Morning Report Monday 29 June 2015
**The US Futures have opened down ~1.8% on the Greece news, including their banks and Stock exchange closed on Monday.**
This morning’s on-line AFR is leading with the predictable Greek Tragedy, but the second place story is around forecaster BIS Shrapnel’s prediction of housing prices set to fall in Australia. There is no doubt that housing prices cannot keep rising at the rate of recent years, even if interest rates fall again, simply because of affordability. Our view at MarketMatters is housing prices are likely to go sideways/drift in coming years with a serious risk to units in the major cities where significant oversupply is looming…..rents (yield) are already falling! When we consider what has been happening in China, there are a number of similarities. China's property sector, which contributes about 15 percent to the country's economy, has been falling since 2011 and literally tumbling in 2015, with oversupply a major contributor – see chart 2. Last month was the first time recent prices have stabilised in China, aided by a number of rate cuts, with another 0.25% cut that occurred over the weekend. We are confident the Chinese thought property was only ever going up, just like people in Australia did not believe CBA shares could fall 18% recently – chart 3. Investors should consider some very wise words for the years ahead:
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