Don’t Let the RBA Fool You

112

And crunch. US markets took a whack last night.

We’re back to where we were on Tuesday: volatility and lots of red.

I’m not displeased. Just yesterday I was going over a very exciting stock.

I’d love nothing more than to be able to buy into it at a lower price.

The question: Will I get one?

There are no guarantees even when the US markets have a big fall.

Sometimes a stock will clearly be in ‘strong hands’. Existing holders aren’t always easily shaken out.

And not everything is done. Iron ore is at its highest price since 2014.

I have an iron ore miner on my buy list. Mein Gott — they’re making even more money.

We’ll see how it all unfolds.

Australian real estate expert, Catherine Cashmore, reveals why she thinks we could see the biggest property boom of our lifetimes — over the next five years. Click here to learn more.

And as we discussed on Wednesday, big drops like we’ve seen overnight can help ‘stress test’ your current positions.

A day like today is when you need to be very clear about your game plan.

I’m clear about mine. I laid it out for thousands of people yesterday too.

But it’s not too late to check it out!

Don’t hang about. The opportunity will be taken offline come midnight Sunday.

At this point I must leave you in the capable hands of my colleague, Catherine Cashmore.

Below, Catherine brings her latest update from the real estate world. It’s looking as volatile as the stock market…

Best wishes,

Callum Newman Signature

Callum Newman,
Editor, Profit Watch


Don’t Let the RBA Fool You

By Catherine Cashmore

One sector being hit hard in the residential real estate market is…

Inner city apartments.

These are primarily owned by investors seeking yield.

The situation is diabolical in Melbourne.

The city’s vacancy rate has exploded.

Up by 140.7% compared to the same time last year.

CoreLogic gives some hint of the impact.


Profit Watch

Source: CoreLogic

[Click to open in a new window]

Apartment rents have been smashed.

Here’s what they said:

Supply levels for rental grade units have surged over recent years, especially in Sydney and Melbourne, where high-rise unit supply across key innercity markets has remained substantially above average.

And the situation continues.

At the end of March there were around 51,000 units under construction across NSW. Up 19% on the 10-year average.

In Victoria, about 45,000 units are under construction. (24% higher than the decade average.)

A colleague of mine — an inner city property manager — recently disclosed that nearly 2,000 tenants have now walked out on their leases.

A large proportion in student accommodation.

In light of this, you may wonder why the RBA are now claiming we have an apartment shortage.

You can access their latest report titled ‘The Apartment Shortage’ here.

The analysis is so flawed it’s embarrassing.

And no joke, just last year they said the opposite.

That the construction of ‘large volumes’ of new apartments in Sydney and Melbourne would ‘weigh on prices for some time’ and ‘amplify declines’.

Look at this quote from the Australian Financial Review in 2019…

The large increase in supply, however ultimately sows the seeds of a decline in prices, which, if large enough, results in development becoming unattractive, new supply falling and the cycle starting again’.

The claim now is that planning restrictions are creating shortages and pushing up the price of apartments by as much as $355,000 (in Sydney).

How do they come to this conclusion?

Well amongst other things, they say apartment towers are too short!

Therefore, increasing height limits would decrease the costs of apartments and address this apparent shortage.

Remember, the RBA were the crew who advised the federal government to shut down the real estate market to avoid ‘perceptions’ of a COVID crash.

And they are obviously desperate.

Don’t be fooled

It comes hand in hand with another research paper ‘showing’ that our huge household debt is no issue.

See it here…‘How Risky is Australian Household Debt?’

Short version: ‘nothing to see here.’

Look at some of these quotes…

Banks appear resilient to a severe downturn.

The level and growth of household debt reflects high incomes and direct ownership of rental housing, not evidence of widespread excessive leverage.

It echo’s ScoMo’s words at a recent press conference:

The thing about the Australian housing market is that demand has always outstripped supply…And that has always been what’s driven the housing market.

It hasn’t been driven by speculative investor bubbles or speculative credit, things like that, which we’ve seen occur in other countries.

And I think one of the problems about the commentary about the housing market is too often the analysis has appropriated the conditions of other places and applied them to Australia and that application has been completely misguided.

This effectively gives the greenlight to the financial sector to let their foot off the brakes.

What royal commission?

It’s precisely what we would expect to see at this point in the property cycle.

And the motivation claiming an apartment shortage? It’s no different.

It’s an attempt to save the construction industry and avoid an apartment apocalypse.

Don’t be fooled folks…

Best wishes,

Catherine Cashmore Signature

Catherine Cashmore,
For Profit Watch