I got another earful of criticism from a client today. The main grouse is that the investments failed to beat inflation. But the S&P500 index barely beat 2007's high. I achieved 8% over 2007 high. It hurts when I am continually criticized. In fact I feel that it's unfair. Nevertheless I realized that 80% of clients just want inflation + 2% return yearly. There is no point taking too much risk at all.
I have managed to get my system right in the last 1 year. In fact I achieved 25% return for my own portfolio last 12 months. I will get better I'm sure. But I don't expect the criticisms to stop. There are patient clients who understand that 2008 and 2011 wiped out most returns. I am grateful for those reasonable clients. I will take care of them better.
Tuesday 21 May 2013
Sunday 12 May 2013
What's the Rental Yield for Iskandar?
I first looked at Iskandar in 2006. Back then it was mainly jungle and there was plenty of skepticism. The land was aplenty. Houses were very cheap but crime was rampant in JB. A friend even got his car stolen in JB while having lunch.
In 2009, I re-looked at Iskandar. I could see the region developing and could understand why it has to be a hinterland for Singapore. There is no way that Singapore could continue to grow without a cheaper manufacturing base nearby. Iskandar will be to Singapore what Shenzhen will be to Hong Kong.
Interests gathered with international investors in 2011. Horizon hills terraces around 3300 sf were sold for MYR730k. That's slightly over MYR 200 psf. Just a few years back, in 2009, it was at 500k. I believe I have missed that opportunity.
But Iskandar draws many parallels with the great gold rush in the US in the 19th century, with Dubai between 2004 - 2008, and Dublin from 2000 - 2007. During the Great American Gold Rush, the prospectors rushed in, many did not strike rich. Instead, the ones who sold spades and machinery to explore gold made it rich. During the Dubai property boom, prices escalated exponentially. One key ingredient was missing, the was no yield. The number of homes surpassed the population of Dubai. There was never a reference to cash flow, just future capital appreciation. Movie stars, football stars bought homes in the desert oasis based on this premise. Of course it crashed over 70% between 2008 till now. At the moment, it is still trying to clear many years worth of inventory. If you play the Iskandar game, you have to get out before the music stops or you'll be left with the baby!
Dublin had more fundamentals. But like Singapore, its planning permission was far more ambitious than the realized population growth. Yields were low, but unlike Dubai or Iskandar, they were around
3 or 4% gross. Speculators did not care that mortgage rates were at 6% then. Another eerie similarity between Dublin and Iskandar was the lack of transacted data. No one could tell exactly what the last transacted price was. Dublin's property price collapsed 57% and is just beginning to bottom.
Iskandar's properties will have little yield. The bulk of the completions will occur from 2014 onwards. If you bought a bungalow for MYR1.5m at 4.2% interest, for a 30 year loan, at 85% LTV, you would have to pay MYR 71k per year of mortgage, which works out to almost MYR 6k per month. If interest rates rise to 6% ( average interest over 20 years was around 7%), the monthly payment rises to above MYR 7k per month. I believe some investors will start to put their homes on the market if they cannot find tenants. That's when the day of reckoning occurs. I do not have the existing housing stock in Iskandar because data is scanty. So there's no way to gauge the extent of over supply in Iskandar. All I know is the population is around 1.7m and anything over 380 spells over supply. Also at a growth rate of 3% per annum, any completions of over 11k net per year spells trouble.
The next point is, like the Geat Gold Rush, why be a prospector and put your capital at risk? The developers tend to sell at a 10-20% premium above resale market. This is similar to London. But in Singapore, the premium has narrowed due to the tightening measures. There is plenty of land and the developers will just keep selling. They don't have to care about the lack of rental demand. I would not buy from a developer at a premium but only from the resale market if I wish to buy because I know that there will be desperate sellers in the next 2 years.
The developers also know that those earlier units that were completed will turn competitors starting starting from june 2013. I know that developers are selling horizon hills latest phase at 1.5m for the same size (over MYR 400 psf) so I could drive a hard bargain to bid for completed homes for around MYR900k to 1m. As I will have hundreds of choices I could drive a hard bargain. In any case, I am sure that I cannot get 6% yield so I won't bother. In any case, the developers will not have it easy once those that they sold in 2011/12/13 are completed in 2013/14/15. When competition between resale and new is fierce, prices will stabilize. Only then will we know what the real price is.
In terms of price to income ratio, Iskandar is certainly cheap. Price to income wise it's around 12x. 30 year average is around 10. Singapore's price to income is 25x and average is 15. It's likely that Singapore will hover or fall until it reaches the average. Iskandar will take many years to edge up due to the land supply. Mind you, Iskandar is not Penang which is an island. The average for global mega cities is around 15x.
A few friends asked me about shop houses. I find that the yield is insufficient, although the fundamentals better than houses. The problem is only the first floor is a shop. The second and third floors usually have little value. So the yield is hardly 6% at all. More like 3-4%. Owners of shop houses with yields over 7% are smart. They will not sell at those yields but at 4-5%.the fundamentals are even worse than in Singapore because our yields are 3.5% and mortgage rate 1.6%!
There will always be exceptions in Iskandar. Occasionally you might find an undervalued gem, or a location few have known about that will be very popular in future. But those chances are few and far in between!
INVESTORS prefer stability to uncertainty. So with the Malaysian general election out of the way, investors are likely to make their way back into the market across the Causeway.
In 2009, I re-looked at Iskandar. I could see the region developing and could understand why it has to be a hinterland for Singapore. There is no way that Singapore could continue to grow without a cheaper manufacturing base nearby. Iskandar will be to Singapore what Shenzhen will be to Hong Kong.
Interests gathered with international investors in 2011. Horizon hills terraces around 3300 sf were sold for MYR730k. That's slightly over MYR 200 psf. Just a few years back, in 2009, it was at 500k. I believe I have missed that opportunity.
But Iskandar draws many parallels with the great gold rush in the US in the 19th century, with Dubai between 2004 - 2008, and Dublin from 2000 - 2007. During the Great American Gold Rush, the prospectors rushed in, many did not strike rich. Instead, the ones who sold spades and machinery to explore gold made it rich. During the Dubai property boom, prices escalated exponentially. One key ingredient was missing, the was no yield. The number of homes surpassed the population of Dubai. There was never a reference to cash flow, just future capital appreciation. Movie stars, football stars bought homes in the desert oasis based on this premise. Of course it crashed over 70% between 2008 till now. At the moment, it is still trying to clear many years worth of inventory. If you play the Iskandar game, you have to get out before the music stops or you'll be left with the baby!
Dublin had more fundamentals. But like Singapore, its planning permission was far more ambitious than the realized population growth. Yields were low, but unlike Dubai or Iskandar, they were around
3 or 4% gross. Speculators did not care that mortgage rates were at 6% then. Another eerie similarity between Dublin and Iskandar was the lack of transacted data. No one could tell exactly what the last transacted price was. Dublin's property price collapsed 57% and is just beginning to bottom.
Abandoned Towns in Malaysia. If you buy them too far away from any commercial activities, this could happen.
These landed are not gated. but you could buy them at a fraction of those sold to Singaporeans
Iskandar's properties will have little yield. The bulk of the completions will occur from 2014 onwards. If you bought a bungalow for MYR1.5m at 4.2% interest, for a 30 year loan, at 85% LTV, you would have to pay MYR 71k per year of mortgage, which works out to almost MYR 6k per month. If interest rates rise to 6% ( average interest over 20 years was around 7%), the monthly payment rises to above MYR 7k per month. I believe some investors will start to put their homes on the market if they cannot find tenants. That's when the day of reckoning occurs. I do not have the existing housing stock in Iskandar because data is scanty. So there's no way to gauge the extent of over supply in Iskandar. All I know is the population is around 1.7m and anything over 380 spells over supply. Also at a growth rate of 3% per annum, any completions of over 11k net per year spells trouble.
The next point is, like the Geat Gold Rush, why be a prospector and put your capital at risk? The developers tend to sell at a 10-20% premium above resale market. This is similar to London. But in Singapore, the premium has narrowed due to the tightening measures. There is plenty of land and the developers will just keep selling. They don't have to care about the lack of rental demand. I would not buy from a developer at a premium but only from the resale market if I wish to buy because I know that there will be desperate sellers in the next 2 years.
The developers also know that those earlier units that were completed will turn competitors starting starting from june 2013. I know that developers are selling horizon hills latest phase at 1.5m for the same size (over MYR 400 psf) so I could drive a hard bargain to bid for completed homes for around MYR900k to 1m. As I will have hundreds of choices I could drive a hard bargain. In any case, I am sure that I cannot get 6% yield so I won't bother. In any case, the developers will not have it easy once those that they sold in 2011/12/13 are completed in 2013/14/15. When competition between resale and new is fierce, prices will stabilize. Only then will we know what the real price is.
In terms of price to income ratio, Iskandar is certainly cheap. Price to income wise it's around 12x. 30 year average is around 10. Singapore's price to income is 25x and average is 15. It's likely that Singapore will hover or fall until it reaches the average. Iskandar will take many years to edge up due to the land supply. Mind you, Iskandar is not Penang which is an island. The average for global mega cities is around 15x.
A few friends asked me about shop houses. I find that the yield is insufficient, although the fundamentals better than houses. The problem is only the first floor is a shop. The second and third floors usually have little value. So the yield is hardly 6% at all. More like 3-4%. Owners of shop houses with yields over 7% are smart. They will not sell at those yields but at 4-5%.the fundamentals are even worse than in Singapore because our yields are 3.5% and mortgage rate 1.6%!
There will always be exceptions in Iskandar. Occasionally you might find an undervalued gem, or a location few have known about that will be very popular in future. But those chances are few and far in between!
11 May 2013, The Straits Times
INVESTORS prefer stability to uncertainty. So with the Malaysian general election out of the way, investors are likely to make their way back into the market across the Causeway.
Consultants are confident that Malaysia’s economic transformation programme will continue. This will pump some US$440 billion (S$541 billion) into sectors such as oil and gas, tourism, financial services and urban infrastructure.
This bodes well for all investments, not least for the property market which has been a little subdued in the past two months.
Activity is likely to pick up again now, analysts said.
“Now that the election is out of the way, the property market appears to be re-energised and we are confident of seeing substantial gains over the next three years in both Peninsular and East Malaysia,” said Mr Christopher Boyd, executive chairman of CB Richard Ellis.
However, this may not have an immediate impact on values, he added, as there will likely be a corresponding rise in supply from developers who held back new releases ahead of the election.
“From the third quarter onwards, we anticipate that continued high liquidity, additional public expenditure on infrastructure and renewed confidence in the future will all combine to bring residential property values to new highs,” he said.
Mr Alex Bellingham, director of property consultancy IP Global, is also bullish, saying: “Malaysia has the second-lowest property prices in South-east Asia on a per sq ft basis.”
Consultants see good prospects for property in Klang Valley, which includes Kuala Lumpur and its suburbs.
“There are a couple of launches coming up in the KL city centre area, such as Platinum Park,” noted Mr Brian Koh, the head of research and consultancy at DTZ Malaysia.
He expects Malaysian property prices to rise by 5 per cent to 10 per cent a year over the next few years, with the steepest increases in the Klang Valley market.
“We haven’t seen a lot of launches around KLCC in the past year and a half, so this … should be quite exciting.”
Mr Boyd agreed, saying there are still plenty of prime units in the Klang Valley that can be picked up on the cheap.
“Bargain hunters should be looking at areas like Mont Kiara, where condo prices have lagged in response to a very full supply picture,” he said, referring to the affluent township just outside the KL city centre.
“In addition, almost any reasonably well-located terraced house in the Klang Valley under RM1 million (S$414,000) is worth considering. Don’t forget foreigners are permitted to buy landed property.”
Many Singaporean investors have been keen on Iskandar. Although prices there have doubled in the past two years, analysts warn it is an untested market.
“Who will rent the houses in Iskandar? Will it be easy to sell the units in future? Long-term liquidity is still a concern,” said Mr Bellingham.
Mr Koh agreed, saying the price rises in Iskandar might not be backed by fundamentals.
“I would say Klang Valley continues to be fundamentally strong, while Iskandar is more speculative at the moment, at least until commercial activities become more established,” he added.
House prices jump GBP6k in one year in the UK. Supply to Meet Demand By 2016.
I believe that US' real estate hit the trough in June 2012. For London, Zone 1 hit trough in Sep 09, the rest hit trough in January 2012. The rest of UK just hit the trough in 1Q2013. The rest of Europe are around the trough.
There is a lot of upside still for UK properties. From the sentenses in bold, we can tell that affordability is at 28%, compared to the average of 38% and 2007's peak of 48%. UK's property prices have at least 36 - 71% up side in the next 3 to 4 years before another bubble blows. Even if I factor in interest rates hikes from 2014 onwards, I believe the up side is around 40 - 50% from 2013 to 2017.
Singapore's affordability is above the 30 year average and the interest rates are at the lowest point. There is obviously very little upside left. Prices will plateau for the next 4 years.
http://www.thisismoney.co.uk/money/mortgageshome/article-2321174/Halifax-House-prices-jump-6-000-year-mortgage-access-improves.html
|
There was more evidence of an improvement in the UK property market today, as the latest Halifax house price index showed property prices rose 1.1 per cent in April.
Property prices have now risen 2 per cent in the last year meaning the average house is now worth nearly £6,000 more than it was in April 2012.
The rise continues the bright start to the year for property prices, which rose 0.5 per cent and 0.4 per cent in February and March respectively. It also completely reverses the 1.7 per cent annual fall in property prices recorded in October last year.
On a quarterly basis house prices rose 1.3 per cent in April building slightly on the 1.2 per cent increase seen in March.
Moreover, the number of mortgage approvals – a leading indicator of completed house sales – increased by 3 per cent between February and March following two monthly falls.
Mortgage affordability levels were continuing to provide support to property prices, Halifax said.
Typical mortgage payments now take up 28 per cent of average incomes compared to 48 per cent at the peak of the property boom in 2007 and the long term average of 38 per cent of the household incomes.
But Halifax warned property market activity remained subdued by historic standards.
Martin Ellis, housing economist at Halifax said: ‘Weak income growth and continuing below-trend economic growth are likely to remain significant constraints on housing demand during the remainder of 2013.’
However Jonathan Hopper, managing director, property search consultants Garrington, was buoyed by the figures saying: ‘With strong annual, quarterly and monthly figures, the UK property market is once again heading in the right direction.
‘For the country as a whole, the fourth consecutive rise in the annual rate of growth shows the market is once again beginning to fire.’
The Halifax data contrasts sharply with the 0.1 per cent fall in house prices reported by Nationwide last week.
Mortgage availability has increased sharply since the Government launched its Funding for Lending scheme last August, which gives lenders access to cheap finance to help borrowers.
Chancellor George Osborne's new Help to Buy scheme - a £5.4billion package of loans and guarantees - lends buyers up to 20 per cent of the value of a new-build home, interest-free for five years.
Mortgage guarantees also aim to support another £130billion of high loan-to-value mortgages by shifting the risk of default away from lenders on to the state.
There is a lot of upside still for UK properties. From the sentenses in bold, we can tell that affordability is at 28%, compared to the average of 38% and 2007's peak of 48%. UK's property prices have at least 36 - 71% up side in the next 3 to 4 years before another bubble blows. Even if I factor in interest rates hikes from 2014 onwards, I believe the up side is around 40 - 50% from 2013 to 2017.
Singapore's affordability is above the 30 year average and the interest rates are at the lowest point. There is obviously very little upside left. Prices will plateau for the next 4 years.
http://www.thisismoney.co.uk/money/mortgageshome/article-2321174/Halifax-House-prices-jump-6-000-year-mortgage-access-improves.html
House prices jump £6,000 in one year as mortgages become easier to get and rates fall
- Prices jump 1.1 per cent in April
- Mortgage approvals up three per cent between February and March
- Typical payments now take up 28 per cent of average incomes compared to 48 per cent at the peak of the property boom in 2007
|
There was more evidence of an improvement in the UK property market today, as the latest Halifax house price index showed property prices rose 1.1 per cent in April.
Property prices have now risen 2 per cent in the last year meaning the average house is now worth nearly £6,000 more than it was in April 2012.
Right move: House prices have risen two per cent compared to the same time last year
On a quarterly basis house prices rose 1.3 per cent in April building slightly on the 1.2 per cent increase seen in March.
Moreover, the number of mortgage approvals – a leading indicator of completed house sales – increased by 3 per cent between February and March following two monthly falls.
LAND REGISTRY ALL SALES: ARE HOUSE PRICES RISING FASTER?
Figures from the Land Registry that track all sales across England and Wales show that house prices rising at a faster pace than the Halifax report. Its data that tracks all property transactions shows the average house price up five per cent annually at at £234,962.
That is 69 per cent higher than the average figure recorded by the Land Registry in its monthly report, which stood at £161,793 in March.
The discrepancy arrives from the fact that the monthly report is based on repeat sales regression, a statistical manipulation that removes new-build properties and those that have not been sold any property that has not sold at least twice since 1995. [The Land Registry statistics are explained here]
That means all those long-term family homes owned for more than 17 years are not included in the monthly figures when sold - they are in the quarterly data.
The Land Registry monthly statistics also do not include repossessions - either in their monthly or quarterly format - something that would create a drag on prices.
The all transactions data is released quarterly and must be paid-for, unlike its free monthly index. The latest all transaction figures above are taken from a report by property investment specialist London Central Portfolio, which has supplied monthly version of the all transaction figures to This is Money.
That is 69 per cent higher than the average figure recorded by the Land Registry in its monthly report, which stood at £161,793 in March.
The discrepancy arrives from the fact that the monthly report is based on repeat sales regression, a statistical manipulation that removes new-build properties and those that have not been sold any property that has not sold at least twice since 1995. [The Land Registry statistics are explained here]
That means all those long-term family homes owned for more than 17 years are not included in the monthly figures when sold - they are in the quarterly data.
The Land Registry monthly statistics also do not include repossessions - either in their monthly or quarterly format - something that would create a drag on prices.
The all transactions data is released quarterly and must be paid-for, unlike its free monthly index. The latest all transaction figures above are taken from a report by property investment specialist London Central Portfolio, which has supplied monthly version of the all transaction figures to This is Money.
Typical mortgage payments now take up 28 per cent of average incomes compared to 48 per cent at the peak of the property boom in 2007 and the long term average of 38 per cent of the household incomes.
But Halifax warned property market activity remained subdued by historic standards.
Martin Ellis, housing economist at Halifax said: ‘Weak income growth and continuing below-trend economic growth are likely to remain significant constraints on housing demand during the remainder of 2013.’
However Jonathan Hopper, managing director, property search consultants Garrington, was buoyed by the figures saying: ‘With strong annual, quarterly and monthly figures, the UK property market is once again heading in the right direction.
‘For the country as a whole, the fourth consecutive rise in the annual rate of growth shows the market is once again beginning to fire.’
The Halifax data contrasts sharply with the 0.1 per cent fall in house prices reported by Nationwide last week.
Mortgage availability has increased sharply since the Government launched its Funding for Lending scheme last August, which gives lenders access to cheap finance to help borrowers.
Chancellor George Osborne's new Help to Buy scheme - a £5.4billion package of loans and guarantees - lends buyers up to 20 per cent of the value of a new-build home, interest-free for five years.
Mortgage guarantees also aim to support another £130billion of high loan-to-value mortgages by shifting the risk of default away from lenders on to the state.
Monday 6 May 2013
Malaysian Election Result Does Not Augur Well For Future
Although the Malaysian stock market rose by 3% today, BN's win actually does not augur well for its future. There were outright allegations of vote rigging with pretty strong evidence, from truck loads of Bangladeshi workers sneaking into voting booths to the supposedly indelible ink easily washed off from the finger, to cars fetching secret ballot boxes to the booths.
Throughout history, when a government cheats in an election, it is usually the start of a revolution. The Arab spring comes to mind. Libya and Egypt did the same and within a year there was a change of government. A government that clings to power by such means simply has no legitimacy. Civil disobedience usually follows.
A peaceful transition of power to the opposition would have been the better outcome for investors in the long term because the states that are run by opposition tend to have strong outperformance in property prices. A win by BN without such controversies would have legitimize the regime. But this is the worst possible outcome.
The next few years many be turbulent in Malaysia. Watch this space.
Throughout history, when a government cheats in an election, it is usually the start of a revolution. The Arab spring comes to mind. Libya and Egypt did the same and within a year there was a change of government. A government that clings to power by such means simply has no legitimacy. Civil disobedience usually follows.
A peaceful transition of power to the opposition would have been the better outcome for investors in the long term because the states that are run by opposition tend to have strong outperformance in property prices. A win by BN without such controversies would have legitimize the regime. But this is the worst possible outcome.
The next few years many be turbulent in Malaysia. Watch this space.
My Goal In The Next Five Years Is To Take Care Of The "Human Element"
As I approach the sunset of our career, I've taken stock of what I've done well and not so well. I felt the weakest part of my life is the maintenance of friendships. I used to think that other than family and spouse, there is little need to maintain friendships. But I realised that more effort must be put in. Like a marriage, friendships sometimes can be damaged and effort must be made to repair it immediately. If I've wronged someone, I have to admit it quickly and apologise, try to "normalise" the relationship. If I've been wronged, I have to forgive the person even though he or she fails to acknowledge or apologise.
The human element is very important, not only for networking purposes, but for the legacy that I leave behind. Kindness, integrity, altruism are important traits to have in any human.
For the next five years, I intend to forge new friendships and revive old ones. I like intelligent people with integrity. These two traits don't come often in one person. But when I find such people, I will take them on board in my exciting journey.
The human element is very important, not only for networking purposes, but for the legacy that I leave behind. Kindness, integrity, altruism are important traits to have in any human.
For the next five years, I intend to forge new friendships and revive old ones. I like intelligent people with integrity. These two traits don't come often in one person. But when I find such people, I will take them on board in my exciting journey.
Sunday 5 May 2013
Invest Outside of London for Better Yields
When I visit Iskandar , Japan, and European cities, I get very excited. In Dublin, 600-700 sf
apartments are 50-60% down from 2007's peak. Gross yields are above 10% for apartments within the financial centre. On a psf basis, some are at €250-300, just slightly above construction costs. Investments with high nett yields give me cash flow and give me assurance that I can always service my mortgage. I also look for future rental growth so I am very particular on where I invest , with an extra emphasis on yields.
I am about to buy my seventh investment property. Out of seven, four of them provide me with a cash flow to mortgage ratio of 125% and above, meaning that I have a buffer for void periods, drop in rental, and some cash flow back after servicing interest and would you believe it, principle.
I told my loved ones, "what is there for me to lose? If in the off chance that what I chose lost money, at most I'll work another three years more to support mortgage. If it works out, I'd be financially free in a couple of years time. The opportunity cost of not investing is to work till I'm 62 or am unable to. That's not good!"
Iskandar is not a cash flow play. There is no rental yield to speak off so it's purely for speculation and capital gains. My exposure cannot be too huge. Buy-to-let strategy is still my core strategy. Buy-and-fix strategy is a tactical play for me!!
PUBLISHED MAY 03, 2013
IPD: assets outside London give higher returns
[LONDON] Investors that bought UK commercial property outside of London this year generated returns that were a third higher than assets in the capital as a lack of competition pushed down prices, according to research firm International Property Databank Ltd.
Yields on offices, shops and warehouses purchased outside of London were 6.5 per cent for the year through March, compared with 4.3 per cent in the city, IPD said yesterday. That's the widest margin since June 2007.
Investors trying to avoid high prices in London are looking to cheaper real estate outside the capital as a six-year decline in values slows, IPD said. The amount of commercial real estate investment in central London last year surpassed the rest of Britain for the first time as overseas buyers preferred the UK's largest city, broker DTZ said in a report on Wednesday.
"The decision now for investors is how much risk they are willing to tolerate," Greg Mansell, head of research at IPD, said.
The value of regional commercial real estate fell 0.9 per cent from January through March, a slower decline than in 2012, IPD said. Properties in "second tier" cities such as Birmingham and Leeds had yields of about 7 per cent after values dropped by about 42 per cent. - Bloomberg
Wednesday 1 May 2013
2013 – 2014: A Time to Sow. 2015 – 2016: A Time to Reap
I’ve been to
Europe and I’m excited. There’s blood on the street for real estate. I know
it’s far away and many Asian investors are unfamiliar. But it’s not that
difficult. Real estate in most of western Europe is down 50 – 60%. In London,
outside of Zone 1, places like Canary Wharf is still 10 – 30% below 2007’s
peak.
I would say
that in order of upside, I’m the most positive in the following cities /
countries:
1.
US
excluding New York: 50 – 90% in the next three years. Limited financing
available, up to 70% LTV for now. Capital gains tax of around 15% will be a
drag. Watch out for 3 – 5% per year of forex losses though against SGD.
2.
Cities
like Dublin / Madrid: 60 – 100% in next three years. Almost no financing
available now but it may be available in one to two years’ time. Capital gains
tax of up to 30% will be a drag though. Expect 4 – 6% per year of forex losses
per year.
3.
Cities
like London 30 – 50% in the next three years. LTV of 80%. Expect 2 – 4% of
forex losses per year.
4.
Certain
asset classes like Iskandar. Expect 30 – 50% in the next three years. 70 – 85%
financing. Lack of transparency in legal framework.
5.
Singapore.
Expect minus 20% to plus 10% appreciation in the next three years. 50 – 80%
financing.
2013 – 2014
will be exciting because it will be a time to pick up very cheap assets in US
and most of Europe except for London and in Iskandar. For London and Iskandar,
the asset appreciation phase has already started in 2011/12. There is still
upside but it will be less than in the areas mentioned in 1 and 2.
2015 – 2016
will be the asset disposal phase. You have to be very careful, liquidate assets
that are very low in terms of yield spreads. Keep lots of cash to be on
standby. Make sure your rental income covers 125% of the mortgage to have a
buffer in case a crash happens.
Nothing lasts
forever. Neither bad nor good times. Remember that.
Subscribe to:
Posts (Atom)