Guys...my take on it is this (and it applies to all property...

Guys...my take on it is this (and it applies to all property based companies).

Right now we are in the eye of the cyclone...this is the worst point we will strike and it was always going to be. Here's why:

(1) The 1H09 results were pathetic as to the asset write-offs to reflect current market value. The companies went way too light and they could because the valuations were largely the "directors/managements assessment". Why would they want to reflect the true posiiton at Dec 31, 08 and possibly call into question loan covenants? That would be like a voluntary fall onto the sword and I suspect the leather of the boardroom is a powerful aphrodisiac.

(2) The end of year financials require external valuations and considerable auditor examination. Ask yourself this: which auditing company wants to get hung out to dry by allowing over-stated assets to pass the audit process? Any accounting firm that has poor audit processes in this area risks massive (maybe company ending) bad publicity down the track when the REITS/property companies start to hit the wall...and some will.

(3) Another six months of falling property values (particularly in commercial) give some real market comparisons..whereas at Dec, 08..there were few current values to use as a guide.

(4) On top of falling values, the NP on which the yield is calculated has fallen as tenants fall over, or sweetheart deals are done to hold wobbly tenants in place.
So less NP and a higher yield expectation (up at least 50 basis points on the Dec figure) will see asset devaluations of massive substance.

(5) There's been a change in the financial world over the last six months where property company directors are now appreciating that the local banks will accommodate loan rollovers...plus...understanding that the banks will suspend loan covenenant issues if the fundamnetals are strong and the management is capable of working through the matters...so the mood can now change to one of "make 08/09 the year of throw out your dead"

(6) The investing community and the public have already been "conditioned" to an 08/09 shocker. Bad results are expected in the reporting season...and it will have to be a dead set shocker to raise eyebrows...so the directors figure they can fly under the radar.

(7) As a consequence of the above, the directors are willing to face up to their past sins so that they can clear the decks for the future where they can return to the old game of reporting profits via asset revaluations.

Conclusion: This reporting season will rattle the rib cages of those who are timid and not understanding of the reality of the property market.

BUT if your property company has the CASH to last 2 years...just as surely as a high tide follows a low tide, the property market will return.

Afterall, you can only invest in property, equities or cash.

Who wants to earn 2.5% in a bank account when you can get as high as a 10% yield on property? Certainly the self-funded retirees are now doing their numbers based upon survival.