We’re deep in a pandemic at present, this is a once in a lifetime public health emergency.
And in the investing world, this is what’s called a ‘Black Swan’, something you thought was impossible, until you see one.
What started as a little cold for our economy has progressed to the flu and now sounds like it could be a dose of economic pneumonia.
I’ve never seen such panic spread so quickly.
And I’m not talking about the battles in the supermarket queues.
I’m talking about the fear that is spreading.
Concerns about our personal health, about our jobs, about our economy and about our property markets – the value of your and my home.
The Morrison government has promised a further stimulus package to keep the Australian economy moving and the RBA is stepping in again, but this pandemic is an unprecedented threat to the Australian economy with stock market falls of around 30% over last three weeks and 60% of Australian businesses now reporting that they are being affected by COVID-19 to some extent.
While other commentators are giving their views on the stock market, I’d like to concentrate on what means for our property market?
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Is there anything we can learn from the past to help us predict what is likely to be ahead?
That’s the question I want to ask Australia’s leading housing economist Dr. Andrew Wilson chief economist MyHousingMarket.com.au in this video.
There is no doubt that the virus will cause illness is some people and tragically even kill others.
And even though we are about here to talk about property, I don’t want people to think that we don’t care about other people, their health and those in need.
We are also concerned for those whose jobs are at risk, and who may suffer from isolation or mental health issues from restricted social exposure.
We’re not qualified to discuss those matters, but watch as Andrew and I discuss:
- How worried we should be?
- It seems currently the real damage is driven mostly by consumer and business sentiment and market psychology.
- Will Australia go into recession?
- Most likely yes, but what does that mean? Of course, a technical recession is a contraction of GDP for two consecutive quarters however the depth of severity of this will largely depend on the impact of the government stimulus packages it is unlikely to be like 2008
- There is NO systemic risk. No one is even talking about that. Governments are intervening in the markets to stabilise them, and the private banking sector is very well capitalised. It feels more like 9/11 than it does like 2008.
- This economic shock is hard to compare with others that all were classic corrections to over-demand. The essence is that this is a non-economic driven response.
- No doubt medium term property price growth will be impacted but nonetheless a recovery more certain than previous episodes. Listing confidence will indicate market direction - just like last year
- Once this is over there will be a perfect storm of economic events that will once again drive property prices up and continue to do so over the medium to long term.
- We still have very strong population growth, even though immigration may slump a bit in the short-term.
- There is an undersupply of the right type of property. We have a requirement for 170 - 180,000 new houses each year, but we are only building around 140,000.
- Building approvals are the lowest rating over a decade so there is very little new rolling stock in the pipeline.
- Low-interest rates are here to stay meaning the cost of debt is now the lowest it has ever has been which means people with a secure job can borrow more and the cost of owning a home or holding an investment property is the lowest it has been for a long, long time
- The share market volatility will remind many investors that the best way to grow their wealth is in real estate
What happens in times like these is that we all get whipped into a frenzy of panic.
And I am sure none of us will forget 2020 which will be firmly embedded in our minds – this is a once in a lifetime experience
However, when we look back at 2020 it is likely that these events will not have a large or lasting impact on the global economy or the future prosperity of you or your family or the value of your home or investment properties.