More Fodder For Our Property Debate

With stock markets directionless and dependent on utterances from the US Federal Reserve for their next move, property has been the main topic of discussion in this week’s Markets and Money so far.

So we thank RBA Governor Glenn Stevens for providing more fodder for our property debate. In a speech yesterday, he made the shocking revelation that you shouldn’t expect property prices to resume their historical growth rates. We get to the meat of Steven’s speech here.

But first, you have to ask how effective interest rates are in the face of backwards government policy. Yesterday also saw the release of dwellings approvals data, and it came in way below expectations.

Admittedly it’s a volatile data release, and swings around quite a bit. But over the past 12 months, in seasonally adjusted terms, total dwelling approvals are down 13%. A sharp 37% fall in apartment approvals was behind the decline, while housing approvals were up 9.9% over the past 12 months.

But despite record low interest rates, even housing approvals fell by 1.2% over the past month. Could the sugar rush of lower rates be wearing off already?

While low interest rates have no doubt helped the housing sector out of its 2008 depths (when interest rates in Australia peaked) the sector needs more than just cheap credit to help on the demand side. It needs intelligent policy implementation to boost the supply side.

Recent changes to state-based first home owner incentives are a step in the right direction, but it’s only a start. Governments must aim to minimise, not maximise, the cost base of land. If they do, they’ll be surprised how much activity follows. But that’s a story for another decade…

 

Regards,

Greg Canavan+
for Markets and Money

 

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From the Archives…

Has the Chinese Economy Hit the Great Wall?
26-07-13 – Bill Bonner

Crisis, Capital Controls, and Accidents of Birth
25-07-13 – Doug Casey

Australia’s Mysterious Natural Gas Shortage
24-07-13 ­– Nick Hubble

Bernanke’s QE Train Wreck That’s Heading Our Way
23-07-13 – Vern Gowdie

The Misallocated Savings of the Chinese Banking System
22-07-13 – Dan Denning


Greg Canavan is a Contributing Editor at Markets & Money and Head of Research at Port Phillip Publishing. He advocates a counter-intuitive investment philosophy based on the old adage that ‘ignorance is bliss’. Greg says that investing in the ‘Information Age’ means you now have all the information you need. But is it really useful? Much of it is noise, and serves to confuse rather than inform investors. And, through the process of confirmation bias, you tend to sift the information that you agree with. As a result, you reinforce your biases. This gives you the impression that you know what is going on. But really, you don’t know. No one does. The world is far too complex to understand. When you accept this, your newfound ignorance becomes a formidable investment weapon. That’s because you’re not a slave to your emotions and biases. Greg puts this philosophy into action as the Editor of Crisis & Opportunity. He sees opportunities in crises. To find the opportunities, he uses a process called the ‘Fusion Method’, which combines charting analysis with more conventional valuation analysis. Charting is important because it contains no opinions or emotions. Combine that with traditional stock analysis, and you have a robust stock selection strategy. With Greg’s help, you can implement a long-term wealth-building strategy into your financial planning, be better prepared for the financial challenges ahead, and stop making the same mistakes that most private investors do every time they buy a stock. To find out more about Greg’s investing style and his financial worldview, take out a free subscription to Markets & Money here. And to discover more about Greg’s ‘ignorance is bliss’ investment strategy and the Fusion Method of investing, take out a 30-day trial to his value investing service Crisis & Opportunity here. Official websites and financial e-letters Greg writes for:

 


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