Australian Investment Blog

Looking at 3 building stocks as the papers forecast a property crash!! A number of our local papers have moved on from BREXIT overnight, assuming the result is a "Remain" and focused on our federal election which is only 10 days away. We all know they love a headline and today its property which is set to fall 15% if Labour wins the election - we believe both events are unlikely. Much has been discussed around the Australian property bubble especially as the supply of units begins to outstrip demand. Our view remains that is it not a time to be gearing up into units / off the plan developments, especially in some parts of Sydney, Brisbane and Melbourne however of equal importance, it is not necessarily the time to throw the "baby out with the bathwater". In Australia people often forget that the property market is very similar to stocks which of course can go both up and down. For example units / townhouses in Port Douglas, QLD, are still ~50% lower than in 2007 pre-GFC. We believe units in Australia's major cities are likely to fall from today's elevated prices but the "trading costs" of real estate agents / stamp duty make selling now and trying to buy later at a cheaper price a large risk within itself. However, we would be very concerned if highly leveraged to property and unable to cope with interest rates higher and especially rents lower. The other implication comes from tightening regulations on overseas buyers. In the NSW budget yesterday, the Treasurer outlined plans for lower stamp duty for local buyers, however, an increase in stamp duty for overseas entrants.
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