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Thursday, February 13, 2014

Wage growth key to property prices

Anybody who thinks that we are at the start of the next property boom should get real. 

Why?  Understanding what propels property values up is key.  The two things that do this are finance and real wages. In previous booms, in the 80s it was the latter, in the 90s and noughties, falling real interest rates and increasing finance availability compounded to produce the ultimate bubble. 

This time around we will have neither for a very long time.  Banks will be shackled from reckless lending for at least a decade, and any real wage growth will be elusive until the end of the decade.

My advice is to lock into a cash cow, prey for rampant inflation, and pay down your debt with a repayment mortgage.  That way you will ultimately have a debt free income producing asset. In that respect you can't go wrong given that in this country because of the good old planning system we will never build enough houses. 

God bless the Planners!

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1 comment:

Anonymous said...

Dear, oh dear!

You're not an economist, are you?