A 47% Gain For Those ‘Lucky’ Few in the Right Area

As we march into the future that 2016 will bring, remember something.

There’s little new about the economic climate we live in.

The game continues to be same, as we keep telling our subscribers over at Cycles, Trends and Forecasts.

It’s pretty simple: find the best location, borrow as much as you can, and get someone else to pay off the interest.

You may run with that basic strategy for a long time to come.

You only have to browse the latest stats out of Western Sydney to see why…

Thanks to the public: money for nothin’

On Thursday this week the NSW Valuer-General released his latest figures.

What will we find?

The Australian Financial Review reported yesterday:

‘Residential land in Sydney’s west has topped the growth chart for that state, driven by a huge surge in infrastructure construction.

‘Blacktown, 42 kilometres west of the CBD, posted the highest growth in land values at 47 percent in 2014-15, followed by Holroyd and Parramatta at growth rates of Thirty eight per cent and 35.9 per cent, respectively.’

The land price requires the gain of the enhancements put in around it. Excellent if you happen to own a home in the region.

Too bad for those of us slaving away for wages and profits each day. We get stuck with the actual tax bill that pays for the actual infrastructure which is driving these land values through the roof.

And we are able to include in the bill the interest from the debt repayments from the government deficits.

And, of course, as the post notes, all this is ‘exacerbating the actual affordability problem in Sydney.’

Oh, well, there is little you and I can do about this. But it might pay for you to definitely pay careful attention to see where the government plans to build facilities.

Land values in the area will increase accordingly.

Australia’s insane tax system gifts windfalls like this to homeowners for doing precisely nothing, and taxes people who actually work and create wealth.

I’m sure you do not need reminding that the ASX 200 finished down for the year in 2015.

But rising house prices keep the voters happy and compliant and — most importantly for a politician — spending.

Australia leading the world in Ferraris, Porsches and Bmw Benzes

Bloomberg reports that luxury car sales in Australia are booming. Sales of the Ferrari NV, for one, were up 48% in 2015.

Take a look at how the premium brands tend to be fared last year…

Click to enlarge

Perhaps it’s all those cashed up realtors in NSW and Victoria?

I’m becoming facetious. It has to be broader than that.

Consider that a couple of notable auto-related stocks taking in and out of the new high list lately are Carsales.com.dans [ASX: CAR] and Automotive Holdings Group [ASX: AHG].

These information mill growing earnings because people are pleased to spend on cars. It doesn’t suggest an imminent recession to me.

In fact, this is in line with what’s happening in the US, too. Vehicle sales hit an all time higher last year in America. That’s mostly been attributed it in order to cheap petrol, strong work and low interest rates.

They might have mentioned a strengthening property market, too. The Wall Street Journal reported yesterday that rents rose at their fastest pace in the US since 2009 last year.

That’s 6 consecutive years of growth. It’s almost inconceivable that pattern will change in the US anytime soon.

Before Xmas most of the financial coverage centered on the effect of the Fed raising rates. They did. Do the world collapse? No.

Here’s something which few noticed, but which is far more important. Bloomberg reported prior to Christmas that US President Obama signed to law a stride easing a 35 year old tax on foreign investment in US real estate.

That opens the door for overseas investors to invest more income into US property. Which will translate to higher prices. This is actually the real estate cycle at work.

Most experts will miss the importance of this because they do not factor in the macro effect of rising land prices.

But this cycle is nothing new. You can see the same dynamic happening in a book written in 1933 called 100 Years of Land Values within Chicago, written by a man called Great hit Hoyt.

Next comes the expansion in credit as more people have to take out larger loans to buy their means by to the market. That’s expansionary for that economy, as I mentioned yesterday.

Of course, anyone’s who has read Hoyt’s book knows those that enter the earliest make the most from the admiring property values.

It’s the latecomers who turn out to be the suckers when the inevitable happens and home goes down.

To make sure you know when you should be in and out of the marketplace, go here.

Best wishes,

Callum Newman