Australian real estate benefiting from Covid?

Discussion in 'Property Market Economics' started by spludgey, 11th May, 2020.

Join Australia's most dynamic and respected property investment community
  1. spoon

    spoon Well-Known Member

    Joined:
    17th Nov, 2016
    Posts:
    1,762
    Location:
    Time-dependent
    I think what drives a billionnaire is money and the opportunities to make money. Those cities which have the worst outbreaks, eg., NY, London etc. are also most concentrated with business opportunities. Even in Australia, Sydney is worse than the rest - lots of people flows.

    Pandemics will recede. They are not like wars, which can last for decades. When people forget about the pandemic, their minds will be on business opportunities. Of course there are some who resort to healthy living, tree/sea change, etc., but most will still follow business/career/etc. opportunities. They will convince themselves, it was only a once in a century pandemic, it's over for this century and won't happen until next. People are forgetful.
     
  2. K974

    K974 Well-Known Member

    Joined:
    29th Oct, 2017
    Posts:
    513
    Location:
    australia

    over a long term this is a huge oppurtunity no dispute , but as always it’ll be for the limited few

    but to suggest explosive growth from The current values as a the starting point Is in my opinion delusional and certainly not going to happen in the short term,
    No offence meant by that everyone has an opinion and you likely don’t agree with mine we are here to exchange views
    But I can’t see any basis behind it

    again you could well be right but I have an Polar opposite view
     
  3. John_BridgeToBricks

    John_BridgeToBricks Buyer's Agent Business Member

    Joined:
    25th May, 2018
    Posts:
    2,407
    Location:
    Sydney
    Thanks, no I am fine with the argy bargy of differing views. I have my perspective, but I usually don't get too sensitive about forecasts - because when it comes to crystal-balling, we will all be wrong.
     
  4. John_BridgeToBricks

    John_BridgeToBricks Buyer's Agent Business Member

    Joined:
    25th May, 2018
    Posts:
    2,407
    Location:
    Sydney
    Thanks Albanga,

    True I am a Buyer's Agent and this no doubt taints my perspectives. But I am also a Chartered Accountant, and been investing for a long time, so I am reasonably financially literate.

    I have some short Youtube clips from a recent Webinar explaining with charts why I think growth will be significant in the next 5 years. So worth checking those out.

    The short answer is that not all recessions are deflationary. Some economic downturns are inflationary - ask anyone in Venezuela, or Zimbabwe, Weimar Germany, or heck, anyone who lived through the 1970's - you can have a stinker of an economy and asset price inflation at the same time. That is what I think will happen now.

    And that is not me being particularly clairvoyant either - the monetary inflation so far by the worlds' central banks has been staggering, and it is designed to pump up asset prices.

    We have seen glimpses of higher property prices already, and I can tell you that on the ground - there are more buyer's than sellers. Last week was the first week of live auctions returning and boom, the clearance rates were back over 70%.

    There is way too much stimulus in the system - it is totally unhealthy, and the patient is definitely sick, but it will manifest with lower AUD and higher property prices in the medium term.
     
    Codie and Anchor like this.
  5. Redom

    Redom Mortgage Broker Business Plus Member

    Joined:
    18th Jun, 2015
    Posts:
    4,607
    Location:
    Sydney (Australia Wide)
    Depends on 'when this is all over' looks like. No one really knows the answer to that, so much uncertainty to it and so much can change.

    If were at unemployment is very high (e.g. 8-10%+) & no more significant emergency income support measures...than there's no 'explosive growth' (or any growth) on the horizon anytime soon until its brought down. Unemployment comes down far slower than it goes up, even with big stimulus. Australians will soon appreciate that - we haven't really had an unemployment crisis for 3 decades here. The mortgage stress alone would cripple households, and lead to sharp falls in prices to reflect realities of economic situation. What we've known about our housing performance over the last 30 years doesn't hold anymore, jobs & economic performance have kept the music on and house prices are a reflection of that. Prices are too high for these conditions. Stickiness of prices may slow the re-adjustment, but they'll adjust downwards in this scenario.

    This is part of the reason why all the major economists are predicting price falls of varying amounts, not explosive growth. The above scenario isn't a wild crazy doomsday scenario now. In some cases, its their 'base case'.

    If were talking 'when this is all over' as unemployment back with a 4-5 infront if, migration in full swing, business investment back, & more or less back to the settings we were at pre-covid, prices staying near current levels in nominal terms & an AUD at this level...then I agree, with this rate & monetary setting, prices are undervalued IMO too and we'll likely see prices rise fast. In those conditions, the monetary settings are just too stimulatory. Prices already went into full blown boom mode between June 2019 & March 2020 - up nearly 15% in Sydney during that time period largely on the back of a couple rate cuts. That pace would likely continue once you fuel it with even more rate cuts & floating low assessment rates. You can run some pretty quick repayment calcs on household finances and its pretty easy to see '1million' as 'affordable' for a very very large number of household income levels. Prices re-adjust.

    Soon enough, I suspect, we'll adjust our expectations of what 'when this is all over' means. Things are unlikely to be the same. It will take a lot of time to get back to those conditions.
     
  6. Redom

    Redom Mortgage Broker Business Plus Member

    Joined:
    18th Jun, 2015
    Posts:
    4,607
    Location:
    Sydney (Australia Wide)
    Also, separately, most of those examples as comparisons to Australia today aren't useful IMO.

    We are in wildly different scenario (this isn't a recession based of years of monetary financing, debt issues, supply side issues, etc).

    It's a once in a generation exogenous simultaneous shock to the global economy, in scale, size & speed that no other compares to in just about anyones lifetime. Very different set of circumstances.

    In saying that, as noted above, agree once/if this does all return to normal, then the monetary conditions and actions taken by regulators will be inflationary. Real activity will need to come first though (and nothing similar to those scenarios).
     
    Last edited: 14th May, 2020
  7. John_BridgeToBricks

    John_BridgeToBricks Buyer's Agent Business Member

    Joined:
    25th May, 2018
    Posts:
    2,407
    Location:
    Sydney
    I agree that this is not a typical recession which is usually caused by the recognition of debt financed mal investment. But it is not really an exogenous shock either.

    It is a "Great Cessation" so to speak. Ie, the government mandated a "tools down" across the economy. Devastating of course.

    But to take a real estate example: no one turning up to an open home because they are not allowed is different to no one turning up to an open home because they can't get finance.

    So we both agree that we are in unchartered territory.

    One thing I am confident about is that monetary policy can't help. But when all you have is a hammer ....

    The folly of the policy response is not only that extra liquidity can't solve a pandemic problem (though it can ease the burden of debt) - the big problem is that we are pouring liquidity on to an economy that has supply issues (fewer goods and services). That is inflation pure and simple, so it is creating more pain than would otherwise have been the case.

    So the reason I am confident of strong property price growth, is that the inflation that has been created can't solve the pandemic, but it has to go somewhere.

    We'll see. And Redom, you make a strong case as always.
     
    Last edited: 14th May, 2020
    Tom Rivera likes this.
  8. Brisbane04

    Brisbane04 Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    92
    Location:
    Victoria
    Unfortunately I don’t think we’ll get rid of CoVid that quickly there are many forms of CoVid this form of one is particularly nasty as it’s highly infectious and attacks the lungs. Viruses like this one mutate. Hopefully we’ll have a vaccine for this one in the next 10 months but unfortunately in that time it may mutate. So I don’t think we’ll eridicate it here in Australia any time soon
     
  9. DrunkSailor

    DrunkSailor Well-Known Member

    Joined:
    25th Jun, 2017
    Posts:
    756
    Location:
    Melbourne
    How long until the market turns around and booms again?