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Finally some good news overseas

While we’re a long way away from Europe and the US, we’re not completely isolated are we? A large part of our lack of confidence comes from the instability and uncertainty of the overseas financial markets.

That’s why I’m pleased that the Europeans have come up with the solution to some of their problems and that the US economy is growing.

So what has happened in Europe?

The EU solution was to forgive Greece 50% of their debt and this has been agreed by the EU banks that hold much of the debt.

They have also decided to recapitalize the banks that need it by increasing their tier one ratio to 9% by next year and this can be done by borrowing from the ECB, investors or by issuing more shares.

The EU has also agreed to increase the bailout fund to 1 Trillion euros and this will be used if necessary to ensure not only the stability of the banking system, but also to assist any other euro zone country that may find themselves in a spot of bother such as Italy, although progress has been made there too.

Now, won’t fix all of Greece’s problems

Despite Greece’s debt burden being halved, experts are suggesting that unless Greece makes some more very significant changes it will find itself bankrupt again by 2020.

Some hard decisions will need to be made. There are still significant problems with corruption, a national ethos of not paying tax and an inefficient, wasteful government.

What’s happening in the US?

Reports the US economy grew at a 2.5% annual rate in the last quarter due to increased consumer spending and business investment. This is good news and has staved off (for a short while) all those who said it was heading for recession.

What does this mean for Australia?

Our economy is chugging along nicely but consumer and business confidence has taken a hit.

The good news form overseas as well as the anticipated interest rate cut on Cup Day is likely to help confidence, but I don’t think either (or both) will be enough to improve our property markets.

Every bit of good news helps, but I see 2012 being a year of flat and in some regions falling property values.

That doesn’t mean I’m staying out of the markets – I’m not – because I’m not buying the market. I’m buying individual properties in the market in the right locations and at the right price so that even if the market falls a little further I’m covered. And then I’m adding value to these properties so that I create my own capital growth.



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About

Michael is a director of Metropole Property Strategists who help their clients grow, protect and pass on their wealth through independent, unbiased property advice and advocacy. He's once again been voted Australia's leading property investment adviser and his opinions are regularly featured in the media. Visit Metropole.com.au


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