No Stopping a Global Property Boom: The Market Can Survive this Crisis

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Global Property Boom - Aussie Real Estate Market After Lockdown

Something smells fishy around here.

My daughter Ema was sitting at the kitchen table with her nose in the air.

I can smell it too,’ I said. ‘We haven’t eaten fish this week. What could it be?

My partner Isabel chirped up. ‘I read burning electrical cables can smell fishy.

‘What?’ That sounded ridiculous.

Google it.

I did. Good Lord. There was a page saying something along those lines.

But please — I had a better way to check. My brother is an electrician. I rang him.

Cam, at the risk of sounding a complete dill, in 30 years as an electrician, have you ever come across a fishy smell from an electrical fault?

His reply…

Er, no.

You see…often it’s only those at the heart of an industry that really know what is real and what is not.

I can barely hammer a nail straight, let alone fix the house up or get the lights working again.

Here’s why I mentioned it.

I once did the required course to become a basic real estate agent.

You would think…if you haven’t done it…that it would be full of information on what makes property prices rise.

You know…the influences of policy and credit and immigration and all the rest of it.

I can tell you it contains none of those things.

It is purely a course on the relevant Acts of Parliament on how to legally transfer a title from one person to another…and handle client money while it’s held in trust.

That’s it!

This is why you have to be most cautious when you hear people opine on real estate.

What sounds vaguely plausible — what burning electrical cables smell like or a property crash ‘has to happen’…may very well be off base, if not completely idiotic.

Best to hear from those at the very heart of their subject matter.

That’s why, for all matters real estate, I pass you to Catherine Cashmore…

Read on for her insight as to why the global property boom rolls ever on…

Best wishes,

Callum Newman Signature

Callum Newman,
Editor, Profit Watch

No Stopping a Global Property Boom

By Catherine Cashmore

The COVID lockdown in Melbourne is creating challenging conditions for the real estate market.

And that’s putting it mildly.

No inspections permitted.

That includes pre-settlement inspections, building inspections, and rental inspections required before bond payments can be returned to vacating tenants.

Only those desperate enough are going to try to sell during this period. And believe me, there are a few of them out there.

The rest will wait it out. Low stock is supporting prices for the time being. But there are good opportunities for negotiation regardless.

Louis Christopher (Director of SQM Research) has flagged that new restrictions could potentially lead to a 30% drop in Melbourne’s house prices.

I’m not so pessimistic.

A few other counties have had much harsher lockdowns than Melbourne.

Take Israel.

At the height of the lockdown all non-essential businesses shut. Residents could only travel 100m from home.

For a while there, it looked like they were going to eradicate the virus.

A couple of months on and cases are soaring once again.


Profit Watch

Source: Our World in Data

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And the real estate market?

After initial reports that it would collapse, they are now post lockdown and recovery is strong.

Agents are seeing a dramatic surge in demand from overseas residents.

Israel is looking like ‘safe haven’ compared to the US.

Reports that a resurgence of both homes to let and people seeking to rent them, has returned to pre-lockdown levels.

China also had a draconian lockdown.

Stories of residents being welded into their homes. Not allowed to leave even for shopping or medical supplies.

That was in February, and now?

A Chinese property boom in megacities is seeing prices rising higher and investors chasing deals past pre-COVID lockdown levels.

288 apartments in a new Shenzhen property development sold out online in less than eight minutes.

Buyers are snapping up more than 400 units in a new housing complex in Suzhou.

In Shanghai, apartment resales are nearing a record high.

And last month, nearly 9,000 people put down a deposit of one million yuan ($141,300) each to qualify to buy apartments in one Shenzhen development.

In France, nine weeks of a total lockdown required residents to totally isolate and show proof that they had a right to be out on the street if they left their homes.

And now, two months later, real estate agents in France are reporting that the real estate market is booming.

Not only that, but in some areas it was booming even during the lockdown. Totally contrary to expectations.

Knight Frank reported that France’s ‘property market has been remarkably busy since lockdown measures began to ease in France in mid-May’.

Closer to home — New Zealand endured a total lockdown early in the piece.

Shutting down real estate, construction, food deliveries, and just about everything else you can think of bar supermarkets and pharmacies.

Now stats are showing an uptick in the number of million-dollar sales.

The Real Estate Institute reports that national demand for property has not faltered.

The top end of the market seems to have also benefited from the flow-on effect, seeing a 30.7 per cent increase in the $3m-plus category and a 38.5 per cent increase in the $5m-plus category nationally’.

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What About the Local Property Market?

And in Melbourne? Well my last house inspection was yesterday prior to lockdown. A nice house in a popular school zone.

There was a queue of buyers waiting to get through. And now I’m in a competitive negotiation that’s likely to push the price over the quoted range.

Don’t get me wrong, the market isn’t flying.

But it’s not crashing either.

Back in May global economist Harry Dent Jr said New Zealand and Australia would bear the brunt of a burst housing bubble following the economic fallout of the COVID-19 crisis. Stating:

Domestic real estate would be in trouble if house prices went down by even 20 per cent…and I think it’s going to be 30 to 50 (percent), in that range…

The world is on the brink of an economic bust, and financial asset bubbles need to come “down to reality”.

Well, I can’t argue that land prices in Australia are too high. The result of speculative tax policies favouring property owners.

But so far Harry is wrong.

He’s missing one vital piece of analysis. A comprehensive knowledge of the real estate cycle.

Had he had this — he wold not only have called this downturn. He would have also been assured that the real estate market would weather the crisis.

AND he would know the date of the next recession. The one that will pop the bubble. We’ve got a few years to go yet.

Until then I believe there are some massive gains to be made.

Sincerely,

Catherine Cashmore Signature

Catherine Cashmore,
For Profit Watch

PS: I reveal why I think we could see the biggest property boom of our lifetimes — over the next five years. Click here to learn more.