During what is the toughest economic period since the Great Depression there are enormous pressures being placed on Governments at all levels throughout the entire World. There are literally hundreds, if not thousands of interest groups all pushing for a greater piece of an ever shrinking money pie and it’s obvious that everyone will not be happy.
The Australian Federal Government is preparing to hand down the budget for the coming year and speculation is rife that Australia will be running what Wayne Swan (the Australian Treasurer) is calling a “temporary deficit” for six years – in other words is preparing for continuous deficits until 2015.
In real estate there is constant speculation by media, vendors and buyers which is being fuelled by real estate agents about when the “recovery” will occur? I read some of the articles with disgust because it is obvious to all that Nostradamus would have a hard time predicting a date.
I have seen statements by agents that property will recover later in the year (2009), sometime in 2010 and I have even seen an agent team on Sydney’s Northern Beaches say that they have never seen a better property market! Personally, I have never heard a more ridiculous claim.
Household debt in Australia has more than quadrupled in the last ten years to more than AUD $3.5 trillion – this has enormous implications. Wages have not increased by anywhere near that rate and the lending frenzy which fuelled the pricing boom is unlikely to happen again.
The facts are simple. The world economy is in deep trouble. Banks have written off over US $1 trillion in bad debt and indications from the World Bank are that another US $3 trillion may have to go the same way. If that is true we are only one quarter the way toward resolving the current problems the banking industry is facing.
Australia hasn‚t felt the full effects of the crisis, however unemployment is rising quickly, youth unemployment is rising at an even higher rate, household disposable income is greatly reduced and our Governments are going to be paying back their accumulated debt for decades after this crisis has past. The former Australian Government took ten years to pay back a AUD $96 billion foreign debt. The deficit in Australia is likely to be AUD $70 billion by 2010 – just next year.
Infrastructure projects have been put on hold, many of which I believe should have been started many years before now, immigration numbers have been reduced and will therefore decrease the demand for housing and thus reduce pricing pressure. The First Home Owners Grant looks set to be cut and First Home Buyers currently account for over 25% of new mortgages in Australia.
So when looking at the pure facts and without placing any political bias on the issue it is simply impossible to predict when property prices will recover, along with sales volumes. There are far too many variables and we are still to experience the worst ˆ we are not anywhere close to being half way through.
The only way to answer the question of when property prices will recover and keep a straight face is to say no time soon. To predict a date is to lose all credibility, becoming more like a fortune teller or astrologer. Talking the market up at the moment is the act of a lunatic and we need to sit and watch how events unfold.
Michael Marquette, Marquette Turner Luxury Homes