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Ben Kingsley Blog post by Ben Kingsley

Stable Market – Good News for Now…

Can we call it yet?…….. Do we have to repeat ourselves again? Will the papers and naysayers’ such as the likes of Steven Keen  finally admit they got it wrong (Mind you Steven was claiming  well before the GFC that property values would drop as much as 40%, when in fact property prices since have record double digit growth).

So will everyday people now start to listen to the likes of the RBA and other respected property economists and start believing that we are not in a bubble and we never actually got there. Are we actually in a stable market?

I will however note that South East Queensland, namely the Gold Coast and Sunshine coasts, pockets of WA like Mandurah, tourism destinations like Airlie Beach did in fact build mini bubbles driven by property speculation during the past decade.  But I’ve been warning you all about these locations for many years.

Now we are starting to read about the property market stablising in a macro sense, as 2011 saw major markets come off the highs of the last upturn in valuations.  Early results for 2012 are showing slight valuation improvements in most major centres (some naturally better than others).

The pleasing thing for me is that  after the significant run of the past decade we are now in a period of  what I tag ‘the breather’; where macro data will tell us that across major markets our value growth is flat for a few years.

Why is this a good thing ? – It’s a very good thing because growth figures in some years in the past decade were recorded over 20% ranges, and this over the long term is completely unsustainable and would as history has shown us result in a valuation bubble.

From an analysis point of view I’m very happy with the current measure of valuation, debt / savings levels and household income positions.  Furthermore the population story and immigration story are solid numbers from a macro position.

 

Where to from here?

Following the RBA commentary from its board meeting this week, if the inflation numbers are below range (2-3%) I’d expect to see another rate cut next Month and I’d expect the full amount to be passed on – If not passed on, it’s purely a profit grab by the lenders.

Lower rates make buying more attractive so I’d expect this move, if sustained over a 12 month period, will drive up values.

The biggest hurdle to values right now is confidence/market sentiment in the major state economies , plus the share markets performance.  Strong share markets providing a profit is actually a great thing for property.

Macro speaking steady growth. Micro – great investment buys are out there now – you just need to know where to find them…..and enjoy the long term benefits of growth and a regular income.

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