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AverageJoe

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18/05/17

16:29

Post #: 24775380
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Originally posted by Rleonars ↑

Hope you don't have commercial property gobs...

The managing director of listed childcare centre landlord Arena REIT says the debt-fuelled binge by investors on commercial property means the odds of a downturn are now "well beyond the tipping point".

"Record low yields, new supply, generally high debt levels, increasing debt margins and investors are acting like the market never goes down," Arena REIT managing director Bryce Mitchelson told The Australian Financial Review.

"As a prudent investor, the best you can do is understand the odds and be prepared for the inevitable downturn...if and when property prices drop 20 per cent, will/can you survive?

"Operating on high debt levels, given it's leverage effect, is very dangerous in a downturn...it can wipe you completely out...it's not a pleasant experience. The wealth destruction is horrendous and painful."

Mr Mitchelson's remarks follow a warning from professional property investor Alex Collins that a correction could be looming for commercial property because of the "insane prices" being paid by investors which are driving down yields at the same as the cost of fund is going up.

Mr Collins and his father-in-law, Con Angelatos bought a supermarket in Maryborough, a regional Queensland town for $13 million on a six per cent yield.

But he was aghast at the yields being achieved on some assets including a childcare centre in Vaucluse in Sydney's Eastern Suburbs which sold on a record low 3.6 per cent yield and a strata retail property in St Kilda which sold on a four per cent return.

"A lot of these properties have no growth built in to their leases. There could be a crunch if funding dries up," Mr Collins said.

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The writings on the wall with the state of Oz property market. Govt's policy to reign it in hiding behind another agenda of raising more Cash, easy picking of the banks. The Banks can;t really complain on a 6 basis point levy after all they have been independently raising their mortgage rates higher than that in the recent past. Comminsure and before that Fin Planner fiasco and they have the cheek to try and stand down the Govt levy? I need CBA to crash into the 69$ range to start looking for a cheaper entry.....
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