Alarm call after call, unemployment rising and what's worse is you don't know the half; Smudged unemployment rates in a slowing economy, yet inept bulls scream to load up on debt!
But what can you do, property ownership has been tattooed onto our frontal lobe. We should run courses in tattoo management.
We can encourage this behaviour, that is certainly my intention. Frenzies like these suck all available capital into them. Business formation seizes, green mailers raid company's shares because the market value of the land they own is greater than the book value, they break the company up, sell the plant and equipment overseas and offload the land to property developers. Commercial rents skyrocket, pushing SMEs to the wall. Business owners figure why work for a living when all you need to do is buy property and wait for the double digit returns, so they shutter their business.
There are moral hazards of low interest rates and unintended consequences of low interest rates.
One would think that low interest rates can not last forever.
If interest rates rise to or return to the mean we may see the spectacular gains in asset prices taper.
A taper would be the worst possible outcome, the market would just stagnate while the rest of the economy died. What we want is a fantastic boom, double digit growth in prices for at least 18 months, but 3 years is good also. We want plumbers and cleaners giving up their day jobs to become property investors. We want to make land so expensive that no business can afford to lease or buy it. We are very close now. Another 100 bps of rate cuts and the process will be well under way.
I've lived through this kind of boom twice in Hong Kong. You need to get to the point where half of the city's restaurants shut down because people can no longer afford to eat out and pay their mortgage, and rents are so high there is no profit left anyway. Watch for Dominoes and Maccas to pop in revenues. Any cheap calorie provider. Watch also for calls to lower the minimum wage.
We want plumbers and cleaners giving up their day jobs to become property investors.
....except that the environment for property investment in Australia is such that most PIs don't (and couldn't) give up their day jobs.
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I've lived through this kind of boom twice in Hong Kong. You need to get to the point where half of the city's restaurants shut down because people can no longer afford to eat out and pay their mortgage, and rents are so high there is no profit left anyway. Watch for Dominoes and Maccas to pop in revenues. Any cheap calorie provider. Watch also for calls to lower the minimum wage.
It has arrived.
In which case you will probably remember that the closure of all the restaurants and shops in Hong Kong happened after the crash, not during the boom. I remember every second shop I walked past having a "closed for renovations" sign as well, but it was in 1998, not 1996. You could rent commercial space in Hong Kong for a (relative) song then.
The truth will set you free. But first, it will piss you off. --Gloria Steinem AREPS™
....except that the environment for property investment in Australia is such that most PIs don't (and couldn't) give up their day jobs.
Yes, that's what I want to change. Double digit leveraged returns could achieve that for us. Borrow 1M, 15% price increase is 150K per year. Live on credit cards, then sell. Even with transaction costs that is 100K per year.
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In which case you will probably remember that the closure of all the restaurants and shops in Hong Kong happened after the crash, not during the boom. I remember every second shop I walked past having a "closed for renovations" sign as well, but it was in 1998, not 1996. You could rent commercial space in Hong Kong for a (relative) song then.
As it happens, a LOT of local restaurants in Tsim Sha Tsui began closing down at the height of the boom, NOT in the crash. Of course, in HK, one restaurant closes and another pops up in it's place in 6 weeks or less. It was those latecomers that got killed after the crash. Retail leases are very short in HK (usually 2 years with no renewal, or 2X2). The restaurant downstairs had been open for about 8 years, which is a long time for HK, their lease came up for renewal at the height of the boom and the new rent just wasn't feasible, so they shut up shop. Replaced by a Cyber Cafe which got killed in the crash. Same story all over TST. Long term businesses packed it in when their lease came up for renewal. Replaced by business noobs who got killed in the crash. Same thing happened in 2000/2001. It's just a transfer mechanism of wealth to the rich. Happens continuously until the peasants revolt.
We want plumbers and cleaners giving up their day jobs to become property investors.
....except that the environment for property investment in Australia is such that most PIs don't (and couldn't) give up their day jobs.
That's the truth. They definately need a good day job to pay the difference between the mortgage repayment and the "yield". But that's ok, in another 7 years they will have doubled in price and rents will have doubled and it will all turn out just dandy like the experts all assured it would. Unless of course gfcII comes along. After all, you can't see these things coming can you, so for all we know another could be just around the corner.
Shadow was hopelessly wrong about the Gold Bull Market. What else is he wrong about?
That's the truth. They definately need a good day job to pay the difference between the mortgage repayment and the "yield". But that's ok, in another 7 years they will have doubled in price and rents will have doubled and it will all turn out just dandy like the experts all assured it would. Unless of course gfcII comes along. After all, you can't see these things coming can you, so for all we know another could be just around the corner.
It almost always works out well after a few years. The trouble with us PIs is we tend to keep collecting properties.
It almost always works out well after a few years. The trouble with us PIs is we tend to keep collecting properties.
And I would encourage you to collect a dozen more in the coming 2 years, especially in Canberra. Maybe we will be the last generation to work. The next generation will derive their income from buying and selling property to each other.
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