It was probably inevitable that falling interest rates would drive the people who manage their own investments to seek other avenues to get a decent return on their money.
Some of the astute ones have connected the dots and see huge opportunities waiting in the first home buyers market. The government is only awarding first home buyer grants to those who purchase brand new homes, and rising real estate prices are locking out those seeking to get their foot on the real estate ladder.
A few years ago we were seeing the " McMansion " phenomenon. Buyers were snapping up old fibro homes on quarter acre blocks, sending in the demolition crews - and re-building huge homes in the heart of suburbia. That trend has slowed down - because the opportunity for profit has taken a new direction.
Old fibro homes on quarter acre blocks are still in demand for demolition, but what is planned for the site now is villa housing. Depending on the regulations required by individual councils, it is possible to cram two - and sometimes three - one or two bedroom villas on such a site.
These are not luxury villas. The objective is to provide a basic living unit that meets the standard set by council regulations, but also attracts that all important first home subsidy. It is a starting point for those desperate to get a start on owning their own home - and because of this the investor can expect a handsome profit return.
At the same time, the people who usually favour fixed term deposits to service their money are looking at the home rental market as an alternative. Home prices are on the rise again and rents are at an all time high. It seems a safe investment to return to " bricks and mortar " and reap high rental returns.
The danger is that the banks may find they have surplus funds and lack of demand for loans - and thats when they may be tempted to ease standards on home finance. That is precisely how the 08 crash roiled world markets. When the banks found they had huge wads of dodgy loans a few smart operators combined them into " securities " with high credit rating accreditation - and sold them to unsuspecting institutional investors.
History has a nasty habit of repeating itself !
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