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I RECENTLY asked a book publicist who has been badgering me to write about his authors: "What have you got for me?" "Well, Steve McKnight's got another book coming out."
You know the boom's back when this spruiker brings out another book.
McKnight is Australia's best-selling property author ever ... well, according to his publicist anyway. He has sold 160,000 copies of his ridiculously titled From 0 to 130 Properties in 3.5 Years.
Then, as the property market slowed in late 2006, a defiant McKnight doubled down and followed up with From 0 to 260+ Properties in 7 Years.
"What's next? From 0 to 720 Properties in 23 Days?" I asked.
"No," said the publicist, "he's revising his original 0 to 130 book. Give him a call."
And so I did:
Barefoot: "What happened to the other 130 properties, Steve?"
McKnight: "Well, I split with my business partner and he bought out all my properties but I got into real estate with the aim of not having to work, and I achieved that in 2004."
He was talking to me on his mobile as he walked off the plane from his gruelling state-by-state book-flogging fest.
McKnight went on to say: "Property investors wanting to cash-in on the next property boom have a six-month window of opportunity to get in or they'll miss the boat."
Now on this point, I actually agree with him.
Over the next six months - and possibly beyond - house prices look set to rise. And that's on the back of an already strong recovery.
The latest figures from the Australian Bureau of Statistics show that prices were growing at an annual rate of 6.2 per cent in the September quarter.
These figures are all the more impressive given that interest rates have risen, and we've been softened up to expect more to come.
BARRING economic Armageddon, the Reserve Bank of Australia plans to increase official interest rates back to pre-emergency levels (best guess of around 5 per cent).
So why will prices continue to rise, especially given the First Home Buyers Grant (FHBG) is winding down?
Well, the people who have a vested interest in seeing property prices stay at unaffordable levels (banks, real estate agents, politicians, spruikers) are making a compelling argument for higher house prices. And unlike their usual self-serving claptrap, this time it actually stacks up - in the short term at least.
Let's take a look at it:
The threat of rising interest rates has caused some builders to delay, and in many cases abandon, starting new housing over the past 12 months.
This shortage has fed into the already existing under-supply of homes that occurs because of our increasing population.
Now even if you only have the most basic understanding of economics (like, say, the Rudd Cabinet), you'll be able to grasp the concept of supply and demand - a shortage in the supply of homes is pushing up the price of existing stock.
Now let's look at the demand side of the equation.
This Government, like the one before it, has done everything in its power to interfere with the market and prop up housing prices.
There are the obvious measures like the boosting of the FHBG, and the not so obvious, like their constant meddling with superannuation.
Specifically, if you're a high-income earner under the age of 50, current super rules only allow you to put a maximum of $25,000 into the juicy pre-tax super contributions (down from $50,000 in the last Budget).
If you're in this situation, you face a decision: you can either pay out a large wad to the taxman, or you can go looking for a tax deduction (or two) in the form of a negatively geared property investment - pushing demand up even more.
THERE'S also been speculation in the media over the past few weeks that Treasurer Wayne Swan is looking to introduce "equity" back into the super system - which many have interpreted as hitting higher income earners by reducing their superannuation tax benefits further.
Underpinning all these points is that Australia has sailed through the global financial crisis relatively unscathed, thanks in part to sustained Chinese growth together with (proportionately) the biggest sugar-hit stimulus measures in the world. And it's worked.
If there was a pin that would have pricked the housing bubble, it was going to be a spike in unemployment.
In the darkest days of the GFC, the Government flagged that unemployment could reach as high as 8.5 per cent. Thankfully that hasn't eventuated, and many economists are now suggesting that unemployment has peaked at the current rate of 5.8 per cent.
CONFIDENCE has returned to the market - and even if rates rise by 1.5 per cent next year, historically it will still be cheap to borrow. This will fuel investors, including many who have been burnt by the share market.
So is now the time to jump in and buy the first of your 130 properties?
If you listen to McKnight, you probably would.
His updated book advises people to invest in cashflow positive property (where the rental income is more than your outgoings, and the property thus puts money in your pocket), and he warns that "anyone who negative gears is a mug".
This advice makes perfect sense - in the short term - in much the same way as encouraging young couples to take advantage of the government bribe, and generation-low rates, to get their feet in their first home.
Yet taxes, fees and the long selling lead-time combine to make property a long-term investment. And the longer-term trend (for the share market and the property market) is shaky at best.
The US economy is still a basket case - unemployment is still rising, and the number of homeowners hitting the wall is yet to reach its peak.
Sustained low interest rates are risking another borrowing bubble (this time in commodities), and the unprecedented money-printing of the past 18 months may lead to a jump in inflation, and with it much higher long-term interest rates.
If this occurs, many of McKnight's readers will struggle to keep their investment properties cashflow positive, because their biggest cost (repayments) will rise over the next few years. Ditto for young couples.
I reckon a better book would be 'From 0 to 1 Property - Pay Off Your Home Quick and Spend More Time with Your Family and Less Time Stressing', but it's hardly going to become the best-selling property title of all time now is it?
Tread your own path!
- Barefoot Investor Scott Pape
- From: Herald Sun
- November 21, 2009 12:00AM
I RECENTLY asked a book publicist who has been badgering me to write about his authors: "What have you got for me?" "Well, Steve McKnight's got another book coming out."
You know the boom's back when this spruiker brings out another book.
McKnight is Australia's best-selling property author ever ... well, according to his publicist anyway. He has sold 160,000 copies of his ridiculously titled From 0 to 130 Properties in 3.5 Years.
Then, as the property market slowed in late 2006, a defiant McKnight doubled down and followed up with From 0 to 260+ Properties in 7 Years.
"What's next? From 0 to 720 Properties in 23 Days?" I asked.
"No," said the publicist, "he's revising his original 0 to 130 book. Give him a call."
And so I did:
Barefoot: "What happened to the other 130 properties, Steve?"
McKnight: "Well, I split with my business partner and he bought out all my properties but I got into real estate with the aim of not having to work, and I achieved that in 2004."
He was talking to me on his mobile as he walked off the plane from his gruelling state-by-state book-flogging fest.
McKnight went on to say: "Property investors wanting to cash-in on the next property boom have a six-month window of opportunity to get in or they'll miss the boat."
Now on this point, I actually agree with him.
Over the next six months - and possibly beyond - house prices look set to rise. And that's on the back of an already strong recovery.
The latest figures from the Australian Bureau of Statistics show that prices were growing at an annual rate of 6.2 per cent in the September quarter.
These figures are all the more impressive given that interest rates have risen, and we've been softened up to expect more to come.
BARRING economic Armageddon, the Reserve Bank of Australia plans to increase official interest rates back to pre-emergency levels (best guess of around 5 per cent).
So why will prices continue to rise, especially given the First Home Buyers Grant (FHBG) is winding down?
Well, the people who have a vested interest in seeing property prices stay at unaffordable levels (banks, real estate agents, politicians, spruikers) are making a compelling argument for higher house prices. And unlike their usual self-serving claptrap, this time it actually stacks up - in the short term at least.
Let's take a look at it:
The threat of rising interest rates has caused some builders to delay, and in many cases abandon, starting new housing over the past 12 months.
This shortage has fed into the already existing under-supply of homes that occurs because of our increasing population.
Now even if you only have the most basic understanding of economics (like, say, the Rudd Cabinet), you'll be able to grasp the concept of supply and demand - a shortage in the supply of homes is pushing up the price of existing stock.
Now let's look at the demand side of the equation.
This Government, like the one before it, has done everything in its power to interfere with the market and prop up housing prices.
There are the obvious measures like the boosting of the FHBG, and the not so obvious, like their constant meddling with superannuation.
Specifically, if you're a high-income earner under the age of 50, current super rules only allow you to put a maximum of $25,000 into the juicy pre-tax super contributions (down from $50,000 in the last Budget).
If you're in this situation, you face a decision: you can either pay out a large wad to the taxman, or you can go looking for a tax deduction (or two) in the form of a negatively geared property investment - pushing demand up even more.
THERE'S also been speculation in the media over the past few weeks that Treasurer Wayne Swan is looking to introduce "equity" back into the super system - which many have interpreted as hitting higher income earners by reducing their superannuation tax benefits further.
Underpinning all these points is that Australia has sailed through the global financial crisis relatively unscathed, thanks in part to sustained Chinese growth together with (proportionately) the biggest sugar-hit stimulus measures in the world. And it's worked.
If there was a pin that would have pricked the housing bubble, it was going to be a spike in unemployment.
In the darkest days of the GFC, the Government flagged that unemployment could reach as high as 8.5 per cent. Thankfully that hasn't eventuated, and many economists are now suggesting that unemployment has peaked at the current rate of 5.8 per cent.
CONFIDENCE has returned to the market - and even if rates rise by 1.5 per cent next year, historically it will still be cheap to borrow. This will fuel investors, including many who have been burnt by the share market.
So is now the time to jump in and buy the first of your 130 properties?
If you listen to McKnight, you probably would.
His updated book advises people to invest in cashflow positive property (where the rental income is more than your outgoings, and the property thus puts money in your pocket), and he warns that "anyone who negative gears is a mug".
This advice makes perfect sense - in the short term - in much the same way as encouraging young couples to take advantage of the government bribe, and generation-low rates, to get their feet in their first home.
Yet taxes, fees and the long selling lead-time combine to make property a long-term investment. And the longer-term trend (for the share market and the property market) is shaky at best.
The US economy is still a basket case - unemployment is still rising, and the number of homeowners hitting the wall is yet to reach its peak.
Sustained low interest rates are risking another borrowing bubble (this time in commodities), and the unprecedented money-printing of the past 18 months may lead to a jump in inflation, and with it much higher long-term interest rates.
If this occurs, many of McKnight's readers will struggle to keep their investment properties cashflow positive, because their biggest cost (repayments) will rise over the next few years. Ditto for young couples.
I reckon a better book would be 'From 0 to 1 Property - Pay Off Your Home Quick and Spend More Time with Your Family and Less Time Stressing', but it's hardly going to become the best-selling property title of all time now is it?
Tread your own path!
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