Factories/warehouses seem to be the grab. Mate of mine can't build enough of them. We are talking 20 lots at a time and they sell out before built.
The future of Australian property prices
- Thread starter Joe Blow
- Start date
Small business owner buys it with his super and his company rents it back off him?
A lot of small online businesses seem to be buying them. I the tax perks help.
The other thing is rents are ridiculous and it's not much different to loan repayments.
For a while I thought that commercial/industry RE isn't a bad option for investment. Especially if you're like me and think the residential RE is overpriced. Though the entry requirements into commercial/industrial is different. Those are definitely things I have thought about when I can eventually add in some RE to my portfolio. Plenty of diversification with trading (stocks, different countries, etfs, futures) but have some RE isn't a bad idea either.
- Joined
- 3 July 2009
- Posts
- 27,059
- Reactions
- 23,596
It may be different over East, due to the much higher density population, but here in the West commercial property can sit vacant for a very long time. As @Humid said business owners buying the property into their SMSF, makes a lot of sense, but guys I've known over the years who invested in commercial property didn't do very well. 
- Joined
- 8 June 2008
- Posts
- 12,442
- Reactions
- 18,102
My own experience was not flashy for industrial RE:
Went for niche small Warehouse, starting, sme, reseller emptying container etc
Great return in % then one by one, all sme failed and took 2 years with no income or nearly to sell
Never again in Australia.
We are NOT going toward a SME society.
So yes if you have a few millions for a medical centers etc otherwise be very careful.
Too many built and bought by investors for not enough customers imho.
Obviously depending on areas but was in a high growth area.thanks to RE growth, no loss and some profit but happy to be out
Need to keep more stock to guarantee supply due to pandemic
Worst case park a caravan in there and turn up the music with no neighbours at night
wayneL
VIVA LA LIBERTAD, CARAJO!
- Joined
- 9 July 2004
- Posts
- 25,586
- Reactions
- 12,710
Spot on. I know some people that have done exceptionally well from commercial real estate but also a lot that mirrors your experience.
What is missing in a lot of real estate investment, both commercial & residential use and adequate *risk premium*... Especially now at such astronomically high valuations.
Friend of a friend last year during shut down in Queensland lost everything after many years of doing extraordinarily well in CRE.
I 100% agree that the risk premium probably isn't there. It more leads to something inherent in some of my other comments, and that is, an understatement of the true risks involved in RE. Cherry picking the success and selling the story leads to people either forgetting about the risks, not truely understanding the risks, or understating them. This isn't an equity vs RE comment, but I like equity's because I know my risk metrics. I code and backtest to make sure I've covered my risks and understanding what is on the line when I put in a new trade.
lack of knowledge of the risks, or acknowledging the risks, is always the downfall of many. RE wont be any different.
This was my experience about 7ish years ago. Not sure if it's the growth in this area or what.
Value Collector
Have courage, and be kind.
- Joined
- 13 January 2014
- Posts
- 12,016
- Reactions
- 8,291
It may be different over East, due to the much higher density population, but here in the West commercial property can sit vacant for a very long time. As @Humid said business owners buying the property into their SMSF, makes a lot of sense, but guys I've known over the years who invested in commercial property didn't do very well.
I think the best way to get exposure to commercial property is by buying a stake in a diversified portfolio portfolio of properties, something like CLW or one of Charter halls direct property funds like Dif4.
That way you still get the decent net rental return of 6% or so (at todays prices), and you are diversified by geography, property type and tenant.
At present you are right but we have been living in an artificial boom for the past 20 years.
When the shyte hits the fan, commercial can be empty for years, hence the higher yields
JohnDe
La dolce vita
- Joined
- 11 March 2020
- Posts
- 3,926
- Reactions
- 5,765
How many years before “an artificial boom” becomes good management and hard work?
wayneL
VIVA LA LIBERTAD, CARAJO!
- Joined
- 9 July 2004
- Posts
- 25,586
- Reactions
- 12,710
When the boom can stand up without government and central bank interference.
JohnDe
La dolce vita
- Joined
- 11 March 2020
- Posts
- 3,926
- Reactions
- 5,765
When the boom can stand up without government and central bank interference.
Isn’t part of a government’s role to maintain economic security of the nation and its people?
If we look at the USA we see inflation at 8%pa, the current Fed interest rate should be 5% at least.
With the incalculable actual debt in the world they want hyper inflation to start happening ASAP, something like 20% will suit.
Then they will jack the interest rates up to 10% so they look to be doing something and all the plebs will be smashed.
No more SMEs, everyone works for the conglomerates and they do whatever the hell they want.
After a generation has passed we have a new generation that has not been burned and they will start taking risks again.
So, to answer your question, 20 years after the Shyte hits the fan
most definitely. arguably one of its main role. I hope wayne's point was more than the gov is prop'ing up RE in a way that doesn't provide economic security and is more for political gain to whomever is in power. Long term sustainability would be the policy solution to provide economic security -- indefinite growth has never been part of such a solution.
wayneL
VIVA LA LIBERTAD, CARAJO!
- Joined
- 9 July 2004
- Posts
- 25,586
- Reactions
- 12,710
Yeah but that shouldn't involve kicking the can down the road.
Productivity should be the goal rather than unproductive monetism(sp?).
Eventually, it will catch up to us, I don't know when and it may still take a fair while. but it will catch up to us.
In theory Yes it is, but the Reserve Bank could/should have punctures the RE boom Loooong ago.
To allow housing to become so expensive is very poor management as it forces people to invest in RE so they don't miss out on the CG but they then owe squillions just to have somewhere to live.
Far too many immigrants over a 5 year span, infrastructure could not keep up and we have a bubble develop in our major cities.
We have young families that will never be able to invest in anything else as they will be paying their house off forever.
They do have their Super which will be in the Market but when they lose a job while they look for another they will be sinking deeply into debt.
It compels couples to both work which does effect the children in many ways, the obvious one is that Mum and Dad are both tired, stressed and rarely home.
The USA has poisoned the world by allowing unlimited funny money to be printed, flooding the world with cash looking for a home and distorting other countries economic policies.
The Govt has had to do things they may not have wanted to do just to combat the USA flood and we then have Covid on top of that.
We have a massive debt that in the current climate was hard to avoid but we cannot ignore it, we need to adjust peoples expectations of the Govt doing and paying for everything.
We need people to start accepting the fact that bad things happen in life and people need to be more responsible for their own poor decisions.
