Real Estate Investing in 2009
9 February 09Welcome back everyone to 2009. I have finally got the kids off to school and back into my office, caught up on all the backload and I am back to work for the year rested and hugely excited about what 2009 is going to bring. And I think all of you should be the same. You know, over the next 12 months we are going to see an enormous amount of wealth created. There are going to be fortunes made over the next few years and what it comes down to is the ability for people to see through the media hype. See through the political venture that is going backwards and forwards and actually get back to basics. I mean that is what it comes down to.
Start to have a look at the fundamentals that underpin the market and that is what I encourage you to do throughout all of 2009. Now look I do not have a crystal ball so what interest rates are going to continue to do over the year. I do not have a crystal ball as to what markets they are going to do individually wherever you might leave in your particular town. But what I do have is a very sound grip of economics and I particular, microeconomics and how it affects the real estate market.
So I want you to really listen to the market this year, really listen to what is going on at a grassroots level. Come back to everything that I have been talking to you about over 2008. Manufactured growth, what happens at a microeconomic level? What is the difference between demand and supply for whatever it is that is in the market, whether if the units or townhouses or single family homes or multiple income string properties. Have a look at what the demand is saying, have a look at where you have got population increases. Have a look at where you do have infrastructure spending. Have a look at what that means to that particular economy.
I do not think you can treat Australia as a blanket economy, you never have been able to but unfortunately, that is what has been going on in the media and to be uneducated in the real estate market, that is who people listen to. They listen to the GNOs and the political speakers particularly who quite often have a very different hidden agenda.
I want you to think about things for yourself. I want you to analyze the markets. Have a look at areas where those of increasing demand. Have a look at areas where population is increasing. I mean, have a look at areas where the price of housing has been held down for a long period of time that have not experienced the big burst that some other areas have. Have a look at the markets that underpin any particular town or suburb or area.
You know, I cannot help when I talk about these types of things, talking about Sydney. Sydney has got to be the biggest potential we have in a concentrated area in this country. They have an increasing population in Sydney. We have greater than 20% of our points between demand for new housing and supply of new housing.
It is just is not enough supply and you know, you think about the media around the world and even our media here in Australia, they talk about us following the global economy and of course we are not insulated from the global economy but at the same time, we are in a situation where we have a dramatic undersupply of housing.
Now, England does not have that, America does not have that and they have two majors I guess, as Australians that we look at as a mother/father, if you like, economy that we tend to follow. They have a very different set of circumstances. Their debt level is much higher than ours. The supply of housing is greater than their demand. We are the exact reverse and the thing that holds our economy down is this lack of confidence. It is holding down the whole global economy but in particular here in Australia because our fundamental is strong.
Now, we are affected by the global economy because when you start to think about us as a one unit, the country as a one unit, we have things that we sell and we have things that we buy and you start to have a look at what we sell. And obviously, we are heavily into ore into the mining resources.
We are not heavily into the end product, unfortunately. We tend to buy that back. Now that is just ludicrous and I am very idealistic as to what we should be doing there but I am not going to go into that with you today. I want to talk to you fundamentally about how that affects us and it will affect jobs and it will affect the mining towns.
What you have got to look at is the profitable mining areas, if you are looking at any of the mining sectors or towns in mining areas but again, that is something I have been saying for a long time. Do not pin your hopes in a small mine that has been marginal in the past and even though the returns have been very good over the last few years, an economic downturn, as I have been saying can affect those towns and will affect those towns.
So stick to the major, stick to the biggies if you are going for cash flow in those types of areas. If I think there is a greater opportunity in and around the coastal belt, I believe there is a greater opportunity in more sought after areas because that is what you will see a movement back to.
That is where you are going to see the greater increases in population and that is where you are seeing at the moment an increase in the yields on these properties. You start to really have a look in some of the more coastal areas like in and around Southeast Queensland being a major one, the yields that are coming from places in Brisbane.
You know, you can borrow money for less than you are getting on the yield. Now, that is going to be a good thing even in the commercial market but watch the commercial a little bit because when you have a downturn in the business market, obviously, your commercial properties are affected as a result so just be a little bit more aware of that, let us say.
Fundamentally, I am excited about 2009. The economics are good. Our fundamentals are good. What is wrong is the media hype and that is what I am not excited about. That is where we have to get back to people being more astute, having a look at their personal situations, yes that has been important. I have been telling you that for two years. Get out there, do manufactured growth, pay down your debt, pay down personal debt, get rid of credit card debt and that type of thing and be in a position really, really strong to act.
The other thing that is slowing the economy a little bit at the moment is the lack of funding. Banks are not taking any risks; they are making every excuse out of their fund not to lend you any money. So even more so, it is time to be the strong applicant or partner yourself with a strong applicant. Partner together with somebody that compliments your weakness, if you have a high income, partner with someone that has got lots of equity.
If you have lots of equity but no income, partner with someone that has a good income because together they will look at you as a unit and together you will make a strong application. Marginal applications are getting refused right now. So what you have got to do is look to how can I strengthen my position? How can I strengthen myself as an applicant for loans and how can I get the maximum out of the opportunities that are in the marketplace right now.
Because as I have said in the beginning of this talk, there are going to be huge fortunes made over 2009 and you want to be part of that and being part of it means taking action. Being part of it means getting out there and getting into real estate that is, perhaps under market value but more so, the real estate that you can do something with.
Get into real estate that you can manufacture growth on getting the real estate that has good high yields on it and the potential to do something to it to force the value of the property.
Do not rely on a market just to increase. Now in some areas I think you can, just sit back and wait for the increase because it will happen, it will absolutely happen but in other areas, you are going to have to make it. So I do not care where you live around Australia, I do not care what your situation is.
The opportunities to get out there and make significant gain in 2009 is enormous and once you start realizing that and you start recognizing the fact that you have one of the biggest opportunities sitting before you in 2009 that you have ever had in the last five to 10 years. Then I think your attitude to what is going on is going to be a little bit different and I think you will be a little bit more cynical about some of the rubbish that is being reported on the television right now.
Stay tuned because I am going to do an economic review of the stimulus package that was released earlier this week. So just stay tuned for that one there. I just want to check up on a couple of statistics that I want to share with you and how it relates to what went on back in the 1930s because I think a lot of people will be surprised about the similarities and the differences. So stay tuned with me, have a great day and I am going to have another audio out to you very, very soon. Bye for now.