Comments on: Bubbles, Busts and the Great Disconnect! http://www.business2.com.au/2007/08/bubbles-busts-and-the-great-disconnect/ Real Estate Agent News and Information Technology Mon, 15 Mar 2010 04:36:35 +0000 http://wordpress.org/?v=2.9.2 hourly 1 By: Paul D http://www.business2.com.au/2007/08/bubbles-busts-and-the-great-disconnect/comment-page-1/#comment-3022 Paul D Wed, 22 Aug 2007 01:46:32 +0000 http://www.business2.com.au/2007/08/21/bubbles-busts-and-the-great-disconnect/#comment-3022 I was in discussions the other day with a young (x -gen) industrial agent. I commented that I thought he was asking too much for the land, and that the fundamentals were not right, because after you pay for the land, build the building and try to find a tenant - the tenant would not pay an economic return on the property, because they simply would not be able to afford the rent that was needed to provide any sort of return. I was amazed as his off-handed comment, that these days, that was not the way to calculate a return. His opinion was that you aim to sell to an owner occupier, because they didn't care about a return. The worst thing was, that he was SERIOUS. Another case in point was a seaside block of units, in a managed hotel complex. I pointed out to the sales lady that the asking price represented approx $8,000 per m2. and for that kind of money, you could buy a strata office in the centre of the Sydney CBD, and have practically 100% occupancy at nearly double the rent, and she didn't have a clue what my point was. The main problem is that sales people have seen prices increasing for so long (in some cases their entire careers) that they just assume that it will continue at that pace forever. I was in discussions the other day with a young (x -gen) industrial agent. I commented that I thought he was asking too much for the land, and that the fundamentals were not right, because after you pay for the land, build the building and try to find a tenant – the tenant would not pay an economic return on the property, because they simply would not be able to afford the rent that was needed to provide any sort of return. I was amazed as his off-handed comment, that these days, that was not the way to calculate a return. His opinion was that you aim to sell to an owner occupier, because they didn’t care about a return. The worst thing was, that he was SERIOUS.

Another case in point was a seaside block of units, in a managed hotel complex. I pointed out to the sales lady that the asking price represented approx $8,000 per m2. and for that kind of money, you could buy a strata office in the centre of the Sydney CBD, and have practically 100% occupancy at nearly double the rent, and she didn’t have a clue what my point was. The main problem is that sales people have seen prices increasing for so long (in some cases their entire careers) that they just assume that it will continue at that pace forever.

]]> By: Glenn http://www.business2.com.au/2007/08/bubbles-busts-and-the-great-disconnect/comment-page-1/#comment-3021 Glenn Wed, 22 Aug 2007 00:06:08 +0000 http://www.business2.com.au/2007/08/21/bubbles-busts-and-the-great-disconnect/#comment-3021 You read a lot over your muesli!!! At least you did not spit it across the screen this time.. You read a lot over your muesli!!! At least you did not spit it across the screen this time..

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