What does the new decade hold for Aussie property?
Ok, as another investing year comes to a close, let’s take a step back and let me share with you some of the themes that are going to guide my investing into the 2020s.
In the short run, the emergent boom in property prices will continue. I’ve no doubt about that. The momentum is there, and the fundamentals are as well. We’ve got an easier credit environment, we can probably expect another rate cut and possibly some unconventional easing policies in 2020, and our population growth continues to outpace our ability to build houses, thanks largely to overseas migration.
On that front, Australia continues to run the biggest immigration program in the OECD. You might ask why we’re doing that – why we’re importing 300,000 people a year into a drought and into cities that are already straining under the load, but that’d make you racist.
This trend was set in motion by John Howard, and Labor is too concerned with appearing ‘woke’ to challenge it, so it will continue. That means housing demand will continue to run well ahead of supply, especially as the banks continue to shy away from funding high-rise apartments, and so that means further price gains.
So that’s one trend I’m playing – strong population growth.
Another one to look for is government spending. Right now, government spending is already the only game in town when it comes to economic growth.
Private final demand turned negative in the last quarter, and booming public demand is the only thing saving us from recession.
I’m not sure I see that changing in 2020. And if the Reserve Bank empties the rate-cut barrel, as I expect they will, then there will be growing pressure for government spending to pull even more weight.
I expect that will come in the way of pork-barrelling. Labor will want to focus spending on regional Queensland to try and win that back. The Liberals will be focused on the cities for the same reason.
This might create some interesting plays for hot-spotters, since the regions can, rightly, demand their fare share.
Thinking a little longer term, politics remains fraught. Social-media thought-bubbles have totally hollowed out any centre to be had, and politics will remain extremely partisan and aggressive.
People will also continue to see politics for the self-serving cess-pit that it is. A recent study found that 75% of voters think politicians act out of self-interest, while only 12% believe that government is run for the people. These are the worst results in the history of the survey.
But are people wrong? I don’t think so. And so the political situation looks precarious to me.
And I think China will try to continue it’s friendly corporate take-over of Australia. Military conquests are so last-century. And why spend all that money on guns and soldiers, when you can just buy the politicians, buy the universities, buy the ports, buy the media etc.
Both parties have been suckling on the Chinese teat, and are either naïve or treasonous. Andrew Hastie seems to be the last patriot standing, but there’s every chance he unearths something that highlights just how corrupt our for-profit democracy has become.
If that happens, I don’t expect an otherwise placid Australian population, who haven’t seen any real wage increases in the better-part of a decade, will take it lying down.
I’m not talking revolution, but a major period of disruption could easily be on the cards. That will hammer the economy, but I’d expect to see substantial safe-have flows into property, particularly given the above.
So that’s another theme.
In sum, the outlook for property is undoubtedly strong, although it could be a very bumpy ride.
I hope you’ve had an extremely profitable year, and if these blogs, and all of us working here at Knowledge Source have contributed to that in any way, I’m chuffed.
Here’s to ratcheting it up another level in 2020.