MARKET – UPDATE 12 DECEMBER 2012

I keep calling, asking, digging and interpreting.  The truth is being kept from us.  The main offenders are Banks and politicians as they don’t want a stampede in the marketplace.

For example did you know that in the June quarter nearly 30% and in the September 2012 quarter more than 25% of commercial property sales were made in distressed circumstances?

Almost HALF of all these sales happened right here in Queensland.  Why… because builders and building companies in the Sunshine State are failing at a continuous and alarming rate.  There are no indications that this failure rate will slow in the next couple of years.

This is hardly in line with calming advice coming from Governments, newspapers and self-interested real estate franchises.

The large percentage figure of “forced, distressed or impaired” sales is only one part of the picture.  It’s the discount to 2007/2008 prices that’s perhaps even more alarming.  Most commercial sales here in south east Queensland have achieved only 50% of the original price paid with the rest being sold at a discount of between 25 and 50 percent.

Its reported that Australian Banks are holding more than $20 billion in “impaired commercial assets” on their books. That’s what they’re prepared to admit.  It depends on how recently the properties have been valued or whether owners have just managed to keep up their payments and haven’t brought themselves to the Bank’s attention. There are thousands of commercial properties across Australia in severe stress that have yet to be added to the Banks’ books.

Back in the 1990’s Banks really screwed up and drowned the market with distressed properties causing even more pain as no one would put their hand up at Auction in case the property came back on the market at an even lower price.  This is the same as the malaise that’s now obvious in the United States market and why prices in many areas over the Pacific are still falling to levels said to be “impossible” even last year.

Banks are cashed up and in a position to gradually slide an increasing number of distressed or impaired properties onto the market, keeping the “fanfare” to a minimum.  This tactic is designed to keep us all in the dark as to what’s really happening.  Once I check with sources and received legal advice, I’m hoping to reveal details of a conversation I had that will confirm just what the Banks are up to and how far they’re prepared to go to “lie” to the market.

As a result of all of these forced sales, the government is happy to report an increase in lending for commercial properties but as I’ve just illustrated, the increase in lending is as a result of bad things happening in the market, not good.

There is also a lot of “private” money floating around looking for a home.  The returns from bank interest are negligible in most countries and decreasing here in Australia.

The share market is just scary and shaky right now so this money has to find a home somewhere.  Obviously some of this money has decided that half price off a high is good enough for them and they are happy to hold until the market turns.

I think they’re foolish and that prices will continue until they correct to 2000-2001 prices plus compound CPI to present or below.

Come back in 2015 and compare my projection with reality. I hope I’m wrong but think I’ll be proved right.

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