mrd

Over the past 8 years or so speaking with all types of people on the subject of investing in property, many, generally new to investing, ask me the “what if” questions. My broad base of experience has meant my answers have generally put their minds at ease. Two questions, however, that I lacked a good solid answer for were:

1. How good will your portfolio be if we have another world war?
2. How good will your portfolio be if we have a worldwide recession or depression?

Well, with regards to Q 1, I still have no concrete answer for, and hopefully never will. With respect to Q 2, however, I can now (i.e. only now) say from experience… “It’s all ok”!

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January 17th, 2009

RESIDENTIAL property values on the Gold Coast are set to benefit from a booming population and strong demand for housing, according to research from PRDnationwide.

The research, compiled by Lynda Campbell of PRDnationwide’s Gold Coast office, shows the city needs 129 new dwellings a week to cope with the present population growth of 3.6 per cent — 2.1 per cent higher than Australia’s national growth rate.

Ms Campbell said while the actual population figure was down from previous years, this was a direct result of recent local government boundary reforms rather than a declining population.

“Population figures have dropped below 500,000, but when you consider that Beenleigh and its surrounds no longer form part of the Gold Coast, the population growth is still significantly high,” she said.

The report states that building approvals for houses and apartments on the Gold Coast have dropped dramatically in the 12 months to June, 2008.

“Building approvals aren’t keeping up with the residential demand resulting from the Gold Coast’s burgeoning population,”said Ms Campbell. “The last year has seen approval of 735 fewer houses and apartments across the region.

“Combined with current record low interest rates, this drop in supply and continual increase in demand should have a positive impact on property.”

>>> Gold Coast needs 129 new homes a week: report – Realestate News – Gold Coast, QLD, Australia.

Before my days of property investing and involvement in this industry a property valuation meant just that; or so I thought. It didn’t take long before I began to understand that the same terminology, “Property Valuation”, can mean very different things.

Here are a few examples:

1. A probable sale price in a seller’s market
2. A probable sale price in a buyer’s market
3. The value of the land acquisition, construction of the dwelling and associated costs of bringing the product to market
4. A representation of a banks risk assessment of a property

While 1, 2 & 3 are self explanatory, let me expand on # 4.

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To make sense of the property market we must separate opinion from fact. Opinions will always be heard… just in greater numbers now perhaps. If you are prepared to “drill deeper” and dissect the evidence available; the facts will speak for themselves. There’s no reason for allowing the conflicting voices of opinion to keep you confused!

In the current round of Web Seminars we are offering, I highlight four key factors that are a MUST… if you expect to draw any credible conclusions.

1.    Record Population Growth
2.    Investors Have Fled The Market
3.    Home Ownership Unattractive
4.    New Construction Has Stalled Badly

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The Australian Bureau of Statistics (ABS) recently released its population projections which highlight strong population growth between now and 2056. This week RP Data looks at these statistics and highlights some key findings from this information including: growth by state and capital city and the implications of such strong growth…..

By 2056, Queensland will be the second most populous state and will house one quarter of all Australian residents compared to 24% of all residents which are projected to live in Victoria. Queensland is projected to overtake Victoria as the second most populous state in 2050. Western Australia’s portion of the Australian population is also projected to increase with the states population growing from 10% of the total Australian population during 2007 to 12% of the total population during 2056.

Essentially, this increase in population throughout all areas directly equates to demand for new housing. Based on a total population increase of almost 10.5 million persons between 2007 and 2056 a significant number of new dwellings will need to be delivered to cater to this strong demand.

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RP Data – Rismark Property Value Index Release
Released 01 October 2008

The national end of month property indices report released today by RP Data & Rismark International confirms that the supply and demand imbalance currently being experienced in the Australian property market has placed a floor under housing prices, resulting in minimal value falls.

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The so called economic guru’s are very quick with their opinions and commentary on the state of economic affairs; but remember they are only expressing their opinions. While I don’t profess to offer financial advice, or to have the answers to “life, the universe & everything”, I too have opinions.

In the lead up to the end of the 06/07 tax year, when “the experts” were promoting the virtues of investing into the Howard/Costello “tax effective Superannuation offer”, I didn’t believe them. Today I hear economic guru’s peddling the fear that our property market will follow the US lead and fall by up to 20%. Guess what, I don’t believe them!

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Economic Viability

• A fundamentally broad based economy benefiting from regional industries including sugar production, mining, cattle grazing and fishing; each of which form large elements of the North Queensland regional economic base with no end in sight in particular to the boom in mining services
• Gross Regional Product (nth region) 06/07 up 7.8% to $11.8 billion
• Defence bases expanding by 2012 – 1500 soldiers and support staff moving from Holsworthy
• Business challenge: Skills shortages & increased supply costs

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With the collapse of Lehman Brothers and the bargain basement sale of Merrill Lynch in the US, many economic commentators are predicting a second official rate cut next month in an attempt by the RBA to ease domestic financial conditions. Highlighting this renewed confidence, trades on the Sydney Futures Exchange indicate a 100% likelihood that rates will fall by 25 basis points on October 8th.

In all likelihood we will see higher levels of confidence return to the property market on the back of rate falls and demonstrated domestic stability. The most recent consumer sentiment figures released by Westpac and the Melbourne Institute have risen considerably during August and September, providing further evidence that market conditions are likely to improve.

With fewer buyers in the market, ABS statistics are highlighting a reluctance by developers to initiate the building of new housing projects. This may be good news for sellers, as the lack of new stock helps to underpin existing market listings with a floor price. Investors should also benefit as population growth and a general housing shortage will likely drive up rents in coming years.

Dwelling commencement figures recently released by the Australian Bureau of Statistics (ABS) show dwellings commencements have declined for the second quarter running. Construction on just 38,348 homes commenced in the three months to June, a seasonally-adjusted drop of 3.7% on the March quarter.

Source: My RPData

When investing, we look at things from a different perspective to a home owner and what may be fear and trepidation to one is a potentially burgeoning opportunity to another.

“Be Fearful When Others Are Greedy and Greedy When Others Are Fearful”
- Warren Buffett

So how do you interpret the headlines and the media commentary on our property markets as an investor?

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