A drivers license and a car are good to have. They offer convenience and choice. But when a person throws caution to the wind, driving becomes hazardous!
The following “Horror Finance Stories” took their victims by as much surprise as the person who had someone pull out in front of their car and cause an accident.
The developer has recently released to market those last remaining units that were not made available for sale at the time the project commenced.
The developer behind these properties is one that mrd has worked with in the past. We are confident that the location, build quality and finish will make for an exceptional long term investment.
Banks in general are nervous about the general economy. As such, some are reducing their most recent valuations within this project… from what they were previously valuing them at.
These new bank valuations, in our opinion, do not reflect the state of real market as much as they expose the banks very strong attempts to mitigate their risk… by ensuring that purchasers who borrow 80% (of the valuation) will chip in more than just 20% (of the purchase price).
We have used our relationship and track record as leverage to negotiate with this developer to have him agree to absorb the difference between the market value and recent bank valuations.
This developer has been told by his lender that he must clear ALL his remaining completed stock before they will agree to funding the construction of his newer projects.
This change of attitude from his lender; who had previously said “YES” to his funding request – before the global credit crisis – has incentivised/motivated the vendor to make this limited, attractive offer on those last remaining completed stock items.
Therefore, we are excited to be able to offer a small number of investors, a brand new property at 2005/2006 prices, PLUS a few other sweeteners/incentives as well.
A passenger in a taxi leaned over to ask the driver a question and tapped him on the shoulder. The driver screamed, lost control of the cab, nearly hit a bus, drove up over the curb, and stopped just inches from a large plate glass window.
For a few moments everything was silent in the cab, and then the still shaking driver said, ‘I’m sorry, but you scared the daylights out of me.’
The frightened passenger apologised to the driver and said he didn’t realise a mere tap on the shoulder could frighten him so much.
“There has never been a better time to buy property.” How many times have you heard this catch phrase from property spruikers and slick sales people? Well this time, it is true! You can take it from me, as a person who doesn’t sell property but lectures in property and most importantly, personally invests in property “There has never been a better time to buy property.”
Read Entire Article >> 2009 – not all doom and gloom – market comment from property professor Peter Koulizos – realestate.com.au.
Today’s Courier Mail reported that “A rise in the number of investment properties whose rental returns exceed the cost of the mortgage will trigger a recovery in the housing market”.
I agree with this sentiment but would like to add to it. Many developers are now either unwilling or unable to obtain construction funding. This is causing a diminishing of supply of new property… either in the planning phase or currently under construction. On the demand side of the equation, we have a growing population, record migration levels and a very generous first home owners grant. These factors, along with the new era of falling interest rates, are all placing additional demand pressures on what limited and dwindling supply of new property is coming onto the market. This good news for property owners should not be underestimated; it will help bring on the next up-cycle!
The global economic crisis has caused some young people to move back with mum & dad and others to share accommodation. The net effect of all this has been a temporary softening in rental demand and thus… rental values. Even so, the recent dramatic reductions to interest rates means investors are so much ‘better off’ than was the case just 6 months ago; even if we factor in a 5% softening of rental income.
There are many thousands of Australians looking to start investing again… they are just waiting to see what “everyone else” is going to do first. Look out! Because when the tide turns it will turn quickly… and property prices will follow accordingly.
Happy Investing,
Nick Lockhart
mrd Customer Care Program… because investing is personal
Friday February 13, 2009, 3:27 pm
SYDNEY (AFP) – Australia’s parliament narrowly passed a 42 billion dollar (28 billion US) stimulus package Friday in a bid to stave off recession in the face of the global economic crisis.
The parliamentary approval leaves the government free to immediately implement its spending plans, with Prime Minister Kevin Rudd stressing the need for swift action throughout protracted negotiations during the bill’s passage.
Rudd was jubilant after parliament backed the plan, saying the package was in the national interest and would help Australia’s centre-left Labor government fight the global economic recession.
“The most irresponsible thing to do today, with the worst global economic recession since the 1930s staring us in the face, would be to do nothing,” he told parliament.
The package includes spending of 28.8 billion Australian dollars on schools, housing and roads over four years, tax breaks for small businesses and cash handouts of 12.7 billion dollars to eligible workers, farmers and students.
Rudd said the Treasury estimated the plan would boost economic growth by 0.5 percentage points in 2008-09 and 0.75-1.0 points in 2009-10, supporting up to 90,000 jobs.
“Without parliament’s support for this plan, growth would be slower and unemployment would be higher,” he%2
One factor we look at when researching an area for investment is the median sale price of houses and units. This is the most commonly reported real estate statistic which analysts consider to be reflective of the price that a “typical” property sold for; but don’t be fooled by median prices; the way these are calculated first needs to be understood.
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