You may have read that the Australian housing market is in for an 'implosion'. Read this article in The Australian. I disagree with this analysis by a US investment banker.
The guy who emailed me this story also made the point:
"Is the Australian house market a bubble? The Australian money supply (M3) has gone up 10% per year, the last 10 years. It is not an issue of if, but when".
Here are the reasons why I think there will be no collapse. But I do expect higher interest rates, and I do not expect much growth (if any) in prices. Yields need to rebuild in property.
The increases in the money supply have occurred because of huge capital inflows and investment, so matched by increases in productive capacity in mining. The outlook is for more mining investment in iron ore, coal, oil & gas. The outlook for commodity prices is rather good. Expect $300 billion of mining investment in the next 20 years.
Property prices are high because govt artificially keeps them high by restricting land releases, so they can keep taxes high, keep you working hard, and minimise the cost of local services, i.e. roads to nowhere, buses servicing no communities. High rates of immigration can be expected to assist with property demand. Where are all the NZ'ers going to go for a job. Sorry, you are right, they are all already there. :)
Many argue that China is a bubble, but again with huge capital inflows boosting labour productivity and productive capacity, I think there is fundamentally strength there. They are on an exponential growth path, along with India. I think this is one of those magical times where the world does REALLY WELL. Afterall 3 billion people have had their markets deregulated.
The US and EU are more of a basket case, so I think there will be a short term impact from those countries performing poorly and as he suggests 'boosting their money supply', but the long term looks good for Australia and the world, and govt spending will raise demand in the short term, as much as it might be inefficient expenditure.
I think markets will fall, and activity subdued only for the next few years...sideways more than anything. There was no huge capacity overhang when the US tanked, so the slack will be absorbed in a few years.
Property prices are high because govt artificially keeps them high by restricting land releases, so they can keep taxes high, keep you working hard, and minimise the cost of local services, i.e. roads to nowhere, buses servicing no communities. High rates of immigration can be expected to assist with property demand. Where are all the NZ'ers going to go for a job. Sorry, you are right, they are all already there. :)
Many argue that China is a bubble, but again with huge capital inflows boosting labour productivity and productive capacity, I think there is fundamentally strength there. They are on an exponential growth path, along with India. I think this is one of those magical times where the world does REALLY WELL. Afterall 3 billion people have had their markets deregulated.
The US and EU are more of a basket case, so I think there will be a short term impact from those countries performing poorly and as he suggests 'boosting their money supply', but the long term looks good for Australia and the world, and govt spending will raise demand in the short term, as much as it might be inefficient expenditure.
I think markets will fall, and activity subdued only for the next few years...sideways more than anything. There was no huge capacity overhang when the US tanked, so the slack will be absorbed in a few years.
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Andrew Sheldon www.sheldonthinks.com
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