“Captain Obvious” & Crazy High Property Prices

I spent the Easter weekend at the family farm. 

I love it there, because it’s in Victorian high country so the air is fresh and deeply rejuvenating. 

Beautiful huh? 

Plus, the kids love to drive around with their Pa on a tractor etc. 

On the way there, I noticed some land for sale in a new estate, in a country town. 

I checked out the pricing later, because I wanted to see what the farmer was making through his sub-division. 

Turns out it’s about $155,000 for a 800 m2 block of land, which is obviously very cheap by city standards. 

Cheap right? But of course, this is full-on “country”.

Your neighbour goes to work on a tractor each morning. 

And, this the points to a problem with all the housing affordability ideas being talked about for the budget. 

The latest one is Labour wants to stop borrowing in SMSF’s. 

Sure, that might make a difference, to a certain degree. 

But the real issue is that…(and forgive me, if I sound like Captain Obvious here)…

Our prime Real estate is expensive because people want to live in Australian cities close to high paying jobs and lifestyle hubs…

And they will pay a lot of money to do so. 

So, there’s a high demand. 

And there’s a limited supply, especially of houses and townhouses, because there’s a limited amount of land available. 

High demand + low supply = high prices. 

One longer term possibility would be creating super-fast trains etc. out to where the land supply is abundant – like that country sub-division I saw. 

But that’s unlikely to be done quickly in Australia. 

Now, of course, us property investors have helped to fuel prices as well. 

This is largely fuelled by low interest rates…

And, just to be clear, the reason interest rates were lowered is to kick-start the economy – particularly the housing/construction industry –  after the GFC and post mining boom…

So higher interest rates to any significant degree – i.e. 3 or 4 percent – will have the opposite effect.

It will pour wet water over the flames of the economy, and cause huge mortgage related stress, and increase unemployment. 

Because remember, after retail, the property industry is our biggest employer in Australia.
 
So, for these reasons, I don’t expect the RBA to put up interest rates to significant way. 

And the banks agree – that’s why you can still fix interest rates at below 5% for 5 years. 

That’s why I don’t expect the government changes to have any miraculous effect. 

I am not expecting see $500,000 homes by the harbour in Sydney! 

 Because, they are not affecting the fundamental drivers. 

They are tinkering around the edges. 

Now, it’s likely most of the politicians know that their changes aren’t going to fix the issues in any major way – they just need to be seen to be doing something. 

But here’s the thing.

As property investors, here’s the good news. 

Regardless of what happens there is ALWAYS money to be made. 

It’s just a matter of having the right strategy and investing in the right location.

Because there’s 3,500 suburbs in Australia. 

And, there’s always a way to create a healthy profit….when you know how. 

For example, Nhan Nguyen is currently looking at splitting up a large block into 5 land lots and selling them off. 

This will probably make him about $200,000 for about 15 hours’ work. 

And, interestingly, by creating more affordable land-supply, he’s making a real difference to housing affordability. 

Because, these 5 land lots will be a heck of a lot more affordable for young families than the large block. 

Double win. 

What’s your strategy for creating big financial wins in this changing property market? 

How will you make money?  

Why not join Nhan and other property multi-millionaire investors at Deals on Fire…and create your own ‘game plan’ for super-sized equity gains and cashflow in years to come…

Submit a Comment

Your email address will not be published. Required fields are marked *