We have long known that technology is disruptive. You have to ask however what impact technology will have on our lives looking forward. No where is such consideration more important that in the asset market. The reason why this is the case is because conceptually, the value of assets or wealth is to be measured in terms of 'the net present value of future incomes', or the potential for certain assets to yield those incomes. This is the quantification of value. What happens where there is too much money chasing too few assets, is that there is an economic imbalance, that is resulting in the financial markets trumping the real economy. We have the bidding up of asset prices in most 'aspirational' growth markets, prompting financial relativism. Money is undermining the yields on the assets being bid up. Lower interest rates are part of that, but consider the impact of AirBNB.
AirBNB is having two impacts:
a. It is collapsing yields through competition
b. It is introducing property stock to the market that would not otherwise be there.
Consider the Philippines for instance, or Japan. There are a lot of Filipino expats in the US or Middle East earning money, and the sales-spruiking agents from SM, Robinsons, are targeting the financially naive expats with 'yields' on investment, or property portfolios whilst they are cheap. In Japan, there are a lot of Chinese people buying up investment condos. The 'trade' is not as big as has been 'mooted' in the press, however it is occurring. There is no gross over-supply. In fact, the prospects for AirBNB to add utility and flexibility to property renting is a far bigger phenomenon.
The reality is that, whilst these markets are cheap compared to Western markets, they are in oversupply given the poor utilisation of those assets. The problem is that many of these units bought for personal use, or maybe rental, are going to find their way onto AirBNB, and their competitiveness is going to come under attack from other providers, whose profit motive might be marginal, because they only need to cover costs. Clearly those people holding stock as 'investors' are most vulnerable if they are indebted, and interest rates rise. There is no prospect of that. But is does suggest that the property market is a candle being 'burnt from both ends':
a. The yields on investor property are being undermined by increased stock and the greater ease of 'self-listing' properties through AirBNB.
b. The yields on hotel property portfolios are going to come under attack from AirBNB. Why stay in a hotel when you can stay in a more flexible 'short term' AirBNB accommodation for 7-day stints closer to your preferred location, with less sensitivity to price, and avoid the add-on costs of hotels like telephone, internet, food. This point makes more sense in a place like the Philippines where condos are increasingly integrated with malls.
c. Ultimately commercial properties are destined to come under similar attack as people become more mobile, there is greater use of contractors, and people working from home.
The entire property market is under a revolution and no one is talking about this phenomenon. In fact, governments are seemingly going in the opposite direction of making property even less enticing with higher costs, i.e. They are restricting zoning, driving up prices which raises property rates (taxes), and of course subsidising interest rates.
This is a gigantic crisis. There is no reason to expect imminent crisis. AirBNB will take years to work its way into a serious market phenomenon. Its still new, however the trend is clear. The interesting issue is that AirBNB will just make property prices go 'less high' by driving down yields. It might make one however question the 'validity' of statistics that might use 'traditional' rental prices as a measure of market health (i.e. yields).
It would not be surprising to see governments take the 'perverse' position of blaming AirBNB for the collapse of property in years to come. The reality is that AirBNB is a god-send for better asset utilisation. The problem is ultimately subsidised credit and the 'protracted' low unskilled wages that have become a 'drug' for the global economy. They were caused by the autocratic, statist regimes in 'the third world economies', which today we consider 'the emerging markets'. The problem is that we are going to see people blaming the market for these outcomes, however it was always a 'political crisis' in the making.
Japan yields are actually very reasonable, as as Philippines and Indonesian yields, so we are not singling these markets out as if they were 'overpriced'. They are going to rise in price. The issue is not the 'yields' on these markets, but the warning. There is a crisis in the future, and these markets are opportunities for the next decade. Most Western markets are in fact the 'risk markets'. They are already overpriced. When matters read a head, rental properties are competing with a friend on Facebook with a spare bed. More scary is the fact that AirBNB presents a more flexible scary risk to such property because AirBNB listings are everywhere. They are closer to any particular place you need to be, or want to be.
With so much human capital invested in this market, AirBNB represents a transformational change that will 'upset' property markets, to an extent greater than Facebook and Google Adwords transformed advertising. Why? The value of the underlying assets affected. This does not stop property prices going higher; it means that property prices will inevitably collapse to a lower yield when those lower 'competitive' rents work their way through the market.
Asian property markets outperforming Japan Foreclosed Guide Philippines Property Guide
Profit from mining with Global Mining Investing eBook
AirBNB is having two impacts:
a. It is collapsing yields through competition
b. It is introducing property stock to the market that would not otherwise be there.
Consider the Philippines for instance, or Japan. There are a lot of Filipino expats in the US or Middle East earning money, and the sales-spruiking agents from SM, Robinsons, are targeting the financially naive expats with 'yields' on investment, or property portfolios whilst they are cheap. In Japan, there are a lot of Chinese people buying up investment condos. The 'trade' is not as big as has been 'mooted' in the press, however it is occurring. There is no gross over-supply. In fact, the prospects for AirBNB to add utility and flexibility to property renting is a far bigger phenomenon.
The reality is that, whilst these markets are cheap compared to Western markets, they are in oversupply given the poor utilisation of those assets. The problem is that many of these units bought for personal use, or maybe rental, are going to find their way onto AirBNB, and their competitiveness is going to come under attack from other providers, whose profit motive might be marginal, because they only need to cover costs. Clearly those people holding stock as 'investors' are most vulnerable if they are indebted, and interest rates rise. There is no prospect of that. But is does suggest that the property market is a candle being 'burnt from both ends':
a. The yields on investor property are being undermined by increased stock and the greater ease of 'self-listing' properties through AirBNB.
b. The yields on hotel property portfolios are going to come under attack from AirBNB. Why stay in a hotel when you can stay in a more flexible 'short term' AirBNB accommodation for 7-day stints closer to your preferred location, with less sensitivity to price, and avoid the add-on costs of hotels like telephone, internet, food. This point makes more sense in a place like the Philippines where condos are increasingly integrated with malls.
c. Ultimately commercial properties are destined to come under similar attack as people become more mobile, there is greater use of contractors, and people working from home.
The entire property market is under a revolution and no one is talking about this phenomenon. In fact, governments are seemingly going in the opposite direction of making property even less enticing with higher costs, i.e. They are restricting zoning, driving up prices which raises property rates (taxes), and of course subsidising interest rates.
This is a gigantic crisis. There is no reason to expect imminent crisis. AirBNB will take years to work its way into a serious market phenomenon. Its still new, however the trend is clear. The interesting issue is that AirBNB will just make property prices go 'less high' by driving down yields. It might make one however question the 'validity' of statistics that might use 'traditional' rental prices as a measure of market health (i.e. yields).
It would not be surprising to see governments take the 'perverse' position of blaming AirBNB for the collapse of property in years to come. The reality is that AirBNB is a god-send for better asset utilisation. The problem is ultimately subsidised credit and the 'protracted' low unskilled wages that have become a 'drug' for the global economy. They were caused by the autocratic, statist regimes in 'the third world economies', which today we consider 'the emerging markets'. The problem is that we are going to see people blaming the market for these outcomes, however it was always a 'political crisis' in the making.
Japan yields are actually very reasonable, as as Philippines and Indonesian yields, so we are not singling these markets out as if they were 'overpriced'. They are going to rise in price. The issue is not the 'yields' on these markets, but the warning. There is a crisis in the future, and these markets are opportunities for the next decade. Most Western markets are in fact the 'risk markets'. They are already overpriced. When matters read a head, rental properties are competing with a friend on Facebook with a spare bed. More scary is the fact that AirBNB presents a more flexible scary risk to such property because AirBNB listings are everywhere. They are closer to any particular place you need to be, or want to be.
With so much human capital invested in this market, AirBNB represents a transformational change that will 'upset' property markets, to an extent greater than Facebook and Google Adwords transformed advertising. Why? The value of the underlying assets affected. This does not stop property prices going higher; it means that property prices will inevitably collapse to a lower yield when those lower 'competitive' rents work their way through the market.
Asian property markets outperforming Japan Foreclosed Guide Philippines Property Guide
Profit from mining with Global Mining Investing eBook
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