Monthly Archives: September 2013

MARKET UPDATE 26 SEPTEMBER 2013

Good evening and Welcome to the Australia Bureau of Statistics latest press release. I really love my country so the A still stands for Australia.  But here, as in many countries, BS stands for something else entirely.  I certainly have no idea what some people smoke, drink, take or where they’ve completed their tertiary studies but to produce such figures as I’ll reveal below, there just has to be something seriously wrong.  How do they gather their figures?  Who do they speak to?  How do they sift and sieve the good from the bad or the lies from the truth and do any of them actually HAVE a mortgage, run a home or balance a bloody chequebook?  The following is nonsense, means nothing and when I showed a few people today, they laughed and asked me to point them to this Place de la Nirvana where they could have a mortgage and household expenses that were less than $450.00 a week and where could they sign up.  I said I’m sure I could find them somewhere but they’d be 200 kilometres  from the nearest hospital, ‘maybe’ have internet and perhaps even have to pump their water by hand but it was do-able!

So, here it is….

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WE ARE NOT IMMUNE

Real estate is linked to the economy and vice versa. What’s happening in the United States absolutely impinges on Australia.  Always has and always will.

The following is from Phoenix Capital Research in the USA and is reproduced with full acknowledgement as to source.

“The Fed failed to announce a Taper yesterday of any kind. It is positively outrageous, but it does inform us of many things. First and foremost, the Fed has made it clear that it

cannot be hawkish is any way…So for all the talk of taper and shifting to a more hawkish tone, the Fed’s actions speak louder than words: the Fed is totally and completely

incapable of being hawkish at this time. Secondly, the Fed knows that the US economy is a total disaster. If tapering even $10-15 billion per month from $85 billion month QE

programs would damage the economy, then we’re all up you know what creek without a paddle. Put it this way… here we are, five years after 2008, and the Fed is stating point

blank that the economy would absolutely collapse if it spent any less than $85 billion per month. This admission has proven just how long ago we crossed the Rubicon. We’re

already in the End Game.

Period. Finally, the Fed has proven that it has absolutely no exit strategy. The Fed is going to print money and buy bonds until the entire financial system collapses. Any

time stocks fall it will try to rescue the markets. And it is going to do this ad infinitum because it has no clue what else to do. In plain terms, the Fed has proven

beyond even a hint of a doubt that it is simply flying by the seat of its pants, with no clear game plan or eventual outcome in mind. The Fed is simply going to keep doing

what it’s done for five years until something breaks. That something will be the entire financial system. We will have a crisis that is substantially worse than 2008. It

is coming. In fact it is now coming much sooner than it would have had the Fed announced a taper yesterday. In the meantime, inflation is soaring. The Fed

continues to lie about CPI and inflation but the reality is that the cost of everything is going up.” – Phoenix Capital Research, 19 Sep 2013 …

Oh dear – sell your property…buy gold, rent, and sit tight…

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DEATH TRAPS

I’ve written about the dangers of living in a property that’s been used (abused) as a drug lab but there are more subtle dangers out there, just as deadly.  I’ve watched a lot of dodgy builders and renovators over the years create modern day death traps for the buyers and renters of their properties.  These people just don’t care.  Well-meaning renovators care (I guess) but in their ignorance, also create death traps.

And, blokes with their sheds are the worst offenders, especially old blokes who’ve come off farms and retired to the ‘burbs.

Here then, in no particular order, are my things to watch out for.

If there’s been a renovation of a pre-1987 property, asbestos may well have been disturbed.  This nasty substance, if contained and solid, coated in heavy paint is sort of okay to have around (sorry, for me and my child – no asbestos please) but if it’s on the loose, it will kill you.  Not right away, but you, your children and visitors, may just get a dose big enough to ensure you endure a long and painful death sometime down the track. This shitty substance was used in fence panels, roofing, insulation, behind tiles, in old stoves, as lagging around pipes.  I’ve seen in buried in gardens, and also just under the lawn where every time you mow the lawn that cloud of dust is not dirt but ultra-fine asbestos fibres – charming!  If the ceiling space is filled with asbestos insulation that is spalling particles, every time the wind whistles through the roof space, the fibres are pouring into your home and out through the eaves and onto every outdoor surface.  That rippled asbestos fencing that Councils tell you is safe as long as it’s painted, isn’t!  Is the neighbour’s side painted and in excellent, fully sealed condition?  Is your fence absolutely free of chips and scrapes so that no asbestos is getting loose?  How about this then? If you have grass growing up against the fence, what happens every time a whipper snipper cord smashes into it at 300 miles an hour?  No kidding there aren’t asbestos fibres flying everywhere!

Lead.  There is old lead everywhere. New lead is not better for you than old lead – it’s all bad! Again, authorities tell you that old lead based paint is okay as long as it’s sealed and in good condition.  RUBBISH.  Young kids always have their hands on and into everything, followed by those same little hands being thrust into their mouths. (If you suspect you have a lead problem in and around your home, please go and have blood lead level checks done – it’s an easy test, as long as you don’t mind the needle!).  Think about old wood framed windows, painted with lead paint – every time you open and close the window, or it rattles in the wind and rain, where paint rubs on paint, or painted surface against wood or metal runner, lead dust is being liberated.  Lead paint, in fact any paint, can crack and craze and if that’s happening 10 feet above you head, you’re not going to notice it.  Lead dust will fall from those cracks and all over your skin, carpet, furniture, food and glass of water.

The Man Cave, otherwise known as a SHED.  More than likely a toxic waste dump, chock full of carcinogens. Moving on to free range chickens, egg laying and growing your own vegetables. Nothing more satisfying is there?  Or is it?  Could it be incredibly dangerous to your health? The old guy, Farmer Joe, who moved into the house years ago and filled his shed out the back with all sorts of leftovers from the farm.  He also had a range of nasty, polluting hobbies that involved acids, welding, chemicals, weed sprays long since banned and goodness knows what.  He threw waste into the weed strewn fence-lines, poured who-knows-what on the grass and hung up chemical laden clothing in the laundry to “air”, filling the house with fumes from who-knows-what – traces are still clinging to paintwork and window furnishings, not to forget the carpet, all through the house.

If you want to have your Farm declared “organic” and “pesticide free” it is a very long and arduous process.  there are no rules really for putting up a Chook Pen, or digging up your back yard and throwing some seedlings in the ground and yet, people do, often encouraged by the dozens of Home Maker Shows on TV.

Well, here’s Gordon’s Caveat!  STOP.  Do NOT do any of this unless and until you’ve had the soil tested.  There are laboratories that do this kind of thing and you’d be mad to eat lettuce grown in a garden bed full of toxic waste – Imagine feeding your innocently home-grown produce to your children and have them develop some nasty, life threatening illness?  You’d never forgive yourself.

Be careful.  Be aware. Do your homework.  Seek professional advice and DO NOT PROCEED until the road ahead is clear.

 

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THE AMERICAN DREAM

Following my articles of the relative costs of American real estate I was asked about buying in the USA vs buying here.

The answer is simple – DON’T.  if it were that easy, everyone would be doing it and the US real estate market would be a STAR performer for everyone.

A website was brought to my attention so I decided to research a property they have advertised for about $50,000.00 in an area that I’m generally familiar with.  With the power of Google [TM] I fail to see how people cannot, will not or are just not capable of doing their own research.  American Government Agencies at all levels have a remarkable amount of information available online – not private individual information but they are MAD KEEN on hard facts and, yes STATISTICS.

In ten minutes I found that this property is in an area where the average similar house price is $25,000.00 (no surprise there – this Anglo-American company are a bunch of “flippers”).  Alarmingly the statistics for all sorts of violent crimes are up to three times the USA average per head of population.  The population of this township is less than 2,000!  No-one in their right mind buys a rental property in a one-horse town – way too easy for the house to be vacant and quickly derelict in no time at all.  And then there is Google Street View!  WOW – this is where you find they’ve photo-shopped the photos of the house but more surprisingly is when you pan left and right and take a “virtual walk” up and down the street.  Looks like a scene from an END TIME Movie – good grief – SCARY does not begin to describe the scene.

Anyone who buys anything from these Scammers, sight unseen, is a  FOOL!

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NAMING NAMES

Okay then… to all you doubters out there who think I pull examples out of thin air.  A local agent sees fit to sprout their success and tell all who’ll listen about their recent sales , so I’ll examine their claims to see how the sellers fared.  Don’t forget its not just about looking at “bought for $450,000.00, sold at $480,000.00 – WOW a profit!”  That’s not a profit when you take out Stamp Duty and legal fees IN and Agent’s commission and legal fees OUT.  Don’t forget if they’ve paid a massive mortgage, all the time taking aim at people who rented for the same period, these hapless BUYERS/OWNERS/SLAVE TO THE BANK are waaay behind, waaay behind…  Some of these properties may have had pools, solar water heaters, solar roof panels, insulation, upgraded kitchens, patios and verandahs added, revamped landscaping and so on – who would know or at what significant cost…

1.  19 Wisconsin Street, Varsity Lakes – advertised at $465,000+ marked as sold but the actual contract price is not disclosed (same for all the examples) – was bought for $480,000.00 in July 2007.  Not a great result.

2.  9 Cornell Court, Varsity Lakes – advertised at $620,000.00+.  The land was bought in March 1998 for $281.000.00 a big price as its north to and on Lake Orr. The house would have, in those days, cost at least as much as the land and most likely more, so again, a shocking result after more than 15 years of “ownership”.

3.  6 Wisconsin Street, Varsity Lakes – advertised at $455,000.00+ but again, no revelation as to actual sale price. They paid $439,000.00 in November 2011.  Ouch.

4.  9 Washington Crt, Varsity Lakes – advertised at range $599 – 639,000.00. (Comment – Agents who put a price range on a property in this Buyer’s market are, sorry, but just plain stupid and are not properly servicing their clients – I mean, really, if you, as a buyer, saw this, where would your first offer be?  In the middle somewhere?  At $620,000.00?  I don’t think so.  You’d be south of $575,000.00 if you had any idea of what you’re doing.)  The sellers paid $545,000.00 more than 10 years ago.

5.  3 Peppertree Circuit – just advertised at offers $520,000.00+ – They paid $500,000.00 more than 5 years ago.  They WILL take a hit.

6.  14 Shorehaven Place, Varsity Lakes – also advertised at $399,000.00+.  The owners paid $435,000.00 just over 5 years ago. I think, but aren’t entirely sure that they added a pool, so no money back for that, and a massive hit coming up.

So, I’m not cherry picking statistics.  This is real-time intelligence straight from the street.  Street-by-street, property-by-property, in areas that are close to schools, shops, medical facilities, lakes, pathways, parks, bike-ways and the beach.  All desirable attributes in any property but even that extensive list of pluses fails to put a line under a sinking ship.

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WHAT PRICE SHOULD I PAY?

I’ve had quite a few enquiries from people who are nervous about waiting until the market goes down and are afraid (scared by media hype) that they’ll miss out if they don’t dive in now, especially as interest rates are at a record low.

The first thing I tell them to do is to calculate how their repayments will be at 3, 4 and 5% ABOVE the rate they’re being quoted today.  If that scares them, they’re not in a position to buy.  I also tell them that if interest rates do rocket up by 5% in the near to medium term, the valuation of their property will plummet and they’ll be faced with owing the lender more than the place is worth.

Considering that house prices, up until about say 2001 when the madness started, kept rising roughly with inflation, the following tool, from the Reserve Bank of Australia, is useful.

Click here – http://www.rba.gov.au/calculator/annualDecimal.html

I was selling a range of standard three bedroomed houses in a particular area in 2002 for around $200,000.00.  Go to the calculator and enter $200,000 and the year 2002 and then ask it to give you the adjusted price for 2012 (2013 not available yet).  You’ll see its about $263,000.00

NONE, I repeat NONE of those homes have sold for anywhere near $263,000 in the last 5 years BUT the prices are heading that way.  At the peak of the madness, some changed hands for $445,000.  They are now selling around $350,000.00 and my wee spies tell me there are sellers out there who NEED to unburden themselves, and because they bought in 2002 for $199,000.00, would take $250,000.00 if push came to shove.

The correction we HAVE TO HAVE is coming.  If inflation takes off in the USA we are doomed…

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VALUER GENERAL REPORT 2013

I quote directly from the Queensland Government Report from the Valuer-General’s 2013 Property Market Movement Report and I acknowledge the source.

The overall value of Gold Coast land fell by approximately 4 per cent since the 2012 valuation. Residential land values generally moved within a range of no change to decreases of approximately 14 per cent in value at Coolangatta, where the median residential land value is now $305,000.

No overall change was made in some hinterland areas such as Pacific Pines where the median residential land value remains at $197,500.  Commercial, industrial and multi-unit residential land values fell by 4.5, 6 and 8.5 per cent respectively, with Surfers Paradise values reducing by approximately 9 per cent overall.

Sort of goes against everything you are dished up in the daily press doesn’t it?

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WHERE WE’RE HEADED

Today I’m going to post a lot of photos of a premium home listed for sale in the United States – I know the area personally and, if I were to move to the USA, would be very happy to live in this up market neighbourhood.  In comparing this house, which is 5 bedrooms, 4 full bathrooms, of about 32 squares as we say here, with a 4 car garage, two stories with a working fireplace, built about 15 years ago to a similar property here in Australia, I would not go below about $750,000.00 range $900,000.00.  Scroll to the bottom and see what this house will sell for TODAY.

$350,000.00 (Aussie dollars!)

MARKET UPDATE – 06 SEPTEMBER 2013

Sat a while today going through the newspapers. Still a lot of Mortgagee In Possession Sales, Receiver Sales and property for sale that I KNOW are in the hands of the Banks but the Agent has been told NOT to advertise it as such!  Mmmm – trying to hide something are we?  Yes you are!

I’m not going to rabbit on today except to say – look at the next photo, taken from a major newspaper today.  Says it all doesn’t it?

OUCH

OUCH

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KARMA

Should I gloat? I’m going to anyway.  A real clever fellow screwed me out of a fair sum of money many years ago and gloated over the fact.  I gave up, settled out of Court for a lot less than he owed me but….I knew he would get his.

At the time he boasted about the purchase of a very expensive piece of land (that I’m sure had MY money in it too!) and further crowed about the equally expensive house he built upon that land.

Well, Karma came in the shape of the GFC and I’ve just learned that he flushed about a million bucks.

Time for a gin and tonic!

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