Affordability…

Apparently that's why the real estate market has stalled.

The argument is quite simple, most people can't afford to drum up the deposit and on top of that pay the mortgage. Not a new challenge, I've heard all of that before – I'm sure you have too.

Now the way the media is carrying on, you would think that this has never before happened in history and that it's a new phenomena.

…all conspiring with a media-lead conclusion, that the real estate market is going to crash.

However, I beg to differ. Especially on the predictions of a real estate bust.

I'm going to get into that shortly, but whilst I have your attention here is something that I saw recently.

A big penthouse-style apartment of 1,600 sq. metres (that's big) sold for… are you waiting for this…?

$330 million!

Where the heck was that???

Ok, it was Monaco, no issues about affordability there.

Now you're probably saying to yourself, “Big deal. A one-off sale by some massively rich dude, so what?”

Well, I can't tell you who the buyer was because at that level they typically withhold that information… But what is interesting is that the fastest growth for the global luxury residential markets is coming out of Shanghai in China.

The increase in that city at that level was 17%!

The Chinese, with a stack of cash in the bank that they must spend is probably going to effect the top-end of the Australian market.

But I know what you're thinking… You're not in the luxury residential market.

Yep! And neither am I.

But the trend is certainly there and as our rich neighbours get even richer, the security and safety of our economy will be attractive to the Chinese investors.

It's not just the super-rich but it's the emerging middle-class ( which is huge) who will support any downward movement in Australian prices… I don't want to get into specifics because I know that for many of my subscribers it's a hot topic.

…But if you've been to an auction in the last three months in any capital city, you would see a high representation of Asians there. I've got no problem with that – it's just something that is obvious to me, especially at auctions.

I'm sorry – but it's the world we live in.

But I digress… Where was I?

Oh yes, affordability.

Here's why I believe the affordability issue is normal…

First of all, it seems to me that it always comes after a significant property price increase. What we've seen in the last 3 years is a big jump in prices of property. I told you 3 years ago this would happen and if you have been following me for a while, you would have made a stack load of money if you took action.

But to qualify this – our predictions of price increase was not across all area. That's not how it works.

So what happens next?

Simple.

The people who get priced out of the market because of affordability issues will become renters.

Again, the normal process a typical real estate market goes through.

According to RP Data, across all capital cities, rents have increased by 2.7% in the last 12 months.

Now that's not huge. But my prediction is in the next 12 months you're going to see similar increases if not more.

Here are a few examples of what I'm talking about:

With all of my properties, when a lease comes up for renewal the minimum increase is 10%. In some cases I've increased it by 20% and have signed up the same tenant on a 12 month deal.

Now, I don't care if they don't agree to the increase – they can move out and within 4-6 weeks I'll have a new tenant… Why? Because vacancy rates at the moment in most of the areas that my properties are about 1.5%.

Also, consider this…

Unemployment is at an historical low, which means many workers are shopping around for a better job with more pay… and they're getting it.

The RBA is concerned about this scenario, because quite simply it puts pressure on wages (on the upside) and potentially leads to inflation. The likely outcome is that wages will increase in the next 12-24 months as well as the cost of living.

So, all normal stuff to a seasoned investor.

So what should you do?

Well, there is a lot of fear in the street at the moment – and that's easy to see because right now there is probably 50%-75% more stock on the market than at the same time last year… add to that the media hype about a crash and there are a lot of nervous vendors.

…which is great news for you.

Here's what the pros are doing…

They've got their cheque-books out and looking for bargains – and I can tell you that there are a lot out there.

I picked one up the other day – it was a beauty.

I'll give you a full-blown report in the next couple of days, but what I can tell you is that I probably bought it for about $70-$100k below market in a blue-chip area in Melbourne called Brunswick. Contract price: $550,000.

It's a development site and I'll probably make $200-$300k profit once we turn it around.

But like I said, I'll get some photos and give you all the maths as a bit of a case study as to what is possible.

Now, why am I telling you all this?

Because I want to let you know that right now is a great time to buy real estate at bargain prices. I'm doing it, I know several of my friends are doing it as well.

So don't be afraid, everything that is going on at the moment is normal, it's happened in the past and will happen again in the future.

Think of a time back in mid-1995 when we experienced the same scenario. It was great buying properties back then. How many properties would you have liked to have bought back then?

Also, 2003. Another great opportunity to have picked up bargains.

It also happened recently in 2009.

We did a big song and dance about the opportunity just 2 years ago, again if you followed our lead you could have potentially made hundreds of thousands of dollars.

And today it's 2011 and there's another window of opportunity.

But let me also say this…

Not every property is a good deal. In fact, only about 5% of properties on the market that are what I call great investment opportunities.

The other 95% is crap from an investor's point of view.

You need to know the difference and you need to know what NOT to buy as much as what TO buy.

…and all that is what quality education and knowledge can bring to the table and fill in the missing links.

Don't miss this opportunity… again.

Signed with Success,

Jon Giaan
Knowledge Source

This report came across my desk a couple of weeks ago and I thought it'd be great to send it to you.

The title of the report is…

> Investment returns from rental housing in Melbourne, 1998-2009
> Department of Human Services Victoria

Now I know it's Melbourne-centric, but regardless of what State you live in, it really does show you how property has consistently performed over the last 11 years.

…note, that when it was finished off, it would not have included a large chunk of 2009 which was a big year in the Melbourne market at least.

If you are at all remotely interested in hard data on real estate, this will be valuable to you.

You can download it here.

It's got lots of charts on property returns, growth, rental yields and vacancy rates… The lot!

Just remember that public servants put this together, it's a pretty good job but it's written in a bland style. The information that you can get form it though is priceless.

Enjoy!

Jon Giaan
Knowledge Source

I hope you're having a good weekend.

I want to take you through a deal that in the end didn't happen – but it's educational for you in any case.

First of all, I've been researching the Brisbane market a lot. Not so much for its potential in the next 12 months, but over the next 3-5 years I believe this market will have a lot to offer investors who get in early.

So let's talk about the deal and what you can learn from it (I learnt a lot).

With the property, it was offered to me by a friend of mine who makes about $200,000 a year doing nothing else but finding real estate deals for investors. Of course he keeps a few to himself, but he realises that he can't buy them all and hence has created a side-business which is booming.

Now, that's your first lesson. The education that you get when you invest in courses can go a long way if you think outside of the square.

The funny thing about my friend was that I used to hire him to video-tape some of our events and because he was into the content of the seminars, he would actually take the information in and use it.

In the last 3 years he has gone form earning $50,000 a year to over $400,000 a year and even more if you add up the equity that he's created with his partner.

Now, let's talk about the deal…

The property was in a suburb called Hawthorne, a blue-chip area about 5kms from the CBD. Having bought over $3 million of real estate in the inner-city of Brisbane in the last 7 years, I knew the area well.

Here's a photo of the property…

Not much to look at, however I was only interested in the land component, which was around 607 square metres.

The next thing I wanted to do was get a bird's eye view of the position.

Now, here's why this property was of interest to me…

You can see that it backs on to another property which is numbered 16 in the satellite image and it has a decent-sized vacant section to its right. The plan at this point in time was to negotiate with the owner of the possibility of buying that section.

The vendor of that property was happy to sell us that piece of land for around $200,000.

So that heightened my interest in 13 Balmoral St. Hawthorne.

The next thing I did was get a recent sale report from RP Data to see what has happened in the area in the last 6 months.

Here's an example of a few comparable sales…

Now, looking at these, I knew that the $450,000 asking price was a reasonable deal in the making.

Considering I wanted to demolish the site eventually and I know that in Queensland this can be an issue sometimes, I got onto the council's website and pulled up a report to see if there were any restrictions.

Here's the report:

By looking at the report, I was confident that it could be demolished.

You're probably wondering how long this all took. Well, probably no more than an hours work in total and it all happened within an afternoon.

So, confident that I could achieve what I wanted to, which was to eventually develop the site and take advantage of the land at the back, I could get rear access as well as access from the front.

That was a big asset to me.

I put in a contract for $440,000 and I added a few conditions. The major one was that it was subject to 30-day due-diligence period to establish whether I could in fact demolish the property.

Subsequent to those conditions being met, it would be a 30-day settlement.

So what happened?

I got pipped at the post and believe that somebody on the same day made a better offer, I'm guessing about $450,000 and bought the property.

So what are the lessons from this?

If you know what you're doing, you can research property very fast and work out if its a deal worth persuing.

Of course you need a criteria and a think-outside-the-square attitude and you can see value where most investors just walk on by.

Considering that I wanted to develop this block with the adjacent block at the back, I estimate that I probably lost anywhere between $300,000 – $500,000 of capital gain over the next 18 months… Which makes up the time to get a permit and build.

Now, I'm not too upset about losing the deal, although it does hurt when I think of the opportunity and the potential gain evaporate. But, I know that in this marketplace there are probably 100's of deals like this and it wont be long before I'm making an offer on yet another one.

The lesson here is don't get too emotional if your deal doesn't go through. Especially in this climate – there are plenty of opportunities.

My mistakes…

Usually if I like a property and I think it has plenty of upside, I pay the asking price and don't stuff around with long drawn-out negotiations. Now considering that I probably lost this property for $10,000 and I could have made $300,000 in the next 18 months – it does seem ridiculous, doesn't it?

I've said in previous articles that I've written that you could pay $20,000 more than what the vendor wants and if your attitude is long-term, you can't go wrong… But because with this particular property my friend was at the forfront of negotiations, I let him run with it.

He was of course trying to do the best thing by me and get it for the best price… However, looking at the comparable valuations I think we were buying this at about 20% below market.

That's always handy… When you can get some equity upfront as well as some upside potential.

The other mistake that I think I made was that my contract had conditions on it to take the property off the market for 30 days with a due-diligence clause. We knew that the vendor was desperate and he needed a contract to satisfy the banks.

Considering the homework that we'd done on the demolition aspect, a phone call to town-planner (10 minutes) would have confirmed or denied the accuracy of that report. So I could have gone unconditional (even better for the vendor) and settled in 60-days.

Now, that's my fault again because I was allowing my friend to tie this deal up because after all, I was going to give him a $10,000 fee for finding it and negotiating it.

Ok, I could go on and on – but the lesson that I want you to learn here is that there are plenty of these deals around and right now vendors are very nervous about the future of the real estate market and happy to consider any deal.

With education, you can do as I do and immediately identify potential deals in a couple of hours, know where to go for all the resources and information quickly and assess if they're worth following through on.

Also with education, you can do like my friend does, get really good at this and make a BIG second-income helping investors like me to find deal after deal after deal.

So, there's a double-whammy in investing in your own education.

Now, I'll be out and about again looking for these bargains and sooner or later I will pick up a few.

I hope this information was valuable for you today and you got something out of it.

Signed with Success,

Jon Giaan
Knowledge Source

I'm not joking! l've seen information, stats, data and numbers that could be a leading indicator to where the real estate market is heading.

This information is critical – especially right now.

Allow me to explain…

The big talk at the moment in the investment circles is all about the boom and the pending bust of the real estate market right here in Australia.

I have news for you that l know you'll find interesting.

Of course any one with half of a portfolio would read all the dooms day reports and wonder if there was any truth in it.

Should you sell everything right now…?

Let's face it, there is a lot of evidence around.

The USA market took a hammering 2 years a ago and has yet to recover… still with no sign of life even today.

Talk to a person in the USA about investing in real estate and they look as if you're from another planet.

Same goes for England, Ireland, Greece, Spain, etc…

Recently I was in Greece and they are in bad shape. Everyone I spoke to was worried to death about what the future will bring… They literally wake every day to yet another story about a pending strike or a budget cut that will reduce their pension, wages, or some other entitlement that they have come accustomed to.

The nation is a state of paralysed fear of taking any positive action forward.

Uncertainty is all they are sure of.

Now, my family, friends, and taxi drivers would ask me how things were in Australia, is it just as bad?

The Greeks are not renowned for there global perspective. To give you an insight, most have never holidayed on there much acclaimed 11,000 Mediterranean islands let alone travel to other part of Europe (no jokes).

When l spilled the beans on how things were back home, many insisted that what is happening to Greece and other parts of the world would eventually happen in Australia… Guaranteed.

In fact I found myself in some pretty heated, almost fully-blown arguements about why Australia would collapse just as the Greeks an others have done so.

So l wondered, is a real estate collapse on our door step?

My personal opinion is ‘no', but can I be wrong?

At times like this I go back to one of the key fundamentals to real estate, supply and demand.

Now l won't go into a 5,000 word essay on this subject, but today I want to look at one of the BIG drivers of supply and demand.

…..Migration.

The value of real estate is significantly influenced by population growth.

Here are some interesting facts:

The all-time high for the biggest expansion of our population was in the year to June 2009 with around 476,000 people added to our population.

Most of these guys where housed in the major cities around our country.

What happened to our real estate prices in most parts of Australia in most of 2009..?

Mmmm interesting.

Since June 2009, the population growth has been around the 400,000 mark.

The figures in 2010 show a significant slow down in net numbers being added, with the figure likely to be around 350,000.

So what happened?

Well, we're going through a bit of a baby boom at the moment and people are living longer so the drop hasn't come from within the country. The obvious place to look at is how many new migrant are coming into the country from overseas.

In 2009, 313,000 of the 467,000 added where from overseas. The numbers for the 2010 look like to come in at 218,000.

Net migration has dropped by about 30% in 12 months… around 100,000 people less than our bumper year of 2009.

Could that be the reason why the heat has come out of our market?

Most would think that intrests rate are the main reason why, but this evidence of net migration number could have had more of an impact that most would think.

So what to make of all this data?

The hardest hit of our states, the one with the biggest fall in numbers is Queensland (it fell by 42%) and Western Australia was down by 47%.

With Queensland in particular, not only have they suffered from less overseas migration they have also suffered the double whammy of less local migration as well.

Now add to that the recent flood disaster and property values in certain parts of QLD may see a sharp reversal as demand dries up in the short term.

Ok, that may sound like doom and gloom and l admit the picture doesn't look bright – especially if you live in Queensland.

…But if you're a long term investor you can look at this moment in time and see it is as a big buying opportunity.

If you want a tip that will probably make you lots of money in the next 5 years and if you want a holiday home then the Gold Coast, Sunshine Coast and South-East part of Queensland are good buying.

The sentiment in those areas is really negative… And where there is negative sentiment there is a good deal around the corner.

Now to clarify, l'm not advocating taking advantage of someone's misery or preying on the flood victims by going around and making all these low ball offers. No doubt that is already happening if l know anything about human nature.

What lm taking about is being prudent and proffesional and buying value.

So, if you agree with me that the migration numbers may be a valid tool in assessing the current and future direction of the real estate market, then l suggest you look at the quarterly numbers on migration and see if there is an increase or decrease.

My bet is as soon as we see these numbers start to grow in line with our now long-term trend, we will see real estate prices climb again.

For now, time to accumulate, buy value and simply wait for the great times ahead.

Jon Giaan
Knowledge Source

I have to admit it – l'm property crazy….( you'll soon see why)

I have made millions and most of has been as a totally lazy property investor.

….or better still a “chicken property investor”

Here's a typical example….

In 2001 I bought a single front in Richmond Melbourne for $238,000

….got it valued in November 2010.

The valuation came in $825,000

Wow… that's a $587,000 capital gain in 10 years.

Average that out and it's $58,700 per annum tax free (lm never selling) for the last ten years.

No renovation… No add value…No money spent…literally buy it and hold.

You might think that this is a once off and fluke…I've got lots of other examples like this personally and lm sure that you might know a few people with similar stories.

This is what l call the “chicken property investment strategy”

Why “chicken” you may ask?

Well l sweated on the decision to buy…should l??? shouldn't l??

What if real estate prices fall?

What if l can't find a tenant?

Now back then l was looking at other deals that l could have bought, but they involved renovations and getting my hand dirty…

So l chickened out and bought the one that l would have to least work to.

Looking back on it my strategy was simple and easy…

Buy well in an established area with a 20 year history of average 6-7% annual capital growth and wait…

Don't know why more people don't do it….it really isn't that complicated.

You know l've come to realise most individual are risk adverse…meaning that are not willing to take to many risks when it come to money.

And the reality is you don't have to.

….any one of you could have bought the Richmond property if you had some money saved or equity in your home and the best part is that you would not need to leave your day job.

If fact you can use your day job and get rich.

Yes that right.

Your day job can be your best mate when it come to creating wealth…for one thing the banks love you and finance is a big part of the wealth creation puzzle.

Too many investors want to be property pro's from day one and at the end of the day never get started with the most basic of investment stategies.

They think that their day job is what is getting in the way…the fact is when you start out in investing your day job is a huge asset to you.

Too many wannabe investors under-estimate how valuable the old day jobs is.

Here's another quick story that l want to share with you.

I've got a good friend of mine who over the last 15 years has literally bought and sold over 200 million dollars of real estate…

He's what you would call a full time developer.

Now, not the kind that does the big building in the city or the estates.

His niche was and still is refurbishing the old 70's blocks of flats…

Today he sits on a portfolio of around $20 million totally debt free (he is only 44 yrs old).

Earns about $750,000 in rental income.

I asked him what would he do different (if anything) in his 15 years of developing?

What he had to say was really eye opening for me.

He said “Jon l would should have done only 30% of projects and never sold a thing…my net worth would have been about $60 million today and that would have been game over….less risk, less headaches and my passive income triple what it is today- so much more.

…Jon, buy as much as you can…BUT NEVER SELL”

Wise words from a property pro….

Ok you might be thinking that he didn't just buy and hold, he got in there full time and added value…yes that's true.

If you want to build a $20 mill empire in 15 year (debt free) you do have to become full time and take a few risks…but if you don't you could end up with a $10 million dollar empire in 10 year being part timer.

That's how l have done it and believe me l have made lots of mistakes a long the way.

The secret is to get going… get started…enjoy the journey.

Be a chicken real estate investor and see what happens in short time, you won't regret it.

Signed with Success,

Jon Giaan
Knowledge Source

I've had enough!

In fact, many subscribers have sent me emails challenging me on my thoughts and ideas and investment philosophy.

The biggest bubble in real estate is not the prices, it's the B.S. of journalistic opinion about “the imminent real estate crash.”

It's getting to the stage where we might even see a headline that reads, “Expert Says Sell Your Real Estate Now Before You Lose Millions!”

That expert of course is probably someone who doesn't own any real estate, never has and never will.

The contrarians, who have been saying for a long time the Australian market will crash are at it again. Now the predictions are anything from 40% to 62%.

Crazy, crazy stuff I think…

You are probably wondering who has been pedalling this dooms day scenario… Well apart from the usual suspects in the press, the guy who seems to have the biggest voice here is US investment legend, Jeremy Grantham.

His views are that the Australian housing market is a time-bomb, seriously over-priced and on the verge of collapse.

His research to formulate his view seems to based on one idea – and that is that Australian house prices are 7.5 times the family income. Supposedly twice what they should be.

Now, it's an important point that I've just mentioned.

“Twice what they should be.”

Stick with me here, I will explain…

The other group of doom-sayers are surprise, surprise… All involved in some form of stock market promotion. Whether it's newsletters or transactional, it doesn't matter. They've all jumped on to this, not because they're concerned about the real estate market – but because it's a great story to get clients out of real estate and into stocks.

Hmmm… Interesting.

So I thought I'd drill a little bit deeper and get some facts.

You don't have to be Einstein to figure out that the real estate market has slowed and with clearance rates averages at 60%, the tide has turned from a sellers market to a buyers market.

But should you be buying?

Based on the media's view – absolutely not!

Professionals don't use the media as their motivation for investment, in fact I learnt a long time ago to do the exact opposite direction of media consensus.

But I digress.

Now back to the facts…

I searched around to find information on exactly what is the Australian home-price to disposable income ratio. A useful fact, but in isolation not much good to you. However, seeing that Jeremy's premise is based on that fact, let's see if I can come up with a factual, logical counter-view.

Here's what I found…

Utilising the latest ABS national account data, combined with Australia's most comprehensive residential sales database, RP Data (which captured 100% of all home sales), the home-price to disposable income ratio is now…

Only 4.6 times as at June 2010.

That's 40% less that Grantham's claim and only marginally above what it should be based on his view as to what is normal.

But could we in fact have a normal real estate market or are we about to see an all mighty crash?

Now to see a crash in the real estate market, a lot of factors have to come into play. I can't deal with all of them right now, but one of the main things that needs to happen is for people to stop buying (unlikely) or banks to stop lending. This is what happened in the States.

The fear of most commentators is that the Australian banks are top-heavy to the mortgage industry and are simply lending on high loan to deposit ratios.

Three years ago this may have been the case, when they were lending at 95%. Today, they've gone conservative and are back at 85%.

However most commentators fail to recognise that in the eye of the storm of the recent GFC, the government came in swiftly and by and large, guaranteed our major banks funds in the unlikely event of a rush for liquidity.

Considering that most people who own their own home are not investors, and therefor have no need to panic and sell, it's unlikely that our market will see a free-fall of prices that some US experts predict.

I'd love to show you a chart here, but unfortunately I cant, which tracks that relationship between national median dwelling prices and national disposable household incomes from March 1993 – 2010.

…But maybe I can paint a picture for you.

There has only ever been a brief period where Australian house prices have out-paced disposable incomes and that was between 2000 and 2003. …and we saw a cycle-peak in 2000 as well as another cycle-peak around 2004.

After that, a lull and a sideways period and then prices continued to increase again.

The bottom line is, our incomes are growing in par with our real estate prices and there is no major blowout in that department.

Now it's important to note and illustrate where some of the data has come together to base my opinion.

Now remember, we based out information on all sales, houses, terraces, units, etc, etc, etc.

The average price Australia-wide was $413,000.

The median on the same data was slightly higher at $441,848.

It's important to note that we went across all transactions in Australia, not just the major metro.

Ok, that deals with price. Now income.

I'm drawing from HIA data. There are 8.57 million households in Australia and pulling the rate of ABS national account figures, the average disposable income is $95,089 per household.

Maybe, just maybe Jeremy (our US legendary investor) should have a look at these numbers again and get a bit more of an accurate picture into exactly what is happening in a foreign country with a foreign concept to him of strong household income, a strong banking system and strong residential market.

…Like I said, a foreign concept to most US experts considering the last 3 years of shenanigans in their country.

If you wanted to drill down even further, what you would need to do is get the data on the average or median price for metro areas and the average disposable income for those areas.

…and what you'd find is that a high average price and a higher average of household incomes.

I bet you that whichever way you look at the data, it wont come to a 7.5 times ratio.

Now what I'm saying is, do your own homework, don't believe the headlines that appear in newspapers and statistics are not always valid.

Ok, it begs the question – is it a good time to buy?

Well, I did say earlier that it's a buyers market, and the bottom line is if you are well-researched, understand the segment you're in and you can find value, YES, absolutely. Buy it! i have no problems with that.

There are always bargains in the real estate market – regardless of where prices are. It just happens that some times are better than others.

You make up your own mind… I've made up mine.

They're my thoughts.

What are yours? Post your comments below.

Signed with Success,

Jon Giaan
Knowledge Source

P.S. Have to let you in on a secret… A lot of the research here I compiled with the help of keeping up to date with many publications. In particular, Rismark and Chris Joye.

P.P.S. Now, I'm not saying that real estate prices will again accelerate. Good Lord, we've had an incredible run in the last 3 years, But if it comes back 10% and you had gains of up to 30 and 40% – it's still good isn't it?

Earlier this month I went to a seminar called, “Infrastructure Partnerships Australia Conference.”

Yes, I know it's a weird name, but basically the seminar was about real estate trends and forecasts in Australia.

The people that attended this event were the ones who were at the pointy end of the real estate pyramid, and that is listed property development companies like Stockland, Mirvac, government officials, major banks… you get the drift.

Most of the event was pretty boring, but there were certain talks and information that is relevant to anybody interested in real estate. I thought it would be appropriate for me to tell you some of the things that were discussed there that would be of value to you.

This is a continuation of yesterday's theme of the biggest trend going forward.

If you haven't read it, I suggest you check out Tuesday's email.

Here's one of the highlights of what I learnt at the event.

There is a major push to create smaller houses in Australia. However, culturally we've developed a “massive house” mentality simply because of the large land mass that we live on. No shortage of space in Australia, so big has always been better.

Looking at the statistics, the average size of a new house in Australia is 260 sq. metres which equates to 83 sq. metres per person on average.

Compared with 68 sq. metres per person in America and much smaller spaces in European countries including 32 sq. metres in Britain.

Now, you're probably thinking that both of those countries went through a serious property crash of late. Yes, that's right. But I'll discuss the reasons for that as we move on.

So you can see from the overseas trends that smaller houses are the norm, and it's also one way of keeping affordability down.

This is what many State Governments are pushing for Australia-wide. Smaller blocks, smaller houses, no backyards. Despite this, we have councils that aren't setup to follow this trend which is providing an opportunity for you and me to make money from.

Keep reading to find out how…

Considering that immigration isn't going to change much going forward, this trend is likely to accelerate in the next 5-10 years.

Here's something else that came out of the conference, the constraint on development approvals.

We must move to smaller housing, suits our infrastructure spending – but the lines to get things done are growing longer and longer by the day.

The waiting times for a VCAT application to be heard is 9 months. Only months ago it was 60 days. Now you don't have to go to VCAT to get a permit to develop, you can do that through the council.

Typically it's a 60 day turnaround if you do that, however all of my applications are heading off to VCAT. Now I wont go into the reasons why in this email, but if you've ever dealt with the council or done any form of development yourself – you'll know the answer to that.

So what do you think will happen to real estate prices in the next 12 months if there is such a constraint on supply?

Well, they certainly wont go down – that's for sure.

Here's a thought…

If you could work out which councils have the longest wait for development approval, you could almost guarantee capital growth in that area. I'm attempting to find out how to get access to that information – I'll let you know if I'm successful.

For me, this is a clear trend on where I should be investing in the future. I've spoken about this before many times.

But I know there are fears and doubts…

The biggest concern that you might have at the moment is that we're in a media-driven property bubble and you fear prices crashing… I say media-driven property bubble because every time you pick up the paper, there is sure to be a negative story on how the property market is running out of steam or about to come crashing down.

Here's why I don't believe any of that rubbish…

To have a serious fall in house prices, you need the following:

• Significant deterioration of the employment/labour market. We're at about 5% unemployment which is around the historical low.
• A credit crunch. We already had one of those and we buffered the storm brilliantly simply because we were not exposed to the type of loans that were available in the Northern Hemisphere.
• A rapid tightening in monetary policy. To a degree this happened 18 months ago, but right now things are easing up.
• An oversupply of housing. The reverse is the trend in Australia. We've got a chronic undersupply in many parts of the country. Interestingly the State that has had oversupply has been Queensland and consequently it hasn't participated in the current price increases.
• Massive interest rate rises. Yes, we've had significant rises in the last 9 months, but that's coming off a very low base. We're back to just below the average.

So you can believe whatever you want, but in 10 years time when you look back and scratch your head as to why you've missed yet another property cycle and everything is obvious to you then, it may be too late.

There is no point in theorising about these things and wondering “what if” – just get out there and see for yourself what is happening with a whole new set of eyes.

Once you get access to this type of thinking and information, you'll probably see money-making opportunities that previously you'd drive by and think nothing of.

Signed with Success,

Jon Giaan
Knowledge Source

P.S. Get educated first and make educated decisions that will pay you back forever.