Anyone care to explain what a crash in the stock market would mean for real estate?

Discussion in 'Property Market Economics' started by DrunkSailor, 6th Feb, 2018.

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  1. DrunkSailor

    DrunkSailor Well-Known Member

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  2. hobartchic

    hobartchic Well-Known Member

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    If the AUD continues to go down due to capital flight to USD and our poor consumer sentiment (and profit) then bank interest rates may increase. An increase in US interest rates will probably have a bigger impact though. AUD stays down could be good for local exporters, jobs growth and inflation and drive up those interest rates again due to increased employment and wage growth.
     
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  3. Kangabanga

    Kangabanga Well-Known Member

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    Depends on whether it rebounds or not. Usually a crash in stocks would mean a big drop in other assets further down the line as stocks are usually more forward looking and track the economy closely.. It would take around half a year before property prices take a hit. I would expect the first things to get hit be things like new car sales.

    Take the recent dip/slowdown in 2011. Stocks went down first, then property.
     
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  4. DrunkSailor

    DrunkSailor Well-Known Member

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    How vulnerable are the big banks at a time like this and what is the significance to the overall economy?
     
  5. hobartchic

    hobartchic Well-Known Member

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    This stock market sell off has been triggered, according to most commentators, by fear interest rates will go up in the US due to a stronger economy (lower unemployment, higher wages, higher disposable income). Good for the US, not so good for Australian mortgage holders, as it could drive up our interest rates.

    If interest rates go up but then they have houses they can sell. As long as deposit holders keep money with the banks and the government secures the banks (big four, major credit unions) they are likely to be fine. A further tightening of lending is a possibility though.

    Sources of overseas funds are unlikely to dry up but might cost more to use (drives up interest rates). Over time, once higher interest rates normalized the banks are likely to increase deposits, access those deposits for lending, and make more money as they charge more interest for loans and secure less overseas funding.

    Historically high personal debt puts the economy into trouble. People stop spending on anything other than the basics. Dwindling disposable income leads to business collapse and higher unemployment. More importantly, high debt leads to asset devaluation as people are forced to sell their homes and can not buy back into the market.
     
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  6. hobartchic

    hobartchic Well-Known Member

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  7. datto

    datto Well-Known Member

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    I believe that the 1987 stock market crash was soon followed by a property boom.

    Not everyone goes broke. Those left standing still invest their money somewhere.

    They may buy back in on the cheap and wait for prices to recover......remember what Kerry P said "you only get one Allan B in your life time".
     
  8. marmot

    marmot Well-Known Member

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    And then when interest rates went up again, many could not afford the repayments after house prices rose by about 30-40% , that sent house prices downhill , and the recession that we had to have.
    To much greed and way to much easy money , with no real oversight for big business.
     
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  9. Pete Arendt

    Pete Arendt Well-Known Member

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    Didn't property crash in 1989. So the "boom" must have been short lived.
     
  10. Hamish Blair

    Hamish Blair Well-Known Member

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    This is just a pull back - Dow is up massively in past 12 months, so this is just a correction. Paper losses only.
     
  11. Hamish Blair

    Hamish Blair Well-Known Member

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  12. kaibo

    kaibo Well-Known Member

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    Unless the shares rebounds later this week then this weeks auctions will be weaker especially in the investor markets
     
  13. sash

    sash Well-Known Member

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    Yeah I know mate....its like Thunderdome in Mad Max...two men enter...one leaves....

     
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  14. Ricflair

    Ricflair Well-Known Member

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    I am so glad someone asked this.

    It seems as thought every time the Brisbane market feels like it’s about to run we have a GFC or a flood.

    Maybe it is not to be
     
  15. Perthguy

    Perthguy Well-Known Member

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    Then what happened after the recession?
     
  16. Scott No Mates

    Scott No Mates Well-Known Member

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    Economic reform. Campbell committee, deregulation of banks, floating of banks, removal of protection, weakening of trade union powers, free beer, debauchery in the streets, no child shall live in Poverty (widescale suburb renaming form 'Poverty' to 'socially disadvantaged', etc.

    BTW, @Perthguy - which recession (we've had a few)?
     
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  17. hobartchic

    hobartchic Well-Known Member

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    I remember the nineties vividly, things weren't great in Tassie at the time though most families benefited from low house prices and stable employment. No one seemed to have much to spare even at a private school (low ish fees, independent is more accurate) it was normal to have parent/s that struggled financially. There weren't the wealthy retirees there are now as many retirees left Tassie in the 80s to Queensland to avoid duties on homes at death which was probably a major factor.
     
  18. Perthguy

    Perthguy Well-Known Member

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    The recession we "had to have".

    My point is that was 26 years ago and we still have people raising it.
     
  19. Perthguy

    Perthguy Well-Known Member

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    That's not good at all. How long did that last?
     
  20. Tenex

    Tenex Well-Known Member

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    Crash in stock market is good news for property for a number of reasons.

    When stock market isnt doing well, investors look at assets and bonds. Gold and property being the top ones. So it shuffles money towards assets rather than stocks.

    Also a bad stock market is a good indication of underlying problems in consumer confidence meaning interest rates will have to remain low until consumer confidence is restored.
     
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