Insider Tips to Help You Discover How to Succeed with Commercial Property
WILL COMMERCIAL property investors and businesses be starved of ready funds during 2012?
The banks seemed to be protesting about the increased cost of offshore borrowing. And using that as their excuse for not wanting to pass on any future RBA rate reductions in full.
But are they really telling you the whole truth? [Read more…]
ALL YOU need is a sprinkling of confidence … with an understanding that things are not as bad as you read in many newspapers.
For some time now, I have been trying to explain how the underlying fundamentals for Australia’s economy and Commercial property are strong.
And a recent AFR headline Recruitment boom bucks the trend (9 Dec 2011, page 41) now confirms that our major law firms are “in the midst of a hiring spree”.
However, if you still need some more convincing of Australia’s well-being, just take a look at these two graphs. [Read more…]
Last week’s inflation figures were certainly much better than expected.
As such, there had been considerable political pressure placed on the RBA from by the government to cut interest rates this week.
Retailers were virtually pleading with the RBA to do so. Plus, homeowners were also looking for some relief in the run up to Christmas.
However, this is probably the last interest rate cut by the RBA for quite some time. To understand why, you need to cast your mind back to when the GFC began in 2008.
At the time, business investment was falling.
This is unlikely to occur from now on — because planned mining investment (at $430 billion) is three times greater than in 2008, representing about a third of Australian’s GDP.
And overall, Australia is said to have around $900 billion of business investment in the pipeline.
Furthermore, our main trading partner (China) is now far less dependent upon Western countries for its growth.
In 2008, China’s 12% per annum growth in GDP reflected a 3% to 4% component of exports to the West. While this year’s 9.5% growth in GDP was basically driven by domestic demand — with virtually no exports involved.
Overall, there is said to be around $900 billion of business investment in the pipeline. Add to that the improved stability of Australian banks, with their reduced offshore exposure and improved domestic deposits. Plus, an increase in the Tier 1 capital ratios.
Finally you also need to remember the RBA’s cash rate has now fallen from 7.25% in 2008 to its current level of 4.5% today.
Bottom Line: Apart from the current turmoil in Europe, Australia’s underlying fundamentals are solid. And these augur well for strong growth in Commercial property over the next 5 years.
To reduce interest rates any further would only serve to artificially inflate asset prices — rather than allow the market to grow organically … based upon genuine, sustainable demand.
Following the global financial crisis, the extent of trade imbalances has eased somewhat between Advanced Western economies and the Emerging Asian economies.
The gap between China’s huge current-account surpluses and America is out-of-control deficits may have temporarily narrowed. But the IMF believes the massive disparity will return, as world economic activity improves.
The ups and downs of exchange rates and capital movements are seen by the US and the Western economies as a method of ensuring a proper allocation of resources.
Whereas, it seems Asian countries view exchange rate movements as an annoying distraction from controlled expansion of their “home” economies. And amassing foreign currencies is seen as the best protection against a re-occurrence of the 1997 Asian financial crisis.
China’s stated goal of 7% growth over the next five years (plus its dependence upon coal, iron ore, LNG and nickel) will provide enormous economic upside for Australia.
On this basis, China’s contribution to global economic output will rival that of the European Union within five years; and even the US, within the next 10 years.
While Australia’s mining boom may help to create a “two-speed economy” … the flow-through benefits will be felt by everyone — to a greater or lesser extent.
Clearly, the growing mining (and mining-related) sector will need to be physically accommodated.
Similarly, the support services and businesses like … accountants, lawyers and the merchant bankers … will all need to engage more staff. And that means we’ll need to construct more office buildings to house them.
Bottom Line: Until we do that (which can take between 3 to 5 years), rentals for both CBD and suburban Office space will continue to escalate those capital cities where the vacancy rates currently sit at around 7%, or below.
Therefore, right now, that means you should be looking to snap up something in Melbourne, Sydney or Perth. And then, ride the current growth cycle through to 2018.
With Australia having weathered the global financial crisis, we are now having to cope with the potential after-effects of:
Given all of these so-called “Black Swan” events occurring so close together, certain pundits appear to be jumping to the wrong conclusions.
They are ignoring the fundamentals; and simply encouraging a knee-jerk reaction — driven more by sentiment and (supposedly) an attempt to avoid risk.
Right now, many investment decisions are being based upon incomplete, and often incorrect, information. And this is also being inflamed by sensational headlines in the media.
Without question, the human pain and suffering in these disasters is beyond a full comprehension — whether it be in Japan, NZ, Libya, Queensland or Victoria.
However, history would suggest the adverse economic effects will be comparatively small and temporary.
In all these circumstances, there may be some short-term decline. But the subsequent rebuilding efforts tend to provide an economic boost, well beyond what would have otherwise occurred.
You only have to look at the Victorian bushfire tragedy of several years ago. As truly devastating as that was … the Victorian economy now leads the rest of Australia in so many areas — both economically and in its relative population growth, compared with other states.
With Japan, its $200 billion rebuilding program will consume an enormous volume of steel — and therefore, create huge demand for Australian iron ore and coking coal. Not to mention, the design and construction opportunities for Australian firms.
Bottom Line: Just step back, and view the fundamentals clearly.
While China remains an important influence, the recent disasters in New Zealand and Japan will also actually impact very favourably upon the Australian economy AND the Commercial property market.
Your competitive advantage will be found in buying Commercial property … while others seem to be frozen to the spot.
The Industrial sector was probably the one most harshly affected by the global financial crisis.
Nobody wanted to expand — being prepared to operate in cramped premises, until a clear picture of economic growth emerged.
However, there has been a growing and now, strong tenant demand reported within the main east-coast cities. [Read more…]
Pick up any newspaper, and you’ll find most commentators saying the Resources boom is back on once again.
Also, people are pointing to China as our guiding light going forward.
But is this really true? And if so, why?
Here’s a short Video giving you a quick insight into whether there really is any substance to what we’re being told.
[Read more…]
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…]
Whenever Investors are confused … the Property Market tends to do nothing and simply moves sideways.
Confusion Reigns
People simply put their buying decisions ‘on hold’. And then, frantically played catch-up over the last 12 months … as soon as they realised things were still okay here in Australia.
Over that period, you have seen most Commercial markets around the country showing good growth — particularly in Melbourne.
[Read more…]
Overall, Australia has sailed through the Global Financial Crisis more or less unscathed. And from all accounts, Victoria and enjoys the standout economy of all the States.
Last week, you explored the traditional cycle for CBD Offices — being 18 years from peak to peak. And over that same period, Retail and Industrial properties tend to go through several cycles.
However, given Australia’s privileged position within the global scene … my view is you are now at the upswing in the cycle for the Office market. In other words, you are already at the halfway point in the traditional Cycle.
[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…]
WITH EVERY NEGOTIATION, you always need to be thinking on your feet. And here are several simple Tips to help you do just that.
WHEN YOU EMBARK on your journey as a property investor, it can be overwhelming – with a flood of information and diverse opinions. To help simplify the process, here are five essential tips for new (and seasoned) investors.
IT DOES NOT MATTER whether you’re an investor or an owner-occupier, there are several important factors to consider when purchasing a commercial property to ensure you make the right choice.
In a previous article, I shared a handy App to assist you in shortlisting potential properties. If you haven’t already downloaded it, simply click on the HiReturn Filter over on the right, to install it on your tablet or mobile device.
THERE IS A BELIEF among many experts that a surge in the stock market typically precedes a recovery in the commercial property market by about six months. And the start of this year saw equity markets gaining some momentum.
I HAVE BEEN ASKED countless times about the secrets to a successful negotiation. And I want to share with you the key elements to help make your negotiations effective.
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.
