Residex's John Edwards argues that property prices are likely to accelerate from here. In the short term he may be right.
Although we haven't yet seen much growth in mortgage issuance .... the kind of clearance rates we are seeing are consistent with higher credit growth to come.
His main reason:
China is serious about rebalancing because the costs of inaction are now higher than the costs of action -->
Australia's terms of trade to continue to be down for the next few years --> At some point both national income and mining investment are going to drop more precipitousl --> Rising unemployment and falling standards of living will pressure rents because more people live together. Now that rates are falling because real risk is growing, the market is warming up.
There are swings and roundabouts here.
People are paying down debt faster --> more credit availability despite capped aggregates --> The stock market rally may draw out deposits but it also boosts equity.
But as long as APRA maintains this discipline, property prices cannot rise like they used to, nor far above inflation, for any period of time.
(1) Long term goal to live in the property - then who cares, right? As long as your equity is good and you intend to live in it for a goodly period.
(2) Long term goal to invest for capital growth and yield over the medium term - then I'd be asking myself if you're being appropriately compensated for risk, especially when you can get the same exposure in bank shares, with better yield and the same capital growth prospects. And most importantly, in a liquid form.
For full article : http://news.domain.com.au/domain/real-estate-news/is-australian-property-worth-the-risk-20130308-2fpoy.html
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