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You are here: Home / Archives for foreign investors

What is a house? (asking for a friend)

August 9, 2017 by Jon Giaan

 

Housing isn’t the concept that we thought it was… have you caught up?

What is a house?

If like most people you said something like, “a place where people live”, then you’d be right, but you’re missing a big part of the story.

Even if you put on your investor hat and said, “a place where people live, that you can also own and earn a rental income from,” again, you’d be technically right. Full marks from Investopedia for you.

But again, this is only part of the story.

Housing, as a concept, is changing.

And if you’re not watching this space, then you’re going to miss the biggest opportunities on offer over the next twenty years.

For a long while, you’re “a place where people live” definition would have served you well. Up until about the late 1980s, that was pretty much right.

But then ordinary Australians started cottoning on to the investment potential in property. They realised that housing was a place where people lived, but it was also something you could invest in.

The game changed, and a big part of the story behind the ongoing boom we’re living through is that more and more people are making property part of their portfolio.

But now the game is changing again.

Some of those changes are easy to identify.

Take the evolution of AirBnB for example. That has surged in recent years, and it’s a whole new way of thinking about housing.

Now a house is somewhere that people live, that can be invested in, and can give you access to the Tourism dollar if you fancy being a hotelier.

The latest stats show there are 115,000 listings on Air BnB right now.

And a study from the University of New South Wales shows that in Sydney, 60% of Sydney’s 20,000 listings are for entire homes.

That means there are 12,000 homes in Sydney, that used to just be a place where people lived, but are now a sort of quasi-hotel.

And if we extend Sydney’s experience around the country, that means we’re talking about something like 60,0000 to 70,000 homes, across the country, now dedicated solely to the short-term accommodation market.

This is a real shift.

I mean, we’re talking about almost a full year’s worth of housing supply, just never making it to market. That’s got to have an impact on prices.

Or take the way housing has become a ‘store of wealth’ for rich globalists.

Rich people (even aspiring rich people!) from China to the US, from the UK to Russia, are looking to Australian property, not because it earns an investment return, but because it gives them a way of storing their wealth…

(… and possibly hiding it from the authorities back home.)

There were almost a million empty homes on Census night. We don’t know how many are due to investors deciding that they’re better off leaving their investment empty, but we hear stories of entire apartment blocks in inner-city Melbourne and Sydney being used for just this purpose.

Again, this has got to have an impact on the market.

And again, we need a new framework for thinking about housing. This isn’t just “a place to live” or a place to invest in.

This is something different.

So what is it?

This is important. The people who made money in the early days of the internet were the ones who saw what the paradigm shift was really about. It wasn’t just a way to connect a bunch of boffins at elite universities.

(It was an unprecedented vehicle for porn!)

Same story with the blockchain technologies. The ones to make money will be the ones who see the full promise of the technology on offer – a promise that may take years to realise.

So how should we think about housing?

Well, at the risk of drifting off into abstract space, I would say this:

Property is the gateway between the real and the unreal worlds.

I don’t mean that if you set up your Ouija board in the right way, property becomes a portal for communicating with the dead.

I mean that there are fundamentally two types of economic activity. There’s real world activity – making cars, growing fruit, building stuff. And there’s unreal economic activity – writing blogs, marketing, mining for bitcoins.

No one is any better than the other, but at some point, all economic activity needs to be made real. We work so that we can ultimately buy real things – food, housing, clothing etc. You can’t live on blogs.

And while you can have a real economy without any unreal elements, you can’t have an unreal economy without any real elements.

So the unreal rests upon the real.

Property – and land in particular – are unique then because all real activity must be grounded in the earth. The minerals that make up your IPhone have to come from somewhere. Your factory has to be located somewhere. Your zucchinis have to be grown somewhere.

And so property is the place where all the unreal economic activity – the vast billions and billions of dollars that rush about producing nothing anyone can touch or see – it is the place where all this activity grounds.

It’s the way that lightning needs to ground to exist. A lot like that.

The great colossus of human economy must at some point pass through the gates of property.

And the bigger the economy becomes, the bigger those gates have to be. The more value they hold.

And so as our economies continue to expand rapidly, and as the balance continues to shift from the real to unreal, as it has done for the past 50 years, the relative value of property increases.

And so we digitised hotels – that revolution grounds out in property values. We digitalised taxi’s. Now everyday parking spaces are factor of production.

China produces a thousand billionaires. They want to ground their wealth into something real before it is taken away from them.

So this is what I’m suggesting. Over the long, long run, I’m thinking about property this way – it is the gateway between the unreal and the real worlds.

No modern economy can do with out it.

And once you have that level of necessity, its potential long run value becomes limitless.

What’s your framework for thinking about property?

Filed Under: Business, Featured, Property Investing, Success Tagged With: foreign investors, property, property investing

Monday Smackdown: Auction Clearances still stratospheric… Plus much, much more!

May 25, 2015 by Jon Giaan

Everything worth knowing in less than a minute!

Consumer Sentiment Surges

Both the ANZ and Westpac measures of consumer confidence surged in the week, poking their noses up above the long-run average for the first time in a while.

Screen Shot 2015-05-25 at 12.42.01 pm

Why? Seems it was all about the budget, which was seen to be much friendlier and cuddlier than the last one.

Screen Shot 2015-05-25 at 12.42.06 pm

To me, this tells us two things.
1. The government’s ‘warm and fuzzy’ spin strategy worked.
2. People are idiots.

Auction Clearances still stratospheric

The national auction clearance rate moved even higher this week to 78.4%.

Screen Shot 2015-05-25 at 12.42.14 pm

Either we’re looking at one of the strongest booms in recent memories, or there’s something going on with the way Aussies relate to auctions. I think it could be a bit of both.

Foreigners love (new) property

Braclay’s has broken down the Foreign Buying data from FIRB. We knew that foreign property purchases had doubled in the past year. Now it seems that doubling is all about new (vs existing) properties. Though existing also posted decent growth.

Screen Shot 2015-05-25 at 12.42.23 pm

Big Business getting Bigger

All this talk about young and nimble tech companies “disrupting” the business world – and someone forgot to tell big business.

In America, the overall revenues of Fortune 500 companies have risen from 58 percent of nominal GDP in 1994 to 73 percent in 2013.

Screen Shot 2015-05-25 at 12.42.36 pm

So much for the new economy.

Have a great week!

JG

Filed Under: Blog, Monday Smackdown Tagged With: big business, clearance rates, consumer sentiment, foreign investors

The Giaan Investor Review Report

May 5, 2015 by Jon Giaan

Each week, I jot down interesting bits and pieces as I come across them, like a scrapbook I guess, and I use it to build a picture of what I think is going on.

In recent months I’ve started forwarding it around to friends and mentoring students. Friends started forwarding it to friends, and I’m getting more requests to join the distribution list, even though I haven’t officially set one up.

So anyway, I thought, why not just share it with everyone. It doesn’t cost me anything since I’m doing it anyway. And the more knowledge we have, the better off we all are, right?

So welcome to The Giaan Investor Review Report. This is just a hodge-podge of whatever data and news I find interesting. Sometimes I’ll give a little commentary on what I think it means. Sometimes I won’t.

Give it three mins. Read the stuff that interests you, and you’ll be as well-informed as any analyst out there.

Enjoy
JG


Auction Clearances still pumping

Screen Shot 2015-05-05 at 9.50.18 am

Holding around record levels. 87% in Sydney. 83% in Melbourne. Tubthumping. The market has never seen anything like it.

(I’m starting to wonder if there’s been a cultural shift towards auctions… Is the market really this strong?)

House prices strong, but increasingly Sydney-centric

Latest RP Data shows Ozzie houses growing at 8.1% y/y. But Sydney is the main story, growing at 14.4%. Melbourne gets silver at 7%. Bris gets bronze on a barely also-ran 2.5%. Perth was flat. Darwin fell.

City narratives are dominating national stories.

Screen Shot 2015-05-05 at 9.49.56 am

May rate-cut is on

The odds are shortening for a rate-cut in May, with renowned bank-watcher (and some say the RBA’s leak distribution channel of choice) Peter Martin writing in the SMH:

Concern about a deteriorating economic outlook and a resurgent Australian dollar will force the Reserve Bank to cut interest rates on Tuesday…

Among the concerns driving the bank is a realisation that unless it cuts its cash rate on Tuesday, financial markets will stop believing that it is prepared to cut and push the dollar even higher.

Of most concern to the bank is new data on business investment plans, which shows that not only is mining investment set to fall sharply in 2015-16 but that non-mining investment is expected to fall as well, despite the talk about new economic drivers emerging to take the place of mining.

Although the Bank is concerned about the effect of another cut on Sydney house prices, it is prepared to rely on its sister regulator, the Australian Prudential Regulation Authority to ensure banks do not cut their lending standards…

The RBA is acutely aware that the upcoming federal budget will do little to boost the economy…

The RBA is playing chicken with the markets. If they don’t move, the dollar pumps higher, and no one believes anything they say. At the same time, Canberra is in Austerity mode, so no help there.

(Martin has picked the last two cuts.)

Prices give them lots of room to cut if they want to:

The ABS says the cost of living is up a piffling 0.9%. Inflation and rumours of inflation seem banished from the earth. At the same time, wages are up 1.3%, so Aussies are (technically at least) better off.

Iron Ore Prices Jump… a little.

Screen Shot 2015-05-05 at 9.50.09 am

Iron ore prices ended the week up 20% on their recent trough. It’s enough to put some high-cost miners (like Atlas and FMG) back in the black, but in the scheme of things isn’t much to write home about.

Here’s a sobering thought: Deloitte Access Economics reckon that falls in the iron ore price in the past 6 months (which feeds into profits and therefore taxation revenue) have left such a gaping hole in the budget, that even if you extended the GST to all fresh food, it wouldn’t cover the shortfall. Ouch.

Negative Gearing Aussies approach critical mass

According to the ATO, there are now 1,967,260 negative gearing property investors across Australia.

Whatever you think about neg gearing, 2 million voters is a political force to be reckoned with.

Govt get serious about foreign purchases

Abbott has announced plans for legislation to crack down on illegal foreign buying, including the potential of jail time. Not a moment too soon. Should be before parliament by June, and taking effect from December. I’ll cover the details later this week.

White-sex sells property


Here’s something cute. What do you do when you’re having trouble moving apartments in China? Get foreigners to stand around in their underpants for no good reason. Looks like it works.


There you go. What do you think? Is that useful to you?

Have a great week
JG

Filed Under: Blog, General, Monday Smackdown Tagged With: clearance rates, foreign investors, house prices, interest rates, iron ore, negative gearing

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