Aussie Property’s Next Hot Spot

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Keep an eye on Brisbane if you want to get into the property game.

The latest report from a mob called BIS Oxford Economics says the fair city in the north could see house price growth of 20% in the next three years.1

This seems like a fair assessment.

We know the Queensland government is spending a fair chunk of coin on infrastructure up there. And the whole state has good population trends.

My old friend, Catherine Cashmore, is a buyer’s advocate.

She told me years ago that Queensland always gets the overflow once the lower income tier of property investors get priced out of Sydney and Melbourne.

Just remember the windfall is usually in land, not apartments.

But you’re not one of those property doomers, are you?

Today’s Profit Watch explores why money could keep flooding into Aussie property…

The Australian ran an interesting piece yesterday suggesting that the current political crisis in Hong Kong could send a wave of money into Australia.

I hadn’t thought of that, but it seems an excellent insight to me.

The massive protests (they’ve been going for five weeks) in Hong Kong relate to a proposed bill to allow the Chinese to extradite Hong Kong locals to the mainland for trial.

It might be a case of getting out of Dodge while you can.

There’s one bull case: Foreign capital to seek shelter here. But a second case might be even more compelling.

Recently I was reading about the Japanese real estate boom of the 1980s. At the time, there were companies called ‘jusen’.

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These came into existence because the large Japanese banks had restrictions on entering the mortgage market.

The big banks got around the rules by extending loans to the jusen who, in turn, lent the money to the borrower buying the property.

These jusen went wild lending to all manner of speculative projects.

Let’s bring it back to Australia.

We already know here the non-bank financiers have stepped in where they can to fill the gap the banks have left from their regulatory credit restrictions.

But they can’t reach the equivalent scale in terms of dollars. 

It’s possible something like the jusen appear in Australia: Non-bank companies that gobble up big market share for mortgage lending…but with powerful backing. 

That leads me to conclude the super funds could get involved in a large way here. They have a lot of cash, and there’s no money in bonds and cash anymore.

This is not something that’s all going to happen tomorrow.

But property developers may find the market for cash easing sooner rather than later if the two big trends above are on the money.

But can you make a buck out of it on the share market?

The cryptocosm goes legit

Not yet, at least as far as I know.

But these possible opportunities may never appear on the ASX anyway.

It’s possible they show up in the crypto market.

I say that because an important development just occurred over in the United States.

A blockchain company called Blockstack just became the first company to receive SEC approval to conduct the first regulated token offering. Blockstack wants to raise $28 million. 

This is an example of how crypto is encroaching into the traditional realm of the share market, investment banking, and, in time, the property market.

This time, it’s doing it with government approval — no small thing.

Think through the implications.

In the context of today’s discussion, it’s no stretch to imagine a property developer seeking finance via the crypto market, and either paying interest on the debt or issuing equity (via the token) in the project. 

There could be a lot of opportunities around this, and probably a lot of scams and cons as well.

I’d be staggered if there wasn’t a heap of both within five years or so.

Suffice to say, there’s plenty of evidence pointing to the fact that the property cycle is not quite as dire as some would have you think. Markets rarely do what everyone expects.

Please keep reading here for an important point my colleague Jonathan makes.

Best wishes,

Callum Newman Signature

Callum Newman,
Editor, Profit Watch

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