Sam’s Weekly Reading List for the week of October 14th through October 18th

October 19, 2013 Sam Saggers

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As savvy property investors it’s important to keep on top of events and changes which can have an impact on our property investments. There are so many analyses, opinions and articles about investing in property out there that it can be tough trying to keep up with what’s happening in property.

I’d like to take a moment to share some of the more interesting articles I’ve come across this week.

What next for the great China boom…and what does this mean for capitalism?- Pete Wargent

Pete Wargent, Chartered Accountant, Chartered Secretary and Financial Planner, discusses the subject of China’s “ghost cities”, as referenced in an article published on news.com.au

These cities are a result of growth fuelled by China’s middle class seeking a safe haven for their wealth. Wargent is fascinated – as am I – by the fact that we really have no idea what will happen should China’s “property bubble” burst.

Discussing the massive growth of the Chinese and Indian economies, Wargent poses the questions “While it’s hard to envisage such a growth in credit ending well, the real questions are how long it will last and how badly it will end…and whether the fallout will impact the ongoing growth in China adversely?”

Says Wargent, “Sure, we’ve had construction booms before and some of them ended disastrously, such as in parts of Florida in the USA. But nothing on such a vast scale has been witnessed.

Click here to read more.

On the rebound, Australia may be the star performer of 2014: Robert Simeon

Robert Simeon, director of Richardson Wrench Mosman and Neutral Bay, makes the observation that all signs point to Australia playing centre stage in the world of 2014.

Says Simeon, “Over the past week we have seen some very interesting observations namely: Rate cuts revised where analysts now have all but ruled out another cash rate reduction in 2013. Global growth forecasts for 2014 tend to fluctuate between 3-4% so everyone will be looking for the stand out economies. Many are suggesting that Australia may very well be a star performer.”

Other positive signs noted by Simeon include:

  • “The National Australia Bank Business Survey showed business confidence rose eight index points to 12 in September – its highest level since March 2010. The jobless rate fell from 5.8% to 5.6% which really surprised everyone given once again our over – analysis had the jobless rate higher.
  • Australia urged to diversify economy as five “super growth” industries could boost the national economy by $250 billion over the next twenty years. Mining is expected to remain a major driver of prosperity, according to a new Delloitte Access Economics report released on Tuesday, with agribusiness, gas, tourism, international education and wealth management well – placed to join it.
  • We also saw that “property bubble theory” laid to rest – Is there a property bubble? The experts have their say. As I’ve said all along the “property bubble theory” in Australia is just a pile of rubbish theory. Housing boom is a necessary evil said HSBC, with house prices having risen 9% since the May 2012 lows, and up 5.5% over the past year, it’s clear that momentum is picking up. I must admit that when these increases are scrutinized much closer we will see that the increases are not reflected in every suburb – more so at the lower end markets although eventually it will move to the top – end markets.
  • The property markets are simply at the early stages of rebalancing growth and the Reserve Bank of Australia would be most happy to see these green shoots. What many forget is that at the lowest cash rate Australia has ever seen it is very easy to service debt. It only becomes interesting once the cash rate is restored to what many call normality which is somewhere from 5.5% to 7%.”

To read more good news about Australia’s future, click here.

Where have all the first home buyers gone?- Michael Matusik

Director of Matusik Property Insights, Michael Matusik gives his insight into the low showing of first home buyers in the marketplace.

Matusik forecasts that “…over the next 24 hours you will be bombarded by tales of woe about all those poor first timers [emphasis mine] who cannot get into the market.”

Why does he say this? Recently released figures from August on first home buyers show that FHB’s account for only 13.7% of all loans and that this figure represents a 9 year low, with the long term average at about 20%.

These figures are a result, per Matusik, of “the machinations with regards to the First Home Owners Grant (FHOG)”. This incentive “…have interfered with the property cycle”, continued Matusik. “The FHOG is great politics, poor policy.”

Matusik believes that the current decline is a direct result of the FHOG, and that because of demographics, first home buyer purchases would have “started [declining] more than a decade ago and the decline would have been far more gradual”.

Why would it have declined? Because “Generation Y – the largest rental group – is more interested in travel and other lifestyle things than being saddled with a home loan,” says Matusik.

For more insights into why demographics have a great deal to do with the low level of first home buyers, click here to read the article in full.

Have a great weekend, and if you enjoyed this list, please share it with your friends by clicking a social link button to the left of this article.

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