Wow if it's so easy you should launch into land developments.
Best of luck.
Wow care to explain how you interpretted anything being discussed here as claiming it's "easy" to "launch into land developments."
Best of luck.
Well the Count is claiming that it is highly profitable, which should make it easy for a cashed up investor, except that he has knowingly underestimated costs, left off developer contributions and GST.
He has conveniently forgotten to mention that developments are high risk enterprises that might make a small killing or they might make a not so handsome loss and lead to suicide. If there is one way for an inexperienced investor to lose his shirt and underpants, then property development is the best way.
The Count (aka Wulfgar) and I have discussed this before when he rather honestly conceeded that he was incorrect, and that developers did indeed have to pay both statutory fees and the costs of installing roads, electricity, water, gas if appropriate, parks, as well as kerbing, channeling and storm water, sewerage etc. If you or the Count think that can be done easily or cheaply with no holding costs, high interest costs or other ongoing fees such as land tax and council rates, then I urge you both to have a go.
It seems to me the Count's argument is that Stockland's control over specific development sites is monopolistic.
One of the characteristics of monopolies is that there are high barriers to entry for competition, so your argument that "if it's so profitable, then you could also enter that market and make an easy profit" is ridiculous in this context. You're argument would make more sense if you were talking about, say, the overall property development market in Australia, including very small developments. But in the context of being able to buy, hold, and develop large sites, when the supply of those is limited by government policy, it is a ridiculous argument.
I don't think anybody is arguing that, even in a monopolistic market, there aren't still development costs. But the existence of these costs don't prove that the market is not monopolistic.
The slow release of supply does indicate the market is monopolistic.
I have one question for the Count and his cohorts - if housing block development is straight forward and highly profitable as they believe how come it appears that the original owners eg farmers don't do it and it ends up being done by the large development companies?
“You Keep Using That Word, I Do Not Think It Means What You Think It Means” - Inigo Montoya
I have one question for the Count and his cohorts - if housing block development is straight forward and highly profitable as they believe how come it appears that the original owners eg farmers don't do it and it ends up being done by the large development companies?
Farmers occasionally do try their hand at greefield developments, and some do OK. I have financed a few over the years, and in the country they can do quite well. They also have an income from crops during the holding period, which helps a lot.
They often have an easier road getting the DA as they might have a mate on the council who can help them, but after that it's more difficult for them. Areas like finance, marketing, planning, project management are not in their usual skillset - and I'm not having a go at farmers, most people don't have any experience with those skills.
I don't think that anyone should sympathise with developers who lose it all, it's part of the risk that they take, but to run up a few meaningless figures on an internet forum, as has been done here, and declare that they all make a fortune is more than a little simplistic and it completely disregards the high level of risk involved.
Any expressed market opinion is my own and is not to be taken as financial advice
I have one question for the Count and his cohorts - if housing block development is straight forward and highly profitable as they believe how come it appears that the original owners eg farmers don't do it and it ends up being done by the large development companies?
It has to be zoned for that! The Farmers are begging for their boat to come in! But there's already 300 square km's zoned for housing and these farmers have missed out.
Zoned out: Stan Velisha and John Zausa are among Werribee South vegetable growers concerned about declining viability. Greg Scullin
FARMERS on Melbourne's Western fringes are struggling to succeed, writes KATE DOWLER
Werribee South vegetable growers say farming the area is barely viable and they want the land rezoned residential.
Growers such as Stan Velisha, Don Mazaris, John Costa, Warren Velisha, Andrew Christou, Harry Velisha, Nick Kasmanidis and John Zausa say they want the opportunity to sell up and move to farm elsewhere.
They say they feel the future of farming at Werribee South is limited because water prices are about six times higher than many other regions.
Water supply and delivery is also not as reliable as they would like - and they are landlocked and physically cannot expand nearby.
They say it is a myth their area is prime farmland, but nobody listens to them - or asks them what they want.
The growers are asking the State Government to either rezone Werribee South as residential land so they can sell up and go farming elsewhere, or invest in proper infrastructure that makes water delivery cheaper and more reliable. "Water security and prices are the biggest issue," Harry Velisha said.
The growers pay almost $300 a megalitre. And while upgrades - including lining the water channels - are planned, they are concerned the water price will simply rise to cover the cost.
Mr Zausa said there are few younger farmers coming through the ranks at Werribee South, as they do not feel the region has a strong future.
Mostly these growers produce lettuce, silverbeet, broccoli and cauliflower.
The next trick of our glorious banks will be to charge us a fee for using net bank!!! You are no longer customer, you are property!!!
I don't think that anyone should sympathise with developers who lose it all, it's part of the risk that they take, but to run up a few meaningless figures on an internet forum, as has been done here, and declare that they all make a fortune is more than a little simplistic and it completely disregards the high level of risk involved.
Since you're all knowing Peter, show us the costs of an ordinary suburban development in Brisbane.
Show us your meaningful figures?
The next trick of our glorious banks will be to charge us a fee for using net bank!!! You are no longer customer, you are property!!!
Farmers occasionally do try their hand at greefield developments, and some do OK. I have financed a few over the years, and in the country they can do quite well. They also have an income from crops during the holding period, which helps a lot.
They often have an easier road getting the DA as they might have a mate on the council who can help them, but after that it's more difficult for them. Areas like finance, marketing, planning, project management are not in their usual skillset - and I'm not having a go at farmers, most people don't have any experience with those skills.
I don't think that anyone should sympathise with developers who lose it all, it's part of the risk that they take, but to run up a few meaningless figures on an internet forum, as has been done here, and declare that they all make a fortune is more than a little simplistic and it completely disregards the high level of risk involved.
And yet you fail to identify what those risks are, so let me assist you.
In Australia, the risk in property development is primarily associated with delays. If you leverage up to purchase the site, then every day you hold the site (and hence the debt) incurs a capital cost. Those who know how (or who) to get things done quickly are the ones that make money, those who don't get killed.
There are many different types of delays; council and other government approvals, contractors, materials deliveries,stop works, and nearly all of them can be solved by some well placed cash in the right hand. Consequently, the high sale price of property is the enabler of a system of corruption. It's not just the developer that is gouging the buyer, it's everyone involved.
The other risk in property development is overpaying for the site at the top of the boom, and having to wear the loss if prices drop in the intervening period, which could also be said to be a risk associated with delays.
There are many different types of delays; council and other government approvals, contractors, materials deliveries,stop works, and nearly all of them can be solved by some well placed cash in the right hand. Consequently, the high sale price of property is the enabler of a system of corruption. It's not just the developer that is gouging the buyer, it's everyone involved.
As I've said before, create a big pile of money and the hands will be many in for their piece of the action. There is no limit to how expensive something can be made.
The cure is deflation, but most think the cure is to throw even more money at it!
The next trick of our glorious banks will be to charge us a fee for using net bank!!! You are no longer customer, you are property!!!
Farmers occasionally do try their hand at greefield developments, and some do OK. I have financed a few over the years, and in the country they can do quite well. They also have an income from crops during the holding period, which helps a lot.
They often have an easier road getting the DA as they might have a mate on the council who can help them, but after that it's more difficult for them. Areas like finance, marketing, planning, project management are not in their usual skillset - and I'm not having a go at farmers, most people don't have any experience with those skills.
I don't think that anyone should sympathise with developers who lose it all, it's part of the risk that they take, but to run up a few meaningless figures on an internet forum, as has been done here, and declare that they all make a fortune is more than a little simplistic and it completely disregards the high level of risk involved.
And yet you fail to identify what those risks are, so let me assist you.
In Australia, the risk in property development is primarily associated with delays. If you leverage up to purchase the site, then every day you hold the site (and hence the debt) incurs a capital cost. Those who know how (or who) to get things done quickly are the ones that make money, those who don't get killed.
There are many different types of delays; council and other government approvals, contractors, materials deliveries,stop works, and nearly all of them can be solved by some well placed cash in the right hand. Consequently, the high sale price of property is the enabler of a system of corruption. It's not just the developer that is gouging the buyer, it's everyone involved.
The other risk in property development is overpaying for the site at the top of the boom, and having to wear the loss if prices drop in the intervening period, which could also be said to be a risk associated with delays.
Yep all of those risks and more, as well as the day to day risk of dealing with councils, certifiers, engineers, stiking rock formations, underground gas, and I have even seen unsurveyed underground mines that no one knew existed become a problem. Councils won't allow construction on land that might develop into sink holes - therefore the land is worthless as a subdivision - it's only suitable for parkland.
As for the figures that the Count asked for, they are always a highly detailed cashflow analysis done on excel spreadsheets that get checked by specialists - I just don't have time and nor do I know the detail on all costs etc - that is not what I do.
But I've seen enough to know that a few figures on a piece of paper would get seriously laughed at during a meeting with specialist lenders. Everyone underestimates costs on projects, and the less experience you have the worse your calculations will be.
Any expressed market opinion is my own and is not to be taken as financial advice
So something thats selling undeveloped lots for $100,000.....................it can be assumed that the real value of those lots $25,000 at best.
So you can factor in a 75k gouge of the average block for the raw land alone.
120,000 x 75,000 = 9 billion dollars of raw land gouge in Aus each year just for house blocks.
Even though that's the biggest gouge, there's still a few more on top of that.
Do you know what it costs to put drains, roads, power and water. I'm not arguing about the gouge but I think development costs are quite high and the biggest gouge there comes from local councils,water and electricity providers. The reason their costs are now higher is to pay for the extra infrastructure charges brought to any specific region as a result of the extra population eg roads. I still can't work out how land up my way jumped from 19K to 200+K in 10 years though although I think the councils are probably the main suspect.
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