At my ever popular colleague Bindi’s request this week’s newsletter “needs to be more positive”, it would seem that my last outburst spooked some of the locals.
Ok so forgive me, it is true that in recent weeks I’ve been morbidly researching the economy looking for Easter eggs that may help predict what lies ahead. This has led me to discover that there was indeed another time following a debt-fuelled boom, coupled with soaring inflation and unbridled government spending that things went south…like south south…that time was called the late 1980s. So I did what the kids do and asked AI “what caused the last major recession?”. It turns out the only missing pre-condition for the next recession we have to have is a stock market collapse…*file note at time of writing the stock market is currently near record highs.
You are welcome, I know how positive that makes you all feel.
But challenge accepted, there are positives to focus on when things get a little tricky and here goes *waves to Bindi.
Firstly, if you are thinking of upgrading your home this is an ideal market. Sure, your place may be worth a bit less but the next one will be too and all you need to do is focus on your changeover (or as the finance bros call it ‘the delta’). That’s right folks, it’s a relative market and if it’s down 10% here, it’s down 10% there…the maths will make you feel better – your $3.3M semi may now be worth $3M but the $5M house you have always wanted is now worth $4.5M. Ta-da! This means you are $200,000 better off.
The second thing I’ll say is we are now being reminded just how stubborn the Sydney property market can be…behind every door there is an owner.
During the GFC I quickly developed a very thick skin listening to would-be buyers telling me that prices were going to fall by 30% etc etc and that the end was nigh. Inevitably the low offers came in but most of the time the owners simply said nay.
Whether you agree with it or not, Australians have an intrinsic belief in the long-term value potential of real estate and this national psyche has created a sort of mythical forcefield around values in times of woe (I have friends who would survive solely on baked beans to avoid selling their property for a price they didn’t like, grim perhaps, but true).
So my conclusion is that this market is going to be stodgy for quite some time as the world works itself out. This will mean lower sales volumes and an eventual tightening of supply. In the short term you will probably see a fair bit of property on offer but a familiar line you will hear from agents is “they are only going sell if they get $X”. The period of tight supply will then be followed by a change in conditions (a change in government perhaps?) and demand will increase…rinse and repeat.
That’s it. I must admit I struggled with the title this week, other bangers on the short list were ‘Beans means Heinz’, ‘Rinse and Repeat’ but when my AI searches made me realize that Cher’s unlikely smash hit ‘Turn Back Time’ was in the charts during “the recession we had to have” I knew I had nailed it. A gaudy U.S. military-dominance-inspired film clip that was disturbing on just so many levels…do yourself a favour and don’t look it up.
Until next week,
David Murphy