Property Developers Show Stock Pickers the Way

Property Developers Show Stock Pickers the Way

Those big four bank chiefs must really feel bummed out right now.

The regulators are giving them a hard time.

Now they have to watch as other companies take their business off them.

Case in point is a company called TH Real Estate. It’s now setting up a platform to dish out commercial property debt here in Australia for the first time.

Apparently, TH Real Estate is ‘one of the world’s largest real estate investment managers’, according to The Australian.

Their operation can’t be too shabby. The Australian says they’ve averaged US$3.3 billion a year in loans globally since 2011. Not only that, they already own about a billion dollars worth of real estate right here in Australia.

Hello. This shows you why the people who keep calling for a property collapse keep being proved wrong. We know that doesn’t stop them going on about it — but feel free to ignore them.

As long as the credit flows, the good times will keep rolling in Australia. It’s a pretty simple equation. More credit equals higher prices.

A week or two ago, you may recall that I reported on the Pepper Group Ltd [ASX:PEP] takeover that is currently happening. Pepper is a ‘non bank’ lender.

The acquiring firm had to sweeten the deal a little bit to get one of the major shareholders to agree. That’s because business is good! Nobody sells a gold mine.

The financiers are in town and making a lot of moulah.

And that’s not all…

Follow the lead of this shrewd operator

The rich dudes are still ploughing ahead with projects too. Developer Paul Little is going ahead with a $220 million apartment project on the Gold Coast.

The report I read suggests that the infrastructure going in for the upcoming Commonwealth Games — light rail, casino upgrade and airport — will provide a ‘tailwind’ for the building.

Smart. Mr Little is clearly a shrewd man, and points the way for your own real estate invesments. Infrastucture can deliver good capital growth over time.

The taxpayer foots the bill for a lot of that stuff, and the building is far more appealing — and hopefully far more profitable.

There’s no certainty in investing, of course.

Alas, we can only assume not all in Queensland act with integrity, it seems.

Why else would The Australian Financial Review report that the Queensland government wants to ban property developer donations to local and state governments?

The AFR says there’s been a damning report from the anti-corruption body. Oh dear.

Alas, until the government changes the tax system, such measures are unlikely to work over the long term.

And since politicians are loyal servants, I don’t see any genuine tax reform happening anytime soon.

I recall the Prime Minister coming in and making a great deal of noise around his ‘value capture’ proposals when new infrastructure went in somewhere. Alas, that too seems to have fallen to the wayside.

It’s pretty obvious that nothing is going to change about Australia’s economy: More debt and higher property prices are on the cards. Invest with this in mind.

The should give you confidence to get on with investing in stocks. Why? As long as property keeps rising, and unemployment stays low, I don’t see anything coming along to derail the economy in a major way.

Check out all these developments…

And there’s a lot of real estate projects still going on around the country. This investment drives the building trade, and credit firms, and the suppliers, for example.

This leads to jobs and income, and company earnings — and can show up in the stock market.

Obviously, we’ve seen Paul Little’s latest move.

But fellow rich lister and property developer Tim Gurner has bought up a big site in the Fishermans Bend area in Melbourne. He wants to turn it into a $1.5 billion mixed use precinct. It could have more than 2,200 apartments, plus a hotel and retail space.

Apparently, he wants to complete the project over the next five to 10 years.

There’s also the Syrian billionaire who has bought Port Douglas’s Reef Marina and plans to spend $100 million redeveloping it. That’s due to be done and dusted around 2020.

Marriott International is also going to put a new Ritz-Carlton hotel in Sydney. One has already begun construction in Perth. That’s due to open in 2019.

You can see these projects have some time to run, too.

That’s just some of what I’ve seen in the last few weeks. There’s plenty more already underway or on the cards.

Like I keep saying, now’s the time to be making hay, while the going is good in the economy.

Go here to get started.


Callum Newman
Editor, The Daily Reckoning Australia