Buying foreclosed property in Australia

Here is a good article on foreclosed property in Australia.
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Andrew Sheldon www.sheldonthinks.com

Property market risks moving forward

The property market risks looking forward is an important issue to consider. My focus is Japan and the Philippines, so I will restrict myself to those two countries because I consider them the most promising in the Asia Pacific region. There are 3 main considerations:
1. Foreign exchange exposure for foreign investors or foreigners residing locally looking to repatriate earnings from Japan.
2. Debt leverage
3. Interest rates

Interest rates in Japan are already very low so there is only one way they can go and that is up. The most pressing reason to raise rates would be inflation in the current climate. This is not a factor however that you strike Japan in isolation, so this is not an issue, and there is no reason to rein in private spending because its not strong. The private sector in Japan is not overly leveraged, though the government is. At some point the government will be looking at increased taxation to fund the public sector deficit. I think this is likely to fall upon the property market because consumption is weak and the government will be reluctant to tax income given the economic weakness. I don't see this as a significant increase. Certainly not enough to discourage investors given the high yield opportunities.
For the Philippines, debt leverage is very low, which augers well for future credit growth. Interest rates in the Philippines have always been at a premium because of the poor propensity for Filipinos to save. They pay a premium for borrowing abroad, which also increases the risk to local banks. Well the Philippines is not the only plausible source of capital. I think we can expect an increase in foreign savings flowing to the Philippines as the Arroyo reform agenda continues...albeit slowly. Metal commodity prices are lower, soft commodities are likely to fair better. The country will continue to attract remittances from abroad. Its a good story, though I do see it taking some time for the Philippines to benefit. Attractive features include Chinese, Korean and Japanese investment. The Philippines will be a future tourist and retirement destination. The scale will however be low-key for the time being as developer projects are restricted by foreign investment limitations. Its not the time to commit a lot of capital, but high net worth individuals with local relationships are investing with confidence. Some are not protecting themselves. Some don't know how to protect themselves. I recommend using protection!
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Andrew Sheldon www.sheldonthinks.com

End of the global property cycle?

Are you wondering whether this is the end of the property bull market? You will hear conflicting information. There are those saying that:
1. The OECD countries are so indebted that they will take years to bail themselves out
2. You have central banks cutting interest rates around the world

What gets me is how people just don't understand global finance...including the so called experts. Everyone is an expert. I must concede that it does take a lot of time to learn global finance. It covers a lot of topics. Fortunately property is one of those areas which is a lot simpler to understand. Simple, but its not always readily evident. For instance, relationships are often over-simplified. eg. Cuts in interest rates mean rising housing prices. That is a dangerous assumption. Falling property prices mean recession or depression. So which way is the market going?

My answer to this is simple. Its going sideways. That is true for property and equities, though equities clearly offer the superior opportunity to trade positions. You should therefore look for rallies and sell into weakness. The implications for property: Look for yields in Western markets. Really Japan is the only OECD market offering good yields, and best of all is that anyone can buy property there. I bought property there on a tourist visa.
The other opportunity are those Asian markets which have not yet moved. The best two economic laggards are Indonesia and Philippines. These two countries still offer capital growth propositions. Among those two countries the Philippines is by far the best prospect for a number of reasons including visa rules, reform measures, language, etc. The Philippines like Japan also has a sizeable foreclosed property market, though the price discounts are not nearly as compelling as Japan. But thats ok its a interesting story for different people. If you want a tropical life you go to the Philippines, if you want a cosmopolitan life you go to Japan. If you are a high roller, then you have a place in each country, and spend a few nights transferring in Macau besides. :)
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Andrew Sheldon www.sheldonthinks.com

Refurbishing foreclosed properties a great hobby

I count refurbishing my ex-girlfriend's foreclosed property (and my own) as among the most rewarding things I have ever done. It was great fun to start something from scratch and learn how to repair a house (as well as learning the peculiarities of the Japanese property market). Admittedly I did most of the work :) She spent most of her time sleeping in and talking to her mother, but that's ok. Her father was pretty happy too to see us doing such things. Finally she was doing something productive with her life. 'He's a keeper'. Well that wasn't to be. But anyway, its a great way to build a relationship with your partner. I can't think of any better way to learn about another person. It's fun, its education, its challenging, its a diversion from what can be a very sedentary life. And best of all you can make MONEY!! The payback can be as little as 3-4 years. That's return on your equity assuming you leverage with a bank. If you simply pay cash then it will take you a little longer.
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Andrew Sheldon www.sheldonthinks.com

Maintaining your foreclosed property

One of the legacies of buying a foreclosed property is that sometimes they are not well maintained. This is one of the issues I deal with in my foreclosed property report because its a big issues for those who are buying an investment property. One of the most important tasks is to look after the septic tank if you have one, as well as making sure the gutters are cleared of pine needles. You cannot expect tenants to do it, and of course you can't expect outgoing (delinquent) homeoowners to do it. If you don't clear out the gutters water can flood the house and damage the walls. Some times you can get away with a repaint, but on other occasions its more serious.

I had my first Japanese buyer today! Sorry to say I have not produced a Japanese language version, but I was just thinking what a great way to learn another language. Whether you want to learn English or Japanese, people of both languages now have a great tool for learning home economics. :)
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Andrew Sheldon www.sheldonthinks.com

Russians increase buying of Philippine property

Russians have been amongst the new wave of investors in the Philippines according to a recent article. This interest is likely to die since oil prices have since fallen from $145/barrel to $80/barrel. One can argue that these prices are still high though since oil is a real asset class, though Russia also produces a lot of other commodities which are faring far worse. The implication is that we can expect Russian interest to remain in cheap property markets like Japan and the Philippines. Aside from the cheap property there is also the benefit of warmer climate which is not a feature of Russia.
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Andrew Sheldon www.sheldonthinks.com

Google Maps in English

The search for property in Japan is getting easier since Google has added English to its map labels for Google Maps, making it the best choice for foreigners without Japanese ability. Otherwise you can use Yahoo Maps (without English).

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Andrew Sheldon www.sheldonthinks.com

South coast of Tokyo appealing for foreclosed property

There is a lot of interest in the Japan Foreclosed report of late. For good reason you can image. The shattered confidence of Japanese buyers is likely to draw foreigners since the Japanese market is relatively cheap. Last year I was in Japan for my brothers wedding. This was my 2nd Japanese wedding - this one was traditional. My one was modern. That marriage lasted a year :)
I am very impressed by the southern coastline of Tokyo. The wedding was held in the town of Yugawara. This is an onsen town so kind of a tourist area, but not overwhelmingly so. Importantly the wedding guests were very friendly. No death threats which is always positive. I went drinking with some of the friends of the brides brother. They were the nicest people. Normally I never connect with Japanese guys, but these guys were very engaging and good fun. Nice area to invest in foreclosed property as these areas will be valued in future as 'alternative' lifestyle havens. I have looked all along this coastline heading south into Shizuoka, as far as Shimoda. That far south and you are dealing with a slow, expensive rail connection to Tokyo, but around Yugawara-Odawara is good buying.

View Larger Map
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Andrew Sheldon www.sheldonthinks.com

Opportunities for Arab investment in the Philippines

Another group of countries with an appealing exposure to the Philippines is the Arab (OPEC) bloc, with its petrodollars. Arab governments and investors looking to diversify away from the USD assets might consider the Philippines. We can see from the following charts that the Arab countries currencies are still strong against the peso. Will that remain the case as oil prices weaken? I suggest it will because oil is a hard commodity, though certainly we are not going to see oil prices taking off for a few years again unless there is an oil shock.

The obvious link for Arab investors to the Philippines are:
1. Personal - those Arabs having relationships with Filipinos wanting to retire or invest in the Philippines. Muslim Mindanao has suffered because of conflict, but not all areas are subject to conflict. Its a big island and conflict is confined to certain areas.
2. Muslim link - There is I guess some desire of investors to invest in a place that share one's values. I would argue that religion is skin deep, but if you can connect with people on a deeper level, you might appreciate this opportunity.

3. Commercial - There is of course an opportunity to supply food, handicrafts and other products from the Philippines to the Arab world.

The attractiveness of the Philippines extends beyond the currency opportunity. Its a relaxed culture will compelling opportunities to buy property with scenic splendour. I didn't look at other Arab currencies, but I dare say they are in the same favourable position to buy forecllosed property in the Philippines; whether you are from Kuwait, Oman, United Arab Emirates. Flight crew and pilots are other people who might welcome such opportunities after talking to several in Manila. Mind you, these pilots were from all over the place. One was a Pakistani, another a Saudi educated in England. The world is more global. The question is - Do you have a home in the Philippines? See report.

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Andrew Sheldon www.sheldonthinks.com

Japanese investors and retirees in the Philippines

I have some Australian and NZ friends in Tokyo who are earning Japanese yen. There is no question that now is a good time for them to send those dollars home whilst the AUD and NZD languish at 66Yen and 60Yen respectively. Another option is to buy property in the Philippines in coming months. The Philippines is a little different from Japan. Japan offers exceptional yields, but the Philippines offers better growth prospects given its reform trend, 2% population growth as well as land reforms.

For Japanese retirees too, this is a good time to make a move to the Philippines. The Japanese pension system is returning a paltry 1% on Japanese bonds. That is where Japanese savings are stored by the Japanese Postal Scheme, not to mention US 'worthless paper' bonds, losing more value by the day. For Japanese savers, unless they have some valuable property in Tokyo or other cities, they are likely to be looking at retirement in the Philippines, or sleeping with other homeless under a subway bridge in Sumiyoshi, collecting garbage cans every day for extra money.
As the attached chart will show, then Yen is particularly strong against the peso. I would also argue its a good place for foreigners based in Japan, earning Yen to place their money, particularly the Canadians and Americans since their currencies are relatively strong against the peso. No point sending it home. Buy the end of the year you could have paid off an apartment.
I think Japanese property developers are soon going to wake up to the opportunity to develop tourism and retirement developments in the Philippines. Its not such a lifestyle change for many since the families are inclined to go home to the countryside once or twice a year to see family. Instead some will go to the Philippines. The Japanese will miss their culture, so some will want large developers to duplicate Japan in the Philippines. Already companies are looking at certain areas. Mayon Volcano might just be mistaken for Mt Fuji if some developers have their way. There is a proposal to establish an international airport near Legaspi City for the benefit of tourists.

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Andrew Sheldon www.sheldonthinks.com

Philippines property attractive to Chinese investors

The weakening peso is proving lucrative for Chinese investors considering an investment in the Philippines. The peso is likely to suffer somewhat because of weaker exports to Japan and the USA. In contrast there is the possibility that the Chinese government might invest offshore to weaken its currency somewhat. China is facing the same prospect as Japan in the 1960s to 1980s, when their ascending currency placed upward pressure on their currency. China now faces the same pressures. In response, just as the Japanese did before, we can expect the Chinese state enterprises to invest in Philippines property. For the Japanese the interest was property and mining assets in the USA and Australia. For the Chinese, I think we will see a broader spread of investments, but clearly insofar as property is concerned the Philippines is the best place. Why? Well the country is already familiar to them. There are already a lot of Chinese-owned resorts, Chinese people living in the Philippines, and thus Chinese cultural influences. For Chinese private investors too there are opportunities for business, as well as the ability to invest from a strong currency, as well as providing some security away from an uncertain political regime. You can be sure that China is not shifting from communism to capitalism, but rather the collectivist fascist model embraced by its Western counterparts. Even the Philippines is not free from this trend. We are going to see more government spending in China, more public education, insurance, etc. The Philippines, with tax receipts of just 17% of GDP, looks relatively good.
The Philippines is particularly attractive for Chinese travel & property development companies. Already several Chinese companies have formed local join ventures to buy local property. The same opportunity exists for all Chinese from Singapore, Taiwan or mainland China, since all those currencies are strong. For more info refer to the 'Buying Philippines Property' report.

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Andrew Sheldon www.sheldonthinks.com

Which currencies will drive Philippines property?

Many buyers of property in the Philippines are foreigners, including among them balikbayan. The recent collapse of asset prices will be impacting on families in several respects:
1. Employment - job losses will be undermining people's capacity to pay off home loans and credit card debts

2. Foreign exchange movements will be increasing/decreasing debt payments for everyone. Those in the worst position are Australians or NZ'ers. Those in the best position are likely to be Asians like the Chinese, Koreans and Japanese. The Americans look ok in the short term, but as the Fed makes cuts to rates, this might not be the case in the future. Arab investors will no doubt also be in a strong position to buy foreign assets as this market settles.

3. Inflation squeezes out defaulters. Inflation is actually no problem for real assets, but in the short term the higher interest rates will squeeze people who are not cash rich into foreclosure if they can't sustain their job or meet margin call obligations.









Given these circumstances one would be inclined to buy Philippines property when these circumstances are at their worst, but one might hold off actually paying off the debt until the optimum time - that is when the peso is weakest. We really need to look at the trend to determine this. At the moment the peso is weakening.
The currencies or countries in the best position to buy property in the Philippines right now are: Canada, the Chinese & Arab (OPEC) oil currencies, Vietnam, among others.

The Canadian dollar is generally very stable against the Philippines peso. The Chinese yuan is a very hard currency so we can expect a lot of public and private Chinese investment in Philippines property. There are several reasons for this, but I will explore that is a separate post.

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Andrew Sheldon www.sheldonthinks.com

Foreclosed property in Japan still good buying

One of my Japan Foreclosed Property buyers tells me that foreclosed property prices are still cheap in Japan. There are properties being sold well below the nominal property prices. One must appreciate the trgic sense of life of the Japan people. Most of them live in fear....which is why they are collectivists with a strong social identity. Westerners with a strong stomach (...that is trust in their own judgement) can really get a bargain. But why enter the market with no information? A $20 report can help you save thousands buying an already very cheap property in Japan. Japan is a big country, and there are a lot of foreclosed properties in the retail end of the market.
One of the reasons Japanese people are not so active is because Japanese people are too ashamed to talk about it. But sometimes the wife lets the information out, and it spreads around the neighbourhood. Or maybe the owner lets the neighbour next door know, his friend for years. Maybe he is hoping he buys it for him and leases it back to him for cheaper rent.
This is just one of the factors driving the market. Download the table of contents here. Clearly the current weakness in the US is creating buying opportunities in Japan, that the fearful Japanese have pulled back from buying. You will not get any closer to bottom than over the next couple of months.
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Andrew Sheldon www.sheldonthinks.com