“Real Estate Prices Going Through the Roof so now is the Time to do Something”

We loved these comments from Tim Farrelly in his Crockpot section of farrelly's Quarterly Asset Allocation Handbook, be sure to read to the end.

“Real Estate Prices Going Through the Roof so now is the Time to do Something”

So ran a recent advertisement for an Australian real estate agent / mortgage broker/ financial planning firm – accompanied by the seemingly obligatory photograph of a satisfied, Hawaiian shirt-clad investor lounging in a hammock. Importantly, it was backed up by the following Facts.

• Land running out – pushing real estate prices up.
• Banks reluctant to lend to developers – pushing real estate prices up.
• Investors coming back into the market – pushing real estate prices up.
• Interest rates on their way up – pushing real estate prices up.
• People not investing in the stock market – pushing real estate prices up.

Crockpot normally focuses on ideas that are plausible but, in farrelly’s view, fatally flawed. And, while we should be the last ones to ever poke fun at non-conventional investment ideas, this one was SO out there we thought we’d run it on its own without much comment – other than to say that we are wondering what it would take to get property prices down? Perhaps a combination of falling interest rates, a property lending spree by the banks and a buoyant sharemarket should be the stuff of property investors worst nightmares?

Even better still, the ad advises that you can borrow to invest and “take all the rent and the negative gearing” to pay off your existing home loan. Negative gearing never seemed so good!

It’s nuts and you can clearly see it’s nuts!

Source: farrelly's Proactive Asset Allocation Handbook - NZ Edition - June 2011.