Australia’s economy will recover faster than anticipated from last quarter’s contraction driven by a record mining boom, and the government won’t relent to pressure to scrap new taxes, Finance Minister Penny Wong said.

The economy will be underpinned by a $430 billion pipeline of investment in minerals and energy, Ms Wong told Bloomberg Television in an interview in Sydney. The government is committed to introducing resource and carbon taxes, she said. [Read more...]

With just two weeks to go until the end of the financial year, leading economist Craig James saw it is an opportune time to review how our economy and financial markets are faring compared with the rest of the world.

In a recent bulletin this is what the chief economist at Commsec had to say: [Read more...]

With just two weeks to go until the end of the financial year, leading economist Craig James saw it is an opportune time to review how our economy and financial markets are faring compared with the rest of the world.

In a recent bulletin this is what the chief economist at Commsec had to say: [Read more...]

You don’t have to be Einstein to recognise that the cost of living in Australia is on the way up…and pretty quickly. You just need to do the weekly grocery shop or fill up at the petrol pump to feel the pinch of growing food and oil prices.

Unfortunately, a report in The  Financial Post suggests that things are not about to improve any time soon, with Superfund Financial estimating that coffee, sugar and cocoa prices are set to rise five to ten fold by 2014 due to shortages that will see consumers swamped by food inflation

A shortage of agricultural land and rising production costs means growers will not be able to keep up with demand according to Superfund’s outlook, which comes off the back of a United Nations Index of world food prices that jumped to a record last month. [Read more...]

China is now the second largest economy in the world while Australia ranks as 13th biggest. But Australia is regarded as an advanced economy whereas the International Monetary Fund defines China as an “emerging and developing” economy. So what defines the level of advancement?

Commsec Economist Craig James recently gave a great explanation of how the two economies differ in Peter Switzer’s newsletter. 

Craig James explained it as follows: [Read more...]

One of the biggest furphies in 2009 was the claim that Australia had a ‘bubble’ in the housing market according to Craig James chief economist at CommSec

He is reported in SmartCompany as saying It didn’t (have a bubble) and still doesn’t but to some extent you can understand where some commentators were coming from with the claims. [Read more...]

The Reserve Bank is tipping the resources boom could last another two decades as the tally of resource projects with firm commitments soars to $133 billion.

Obviously this is good news for the Australian economy and this will in turn underpin our property markets. [Read more...]

The Australia economy grew by only 0.2% in the September quarter, according to the latest figures from the Australian Bureau of Statistics.

The result is well below the general expectations of many economists who thought the increase would be more like 0.5%.

On an annual basis, our growth was 2.7% to September 30th, while analysts predicted booming growth for the year would be more like 3.5%.

Does this mean our economy is faltering? Not really…

CommSec economist Craig James says that while the growth was modest, growth is now in its 19th consecutive year – a point that should be praised.

“How many countries can claim to have notched up 19 consecutive years of economic growth. You’d be scratching to find any country apart from Australia in this elite club. No doubt there are challenges ahead to maintain the extraordinary run of prosperity, but clearly you would want to be in Australia’s shoes as opposed to any other advanced nation.”

“The challenge will be to expand productive capacity and take on more foreign workers to ensure that the economy doesn’t hit the wall.”

What this does mean though is that the RBA will not be in as much of a hurry to raise interst rates next year.

The financial markets around the world are currently taking a beating and for the first time in a long time property prices are falling in many parts of Australia.

According to RP Data-Rismark’s Home Value Index the seasonally-adjusted, capital city median house price in Australia dropped by 0.2 per cent for August, with an overall decline of 1.2 per cent since the market peak in May.

Even though national house prices increased by 8 per cent during the 12 months to August, current signs clearly indicate a cooling market as we wrap up 2010 and many commentators are predicting that, at best, prices will remain flat for some time to come. Of course there are always the doomsayers who see home prices falling significantly.

So is it time to worry about our property markets?

I don’t think so. Sure we are moving on to the next phase of the property cycle, but this is normal after a period of high capital growth. All markets go through cycles and after a few years of close to 20% growth in some suburbs; the markets are simply getting back to their averages.

The RP Data figures for the last quarter show Hobart and Canberra were the top performing capitals, with median house prices increasing over the three months to August by 1.4 per cent and 1.2 per cent respectively, while Sydney was the only other city to experience a price rise, albeit a negligible 0.2 per cent.

Declines in median prices for the same period were seen in Melbourne, with a fall of 1.5 per cent and Brisbane where prices dropped by 2.6 per cent, while Perth took the biggest hit with a substantial decrease of 4.8 per cent over the last 3 months.

Overall the national median house price was recorded at $410,000 for August, down from $415,000 in July

So what is a property investor to do?

One of the biggest mistakes that many property investors make is they forget history.

When a market turns, they forget that the same thing happened years ago and the market will once again improve and start rising. As human beings, when things are good we think that they’ll be good forever, when things are bad we think they’ll be bad forever. The truth is that all property markets are cyclical – they grow, they plateau, they may even drop in value for a short time, then they grow again. It is just the nature of economics. Certain factors in an economy have to catch up with each other.

If you’re a long term property investor you should be excited about the opportunities our current markets present.  Of course you can’t just go out and buy any property or pay any price, like some investors thought they could do in the past. In this very different financial era, to be a successful property investor you will need to develop new strategies or adapt your existing ones to meet the new factors posed by a cycling market.

I foresee generally flat property prices over the next few months – possibly well into next year. But I also see some great opportunities.

With an improving local economy, strongly rising population growth, rising rents and the ability to buy a bargain from some motivated vendors – the type of bargain that we couldn’t find in the last few years when there was strong competition from other investors – I know some investors will set themselves up for success in this current stage of the property cycle.

My personal strategy is to continue what I have been talking about and doing personally for years:

1. Buy the right type of property – one that has some element of scarcity, which will always make it appealing to owner occupiers (who push up the prices) as well as tenants.

2. Buy in an area that has always outperformed the market.

3. Buy at the right price –this should be below intrinsic value – the type of price that even if values do drop 5 or 10 % (and I don’t think they will in most areas) you will be covered.

4. Only buy a property to which you can add value – during this time of flat growth, manufacture some capital growth yourself through renovations or redevelopment.

What about falling property values?

The property markets across Australia have generally held up pretty well, but are obviously adjusting to the rising interest rates and general market nervousness.

Sure, the value of some properties has dropped. This has occurred particularly in the upper end of the market – but these were never investment grade properties. The same will happen in many holiday locations over the summer months – prices will fall as fewer buyers bid for the many properties on the market. And property values are falling in the lower end suburbs, new housing estates and regional Australia – all areas that will be more sensitive to rising interest rates. And prices will fall further in these areas.

But I see medium density middle priced properties – particularly inner and middle ring suburbs in Melbourne, Sydney and Brisbane – holding their values pretty well. People living in these areas are not as interest rate sensitive.

You know how they say statistics lie? Well currently the reported median price changes are not a good measure of what is really happening in the market.

Let me explain…

While the general property market has been pretty flat, there are still some suburbs that have had very strong capital growth, while at the same time many suburbs have had their median prices fall.

It’s like me putting one hand in a bucket of ice water and the other hand in a bucket of boiling water and saying “on average the temperature is fine!”

Some parts of our capital city property markets are hot and others are not.

We’re moving into the next phase of the property cycle – one of increased risk for many investors (because they won’t be carried by rising markets), yet one of great opportunity for those who know how to play the game.

So what am I doing now? I’m going to continue investing the same way I’ve always done.

I’m going to continue looking for opportunities, be financially responsible and take advantage of the buyers’ market.

What does the future hold for you? Will it be one of prosperity or one of dependence? That’s the most powerful question you can ask yourself. What are you doing today to protect your future?

If you want to grow your own significant property portfolio, you need to own properties that provide wealth-producing rates of returns. You should seriously consider learning how to grow your wealth the same way these sophisticated investors do and manufacture your capital growth through property renovations or property development.

If you join me at my annual “Real World” Real Estate Workshop in October you can discover proven systems and strategies for profitable property investment that will allow you to take advantage of the window of opportunity between now and when our property markets turn down.

Just to make things clear this is an advanced property workshop that I only conduct once each year and it’s Australia’s longest running 3 day property workshop where you learn the art of property development and property renovations from some of the most respected experts in Australia.

And your satisfaction is guaranteed by my personal money back guarantee!

When you come you will learn “Real World” answers to the real problems faced by investors in today’s changing property markets and “Real World” property renovation and development strategies.

So if you want to get started in property renovations or development please join us. No get rich quick or pie in the sky concepts from people who have only done this for a few years.

Just click here to find out more.

Between now and then I’ll keep you up to date with how to take advantage of the changes happening in our property markets in future updates, but it is probably appropriate to remind you that in changing times like we are experiencing, no one can help you quite like the independent property investment strategists at Metropole.

Remember the multi award winning team at Metropole have no properties to sell, so their advice is independent and unbiased. If you want to find out a bit more about what is happening in your local market and what our research suggests is in store for us, join us at a free property briefing in Melbourne, Sydney and Brisbane or with our associates in Perth. Just click on this link to find out more and reserve your place.

As so much is happening in property nowadays I’ll keep you updated almost every day with a short post in my blog – just click Michael’s blog in the top menu items on this page and subscribe to it – that’s a different subscription to my regular newsletter – it gives you my short daily updates.