Roddy

Very interested in Ronnie Chan's comments about restaurants. My views are slightly different: 1. The most important thing as a mall owner is to ensure that the retailers are busy - with profitable footfall 2. Most mall owners fail to appreciate that a shop is scaled (ie costs) in terms of staff / inventory etc to the peak sales hours but the profitability is dependent on the average sales per hour. Admittedly a shop can add a couple extra staff to cope with peak but the number of checkouts etc have to be designed for peak. 3. Peak shopping (using a UK example) is typically Thurs / Friday evening and Saturday late afternoon / early evening. 4. Cinemas and restaurants help bring in people on other evenings etc. 5. However I believe that mixing in offices and residential would add to the average utilisation. Consider a mall with a number of office blocks sitting on top of it; and a few residential blocks. And ideally the mall itself sitting on top of a railway station. Within the complex there would also be gyms and maybe even a crèche etc. 6. The footfall during the day - eg office workers looking for lunch; residents going to and from work; etc would add to the footfall etc and tremendously increase the spend in the mall and hence its value. 7. I think the nearest example of this scenario I have come across is Canary Wharf in London. But also work looking at Bullring in Birmingham (which sits on / near a station). As Canary Wharf develops its residential areas and its studio workspaces it will be interesting to see how this measures out. But I think the proof it is seeing how busy the restaurants and hence the retail space is at Canary Wharf during lunch time in the average week.

That depends on: - is the loan fixed or variable - what is the nature of the tenant and the duration of the lease Eg: A commercial property (ie office) leased to the govt. on a 20 yr lease at 5.5% yield (full repairing and insurance) but with a 5 yr upwardly only CPI linked rent review and a 20% fixed rate commercial loan for 5.0% (ideally interest only) - probably want to take that. A residential property on a 25 yr variable rate mortgage; with a LTV of 95% and in an area where rent yields are currently 2.5% and the market is frothy; with tenants typically staying only 3-6 months and long voids - probably give that a miss.

If you were an advisor to the PM + Chancellor in 2009 / 10 what would you have been saying: (1) If property prices fall the banks crash - but if property prices rise the banks are saved (2) If property prices fall the middle classes become destitute - if prices rise the wealth effect trickles down (3) If property prices fall local and national government income from property taxes fall etc (4) Mass unemployment is a risk - increased construction activity soaks up a lot of unemployed / unskilled people. Rising prices drive construction. When property prices fall construction slows (5) In 2009 / 2010 would you have been worried about the next 'bubble' - no - you were worried about a 1929 style depression Think the current environment is a reflection of thoughts similar to the above in 2009 / 2010 in the corridors of power. Remember that property prices are usually not properly reflected in inflation numbers. And the GDP reported on TV is usually the 'real' GDP which is computed by taking the nominal GDP and subtracting inflation. So if nominal GDP is growing rapidly due to construction and property transactions (ie estate agents etc being active) and parts of this activity are not being recording or leaking out of the inflation numbers then inflation is underreported so the 'real GDP growth rate' goes up faster and we appear to 'recover' faster.

The papers are full of stuff on house prices; a hedge fund (Tosca) is buying commercial property in the north of the UK; RICS is asking the govt to intervene to slow down house price rises. New mortgage guarantees coming in etc. Is this all smelling like nearing a top? Maybe one more season (ie spring 2014) before we start going sideways? Any thoughts? Indeed by 2015 could we see interest rates rise to slow down housing? The big question to me is whether it will be 2015 or 2016 before we see a slow down in housing (not necessarily tho a significant decline). More generally - is this not the point of QE ie to inflate assets and thereby make loans good, banks survive and the economy continues....

Of interest - page 8- re gold http://mauldin_images.s3.amazonaws.com/images/uploads/ttmygh/6107/Nov27_2012_TTMYGH.pdf and http://sprottglobal.com/markets-at-a-glance/maag-article/?id=6590

Er - this thread has has over 4500 responses - any view on whether we can plot replies per month vs house prices?

Was an article I saw today ( ?ft) showing high percent interest only mortgages in UK? Separately interesting stuff on German property at http://wexboy.wordpress.com/

Surely the key issue is this: (1) Govt finances are a disaster. The choices are deflation / austerity which leads to an implosion of the banking system or inflation. As the first choice is politically unacceptable the politicians will go for the second (2) However regulatory changes for banks etc mean that printing money is not creating enough (/any) inflation of the right type. (Velocity of money is collapsing) (3) At some point credit availability / velocity will return (4) The average guy in the street thinks that housing will track inflation - in the long run it roughly does (can anyone confirm this?) However high leverage makes housing sensitive to interest rates. Is the big issue between Germany and the UK the level of leverage in residential housing? (5) How much of UK house prices are driven by demand and how much by artificial rules (planning permission / green belt) creating artificial limits on supply? (6) Does telecoms ie the ability to work from home etc plus transport links (eg Crossrail (again!)) reduce the pricing pressure in the centre?

Should have added: (1) Unit size - listed sector I can buy what ever unit size I want (2) Direct - I have to buy in whatever size property is available (3) Prime vs non prime - listed sector tends to be focussed on prime - is this a good or bad thing? (4) ISA obviously has limits but several members of a family can all play

( Not sure how to smilies got into the above ) I would be interested to know if anyone has any accurate estimates on void periods, interest costs, agent fees and yields?

Following on from my earlier comments re buying directly or indirectly this is what I am thinking: (1) If I buy direct property it is likely to be residential. The issues with this are: (a) use of agents to find tenants - I am likely to find this leads to a 10-15% (say) leakage in terms of fees ( void periods - I think it is reasonable to assume say 10% ie one month of voids per year © tax on capital gains - I think a lot of people forget the capital gains tax on non primary residences (d) competition - lots of people doing buy to let (e) supply - demand - as highlighted elsewhere there is a lot of build going on and does CrossRail alter the competitive catchment area ie if I buy in Central London I will be in competition with Slough? (f) refurb costs - lets not be blind that bad tenants can mean the need to refurb a property / or at least put in new furniture (g) illiquidity - typically I think people miss the costs of transactions ie stamp duty, agent fees and time taken The advantage of direct ownership is that I can be selective on what I buy and control it directly (this assumes of course I will add 'alpha' to the process rather than just be underpricing my time and being rung in the middle of the night after the tenant has broken the shower. (2) If I buy a REIT via an ISA: (a) Usually (I hope) REITs can borrow at cheaper prices than me - and often they will fix the rate ( Overheads spread over a bigger asset base than I would have (ought to mean less leakage from gross to net though not always) © By focussing on certain REITS I can select areas of exposure - sometimes down to a couple of locations in London (d) Less tax leakage - REITS do not pay tax on their activities and also I do not pay tax on ISAs (e) Sometimes at a significant discount to NAV (f) Sometimes complex structures and takes time to get head around some of them (g) Need to get to know managements (h) Instant liquidity, low transaction costs (UK stamp duty on shares and brokerage fees) (i) Not necessarily the advantages of leverage of direct ownership (j) Not necessarily exposed to residential (depends on REIT and structure - eg some have big resi. development sites) (k) No headaches re being woken at night re broken showers etc Any thoughts?

I have been thinking re whether it makes more sense for a private investor to buy property ie buy to let directly or buy a REIT via an isa. Admittedly different assets ie residential vs commercial, different leverage etc but am thinking the tax advantage, instant liquidity and the opportunity to buy REITS at a discount to NAV make them attractive? Add in the ability to chose your mix of commercial, retail, development and location mix? And without the headaches of having to manage property directly. The negative arguably is that the best performing sector has been residential for a long time ( tho' some property co.s have resi exposure). Thoughts / comments?

Hi I am a new member. I am an investor interested in market always looking for an edge. I believe that hard work and study pays off in investing. But it is important (especially in the current environment) to look at margin of safety / risk vs reward.