Category Archives: High Rise and Skyscraper Living

DISTRESS CAN COME FROM THE MOST UNLIKELY PLACES

When “Free Enterprise” gets it wrong, things can go pear-shaped quite rapidly.  Take the Brisbane Central Business District as a prime example – and if this goes as badly as I think it will, the effects will flow to surrounding areas like a cancer.

Buyers are gullible.  Who believes everything the salesperson and/or Developer tells them in their glossy brochures?    Well, the vast majority it seems.  People want a nice new shiny Apartment with a rental guarantee and massive capital gain to fund their retirement, buy a big boat and so on.  The promoters will say and write anything, as long as it comes with a Disclaimer as long as a telephone book (and about as interesting).

People do NOT do their own research.  Are they just lazy, or have so much money they can afford to lose $100,000.00 like dropping a $5 note on the ground?  Or is it that they really do not want to find out that they can buy far better value for sometimes 100’s of thousands less a few blocks away where it’s all established and happy?  Who knows?

The fallout from over 30 thousand Units/Apartments hitting a saturated Brisbane CBD market over the next 24 to 36 months will be catastrophic. This same thing happened here on the Gold Coast and was well publicised in the lead up, during and afterwards when folks lost their “investment” and their principal place of residence to the Banks as it was tied up as “security” for their supposedly bulletproof investment!

Prices of Apartments are falling – and fast – I would not be surprised to see discounting at the 15 to 20 percent range in the next 6 months.  Rents are falling much faster.  Apartments are sitting vacant for a couple of months, so cash poor landlords (many of whom have never had an investment property before) are going nuts at their letting Agent and saying “get me a tenant…at any price, as I am bleeding cash here!”

Well – there is your next problem.  Crap tenants.  Agents not only have to deal with a very large number of new Apartments to try and find tenants for, their time to check references is reduced so some very bad tenants will move in to new buildings and cause chaos.  Good tenants in the same building will cry foul and move out to get away from the drunken party animals, leaving even more apartments vacant and the cycle then spirals downwards.  There are many buildings here on the Gold Coast where the ratio of sole operator prostitutes to tenants in the same building is quite staggering!  Not to forget the Mobile Drug Labs!

As rents crash and buildings become full of rat-bag tenants, first-time landlords will “want out” so even more Apartments will come on to the market, adding to the glut.  These “distressed sales” will put more pressure on Developers, already staring at floors and floors of dead stock. Prices will “tank”.

When prices “tank” in one area, especially when you talk about tens of thousands of properties, the contagion rapidly spreads to surrounding areas as confidence falls.

I know I’ve been banging on about this rapid correction for a while now, but we are seeing the many and varied conditions required for a perfect storm, slowly but surely coming together.

Watch this space for when interest rates cycle upwards!

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PERFECT STORM BREWING – 03 APRIL 2014

It’s all adding up….well, for me anyway, so let’s see how this pans out.

Retail stores are closing at an alarming rate in the USA and Europe, and yes, here in Australia.  My local large shopping centre has just had 5% of tenancies “walk” at the end of their leases, with strong suggestions from people I know who are “in business” but only just, in the same centre, that up to 10% of the tenancies could walk in coming months.  Unlike 2005 for instance, there aren’t 40 people waiting in the wings to get into this centre.  There is no-one.  No registers of interest, no active list, reserve list or any kind of list.

Large shopping centres are dinosaurs and some people just won’t admit it.  Ridiculous rents forcing retailers to charge equally ridiculous prices and therefore having no chance against online retailers with cheap-as-chips warehouse rent in the middle-of-nowhere.

There are otherwise intelligent people (I think) spending nearly AUD$700 million on rebuilding and revitalising another massive local shopping/destination centre.  The reasons they cite to try and justify their decision are plain ridiculous – the place will be an albino pachydermata.

If shopping centre owners drop their rents to a level where traditional retailers can once again run a half decent business, capital values will plummet.  Flow on to smaller commercial and industrial properties is sure. Lack of return, loss of jobs and its not hard to see residential housing taking a dive as well.  Don’t think so?

Massive interest rate cuts have failed to stem the drop in residential values.  The butchering of statistics continues.  I was recently challenged as to why my view differed from the those reported in the news and delivered startling “real results” to back up my view.  Yet again a number of properties in a suburb were quoted as delivering massive price rises that contributed to the percentage rises being quoted in the news.  Shallow analysis of each of these properties showed that there were, in each and every case, factors that impinged on the price rise and therefore those properties should have been excluded from the ‘results’ for that suburb.  Trouble is, you take those properties out, and the price FALL is dramatic.

Factors that made for selling prices being reported as UP from previous acquisition prices were as I’ve reported before in my blog.  Reconfiguring a home to cater for two families. Significant and costly renovations not taken into account. Rezoning of land adding to it’s base value.  And so on.  And… no IN and OUT costs taken into account to arrive at a nett gain (if any).

Make no mistake that fiscal policy makers are all out of ideas for getting our economy going.  The USA think-tank  has screwed up and nothing is working over there.  I know many people in the USA in business and they tell me it’s rubbish that side of the Pacific, more than a little scary and they’ve little to no confidence.

The USA 30 year mortgage rate when I was there in 2013, was about 3.4%.  A year later and its nudging 4.5%.  If the same rate of rise occurs here (and it will) our rates will jump 30%!  Imagine mortgage repayments for all those silly sods who dived in with their 90% plus loans on minimal deposit using their Mum n Dads place as extra collateral…  Most are paying over $500 a week – that could easily jump to $650 a week – and wipe out their ability to EAT!

An interest rate jump of that magnitude will cause a REAL and long overdue drop in house prices.

CHINA – for a start you can’t believe most of the numbers that come out of ‘Official’ China however the word from people I know who travel regularly to that mysterious land is that things are crap. I’ve heard it said that China is at about 2004/2005 on the Western GFC Clock.  When their house-of-cards comes down it will not be pretty and the flow on will be nasty.

Its all coming to  ahead.  If you have property, sell it NOW and take advantage of the pseudo reports and spin to get some sucker to cough up.  RENT, or take a long holiday.  And buy back in when the dust settles.  Go back in this blog to see just HOW CHEAP housing is in so many desirable areas of the USA – not the ghettos of Detroit but NICE PLACES TO LIVE.

We are waaay to expensive and need a correction… It’s coming…

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CHINA CONTINUES TO BUY UP BIG

Chinese buyers are really exerting their influence in my home town.  It’s different to the heady days of the Japanese though.  Many Japanese ‘investors’ were thoroughly lied to and screwed over by Gold Coast ‘sharks’ and paid the price years later when their investments sold for pennies on the dollar.  The Chinese are buying up distressed assets at the higher end of the market at bargain basement, ‘less than replacement’ cost.  Whilst there is still some downside risk, in most cases they are buying well.  That said, and as I’ve opined previously, some just don’t seem to care they are paying well over the asking price or reserve at auction, hence my questioning of their true motives.  There appears now to be two distinct types of Chinese buyers.

Anyway, back to the article below. I wonder if this Chinese buyer has even set eyes onf this penthouse.  Who in their right mind would live in the middle of Surfers Paradise is beyond me.  I am sure that living in the Penthouse would be lovely (I wonder if it and the Sky Homes have a dedicated elevator?) but having the share the foyer with the drunken ferals about to descend on the Gold Coast for the Motor Racing Festival followed by hoardes of out-of-control “Schoolies” would put me off.  Imagine living in that gorgeous penthouse and waking very early Sunday morning for a walk on the beach.  You’d step out to drunks, half-clothed foul-mouthed women, vomit and rubbish all the way to the beach.  No thanks.

And whilst this may not happen any time soon, the old real estate cry of ‘Location, Location,Location’ must always be applied to any purchase.  Most of the gorgeous views to the ocean could vanish over the years as massive high rises are built on the beachfront north and south of the already massive ‘SOUL’ building (another pricing disaster subject to many, many law suits as I write).  If you venture into a beach area with high rises, the ONLY position is absolute beachfront or across the road from a beachfront park that would/should never be sold off for development by local authorities.

Good luck to whoever bought this. Their first early Sunday morning walk may well see it back on the market!

Hilton Penthouse Article

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LIARS, THIEVES, MALCONTENTS and IDIOTS PART 1

Sadly a fair number fit into the heading’s description.

On Site Managers, or the Owners of Management Rights (OSMs I’ll call them) in Complexes fall into a wide number of categories.  I’ve worked with some, butted heads with others, been subjected to their lack of professionalism and incompetence as a tenant, and watched as they’ve been caught cooking the books.

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ACE #1

ACE (Aspect, Contour and Elevation)…amongst other things!

This post will be broken into 2, 3 or more parts and is a rambling recollection of issues I’ve encountered over the years.

Many of the points I’ll raise are still the cause of much grief as people fail to ask, heed or properly interpret professional advice and rely far too much on advertising, promotional blurb and spin.

Talk to your future neighbours.  Don’t be shy. They know what’s going on.

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ENDORPHINS

People become emotionally tied up in a residential real estate purchase.  Real Estate agents just ‘love it’ when someone shows all the hallmarks of being in love with a property.

Your brain turns to mush and all sorts of uninhibited emotions take over as you stare quietly into the magnificent view, run your hands tantalisingly over the smooth marble finishes and imagine yourself surrounded by admiring friends as they ooh and ahh over your clever and astute purchase.

Remember the sound when a needle falls off an old fashioned vinyl record?  That’s the sound that careers through your head as the realisation you’ve been duped arrives like an unwelcome freight train in the middle of the night.

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