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If you are looking for a comprehensive snapshot of the current state of the Australian housing market, look no further. Thanks to Promentor’s Dominic Wilson-Ing for his insights.
The changing economic climate driven by the US-China Trade War and impending wide-ranging staff lay-offs by large companies, such as NAB, Telstra and other factors including the Royal Commission, forecasts a major impact to the Australian housing market. Previously, people predicted a major downturn which never happened. Instead, house prices steadily increased to the point where many are now unable to afford their own home. This has been good for investors, particularly foreign investors. Foreign investors are snapping up properties in locations such as Melbourne Docklands, where the banks loathe to fund home-loans. We need to ask ourselves, is this another doomsday prophecy, or should we take proactive action to protect ourselves?
As is usual with predictions, some still say that prices will continue to surge, especially in Brisbane, Perth and Canberra. Some predict prices will slow, such as in Sydney [1], whereas others state that the decline won’t only continue, but accelerate. This sentiment is supported by that fact that Melbourne experiences worse price falls than Sydney over the past three months, (see Figure 1 [2]).
If the pessimists are right and prices continue to decline, what will this mean and who can benefit? When prices drop, properties become accessible to first-time buyers, on the proviso that they can raise the capital funding needed. A key beneficiary group are those without mortgages who have capital from prior sales, such as retirees, those downsizing and/or moving interstate, and people who have no intention of moving out of their existing home for an extended period. Conversely, those most affected include investment buyers, owner-occupiers who are wanting or expecting to relocate and those with recently-taken large mortgages. The latter is because the property value during the boom may exceed its maximum value. Even after the downturn has started to recover, they remain in negative equity.
In summary, now is not a good time to buy an expensive property. Rather, sit back and watch the market to see whose predictions are coming true. If you are planning on selling your property soon, then now may be a good time to sell as prices may continue to, or suddenly, drop. All these strategies are risky and depend on how far it is to the bottom of the market with regards to percentage terms and time. [3]
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Figure 1: Percentage house price change
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We are well into a new financial year, and so it is time to reflect on economic conditions around the world.
Economic Conditions Snapshot, September 2018: McKinsey Global Survey results
As they regard economic conditions at home and in the world economy, executives are warier than they have been all year. For the third quarter in a row, respondents to McKinsey’s newest survey of executive sentiment share less positive assessments of the economy’s current state, and their outlook for the months ahead is also cautious. Expectations for trade activity are declining, trade-related risks are still perceived as top threats to growth, and for the first time this year, less than half expect the rate of economic growth, both at home and globally, will increase over the next six months. The view from emerging economies is particularly downbeat. These respondents offer a more negative overall assessment of the global economy, economic conditions in their own countries, and their companies’ prospects. In a few cases, they are also more likely to cite the United States as the country with the best opportunities for their businesses, rather than their home countries or nearby economies. McKinsey and Company’s comprehensive survey of global economic conditions is unmissable, read the complete snapshot here. more
What Has the Eurozone Learned from the Financial Crisis?
This month marks the 10-year anniversary of the Lehman Brothers collapse, the prelude to the worst global financial crisis since 1929. As we pass that mark, we are also approaching the 20-year anniversary of the launch of the Euro. And when the retrospective assessments of the Euro’s first two decades are written, they will all be set in the context of the economic disaster that followed the Lehman collapse. Harvard Business Review’s Antonio Fatás reviews recent economic history in this thought-provoking piece on the Eurozone and financial crisis. more
Less Even Expansion, Rising Trade Tensions
As the global cyclical upswing approaches its two-year mark, the pace of expansion in some economies appear to have peaked and growth has become less synchronized across countries. Among advanced economies, growth divergences between the United States on one side, and Europe and Japan on the other, are widening. Growth is also becoming more uneven among emerging market and developing economies, reflecting the combined influences of rising oil prices, higher yields in the United States, sentiment shifts following escalating trade tensions, and domestic political and policy uncertainty. The International Monetary Fund lends its expertise and has put together a comprehensive analysis of our global economic outlook. more
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Some of the biggest headlines in September focused on the needle tampering scandal enveloping the fruit-growing industry. The Royal Commission into banks continues, while Australia sees its fifth Prime Minister in a decade with another liberal party spill. In property news, falls in house prices receive a range of commentary.
Strawberry needle sabotage scare spreads to all six Australian states... more
These are the shocking acts that trashed the reputation of Australia’s banks.... more
Behind the scenes of the Liberal Party Leadership spill.... more
First home buyers shrug off the credit crunch as home loans are bigger than ever...more
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