FINANCIAL TURMOIL and AUSSIE PROPERTY… 

The most common question we are being asked at the moment is - what does this financial crisis mean for the Aussie property markets?   

This is our second bear market in stocks in less than 10 years. The 10-year return on the S&P 500 is a negative 4%. Investors in the stock market over the past decade have actually lost ground -- and that's before inflation, which has run at an annual 2.7% in the USA from 1998 through 2007. 

So what does all this uncertainty mean for Australian property? 

Following the World Stock market crash of October 1987, when the Dow Jones fell some 23%, and the Australian all ordinaries fell some 42%, WHY did the average Melbourne apartment rise by 37%, and the average  Sydney apartment by 54% in the 24 months immediately following the crash? (Source: Residex October 1987-October 1989)  

What happened then was that everybody who had been burnt or who had ridden the roller coaster threw in the towel, and said they would never buy a stock again. People moved back into the security of bricks and mortar. 

There was a flight to safety, and billions moved into real estate.  

And that was at a time of 15% mortgage rates. Will history repeat itself? 

 One thing for sure the events of the past 6 months have taught us is that no one knows the future.

The lower Australian dollar should help to strengthen our  exports, as will the partial recovery after the drought which will further support growth over the next year.  

The move to guarantee Bank deposits for three years was a good call, and did much for confidence.  

And the RBA is well positioned to lower interest rates even further to help stimulate our economy as required.  

Certainly it is a great time to be a landlord if you already own property.  Rents are rising, and are likely to continue upwards for some time, there is no sign of occupancy rates easing, and interest rates are falling. 

Migration in 2007 was at an all time high, with over 400,000 new migrants arriving. With construction levels for new homes and apartments at record lows, where will all these people live? 

Foreign investors are increasingly seeing Australia as a “safe haven” and the low Aussie dollar will attract them into acquiring Australian assets. They have effectively had a 20% “discount” on Australian property prices because of the lower dollar. 

 For those already in Australian dollar loans, they may be tempted to swop into HK$ or US$ now while the dollar is low, and then will also be able to take advantage of the lower interest rates.

 The cost of constructing new dwellings is only going to increase which will drag up the value of established properties. 

 When should you make your move? Assuming the world will NOT in fact end,  Jim Jubak, the Web’s most-read investing writer suggests a full recovery in 2010 with a strong rally this year) an off-the –plan property purchase now from a reliable developer, on just 10% deposit, with a 3 or 4 year completion looks like an excellent way to lock in an investment now to take advantage of the next upturn.

 The biggest problem you may face? In Sydney and Melbourne, there is a huge shortage of new property.

This is one of the biggest shortage of properties seen in Australia's hisory.

So even if you  decide to buy, it is entirely possible you may not find anything brand new off plan in a good location.

To the extent that this webpage contains information for investors Australian property centre.oma nd all its associated companies does not warrant that it is accurate or complete and no responsibility or liability is accepted for the consequences of any actions taken on the basis of this email.  Information provided is of a general nature only, and investors should seek their own advice.