Eyeing Off Property Deals — from Greece to US House Flipping

Oh lordy, how the world turns. Everyone’s in a tizz about Donald Trump. That’s funny. Before that, everyone was obsessing about China’s mountainous debts and the coming collapse of its economy.

Once you’ve been around financials markets a while, you see this happen all the time. Collective worries leap from one thing to another. After all, who could forget Greece?

Actually, we all did. At one point, Athens was held responsible for destroying the European Union and/or bankrupting the rest of the members, or at least killing the euro. None of those things happened. None of us care anymore, anyway. We’re all worrying about China and Trump now.

The predictable is happening. Money is going in to buy the juiciest of the Greek assets. There’s plenty up for grabs when a country is bleeding like Greece was.

Greece should have defaulted, and told the EU to stick it like the British did. It would have made their currency hellishly cheap. But they wouldn’t have to endure the resulting depression that’s put the Greek people through the wringer.

You have to know your history here. It shows that the banks who lent to Greece would NEVER allow them off the hook. This is where the real power lies. Anyone who thinks it lies with the people is a fool.

If you’re rich enough, a nice pad in Greece was up for grabs at a knockdown price in 2012, provided you could overcome the fearmongering in the headlines.

History shows that property should ALWAYS be bought at lows. Something always happens to move it back up again, no matter where you are. You can simply use the Cycles, Trends and Forecasts property clock for the timing.

For Greece, it appears what isn’t wanted by international capital is being picked over by the Turks. The collapsed prices were one lure. Demand is now taking off after the failed coup in Turkey pushed investors to secure their money outside of the country.

What’s Happening in Melbourne’s Property Market?

Let’s leave Greece behind and come to Melbourne. That’s fitting. Melbourne remains the largest Greek city outside of Greece. The Age reports that a property developer has made a $30 million ‘windfall’ after he flipped a property bought in September 2013 at Fisherman’s Bend in South Melbourne. This is the suburb that Victoria’s former Liberal Planning Minister generously rezoned for development, which has benefitted a number of Liberal Party supporters. It just so happens that our developer in this case also donated $150,000 to the party over three years.

Re-zonings are one way for property values to keep rising in Australia, as we keep saying they can over at Cycles, Trends and Forecasts.

Revaluations are another. You can see this currently playing out in the share market, actually. Harvey Norman [ASX:HVN] is going to book a possible $70 million revaluation on its $2.4-billion-dollar property portfolio, according to the Australian Financial Review. A similar story is happening with Vicinity Centres [ASX:VCX]. Its 75 shopping centres are now worth $508 million more.

It’s onwards and upwards as far the real estate cycle is concerned. The same thing will happen in the relevant US stocks going forward.

The US Real-Estate Market

Inevitably, we come back to President Trump here. He is, after all, a real-estate man. Everyone is focused on his Tweets, his blunt comments, and his more ‘creative’ policies. These are distractions from the main agenda.

If he can get his debt-financed infrastructure agenda through the US Congress, it’s going to crank US real estate gains higher and higher.

All the gains you’ve read about have really only taken the US back to where it was in 2006. Nominal property values in the US are in all-time highs, and, even then, that’s only in some parts of the country.

In real terms, they have a long way to go. The people’s mindset will help take it there. Flipping is making a comeback in the US. Whatever ‘lessons’ were supposed to be drawn from 2008 have been cast aside in chasing quick profits.

You only have to look at what Americans are watching to get a sense of where the cultural mindset is currently residing. ‘Home & Garden Television’ was the third most watched cable channel in 2016, according to the Business Times.

It shows house renovation shows, mostly, as well as occasionally featuring programs on flippers and property dealers. Some old dump is done up, and a happy couple move in. But it shows to us that real estate is now coming back into focus among the general population. The previous downturn is being left behind in the cultural memory. The gains will become more notable now as a new generation of property investors start to cash in on a resurgent US.

Trump’s ascendancy will only accentuate these trends. If the biggest cultural conceit of the US is that anyone can become president, the second might be that anyone can get rich in real estate.

As we keep saying over at Cycles, Trends and Forecasts, history repeats. The next move from here is for Middle America to start hitting up banks for loans to get in on the action. And around in a (real estate) circle we go. Go here for the rest of the story.


Callum Newman,
For Money Morning Australia

Editor’s Note: This article was originally published in Markets and Money.

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