Property and Cryptos to Keep on Booming
Talk about a follow-up! On Friday, we went over why credit will keep flowing into the Australian real estate market.
We said it was a simple equation: More debt equals higher prices.
Now The Australian Financial Review reports that private lender BC Securities is launching a 25-year mortgage for foreign buyers — so they can settle on buying an apartment.
BC has over $700 million to dish out right now. Apparently, it has a lending target of $2.5 billion over three years.
It’s also going to get client referrals from a Hong Kong behemoth called Far East Consortium. This mob have 2,500 luxury apartments under construction, so the partnership is a natural fit.
There’s been plenty of scaremongering in recent times about too many apartments being built on Australia’s east coast. Maybe there is too many — I don’t know.
But the doomers were always worried that the Aussie banks would take a hit from apartments that didn’t settle, and see an uptick in bad loans.
The Aussie banks have retreated from this market over the last 18 months or so.
This is good news for us as investors.
If foreign buyers and banks are willing to soak up these apartments, it should negate the systematic risk to the Aussie economy via the Australian banks.
Put it this way: If CBA runs into a lot of problems in the apartment market, the economy has a problem.
If BC Securities runs into trouble, it bears the brunt of the problem, not the rest of us.
The credit markets seem to be heating up, rather than cooling down…
Follow the financiers as they circle tempting targets
I mentioned last week that the company trying to take over non-bank lender Pepper Group has had to sweeten the deal to get all the shareholders on board.
Now there appears to be interest in mortgage broker and investment management firm Yellow Brick Road Holdings Ltd [ASX:YBR].
There’s a whisper that a potential takeover bid could happen here. YBR’s chief Mark Bouris said recently that he was looking for funding so he could start originating loans, instead of referring them on to other businesses. So some kind of deal could make sense.
I give this evidence more weight than the current spook about the UBS report recently released. Warning: I haven’t read it, except as it’s been reported.
The Australian had the story in the weekend edition just gone. It says this ‘explosive’ report suggests a third of interest-only borrowers don’t realise they’re not paying back the principal on their loans.
The catch is that the survey was done on 907 borrowers.
I think Australia’s trillion dollar mortgage market warrants a slightly bigger survey of borrowers than that.
Anyway, I’ll add the story to my list of Australian real estate crash warnings that have yet to come true.
The banks, quite rightly, rebut such a figure as statistically irrelevant.
I think the banks have a bigger problem…
Crypto party just beginning
It’s called the blockchain and it’s on track to upend their business.
You only have to start buying crypto to see how archaic the banks’ payment systems actually are.
I wanted to add to my bitcoin holdings last week. I needed to move money into my crypto account. Time got away from me.
Saturday was the earliest I could get to it.
No deal on the weekend of course. Transfers are closed and then there’s the usual delay sending money around.
When you move crypto, it’s a lot quicker than that.
And the crypto market trades 24/7.
Around 5:00pm last Friday our time, bitcoin was US$4,398. It’s moved up to US$4,607 over the weekend to now.
The more you delve into the crypto space, the more impressive it actually becomes.
Old investing silverbacks like to paint crypto as the plaything of foolish novices and wannabe traders.
It’s idiotic. The ongoing development of blockchain technology will continue for years, just as the internet has done.
In fact, if you want to see the full creativity of entrepreneurs and the power of the market unleash, you should be following crypto.
Shares are beginning to look slightly dated themselves.
Yes, some crypto coins are foolish, and investors will overbid or use poor risk management.
That goes with the territory. These symptoms are in every other market, too, by the way.
I cannot think of anything more important to follow than the crypto market. The future of businesses the world over — not to mention national currencies — is being formed here.
This week, I’m releasing two special reports to subscribers of Small Cap Alpha to make sure they know how important this all is.
There’s still money to be made here as well. The market sits still for no one, and we’re all going to have to learn to follow a new industry.
It’s set to wipe out a lot of the existing ones.
Editor, The Daily Reckoning Australia