Each Saturday morning I like to share some of the interesting property investment and economic articles I’ve read during the week.
I’ve put them here all in the one place for your easy reading.
Enjoy your weekend….and please forward to your friends by clicking a social link buttons on the left.
Over the long haul home is where the profit is
In one of his typically insightful articles, economist Chris Joye explains that most investors look at investment returns but generally make two mistakes.
First, they often ignore, or seriously underestimate, “risk”.
Before the global financial crisis, did you think it was possible that the total value of the sharemarket could fall by half within a year?
Or that the value of allegedly safe, income-generating listed property trusts (LPTs) could plummet 70 per cent?
In a surprising demonstration of risk insouciance, the typical Aussie super fund managed to commit more than two-thirds of its members’ savings to these two asset classes alone.
The second mistake savers make is that they often evaluate each investment independently of one another – that is, they rarely engage in portfolio-wide analysis. Have you, for instance, ever worked out the return correlation between your home and your other savings? I doubt it.
Joye shows why when you adjust for risk, residential real estate has made a great investment over the last 30 years
And these figures don’t take leverage or gearing into account. Obviously this will magnify the returns and risks
Property reporting – a race to the bottom.
Another great Property Uncut show produced by Kevin Turner. If you don’t already subscribe to this excellent weekly Internet based radio show.
This week he has a heap of great guests:
- Dr Andrew Wilson from Australian Property Monitors who gives two good reasons why there is such a variation in the reports and goes on to say that it could be more an indication about where the market actually is and not where it has been.
- Louis Christopher from SQM Research – a long time critic of the daily index – wades into the debate with information about where he prefers to source the statistics to help him come up with his version of the events.
- Property investor, developer and mentor Nhan Nguyen from Advanced Property Strategies explains how he sorts through the reports to develop his strategy. It is much more hands on, grounded and relies on actual activity as he explains.
- Hot Spotting guru Terry Ryder says he believes it is nothing more than a race to the bottom to see who can produce the most negative report – ‘the end of the mining boom’, ‘declining economy’ and even ‘interest rate hikes when in fact they declined’.
- Michael Yardney from Metropole Property Strategists will wrap it all up for us this week with his thoughts on what is going on with the reporting and in his view some of the fundamental errors being made that confuse investors.
You should definitely subscribe to this weekly audio program. Click Here It’s free and you can listen on the go on your smartphone, iPad etc.
Predictions for the spring market
With spring fast approaching, investors and home buyers are wondering what’s in store for our property markets.
Will it be all doom and gloom, or are things looking up?
Andrew Wilson, the senior economist at Australian Property Monitors gives his insights on what is happening in each of Australia’s capital city markets in this article.
302,565 reasons why demand for housing is rising
The Australian Bureau of Statistics (ABS) recently released quarterly population growth data for the December 2011 quarter which showed that over the 2011 calendar year, Australia’s residential population increased by 302,565 equating to a growth rate of 1.36.
The annual population increase was the strongest since the 12 months to March 2010 (313,529 and 1.44%).
Apart from creating a demand for housing, with population growth once again increasing this could create more social and political issues.
Dwelling commencements continue to show no bounce despite the fact that population growth has been above the long-term average level since March 2005.
Population growth also creates additional demand essential services. Given the Federal Government has cut spending to return the Budget to surplus it is difficult to see how essential services are going to be delivered to cater to the increase in population growth.
As a result, we can expect the population growth debate to become a political issue once again over the coming year.
Read more here and find out what happening with population growth in your state…
100 Mind-Blowing Facts About the US Economy
In a recent great article Motley Fool columnist Morgan Housel listed 100 fascinating facts about the US economy.
I’m going to share some here with you now. They’re in no particular order and you can read the rest in his article here.
- Facebook claims 100 billion friend connections have been made on its social network. That’s about the same number of humans that have ever lived since 50,000 B.C., according to the Population Reference Bureau.
- China’s labor force grew by 145 million from 1990 to 2008. The entire U.S. labor force today is 156 million.
- From 1929 to 1932, the total amount of money paid out in wages fell by 60%, according to historian Frederick Lewis Allen. By contrast, from 2007-2009, total American wages fell less than 5%. What we experienced in recent years was nothing close to the Great Depression.
- A Honda Civic hybrid starts at $24,200 and gets 44 miles per gallon. A Civic with a normal gas engine starts at $16,000 and gets 39 MPG. If you drive 15,000 miles a year and gas averages $4 a gallon, it will take 47 years for the hybrid to justify its cost over the traditional model.
- China’s working-age population is expected to shrink by more than 200 million between now and 2050. The U.S.’ is expected to rise by 47 million.
- In Russia, 0.00007% of the population (100 people) controls 20% of the wealth.
- Boeing accounts for almost 2% of all U.S. exports.
- The U.S. makes up less than 5% of the world’s population, but a third of the world’s spending on pharmaceuticals, according to the IMS Institute for Healthcare.
- Federal Reserve economist Bhashkar Mazumder has shown that incomes among brothers are more correlated than height or weight.
10. According to Sheldon Jacobson of the University of Illinois, the added weight carried by vehicles due to obesity in America consumes an additional 938 million gallons of gasoline a year.
11. A study of retired investors between 1999 and 2009 showed those who hired a stockbroker underperformed those managing their own money by 1.5% a year. “Fees accounted for only about half the gap,” writes Jason Zweig of The Wall Street Journal.
12. In 2010, 6.0 percent of families reported that their spending usually exceeds their income,” according to the Federal Reserve’s Survey of Consumer Finance.
13. Americans will inherit $27 trillion over the next four decades, according to the Center on Wealth and Philanthropy at Boston College.
14. America is home to less than 5% of the world’s population, but nearly a quarter of its prisoners.
15. According to economists Thomas Piketty and Emmanuel Saez, 80% of all income growth from 1980 to 2005 went to the top 1% of wage earners.
16. We tend to underestimate how powerful the agriculture boom has been in the last century. The 1952 book The Big Change describes life in America in the year 1900: “In most parts of the United States people were virtually without fresh fruit and green vegetables from late autumn to late spring.”
17. The first American hotel to offer every guest a private bathroom didn’t open until 1907.
18. In 1900, the standard American workweek was 10 hours a day, six days week. Historian Frederick Lewis Allen notes in a 1952 essay: “If anybody had suggested a five-day week he would have been considered demented.”
19. According to Bankrate.com, nearly half of Americans don’t have enough savings to cover three months expenses. Worth noting: The average duration of unemployment is now 10 months.
You can read more fascinating fact at Motley Fool here.
Subscribe & don’t miss a single episode of Michael Yardney’s podcast
Hear Michael & a select panel of guest experts discuss property investment, success & money related topics. Subscribe now, whether you're on an Apple or Android handset.
Need help listening to Michael Yardney’s podcast from your phone or tablet?
We have created easy to follow instructions for you whether you're on iPhone / iPad or an Android device.
Prefer to subscribe via email?
Join Michael Yardney's inner circle of daily subscribers and get into the head of Australia's best property investment advisor and a wide team of leading property researchers and commentators.