Opportune Times for Australian Property

Let’s face it - we all know the Australian property market has been strong - even exciting in some locations like Sydney and Melbourne, while other centres have shown modest growth.

The overwhelming conclusion from the last few years, however, is that the doomsayers like Harry Dent should be eating their hats right now. They aren’t though, because they make a living out of advocating disaster and scaring people. They love selling fear. Fear sells. That’s it!

They do this even when the economics are positive - even when the demographics are positive. There will always be plusses and minuses in any economy at any given point. The trick is to honestly figure out the resulting balance.

The economic outlook for Australian property has been aggressively bullish for many years now.

I am here at the start of 2016, to tell you the same bullish outlook continues!

The World Is Still Spinning

Not only is the potential for the Australian economy improving, but the whole world is looking good.

Now, that is not what you would have read in the media lately, but as I always say, the media is there to sell fear too. That’s how they keep their readership and advertising revenues up. It is what they do.

You would have heard China is slowing again. No, it is not!

The run of data since the start of the year has been remarkably positive. The services sector, which is now the biggest sector of the economy, accelerated sharply. The non-manufacturing PMI, an index of growth in a sector, jumped to 54.4, which is economic boom territory. The manufacturing sector also improved. The big sample official PMI edged up from 49.6 to 49.7. Well, at least it moved up.

While new orders for manufactured goods were up by a healthy amount, we also just had the Fixed Direct Investment results for 2015 - up a very strong 6.4%. Extraordinarily, there was a 9.5% jump in investment in high tech manufacturing. This confirms what I’ve been saying all along - that China’s manufacturing is going through a massive modernisation phase to enable them to become ever more competitive in the world.

Germany just posted its strongest growth in four years at 1.7%. It’s not a lot, but Europe is growing. Europe will always be the tortoise rather than a hare when it comes to economic performance. Nevertheless, the data is all positive there.

In the US we have just seen new jobless claims (people applying for un-employment benefits) again come in at near all-time lows. The size of the US workforce is dramatically bigger than it was, yet those needing assistance due to being out of work is at record lows. You cannot get any better data than that!

Yes - oil has crashed, but this is because the traditional oil producers are deliberately driving prices lower to force the new fracking producers out of business. In the medium to long run, lower oil prices will mean lower energy prices in general, a fantastic outcome for the world’s consumers and businesses alike. So, this is a great positive too.

Aussie Property Outlook Is Positive

In Australia, the latest un-employment data suggests steady growth in employment is underway, and with the un-employment rate steady at 5.8% there is again some light at the end of the tunnel for the economy overall.

The Australian dollar is still low, keeping Australian property looking like a bargain to foreign investors who will have an ever increasing influence on the Australian property market for decades to come.

When I say “opportune times”, I mean there’s been so much misinformed negativity about China, the world and Australia, that potential property buyers have been holding back. This is quite clearly the case in Sydney.

When you consider that the fundamental economics are actually very strong, and prices are holding up despite all the negativity, it makes you realise that once everyone works out things are fine, we could have another sharp price acceleration phase. This is especially true of the Gold Coast and South East Queensland in general, but will also apply to other centres.

By mid-year we may well have started yet another price boom. Now, wouldn’t that surprise everyone?

Clifford Bennett