Sell Your Property and Buy Resource Stocks

A financial crash is coming to a house near you.

While we’re not there yet, the property market is fast approaching bubble territory.

On this topic, I know that some of my colleagues (Phil Anderson, Terence Duffy as well as Callum Newman) over at Cycles, Trends and Forecasts will disagree with me! The team associated with property bulls do make some solid arguments, pointing towards an additional 15-year rally in property costs. If you ask them, we’re nowhere near the top in real estate.

Admittedly, they could be right. This is why I don’t ignore what they have to say. Nor should you. I suggest checking out what they are saying here.

That said, getting done my research on the property sector, I’m not going to run out and buy an investment property.

Here’s why…

Australia’s property market now worth $6 trillion!

A good place to begin is questioning whether home has already peaked. In some Australian states, it appears so.

Looking from Perth, in a clear sign that the mining boom is over, the actual June REIWA figures show that the actual medium house price rests around $530,000. Prices have crashed by $20,000 typically in the last six months.

While you don’t want to hold Perth property, it’s another story over in Sydney and Victoria. The average house price has now reached the $1 million mark in both states. And, based on the Australian, the good times may be more than:

‘Amid booming prices in Sydney and Melbourne, regulators possess in the past year grown increasingly concerned that lending standards are slipping, as banking institutions battle to lend and purchasers take advantage of record low interest rates.

‘In December, the Australian Prudential Regulation Expert stepped in and told banks to limit financing growth to property investors in order to 10 per cent a year…

‘Despite the banks constant shrill of super-safe housing, APRA have comprehensively dismissed this given the main banks all failed the APRA November 2014 mortgage stress assessments. And in May APRA highlighted severe deficiencies in bank housing financing credit underwriting standards.’

Indeed, the brakes take presctiption with bank lending. Which is a cause for concern.

The whole property market is built on the premise that the lending and leverage will continue forever.

Unfortunately, it’s unrealistic to expect debt to develop forever.

Eventually, the system requires a major restructuring to grow again. This isn’t rocket science. The editors from Port Phillip Publishing have contended for years that the increasing worldwide debt load is totally not sustainable.

With limited economic growth and deflationary conditions, it’s likely that the debt cycle will blow up soon. So when the overleveraged system goes down the actual drain, this won’t be good news for property prices.

The Reserve Bank of Australia’s Governor, Glenn Stevens, is also concerned. He said?that he was ‘concerned regarding Sydney‘ house prices,?which he described as ‘crazy‘ in June.?This week he backed up his view through saying that ‘dwelling prices continue to increase strongly in Sydney‘. And that the actual RBA is working to?’assess and include risks that may arise in the housing market‘.

Given the extraordinary financial debt levels, authorities are even starting to look at regulating negative gearing. Doctor Luci?Ellis, the?RBA’s?head of monetary stability,?told a United states senate economics committee inquiry in to home ownership on Tuesday,

‘The combination of negative gearing and concessional taxation of funds gains creates an incentive that makes people more comfortable about dealing with leverage… It’s worthy of a holistic review.’

At the end of the day, it’s really easy…

Increasing regulation and slowing financing growth are ominous indicators for the housing sector. And if these measures go ahead, the actual knife will be put to the property bubble.

And if you didn’t know, 60% associated with Aussie wealth is associated with the property sector. This comes even close to the global average of 45%. Then when, and not if, property costs crash, household wealth will require a huge hit.

The property peak is approaching

We’re also facing the biggest financial crash of our life time — the sovereign debt crisis. This is the real trigger for the collapse in property prices. Don’t merely take my word for this…

Doug Casey, from Casey Research, has been saying this for years now. Martin Armstrong, Chairman of Princeton Economics International, started warning about the coming ‘Big Bang’ back in 1985! And our founder, Bill Bonner, has been warning about financial systems defects and faults since, well, before I was born!

The unfortunate fact is that no one listens.

Unfortunately they will hear it when the relationship bubble pops…and the majority associated with overleveraged products collapse. And this includes home prices.

Don’t be the last one standing

Already, the actual smart money is getting out…

Billionaire Wayne Packer just sold his mansion for $70 million, breaking the all-time record. This kind of activity typically occurs at the top of the market.

And my close friend’s dad, a multi-millionaire in the Melbourne property development space, is going to sell all his properties. When the smart money is escaping . like this, you don’t want to be the last one standing.

You need to look after yourself.

The best way to do this is by moving your money into quality resource stocks. Compared to property, they are dirt cheap. And when resources come back, as I’m sure they will, a person stand to make a tidy revenue. But you have to play your cards right, buying in to the right sectors…at the right time.

If you want more information on how to best play these markets, you can start here.

Regards,

Jason Stevenson,

Resources Expert, Resource Speculator

From the Port Phillip Publishing Library

Special Report: Nitro Stocks Completely unknown to most Aussie investors, there is a special type of ASX expense that can generate more cash per week than most people earn in a year! They’re called ‘Nitro stocks’ and they can cram 20 or 3 decades of market profits into just a few months. Sam Volkering states, ‘It’s like taking a slow-moving bluechip and pumping it full of steroids!‘ Sam’s noticed three stocks on the verge of striking their ‘Nitro-phase’. And if you want within, you’d better hurry!