Readers will know that MB has a bearish three-stage bust outlook for Australian house prices.

phase one is monetary authorities pulling up prices and triggering minor falls (in the east as well as west). We see a little more tightening as needed but we may already be there;

phase two is fiscal authorities tightening on demand. Either the Coalition cuts immigration hard next year (with or without a new leader) as a last ditch attempt to win the next election late next year or early 2018. Or, Labor gets in and cuts negative gearing. Or both;

phase three is the end of the global business cycle shock that always comes eventually. Currently we see that happening when the Fed hikes too hard into the Trump boom in 2019.

Nobody knows how far house prices will fall when the bubble pops but we caution against optimism this time around. Household debt is exhausted. Rate cuts are next-to exhausted. Commodity prices are reverting to mean. The Budget has only a few fiscal bullets left and it will soon be exhausted along with the AAA rating. Immigration policy is reaching its end.

A 30% fall in house prices seems a reasonable projection. I would say deeper except Chinese bottom fishers will likely play a role. Let’s say 15% real price falls over a short time frame and 15% nominal over the longer term. Recession and a big fall in living standards is a certainty.

Today Domainfax advises you on how to prepare:

Bureau of Statistics figures last month revealed that in the December quarter alone, across the eight major Australian cities, house prices increased by 8.98 per cent while apartments rose by 4 per cent. These are ridiculous gains on the back of already huge rises in recent years, which is exactly why many experts are talking about a bubble. This can be paralysing for some investors, frightening for first-home buyers and cause you to consider cashing in your own property. It begs the question, what should you do? I think we need to go back to basics. Don’t spend more than you can afford

Make sure you can afford to repay your mortgage at 8 per cent

Spread your risk If you are still contemplating investing in property, perhaps to take advantage of negative gearing rules or the ability to purchase in your self-managed super fund (SMSF), then consider spreading your risk. Too many people buy where they know which is around the suburbs in which they live. This means if their city or region drops in price, they’re going to be affected more intensely. Instead, consider spreading your risk to other capital cities or regions (having completed your due diligence as to why you’d invest there) and make sure you can afford to repay at a higher interest rate. Think creatively If you’re concerned you’re being priced out of the market, you’ve done your research, you’re happy with pricing your interest rate at 8 per cent and you’re prepared to look at other suburbs but you’re still nervous, then think creatively. Consider fintech solutions such as BrickX, which allows you to buy partial ownership of residential property, or look at buying a property with friends using structures such as a unit trust and owning the units in an SMSF, or perhaps consider whether you could add a granny flat or take in a long-term lodger instead.

So, according to the independent always Domainfax, the best way to protect yourself in the event of a property crash is to buy property. Just a bit less of it.

How about you don’t buy property at all (I’m addressing this to investors only, owner-occupation is a different calculus) and instead position yourself to make a killing when the bubble pops?

Now there’s a thought for non-Domainfax employees (and secretly for them as well).

How can this be done? There are five obvious options:

Invest in any listed Australian business which has offshore assets – especially if it has lots of them. If a business has a lot of offshore assets, when the Australian dollar falls, the value of that business will increase comparatively – therefore the value of the company will increase.

Examples might include Macquarie Bank, CSL or ResMed. (By the way, these are not share recommendations. Shift to international shares, preferably traded on large and stable stock exchange, such as the New York Stock Exchange or NASDAQ. I f the Australian dollar falls, the value of international shares will increase comparatively, even if those shares stay static. If you have never invested in international shares before, perhaps consider blue chips, such as Apple, Disney or HSBC – companies which are unlikely to have a major dive in their share price. Buy American dollars or, gulp, even euros. If you buy foreign currency with your Australian dollars and, then, if the Australian dollar subsequently falls – the value of your Australian dollars will increase to reflect that. This strategy ain’t rocket science. However, t he options for buying US dollars is getting increasingly complex. They include ETFs and CFDs. EFT stands for Exchange Traded Fund, which is an investment fund on a stock exchange. An EFT holds assets such as stocks, commodities, forex or bonds and trades close to its net asset value over the course of the trading day. Most EFTs track an index, such as a stock or bond index. CFD stands for Contracts For Difference, which provide a flexible way to trade on the price movements of thousands of global financial products such as shares, indices, commodities, currencies and treasuries. With CFDs you don’t buy or sell the underlying asset, such as a physical share. Instead, you buy or sell a number of units – depending on whether you think the product’s price will increase or decrease. For every point the price moves in your favour – you gain multiples of the number of units you bought or sold. However, for every point the price moves against you – you make a loss. Buy gold. This method is similar to buying US dollars. Once again, if you buy gold in Australian dollars and, if the Australian dollar falls and, then, if the price of gold holds, the value of the gold will increase to reflect the fall in Australian dollars. Buy bonds. If you prefer to not take any forex risk then buy Australian bonds, which will rise in value as interest rates fall to a 0.5% cash rate. There is an outside risk that the value of said bonds could fall if things get really bad and foreign investors don’t want our bonds any more.

Or, you can find an asset manager to do all of these things for you.

As it so happens the forthcoming MB Fund (launching next month) does all of the above! Register your interest today (if you have not already):