Chronic Oversupply: Landlords hit by apartment glut and falling rental yields; Without rental growth or capital growth, the prospects for many investors are bleak
Tweet Topic Started: 21 Aug 2014, 10:18 PM (10,349 Views)
It's the shift from industrial capitalism to technological not-capitalism. The first 90% of the agricultural revolution was an energy revolution, specifically a wood and grain revolution. The last 10% of the agricultural revolution was the start of the industrial revolution. It was also an energy revolution, two in fact, coal, and then oil. The first 90% of the industrial revolution is now over, we are in the last 10% of the industrial revolution now, which is the start of the technology revolution.
The technology revolution is also an energy revolution, but unlike the three energy revolutions that came before it (wood/grains, coal, oil/gas), the technology revolution is not a supply revolution, but a demand revolution. An energy supply revolution is when we find new sources of energy, and put those new sources of energy literally to 'work'. That is, we replaced muscle with machines. In a supply revolution, everything grows. Output grows, yields grow, populations grow. Machines, houses, serving sizes, families and people get bigger, but not much better. That is, in a supply revolution we get the same stuff, but more of it. In a demand revolution, i.e. the coming technology revolution, we don't find new sources of energy, we find ways to use our existing sources of energy more efficiently and effectively. That is, we get more, for less.
A energy demand revolution is a good thing. As good as the previous three energy supply revolutions, but it is antithetical to our current social and economic institutions. Science and technology change quickly, but human beings not so much. Whatever has worked for humans in the past, they will insist on doing in the present and the future. That is, humans don't like change and cling to the status quo.
However, revolutions are opportunities for those who are outside the power and wealth clubs. So there are people in our society that have been pursuing the current revolution, and because it has a disruptive effect on our economic and social institutions, the people who head up and belong to those institutions perceive these changes as some kind of threat and react accordingly. That is, the status quo become reactionaries, sometimes without even realising it. You can hear it in the language they use. They believe the current situation is part of some cycle of industrial capitalism, and they acted accordingly. Counter-cyclical monetary policy. And yet, despite the empirical evidence that their actions are having almost no effect (or in some case, the inverse effect), their answer is that they need more!
The energy supply revolution is drawing to a close, and the energy demand revolution is just beginning. In the same way that the industrial revolution redefined wealth and power, the technological revolution will also. The changes (if we survive that long) will be all encompassing. Importantly however: 1. Families will get smaller 2. Instead of more and bigger, the 'things' in our environment will become less and better 3. Because of (2) above, our monetary system will find it very difficult, if not impossible to create inflation. 4. As things, including houses, get better and cheaper, the great migration to cities that began 300 years ago will slow and begin to reverse.
Those are the broad strokes. Obviously there is a lot more to it than that. There will be a transition period that will probably be very volatile, with a lot of social unrest and upheaval as the old power structures begin to crack.
Ned
------------------------------ " ... which is that all-too-familiar dynamic in Irish life where people tell lies, cover them up and create all sorts of collateral damage, sometimes spread out over decades, and never take responsibility." - Alan Glynn
The world won't end bardon, it will just seem like it has for millions of people who have borrowed the next decade's earnings to gamble on property prices doubling and to spend on new cars and overseas holidays. I myself will continue to live within my means with no debt and a substantial amount of diverse savings. Some of which will no doubt be wiped out by bank bailouts and the like.
They say that every cycle, remember in the nineties when they said that the world debts were too high and would never be paid off, the US dollar would collapse etc etc. Even down here we had the Pyramid Building society collapse, the SA state bank, strikes and all that. What actually happened was that stock markets boomed and then land markets boomed. The same things will happened this time around, the new land rush has already started in Miami and I will enjoy watching it ripple out from there.
You wont need any more bank bailouts for at least another decade now.
But like most bulls you are scope locked on the past. Always looking at the past 40 years and ignoring any other timeframe.
The most important time for any investment that you buy now, is the time that is yet to pass. The price of anything is the price you can get for it right now. Anything else is just pure speculation.
That is why I am happy to see my gold sitting around $1400. That's over 50% more than what I paid for it, a much better return that any term deposit could have delivered this side of the 1970's. But at the end of the day it has no counter party risk, that's the bit that lets me sleep soundly every night.
Shadow was hopelessly wrong about the Gold Bull Market. What else is he wrong about?
Nice to see the all-out bull assault continuing its fine tradition of smashing remtal yields and generally making property look less and less like a magic asset class impervious to the downside.
A lot more stupidity to come though folks. We're getting close to the top of the ride, so use these last moments of serenity to buckle up - this will ensure you can fly safely through those bull traps on the way back down.
"It were not best that we should all think alike; it is difference of opinion that makes horse races." - Mark Twain on why he avoids discussing house prices over at MacroBusiness. "Buy land, they're not making any more of it." - Georgist Land Tax proponent Mark Twain laughing in his grave at humourless idiots like skamy that continually use this quip to justify housing bubbles.
Nice to see the all-out bull assault continuing its fine tradition of smashing remtal yields and generally making property look less and less like a magic asset class impervious to the downside.
A lot more stupidity to come though folks. We're getting close to the top of the ride, so use these last moments of serenity to buckle up - this will ensure you can fly safely through those bull traps on the way back down.
That old supply and demand metric can really bite you arse when it goes the other way.
Matthew, 30 Jan 2016, 09:21 AM Your simplistic view is so flawed it is not worth debating. The current oversupply will be swallowed in 12 months. By the time dumb shits like you realise this prices will already be rising.
It's happening all around you, from the last 7 years of turbulent property prices worldwide to the massive unemployment and rampant inflation worldwide. All of which is happening here too if you open your eyes.
I see 5 or 10 years into the future based on current trends, trends that began 7 years ago with the GFC. You remember the GFC don't you? How the whole financial world went into a bunker and hid for 6 months, only the emerge with a lot of bullshit promises and a supposed recovery plan that 7 years later still has no legs yet has seen the world amass unimaginable debts.
You deserve a lobotomy for your inability to put these facts together and act appropriately, and that's the truth.
Rampant inflation eh? Actually global inflation is at the lowest level it has been in my lifetime. Unemployment in the rich world is high, but it is dropping in most places, and in most places including Australia it is well below the levels seen in the 1970s and early 1990s. Souther Europe is the exception here.
Exactly half of the OECD countries had exceeded their 2007 Real GDP per capita by the end of 2012. Many more have exceeded it now.
Face it Frankrider. The GFC is over and the recovery is still underway. The absolute best time for investment activity is during a recovery. My nett worth demonstrates that nicely. How's your gold doing?
As to the future, who knows what it will bring? Some people are dumb enough to think they do. Others are dishonest enough to pretend they do. Most of us just keep some powder dry and deal with it when it arrives.
The GFC is over and the recovery is still underway.
What is your take on the UK economy?
In my book it is totally fucked, but it currently has the strongest growth rate in the G7.
Can you explain why?
Matthew, 30 Jan 2016, 09:21 AM Your simplistic view is so flawed it is not worth debating. The current oversupply will be swallowed in 12 months. By the time dumb shits like you realise this prices will already be rising.
In my book it is totally fucked, but it currently has the strongest growth rate in the G7.
Can you explain why?
It's one of the countries in the OECD that has yet to attain pre-GFC real GDP per capita. Aside from still-elevated unemployment and a somewhat concerning current-account deficit and budget deficit, it seems to be well on the mend though. Latest quarter GDP growth is not the highest in the G7 though. That would be the US.
Totally fucked is not a recognised economic term. Why would you describe it that way? Support you argument with actual data, not expletives.
The truth will set you free. But first, it will piss you off. --Gloria Steinem AREPS™
Rampant inflation eh? Actually global inflation is at the lowest level it has been in my lifetime. Unemployment in the rich world is high, but it is dropping in most places, and in most places including Australia it is well below the levels seen in the 1970s and early 1990s. Souther Europe is the exception here.
Exactly half of the OECD countries had exceeded their 2007 Real GDP per capita by the end of 2012. Many more have exceeded it now.
Face it Frankrider. The GFC is over and the recovery is still underway. The absolute best time for investment activity is during a recovery. My nett worth demonstrates that nicely. How's your gold doing?
As to the future, who knows what it will bring? Some people are dumb enough to think they do. Others are dishonest enough to pretend they do. Most of us just keep some powder dry and deal with it when it arrives.
Funny, we were watching some old home videos the other day. One was a Xmas video from 98. On the tail end it has an old lifestyle program on Perth, and there was an ad for a washine machine for$999, which had a $300 discount. Couldn't believe it.
Jimbo
23 Aug 2014, 06:06 PM
What is your take on the UK economy?
In my book it is totally fucked, but it currently has the strongest growth rate in the G7.
Can you explain why?
UK is doing quite well jumbo. Certainly not boom times, but compared to the shit we've endured over the past five years, things are good. Cost of living, taxes etc still seem high, but on the whole things are better and on the improve. But the last thing we need is another property boom and bust.
Huge evidence coming in now from many quarters on this new cycle developing, surging rents, Miami land rush and now Manhattan showing 100% rises in office prices in two years.
Buckle up and enjoy the ride as this is the big one.
"A building boom is under way in major markets as Real Estate Investment Trusts increasingly invest in new developments rather than pay inflated prices for existing properties. Office REITS plan to spend nearly $11 billion on new proje¬cts, primarily in New York and San Francisco. That’s the largest investment in at least a decade.
It is no surprise that prices for development sites are surging in Manhattan. Land prices in Manhattan’s most popular neighborhoods have doubled compared to two-to-three years ago.
The Manhattan office market roared on in the second quarter of 2014, as demand surged Downtown as availability declined in Midtown.
Average asking rents in Midtown South have nearly closed the gap with those in Midtown."
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