Australian property buyers set for retirement

On many occasions I have spoken of the huge amount of investment which is set to provide a huge amount of stimulus for the Australian economy over the next few decades. In the 1960s and 1970s we saw a rush of Japanese investment into Australian resources. Well in the next 20 years I would not be surprised to see $300-350 billion of mining investment in the industry, encompassing mostly offshore gas, iron ore, coal, coal seam gas, gold, base metals and alumina. Am I missing anything? Probably. The Chinese population is 10x Japan's and I have not even considered the other billion in India, which will also need a large amount of resources. India and China are not exactly mineral-poor economies, but mining in them is relatively disruptive compared to mining in Australia. There resource quality is not as good either. eg. India's coal is dirty, particularly its coking coal. China lacks coking coal, so these are good areas for investment.

The implication however is that Australia is going to have a strong market, so I would not be expecting property prices to fall. They will go sideways at worst, if the government opens up land releases. The reason to keep property prices hard is that it makes you work harder, you pay more taxes, and it ultimately makes you compliant with our fascist punitive government.
Sovereign risk is a problem in any country, and its easier than ever to shift funds and buy assets abroad. There are other reasons as well....foreign exchange benefits.

There is no question you will benefit from having assets in Australia. The AUD will be strong, though when our terms of trade is so strong usually Australians spend a lot on consumption. This is just one for reason to have assets overseas. The AUD is one of the most volatile currencies in the world. If you have the flexibility to be transferring funds at opportune times, you can save a great deal. For instance, we bought a house in NZ at USD0.50-0.53, its now 70c to the USD. The implication is the same for Australia.

Of course we want to be buying in markets with good fundamentals, or perhaps simply lifestyle benefits. My partner and I have property in NZ, Japan and the Philippines. We like these markets. I believe 84yen was a low for the Yen. That has not been my position for the last 2 years. That target was essentially reached. There will be a stronger currency looking ahead because of higher interest rates. Eventually the property market will recover, so you might want to look at foreclosed property. Of course if you can't borrow money in these markets its a bit more difficult, as you have to time your investment well. So you need to watch the charts. Of course we have provided guidance before through this site.

Japan is very cheap if you want a rural lifestyle place for just $USD20-50,000; its more in the city, but you don't need to live right in the city and pay $500,000 plus. Japan is a great place to be a tourist. The Philippines is not a lifestyle place for everyone, however it does have appeal as an investment destination as well.

From a currency perspective there is no need to rush your dollars out of Australia because the AUD is strong, and any interest rate increase to slow the economy will only aid the currency. The greater issue is timing. Key dates to consider are the elections coming up in the Philippines and Japan, plus I would not wait too long in the USA, as the surplus property will be soaked up. High apartment vacancy rates in places like Miami will be absorbed.

NZ Property Guide
Philippine Real Estate Guide
Foreclosed Japan Guide
Author
Andrew Sheldon
Applied Critical Thinking | www.SheldonThinks.com

Korean population and tourism rising in the Philippines

This article highlights the growing popularity of the Philippines, both as a tourist destination and a place to live. You will not see accurate statistics on inbound tourism since the rules for entering the country have become increasingly liberal. The Bureau of Immigration cites a 51% increase in the number of Koreans entering the Philippines between 2003 to 2006.
It is not just Koreans either - the number of Chinese are also rising strongly, as well as Westerners and Japanese. Each nation seems to have its particular precincts or focal areas. The Koreans are keen on Cebu as a holiday destination, however a great number of Korean families are living in the Philippines for the benefit of their children. The appeal is that they can live in the Philippines cheaper and ensure their children obtain an English education. This strategy also allows them to trade up to a nicer house, as well as have a maid. All the things they would never have conceived of in Korea.
For English most families stay in Manila, or choose the larger cities like Baguio. In some cases the father remains in Korea to work. I know cases of Korean families who have attempted to establish Korean food restaurants in the Philippines, and not been able to attract the customers to justify the business. The reason I suggest is the unsophisticated pallet of the Filipino who are not accustomed to Korean food, and for all but the upper class, eating out is a luxury, and they prefer sweat fatty foods, rather than spicy Korean.

A number of Westerners are taking of the opportunity to develop English schools in the Philippines for these people. Consider that many Westerners working in English schools in Japan or Korea are able to move to the Philippines can poach customers from their traditional home market. The logic is simply to save money and give the child the best possible chance to learn English. The strategy is typically:
1. Buy or rent an apartment for mom and child to live in for a few years
2. Buy a business with the intent to migrate
3. Buy or rent an apartment for university age student to study English

NZ Property Guide
Philippine Real Estate Guide
Foreclosed Japan Guide
Author
Andrew Sheldon
Applied Critical Thinking | www.SheldonThinks.com

Properties in NZ for Australian retirees

The cheapest places to buy property in NZ are probably the places you would least likely want to live. For example, driving through Murupara, NZ, I have sympathy for the people trying to sell a house there. Not so much that I wouldn't discourage you. The south too is isolated and colder, which might scare off buyers. The far east coast of Gisborne is a little remote.
The cheapest places you might consider are Wanganui and Taumaranui on the North Island and Oamaru on the South Island. I would be inclined to research the level of crime for Taumaranui, however Oamaru and Wanganui have a lot of appeal and decent priced houses. These places offer good buying because they have experienced depopulation. This might scare off investors, but for retirees, they offer attractive entries into the market.
In fact the opportunities to buy will only get better. We watch the number of properties for sale in Wanganui and the numbers just keep growing. There are several reasons:
1. Property prices are falling in real terms in some areas, or otherwise consolidating in growth areas as rents rise
2. Investment properties are being talked down by the government intent on taxing them
3. Depopulation is rife - not aided by a weak NZD relative to a strong AUD
4. Strong mining investment in Australia, which keeps taking New Zealanders offshore

This of course makes NZ good buying for Australians, though there are few places like Wanganui where I would rush in. I would suggest taking advantage of the strong AUD in coming years. Here are some pointers to the local value. It will only get better.
1. www.trademe.co.nz/link.aspx?i=12121&id=276780398
2. www.trademe.co.nz/link.aspx?i=12121&id=268402395
3. www.trademe.co.nz/link.aspx?i=12121&id=276591749
4. www.trademe.co.nz/link.aspx?i=12121&id=278200693

NZ Property Guide
Philippine Real Estate Guide
Foreclosed Japan Guide
Author
Andrew Sheldon
Applied Critical Thinking | www.SheldonThinks.com

Tools for researching property in NZ

If you are interested in researching property in NZ, there are several useful online tools you can use. The best tools are:

1. Online Statistics NZ interactive database - see their online portal. The attraction of this page is that it allows you to scan the income levels of each district and sub-region, and to focus in upon specific areas. The attached diagrams provide examples of the detail. You highlight an area to get basic statistics, and then click on the 'Quickstats' hyperlink to see a more detailed breakdown of information on the district's proportion of education qualifications, incomes, age, employment, housing, etc.
2. Google Maps - This is a useful tool which provides more research about the house you are about to buy. Consider the power to search into people's backyards. In NZ, this feature is useful for identifying bad neighbourhoods. ie. If you see a lot of cars in a backyard, they are probably wrecks. If you see several caravans, they are unregistered, unemployed people. Of course in the right neighbourhood they can attest to a car with several cars and recreational time (usually retiree minded).
3. REINZ Housing Price Index - see the REINZ website for further information.

NZ Property Guide
Philippine Real Estate Guide
Foreclosed Japan Guide
Author
Andrew Sheldon
Applied Critical Thinking | www.SheldonThinks.com

Australian property is hot, NZ is not (yet)

Property prices are likely to come under pressure in rural areas of NZ as a result of depopulation. The weakness of the NZD relative to the Australian dollar is likely to give encouragement to more New Zealanders to move to Australia. There is some $300 billion of mining projects to be developed in Australia over the next 20 years, and this will underpin a very strong economy thanks to the commodity demand of 2.5 billion people living in China and India. Property for this reason looks very good in Australia. Those areas likely to benefit most are Perth and Darwin (because of their role as a service centres to mining & oil industries), plus anywhere from along the Queensland coast.
The argument will be made that Australian property is overpriced. That is true, but the strength in the economy and restrictions on urban development mean that those characteristics are going to be retained. Regional coastal areas however look more attractive. The influx of people from NZ will help, but I would suggest to you that the movement might just go both ways. i.e. The weak NZD relative to the AUD will attract NZ'ers to Australia to earn income, but it will also draw poorer Australians to NZ for retirement or holiday (houses). Deregulation of the airline industry between Australia and NZ is likely to aid that process.

In the short term, I would keep an eye on the number of homes for sale in rural places. i.e. Watch online listings in each rural city. The main cities tend to have more growth, so they are still expensive, and will not offer the attractive discounts, however rural areas like Wanganui, which suffer depopulation are likely to turn around at some point. This has already happened in the Southland area, an area that has good access from Queenstown. Wanganui is similarly well located between Auckland-Rotorua-Wellington, and is perhaps the nicest town in NZ, offering full services to retirees. Its weather is reasonable, though it is a little windier compared to other places. It has reasonable sunshine hours. There is less wind on the Bay of Plenty and East Coasts.

NZ Property Guide
Philippine Real Estate Guide
Foreclosed Japan Guide
Author
Andrew Sheldon
Applied Critical Thinking | www.SheldonThinks.com

Are OFWs really buying property?

The Philippines Inquirer "Property sales to OFWs are rising" (7th Mar 2010) seems to suggest inconclusively that Overseas Foreign Workers (OFWs) are buying more property in the Philippines. This strikes me more of biased reporting by interests aligned to the property developers. Certainly remittances are rising - up some 16% if I remember correctly. Though I would suggest increases in interest rates, new property sales, non-property-related remittances and long 20-year loan commitments could readily account for those increases, not to mention uncertainty about the US market, the talk of weakness in the USD, concerns for family during recession, volatility or uncertainty in investment markets.
I suggest instead that the ratio of OFW buying has increased as a proportion of total sales because local property buying has declined significantly. The increase in domestic tourism might suggest that Filipinos are spending more on recreation rather than capital investments. I think if there was more to this story, they would have provided more detail on absolute sales numbers. This is not an easy number to determine because some OFWs are inclined to buy in the names of local family. My experience tells me to be suspicious of this argument. Property developers will benefit from prior commitments to incomplete properties. They should thus record reasonable sales for this year, though I suggest it probably does not look so good for 2011.
You can read the article on the Philippines Inquirer website.

NZ Property Guide
Philippine Real Estate Guide
Foreclosed Japan Guide
Author
Andrew Sheldon
Applied Critical Thinking | www.SheldonThinks.com

Australian opportunity in NZ property

The latest news is that the NZ dollar (NZD) has fallen to a 9-year low against the Australian dollar (AUD). This is good news for Australians and New Zealanders who can take advantage of the disparity in currency values. Consider the following:

1. It makes sense for Australians to buy property if they think their is an opportunity to transfer funds at an opportune low interest rate.
2. It makes sense for Australians to buy property if they think the NZD will recoup its current losses against the AUD.
3. It makes sense for Australians with a house in Australia to buy a place in NZ, and use the rent from their Australian property to pay the interest on their NZ property. They will earn more rent off their (generally) more expensive Australian home, and they will benefit from the cross-rate when they transfer those AUD to NZD. They will have a nice income whilst the cross rate favours AUD. They do need however to anticipate a peaking of the resources boom in Australia to best transfer their wealth. I suggest that will occur price to the peak in metal prices. It will have more to do with consumption levels. The Australian government will be raising interest rates to prevent that, which will also help the AUD:NZD.

Irrespective of your outlook, there is the opportunity to stagger your currency transfers across the period of your loan. Clearly if Australians want to retire in NZ then they need to think about buying property now rather than when it reaches those lows, as they will need to set up a bank account. It need only be a NZD account in Australia if your bank offers that. My guess is that ANZ would. The opportunity is similarly attractive for those NZ'ers working in Australia, to send their money home. I would suggest however that it is premature to send money back to NZ.

There are two factors working for the AUD - strong business investment in mining & energy, strong commodity prices, and the need to raise interest rates to reduce inflationary pressures. Looking at the chart above it is apparent that there are two lines of support for the NZD - the 0.70 and 0.75 levels. I would suggest the NZD is eventually going to get to 70c, so I would suggest people target 0.71 for a reasonable entry into the NZD, as its difficult to pick the bottom. I call this chart pattern an 'accretionary wedge'. We are already seeing this pattern unfolding, as the NZD is already at a 9-year low. The trick is to be prepared to profit from it.

If you want to know more about the NZ property market, i.e. Where to buy, etc, you might want to look at our property guide - see link below.
NZ Property Guide
Philippine Real Estate Guide
Foreclosed Japan Guide

Philippines attractive to Europeans

A gentleman the other bought my report from Spain. It was my first customer from Spain, so I was surprised; however I quickly made a connection with the current banking and currency crisis in Europe. I am aware that wealthy Greeks, Portuguese and Spanish investors are pulling their money out of Euro. This is understandable given the possibility of these countries being ejected from the EU. I actually think this is a desirable occurrence. These 3 countries and a number of Eastern European countries would be better served by their own currency.
I can nevertheless see the interest of this particular customer in the Philippines because of the historical Spanish influence in the Philippines, the similar values, the property fundamentals, the economic fundamentals. The Euro is not faring great against the peso, but even still the trading band is relatively narrow, so no great loss in making transfers now. Over the last 5 years the Euro has traded between PHP60-70, so not much variation.
The Philippines is some of the best exposure you will get to Asia. Its about as Western exposure as you can get to Asia without paying a premium for the currency; as you will do buying property or other asset classes in Australia, Canada or NZ.

NZ Property Guide
Philippine Real Estate Guide
Foreclosed Japan Guide

Philippines property report - reform minded economy

We have just finished our latest report - the 2nd edition of the Philippines Property report. This report is updates the 1st edition, which was already a very comprehensive 2 volume report. The latest report is 345 pages. Some people would prefer a shorter report, however everyone has different knowledge on each country we look at, so we attempt to consider all pertinent material. For those wanting specific information, there is a detailed table of contents included, which can be downloaded from this site.

Some of the pertinent facts which might interest readers is the opportunity for people to buy rural banks in the Philippines. For those of you with a reasonable about of money, a micro-finance business might appeal to you; particularly as you could play a part in the improving standards of micro-finance or banking in the Philippines. These banks have higher rates of non-performing (foreclosures) loans than the main banks. Some rural banking reforms are currently under consideration including foreign investment (up to 40%) and the ability to offer insurance products.

Another big development in the Philippines is the growth of tourism. The Bicol area has recorded a 163% increase in domestic tourism in the first nine months to Sept 2009, including an increase of over 20% in foreign tourists. The Dept of Tourism has been spending a lot of money on tourism. I have noted the difference on my last tour around the Bicol region and Mountain Province. The Bohol area is another popular place, both for local and international tourists. This is of course important for resort developers. Resort developers are looking further afield than places like Boracay and Cebu, which appeal mostly to the Koreans and Chinese.

Property yields in the Philippines are still pretty reasonable at 9%. I would expect these to rise again from the middle of the year as a result of inflation; though I suggest they will rise in lock-step with higher property prices. Buyers are still interested in the residential market, with the commercial market taking the brunt of the recessional doldrums. The fact remains that remittances to the Philippines are strong, Business Process Outsourcing (BPO) is strong, tourism is up 16% and commodity prices are strong as well. By all measures, the Philippines is ready for business and investment.

We considered in the report the appeal of other markets. Thailand is one country which ranks highly, and others might consider property in Indonesia, which offers higher yields. However Indonesia has very tight visa conditions, and does not demonstrate the same level of fiscal reform. I have for the last 2 years been impressed by the progress of reform in the Philippines. More progress is needed in areas like productivity, reform of the ports, the efficiency and fairness of tax collection, reduction in corruption. Aside from corruption I can see some progress in these areas, but a lot more needs to be done. Thailand's yields are not as attractive at this point.

The improvement of infrastructure will mean a great deal for the country. A few years ago we bought some land in Lipa for P750, and already we are fielding interest at P2,000 per m2.

NZ Property Guide
Philippine Real Estate Guide
Foreclosed Japan Guide