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September 2013 Update

2 Sep 2013 coolangatta 0 Comment

We found this article from Michael Matusik, dated 22 August, which we found heartening and enlightening and we wanted to share his insights into the current market with you. Mr Matusik is the director of the independent property advisory Matusik Insights.WeI hope you find it interesting as well.

Why we’re entering a residential upturn

“It astonishes me that we still keep on reading about Australia’s pending housing market crash.

“Moody’s is the latest commentator to join the chorus singing for caution on the Australian residential market. Sadly, most overseas commentators don’t understand the nuances of the Australian property cycle or how mortgages are granted & must be repaid in Australia.

“Yet despite forecasting absolute doom about five years ago, our “property correction” actually went sideways since the late 2000s. And now the residential market is set to recover.

“I am quite bullish about the outlook for east coast residential property & in particular in Sydney, Melbourne and South East Queensland.

“I have several reasons for being so. These include:

Some thoughts

“We currently are saving like there is no tomorrow. Over 10% of what we earn is now squirreled away; more so when you include the reduction in our level of debt.

“But is this the new normal ?

“I have suggested such myself, but I am beginning to wonder.

“A poor federal Labor government (there is nothing else one could say) & flat house prices might be more responsible for our current malaise than the financial crisis or slower world economic growth.

“Surely assuming a change federally, a realisation that money in the bank now earns very little, & once the penny drops, that house prices are increasing (a broad residential recovery nearly always starts in Sydney), surely Australians will revert to their traditional form of tax free or ATO assisted saving—property.

“I cannot see any other major investment pathway forward.

“The ability of SMSFs to borrow to buy property plus the last chance (in their minds) for baby boomers to leverage and make an easier buck before they retire (or re-tread) just adds more fuel to the fire.

End Notes

“We are surely about to enter another residential upturn. Property along the east coast—and especially in the three main capitals/plus on the Gold and Sunshine Coasts—will be the big winners.

“As a result, some are now forecasting that the cash rate could fall another 0.75% to 1.75% within the next 12 months. I think the cash rate will go to 2% by Easter 2014. Anyone want to place a bet ?

“Property values are set to rise and they will most likely overinflate (like they usually do) as a result. I think the residential market will enjoy much better times post 7th September and will remain buoyant for about 2 or three years. Prices will then need to correct. I don’t really know how much they will increase in the next, say three years, but by as much as 25% isn’t beyond the realm of possibility. Who also really knows how big a future correct will be. It might be another long fizz like the last five years or a sharp plunge. The key is to invest and not speculate.

“In summary, it is pointless saying that things are different this time around. Property cycles and all of the hallmarks are there to see that a recovery has already begun. We need a residential recovery. We need more new housing starts. The RBA will make sure we get one.”

As always if you require any advice or assistance in selling your property please feel free to call our office.

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