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Category Archives For: Economy

The Value of Nothing

I’ve recently read the Value of Nothing. I picked up a copy when I was visiting Cambridge university in Boston earlier this year.

It’s not a book with massive hype, however a fascinating read.

Its core message is that as a society we are terrible at realising the true value of something. We also have our priorities out of whack:  such as some might baulk at seeing the cost of water rise but happily fork out $5000 for a Louis Vuitton handbag, etc .

One of the clearest messages from the book is that ‘The Market’ has many flaws. We noticed this heavily in 2008.

I think we see this on a local level in Real Estate. Certain types of Real Estate that obtain ‘market based results’ are in my opinion ‘overpriced’.

They aren’t over priced if you look at the most recent sales evidence. They are over priced in my opinion because of what’s not easily picked up. They are overpriced for the mere fact that many better options exist at the same price point.

This can be quality of construction issue or it can be the fact that I feel that the estimated capital growth projections might be weak.

Many have a habit of only comparing the features such as amount of bedrooms, style of housing – such as is this a single front etc in guessing price points.

From the outside, many places appear the same. The market may value them the same. However, in reality they may be totally different.

Back to the book. If you interested in how free markets operate, I’d recommend reading it.

The difference between London and Melbourne

While many people suggest the similarities, lets face it – they are two very different places.

Also different is the rental market. When I was working over in the UK I remember the constant drive of real estate agencies to make sure that their rental stock was full.

Tenants were constantly followed up by agents to try and find them the right place. A far cry from how prospective renters are followed up in Australia

The vacancy rate was certainly higher and tenants had more choice. The supply of housing, even for a larger city seemed greater.

Also it seemed that due to hight rents, many londoners (including most ex pat Australians) shared accommodation.

Another readily interesting observation is that majority of places are furnished. I suppose that helped make the rental market more fluid. As furniture was fixed, tenants found it easier to move from one place to another.

While here in Australia, the hassles of shifting rental accommodation make many planned 12 month stays, into long terms stays.

Just thought I’d share those thoughts.

Recent changes with the FIRB

Some recent changes have occurred with the FIRB (Foreign Investment Review Board) in relation to foreign interests into our residential property market.

I presume this has come as a result of political pressure on the Federal government to help save home ownership for many Australians.

If you’ve got a spare 5 minutes, check out this press release.

It is an insightful read into the whole matter.

Welcome to 2010, what do we have in front of us?

Another new year has begun. So what does 2010 hold for us?

That’s a challenging question to answer. The great thing is that no one knows exactly, this mystery makes life just a little more exciting.

On my side of things, I’ve just returned from America – part holiday and part business. It was fascinating to see how the world’s biggest superpower (even if it is a little smaller these days) is taking on harder times.

The feeling in the bigger cities such as New York was optimistic. Stories of consumers slowing down their spending on shopping and consumer goods was not witnessed from my end.

On 5th Avenue, the line to get into Abercrombie and Fitch (a major clothing retailer) was out the door on the sidewalk, and an entire block away at that!

In fact New York had witnessed a far higher volume of property sales deep into last year. Some apartments are still seeing huge sale prices, one just sold last week for $47.5 Million. Apartments naturally make up most of New York sales especially in the highly prized market of Manhattan.

Prices were still lower than in the peak however. Many of the top end agents in town felt that the higher volume was attributed to more realistic seller expectations as prices for top end condominiums (above $10 Million) were still off 20% from their peak prices in 2007.

It was the opinion of a number in the banking world that 2010 would see a great start but flatten out in the last 6 months of the year. The consequences for the rest of the world are hard to gauge as we haven’t quite caught ‘the cold’ (in Australia) that many predicted we

While we don’t have the scale in Australia that the USA does,  Australia just feels like it has so much ahead of it. We’re still so new in the world and opportunity awaits.

To be cautious of this year, is rising interest rates. These will increase and some will not have been prepared for these changes. Also while unemployment has not been too threatening, there has been a shift of permanent workers to part time and casual working hours which will mean less income for some.

Also a possible difficulty this year will be the ability to obtain credit as easily as in the past. We have started to see the banks tighten their lending standards, which is great. However if the banks find it harder to also obtain credit then this will also tighten up for consumers, even if they exceed all the requirements.

On the flip side is the undersupply of housing, the strong Australian economy, tight rental conditions and an in demand inner city market. 2010 will provide for many opportunities, some however, to be approached with a grain of caution.

Well it’s almost your last chance

595 auctions are set to take place this weekend. That's actually rather a large amount for the final weekend prior to Christmas.

258 auctions took place the same time last year. As conditions have improved so strongly, there's more people that want to 'get in' prior to Christmas.

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Some thoughts on the loan process

I've recently purchased property on behalf of clients that have had some delay in getting the final 'okay' from the banks after the purchase has taken place.

Some of these loans have been sizable, and many of these clients would normally be thrown money from any financial institution that they were looking to borrow from.

Truth is that many banks are backed up with applications. Many of these applications are sitting on desks under a mountain of others waiting for the same approval.

Normally settlements are organized and no issues arise. Maybe just be a little wary on 30 day settlements if your finance is not so straight forward.

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Australia’s doing pretty well in the world at the moment

Housing markets across the world have began down the slow road to recovery, as the global economy rebuilds.

Of 27 countries, the Australian housing market has emerged as one of the top performers, with Melbourne sitting at the city with the second highest price increase among the capital cities.

Despite strong growth in some markets, more countries experienced price fall – 17 countries, that compared to the 10 that experienced increase.

To read more from the Real Estate Business articles, click here.

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100 Million pounds

Here's a house that was on the market for 100 Million pounds a few months ago: Property

Naturally this was in London, but a good article for those wondering what a 100 Million house would look/feel like.

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Further info on the state of Australian currency

We spoke yesterday about the strength of the Australian currency and the effects on the student accommodation market.

Well you can image the ripple this is having through our top end market; it's huge.

So much money particularly from China has been flowing into our top end markets and now this has really slowed. With the dollar jumping up from the mid 60's to now 93 cents, this has meant many in the Asian markets are in retreat.

In the past when buying property in Australia, not much has been thought about the state of the Australian dollar from locals. However buying when our currency is so strong, could actually be a great move for an investor looking to sell a property down the track to overseas investors when our currency softens (If it ever does!).

As overseas competition backs off this just might mean some good buying now, while currency softening could really see yet another avalanche of money coming in from the Asian region. This could mean further another boom in values.

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Melbourne population surge

Melbourne’s population has hit 4 million! According to new figures Australia’s population is also surging towards 22 million. Australia’s annual population growth was estimated at 439,000, almost double the level of five years ago. Melbourne is expanding by approximately 90,000 people per year.
At this rate Australia could be only days away from reaching that 22 million mark. This population growth has kept the economy growing and contributed to the rise in house prices. Growth is largely being driven by international students. Government figures at the end of July showed that in five years, total international student numbers have almost doubled from 288,400 to 547,663.
Melbourne is a surging city and property values are likely to continue to follow throughout the years to come.

Source: The Age

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