Since the economy is now fixed and we have avoided recession when are property prices going to soar?
It’s a really silly question but I have seen this addressed on television, newspapers and websites all week. The same “experts” that failed to foresee the credit crisis are the same people now discussing when property prices are going to increase.
With unemployment increasing and the world economy facing its toughest test since the Great Depression we really need to be realistic when considering what might happen next. At the most basic of levels it is impossible to suggest that prices are going to increase at all for some time. It is likely that interest rates will increase at the same time that inflation is increasing in Australia – this is a very scary situation.
I know of many people who have already been stretched to breaking point and I constantly learn of more and more corporate collapses. This environment is not one where property prices are going to increase – bank valuers are being very conservative, buyers are showing caution and consumers are learning for the first time in a generation that savings are vital.
Increased levels of “thrift” are also not compatible with property price increases. In other words if people are deciding to increase their level of savings they are unlikely to spend more on a property. This is especially true if we look ahead to higher interest rates- the reality is they are on the way.
The most important point is not to get caught up in headlines. Property prices are not going to increase in the short term and any suggestion that they might needs to be treated cautiously. We are not out of the economic woods – in fact we are not sure how far through the woods we are. My feeling is we are not far enough through the woods to worry about getting out just yet.
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