COVID-19 impacts on the Australian economy & housing market

I agree.
I just dont think that this is what the govt will do post crisis.
I think govt will broadbrush everyone (including those who didnt receive a cent) with higher taxes.
Its unfair to big businesses and high income earners with a job. A) thry dont get a cent (peovided their revenues dont collapse by 50% or more and most large business wont) ,b) thry might have to help pay for everyone else who did receive.
The real financial implications with this is that, using your example above, the Jane's of this world who will receive most likely will not contribute to innovation and economic growth (the economy desperately need this). Maybe a bit in terms of spending..but nothing substantial. It's the businesses and high earners that will or ha e the highest chance and taxing them unfairly in my view will entice them to do an atlassian in some shape or form. This has very damaging effects to the economy. The economy wony be a recipient of tax revenue nor more importantly innovation that we so desperately need.

 

How's that inflation going to be in a few months time after the printing press stops?

 

It’s a great idea for people who don’t get economics

 

Are this Govt subsidies and enhanced Centrelink payments means and asset tested? Or is it a case of someone with $60k in the bank and 2 investment properties being given this money? Seems ludicrous.

Anyone working their butt off in low paid employment at Coles and Woolworths today receiving personal abuse and exposed to the coronavirus, there is a real financial disincentive.

 

Here is a question for you - is it crazy to try to sell a house in a current market (if you were thinking of selling to upgrade anyway) or is it still viable?

 

Given the sale & purchase would be in the same market, I would say the net effect should be balanced out.

You may actually even be able to get a better deal at the higher end of the market (and with any price contractions the absolute difference will be less than in a stronger market).

I'm no economist or property expert, just my $0.02. Happy for someone in here with more knowledge to offer their thoughts though.

 

More mixed messages from Govt.!!

On one hand they message hard to stay inside your home unless you really have to, only do essential shopping and no gathering in groups of more than two and no groups from different households. I'm pretty certain viewing houses isn't essential and if people go as a couple, then by default, there is a group of at least 3 .

 

I'm about to try selling. New listings in the last week have dropped dramatically, but buyers are still there. So my take is that supply/demand balance will support prices. Buyers have the lowest interest rates I've ever seen. Expats are returning, and are cashed up with the 15-20% improvement in the exchange rate. Then there are those who are trying to work from home with children also at home and realize that it doesn't work and something larger is needed.

I would try a soft start approach - short agency agreement, off market, no styling or expensive marketing materials to test the water without a big outlay.

So not crazy - good luck!

 

Agree that you can give it a shot and hope for a sale. But realistically you most likely will get low balled unless the place is something special. People are losing jobs left right and centre and now everyone knows this. Why would anyone buy a house now? Unless it's something special and in desperate need to get into something asap which is from cash buyers. Unfortunately that's rare and most likely not the case for most sales.

 

Furnished rental listings surge 530 per cent in Tasmania in three weeks - realestate.com.au

This is definitely affecting the Tassie rental market. It will be interesting to see the SQM data for March!

 

I think the same is also happening in places like Cairns, and other areas that are popular with tourists.
When it came down to rents it was never really about supply and demand, many were just using it as tourist accommodation, disproves the point that negative gearing helps keep rent low, if its being all used as tourist accommodation.
The Hobart rental market will be an interesting study over the next 3 or 4 months , if the market chases itself down as owners get desperate to fill their properties.
Perth rental prices fell like a hot potato once renters realized the market was oversupplied, and owners of newly built property were desperate to just get some money rolling in.
Owners were even throwing in free lawn mowing just to get it rented out.

 

Actually I have that something special - much bigger & wider block than is normal for the area. I think there are only 3 others the same size. 5 other houses in the same postcode sold during the last week, so buyers are there and buying.

 

How much will the property prices drop in the coming months do use think? I want to take advantage i have alot of cash reserves saved up but i also lost my job .
If i was to take up another job for 2-3 months with the money i have saved up 200k plus do you think the banks will loan me the money ?
Im thinking depending how much the prices drop maybe ill drop 4-6 in Brisbane

 

Really you think so ? And why is that ?

 

You guys think melb and Sydney property prices will drop 20% ?

 

I don't. I think it will be volatile with lack of stock. Some prices may discount 20 percent others stay high. Just a guess though.

 

So the govt is printing money, wont this cause inflation in medium to long term once people can leave their house and buy stuff?

So that would make leveraged assets quite a possible good buy to ride the inflation wave.

 

Dont think this is true. Yes the RBA is adding liquidity to financial markets and increasing money supply. The impacts of this the akin to cutting rates, which should push up inflation around the edges.

But inflation is a function of real demand. Real demand has fallen of a cliff, so inflation isn't really a worry at the moment. It will be very hard to get any meaningful inflation growth where economic demand falls of a cliff.

Where you get inflation from 'printing' money is when the government prints money to fund its expenditures. This is NOT happening in Australia. The government isn't printing money to fund its expenditure, it is BORROWING money. There's a very big difference in terms of its flow through to the real economy & inflation. When a government cannot borrow money any longer, it may need to resort to actions like printing money to fund its expenditure. This has happened in the past and history books have shown that this leads to inflation (hyperinflation).

 

Sure but the debt the commonwealth government is funding its expenditure via bonds it issues. Is the RBA not currently purchasing most of these bonds via money it is creating/'printing'? So ultimately, money is being printed to fund government expenditure?

Nothing of the scale to cause runaway inflation yet, but it is happening right?

 

The government financing process is independent of the QE process, even though they are involve issuances & purchases of the same instrument. The government raises bonds all the time, AAA rated bonds, that financial market participants purchase (superfunds, banks, etc). It has been doing this for the past 10 years +. Even when big surpluses were occurring and the government didn't need to raise bonds, they continued to do so (to keep the market liquid). I.e. the government is using the same process to finance its expenditure as it always has.

Separately, QE is a new monetary policy intervention designed to drive the cost of borrowing down. It is NOT designed to give the government money to spend.

Yes the RBA are buying government bonds, but in the secondary market from financial participants. I.e. the money that the RBA is printing is flowing through to the financial system and injecting liquidity (by transferring bonds held by banks/superfunds/etc into cash). They are also holding onto the bonds purchased, and will likely sell them off later. I.e. they are using their balance sheet to influence yields and interest rates through the yield curve.

The RBA aren't buying primary bonds, these are being issued by the AOFM and being bought by the secondary market. The yields of these primary bonds would have decreased though, as the market is well aware that the RBA is driving the yield down to 0.25% for 3 year issuances.

In short, this statement is a myth:
The government is printing money to finance its expenditure.

This statement is true (it is true now, and has been true for the last 10 years, nothing has changed here):
The government is raising bonds via AOFM to finance its expenditure.