Last week I was shocked to read the headline “Property prices set to tumble 15% as Ukraine crisis bites.”
But now AMP has come out suggesting the fallout from the Russian invasion of Ukraine could slow Australian residential property sales, increase inflationary pressure, and accelerate a downturn in prices of about 15%.
And that's despite Australia's property markets generally performing well during major economic, military, and terrorist crises over the last 35 years.
And these forecasts don't seem to take into consideration the strength of the Australian economy, the shortage of good housing in Australia which will be challenged by a flood of incoming migrants, and the resilience of our housing markets and the Australian banking system.
Now what's happening on the other side of the world is horrific, and the humanitarian and economic impact will be tremendous and possibly long-lasting, but what will it mean for our local property markets?
That's what I'm going to ask Dr. Andrew Wilson, Australia’s leading housing economist and chief economist with My Housing Market in today's Property Insiders chat.
What will the Ukraine Crisis do to our economy and property markets?
Will a war overseas cause local housing values to crash?
The biggest local threat from the Ukrainian crisis – outside escalating into a regional or nuclear war – is likely to be rising oil and energy prices increasing inflationary pressure and the prospect of higher interest rates.
While the Ukraine war may slow our economic growth a little due to the negative impact on confidence, it’s unlikely to drive Australia into a recession locally – so why should property values fall?
Strongest lift in the economy since 1976
The Australian economy (as measured by gross domestic product or GDP) grew by 3.4 percent in the December quarter – the strongest gain since March quarter 1976.
The strong growth followed a 1.9 percent contraction in the September quarter, reflecting lockdowns.
The economy is up 4.2 percent on the year.
The biggest contribution to the expansion of the economy was household spending (+3.2 percentage points), followed by inventories (+0.9pp).
A raft of sectors each reduced growth by 0.1pp, including dwellings, commercial construction, private equipment, public investment, net exports, and ownership transfer costs.
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