An interesting story in News today about the promising property cycle in Australia. This is not just a property spruik, but contains some great ‘facts’ about why this is the case. Like I’ve been telling for quite a while, now is the time to invest for the long term. The wealthy of tomorrow are the ones who acted at this time in history, but ONLY if you are financially able to do it (and stick to the investment rules of location).

AUSTRALIA’’s property sector is about to catch a wave but homeowners and investors do not need to worry about a wipe-out.

While a bubble in the first home owner segment of the housing market is set to burst with the winding back of government grants in two months, industry experts say investors will fill the breach.

They don’t expect the property market to follow the big slumps felt in Britain and the US, where prices have fallen by more than 20 per cent.

In the US, in particular, the problem is too much supply and not enough demand.

“Fundamentally, America has 1.1 million properties in oversupply,” says Damon Nagel, the managing director of property investment  company Ironfish.

“In Australia, it’s more than 180,000 in undersupply. We can keep building for 18 months and only catch up to demand.”

But the buyers of property are expected to increasingly be investors, rather than owner occupiers, once the Federal Government First Home Owner Grant starts to wind down from September 30.

“I think you’ll find first home buyers next year will be like rocking horse droppings – few and far between,” Nagel says.

Professionals Real Estate Group agency principal Claudine Deneuve says buyer inquiries have risen as people realise interest rates are unlikely to fall further.

She’s expecting investors to return to the market as first home owner activity falls in coming months.

“House-price growth will be fairly moderate, with a much slower global economy,” Deneuve says.

“We have avoided the 30-40 per cent drops of the US and UK because our economy was in far better shape than our peers at the start of this historic global recession.

“If the global recession drags out too long, Australia’s economy may become at risk.”

A report released last month by forecaster BIS Shrapnel says conditions are ripe for a sustained recovery in residential property prices.

“Low interest rates, solid growth in rents and housing shortages are evident in most markets,” the report says.

But not everybody believes the outlook is for growth.

Morgan Stanley chief economist Gerard Minack says Australian residential property remains expensive “and will likely prove to be a poor medium-term investment”.

“Whether there are big price declines will depend on employment,” he says.

“In markets where employment and incomes have taken a big hit . . . we have seen big price declines.”

But some do not think prices will drop while houses are still in short supply.

“Demand stems from population growth,” .

“With 190,000 migrants coming into Australia, there’s a shortage of housing, and people need accommodation.”

Some industry names say now is a ‘‘once-in-a-generation opportunity” for investors.

“It’s probably a good time to buy in the right spot, but be careful,”.

PD