My, oh my. We have a glimpse of the future. It looks wildly bullish for Aussie real estate. And yet I doubt anyone else is even remotely paying attention.
The Australian Financial Review reports that a Melbourne company has settled on land in Ringwood. The plan is to build six townhouses. The catch is that any buyer is either going to pay cash — or in cryptocurrency.
That crypto is not bitcoin or any of the other names you might be familiar with. It’s specific to the company setting this all up.
That’s mostly irrelevant for us. It’s the broader point of the whole thing that matters.
‘The company says its motivations for building a real estate blockchain trading platform was to reduce cross-border barriers to real estate acquisition in Australia.’
Aha! We have the crux of it. It’s a way for foreign buyers to get their money into the Aussie property casino.
Think of the massive implications here if this sort of thing continues. Any Chinese buyer can use crypto to circumvent the capital controls at home. That’s the first thing.
The second is this: It could help all overseas investors avoid the foreign ownership restrictions — and possibly even taxes — here in Australia.
How will anyone know where the money is coming from if it’s anonymous and encrypted?
Combined, I couldn’t think of more staggering ways to send a flood of money raining down on the market.
Granted, it’s early days yet…but this trend looks almost unstoppable to me.
And it’s just getting started as the pressure to get money out of China is rising.
Here’s the story…
China: Under pressure on multiple fronts
The Financial Times reported earlier in the week that trading volumes in the renminbi (China’s currency, shortened to RMB) have skyrocketed since the trade war escalated.
This is important to watch. The Chinese central bank does not want to let the RMB drop to 7 (or worse) to the US dollar.
But China’s economy is under threat and weakening.
That could pressure China’s middle and upper classes to acquire gold, foreign currencies, or shift their money abroad completely (another bullish sign for crypto in general).
That’s not all…
It could put the People’s Bank of China in a real bind.
The RMB would probably be selling off right now it floated freely on the world market, like the Aussie dollar.
But China can’t let that happen right now, even if it wanted to.
You guessed it — Donald Trump. He’s gone public with an idea to impose punishing duties on any country that artificially pushes down its currency to boost its export market.
Presumably, the wise men and women in his government would be able to tell when it was deliberate and when it was not.
It’s also typical hypocrisy from the US government.
There was a time when it deliberately demanded the US dollar be devalued on the world market…but hey, they make the rules.
Probably, this new rule is more Trump bluster than a genuine policy initiative — but you never know with him!
Let’s bring it back to Australia…
Property stocks: Worth a look
The property market has likely bottomed now.
I dug out an article I wrote on 14 January this year. It’s worth a read because things have largely played out as I thought.
Sentiment is rapidly changing. CBA says the bank is already seeing a big lift in finance applications since the election.
We’ve speculated before that the previous uncertainty was keeping a lot of money on the sidelines.
You can look to monetise this shift in the stock market.
Many Aussie real estate stocks have taken a beating since the market topped out in 2017.
That’s depressed their valuations. I wouldn’t be surprised to see the fund managers and value stock pickers start nibbling at these now.
The fundamentals around housing — strong population growth, low interest rates, favourable tax angles — are still there for the medium term.
It’s a slow buy-and-hold type strategy. But if that sounds like you, give it some thought.
The crypto angle gives these kinds of plays an extra bit of sizzle that few people appreciate now…but I’m sure will be a major part of the discussion if we leap forward three to five years.
Aussie property is going to go crypto crazy at some point. I just can’t say exactly when.