Australia – 2 speed Economy
So we have a boom nation with a recession mentality. It’s quite bizarre.
We’re on the threshold of the greatest period of prosperity in our history and there will be mega repercussions for real estate.
The Australian Economy is in Good Health with 3% annual growth we should be reveling in the opportunities
It certainly makes prudent business sense to Invest where the Billions of Dollars is being invested, where capital growth and high rental yields are on offer… you can now take advantage and reap your own rewards!
It is said that very little to almost no direct effect of the Resources and Mining Boom will be filtered down to us if we are not directly involved in the Resources Industry in some way?
What if these sentiments were a little inaccurate and you have the occasion to ride on the back of the boom securing and growing your own wealth? Would you choose to remain downbeat and look for the reasons why Not, or would you take this opportunity seriously and look for the Reasons Why too?
For years now Australians have been fed negative vibes with regards to just about everything I am sure you would agree – we are now bored and are sick and tired of it. The Reserve Bank of Australia are quoted as saying “the Australian economy is in a healthy position and way ahead of pessimistic public sentiment.”
[The Economy, Cost of Living, Labour Government woes, crooked politicians, Property Market will crash, Stock Market extremely volatile, Europe etc … the message we are fed is to be a nation of savers, to put your money in the bank. Is this strategy helping you grow your wealth?]
It is unfortunate that current negative market sentiment is the tail that is wagging the dog. Most people we speak to are quite frankly fed up with the current situation and want to return to living a positive and fulfilling life. They know that there are positive opportunities out there and on the lookout for them. They tell me that they are tired of waiting to see what might happen, when nothing really happens – except that they are either stagnating or moving backwards as a direct result of doing nothing.
Contrary to market sentiment and negative media broadcasts, Australia continues to demonstrate just over 3% annual growth year on year, over a long period! Excellent results for an emerging economy and way ahead of established economies world wide. Isn’t this one of the reasons people are queuing to come into Australia?
Our clients are now telling us that they are looking for properties that will grow in value over the next 5 to 10 years and one that might even be positively geared, to suit their own cash flow and investment strategy at this time.
Those wanting property for their Self Managed Super Funds (SMSF) prefer positively geared investment property – minimising the amount that would otherwise be required for negative gearing purposes within the fund.
We continue to hear that Australia is a 2 speed economy, which it is – the question we ask of you is, “Why is your sentiment so low; at the perfect time when you have every opportunity to join the Resources Boom and take advantage of strong fundamentals that are presenting themselves on a silver platter on your lap?”
What will you do if we can give this to you today?
What if the property was totally positively geared today and within 3 years your deposit was paid for by simply diverting income tax you would otherwise have paid to the tax man anyway?
Meaning that you now have title to a growing investment; which is positively geared and instead of you paying for it, your investment is depositing money into your bank account every week?
Robert Kiyosaki, of Rich Dad Poor Dad, states you can either carry home a bucket once a month, which is filled with a salary or you can secure your own wealth and create a Pipe Line of ongoing Residual Income 24/7, that no one can turn off. Being Positively Geared, this is creating a residual income for you, buying you your own lifestyle.
If these properties are in a growth area, that already has over $96 Billion Dollars of committed investment, structured from now through the next 10, 15 to 50 years, in a region with 10 different industries, plus where there is a current shortage of accommodation (requiring another 9,000 homes in the next 10 years) and simply not enough dwellings being built to accommodate the current planned growth; and where your tenant is a blue chip company who is crying out for housing for their employees … would you still say, “No, I am going to wait to see what happens?” or will you sit up and take note and seriously consider the reasons why you should be growing your own wealth and have most of your financial planning paid for you, by the tax man and your tenant??
Did we mention that there are already 10 successful industries in the area? This is a town that will more than double in size geographically and in population ensuring property values rise accordingly. A vacancy rate close to zero is bad for tenants but excellent for Investors!
You may not know this but the likes of Coles, Safeway, Wesfarmers etc have already spent millions of dollars undertaking their own due diligence and are setting up several of their own retail stores to cater for the current and future demand and population growth. They realise the opportunity and did not sit back saying they will wait to see what happens.
Ask yourself, “Would these public companies commit to millions of dollars if their own due diligence did not stack up?”
If you agree that they would make a prudent and well researched investment and business decision, you should also concur that if it is a sound business opportunity for them … then you will recognise that it is also a strong investment opportunity for you!
The companies that have committed to the $96 Billion Dollars of investment into the Resources Boom have also undertaken their own due diligence you may agree. You now have the opportunity to utilise their business decision making abilities and market research lending comfort to you in making an informed decision.
There are several sound reasons supporting the idea of investing in residential property : Australia’s continual populations growth, a well-reported housing under supply, very low vacancy rates, ongoing infrastructure development and the Resources Boom all underpin long term house rice increases. When you have all these factors in one location all under pressure … one enjoys a positive Cash Flow and Capital Growth.
The next thing to research is prices. Find a market with a tight rental market, relatively low selling prices and a healthy weekly rent and you’ll have the right combination of factors for a quality positive cash flow property. Investing is a numbers decision and if the numbers stack up, (remove the emotion) make an informed decision and go with the numbers.
- In 2002 a $1.5b project was approved and prices soared to 23% p.a. growth.
- In 2008 a $2.3b project was approved… and prices enjoyed a whopping 24% p.a. growth.
- Between those years, growth still existed… but it was dwarfed by 2003 and 2008 when project approval went ahead.
- Because growth is only one aspect of property investing. Almost as important is the cashflow we receive as investors.
- The growth in rents during the same time periods –
- In 2002 – after the first big project approved – rents leaped by 39.4%
- In 2009 – one year after the next big project approval and enough time for the market to fully digest the news – rents soared by a whopping 17.7%.
- Research showed the high correlation between expenditure… and WHEN and by HOW much rents and values rise. They’re almost perfectly on par.
- Gladstone is gearing up for it’s Biggest Resources Boom – it is now only at the beginning of this era because there is over $70 Billion of approved projects in the pipeline
- Property prices and rents escalated prior to the majority of projects being approved
- This investment will affect availability of land, population numbers and the supply of dwellings for purchase or rent
Australia’s economy is forecast to continue to strengthen over 2012, albeit divergent by industry and state. The RBA forecasts the Australian economy to grow by 3.25% in 2012 followed by growth of 3.5% in 2013. Economic medium term prospects remain positive despite the high AUD, the shift to a mining investment boom, and the falls in consumer and business confidence. Fundamentals are strong, market sentiment will change once consumers and business realise the potential
Comments or questions are welcome.