Why Australian Investment Property?

There are two parts to this question?

Why Australia? and why property?

Currently the world is being shaken by the global financial crisis and it’s after effects.

The Australian economy is being affected in different ways:-

Natural disasters

1. The Queensland and northern NSW floods, and northern Australia cyclones..  The bad weather left behind a massive reconstruction bill and disrupted many industries.  This caused a drop in coal exports and iron ore, which are now starting to recover.

2. The Christchurch earthquake, with more tremors still occurring. The economic cost to NZ is and will be huge.

3. The Japan  nuclear crisis caused by an earthquake and tsunami.  This disaster has caused caused worldwide economic disruption.

A soaring Australian dollar

The commodities boom has created record prices for Australian exports and pushed the AUD to highs.  A strong local currency makes buying imported goods and overseas travel less expensive, however it has put the squeeze on industries that employ many Australians, including tourism, international education and manufacturing. This impact on manufacturing is referred to as the Dutch disease.

Euro zone crisis

Bailouts for Greece,Ireland and Portugal, Spain and now Italy to contain the euro zones’ debt crisis.

US economy

1. America’s has a  massive debt problems which have caused financial uncertainty. The finance system is built on confidence.

2. A sovereign debt downgrade from ratings agency Standard and Poors, who downgraded the US debt rating to AA+ (from AAA).

China concerns

Chinese growth ave been a critical for the Australian economy.  There are worries that the need for Beijing to deal with soaring asset prices, especially housing, could result in a hard landing for China..  At this stage  a mild slowdown is looking more likely but there is risk this could become more pronounced.

Cost of living

Rising utility prices are contributing to concern among households about the rising cost of living.  There is now a perception that family budgets are under pressure.  Credit card debt is growing at its slowest rate for many years, which can be linked with the poor retail trade trade numbers.

The carbon Tax

Affecting business and consumer confidence the tax is another cost making Australian less competitive.

So how is Australia placed?

All of the above, mean the Reserve Bank of Australia has had to tread carefully in regards to interest rate movements. It has remained balanced.  The resource sector has remained strong, however other sectors have been affected by consumer caution and the high Australian dollar.

Overall, if the current financial fears turn into GFC  part 2, Australia is relatively well positioned to deal with any slump.  With the RBA cash rate, the RBA has lots of scope to cut rates to stimulate growth.

For a wikipedia overview of the Australian economy

Australia is stable politically and is in sound economic condition. Even with the GFC Australia is one of the few countries that has showed economic growth. One of the main reasons Australia has come through the GFC so well is the massive mineral resources it has and there is an insatiable demand for growing economies such as China and India for these resources. In simple terms Australia is the sand pit for the world!!

Why property and residential property?

What does the Australian Treasury say about the Australian property market?

The old saying is everyone always needs a roof over their head. With Australia’s growing immigration and economic growth, property as a real asset is in constant demand. There is real demand supply imbalance. With Australia’s population growing at over 1% pa there is no sign of this imbalance being satisfied in the near future.

****Information only, not advice!!****

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