From Scott Picken and Jonty Cuisack
Scott Picken, IPS CEO lived in London for 9 years and was always very impressed with Ready 2 Invest who helped British people invest in countries around the world. They are always at the forefront of the market and recently they have come out with the statements that they are now getting back into the UK market as there are great opportunities. This is a report by Jonty Cuisack who is the CEO if Ready 2 Invest.
"The media is so full of commentary about the state of the economy that it is difficult to sort the facts from the personal opinion. Because of this we have developed a new predicting model so you can you get a real sense of where the economy is and where it is heading.
The Predictor tracks what I believe to be the best market indicators such as unemployment stats, house sales and the spread between base rates and LIBOR. There are 10 areas in total and, by seeing all these stats in one go, we can get a great visual sense of whether the figures demonstrate crisis, green shoots, recovery or boom. The numbers will be updated every month and a summary presented visually with a narrative by me.
I remain convinced that 2009 is a great property-buying year. My suspicion is that we have hit bottom and that we will bounce along this nadir for the rest of 2009. 2010 will see mild improvements and things will start to recover more seriously in 2011.
What will really get things going again is credit. In homeopathy they treat the illness with a very small dose of the disease. As with credit and debt, the right application of credit, which is also the cause of the crisis, will heal the economy.
The Predictor Model is at http://predictor.ready2invest.co.uk
If you want more information please go to www.ipsinvest.com and we will be able to assist you to understand the UK market and take advantage of the opportunities.
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Friday, May 1, 2009
Tuesday, April 21, 2009
Rebound looms as we surpass 1985 bust
By Cees Bruggemans, Chief Economist FNB
20 April 2009
The year/year change in new car sales and building plans passed, critical leading indicators of our cyclical condition, have reached lows that now even surpass the 1985 bust (in its time the biggest recessionary condition since the 1920s and 1930s).
Technically it could still get worse, for while February 2009 was distorted negatively by a leap year in 2008, April 2009 will be marred by its Easter and general election holidays, deducting three working days compared to April a year ago.
But even without these distortiGoons, freefall in motor trade and building activity is reaching levels cyclically unprecedented in modern times (now pushing uncharted territory).
Even so, our fourth interest rate cut looms later this month. Thus the interest rate cycle is already well advanced after four months of cutting. Financial markets keep discounting a further 300 points of rate cuts ahead.
Even if this remaining cumulative 300 point cut isn’t delivered in full by the SARB, there will likely still be further lowering of rates, prime eyeing 11% by June 2009.
This should greatly further ease household affordability, reinforcing their ability to once again accelerate the replacement of credit-based durable goods such as cars, but also building activity.
On this score two more factors are important.
Firstly, crucially, global confidence needs be repaired more fully, focusing on banking and credit, but also on housing, equity and job markets, thereby probably also easing our household anxieties.
Though this repair process is highly technical, and surrounded by mysticism (and secretiveness) preventing many ordinary people from understanding what progress is actually made, financial markets have been positively voting with their feet.
Though much skepticism remains about many pitfalls, more is probably being achieved than meets the eye. Meanwhile, overseas households are still deleveraging debt by raising saving levels and businesses remain defensive by cutting inventories, investment plans and labour forces.
Secondly, however, overseas commentators keep suggesting global households actually stabilized their consumption spending during 1Q2009 (and by implication their savings behaviour) even as global industrial output was cut deeply below final sales.
Such front loading of business cutbacks allowed inventory levels first being contained in the face of lower sale prospects and then being reduced to emergency lows.
Perhaps as important as future sales growth expectations, global businesses acted to free up scarce capital while limiting new capital allocations to bare minimum.
Inventory ties up a lot of (dead) working capital while reduced growth prospects changes need for capex.
With bank credit access having become problematic and more costly due to spread widening (though contained by aggressive rate easing), the worldwide industrial collapse of late 2008 also reflected a major business attempt to reduce dependence on banks.
But if this is the bad news, and fully reflective of the banking crisis spillover into the real economy, the good news is that the larger part of this adjustment is apparently coming to an end.
The 4Q2008 and 1Q2009 were major adjustment quarters, with massive GDP declines, especially in large economies such as America, Japan and Germany, but also smaller ones such as Singapore, Korea and Taiwan.
But 2Q2009 is already evidencing a much slower pace of adjustment, at household, inventory and capex level.
By 3Q2009, America and China will probably lead the global revival as the inventory hit to industrial production ends and government stimuli gain importance.
Any renewed upturn in GDP will take place at very low levels of global resource utilization. Unemployment will only peak next year. Household balance sheet adjustment (deleveraging debt mainly through higher savings) will probably remain a drag on growth, as will lowered business capex, given reduced global activity prospects.
Yet there will also be major monetary and fiscal stimuli and though these cannot compensate fully for all the private adjustment, spending cuts were frontloaded, suggesting recovery rather than further sliding ahead.
Though South Africa suffers a fraction of the trauma inflicted on overseas economies by the banking crisis and its fallout, we certainly have incurred collateral damage, through widespread anxiety and the very real spillover into our industrial sectors as exports fell.
But eventually all cycles turn, especially when publicly boosted. Overseas, equity markets lead the charge (though still termed bear market rallies). US leading indicators have already for some time signaled a change of fortune being in the works.
In South Africa we have so far only a rising stock market doing the signaling. But with our main leading indicators sinking so extremely, yet with global repair and our own interest rate cycle now well advanced, we should see shortly more of our leading indicators signaling the coming turn.
Interest rates, equity prices, and leading indicators such as y/y change in car sales and new building plans have histories of signaling turning points in the economy by between six and twelve months ahead of time.
It makes 4Q2009 the quarter to watch for our next upturn.
Cees Bruggemans is Chief Economist of First National Bank. Register for his free e-mail articles on www.fnb.co.za/economics
Go to www.ipsinvest.com for more information
20 April 2009
The year/year change in new car sales and building plans passed, critical leading indicators of our cyclical condition, have reached lows that now even surpass the 1985 bust (in its time the biggest recessionary condition since the 1920s and 1930s).
Technically it could still get worse, for while February 2009 was distorted negatively by a leap year in 2008, April 2009 will be marred by its Easter and general election holidays, deducting three working days compared to April a year ago.
But even without these distortiGoons, freefall in motor trade and building activity is reaching levels cyclically unprecedented in modern times (now pushing uncharted territory).
Even so, our fourth interest rate cut looms later this month. Thus the interest rate cycle is already well advanced after four months of cutting. Financial markets keep discounting a further 300 points of rate cuts ahead.
Even if this remaining cumulative 300 point cut isn’t delivered in full by the SARB, there will likely still be further lowering of rates, prime eyeing 11% by June 2009.
This should greatly further ease household affordability, reinforcing their ability to once again accelerate the replacement of credit-based durable goods such as cars, but also building activity.
On this score two more factors are important.
Firstly, crucially, global confidence needs be repaired more fully, focusing on banking and credit, but also on housing, equity and job markets, thereby probably also easing our household anxieties.
Though this repair process is highly technical, and surrounded by mysticism (and secretiveness) preventing many ordinary people from understanding what progress is actually made, financial markets have been positively voting with their feet.
Though much skepticism remains about many pitfalls, more is probably being achieved than meets the eye. Meanwhile, overseas households are still deleveraging debt by raising saving levels and businesses remain defensive by cutting inventories, investment plans and labour forces.
Secondly, however, overseas commentators keep suggesting global households actually stabilized their consumption spending during 1Q2009 (and by implication their savings behaviour) even as global industrial output was cut deeply below final sales.
Such front loading of business cutbacks allowed inventory levels first being contained in the face of lower sale prospects and then being reduced to emergency lows.
Perhaps as important as future sales growth expectations, global businesses acted to free up scarce capital while limiting new capital allocations to bare minimum.
Inventory ties up a lot of (dead) working capital while reduced growth prospects changes need for capex.
With bank credit access having become problematic and more costly due to spread widening (though contained by aggressive rate easing), the worldwide industrial collapse of late 2008 also reflected a major business attempt to reduce dependence on banks.
But if this is the bad news, and fully reflective of the banking crisis spillover into the real economy, the good news is that the larger part of this adjustment is apparently coming to an end.
The 4Q2008 and 1Q2009 were major adjustment quarters, with massive GDP declines, especially in large economies such as America, Japan and Germany, but also smaller ones such as Singapore, Korea and Taiwan.
But 2Q2009 is already evidencing a much slower pace of adjustment, at household, inventory and capex level.
By 3Q2009, America and China will probably lead the global revival as the inventory hit to industrial production ends and government stimuli gain importance.
Any renewed upturn in GDP will take place at very low levels of global resource utilization. Unemployment will only peak next year. Household balance sheet adjustment (deleveraging debt mainly through higher savings) will probably remain a drag on growth, as will lowered business capex, given reduced global activity prospects.
Yet there will also be major monetary and fiscal stimuli and though these cannot compensate fully for all the private adjustment, spending cuts were frontloaded, suggesting recovery rather than further sliding ahead.
Though South Africa suffers a fraction of the trauma inflicted on overseas economies by the banking crisis and its fallout, we certainly have incurred collateral damage, through widespread anxiety and the very real spillover into our industrial sectors as exports fell.
But eventually all cycles turn, especially when publicly boosted. Overseas, equity markets lead the charge (though still termed bear market rallies). US leading indicators have already for some time signaled a change of fortune being in the works.
In South Africa we have so far only a rising stock market doing the signaling. But with our main leading indicators sinking so extremely, yet with global repair and our own interest rate cycle now well advanced, we should see shortly more of our leading indicators signaling the coming turn.
Interest rates, equity prices, and leading indicators such as y/y change in car sales and new building plans have histories of signaling turning points in the economy by between six and twelve months ahead of time.
It makes 4Q2009 the quarter to watch for our next upturn.
Cees Bruggemans is Chief Economist of First National Bank. Register for his free e-mail articles on www.fnb.co.za/economics
Go to www.ipsinvest.com for more information
Thursday, April 16, 2009
“Point of maximum pessimism” - now, gone or coming?
In August 2008 Scott Picken, CEO of International Property Solutions (IPS) presented at the Erwin Rode conference and a fellow presenter Dr Andrew Golding announced that he thought we were at the “Point of Maximum Pessimism” and that things were ready to improve. Unfortunately predicting the future is virtually impossible and no one knew what was about to hit us in September 08.
However Scott says he loves the saying. “It does not mean it is the bottom of the market, but it is the point where there seems to be no good news and things just seem to be getting worse. So my question to you, have we seen it, is it now or is it still to come. Many argue the worst is still to come, but I have a overwhelming belief that February was that point.” In February, there seemed to be no good news. Governments around the world had poured billions into their economies in an attempt to shore them up, but these policies were finding no traction. The stock markets had no confidence and continued to reach new lows and with property the confidence had evaporated and even those who wanted to take advantage of the opportunities could not raise finance, causing the markets to fall further! Interest rates were dropped to all time lows around the Western World and yet it was having no impact, as was common in economic theory, to boost the property market. It was all bad news and everyone sat around waiting and wondering, trying to determine how bad it would get.
And then amazing, almost as quickly as the world turned, March arrived and the good news started to come through. Firstly the government plans were authorised and implemented, the stock markets started to have to rally and even the concerns of a “dead cat bounce” were allayed as they started to improve. With property the huge interest rates started to take effect, and home buyers started to realise the great values of the property and with the increased affordability they decided now might be the time to get into the market. Investors alike started to look at the yields in comparison with the borrowing costs and realised that based on the income streams and the great discounts on value available, now was the time to get back into the market.
Australia was the first to rally. With a 63% drop in interest rates in 4 months and a First Time Home Owners Allowance of $21 000, the market actually moved to a state of “boom” in the affordable sector. On a recent trip to Australia in March, every single developer reported record sales and some even higher than in the peak of the boom in 2007. House builders have reportedly run out of land in cities like Melbourne as they cannot keep up with demand.
In USA in the last 3 weeks of March there was a 78% increase in mortgage applications – a sign of renewed interest in the housing market. The housing crisis which started in 2006 and led to the Credit Crunch, caused the rest of the world to go into a tail spin. As US house prices fell, leaving households much poorer, they were unable to buy the goods in other parts of the world. In the same way and improvement in the US housing activity could lay the foundation of a recovery in the global economy.
In the UK, things were dire in February. Property prices had fallen by more than 1% for eight consecutive month and there was hardly any finance available, with the man in the street only being able to borrow at 70% loan to values, making it virtually impossible to buy, no matter how good the opportunities looked. However according to Reuters and Nationwide, house prices rose for the first time since October 2007 in March. In February they dropped 1.9% and yet in March they rose 0.9% on the back of some confidence and more importantly as there is more access to finance. In the last 2 weeks we met with Lloyds TSB and they informed us they were actively back in the market to lend. The government is also putting pressure on Lloyds, Northern Rock and Royal Bank of Scotland to lend up to 90% which will get the wheels of the property market turning again. We have even noticed a large increase in demand and resulting sales from foreign investors, mainly from Hong Kong and South Africa, where they can get access to finance, understand the discounted values and the great positive income returns.
And then South Africa. Although allot slower to drop interest rates and many would argue to the detriment of the economy, the Reserve Bank has finally started to take measures dropping interest rates by 2.5% in the last 3 months. This will start to have an effect to property and has already been noticed with car sales. However 2.5% is only a 16% decrease and not the dramatic decreases as seen in other countries. Australia where interest rates have dropped from 8.75% to 3.25% since September 08 (5 months) a 63% reduction, USA has decreased from 5.25% (2006) 0% to 0.25%, a 95% reduction and the UK has decreased from 5.75% (July 07) to 0.5% now, a 87% reduction, the ECB from 4.25% (Oct 08) to 1.25% now and National Bank of Switzerland and the Bank of Japan have already reduced credit costs below 1 percent. There is talk that prime in South Africa will be between 10% and 11% by the end of the year which is another 3% or a reduction of 35% which will have a great impact on the South African property market, along with the feel good factor of the World Cup 2010, just more than a year away.
In conclusion, the only time you can call the bottom of the market is in hindsight. The best deals are where sellers are at a “point of maximum pessimism” and the question to ask is that is this pessimism starting to lift? I would say the time to act is now and not to wait another day or else you will be like one of the many who say, “I wish I had bought property in South Africa in 2001!”
However Scott says he loves the saying. “It does not mean it is the bottom of the market, but it is the point where there seems to be no good news and things just seem to be getting worse. So my question to you, have we seen it, is it now or is it still to come. Many argue the worst is still to come, but I have a overwhelming belief that February was that point.” In February, there seemed to be no good news. Governments around the world had poured billions into their economies in an attempt to shore them up, but these policies were finding no traction. The stock markets had no confidence and continued to reach new lows and with property the confidence had evaporated and even those who wanted to take advantage of the opportunities could not raise finance, causing the markets to fall further! Interest rates were dropped to all time lows around the Western World and yet it was having no impact, as was common in economic theory, to boost the property market. It was all bad news and everyone sat around waiting and wondering, trying to determine how bad it would get.
And then amazing, almost as quickly as the world turned, March arrived and the good news started to come through. Firstly the government plans were authorised and implemented, the stock markets started to have to rally and even the concerns of a “dead cat bounce” were allayed as they started to improve. With property the huge interest rates started to take effect, and home buyers started to realise the great values of the property and with the increased affordability they decided now might be the time to get into the market. Investors alike started to look at the yields in comparison with the borrowing costs and realised that based on the income streams and the great discounts on value available, now was the time to get back into the market.
Australia was the first to rally. With a 63% drop in interest rates in 4 months and a First Time Home Owners Allowance of $21 000, the market actually moved to a state of “boom” in the affordable sector. On a recent trip to Australia in March, every single developer reported record sales and some even higher than in the peak of the boom in 2007. House builders have reportedly run out of land in cities like Melbourne as they cannot keep up with demand.
In USA in the last 3 weeks of March there was a 78% increase in mortgage applications – a sign of renewed interest in the housing market. The housing crisis which started in 2006 and led to the Credit Crunch, caused the rest of the world to go into a tail spin. As US house prices fell, leaving households much poorer, they were unable to buy the goods in other parts of the world. In the same way and improvement in the US housing activity could lay the foundation of a recovery in the global economy.
In the UK, things were dire in February. Property prices had fallen by more than 1% for eight consecutive month and there was hardly any finance available, with the man in the street only being able to borrow at 70% loan to values, making it virtually impossible to buy, no matter how good the opportunities looked. However according to Reuters and Nationwide, house prices rose for the first time since October 2007 in March. In February they dropped 1.9% and yet in March they rose 0.9% on the back of some confidence and more importantly as there is more access to finance. In the last 2 weeks we met with Lloyds TSB and they informed us they were actively back in the market to lend. The government is also putting pressure on Lloyds, Northern Rock and Royal Bank of Scotland to lend up to 90% which will get the wheels of the property market turning again. We have even noticed a large increase in demand and resulting sales from foreign investors, mainly from Hong Kong and South Africa, where they can get access to finance, understand the discounted values and the great positive income returns.
And then South Africa. Although allot slower to drop interest rates and many would argue to the detriment of the economy, the Reserve Bank has finally started to take measures dropping interest rates by 2.5% in the last 3 months. This will start to have an effect to property and has already been noticed with car sales. However 2.5% is only a 16% decrease and not the dramatic decreases as seen in other countries. Australia where interest rates have dropped from 8.75% to 3.25% since September 08 (5 months) a 63% reduction, USA has decreased from 5.25% (2006) 0% to 0.25%, a 95% reduction and the UK has decreased from 5.75% (July 07) to 0.5% now, a 87% reduction, the ECB from 4.25% (Oct 08) to 1.25% now and National Bank of Switzerland and the Bank of Japan have already reduced credit costs below 1 percent. There is talk that prime in South Africa will be between 10% and 11% by the end of the year which is another 3% or a reduction of 35% which will have a great impact on the South African property market, along with the feel good factor of the World Cup 2010, just more than a year away.
In conclusion, the only time you can call the bottom of the market is in hindsight. The best deals are where sellers are at a “point of maximum pessimism” and the question to ask is that is this pessimism starting to lift? I would say the time to act is now and not to wait another day or else you will be like one of the many who say, “I wish I had bought property in South Africa in 2001!”
How to guarantee you Offshore Positive Income Cashflow?
Australia is one of the most progressive, politically and economically stable economies in the world. It is also the first country to have shown signs of coming through the Global Financial Crisis and provides an excellent opportunity for a South African looking for a foreign investment with a positive cashflow, an offshore insurance policy and a Rand Hedge.
Imagine being able to invest where you can fix you income, fix your expenses and make sure you are investing in areas with the best capital growth prospects.
In property there are only three variables you need to focus on:
• Your income,
• Your expenses, and
• Your capital growth.
International Property Solutions (IPS) has found a way to fix the first two in Australia and ensure a cashflow positive income, along with ensuring the properties are in the areas with the most potential for growth.
How do you fix your income?
IPS has partnered with Oz Invest a company which was started in 1987 to help Australian Defense Force people invest in Australian property. Whether they are on a boat in the Mediterranean or in a tent in Afghanistan there sailors or soldiers have an end to end solution. The first problem their clients faced was the management and maintenance. They therefore created their own management company and will make sure they management and maintenance of the property is taken care of. The second major issue was what happens if the tenant doesn’t pay, or pays late and you don’t live nearby. They designed their 10 Year Leaseback Guarantee. Basically Oz Invest rent the property from the property owner and they guarantee a market related rental will be paid on the 10th of every month, whether there is a tenant in the property or if the tenant pays late – it is not your problem! Your income is guaranteed! Many people ask, “This sounds too good to be true, how does it work?” Basically they have over 1000 units under management and they charge each client $15 a week, which is a kitty of $15 000 a week. With their own very efficient management company and with vacancies of less than 1%, they tend to only have between 4 and 8 properties unlet, this kitty money can be used to pay for these unlet properties. They use economies of scale to ensure this profit and is the reason they like to extent it after the 10 years. There are also no penalties should the client want to cancel before the 10 years is up as they want to sell the property or go and live in the house.
This is not a developer who is giving you a rental guarantee, overcharging you for the property and then paying you back your money over a couple of years. This is a win win strategy which provides the ideal solution for a property investor, particularly if you are based internationally.
There is also another very important understanding. In the normal situation a developer sells you a property and although they often give indications of the intended rentals, once you take the keys they take their profit and it is the buyers problem to let the property. With Oz Invest you sign a legal lease agreement with them before you buy the property and therefore they put their money where their mouth is. If you buy in an area where they can’t let it out – it costs them money. It is a magnificent safety net to ensure they are doing their research as to the best areas and helping IPS clients invest in these areas.
This is the perfect system and ensures your income is guaranteed for 10 years and beyond!
How do I fix my costs?
In Australia you can fix your mortgage for 5 or 10 years. The interest rates have come done by 64% in the last 5 months and are starting to reach the bottom of the curve. It provides a great opportunity to fix your mortgage costs and ensure that your property is cashflow positive from day one.
How do I ensure I am buying in the areas with the best growth opportunities?
As explained above Oz Invest put their money where their mouth is. Richard Dunn is the full time acquisitions manager and it is his mandate to ensure that he is finding the best investments in Australia, in areas with the best rental demand and the best capital growth. Examples of this are they don’t focus on Perth as the property market has dropped there and is expected to drop further. They don’t focus on Sydney as the prices are high and rentals are not comparable and therefore the yields are lower. They don’t focus on cities where the fundamentals of infrastructure growth and population growth do not indicate long term growth trends, cities like Adelaide and Canberra. And finally they don’t do apartments as they do not rent as well houses, as the average Australian family wants to rent a 3 or 4 bedroom Australian home.
They are constantly researching these markets, but at the moment the best opportunities are in Brisbane and Melbourne and even specific market segments and growth corridors in these cities. IPS along with Oz Invest has done R1.5 million worth of research in the last 6 months to ensure that each IPS client is given the best advice as where to get the best returns on their money!
Conclusion
There are three very important things to consider with property in Australia. Scott Picken, CEO of IPS says:
Firstly, “Buying property in Australia prior to relocating has huge advantages for tax, immigration, credit ratings and ultimately buying your dream home.”
Secondly, “I think it is imperative to understand how important this investment is to you and your families future. More than 90% of middle to upper income families in Argentina, Russia and Zimbabwe were directly and materially affected when their currency fluctuated. The only ones who didn’t were the prudent ones who had diversified their assets and invested offshore in other currencies.
Thirdly, “Before you invest there are 3 fundamentals which you should know and are essential. You should not invest without this knowledge. We will teach you these first.”
Go to www.ipsinvest.com for more information.
Imagine being able to invest where you can fix you income, fix your expenses and make sure you are investing in areas with the best capital growth prospects.
In property there are only three variables you need to focus on:
• Your income,
• Your expenses, and
• Your capital growth.
International Property Solutions (IPS) has found a way to fix the first two in Australia and ensure a cashflow positive income, along with ensuring the properties are in the areas with the most potential for growth.
How do you fix your income?
IPS has partnered with Oz Invest a company which was started in 1987 to help Australian Defense Force people invest in Australian property. Whether they are on a boat in the Mediterranean or in a tent in Afghanistan there sailors or soldiers have an end to end solution. The first problem their clients faced was the management and maintenance. They therefore created their own management company and will make sure they management and maintenance of the property is taken care of. The second major issue was what happens if the tenant doesn’t pay, or pays late and you don’t live nearby. They designed their 10 Year Leaseback Guarantee. Basically Oz Invest rent the property from the property owner and they guarantee a market related rental will be paid on the 10th of every month, whether there is a tenant in the property or if the tenant pays late – it is not your problem! Your income is guaranteed! Many people ask, “This sounds too good to be true, how does it work?” Basically they have over 1000 units under management and they charge each client $15 a week, which is a kitty of $15 000 a week. With their own very efficient management company and with vacancies of less than 1%, they tend to only have between 4 and 8 properties unlet, this kitty money can be used to pay for these unlet properties. They use economies of scale to ensure this profit and is the reason they like to extent it after the 10 years. There are also no penalties should the client want to cancel before the 10 years is up as they want to sell the property or go and live in the house.
This is not a developer who is giving you a rental guarantee, overcharging you for the property and then paying you back your money over a couple of years. This is a win win strategy which provides the ideal solution for a property investor, particularly if you are based internationally.
There is also another very important understanding. In the normal situation a developer sells you a property and although they often give indications of the intended rentals, once you take the keys they take their profit and it is the buyers problem to let the property. With Oz Invest you sign a legal lease agreement with them before you buy the property and therefore they put their money where their mouth is. If you buy in an area where they can’t let it out – it costs them money. It is a magnificent safety net to ensure they are doing their research as to the best areas and helping IPS clients invest in these areas.
This is the perfect system and ensures your income is guaranteed for 10 years and beyond!
How do I fix my costs?
In Australia you can fix your mortgage for 5 or 10 years. The interest rates have come done by 64% in the last 5 months and are starting to reach the bottom of the curve. It provides a great opportunity to fix your mortgage costs and ensure that your property is cashflow positive from day one.
How do I ensure I am buying in the areas with the best growth opportunities?
As explained above Oz Invest put their money where their mouth is. Richard Dunn is the full time acquisitions manager and it is his mandate to ensure that he is finding the best investments in Australia, in areas with the best rental demand and the best capital growth. Examples of this are they don’t focus on Perth as the property market has dropped there and is expected to drop further. They don’t focus on Sydney as the prices are high and rentals are not comparable and therefore the yields are lower. They don’t focus on cities where the fundamentals of infrastructure growth and population growth do not indicate long term growth trends, cities like Adelaide and Canberra. And finally they don’t do apartments as they do not rent as well houses, as the average Australian family wants to rent a 3 or 4 bedroom Australian home.
They are constantly researching these markets, but at the moment the best opportunities are in Brisbane and Melbourne and even specific market segments and growth corridors in these cities. IPS along with Oz Invest has done R1.5 million worth of research in the last 6 months to ensure that each IPS client is given the best advice as where to get the best returns on their money!
Conclusion
There are three very important things to consider with property in Australia. Scott Picken, CEO of IPS says:
Firstly, “Buying property in Australia prior to relocating has huge advantages for tax, immigration, credit ratings and ultimately buying your dream home.”
Secondly, “I think it is imperative to understand how important this investment is to you and your families future. More than 90% of middle to upper income families in Argentina, Russia and Zimbabwe were directly and materially affected when their currency fluctuated. The only ones who didn’t were the prudent ones who had diversified their assets and invested offshore in other currencies.
Thirdly, “Before you invest there are 3 fundamentals which you should know and are essential. You should not invest without this knowledge. We will teach you these first.”
Go to www.ipsinvest.com for more information.
Thursday, March 19, 2009
Lower rates helps kickstart Australian housing affordability
(Foreign) DEAKIN WEST (March 13) - The Real Estate Institute of Australia (REIA) has released the REIA/Deposit Power Housing Affordability Report; a comprehensive assessment of the ability of Australians to meet the cost of home purchase.
The report, released on March 6, notes a record change is evident for the December quarter in the proportion of family income required to meet mortgage repayments. This percentage of family income needed decreased nationally from 38,8% in the September quarter 2008 to 32,4% in the December quarter 2008.
“This is the largest quarterly change recorded by the REIA since calculations of this affordability measure were first made in 1995”, said REIA President, Noel Dyett.
Housing affordability nationally improved significantly during the December quarter 2008 as the result of a combination of interest rate reductions, Government incentives and a changing market.
“Our data shows that average Australian households were paying in excess of $300 a month less for their home loan at the end of December than they were three months earlier at the end of September. This is tremendous news for homeowners who struggled throughout most of 2008 with rising interest rates and increasing loan repayments”, continued Dyett.
The December quarter 2008 is also significant because it starts to reflect the impact the Boost to the First Home Owners Grant has had on first home buyer activity.
ABS data included in the Housing Affordability Report, indicates that the Boost to the First Home Owners Grant, coupled with lower interest rates, is having a positive effect on the housing market.
The number of first home buyers increased by over 25% from the September quarter to the December quarter 2008, but the percentage of first home buyers is still 3% less than for the December quarter 2007.
“Market statistics highlight that first homebuyers make up an increased proportion of the total homebuyer market – a sign that the Boost to the First Home Owners Grant is making new home purchases more realistic for those who may not have been in a position to buy 12 months ago”, said National Manager for Deposit Power, Keith Levy.
“Housing is an important sector of the Australian economy and consequently will play a key role in helping the nation try to avoid severe recession. That is why housing has featured so prominently in the two economic stimulus packages delivered by the Government to date”, concluded Dyett.
The report, released on March 6, notes a record change is evident for the December quarter in the proportion of family income required to meet mortgage repayments. This percentage of family income needed decreased nationally from 38,8% in the September quarter 2008 to 32,4% in the December quarter 2008.
“This is the largest quarterly change recorded by the REIA since calculations of this affordability measure were first made in 1995”, said REIA President, Noel Dyett.
Housing affordability nationally improved significantly during the December quarter 2008 as the result of a combination of interest rate reductions, Government incentives and a changing market.
“Our data shows that average Australian households were paying in excess of $300 a month less for their home loan at the end of December than they were three months earlier at the end of September. This is tremendous news for homeowners who struggled throughout most of 2008 with rising interest rates and increasing loan repayments”, continued Dyett.
The December quarter 2008 is also significant because it starts to reflect the impact the Boost to the First Home Owners Grant has had on first home buyer activity.
ABS data included in the Housing Affordability Report, indicates that the Boost to the First Home Owners Grant, coupled with lower interest rates, is having a positive effect on the housing market.
The number of first home buyers increased by over 25% from the September quarter to the December quarter 2008, but the percentage of first home buyers is still 3% less than for the December quarter 2007.
“Market statistics highlight that first homebuyers make up an increased proportion of the total homebuyer market – a sign that the Boost to the First Home Owners Grant is making new home purchases more realistic for those who may not have been in a position to buy 12 months ago”, said National Manager for Deposit Power, Keith Levy.
“Housing is an important sector of the Australian economy and consequently will play a key role in helping the nation try to avoid severe recession. That is why housing has featured so prominently in the two economic stimulus packages delivered by the Government to date”, concluded Dyett.
Tuesday, March 10, 2009
International Investing - Why you can’t afford not to act - NOW?
Life is all about decisions and most importantly also the timing of these decisions. Scott Picken, CEO of International Property Solutions (IPS) believes it is very important to understand the opportunities which are available offshore in countries like Australia and also why it is so important to act quickly.
1. The first element is the Exchange rate
a. Currently, with the exchange rate, to buy your dream 4 bedroom investment house in Australia you need a minimum of R700 000 (deposit & all costs).
b. If the Rand was to lose 10% against the Aus Dollar, this amount would increase R70 000 or more. Now honestly, even in the next 2 months, what are the prospects for the Rand, taking these 4 elements into account:
i. In a recent article from the Economist, South Africa was portrayed as the most exposed economy globally, based on a statistical analysis and therefore one of the most vulnerable currencies in the global environment.
ii. Interest rates are coming down in South Africa to stimulate the economy and growth, which means South Africa looses’ appeal for international investors who are looking for higher returns and there is a concern of a foreign investment flight from South Africa.
iii. On the 22nd of April we will have a new president who is seen as populist and left wing, with heavy influence to the SA Communist Party and COSATU. Although hopefully this will not change government policy substantially, in the eyes of the world it is going to take a long time to prove this and in the mean time our currency will suffer. Imagine this with Trevor Manuel resigning....
iv. The ANC and COPE want to reduce the Rand to US Dollar to R12 to the $1, a decrease of 25% to improve exports and sustain jobs.
c. Based on all of the above a 10% decrease in the next 2 months is very conservative and it will probably be closer to 25%, which will mean the same property will be 25% more expensive or R177 000 more on the cash you have to input, as well as affecting your affordability for the mortgage.
2. Secondly, why it is so important to own offshore assets? Would / Should you want one?
a. The world is becoming a global village and it is very important to diversify your asset base and ensure you are taking advantage of other markets. Investors from all over the world are taking advantages of this in all asset classes.
b. However more importantly for South Africans who live in an economically and politically challenging environment (I love it as it presents opportunity) must be astute and invest part of their wealth in more economically and politically stable environments. This not only provides a Rand hedge which is vital, but also acts as an insurance policy should the unthinkable happen – you have to move.
c. I believe it is fantastic to live in South Africa, but it is a fundamental necessity to accumulate foreign assets. It is not only wise, but is prudent and essential.
3. Thirdly, understanding you want to invest, what is stopping you from acting now?
a. “I want to go to Australia to choose the right investment?”
i. IPS, through their strategic partners has done all this research for you. Scott Picken, CEO of IPS, has spent a substantial amount of time exploring all the states, cities and projects and also reading all the research to determine the best investment properties.
ii. Do you have the time, contacts or the knowledge in a quick trip to Australia to be able to make this type of analysis?
b. “I am worried about the management and maintenance of my investment property. It is so far away, what can I do if there are problems?”
i. Once again, IPS who have offices in South Africa and work with strategic partners in Australia and the UK, provide an end to end solution. Through Oz Invest, they provide a 10 year Leaseback Guarantee, where Oz Invest will manage and maintain your unit as well as guarantee your rental will be paid on the 10th of the month, each and every month for 10 years? All you will need to do is expect your rental money each month!
c. “What happens if the tenants don’t pay my rent, how can I afford my mortgage?”
i. Through the Leaseback Scheme, Oz Invest charge $15 a week to all their clients. They have over 1000 properties under management which equates to $15 000 a week and ensure they can not only always pay the rent, whether or not your unit has a tenant, but they also make a profit. Your rental is market related, guaranteed for 10 years and covers all your expenses being cash flow positive from Day One!
d. “What happens if interest rates go up?”
i. Investing is all about managing the variables. In property there are 3 variables, the rent, the interest rate and also the capital growth. For this investment the income is guaranteed, you can fix the interest rates for either 5 or 10 years and therefore eliminate the variables. It just leaves the capital growth and for this see below.
4. Fourthly understanding the market
a. Capital Growth - you need to ensure you are investing in areas with the right fundamentals – population growth, infrastructure growth, employment and transport nodes, etc. This is what IPS puts so much time into investigating and delivering to our clients.
b. It is important to invest in the right sector of the market and the best capital growth and rental yields are being found in the sub $500 000 range where IPS is focusing.
c. IPS, with its partners and thorough market knowledge has sourced the best opportunities in Australia.
What to do next?
So with an understanding of what is important, what do you do next? Basically there are a number of options.
1. Come to our next Australian Investment event. Go to http://www.ipsinvest.com/ to find the details.
2. Book an appointment – contact us on 011 463 0588.
As with everything in life, you often regret the things you do not do the most.
1. The first element is the Exchange rate
a. Currently, with the exchange rate, to buy your dream 4 bedroom investment house in Australia you need a minimum of R700 000 (deposit & all costs).
b. If the Rand was to lose 10% against the Aus Dollar, this amount would increase R70 000 or more. Now honestly, even in the next 2 months, what are the prospects for the Rand, taking these 4 elements into account:
i. In a recent article from the Economist, South Africa was portrayed as the most exposed economy globally, based on a statistical analysis and therefore one of the most vulnerable currencies in the global environment.
ii. Interest rates are coming down in South Africa to stimulate the economy and growth, which means South Africa looses’ appeal for international investors who are looking for higher returns and there is a concern of a foreign investment flight from South Africa.
iii. On the 22nd of April we will have a new president who is seen as populist and left wing, with heavy influence to the SA Communist Party and COSATU. Although hopefully this will not change government policy substantially, in the eyes of the world it is going to take a long time to prove this and in the mean time our currency will suffer. Imagine this with Trevor Manuel resigning....
iv. The ANC and COPE want to reduce the Rand to US Dollar to R12 to the $1, a decrease of 25% to improve exports and sustain jobs.
c. Based on all of the above a 10% decrease in the next 2 months is very conservative and it will probably be closer to 25%, which will mean the same property will be 25% more expensive or R177 000 more on the cash you have to input, as well as affecting your affordability for the mortgage.
2. Secondly, why it is so important to own offshore assets? Would / Should you want one?
a. The world is becoming a global village and it is very important to diversify your asset base and ensure you are taking advantage of other markets. Investors from all over the world are taking advantages of this in all asset classes.
b. However more importantly for South Africans who live in an economically and politically challenging environment (I love it as it presents opportunity) must be astute and invest part of their wealth in more economically and politically stable environments. This not only provides a Rand hedge which is vital, but also acts as an insurance policy should the unthinkable happen – you have to move.
c. I believe it is fantastic to live in South Africa, but it is a fundamental necessity to accumulate foreign assets. It is not only wise, but is prudent and essential.
3. Thirdly, understanding you want to invest, what is stopping you from acting now?
a. “I want to go to Australia to choose the right investment?”
i. IPS, through their strategic partners has done all this research for you. Scott Picken, CEO of IPS, has spent a substantial amount of time exploring all the states, cities and projects and also reading all the research to determine the best investment properties.
ii. Do you have the time, contacts or the knowledge in a quick trip to Australia to be able to make this type of analysis?
b. “I am worried about the management and maintenance of my investment property. It is so far away, what can I do if there are problems?”
i. Once again, IPS who have offices in South Africa and work with strategic partners in Australia and the UK, provide an end to end solution. Through Oz Invest, they provide a 10 year Leaseback Guarantee, where Oz Invest will manage and maintain your unit as well as guarantee your rental will be paid on the 10th of the month, each and every month for 10 years? All you will need to do is expect your rental money each month!
c. “What happens if the tenants don’t pay my rent, how can I afford my mortgage?”
i. Through the Leaseback Scheme, Oz Invest charge $15 a week to all their clients. They have over 1000 properties under management which equates to $15 000 a week and ensure they can not only always pay the rent, whether or not your unit has a tenant, but they also make a profit. Your rental is market related, guaranteed for 10 years and covers all your expenses being cash flow positive from Day One!
d. “What happens if interest rates go up?”
i. Investing is all about managing the variables. In property there are 3 variables, the rent, the interest rate and also the capital growth. For this investment the income is guaranteed, you can fix the interest rates for either 5 or 10 years and therefore eliminate the variables. It just leaves the capital growth and for this see below.
4. Fourthly understanding the market
a. Capital Growth - you need to ensure you are investing in areas with the right fundamentals – population growth, infrastructure growth, employment and transport nodes, etc. This is what IPS puts so much time into investigating and delivering to our clients.
b. It is important to invest in the right sector of the market and the best capital growth and rental yields are being found in the sub $500 000 range where IPS is focusing.
c. IPS, with its partners and thorough market knowledge has sourced the best opportunities in Australia.
What to do next?
So with an understanding of what is important, what do you do next? Basically there are a number of options.
1. Come to our next Australian Investment event. Go to http://www.ipsinvest.com/ to find the details.
2. Book an appointment – contact us on 011 463 0588.
As with everything in life, you often regret the things you do not do the most.
Monday, March 9, 2009
I dare you to visit Johannesburg, the city for softies
From the London Sunday Times... Jeremy Clarkson (the Top
Gear guy!)
I dare you to visit Johannesburg, the city for softies
It’s the least frightening place on earth, yet everyone speaks of how
many times they’ve been killed that day
Jeremy Clarkson – London Sunday Times
Every city needs a snappy one-word handle to pull in the tourists and
the investors. So, when you think of Paris, you think of love; when
you think of New York, you think of shopping; and when you think of
London – despite the best efforts of new Labour to steer you in the
direction of Darcus Howe – you think of beefeaters and Mrs Queen.
Rome has its architecture. Sydney has its bridge. Venice has its
sewage and Johannesburg has its crime. Yup, Jo’burg – the subject of
this morning’s missive – is where you go if you want to be carjacked,
shot, stabbed, killed and eaten.
You could tell your mother you were going on a package holiday to
Kabul, with a stopover in Haiti and Detroit, and she wouldn’t bat an
eyelid. But tell her you’re going to Jo’burg and she’ll be absolutely
convinced that you’ll come home with no wallet, no watch and no head.
Jo’burg has a fearsome global reputation for being utterly terrifying,
a lawless Wild West frontier town paralysed by corruption and disease.
But I’ve spent quite a bit of time there over the past three years and
I can reveal that it’s all nonsense.
If crime is so bad then how come, the other day, the front-page lead
in the city’s main newspaper concerned the theft of a computer from
one of the local schools? I’m not joking.
The paper even ran a massive picture of the desk where the computer
used to sit. It was the least interesting picture I’ve ever seen in a
newspaper. But then it would be, because this was one of the least
interesting crimes.
“Pah,” said the armed guard who’d been charged with escorting me each
day from my hotel to the Coca-Cola dome where I was performing a stage
version of Top Gear.
Quite why he was armed I have absolutely no idea, because all we
passed was garden centres and shops selling tropical fish tanks. Now
I’m sorry, but if it’s true that the streets are a war zone, and you
run the risk of being shot every time you set foot outside your front
door, then, yes, I can see you might risk a trip to the shops for some
food. But a fish tank? An ornamental pot for your garden? It doesn’t
ring true.
Look Jo’burg up on Wikipedia and it tells you it’s now one of the most
violent cities in the world . . . but it adds in brackets “citation
needed”. That’s like saying Gordon Brown is a two-eyed British genius
(citation needed).
Honestly? Johannesburg is Milton Keynes with thunderstorms. You go
out. You have a lovely ostrich. You drink some delicious wine and you
walk back to your hotel, all warm and comfy. It’s the least
frightening place on earth. So why does every single person there wrap
themselves up in razor wire and fit their cars with flame-throwers and
speak of how many times they’ve been killed that day? What are they
trying to prove?
Next year South Africa will play host to the football World Cup. The
opening and closing matches will be played in Jo’burg, and no one’s
going to go if they think they will be stabbed.
The locals even seem to accept this, as at the new airport terminal
only six passport booths have been set aside for non-South African
residents.
At first it’s baffling. Why ruin the reputation of your city and risk
the success of the footballing World Cup to fuel a story that plainly
isn’t true? There is no litter and no graffiti. I’ve sauntered through
Soweto on a number of occasions now, swinging a Nikon round my head,
with no effect. You stand more chance of being mugged in Monte Carlo.
Time and again I was told I could buy an AK47 for 100 rand – about £7.
But when I said, “Okay, let’s go and get one”, no one had the first
idea where to start looking. And they were even more clueless when I
asked about bullets.
As I bought yet another agreeable carved doll from yet another
agreeable black person, I wanted to ring up those idiots who compile
surveys of the best and worst places to live and say: “Why do you keep
banging on about Vancouver, you idiots? Jo’burg’s way better.”
Instead, however, I sat down and tried to work out why the locals
paint their city as the eighth circle of hell. And I think I have an
answer. It’s because they want to save the lions in the Kruger
National Park.
I promise I am not making this up. Every night, people in Mozambique
pack up their possessions and set off on foot through the Kruger for a
new life in the quiet, bougainvillea-lined streets of Jo’burg. And
very often these poor unfortunate souls are eaten by the big cats.
That, you may imagine, is bad news for the families of those who’ve
been devoured. But actually it’s even worse for Johnny Lion. You see,
a great many people in Mozambique have Aids, and the fact is this: if
you can catch HIV from someone’s blood or saliva during a bout of
tender love-making, you can be assured you will catch it if you wolf
the person down whole. Even if you are called Clarence and you have a
mane.
At present, it’s estimated that there are 2,000 lions in the Kruger
National Park and studies suggest 90% have feline Aids. Some vets
suggest the epidemic was started by lions eating the lungs of diseased
buffalos. But there are growing claims from experts in the field that,
actually, refugees are the biggest problem.
That’s clearly the answer, then. Johannesburgians are telling the
world they live in a shit-hole to save their lions. That’s the sort of
people they are. And so, if you are thinking about going to the World
Cup next year, don’t hesitate.
The exchange rate’s good, the food is superb, the weather’s lovely
and, thanks to some serious economic self-sacrifice, Kruger is still
full of animals. The word, then, I’d choose to describe Jo’burg is
“tranquil”.
http://www.timesonline.co.uk/tol/comment/columnists/jeremy_clarkson/article5
821586.ece
Gear guy!)
I dare you to visit Johannesburg, the city for softies
It’s the least frightening place on earth, yet everyone speaks of how
many times they’ve been killed that day
Jeremy Clarkson – London Sunday Times
Every city needs a snappy one-word handle to pull in the tourists and
the investors. So, when you think of Paris, you think of love; when
you think of New York, you think of shopping; and when you think of
London – despite the best efforts of new Labour to steer you in the
direction of Darcus Howe – you think of beefeaters and Mrs Queen.
Rome has its architecture. Sydney has its bridge. Venice has its
sewage and Johannesburg has its crime. Yup, Jo’burg – the subject of
this morning’s missive – is where you go if you want to be carjacked,
shot, stabbed, killed and eaten.
You could tell your mother you were going on a package holiday to
Kabul, with a stopover in Haiti and Detroit, and she wouldn’t bat an
eyelid. But tell her you’re going to Jo’burg and she’ll be absolutely
convinced that you’ll come home with no wallet, no watch and no head.
Jo’burg has a fearsome global reputation for being utterly terrifying,
a lawless Wild West frontier town paralysed by corruption and disease.
But I’ve spent quite a bit of time there over the past three years and
I can reveal that it’s all nonsense.
If crime is so bad then how come, the other day, the front-page lead
in the city’s main newspaper concerned the theft of a computer from
one of the local schools? I’m not joking.
The paper even ran a massive picture of the desk where the computer
used to sit. It was the least interesting picture I’ve ever seen in a
newspaper. But then it would be, because this was one of the least
interesting crimes.
“Pah,” said the armed guard who’d been charged with escorting me each
day from my hotel to the Coca-Cola dome where I was performing a stage
version of Top Gear.
Quite why he was armed I have absolutely no idea, because all we
passed was garden centres and shops selling tropical fish tanks. Now
I’m sorry, but if it’s true that the streets are a war zone, and you
run the risk of being shot every time you set foot outside your front
door, then, yes, I can see you might risk a trip to the shops for some
food. But a fish tank? An ornamental pot for your garden? It doesn’t
ring true.
Look Jo’burg up on Wikipedia and it tells you it’s now one of the most
violent cities in the world . . . but it adds in brackets “citation
needed”. That’s like saying Gordon Brown is a two-eyed British genius
(citation needed).
Honestly? Johannesburg is Milton Keynes with thunderstorms. You go
out. You have a lovely ostrich. You drink some delicious wine and you
walk back to your hotel, all warm and comfy. It’s the least
frightening place on earth. So why does every single person there wrap
themselves up in razor wire and fit their cars with flame-throwers and
speak of how many times they’ve been killed that day? What are they
trying to prove?
Next year South Africa will play host to the football World Cup. The
opening and closing matches will be played in Jo’burg, and no one’s
going to go if they think they will be stabbed.
The locals even seem to accept this, as at the new airport terminal
only six passport booths have been set aside for non-South African
residents.
At first it’s baffling. Why ruin the reputation of your city and risk
the success of the footballing World Cup to fuel a story that plainly
isn’t true? There is no litter and no graffiti. I’ve sauntered through
Soweto on a number of occasions now, swinging a Nikon round my head,
with no effect. You stand more chance of being mugged in Monte Carlo.
Time and again I was told I could buy an AK47 for 100 rand – about £7.
But when I said, “Okay, let’s go and get one”, no one had the first
idea where to start looking. And they were even more clueless when I
asked about bullets.
As I bought yet another agreeable carved doll from yet another
agreeable black person, I wanted to ring up those idiots who compile
surveys of the best and worst places to live and say: “Why do you keep
banging on about Vancouver, you idiots? Jo’burg’s way better.”
Instead, however, I sat down and tried to work out why the locals
paint their city as the eighth circle of hell. And I think I have an
answer. It’s because they want to save the lions in the Kruger
National Park.
I promise I am not making this up. Every night, people in Mozambique
pack up their possessions and set off on foot through the Kruger for a
new life in the quiet, bougainvillea-lined streets of Jo’burg. And
very often these poor unfortunate souls are eaten by the big cats.
That, you may imagine, is bad news for the families of those who’ve
been devoured. But actually it’s even worse for Johnny Lion. You see,
a great many people in Mozambique have Aids, and the fact is this: if
you can catch HIV from someone’s blood or saliva during a bout of
tender love-making, you can be assured you will catch it if you wolf
the person down whole. Even if you are called Clarence and you have a
mane.
At present, it’s estimated that there are 2,000 lions in the Kruger
National Park and studies suggest 90% have feline Aids. Some vets
suggest the epidemic was started by lions eating the lungs of diseased
buffalos. But there are growing claims from experts in the field that,
actually, refugees are the biggest problem.
That’s clearly the answer, then. Johannesburgians are telling the
world they live in a shit-hole to save their lions. That’s the sort of
people they are. And so, if you are thinking about going to the World
Cup next year, don’t hesitate.
The exchange rate’s good, the food is superb, the weather’s lovely
and, thanks to some serious economic self-sacrifice, Kruger is still
full of animals. The word, then, I’d choose to describe Jo’burg is
“tranquil”.
http://www.timesonline.co.uk/tol/comment/columnists/jeremy_clarkson/article5
821586.ece
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