Sunday, October 7, 2012

The New Restrictions for Property Loans

Looks like there are lots of people with cash. Additionally everyone thinks property is all good in the long run, and as long as you can hold to your asset, you would eventually be rewarded.

What the new restrictions have done is to stymie the ownership of more properties. The most important outcome of these new measures is to protect the integrity of our banks and keep a large margin of error.

Whatever we have created an environment that will lead up to real estate being priced for perfection. There is no such thing as a sure bet in asset markets. The only sure things are assets that are cheap but isn't going to zero. In our market, real estate isn't it.

In the end the bet on property is a bet on steady enlargement of the GDP. If this doesn't happen, there will be many losers. So the more asset wealthy we become, the more allergic we are to recessions. We will also be more risk adverse. Is this a good thing? A nation of wealth managers instead of wealth creators.

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