LOOK TO THE FUTURE WITH CONFIDENCE.... BUT EYES WIDE OPEN!
The market in Brisbane is said to be booming. Buyers are paying well over asking prices. Sellers are chasing - and getting - top dollar.
For property owners a boom market is great news. Personal wealth increases with each passing week and the thought of an early retirement becomes a real possibility.
But how long can the market sustain the pace of the recovery currently being seen?
Australia's economy is relatively strong. Not so others. There are plenty of questions hanging over the debt burden in the US. Equally there are a number of other economies that are taking a long, long time to emerge from the GFC.
If the US stock market were to take a large correction Australia would almost certainly follow suit and that would wipe out capital gains that might otherwise have been used to fund property investments.
Then there's the issue of interest rates. The Reserve Bank is fully aware of the dangers of a housing price bubble; and they're likely to do everything at their disposal to avoid one. That means putting up interest rates - as we've recently seen - possibly in aggressive manner. Investors - or more particularly speculators - could well see extended periods of flat market performance as a result.
It's a scenario that could put significant cash-flow pressure on highly geared property portfolios.
Of course there are other factors that suggest a market correction isn't on the cards. Chinese demand for resources produces significant demand for skilled trades in the resources sector. This puts downward pressure on Australia's unemployment rate and brings confidence to the broader economy.
We shouldn't forget burgeoning Australian population. Immigrants need to live somewhere and this places further upward pressure on rents making property investment more attractive.
The takeaway is to look to the future with confidence but with both eyes wide open. While there'll be some fortunes made it makes sense to scan the horizon for potential risks. Property has traditionally been a sound long-term investment.
Those who approach investing in this way will be the winners. If you believe in slow and steady, start now. Property prices will always go up in the long term. Tomorrow may cost you an extra
For property owners a boom market is great news. Personal wealth increases with each passing week and the thought of an early retirement becomes a real possibility.
But how long can the market sustain the pace of the recovery currently being seen?
Australia's economy is relatively strong. Not so others. There are plenty of questions hanging over the debt burden in the US. Equally there are a number of other economies that are taking a long, long time to emerge from the GFC.
If the US stock market were to take a large correction Australia would almost certainly follow suit and that would wipe out capital gains that might otherwise have been used to fund property investments.
Then there's the issue of interest rates. The Reserve Bank is fully aware of the dangers of a housing price bubble; and they're likely to do everything at their disposal to avoid one. That means putting up interest rates - as we've recently seen - possibly in aggressive manner. Investors - or more particularly speculators - could well see extended periods of flat market performance as a result.
It's a scenario that could put significant cash-flow pressure on highly geared property portfolios.
Of course there are other factors that suggest a market correction isn't on the cards. Chinese demand for resources produces significant demand for skilled trades in the resources sector. This puts downward pressure on Australia's unemployment rate and brings confidence to the broader economy.
We shouldn't forget burgeoning Australian population. Immigrants need to live somewhere and this places further upward pressure on rents making property investment more attractive.
The takeaway is to look to the future with confidence but with both eyes wide open. While there'll be some fortunes made it makes sense to scan the horizon for potential risks. Property has traditionally been a sound long-term investment.
Those who approach investing in this way will be the winners. If you believe in slow and steady, start now. Property prices will always go up in the long term. Tomorrow may cost you an extra
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