Are you confused?
I am continually amazed at just how inconsistent the reporting in the media is regarding property. It’s hard to work out if prices are going up or down and even harder to decide who to listen to. I read smartcompany.com.au each day which is certainly one of the best sources of economic and business news for Australia and the World but even they are confusing me with their inconsistency and apparent hedging of their bets.
On Monday August 10, Smartcompany.com.au had the following two article headings in the same release:
1. – “No bubble, but no boom for house prices.”
2. – “Average mortgage hits record high as investors return to booming property market.”
So in one article there is no property boom and in the next there is a booming market. Which one do you believe? If our news sources can’t be consistent within their own publications then it is understandable why there are so many people in the community scratching their heads.
The truth is simple. The first home owner segment is very buoyant due to the first home owners grant and this situation will most likely change once the grant ends. The car industry is an example which we should be watching closely. Car sales were artificially increased due to the Government tax relief to end the financial year. Now that the 50% investment deduction is gone so has the number of car sales – in fact they have reduced significantly.
So it’s important to note that prices are affected by so many things but we must consider the fact that interest rates are inevitably going to increase and will affect our economic recovery. Unemployment has not increased to the expected levels of many of our economists but the employment mix has changed significantly. Less people are employed full time and more and more people are working part time and casually and are underemployed – in other words they could work a lot more hours if the work was there.
This loss of capacity will greatly affect our economy through the billions of dollars of lost household income. There are many families struggling and because they work part time are not entitled to government assistance – they are getting by each week but only just. They are not unemployed but are underemployed – this is the largest crisis our economy is facing.
So in considering the facts and the need for households to debt deflate it is unlikely that house prices will increase any time soon. Of course statistics can be put forward to support any argument but statistics are able to tell any story that the writer wants to tell. We have a long way to go in our recovery and we desperately need to change our consumerist ways and live within our means.
Housing is an essential part of our lives – we all need a place to live, a place to call home. Our growing population and the low number of new residential buildings are supporting house prices. The level of Government building to assist with affordable housing options for those in need is insufficient to meet demand.
With interest rates needing to increase along with unemployment and underemployment heading north there is no reason to believe that house prices will increase significantly any time soon. So my advice is don’t panic and live within your means. Don’t be a headline chaser, keep a cool head and make decisions based on time – after all time will tell the whole story.