Property Snake

We live in a disinflationary world and the main worry is that this could extend to deflation – which, of course, means falling prices and much more.

There is monetary policy; but there isn’t much money in the bank anymore to pump prime out way out of the any coming funk, so the cash rate is set to drop further.

This is likely to extend our current property cycle, but not forever.

Sooner or later, we are very likely to face a property snake.

And just like in the board game – which is really based on luck – some might be able to fluke their way out of hitting a snake on the way up to the top square, but most won’t.

The game just doesn’t work that way.

What we face in coming years – which, when combined in even the slightest configuration, is likely to have a negative impact most on property – includes:

  1. Disinflation and most likely deflation
  2. Limited improvements in liquidity, even if we start printing money
  3. Increasing financial regulation
  4. Highest levels of household and government debt
  5. Changing property taxation
  6. Little noteworthy government assistance
  7. Falling population growth
  8. Aging population
  9. Tightening and policing of foreign ownership rules
  10. Baton change economy
  11. General economic disruption
  12. Rising unemployment and high underemployment
  13. More part-time than full-time new job positions
  14. Little or no wage growth (falling wages in real terms)
  15. Low housing affordability
  16. Weakening world economy
  17. Potential Chinese economic correction
  18. Overbuilding (especially of the wrong product)
  19. Government deficits
  20. Potential loss of our AAA credit rating

Have a quick go at marking off those on the list that won’t apply in the near future.  It is a short list indeed.

Exactly when we hit the snake is very hard to tell.  But with each roll of the dice, the chances increase.  We have very little wriggle room left on the board.

For those who were prepared and knew what to look for, past property slides presented great investment opportunities.  It doesn’t have to be all doom and gloom.  But what you buy and how you work your asset becomes paramount.

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