It's Only Going To Get Hotter

This week has seen an avalanche of good news around the world, from Brazil to Europe to China to the USA. All about improving business confidence, industrial activity, strong home sales, and in China continuing advancing property prices at around 11% per annum.

That’s the average for the 72 largest cities. Places like Shanghai and Beijing are often doing even better. So there has been no bursting of any bubble there, that spread to Australia by any means. In fact, Australia stands to win in terms of Chinese investment whether the property market in China is moving higher or even collapsing.

If there was a crisis in China, people would be flooding toward Australia with ever greater enthusiasm. This would be fantastic for property owners and investors, but of course, disastrous for those still looking to buy.

It is always important to stay ahead of the curve as we say in financial markets.

That curve, or wave, as we have been highlighting for many years now, is predominantly coming from China, but not China alone. It is all about the greater mobility of people globally, due to significantly enhanced awareness and the ability to migrate or visit more freely than ever before.

Australia as a very lucky country in terms of natural resources is going to be an ever larger target in the minds of people thinking of making transnational moves in the future.

There was a story in the Australian Financial Review this week, suggesting that as much as 25% of all new inexpensive housing bought in New South wales is now purchased by Chinese buyers.

We have been forecasting exactly this form of human tide and investment flood for many years. A lot of people discounted the importance of China in the Australian property market. We did not. We all need to continuously assert our property ownership, or risk being left out of one of the biggest investment waves of the next decade. Of Chinese investment and migration to Australia.

We have been saying all along when others kept talking about the imminent 50% crash, that it was important to keep thinking in terms of this being the bottom of the future range.

Interest rates will be going up. We are seeing this more and more, where in an increasingly globalised world, banks are funded globally. This means that the bottom in the interest rate cycle in the US, soon Europe, the UK and elsewhere, will flow through to Australia.

The all important point is this, however, that only slightly higher interest rates at still record low levels, will be completely swamped by resurgent domestic demand and accelerating foreign demand simultaneously.

The biggest risk in the property market is not being in the property market.

Clifford Bennett