PROPERTY

To add credibility to its web presence, we decided Urban CAPITAL Private needed to have a web page dedicated to its property holdings.  In truth, UCP has only a single property in its "portfolio" -  in Queenstown NEW ZEALAND.  Anyone interested in a holiday to the NZ Alps should contact the founder. 

As an investment thesis, we take the view that Australian real estate is horribly over-valued and will inevitably suffer from mean reversion as many western markets have post the GFC in 2008 - now coming to fruition in the eastern states.  An extended era of cheap money fuelled by quantitative easing is an effective band-aid for myopic governments focused on the election cycle but in our view ignores the concept that eventually everything has to be paid for.  Flooding markets with government debt to fix a what was a debt crisis is a paradox that we at UCP cannot reconcile.  

We believe that whilst a rising tide will lift all ships in the short term, the inevitability of higher inflation, rising interest rates and tighter APRA and regulatory controls on banks will, in the medium (perhaps long) term be the catalyst to end the real estate frenzy.  Servicing a million dollar mortgage whilst stacking cans at the local factory will then become unsustainable.   House prices will inevitably fall as stretched owner occupiers struggle to service $40,000 in non-deductible interest using after tax money with stagnant wage growth. 

All that said, we'd be very happy to get this call wrong because it will likely end in tears for many.  Even a busted clock gets it right twice a day and we'll just keep calling the end until we get it right.