Insider Tips to Help You Discover How to Succeed with Commercial Property
Most people seemed taken by surprise, when the RBA chose to raise the cash rate to 4.75% on Cup Day this week.
However, with Oaks Day being held yesterday, I thought today would be better timing for this post.
Price Pressures
However, with industry facing capacity constraints and the mining boom heading towards previous levels … inflation is poised to accelerate during the December quarter, as wages start to rise.
[Read more…]
In several recent postings, I have given you an overview of where Australia’s economy currently sits within the overall global scene.
The Worm Turns
The IMF has recently trimmed its overall global forecast — down to 4.2% from 4.3%, for 2011.
The emerging and developing economies are tipped to grow by 6.4% (with China’s growth being over 9%).
Whereas, the various advanced economies are expected to grow by a subdued 2.2%, on average.
However, any double-dip recession is considered most unlikely — as investment and domestic consumption has replaced the building up of inventories.
According to the IMF: “Investment in machinery and equipment is already showing strength in a number of advanced economies.”
Nonetheless, spending and investment in most advanced economies will be constrained by households replenishing their savings; and banks remaining reluctant to lend freely to businesses. Plus, the US housing market still languishes.
Overall, the lack of business investment (and therefore employment growth) will adversely impact on tax revenues. And thereby, make government debt reduction programs a slow process.
On all counts, Australia will continue to enjoy solid growth — relative to other advanced economies. And this will provide ongoing pressure for interest rates to rise, over the next three years.
All the more reason to lock in your interest rates long-term … for any Commercial property investments you intend to make.
On Wednesday, I put up this post about whether or not to fix your interest rate, when purchasing a Commercial property. Only to find there was a problem with streaming of the Video.
Hopefully, that’s now been resolved; and so let’s try Take 2.
The simple answer to the question of timing is … when most Investors are not giving it much thought.
Like right now!
Anyway, here’s a short Video to explain my logic for saying this. Hopefully, it will give you a “helicopter view” of where things will head, over the next 5 years. [Read more…]
The US Federal Reserve is concerned that consumption is still being underpinned by government funding.
And so, even though stimulus measures may be winding down … the Fed has decided to maintain interest rates at their historically low level.
It seems that households and businesses are preferring to repay debt, rather than spend to encourage investment and growth.
In Europe, there is still simply not enough trust between Banks to lend to one another. And that means credit is extremely tight. Right now, Central Banks are stepping in to lend to private banks, in an attempt to free up funds to boost economic activity.
China still remains the bright light with its growing demand for of the commodities Australia exports.
The IMF actually predicts that the Asian economy (which includes Australia) will be 50% larger within five years.
And it will then represent about a third of the world’s trading activity.
h2. The Implications for Commercial Property
Already, major Asian sovereign wealth funds and property trusts are starting to target Office towers within Australian capital cities.
In fact, foreign buyers have invested around $1.7 billion during the past 12 months — representing about 70% of the purchase is made.
While this won’t directly affect the smaller private buyer … it will force everyone to move down a price bracket ought to — looking for better value.
Therefore, as yields quickly firm at the upper levels … this will soon have a ripple effect down through more modestly priced Commercial investment property.
Couple this with rising rentals, as the supply of Office space starts to fall around Australia … and now would be the perfect time to position yourself, ready for the next growth cycle.
Buying and negatively gearing a Commercial investment property is not forever in one — particularly, with interest rates on the rise.
And if you already have high personal debt … adding to that wouldn’t be a smart move on your part.
Negative Gearing
Any gearing you decide to take on, should be viewed as part of your overall strategy — and not there simply to minimise your tax bill.
[Read more…]
Yesterday, the Federal government released Australia’s third Inter-generational Report.
And about five years ago, I came out with a somewhat startling statement:
“If you haven’t sold your traditional family home by 2010-11 … you had better be prepared to hold it until 2025 — because there simply won’t be a market for it!”
Chatswood … Sydney
And given the recent surge in home sales (particularly in Sydney and Melbourne) over the past 6 months … you would be excused for thinking my prediction might be way off the mark. [Read more…]
Looking Up
As you can see, the Westpac-Melbourne Institute consumer sentiment index increased strongly by 9.5% for June.
And that means it has now leapt by some 23% since May — the largest 2-month increase for over 30 years.
First-home buyers have also been active, accounting for nearly 30% of all loans during May.
And this overall level of confidence follows an increase in retail sales, for three months in a row.
[Read more…]
Earlier this year, you read about a funding crisis pending for Property Trusts and Institutional buyers. And this is not helped by the RuddBank failing to materialise.
With a surge in the Share Market since March, several recent capital raisings have helped some of these larger property owners.
However, with the latest hiccup in Share Market confidence, you’re unlikely to see much more capital raised in this way.
Capital Gap
As you can appreciate, the financiers are proving to be rather difficult.
Therefore, over the next two years, you could see a gap of up to $30 billion emerge, between properly valuations and what bank are prepared to fund.
But these problems seem to relate mostly to commercial properties worth more than $20 million.
Because, for properties less than $10 million … the market appears conservatively geared, and is experiencing strong demand — especially for properties in Melbourne, priced under $5 million.
So it is somewhat a two-tiered market … with a number of good opportunities starting to emerge.
Anecdotal evidence suggests that consumers are cutting back on their spending around Australia. And it’s likely that luxury items and overseas travel will be the most affected.
A recent article in The Age expounded “The Flight to Value” — where Australian Property Monitors reported a 24% drop in the median price for Toorak Homes, in the 6 months to September.
[Read more…]
In several previous postings, you’ll recall that I have raised the issue of Australia’s current blowout in household debt.
A recent article in the weekend Financial Review (pages 26-27) highlighted the current state of affairs.
[Read more…]
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But first, just watch this short video to gain a quick understanding of these three essential elements that form the foundation of every negotiation.
If you’re new to investing, you might be wondering if it’s possible to manage your own commercial property. The short answer is “yes”, but only if you know what you’re doing.
It’s important to note that owning a commercial property comes with certain legal responsibilities, particularly when it comes to compliance with Essential Services requirements under current Building Regulations.
The current trends in the business have made it clear that office landlords have to cater to the needs and preferences of their tenants. Building owners and managers (who understand and meet these demands) will be able to command higher rents and reduce vacancy rates.
To expand on this, here are four key tips to help attract quality tenants.
