Alan Kohler reported last night that the rate of property investment has been slowly decreasing over the past several years while the rate of engineering investment has sharply increased –
http://www.eurekareport.com.au/graphs/list – "This Can't Go On"
Engineering investment as a percentage of GDP has sharply inclined over the past few years, surpassing dwelling investment.
Source: TD Securities
(unfortunately the graph won't copy across)
Are property investors a dying breed (certainly not from the ever increasing number of members on this site!)???
ChrisA1
Persistence is 'to keep on keeping on, no matter how hard the going may be'
ChrisA1 wrote:Are property investors a dying breed (certainly not from the ever increasing number of members on this site!)???
Nope. You'll see investment tighten everywhere as markets correct. Money generally chases yield and when yields are poor in a sector then other sectors are favored. Property yields decrease as prices rise. While there's been small increases in the main markets those increases in general are not enough to keep pace with inflation and costs. Rents don't usually rise in difficult labor markets so yield margins compress even further. So both CG and yields are under pressure.
The property investor tribe if you like are slowly realising that the boom days are well and truly gone and squeezing a profit out of property will take more than simply buy and hold. The vast majority of investors are simplistic in their approach and unsophisticated in their over all investment strategies. The bottom 40% will put it in the too hard basket for the time being until they see a more buoyant market. That's enough to put a dent in demand growth rates.
If things go the way I think they'll go I would expect to see the AU property market in all sorts of bother by 4Q14. There's a little bit of heat in the market at the moment and no fundamentals supporting it. If that disappears by the end of this year then I think 2014 could be a smackdown year.
China's the key for the time being. It's in all sorts of bother and deteriorating much faster than most realise and many pundits are willing to admit. It's the only growth driver in an otherwise struggling global economic landscape. China's demand is about the only thing holding the big economies together at the moment. While things are bad in some economies the demand out of China makes the difference between surviving and drowning.
Throw in Japan and you have the makings of a king hit to Australia economically. We live in precarious times.
Freckle wrote:China's the key for the time being. It's in all sorts of bother and deteriorating much faster than most realise and many pundits are willing to admit. It's the only growth driver in an otherwise struggling global economic landscape. China's demand is about the only thing holding the big economies together at the moment. While things are bad in some economies the demand out of China makes the difference between surviving and drowning.
Throw in Japan and you have the makings of a king hit to Australia economically. We live in precarious times.
Can't agree more Freckle. It is interesting that the graph also included the rate of engineering investment, which is steamrolling ahead. It would be interesting to see how this engineering growth plays out (does this mean increased manufacturing, which I have heard rumoured), but without comparable wages with the rest of the world, our products will never be competitive.
Australia seems to be always at the mercy of others (being a supplier rather than a producer) and therefore we are always chasing others.
ChrisA1
Persistence is 'to keep on keeping on, no matter how hard the going may be'
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