I reckon investors (the real estate kind) are feeling a bit like this…
You know the song lyrics…
“Too much information running through my brain. Too much information driving me insane.”
The lyrics are from a band called, The Police and sung by the uber-cool baby boomer extraordinaire, Sting.
What information am l taking about?
Well, anything to do with property investing…
One reporter talks about he real estate markets falling by an average of 5% the others talk about increasing by 2%.
Who do you believe and what do you make of all this noise…?
Here's an interesting charts that might help… and give you a bit of a spur on as well.
Do you see what I see…? (hmmm, another song lyric)
A significant turn around from a downward trend.
The chart is the RP Data-Rismark Hedonic Index, which reprices a portfolio of 5 million homes using all historical sales and the incoming flow of approximately 1,500 new sales that RP Data collects each day…
It's about as realtime and as close as you can get to the “current market.”
Here is what it reports…
A 1.8% increase in Australian capital city dwelling values since the end of May (refer to the blue line the chart below) to July 16.
Dwelling values in Melbourne (black line) and Sydney (red line) have risen more sharply, with capital gains of 2.8% and 2.1%, respectively.
Hang on a second… Melbourne increase by 2.8%?
…everything that is reported in the papers is all about doom and gloom, especially in the Melbourne market?
Whether you believe this or not is up to you.
Whether you want to invest using data, research and empirical or just a gut feeling is up to you…
The fact is that the RP Data-Rismark Hedonic Index is a daily index, which is published by both the ASX and the RBA (in its monthly chart pack).
That's got to be worth something, don't you think?
So what happened in May that saw a change in direction on this index?
…any thoughts? Curious to know ?
RBA Interest-Rate Cut.
So maybe… just maybe the “cost of money” getting cheaper is starting to take effect and are we seeing the early days of broader real estate recovery?
Despite all this, I can guarantee you one thing and that is that you will not see a headline on the front page that says “Housing figures show dramatic recovery due to latest RBA interest rate cuts with more gains to follow…”
In fact the opposite seems to be apparent.
Doom-spruiker-in-chief, Steve Keen, still gets quoted by respectable media despite consistently misleading the public and mis-predicting the housing market. In 2008 he was regularly referenced confidently calling for a 40% fall in house prices (and double-digit unemployment).
You know my thoughts on Keen's predictions… We are on public record saying the complete opposite way back then… In fact l was the only educational investment company that ran public events that gave a different perspective…
We where right, Steven was wrong….
Interestingly, he is still sticking to the 40% decrease in the real estate market. He is just now saying it's going to happen over a 10 year period… Originally it was 3 years.
…that's what economists do when they get predictions wrong, they often tell you there were too early and push out the timeframe. Who's going to remember in 10 years what Steven Keen said today?
Here is what really happened back then…
Prices rose by 13% in 2009 and 5% in 2010, in some city even more…
For what it is worth, Australian home values are currently around 15% above the lows they touched in December 2008.
The RBA then stopped the real estate market dead in its track with several interest rate increases and then thought, “Oh shit, what have we done? Cut… Cut… Cut…!”
Now they had good reason to cut interest rates dramatically. Unemployment in 2008 went to 8%, we've just had one of the greatest economic calamities of a generation and everyone was petrified about the oncoming potential of a global depression.
So what can you make of all this?
I'm no economist (thank god for that) but we may have seen the bottom of the broader real estate market and a recovery on the way.
One thing for sure is that we will see further rate cuts and the cost of funding getting cheaper. This means happy days are ahead if you know and understand how to invest in a low-interest rate environment.
I can tell you one thing. Saving and having money in the bank is probably the worst strategy right now… But that's what most Australians are doing.
Keep this quiet for now, this can be our little secret… It will be 12-24 months before the media start reporting a turn for the better.
But for now, take advantage the real estate market. It is a BUY.
Look, I have to say this because I don't want you to just go out and buy anything. At any point in time, about 5% of the available stock on market is suitable for real estate investors. There are a lot of dogs out there and unfortunately 80% of investors wouldn't know the difference.
The time is right to get some education, do your research, stop believing what the press has to say. They're always typically late, wrong and biased to bad news anyway.
Take your future in your own hands and do something… Now!
Signed with Success,
P.S. I'm sure I'll get some criticism about my views here. I base them on the research that I personally do and the investments I make in the market realtime. I got a lot of heat in 2008-2009. I went out and bought real estate, most didn't. I'm way ahead.