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Below is an extract from a property newsletter that I pay for. In the past 18 months or so there has been much discussion about the Australian property market crashing, a couple of private contacts on this site have talked about it and made enquiries to me about it. Obviously we have had a correction but it has been nothing like a crash and our markets have started the next phase which is one of the reasons I am putting this blog out there. 

Take note of it if you like and everyone will no doubt have their own social perspective of the evils and such of property and who can and can't afford it. My personal advice is too look to anything with a land base (house and land) and low level town houses and units (two story's max). Sydney people would be well aware of the dangers that have emerged in high rise.

Here is the extraction!

‘In the current environment, Australia appears as a safe harbor — both comfortably close and far from home.’
These words come from the CEO of Juwai.com — a Chinese website that lists overseas property.
He was commentating on the surge in interest in luxury Australian real estate from wealthy investors in Hong Kong.

Hong Kong tops the list for world’s most expensive real estate. The average price of a small apartment is over US$1.2 million.
And by the way, Hong Kong has now officially surpassed New York City as the place with the highest concentration of super wealthy people.
Juwai.com — the largest property portal for Chinese investors — recently reported that enquiries from Hong Kongers wanting to purchase Australian houses has increased 50-fold over the last three months.
Most of these enquiries focus on Sydney and Melbourne.

Why? think of the current protests.

It’s by far the most significant and widely publicised protest we’ve seen in the region since the pro-democratic demonstrations in Tiananmen Square over 30 years ago.

Of course, as you know by now history repeats, or rhymes, in set time frames.
In financial markets, it’s easier to observe this because we can chart both time and price.

Take a major event in the market and count forward, 30, 60, 90, or 120 degrees — in a period of days, weeks, or years — and markets are likely to turn or pause on (or close to) those counts.

We can do the same with historical events.

The Tiananmen Square protests in 1989 lasted nearly eight weeks.
Today, we’re several months into the current Chinese/Hong Kong unrest and it shows no sign of stopping.
The consequence's are predictable. More Asian money will flow into Australian property.
Cross boarder investment is always a major feature of the real estate cycle.

In 1990, the banking crisis in Tokyo led to a flood of investment from Japanese buyers into Thailand, Malaysia, and Indonesian real estate markets.
Money also fled to the ‘safety’ of US real estate when Thailand and its neighbours experienced their banking crisis in 1997 — especially to cities such as New York and LA.
Sometimes policymakers do this this quite deliberately.

In 2008, former Aussie PM Kevin Rudd removed restrictions on foreign purchasers to stop our property market crashing. Real estate values boomed by 25%.
30 years ago, after the Tiananmen Square massacre, Bob Hawke opened the gates and allowed 40,000 Chinese students to stay in Australia.

Will current PM Scott Morrison be facing a similar situation?
There are currently over 100,000 Australian’s living in Hong Kong. They own about 600 of the nation’s firms.
Most of the expatriates are Chinese Australians (or Hong Kong Australians).

Hong Kong has no private land ownership.
It was set up on the right premise. Britain acquired the territory from China on a lease. Residents paid 5% of the property value per annum to reside there.
The costs of administration were taken from the rent. That meant that taxes on productivity were low — and as such the economy thrived. The people of Hong Kong had more to spend in their pockets.
Of course, the system has broken down over the years. Less of the rent is collected — and property speculation is rife.

Hong Kong are the most levered nation in the world, with the most expensive real estate in the world.

Our property looks cheap in comparison. Furthermore, it’s on a freehold title.

Australia has restrictions on overseas buyers purchasing established homes — and there are a range of higher taxes for those that do choose to invest.
However, demand is increasing, and non-bank lenders are out in force offering alternative streams of finance.

Here’s the forecast: This potential wave of money could inflate our property markets and carry us into an almighty real estate boom into 2026. You’re well placed to take advantage of it.

 

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            • Funny you mention that.

              I haven’t been to church for nearly 20 years, in fact I couldn’t stand it, but funnily enough, I can’t still regurgitate large swathes of the bible.

              Funny what repetitive shit can do to ones mind, without even realising it.

    • Funny you should post that.

      Did you hear about the climate activists that just got caught in ice in the North Pole during summer, trying to make a point about global warming and the lack of ice on the North Pole?

      No?.......didn’t think so.

  • This guy is saying that money is going to flood the market from Hong Kong and this will drastically inflate housing prices. I think it might be a bridge too far but even if it's not it will line the pockets of a few, but certainly not the masses.

    The thought of house prices booming again is not a particularly palatable one in my opinion. I personally don't think it is realistic either (but - like anyone - that's just my opinion). For the average Aussie - the very large majority - booming real estate value is not necessarily a good thing. Australian homes should be exactly that - homes - a place to live, enjoy life, maybe raise a family - they shouldn't be an asset class. 

    The idea of an average Aussie family with a sizeable mortgage being encouraged to invest in the property market with leveraged money with a view to getting yield via rental streams and capital gain is, in my opinion, immoral. Everything the government is currently doing is pretty much exclusively predicated on propping up a faultering housing market (think construction) and thus keep the economy on life support. At the same time the media are talking up a housing market that is very much teetering.

    Why are the government dropping rates?

    Why is the RBA talking negative interest rates, QE and "unconventional economics" to manipulate the economy?

    Why is the govt introducing legislation for a 10 k cash ban? (the legislation also gives the govt the power to drop the cash ban limit at their will)

    Why is the construction industry shrinking at an alarming rate, and construction companies going broke (Ralan was little more than a ponzi scheme and plenty have lost their life savings)?

    Why are the govt and media talking up what is, really, no more than a dead cat bounce as some sort of property comeback? I live in Bella Vista - a bloke 4 doors down bought in 3 years ago and sold 2 weeks ago at a 35% loss. Box hill prices are off 30% and more from 3 years ago. New estates around the Nepean are in the same boat. I could go on ad nauseum and haven't even started on the Sydney high-rise disaster. Off-the-plan purchases have dried up in Sydney.

    The media are spruiking an increase in auction clearance rates but not reporting that volumes are way down on 24 months ago. Why? - well, mum and dad "investors" can't sell their investment properties. Many have gone from positions of relative wealth or comfort to negative equity. Many Australian famies who not long ago had a solid net balance sheet are now hundreds of thousands of dollars in the red and are trying to cover negative yields from their property investment(s) with an income that should be providing a good lifestyle but is instead supporting a bad investment.

    Of course, there are good, quality property investments for the right buyer but the govt and financials aren't concerned with someone that wants to invest their own cash on an EXISTING, quality purchase - they are looking to stimulate construction and borrowing at a time when punters should be looking to pay down debt - not run it up.

    Wages growth is non existant.

    New car sales are off 30% - a classic indicator of a weak economy and cautious public. You can walk into a car yard - any brand - and pretty much name your price these days.

    Credit card balances are soaring, as are pay day loans - these people aren't using this credit for leisure. They're using it to cover income shortfalls to pay for stuff like electricity, food, petrol and mortgage payments.

    If someone came to me and wanted advice on investing in the property market with leveraged funds I would STRONGLY recommend they hold their fire and concentrate on paying down existing debt until the future is clearer. Different story if it's your own cash and you want to roll the dice - but don't gambe with borrowed money in the current climate - there is a possibility you could lose the HOME your kids sleep in. Some things aren't worth the risk.

    Again, look at the wierd things the Govt is doing and the bullsh*t they are spinning about employment rates (we have chronic under employment), fiscal policy (interest rates), the black economy (cash bans) and the surplus and ask yourself where we are actually heading with all of this. Have an in depth look at the state of the global economy and what people like the IMF are saying. I reckon we are on the edge of a cliff and if a recession hits and hits hard house prices aren't booming - quite the opposite.

    LOOK, before you leap :)

     

    • The idea of continuous exponential growth is dead. A new economic paradigm is needed  Going to be a rocky ride.

      • So true - you look at every big business in the last 20 years that has gone under and they have all recorded year-on-year growth for the preceeding years - at record levels - then suddenly it's all shown to be a house of cards and the whole thing falls over in a blaze of glory.

        I see alot of parallels in our property market.

        A pharmaceutical company will pay it's top executives based solely on their ability to generate profit and in no way whatsoever on their ability to improve product/find a cure. It;s a sad state of affairs.

        As you said mate - a new economic paradigm is needed.

        • Good analysis Kram and it makes a lot of sense--I favour your outlook in the short term but do value Pops input from his advisor as a medium to long term outlook considering the way the world is now politically and also the impact Climate change will have on the property in the mid to long term. Pops article is right there is huge wealth in China,Hong Kong, Singapore and emerging India.The video clip mentions the level the sea will rise and wipe out Bangladesh --150 million people. Will countries sit by and do nothing in support.Many other countries in the same boat eg Pacific Islanders.

          The other big issue is our climate in Australia. They want to take more refugees in Australia {30 odd million within the next 15 years }to boost economic growth. They want to send these refugees to rural Australia which is fast running out of water. All economic considerations should take climate change into consideration.I don,t want to be a wowser but will consider some scientist who is saying the world population will be reduced from 9 billion or so to one billion for the earth climate balance to be sustainable. You have to give weight to Input from Science when considering planet maintenance.If you don,t you are flying blind

          • Shit Tad there are so many wild assumptions in that, you would be crazy to base your worries there.....30 millions refugees, how are you going power that.....burn their shit and pray for a cyclone to turn the windmill!

            Those numbers are as rediculous as the people and articles you are reading......as the man says "more fake news".

            • Pops I reread my post and I did make an error. Our government, as well as Labor, want to increase our population to 30 million within 15 years or so. They want to send more immigrants/refugees to Rural Australia. Sorry about that lots going on around me today

              • Interesting, I commented on the numbers, no one else questioned it. Tells me more about the way we accept non facts....that's not a reflection on you Tad, just our society and the mindless way some people accept things.

                I will repeat, the way Climate Change is treated and viewed on a global basis is the greatest myth of this century/millenium.

                That is not denying the existence of climate change just the way we are reacting to it. Carbon trading is one of the by products and again big business making huge economic windfalls and then we the public paying for it and having no idea what will be achieved.

                 

                • Agreed. It is a complete myth and it has now become a networking tool.The lastest tactic is to completely ignore scientific facts but attack the person presenting them until they are outcast. It can't be rationally debated on this site because any rational science that refutes it gets deleted. I went to a client today that had a big sign on their front door saying "Closed today for climate strike". These people have zero idea what an economic mess they are creating or maybe they do. Back to the football......

                   

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