12 month performance

What's everyone's thoughts on the next 12 months

Here are my thoughts

Key macro drivers:
1) US and China will resolve trade frictions to Australia's advantage and mining exports will surge

2) China will loosen capital controls to put downward pressure on yuan (As they will be constrained from engaging in other pro china mercantilistic activities as part of negotiations with trump)

3) Reserve bank will drop rates by 50bps

4) Labor will win election by a very small margin but will be unable to pass neg. Gearing laws through Senate as the Senate will be a mishmash of major and minor parties

OUTCOMES:

1) Aud rise to 75c

2) Sydney market to level out at -20% from peak with chinese buyers back in force

3) Melb to level out at -25% from peak with chinese buyers back in force

4) Brisbane up 5% from flat due to rate cuts and mining uptick

5) Perth up 10% due to rate cuts and mining uptick

6) Adelaide up another 5% due to rate cuts

7) Hobart up another 10% due to rate rates

 

Only one problem here if investors cant source finance which is currently the case how can they continue buying
You need buyers for property markets to rise

Credit squeeze is killing the property markets oz wide

I expect flat or falling markets accross oz until
we see credit easing

If labour gets in well..screw investors

Most markets atm are either falling or flat

Interest rate drop wont help servicing debt under new lending guidelines

 

Hi MTR

Very true! Do you think APRA will be pressured by RBA and ASIC to promote a loosening of lending standards e.g. interest rate buffer might be reduced from 7%

 

That's a interesting way to look at the big picture ,the only way is eliminate all emotions options and prejudices as all investing markets are sometimes purely a physical phenomenon ..

If your list of 7 outcomes are correct and the election will be a cliff --hanger ,where uncertainties indecisions will remain dominant for who ever is voted in by the Australian public and we will all know the answer to that within the next few months..

I was having a drink at a small bar at stones corner yesterday after noon ,and the main shopping area up too a few months ago there was not a shop vacant..I counted 14 for lease shop-front even the fish and chip and a well know west end based brand coffee shop all gone whistling in the wind..

 

Just imagine what's gonna happen when credit becomes more easily available ...


And i believe it's gonna be sooner than many doomers/cf self interest spruikers would have you believe .

 

No idea, @euro73 and other brokers may have a handle on this??


For me I can only work on what is happening now and make decisions based on this

 

Depends on what you mean when you say “ credit becomes more easily available” Do you mean borrowing capacity improving ? Or do you mean faster approvals by lenders ? If you mean faster finance - meh. It won’t change DTIs of 6-7 . If you mean the former - only 2-3 weeks ago the chairman of APRA said the sensitised assessment rates are here to stay . So again - meh. Barring a complete about turn on that , I think the very best you can hope for is a modest reduction to the mandatory 7% P&I that’s currently in place ....something I floated as a possibility on other threads , months ago ... @Redom jas commented on this as well ... although we both consider this improbable . But even that will only marginally improve borrowing power .

So that improbability aside , if we stay at 7% P&I it means we stay at Debt to income ratios of @6-7 x income .... a figure that is still WAY BELOW What is required for Syd and Mel current median prices - which sit in the 9-10 x income range - to be supported , let alone grow . I dont understand what’s so difficult to comprehend about that mathematical equation.

So When I read these sorts of posts I just kinda wonder ..... in the face of 6-7 x caps , where does this person think the money will come from to create the booming growth they imply is just around the corner ? Cos it can only happen if DTIs go above 10x income , which will require an almost complete reversal of everything APRA spent the past 3.5 years putting in place .

So while I can see how it’s possible .... I can’t see how it’s very likely ...

 

I have no idea when borrowing capacity will improve but my gut tells me alot sooner than we may think. I think more likely a small handful of years than 10+.

But to me that's not really super important because I believe there are still deals and money to be made in RE around oz even as lending currently stands. Just need to employ an active approach and really look oz wide and not just in your own backyard .

 

I think you're being overly optimistic - and I am an optimist

 

Haha your probably right

Out of the cities I noted what do you think the performance will be

From peak I reckon by Christmas 2019:

(-20%) syd
(-25%) Melb
+5% Bris
+5 Adelaide
+10% Perth

 

Optimism has worked for me so far so why change it

 

Expect the best ... but plan for the worst ...

 

My life's motto.

 

You may well be right about this. I said several months ago that I didn't think Labor would necessarily go ahead with their proposed changes. - that's assuming they win of course. We should all remember the election is still @ 3 months away. Before APRA, there was a genuine argument to be made for this. Politically, they were seeing generations of future voters at a significant disadvantage to generations of older voters. Now, prices are correcting anyway and FHB's are not at such a disadvantage. And they risk making prolonging the APRA effect. And depending on the results of the election and the make up of the houses, it's likely going to be a HUGE political bun fight to get it done. Is that a war they need to fight, especially when they have dividend imputation and CGT on their agenda as well? Maybe they will think so. Maybe they wont. So they may soldier on with it, but I think there's a better than reasonable chance they will abandon it.

I also called this a long time ago... perhaps over 18 months ago . I said by mid-late 2019 there was a 30% chance of this. I revised that to 50/50 @ 6 months ago.... so I would imagine you are reasonably likely to be correct about this.