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There's not a lot of good debt these days as asset prices (real estate) are in a bubble
Investment - Good debt vs. Bad debt
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It is hard to see any "good debt" these days. Property asset prices are a bubble BUT regional centres still represent fair value. The point of buying real estate for return is getting around 5% yield and hopefully some capital appreciation.
I think with the ridiculous prices in the cities the value attraction of regional centres like Ballarat, Bendigo, Geelong will cause some rebalancing.
I think with the ridiculous prices in the cities the value attraction of regional centres like Ballarat, Bendigo, Geelong will cause some rebalancing.
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With regard to BS property development.
This article offers a practical alternative. Short story is that potential apartment purchasers join together and engage an architect and builder to deliver a cost plus deal without the developers margins in the middle.
https://www.allhomes.com.au/news/ba...o-that-apartment-buyers-save-20170626-gwwz8w/
This article offers a practical alternative. Short story is that potential apartment purchasers join together and engage an architect and builder to deliver a cost plus deal without the developers margins in the middle.
https://www.allhomes.com.au/news/ba...o-that-apartment-buyers-save-20170626-gwwz8w/
tech/a
No Ordinary Duck
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That's what we as developers do. The only difference for myself is I engage project builders
Rather than an architect and I do it alone.
Why?
I don't want to deal with a group of generally in experienced people arguing about the smallest detail.
My builders have subbies in place for all trades who are reliable and most I know.
They handle from feasibility to council to construction to off plan sales.
We have a rapport going back 20 yrs.
They are QUICK time is Money.
If your into development you don't buy off plan.
That's just a simple purchase.
If you don't know how the numbers stack up then don't get
involved.---in either of the options presented.
Off Plan
Group Development
Individual or own Company development.
Can you explain what BS property development is ?
Rather than an architect and I do it alone.
Why?
I don't want to deal with a group of generally in experienced people arguing about the smallest detail.
My builders have subbies in place for all trades who are reliable and most I know.
They handle from feasibility to council to construction to off plan sales.
We have a rapport going back 20 yrs.
They are QUICK time is Money.
If your into development you don't buy off plan.
That's just a simple purchase.
If you don't know how the numbers stack up then don't get
involved.---in either of the options presented.
Off Plan
Group Development
Individual or own Company development.
Can you explain what BS property development is ?
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Thanks Tech/A .
I see and understand property development. I appreciate the practicality of organising a build with your perception of what you believe you can sell at a good price and then having a bunch of tradies and subbies executing it without having to deal with lots of picky people sticking their nose in.
The process that the article was talking about was a bit more refined than attempting to herd a group of cats. The local model involved a company called Breathe Architecture who have successfully managed to firstly put up an an apartment design concept with high sustainability values and then persuaded potential purchasers to sign up and effectively buy into the project. In that model the architect engages the tradies and subbies directly and in theory the developers and marketers cut is reduced. You can check out their work on the url below.
With regard to BS development? I have no problems with a reasonably appropriate building design and an acceptable final build quality. What I call BS development is
1) Reams of badly built dog boxes set up for investors to rent to overseas students. Melbourne central and the suburbs is now littered with developments that you can't swing a cat in. I have seen them. They are slums of the present let alone the future.
2) Reams of poorly constructed high rise apartments that will certainly have huge and devastating costs to the owners in 20-30 years. These are buildings with poorly constructed lifts, badly designed and constructed power and water facilities, concrete cancer and so on. High rise office buildings have a genuine 25 year life before the owner has to do major refurbishments. How are 150 individual unit owners going to tackle such refurbishments when they are all over the country and O/S as well?
3) The reckless use of poor quality/dangerous materials because they are cheaper and the developer believes they can get away with it. First off the rank is the inflammable cladding. Second is the use of cladding that is badly executed and leaves the building open to water leaks and leaky building syndrome. This is a scourge whose cost has yet to be fully appreciated
4) Finally tricky developers who put themselves in as property managers on the strata title and milk the residents senseless.
In the end a city and it's present and future citizens have to live and pay for the building infrastructure and are put up. If these are done badly and/or dishonestly there will be many sorry people.
https://shadowsonthehill.com.au/201...with-jeremy-mcleod-from-breathe-architecture/
http://www.abc.net.au/news/2017-03-...ourt-battles-dark-side-apartment-boom/8403744
http://www.builderscollective.org.au/tag/leaky-building-syndrome/
https://www.lookupstrata.com.au/qld-why-are-developers-allowed-to-sell-25-year-caretaking-contracts/
I see and understand property development. I appreciate the practicality of organising a build with your perception of what you believe you can sell at a good price and then having a bunch of tradies and subbies executing it without having to deal with lots of picky people sticking their nose in.
The process that the article was talking about was a bit more refined than attempting to herd a group of cats. The local model involved a company called Breathe Architecture who have successfully managed to firstly put up an an apartment design concept with high sustainability values and then persuaded potential purchasers to sign up and effectively buy into the project. In that model the architect engages the tradies and subbies directly and in theory the developers and marketers cut is reduced. You can check out their work on the url below.
With regard to BS development? I have no problems with a reasonably appropriate building design and an acceptable final build quality. What I call BS development is
1) Reams of badly built dog boxes set up for investors to rent to overseas students. Melbourne central and the suburbs is now littered with developments that you can't swing a cat in. I have seen them. They are slums of the present let alone the future.
2) Reams of poorly constructed high rise apartments that will certainly have huge and devastating costs to the owners in 20-30 years. These are buildings with poorly constructed lifts, badly designed and constructed power and water facilities, concrete cancer and so on. High rise office buildings have a genuine 25 year life before the owner has to do major refurbishments. How are 150 individual unit owners going to tackle such refurbishments when they are all over the country and O/S as well?
3) The reckless use of poor quality/dangerous materials because they are cheaper and the developer believes they can get away with it. First off the rank is the inflammable cladding. Second is the use of cladding that is badly executed and leaves the building open to water leaks and leaky building syndrome. This is a scourge whose cost has yet to be fully appreciated
4) Finally tricky developers who put themselves in as property managers on the strata title and milk the residents senseless.
In the end a city and it's present and future citizens have to live and pay for the building infrastructure and are put up. If these are done badly and/or dishonestly there will be many sorry people.
https://shadowsonthehill.com.au/201...with-jeremy-mcleod-from-breathe-architecture/
http://www.abc.net.au/news/2017-03-...ourt-battles-dark-side-apartment-boom/8403744
http://www.builderscollective.org.au/tag/leaky-building-syndrome/
https://www.lookupstrata.com.au/qld-why-are-developers-allowed-to-sell-25-year-caretaking-contracts/
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The world is over-indebted. Global debt totals $164 trillion, or 225 percent of the planet’s GDP, say Vitor Gaspar and Laura Jaramillo of the International Monetary Fund. And in case that number isn’t troubling enough, the Institute of International Finance uses different definitions to reach a debt-to-GDP ratio of 318 percent.
Experts have many disagreements – from how much debt is outstanding to what type of borrowings are most dangerous. Some argue that rising U.S. deficits court disaster. Others focus on the private sector, and how rapid attempts to cut debt play a big role in economic crises. However, almost all agree that too much debt invites serious economic trouble.
Excess debt is bad because the cost of servicing it can constrain spending on both consumption and investments, especially when interest rates are rising. Even worse is the cascade of defaults that starts when asset-price bubbles burst or when economic growth is disappointing. Banks suffer losses on bad loans, so cut back sharply on lending, which destroys confidence.
If these systemic debt problems were unavoidable, they would simply have to be endured. Such stoic virtue is totally unnecessary, though. Debt levels could easily be kept below the danger level, whatever that is. All that is needed are three sensible and practicable financial revolutions.
First, private debts should be taxed, not promoted by the tax system. As it stands, interest payments are usually treated as tax-deductible business expenses, and individuals sometimes get tax breaks for mortgage interest. That is like inviting drug pushers to hang around schools.
Business loans have more straightforward terms than equity investments, but they are a far less flexible way to provide capital. It would be fairly easy to shift the tax code to favour equity by treating some dividends as a pre-tax expense, and to penalise leverage by taking interest payments out of after-tax income. The result would be a major shift in financing, from brittle debt to sturdy equity.
Of course, investors would resist. They like the way leverage can magnify gains. Tax-favoured debt is the not-very-secret sauce of companies like Blackstone and KKR, euphemistically called private-equity companies. It is also the delight of property buyers, from billionaire magnates to young couples scrambling onto the housing ladder.
But there is no good reason for investors to make a lot of money from merely owning an inert asset, as compared to actually constructing a building or a company. Limits on such unmerited income are likely to promote more solid investments and more equitable growth.
Henry George proposed a way to deal with this problem, back in the 1880s. The American political activist argued that since land’s value comes from the wealth of the whole economy, the wealth really belongs to the whole economy, not the legal owner. Justice, he said, required a confiscatory tax on income and unmerited capital gains from property. Such a tax would be the second financial revolution.
Separating the gains from simply holding property and those from improving it can be hard, but it is worth making the effort to tax the first and encourage the other. Such a land-tax revolution would reduce property speculation, lower property prices and cut back on property debts.
As for the government debts that so worry some people at the IMF, Japan is already, if inadvertently, leading the third revolution. The country’s central bank had created enough new money to buy and hold 41 percent of all outstanding government debt, as of the end of 2017. In effect, the government has been printing money, rather than asking for loans from investors.
That is good policy. Controlled and direct money-printing is simpler and no more dangerous to the economy than most actual government borrowing. And such direct money-creation has the big advantage of not leaving a residue of government debt behind it.
Most economists freak out at the prospect. They think that issuing debt helps discipline governments, by putting them under the scrutiny of vigilant fixed-income investors. In fact, though, those investors generally behave more like easily herded sheep than assertive sheepdogs.
These reform proposals may be revolutionary, but they are far from new. George wrote more than a century ago, direct government money creation was promoted in the 1930s and calls to limit tax subsidies for debt stated in the 1960s. So why have these ideas gone almost nowhere over all these years?
For revolutionary ideas to become policies, the beneficiaries of the current arrangements have to lose power. A debt revolution may require a mega-crisis that forces big changes, since the 2008 global financial crisis left the established system largely intact. Until then, expect many more warnings about excessive debt.
https://www.breakingviews.com/columns/hadas-debt-overload-is-an-easy-problem-to-solve/
Think very big
25 April 2018 By Edward Hadas
Experts have many disagreements – from how much debt is outstanding to what type of borrowings are most dangerous. Some argue that rising U.S. deficits court disaster. Others focus on the private sector, and how rapid attempts to cut debt play a big role in economic crises. However, almost all agree that too much debt invites serious economic trouble.
Excess debt is bad because the cost of servicing it can constrain spending on both consumption and investments, especially when interest rates are rising. Even worse is the cascade of defaults that starts when asset-price bubbles burst or when economic growth is disappointing. Banks suffer losses on bad loans, so cut back sharply on lending, which destroys confidence.
If these systemic debt problems were unavoidable, they would simply have to be endured. Such stoic virtue is totally unnecessary, though. Debt levels could easily be kept below the danger level, whatever that is. All that is needed are three sensible and practicable financial revolutions.
First, private debts should be taxed, not promoted by the tax system. As it stands, interest payments are usually treated as tax-deductible business expenses, and individuals sometimes get tax breaks for mortgage interest. That is like inviting drug pushers to hang around schools.
Business loans have more straightforward terms than equity investments, but they are a far less flexible way to provide capital. It would be fairly easy to shift the tax code to favour equity by treating some dividends as a pre-tax expense, and to penalise leverage by taking interest payments out of after-tax income. The result would be a major shift in financing, from brittle debt to sturdy equity.
Of course, investors would resist. They like the way leverage can magnify gains. Tax-favoured debt is the not-very-secret sauce of companies like Blackstone and KKR, euphemistically called private-equity companies. It is also the delight of property buyers, from billionaire magnates to young couples scrambling onto the housing ladder.
But there is no good reason for investors to make a lot of money from merely owning an inert asset, as compared to actually constructing a building or a company. Limits on such unmerited income are likely to promote more solid investments and more equitable growth.
Henry George proposed a way to deal with this problem, back in the 1880s. The American political activist argued that since land’s value comes from the wealth of the whole economy, the wealth really belongs to the whole economy, not the legal owner. Justice, he said, required a confiscatory tax on income and unmerited capital gains from property. Such a tax would be the second financial revolution.
Separating the gains from simply holding property and those from improving it can be hard, but it is worth making the effort to tax the first and encourage the other. Such a land-tax revolution would reduce property speculation, lower property prices and cut back on property debts.
As for the government debts that so worry some people at the IMF, Japan is already, if inadvertently, leading the third revolution. The country’s central bank had created enough new money to buy and hold 41 percent of all outstanding government debt, as of the end of 2017. In effect, the government has been printing money, rather than asking for loans from investors.
That is good policy. Controlled and direct money-printing is simpler and no more dangerous to the economy than most actual government borrowing. And such direct money-creation has the big advantage of not leaving a residue of government debt behind it.
Most economists freak out at the prospect. They think that issuing debt helps discipline governments, by putting them under the scrutiny of vigilant fixed-income investors. In fact, though, those investors generally behave more like easily herded sheep than assertive sheepdogs.
These reform proposals may be revolutionary, but they are far from new. George wrote more than a century ago, direct government money creation was promoted in the 1930s and calls to limit tax subsidies for debt stated in the 1960s. So why have these ideas gone almost nowhere over all these years?
For revolutionary ideas to become policies, the beneficiaries of the current arrangements have to lose power. A debt revolution may require a mega-crisis that forces big changes, since the 2008 global financial crisis left the established system largely intact. Until then, expect many more warnings about excessive debt.
https://www.breakingviews.com/columns/hadas-debt-overload-is-an-easy-problem-to-solve/
Think very big
25 April 2018 By Edward Hadas
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