December 30th, 1986 was an important day for canaries.
On that day, an important tradition ended for them. You could say, that’s the day they got their freedom.
You see, in the early days of mining, one of the most dangerous things for the workers in the mine was the build up of toxic gases. Gases you couldn’t see or smell.
And then suddenly you’d get this almighty explosion. Often scores of miners would be killed. And the worst part was, you’d never know when it was about to happen.
So the lead miner back in the very early 1900’s started carrying a canary with him. The miners grew to love them dearly.
Why? Because the canary in the coalmine is an advanced warning of danger. If there was any gases in the mine, the canary would die first, before the poisonous gas levels were high enough to kill the miners.
So I guess when it comes to property and investment markets, you don’t really want to be the canary, do you? What you really want is to carry your canary, with you, in the cage.
Have you noticed just how much emotion there is on social media platforms like Facebook and Twitter.
And lately, nothing has come close to generating more emotion than the outlook for Real Estate.
The noxious and poison gases have been building.
We’ve been here before though…
So where’s that canary when you need it? Or more than one.
Here they are. Let me explain.
This week Core Logic reported that nationally, house prices across Australian capital cities in April…..increased..!
And it’s not just Australia. As you know we follow closely the US Real Estate market for clues on what’s really happening in the current mid-cycle slowdown.
In fact as reported by the CNBC, US mortgage applications have risen three weeks in a row.
“Buyers are responding to incredibly low interest rates as well as to new technology and processes that allow them to house-hunt from afar.”
3D home tours rose….408%!!!!
Online transactions are rapidly increasing as technology allows the property market to find yet another way to prosper and grow. And with the US cash rate zero bound, it’s never been a better time in the US to leverage up and buy a new home.
Here it is; the 18.6 Real Estate cycle in action before your very eyes.
We banged on about the looming Mid-cycle slowdown for years.
History shows whilst it was likely the economy would face hardship and the stock market was due to retrace, it was unlikely to affect the land price. It’s always been this way for the mid cycle slowdown. That’s what the canaries keep telling us.
So while the news surrounding the falls on the stock market and the economy arguably heading into recession are to some degree justified, what you are hearing and reading about the property markets, well put it this way……. history is against it.
Here’s another Canary.
1st quarter 2020 results from the Australian listed company Genworth Mortgage Insurance, ASX:GMA have just come in.
GMA offers mortgage insurance. It’s something most people have to have when they get a mortgage from a bank if they don’t have a big enough deposit.
This canary reported NO increase in delinquencies arising from arrears, a strong capital buffer in place and ongoing support from its customer base (banks) for its services. Markets will of course watch the next quarter for GMA just as closely as well.
And so will we. The noxious gases of an impending real estate slowdown will show up here first.
Well, perhaps this canary has spoken?
It’s suggesting this: all signs point to property prices being well supported through this crisis and poised to continue their ever increasing rise up once the worst of the lockdown measures are removed.
It is as the cycle teaches us.
And this just in. A five-room, 1,151 sq ft HDB (Housing Development Board) flat at Pinnacle@Duxton in Singapore was just sold for S$1.232 million (AUD1.35 million). That’s a new record for an HDB apartment there.
Canaries earned their freedom on 30 December 1986. That’s the day miners all around the world agreed – with mixed emotions – to stop carrying them.
If you’re interested to earn your freedom – and learn how to carry your own investment and property canary with you go here.
Best wishes
Akhil Patel
and your Property Share Market Economics team.