An Australian recession is just around the corner.
But what will it look like? And what will it feel like?
That’s what we’re going to discuss in today’s podcast as I chat with Ken Raiss, Australia’s leading property tax strategist and Director of Metropole wealth advisory.
We’re going to talk about what you need to understand about a recession, why this time will be different, and what you’re likely to experience.
We’re also going to talk about what it will look like after the recession – don’t worry, there will be an after and it will be good. We’ll discuss how to protect your downside and give you some tips so that you don’t miss the opportunities this recession will bring.
What will the recession in Australia look and feel like?
It’s no secret that Australia is going to fall into recession.
But what does that really mean?
How will this affect you, your job, your finances, and the value of your home or your investment properties?
Recessions are always periods of significant opportunity and transfer of wealth.
That’s just how the economy works.
For instance, because of social distancing we aren’t going to restaurants anymore, but we’re still going to be eating, and some restaurants are prospering with takeaway while other grocery stores supermarkets are prospering because we are buying more food there.
So, there’s always opportunity.
It doesn’t always mean that if you win somebody else is going to lose.
What is a recession?
A recession is when the value of goods and services has fallen in two quarters in a row.
Why this recession will be different?
Recessions usually come after a period of substantial growth, speculation, and general excess.
This time around, the Australian government has sacrificed economic activity in the name of health in response to the COVID-19 crisis.
It’s not alone in this, as you’d well know, major economies worldwide including major powerhouses like the US and China have done and are doing the same thing, albeit in different ways.
What will we experience as we move through this recession?
There will be much higher unemployment, it will be harder to switch jobs, and it’s reasonable to expect more redundancies and terminations as the crisis continues.
This leads to a loss in income and falling wages, which reduces the spending power of affected Australians.
Even for those who are holding on to their jobs, uncertainty will rise.
The Real Estate market will take a hit because of social distancing and the inability to inspect properties and transact in the normal way.
Property transaction numbers will decrease – there will be fewer buyers in the market and there will be fewer sellers placing their properties on the market for sale.
Property parties will drop slightly, but investment-grade properties and A grade homes will not fall much in value.
- Don’t overreact
- Recessions are largely driven by how the population on a whole is feeling about the economy—not the economy itself.
- Investors overreact, and some bargains will become available because of this in the stock market, and in the property market because sellers will overreact.
- Think long term
- Don’t make 30 investment decisions based on the last 30 days of news.
- Think 10 years down the road.
- Don’t try and time the market.
- Build a solid financial foundation.
- Have the right finance strategist.
- Direct ownership structures to ensure you maximize your upside, protect your risks, minimize tax, and pass on your wealth to future generations
Links and Resources:
Some of our favourite quotes from the show:
“There’s no doubt that some bargains are going to become available – in the stock market in the property market – because some sellers are going to overreact.” – Michael Yardney
“I think people are going to try and time the market. They’ve always done that. We’ve always got it wrong.” – Michael Yardney
“Remember, even if 20% of the population’s unemployed, 80% will still be gainfully employed.” –Michael Yardney
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