I am intrigued by the media’s continued reporting of the supposed “property boom” at the moment. It’s not only untrue and short sighted but it is downright misleading. Instead of educating people as to what is happening in the market and why, they are choosing to sensationalize the news and confuse buyers and vendors alike. The way the economy was is not the way the economy will be in the future.
There is no doubt that an artificial price bubble has been created by the First Home Owner’s Grant and properties around the $500,000 AUD mark are selling for at least 10% more than true market value right now. This is not sustainable and given the withdrawal of the Grant at the end of the year prices will correct. What the current economic situation should have taught all of us is that what goes up will come down and booms inevitably turn to busts.
It is easy to recognize how people around us have changed. It is no longer cool to “pretend” to be wealthy or flash money around without purpose. People are choosing to eat dinner at home, purchase home brand products and are generally showing discretion where they never did before. So if the community at large is aware that things have changed why is the media declaring a property boom?
The media fails to truly report – instead of interpreting the news and giving meaningful information they sensationalize. Australia’s economy is far from out of the woods with the massive worldwide stimulus now filtering through the economy. The stimulus was unprecedented in size and was aimed at stopping the collapse of the worldwide financial markets.
Unemployment was estimated to have reached 50% if the financial markets were to have collapsed. Governments throughout the world went “all out” to avoid the unthinkable and in doing so made the decision to deal with the fallout from the massive spending later. In other words the fallout is still to be felt and the worst is not over.
The new “normal” will not be the excessive spending, buy now and pay for it later which occurred in the last decade. People will be forced and are already choosing to reduce spending where possible. Retailers have recorded enormous increases in lay-by purchases and consumers are realizing that credit-card spending is not a solution to having no cash.
The new “normal” will see people spending less and saving more. Choosing not to constantly eat out at restaurants and cafes will be seen as “smart”. Reputation will be more about someone’s show of responsibility rather than the colour of their credit card. Friends and family will become more important as people spend more time at home – the new “normal” is not about returning to the way we were and continuing spending – it is a fundamental shift in the way we approach our lives. Let’s hope the media catches up!