Wednesday, February 8, 2012


Some brief points relating to real estate as opposed to other means of investing.
1.      “Get into land son, they ain’t making any more of it”.
2.      According to Maslow, humans always satisfy their needs in a pre-determined experience suggests that means food first, then clothing then shelter.....there is only two ways to obtain it or rent it. That’s why demand will always rise where the population is expected to rise (W.A. for the foreseeable future).
3.      The rule of 72 will help you work out the effect of inflation on property values and the expected growth rate....27 years selling real estate suggests property grows at roughly 2% in excess of inflation. Low inflation...low long term growth. In the 1980’s when inflation was 8%, property increased by 10% per annum (thereby leading to the “common wisdom” that property doubles in value every 7 years.... 72/10 ).
4.      The cost of the elements of construction and the cost of developing land can be expected to rise as wages, fuel, bricks, energy and other costs rise.
5.      Real estate is a long term long?....a minimum of 7 years preferably 10. Anything else is not investing, it is speculating. Some people have made money in real estate by speculating but more have made money by investing.
6.      Real estate is for control freaks. You decide when to buy, when to sell, how well to maintain or improve the property, etc. If you invest in shares you are handing over control of your investment to someone else, usually the management of the business or company you are investing in. Consider the history of these companies once considered prime investments. Adelaide Steamship, IXL, Enron, HIH Insurance.
7.      Cash gives you a return on your money and is maintenance free, but is at the mercy of inflation (Rule of 72 again.)
8.      The longer the history of markets, the more it appears the smart money looks at what the herd is doing and does the opposite. As Warren Buffett has said “When everyone is being greedy, be fearful and when everyone is being fearful, be greedy.
Ross Cutten
Owner / Director
Noble Real Estate

Monday, February 6, 2012


RE; MY BLOG 7.12.11
In December I wrote this blog.
The simple answer is no.
The current low demand from homebuyers compared to sellers is attributable more to a lack of confidence than the rate of interest.
Buyers fall for the trap of trying to pick the bottom of the market and they will fail, but it will not stop them trying.
The one area where the drop in interest rates may affect buyers is with investors.
We have only 2 properties vacant in our rent roll of over 500 managements which makes the vacancy factor less than .4%.
REIWA’s vacancy factor is 2.4% (average is 3-3.5%).
According to the forecasters that should lead to higher rents being charged next year, increasing returns.
We already have property with gross rentals above 5%, which is the level at which investors have bought in previous years.
So watch this space.
So where are we now?
The buying public have decided at the moment that values are too good and have lost their fear.
We have had a big jump in numbers at homes open and more importantly, in people prepared to put an offer on paper.
To all you buyers who have been sitting on the may have missed the bottom of the market you thought you could pick.
It won’t be a trend until the end of March, but are you prepared to bet against it with interest rates tipped to fall further.
Don’t say you weren’t warned.
Ross Cutten
Owner / Director
Noble Real Estate