Archive for Australia
Chickens roosting?
Posted by: | CommentsI have watched the OZ property market defy gravity, well forever 
, so it is interesting to see some cracks finally appear. I had started to conclude that maybe their compulsory super scheme was actually going to allow them to escape the recession in terms of housing values, but cycles are by nature relentless so maybe it is finally catching up with them.
This article LINK exposes the likely downside for the banks, but worse then New Zealand it will also put a lot of Oz investors underwater. Australia has always been only a growth play so remove the growth and……
you can hear the pop from here .
Like all markets I am sure there will be money to be made in this correction and some markets will roll on. Melbourne, which has been the darling of investors certainly looks like it might be in for a roasting for a while.
Putting aside the human element and just talking as an investor it would be interesting to see a US style collapse in Australia to bring yields up to where it is worth investing there. (I hope this doesn’t happen for the sake of the Aussies but interesting Deutsche Bank allowing for a 60% drop, scary). In the mean time we continue to see double digit net returns in Memphis and Atlanta
Get Going and Stay Safe ~ Dean Letfus
PS: Latest Memphis list at LINK
Investment Property Oz Style
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Investment Property OZ Style
Apologies for the late blog today but I was waiting for the RBA interest rate announcements and it is no surprise that the evils of Investment Property have been blamed over the ditch for the .25% rate hike.
Generally I like the OZ governments fiscal policies but sadly in this case they are ignoring the overall picture in my opinion and defaulting back to the same old same old; prices are rising again, investors are making money, let’s slam them to death with interest rates. I discussed why this is a bad idea before HERE and I am genuinely surprised that a relatively progressive government has resorted to the same blunt implements that caused this problem to try and solve it.
What we have to hope for is the NZ is smart enough to not follow suit. I have been saying for several months that I believed the worst was yet to come and certainly amongst insolvency professionals and in the USA we are seeing the cracks starting to show up. Christmas will wipe out countless businesses who on top of not paying GST and PAYE will have holiday pay and no income for 6 to 8 weeks, so expect some carnage in the new year. We do not need high interest rates as part of that equation.
Of course for investors this is all good news and for educated investors it is an early Christmas but I do worry about the average mum and dad with no plans for retirement and no strategy to grow wealth and no understanding of investment property..
I noticed with much mirth this week that the government in NZ finally noticed what I have been preaching for 3 years, that we cannot sustain our pension scheme. It will cost of 17 trillion dollars by 2050 because of the boomers they suddenly realise. If a relatively simple guy like me could figure this out in 2006 just from analysing basic population stats it is a bit sad and a bit scary that it takes professional economists and politicians forever to work it out don’tcha think
So be glad that the action you are taking now to support yourself in retirement through smart investment property purchases is not only a great idea but will be essential if you don’t want to retire into poverty.
Of course you are buying investment property aren’t you ??
Stay Inspired and Stay Safe ~ Dean Letfus
The Ethical Investors Strategist
PS if you bet on the Melbourne Cup you have too much money. Sort your future out first HERE
RBA rate Rise assists NZ property Investors
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As I am in Sydney currently I have the luxury of reading and watching more than my normal dose of Aussie reaction to the Reserve Bank of Australia’s interest rate rise yesterday.
Whilst it had been pegged as a 50/50 call by local commentators I get the feeling it may be the right ladder against the wrong wall.
The fact is that Australia has meandered through the recession relatively unscathed. There are of course significant numbers of small business closures and bankruptcies but they have been those who were close to trouble anyway in many cases or in particularly hard hit industries. As to why Australia has fared so well one has to say their government policy around immigration and compulsory savings for all workers has proven to be a very, very sound strategy. They have also spent up large to keep the wheels on the economy and that is why they have moved rates now to start to “buy back” their stimulus funding.
So the big concern in my opinion is that they are going to immediately hit the pocket of every homeowner, many of whom are just starting to breathe again. In addition there are thousands of first time home owners helped into their own homes through government grants who are not yet used to the costs of home ownership as opposed to renting and many of them may well sink before they learn how to swim.
And lastly Australia has enjoyed the support and trade monies of China, an economy that just will not die, YET!
In reality Chine cannot be guaranteed to keep going indefinitely and if their economy does retract then the mining and trade related feast Australia is enjoying could end in tears for the whole economy.
The rest of the world is still in trouble and for Australia to engage recovery policy may set them up for a bigger fall in the next year or 2.
So there’s my take on their activity, now the good news for New Zealand.
The reaction in the financial markets in OZ has been most positive. Finance markets, share markets and associated industries are all welcoming in the great recovery and generally everybody is feeling good. Australian banks are once again able to borrow money without wholesale funding government guarantees and generally life is good.
This will help NZ investors in the short term anyway in 2 areas.
1. As mortgage rates rise here there will be increased interest in New Zealand property from Australian investors and that is always good for the supply and demand equation.
2. More importanlty the Australian non bank lenders will start to spread their wings again and return to NZ bringing their non conforming loans with them, just like they did in 1999/2000.
You see the absence of pain in this recession for Australia will ultimately bring a rapid return of risky behaviour in the financial markets because they haven’t learned anything yet. So easier money is likely to appear on NZ’s doorstep sooner rather than later. I don’t think this is particularly a good thing in many ways, but i think it is what will happen.
So expect to see “lowdoc/nodoc/tell me your name and you can have the money” money returning t ouor shores. It will initially be at higher interest rates than banks but in terms of investing we don’t really care about the rate, just show me the capital!!
So all in all thanks to the RBA I think 2010 is going to be a great year for us kiwi investors
Stay Inspired and Stay Safe ~ Dean Letfus @ www.MassiveAction.tv
See you all next Tuesday!! HERE
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Eat the Rich??
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There is a very sad and bizarre debate/attack going on in New Zealand at the moment surrounding executive salaries. Sometimes an emotive subject brings out the dysfunction in a culture and in New Zealand wages and housing both do it.
People earning millions of dollars a year are being attacked for being overpaid and the companies that employ them, many are quango’s or large monopoly style organisations, are being hammered for irresponsibility.
So to me this is just patent nonsense. I have never read such drivel as I have in the last couple of weeks about it. If someone can find a way to get paid a fortune every year without being dishonest shouldn’t we celebrate their success?
If someone has skills that are so honed or valuable that a company recognises it by paying them 5 million a year we should be emulating that persons methods shouldn’t we? But oh no not in New Zealand, instead we get stuff like this:
“Eyebrows and ire were both raised by recent reports of big bonuses – contributing to even bigger remuneration packages – paid out to the executives of some of our leading companies. Even when those companies had seen profit margins fall substantially.
Nothing more strongly suggests the lessons that seemed such a clear legacy of the global financial meltdown a few brief months ago have been quickly and conveniently forgotten.
Even the justification offered by the spokesman for the Institute of Directors was redolent of a distinctly pre-recession complacency.
“If we are to attract the talent we need,” he solemnly intoned, “we have to pay salaries to match those paid in the rest of the world.”
Sadly because this writer is a senior person at a university he is listened to. What people don’t understand is that university lecturer’s are basically “poor people”. They are happy to earn an academic salary instead of ever generating real wealth for themselves. Put another way, they have no idea what they are talking about.
This culture of success bashing is highly toxic and contributes to our poverty as a nation. This is really a serious problem that we need to fight against. Every one of us should be thinking: “How can I increase my net worth and income by a MINIMUM of 20% every year”.
If we thought about it we would start to achieve it and as we achieved it we would become a wealthier nation. This attitude of increasing wealth is evident in Australia for example where they have compulsory Super, (generating huge wealth individually and for the nation), and the general sentiment I hear everywhere there is one of “How do I get ahead?” instead of NZ’s “Why won’t the government take from the rich and give to me”.
These laughable commentators should be required to have achieved great financial success and achieved great poverty before they are allowed to comment on either, then they would at least talk some sense.
So I implore you today to set some fresh income goals for yourself. Why not aim to double your income in the next 12 months and see how close you get to it. Understand that it is both achievable and desirable for you to get paid sa much as you can for your time and even more for your abilities. If enough of us do this we could shift this stinking Helenesque culture back to the cesspit it came from.
Here’s to wealth and prosperity with honesty hard work and integrity. All you people clamouring for more poverty please emigrate
Stay Inspired and Stay Safe ~ Dean Letfus @ www.MassiveAction.tv
To get the latest investing information on time and for free make sure you get my regular newsletter here
Affordable Housing
Posted by: | CommentsI am still in bed with flu so my creative juices are not flowing, (although everything else is) .
So fortunately one of my main agent mates Roger Sumich, who also speaks at my events, sent me this in his latest newsletter. It is too good and true to not share with you here. It doesn’t reference the actual writer.
“THE MYTH OF AFFORDABLE HOUSING!”
This comment developed a life of its own and became a lot larger and more involved than I intended. I apologise for that but I hope you find it interesting.
It is cruel to use the hopes and dreams of people against them. More so when it involves their aspirations and plans for their future wellbeing. For generations Kiwis have believed in their right and ability to own their own home, originally a home on a quarter acre section becoming something a little more humble of recent date. Soon it will be a dream little less ordinary for the majority.
I have noted various comments about the un-affordability of homes, attacking the increasing multiple of the average household income that houses now cost, as if it could somehow be altered and things could go back to the way they were. It simply won’t happen for many reasons. Other comments along the lines of housing must fall to meet rental returns are equally short sighted an unlikely and misleading.
- The median section cost in 1992 was $71,000 and reached a high median of $480,000 range (there were months where distortions took the median price as high as $750,000 but I choose to ignore those months).
- Section prices went up a staggering 676% at their peak.
- Today with median section value at $322,000 that represents an increase of 453% since 1992.
- Houses by comparison rose some 330% ($160,000 to $528,000).
- What that means is that somewhere between $250,000 and $400,000 of the increased cost of homes is due to land increases (only $118,000 or thereabouts, is due to increased cost of materials and labour).
- Even if the use of medians distorts the exact position, the picture represents what is happening is accurate.
- In 1992 the introduction of GST caused median household incomes to drop to $32,800
- Household income (before tax) has doubled, houses (after tax) more than trebled.
- The median sale price of a home (new) is $528,000 of which $58,700 is GST.
- To develop a section you will pay the council somewhere between $0-90,000 in levy fees ,contributions and environmental compliance costs.
- Holding costs accrued from delays due to the inefficient resource management act add significantly to the increase.
- The monthly cost on a $100,000 mortgage to pay all these taxes is $640 and will use the first $10, 900 of the average household income of $67,800.
- It is an outrage committed by stealth upon the public generally.
The current approach has been to abuse the user pays philosophy and tax the new homes via levies to fund the infrastructure.
In Sydney Australia a new home will incur infrastructure charges of $68,000 compared to an actual cost estimate of $1750 – the difference of some $66,000 is used to cover a range of infrastructure that benefits the broader community including libraries, new roading, public pools and transport. These levies may or may not be spent in the neighbourhood that was taxed. I.e.: new home buyers are subsidising the replacement and upkeep costs of infrastructure that they may not even benefit from. This is effectively happening here today in NZ.
Major components in the increased costs are as a result of land rationing, excessive amenity requirements, excessively expensive infrastructure fees and approval processes and a general increase in inflation – Are these factors reversible? I doubt it!
- The majority of Australians taking advantage of negative gearing was in the $40-80,000 pa. tax bracket.
- Negative gearing encouraged private investment in rental housing, without which rental yields would be prohibitively low and cause investors to quit the market.
- Negative gearing helped place a lid on rental pressure by increasing the stock of rental housing and taking pressure off rents.
- Removal of negative gearing as occurred under the Hawke-Keating government in the 1990’s would immediately lead to an exodus of investment in rental housing causing rental shortage and rapid rise in rents (the Hawke-Keating government rapidly reversed their decision).
- Removal of negative gearing in today’s climate, especially given greater land shortages and higher development costs would have a dramatic impact on the rental housing market.
- I am confident the above would be broadly similar and apply in New Zealand.
Home ownership will become the province of those with above average wealth, or those with parents who can help. Dependency on rental housing will increase and future generations of Kiwi’s will not be able to aspire to own a home of their own and will suffer from rising rental costs.
I have yet to see Tax/Levy reductions and have no belief that they will come about. Conversely, there is no lack of example of increases – often indirectly. The local and national governments will not relax land supply and neither will the cost of raw land or development cost of that land fall.
Stay Inspired and Stay Safe ~ Dean Letfus @ www.MassiveAction.tv
To get the latest investing information on time and for free make sure you get my regular newsletter here
Customer Service OZ style
Posted by: | CommentsI am constantly impressed whenever I visit my third home of the Gold Coast as to the quality of customer service compared with New Zealand.
2 examples today highlight this.
1. I was sitting in a fast-food style cafe enjoying the waves break on the beach when a family came in asking where a travel centre was. They were English as a third language and the lass serving was about an 18 year old Ozzie with a full restaurant.
Firstly she patiently tried to explain where the place was and eventually gave up and handed them a telephone book so they could look up the address.
Then about 5 minutes later she came over to their table where they were still trying to come to grips with the phone book and had hand written the address and clear printed instructions for the family.
I could have kissed her myself and I wasn’t even involved
The this afternoon I went to the Telstra shop after 48 hours of not being able to get my wireless broadband working.
When they heard that I had been out of OZ for 6 months the manager said they couldn’t help and I would have to ring tech support back from my hotel with my laptop etc. As I was about to launch into how much effort I had gone to get to them and that I needed internet for my business and I was going to stamp my foot till they did what I wanted, the girl behind the counter waited til the manager went to serve someone else, grabbed my simcard, tested it herself, which was probably not allowed, sorted out what was wrong and solved it for me in about 2 minutes.
So I would go to that shop and that cafe again just because thery were customer focused. There’s a lesson for us all in there!!
God Bless Australia
Proper Blog tomorrow now that I am digitaly enhanced again
Stay safe and stay inspired, Dean
If you don’t laugh at this you are dead :-)
Posted by: | CommentsQ: Doctor, I’ve heard that cardiovascular exercise can prolong life. Is this true?
A: Your heart is only good for so many beats, and that’s it… don’t waste them on exercise.
Everything wears out eventually. Speeding up your heart will not make you live longer; that’s like saying you can extend the life of your car by driving it faster.
Want to live longer? Take a nap.
Q: Should I cut down on meat and eat more fruits and vegetables?
A: You must grasp logistical efficiencies. What does a cow eat? Hay and corn.
And what are these? Vegetables. So a steak is nothing more than an efficient mechanism of delivering vegetables to your system. Need grain? Eat chicken.
Beef is also a good source of field grass (green leafy vegetable).
And a pork chop can give you 100% of your recommended daily allowance of vegetable products.
Q: Should I reduce my alcohol intake?
A: No, not at all. Wine is made from fruit. Brandy is distilled wine, that means they take the water out of the fruity bit so you get even more of the goodness that way.
Beer is also made out of grain. Bottoms up!
Q: How can I calculate my body/fat ratio?
A: Well, if you have a body and you have fat, your ratio is one to one.
If you have two bodies, your ratio is two to one, etc.
Q: What are some of the advantages of participating in a regular exercise program?
A: Can’t think of a single one, sorry. My philosophy is: No Pain…Good!
Q: Aren’t fried foods bad for you?
A: YOU’RE NOT LISTENING!!! ….. Foods are fried these days in vegetable oil.
In fact, they’re drenched in it. How could getting more vegetables be bad for you?
Q: Will sit-ups help prevent me from getting a little soft around the middle?
A: Definitely not! When you exercise a muscle, it gets bigger.
You should only be doing sit-ups if you want a bigger stomach.
Q: Is chocolate bad for me?
A: Are you crazy? HELLO Cocoa beans! Another vegetable!!!
It’s the best feel-good food around!
Q: Is swimming good for your figure?
A: If swimming is good for your figure, explain whales to me.
Q: Is getting in-shape important for my lifestyle?
A: Hey! ’Round’ is a shape!
Well, I hope this has cleared up any misconceptions you may have had about food and diets.
And remember:
‘Life should NOT be a journey to the grave with the intention of arriving safely in an attractive and well preserved body, but rather to skid in sideways – Savvy in one hand – chocolate in the other – body thoroughly used up, totally worn out and screaming ‘WOO HOO, What a Ride’
AND…..
For those of you who watch what you eat, here’s the final word on nutrition and health.
It’s a relief to know the truth after all those conflicting nutritional studies.
1. The Japanese eat very little fat and suffer fewer heart attacks than Australians
2. The Mexicans eat a lot of fat and suffer fewer heart attacks than Australians
3. The Chinese drink very little red wine and suffer fewer heart attacks than Australians.
4. The Italians and French drink a lot of red wine and suffer fewer heart attacks than Australians.
5. The Germans drink a lot of beers and eat lots of sausages and fats and suffer fewer heart attacks than Australians
CONCLUSION
Eat and drink what you like.
Being Australian is apparently what kills you.
Stay Inspired and Stay Safe ~ Dean Letfus @ www.MassiveAction.tv
PS Don’t forget to join me for free this weekend!! INFO HERE
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