Monthly Archives: February 2014

DEMOGRAPHIA

I would urge those of you with a sense for what is REAL out there, to go to http://www.demographia.com/dhi.pdf   and download/digest this large document.

It shows just how seriously UNAFFORDABLE Aussie real estate remains and how we are still poised for a major correction.

Mark my words – it will come.  The current situation just cannot continue.

As wise Persians once uttered…”this too shall pass”

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I LIKE CHINESE

I like Chinese food, almost as much as I like the many Chinese people I’ve met and had stay in my house as a part of the “couch surfing” movement. Chinese people are no different to anyone else.  They have the same basic needs and wants as any of us on the planet, so individually they are not to be thought of any differently.

The only thing is that there are so many of them.  Lots.  Billions in fact.

When you gets “billions” of anything and that “anything” decides to shift its weight around, well, things can happen.  Its kinda like trying to turn a huge aircraft carrier around in a small harbour.  If it misses by even a little, a lot of damage can happen – and you just cannot stop it, because its so big and has so much force behind it.

Billions of anything can distort the environment in which it moves.  Billions of tonnes of ice dumped into Sydney harbour would probably make it too cold to swim in the summer…maybe.  I don’t really know – just saying…

So, you have to be careful where you put billions of anything and you have to mindful of the short term gains vs the long term pain, which is why I’m reproducing an article in full today from the pages of NEWS.COM.AU ….

CHINESE investors are driving up property prices in hot spot Sydney suburbs by as much as three times the city average.

Carl and Marie Mascarello sold their four-bedroom house in Strathfield for $230,000 more than they expected to an investor who had just stepped off a plane from Hong Kong.

“The house sold for $2.28 million. Far out, I was cheering when I heard. It was really unexpected,” said Mr Mascarello, who is downsizing because his two children have left home. “He was a Chinese investor who got off the plane from Hong Kong the day before. He had missed out at two earlier auctions and clearly did not want to miss out on this one.”

Strathfield is one of at least 10 hot spot Sydney suburbs that have been targeted by Chinese investors who are estimated to have spent $5 billion on Australian residential property last year. The average house price here has risen by up to 27.1 per cent — almost three times the Sydney average of 9.2 per cent.

Brian White, chairman of Ray White Real Estate, said that the Chinese property investment boom “is an absolute fact”.

Together with a number of leading estate agents, including McGrath’s, he has opened a China desk to improve liaison with buyers from the booming new market.

China had the second-highest number of immigrants settling in Australia last year with 27,334 people moving here.

Mr White said he is also opening offices in Beijing and Singapore, which funnels large sums of Chinese investment to Australia.

“A lot of Chinese are very keen to balance their investment portfolios with overseas investments because the Chinese government is restricting people buying in China to try and cool the market,” he said. “In many cases they are buying off the plan to provide homes for their children, who they are sending to Australia to be educated.”

Non-resident foreigners are only allowed to invest in brand new properties under Australian law. The rules have led to a boom in investment in units bought off the plan.

Peter Gray, manager of the 750-apartment Billbergia development at Rhodes, said more than 85 per cent of the development had been sold to Chinese investors. “The first block sold off the plan within a couple of months,” he said.

But it is not all good news. Marketing executive Lara Germane, 28, has been trying to buy her first unit with partner Olaf Wright but has been beaten out of the market.

“We have been looking seriously between Randwick and Maroubra for the last six months but the prices are up $100,000 on where they were last year. It seems to me that it is Chinese buyers who are moving into the area because that is the vast majority of people we see at inspections.”

TROPHY HOMES ARE MUST-HAVES Matthew Benns

CHINESE investors are also looking for trophy properties with Harbour views on the lower north shore and in the eastern suburbs.

Richard Simeon from Simeon Manners real estate agents sold a five-bedroom waterfront home in Pearl Bay Ave, Mosman, last week to a Chinese buyer for more than
$7 million.

“It is bigger than Ben Hur. In recent years I have sold more than $100 million worth of property to Chinese buyers,” he said.

“They are looking for trophy properties with the classic Opera House, Harbour Bridge view.”

“The highest price for a property in Mosman last year, 34 Julian St, Middle Harbour, was $13.88 million and that also went to a Chinese buyer,” said Mr Simeon.

He is now working with cashed up investors from the recent luxury property expo in Shanghai and also developing new, off-the-plan, apartment buildings in Burwood and Terrey Hills specifically for the Chinese market.

“The money from China is just extraordinary,” he said.

“It is a brave new world.”

Stupid, short sighted fools these agents.  The residential real estate market here in Australia needs to cool off and correct to where it’s historically been.  Some sectors of the market are cooling off and some are crashing back to pre 2001 prices (I’m not just saying this, I know and can quote hundreds of real life, real time examples) but to actively encourage this stupidity will do nothing but make the inevitable correction much more fierce, damaging and will embarrass us internationally.  Capital will flow out of here like a broken dam and the correction will bankrupt tens of thousands of Australians…

Just sayin’

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UPDATE 11 FEBRUARY 2014

Funny how you pick up on things.  Talk of First Home Buyers rushing into the market before the prices rush upward yet again, pricing them forever out of the market.

I keep seeing a market that is stuffed and on the verge of cataclysmic correction – butchered, hyped and manufactured figures and people, real people, losing hundreds of thousands of dollars.

I see an ‘economy’ supposedly on the way up, yet I talk to dozens of small and medium enterprise operators who are collapsing through sheer exhaustion trying to keep up with costs as sales dwindle.  Just take a look at new car sales for January if you want an idea of how crap the sentiment is out there.

Then out of the blue comes a RAMS Home Loan advertisement showing that silly old sheep following a rather fetching young lady into a lounge room as her grungy flat-mates sleep off another bender.  There’s a kinda creepy aspect to that part of the ad – but I’ll leave any interpretation up to you dear reader.  Moving along and the ad goes down the predictable path of “I didn’t realise how easy it would be to ONLY have to have a 5 percent deposit”.  Not to dwell too much on THAT little number, they fail to mention the EXORBITANT COST of Mortgage Insurance if you ONLY have a 5 percent deposit but that’s yet another story for another time. (Sorry but HAVE to go there – well say they want to buy a 400k house-saved 20,000 deposit – the Lenders Mortgage Insurance could be as high as 14,000! That works!)

The kicker for me comes when the ad proposes dearest MUM and DAD be asked to put THEIR home up as security and the non to subtle suggestion is that you can get into your own cliff-edge depreciating asset with even LESS deposit.  Couple of things here.  Encouraging youngsters will poor savings habits to mortgage themselves to the hilt early – they’ll be bad payers and will lose their house.  But, more sinister than that – I bet RAMS (and others in the know) will actively seek to cross collateralise loans so that when the correction comes, RAMS and the rest can grab and sell TWO PROPERTIES to recover their money rather than just one which has lost all its equity in a heartbeat.  two families on the street instead of one – the kids can’t even move back in with Mum and Dad because the big nasty lender has taken BOTH properties.

There endeth the cynical viewpoint for today!  Cheers – Gordon

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