Recognise the Investment Opportunities ...

Posted on 12. Nov, 2008 by Chris Lang in Economic Issues, Global Scene, Interest Rates, Investment Opportunity, Property Cycles, Property Yields, Retail Sector, Using Debt, Your Exposure

Anecdotal evidence suggests that consumers are cutting back on their spending around Australia. And it's likely that luxury items and overseas travel will be the most affected.

A recent article in The Age expounded "The Flight to Value" — where Australian Property Monitors reported a 24% drop in the median price for Toorak Homes, in the 6 months to September.

This was something we foreshadowed some 18 months ago — warning of the potential flow-on effect for Commercial property, if your home had been used for a line of credit.

Apart from a few over-committed vendors, you have not seen a significant number of Commercial properties come onto the market as yet.

However, the Commonwealth Property Fund has reported a softening in capitalisation rates (up to 1.5% for Brisbane and Perth), as it concludes a revaluation for eight of the Fund's Commercial properties.

And with rentals having increased, any significant fall in value has been contained for the time being.

China's stimulus package should certainly help us. However, as our economy tightens in in 2009 ... not only will Commercial property values come under pressure, but also the cash flow to cover interest payments on the loans.

How to Gain the Upper Hand

The latest figures suggest that Australian banks currently have close to $140 billion in exposure to: Office Buildings, Shopping Centres, Industrial Complexes, Hotels and Residential Projects around Australia.

In the early 1990s, the banks had a far greater exposure, and there was a massive oversupply of accommodation. So, the fundamentals for Commercial property are still solid.

But now, the world has a cash shortage — something not experienced since the mid-1970s.

Therefore, as loans fall due over the next 6 to 12 months ... banks will be looking to reduce their loan-to-value ratios; or asking you to provide additional security, to help support the loan.

Many of my clients have heeded the warnings and are now cashed up — and poised ready to gain the upper hand, as some of these properties start to come onto the market.

Therefore, just let me know if you would also like to be given an advance look at these opportunities, as they arise.

Tags: anecdotal evidence, brisbane, cash flow, CBD_Offices, chris_lang, commercial property values, industrial complexes, industrial_property, interest_rates, luxury items, median price, melbourne, mid 1970s, n banks, office buildings, offices, office_property, overseas travel, oversupply, perth, potential flow, recent article, residential projects, retail, retail_property, revaluation, stimulus package, value ratios