How to Know When the Aussie Property Boom Ends

Is the Aussie property market ready for a fall?

The experts seem to think so. They’re lining up to predict a property crash.

What to believe?

One thing to remember in all this is that the experts have been predicting an Aussie property crash every year now since 2011.

The first thing I do to get to the bottom of things, if possible, is to bring up a related chart.

You don’t need to form an opinion on Aussie property. Just quietly follow the charts, because they’ll tell you which way the wind is blowing.

Simply look at and follow stocks that are strongly tied to the residential housing market.

Because if housing was in any sort of trouble, you’d start to see a softening in demand for housing-exposed stocks. That would impact company revenues and, ultimately, share prices.

One company I’ve been following for years for this exact reason is cement maker and construction materials provider, Adelaide Brighton Ltd [ASX:ABC]. The CEO, Martin Brydon, has been saying for years now how strong the housing market is.

No one seems to believe it. It falls on deaf ears, mostly.

But you don’t have to believe it — the chart tells you the truth. The Adelaide Brighton chart has continued to trend higher for almost a decade. It hasn’t broken a prior monthly support level since the low made in 2009 after the GFC.

That tells you that revenues are growing — that’s what you need to follow, not academic and journalistic opinion.

And this year hasn’t been any different. The Adelaide Brighton CEO has come out again stating that strong demand is anticipated from the east coast residential housing markets.

In fact, the company is on the lookout for further acquisitions in a bid to keep pace with demand. It’s also set to raise cement prices for the second time this year amid the boom-time conditions.

The recent demand, particularly in Melbourne, has astonished the company.

That tells you more about the housing market than any academic opinion ever could.

When I read things like that, I find it very hard to get gloomy about the property market. Or the economy at large.

Property collapse not on the horizon

Time may well prove me wrong. But the charts don’t seem to suggest a property collapse on the horizon.

Housing related stocks continue to break higher for the most part.

That tells you far more than some analyst’s academic opinion.

Very few seem to do this. Read the economy through the charts.

Most investors will rely on the opinion of some analyst. Often that only misleads.

The charts will tell you the truth. The weight of money will tell you where the property market is heading.

And if you do bring up the company price charts of housing related stocks, keep in mind this most important point. The chart is not telling you about today’s business conditions. The chart is factoring in expected conditions three to six months ahead.

So if the Aussie property market is to collapse soon, then the share price of housing exposed stocks should already be starting to break lower and make lower bottoms on the monthly chart.

That’s how you can tell the run for Aussie property may be over.

However, they’re not breaking lower. For the most part housing exposed stocks are doing the opposite, breaking higher.

Don’t get caught up in all the market commentary. Much of it is conflicting, will only mislead you.

The chart never lies

Let the weight of money tell you what is happening in a particular sector and in the economy at large. The chart will never lie to you.

When you see housing related stocks breaking higher, which many are right now, we’ll I’d just be a little cautious about calling an end to Aussie property.

If only the well-credentialed analysts and academics could read a chart.

That’s something we do at Money Morning Trader, learn to read a chart. Not only can it help you read the economy, it can help you zero in on stocks ready to make a move.

In fact, I have a housing related stock in the crosshairs right now. I’m watching it closely. It’s looking set for a move. Go here to find out more.


Terence Duffy,
Editor, Money Morning Trader

Terence Duffy is an analyst and chartist, specialising in researching economic trends and cycles.  His primary focus is housing and land affordability. But you can also depend on him to offer his unique analysis of stock market charts. As Terence will show you, the charts often forecast, well in advance, the good or bad news to come.

Money Morning Australia