The Rough and Tumble Marketplace
The recent stock market instability has been more related to investor panic, than to any logic or reason. And you’re not about to see a stock market collapse — which has now been confirmed by Monday’s rebound, following 0.5% rate reduction by the US Federal Reserve.
Both here and in the US, company profits are strong and corporate borrowing is relatively low. It’s simply market positions that have been oversold, due to a sudden panic by some investors.
The fallout from the US sub-prime debacle should have marginal effect on the core banking system. Second-tier lenders may well need to significantly increase their rates to cover their losses — but the overall effect should be contained mainly within the residential sector. Although bond rates tend to govern the commercial lending rate — so you may still see a little volatility there.
The US still has some deep-seated issues to address. But I think you’ll find there is still a lot of life left in Wall Street for a while yet; and consequently, the Australian stock market too.
As such, you should see this confidence continue to flow into the Commercial property market.
22 August, 2007 at 8:48 am
My concern about investing in the Commerical Property market right now is much like any other market … global conditions and trends seem to have compressed return rates on all assets … bonds, shares, residential, commercial, cash … there is nowhere to hide from a shift in the other direction - except maybe cash for capital protection with little to no real growth.
Yet I continue to invest in good commercial property because (1) I can get 7 year “bond type” lease agreements with quality companies, whwre (2) there is still the chance for capital growth, and (3) if I have minimal debt then I ought to “come out the other side” of any global asset value correction in a reasonable position (with commercial property). Good businesses will continue to need good locations to service the population - which isn’t going away.