Paradise Lost , Paradise Found

Paradise Lost , Paradise Found

Fresh back from the annual pilgrimage to Hawaii (with wifey, and no kids), and it is interesting to reflect on “Australia’s state of play”.

First up the Australian dollar … the so called AUD, has seen the sharpest plunge since the Global Financial Crisis, and the AUD is now trading below 78 cents. It doesn’t seem that long ago that the Aussie dollar was buying $US1.10. Ouch!

The next thing that hits you in the face, is the price of petrol, it is below $1.00 a litre. No complaints there. It doesn’t seem that long ago, that it was $1.40 a litre.

Then there is the state of the economy, while no one is thinking Australia is like Europe (ie recession bound), there are worries, as we continue to transition from the “mining boom”, and further interest rate cuts are contemplated.

Then there are the political rumblings …there is trouble in Paradise, at least if you are Tony Abbott.

Anyway back to Hawaii, strange place in many ways. You buy a banana, and it is labeled as imported from Ecuador. Even the sand on Waikiki is supposedly shipped from Australia. On one side of Oahu the waves are small, while on the other the waves are colossal. And Honolulu has traffic, bumper to bumper! The Hawaiians look fearsome, yet the aloha spirit, makes it an easy travel destination.

The scarest thing in Hawaii seems to be the property prices. I noticed the asking price on a Kahala property (a suburb just outside Waikiki) was $US26 Million. Yes, it was large home and sat on an acre of waterfront land. But who has that kind of money, for what is almost certainly going to be someone’s 2nd property?!

Much as I love Hawaii, there is no place like home. With the Aussie dollar having lost 30% of it’s value, this only makes Australian property more attractive, particularly to expat and Asian buyers, looking for a piece of Aussie paradise.

And for all the fear mongering about Australia being “post” mining boom, and Australia ceasing to be an economic paradise, I thought the following interesting:

“According to a poll, the average Australian who was surveyed believed mining makes up more than one third of the economy. In fact – and even after doubling in size over the past decade – mining (and related industries) still account for less than 9% of economic output.” Tom Allard, 17 January 2015

Australia is not the banana republic that Paul Keating once worried about.

While there are a number of drivers to the property market (I read an article listing 20 key drivers), I see the weak AUD, and cheap petrol prices, as positive economic drivers, adding to existing positives (immigration, low interest rates, low supply, etc). As a result, I expect Sydney property prices to continue to rise over 2015 (albeit growing slower than the 14% that was seen in 2014).

By Danny Doff

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