Back in Perth now, and it's been all go since arriving back - chasing down paperwork to be executed as a director of the two commercial sheds that have both gone under contract (unconditional) and now awaiting settlement.
Both offers are cash which is always nice, but settlement is still a way off as we are waiting on the Shire to issue the strata titles which seems to be taking forever. Maybe another 4 weeks or so before we see our money which can't come soon enough for me as plans are afoot....
An update on the other settlement, the JV purchase in South Hedland, this property settled last Tuesday which we (my JV partner and I) were very relieved about as it was 11 days late! We got stung with about $3k in late fees (late fees can be applied by the 'other side' after a grace period of 3 days) which we felt was a small price to pay considering the profit in this deal. Development size blocks in South Hedland are fetching $1000/m2 and this block ( with house) is 1527m2. True Val should be in the vicinity of $1.5m, however purchase price was only $1.05m due to it being secured under option some 6 months prior. Note: Bank holds OA (or contract price) until a minimum of 3 months at which time we can call for a revaluation and capitalize on the additional equity.
Since that time prices have soared on the basis of the Shire Planning Scheme amendment 51 which will see rezoning of R20 to R30. Subsequent to that was Landgate's auction in late April which saw insatiable demand spill over to the wider market setting new benchmark prices circa $1000/m2 for anything that has potential to develop.
The reason settlement took so long was due to finance approval coming very late in the piece. To avoid losing the contract, as the seller was within his rights to break the contract if we didn't go unconditional by the 'due time', which he fully intended to do, we waved the finance clause to keep the contract in play, confident that we would get it, albeit late.
During this time dealing with the bank it became apparent that the goal posts are shifting with regard to purchasing property in the Pilbara. They ( banks) are pulling back on LVR and the rent allowed for servicing calculations which are clear signs that they're getting a little antsy. (for the record the terms offered were 70% LVR P&I over 15 years. We were hoping for 80% IO) This has a lot to do with the recent sudden fall in the iron ore price and BHP's recent decision to post-pone the Outer Harbour expansion, which they feel may impact the property market.
Me personally I think the long view is the one to take, and China haven't suddenly shut up shop! The iron ore price is likely to be a little volatile and there is some suspicion that the price has been manipulated by stock piling at uneconomic levels, so it's very likely that the price will rebound significantly on the lows of last week.
My view is that there may well be some good buying opportunities presented in the property market if there is a 'slow down'. As I write this it is business as usual in the Pilbara and rental demand is still very strong. We've already got people interested in signing up on the lease for the property just settled ...So onwards and upwards!
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