I’m going to go out on a limb and make some pretty bullish forecasts here. But take a look at this data and tell me I’m wrong…
Ok, if you’ve been following me for a while, you know I’m a glass-half-full kinda guy. I’m optimistic by nature.
And I’m happy to have that on full display here because, 1. I believe it, and 2. I’m pretty sure whatever other media people are consuming is going to be biased towards bummersville. Fear sells.
But seriously, when I take a look at the factors lining up behind 2017, I’m starting to get a bit excited.
It was almost like there was a paradigm shift in the global mood when Trump became president (stronger economy mixed in with a more comical/dangerous diplomatic environment).
Thing is though, we’re already seeing that it play out in the data. Trump can’t take all that credit for that (if any!), but suddenly markets are marching to a much peppier tune.
And all of that is going to be a solid boost to Australian property markets, in my humble opinion.
So if I was to lay it out in themes, I would say that a stronger US economy is going to lift the global outlook, while renewed strength in China is going to directly pump-prime the Aussie economy.
The much-anticipated (hoped for) pause in Sydney and Melbourne isn’t going to materialise and FOMO is going to drive those markets back into double-digit growth. Expect more macro-prudential (=APRA meddling) as a result.
However, a resurgent resources sector is going to put a floor under markets in Perth and Darwin, and give a lift to the more resource-balanced Brisbane.
Put that together, and you’re painting a pretty decent picture for the major capitals.
Suddenly double digit growth for the nation is shaping as a possibility. I don’t think we’ll get there, but I reckon we’ll give it a nudge.
All that puts me at the bullish end of the economist pig pen – but then that’s exactly where I like to be!
But if you’ve been reading me for a while you also know I’m not one for just throwing outlandish claims about.
(I’m a data-nerd at heart.)
So let me lay it out for you.
First up is the US outlook. This market has a screaming buy on it for my money. It’s probably about 7 or 8 O’clock in the property cycle already. Trump is probably going to take it to 10 very quickly.
And the key signs of health are in the labour market. The unemployment rate continues to trend lower, and is now around a very healthy 4.7%.
As a result wages are rising. Wages growth is at a post-GFC high, and for the more stable segment of the employment market, we’re now back at 2007 highs.
So even before Trump takes office, all the ducks are lined up for him. He’s probably the luckiest president ever.
And Trump’s job is easy. Just make sure that people remain upbeat about the economy, and everything will take care of itself. For a master deal-maker (spin-demon) like Trump, that’s a walk in the park.
So lock in a solid year for the US.
And if the US is looking solid, suddenly the rest of the world doesn’t look so bad either. Take Europe. Unemployment has fallen to a seven year low.
Europe still has all sorts of problems, but suddenly things are looking up.
And then there’s China. Very quietly, China has been putting it foot on the gas in recent months. This chart shows output of electricity, steel, plate glass and cement – the ingredients of economic activity.
After a lull in 2015 and early 2016, they’re all on the rise.
And of course that’s fantastic news for Australia – the country that produces a lot of the ingredients of economic activity. Thanks to a resurgent China, commodity prices are off the floor again – in fact they’re booming!
(I know right? I almost missed that news too.)
And if you look at our export volumes, they haven’t backed off at all from boom-time levels.
So boom-time prices plus boom-time volumes equals boom-time revenues.
Of course the big winners are going to be the resource states of WA and the NT. However, the investment is already in place so it’s not going to be a repeat of the previous investment boom. That was crazy. But nevertheless, it should be enough to put a floor under these markets to my mind.
So, all-in-all, the outlook for Australia is actually looking fairly sunny.
And you can see this shift in sentiment in the share price of our banks. The finance sector bankrolls economic activity, so when the economy does well so do they. They are also highly geared around property, so they’re also going to reflect property market sentiment.
And they’ve surged 15% since Trump’s victory.
It’s a massive vote of confidence in the economy and in our property markets.
Not that I’m saying that you should take the idiocy of the markets as gospel, but there’s no mistaking where sentiment is at right now.
The US is back. China is back. The Aussie economy is back.
And property is in the box seat.
How do you think 2017 and beyond will pan out? Are you buying property this year, selling or standing aside waiting?