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Take a Trip Down Under? - 26 October 2011

Australia has long been a destination for disillusioned Brits to get away from the grim weather and crowded cities. However Australia has moved forward and is no longer our poor cousin who will happily give you 3 dollars to your pound sterling. After batting off the GFC, Australia’s economy is in good shape, backed up by a strong mining economy and ties with China and South East Asia. But what is the opportunity for us Brits? Does the land of opportunity still provide us with a haven to buy cheap property and live the dream of all day BBQs by the beach?

Unfortunately Australian property has risen considerably over the last 40 years (6% Pa. since the 1990s) and is considered some of the most expensive in the world in relation to average incomes. Furthermore the currency has in recent times reached record highs against the US dollar and is currently floating around $1.5 to the pound. With all these circumstance considered you may be thinking that Australia is currently a bad idea in terms of property investment.

However, there is growing speculation around the Australian property market that the bubble is about to burst. Warnings in 2010 by the Economist and ABS that property was overinflated bare resonance as new home loans hit a 10 year low and Melbourne properties saw average prices slashed by $37000 earlier on in 2011. Such events have seen cash rich investors from South East Asia target gateway cities like Melbourne and Sydney and also more localised mining economies like Brisbane where population growth is high.

So on the face of it Australia seems expensive because of the weak pound and strong dollar but it is definitely worth keeping an eye on the market as if a dramatic crash ensues or consistent % decreases there may well be some bargains to pick up in one of the only developed countries with above average population growth.

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