Where The Remarkable Becomes Reality
by John hopkins_Executive Chairman
The headlines for the marketing of Dubai and its property developments during the quite recent high flying days were all about the wonder and amazement of everything, especially the architecture, the booming economy, the glitz, glamour and the international stars and millionaires.
Yet today Dubai is floundering. And some in the media are behaving like they’re surprised!
I would suggest when you hear statements like, ‘when the remarkable becomes the reality’, or when property spruikers are preaching their ‘become a millionaire in a minute’ philosophies, when those who should know better are waxing lyrical about ‘no money’ or ‘no risk,’ then surely the alarm bells should be going off in the heads of any straight-thinking individual?
I remember in the early Eighties, an associate of mine from Queensland was telling me that clients of the John Hopkins Group should be purchasing apartments off-the-plan in the Gold Coast because he would then be able to re-sell them for mega profits before my clients needed to settle. Needless to say, I ignored this temptation, and he, along with many other short-sighted investors, ended up losing, at the very least, their shirts.
All that glitters is not gold. A cliché, I know, but still well worth remembering. And now back to Dubai.
The stock markets of the world reacted badly to the news that there needed to be a renegotiation of the $63 billion debt the Dubai government has racked up.
It’s both understandable and fair that the markets reacted badly. Even though the amount is relatively minor compared to what’s been written off because of the GFC, large and small investors still remember all too clearly, and with a great deal of pain, the impact of the US’s sub prime debacle. So anything that bears even a vague resemblance to either of those events will put them on a state of high alert.
However, what I do struggle to understand is this surprise over the events in Dubai. Why?
It’s an economy built on little else than a property development boom – on sand, most aptly. It’s most definitely not a property market built on a development phase that came about as the result of a solid and growing economy with the resulting population growth.
An analogy
As you know, the three little piggies built three little houses – one out of stone, one out of timber and one out of straw. The Dubai property development boom was no different to that third little piggy, nor was the over-development disaster of houses in the backwaters of the US, with no one to occupy them, and no one with the funds or income to buy or rent them.
Both the Dubai development boom and the US residential over-development phenomena were mirages. They were built on unmerited belief, undeserved optimism and, more than likely, a huge helping of greed.
They were built on the development and building booms themselves, not on any basic and strong underlying property principles; principles that should always be real and visible.
The fundamentals (again!)
The fundamental principles are all about Continuing Strong Demand of both Tenancy and Sale.
These fundamentals are at the core of why we have never, and will never – despite many others doing so – recommend our clients purchase property as an investment:
• in Wellington, New Zealand
• on the Gold Coast
• in other resort locations
• in regional areas where the underlying demand of occupation or ownership is thin or can disappear overnight
• in places like Perth or Townsville where the economies are over-reliant on one section of endeavor or economic activity, namely natural resources.
The basics
For property, always follow the John Hopkins basic rules. They haven’t changed in thirty years. They will provide you with appropriate levels of Returns, Security and Flexibility.
1. Do your financial planning conservatively and correctly
2. Buy the right property
3. Give it time
Purchase your property investments in the best inner urban areas of a major metropolis. I am certain, sure, convinced and absolutely 100 per cent definite this the right advice.
No matter how alluring the talk is or the marketing collateral (look at Dubai!), always stick to the basics.
For more information, or to arrange an appointment with a John Hopkins Property Adviser, please contact our Client Liaison Officer on 1300 726 082 or click here.