COVID-19 impacts on the Australian economy & housing market

I couldn't agree more.

Countries around the globe are not wrecking their economies or incurring the wrath of the people through lock-down, for no good reason.

 

One consistent message from people who have experienced this in other countries and are watching us is it’s laughable what we are doing.

 

As I said previously I'm generally quite risk-averse and would probably err on the side of caution through this. Part of me just thinks we should sit on the cash we have and continue to add to this savings before making a move when we can see things shake out after the virus has been contained.

We got an extension on the cooling off period do still deciding on that front.

 

Thanks @K974. From what you say "...expect your credit facilities to be pulled..." If I have money in the mortgage account with redraw facility, do you think the bank can just close that mortgage account even though the Loan term is not expired until 2040?

 

There are two options for our government either let it go like Netherlands did or lock down. IMHO, it is not a matter of if but when, it will happen here too if we follow the China and other most countries route (I think within next two weeks based on the numbers recorded and spread, who knows, perhaps during Easter period?).
Yet, despite all this I think the stimulus announced and to be announced should aid some not all during the lock down period, our PM suggests 6 months, but if the bell curve is adopted based on China's figures this would suggest we may be open for business in June/July instead of 6 months? I don't know (assuming 6 weeks for turnaround based of China's figures?).
I try to analyse the history, so after 1987 crash (59% downfall for some companies total wipe-out) most money and liquidity was pumped back to housing, as most 10 companies on our ASX are comprised from banking sector and mining, most banking is reliant and heavily invested here in housing so I doubt they would let this fall?
Similarly if we look at 9/11 after effects, most money was pumped back to economy and hence into RE.
I just hope that the time frame and liquidity permitting can happen within the next 3-5 years, but who knows?
I try to concentrate on the numbers...but cannot predict people's irrational panic behaviour, that's certainly a different beast!

 

Banks Offshore funding costs are very low historically and the size of the funds is a lot lower too were Long term Offshore is @ 10% and Short term Offshore is at @ 8-9%

https://www.rba.gov.au/publications...-funding-costs-and-lending-rates.html#graph-3

Still, the banks will cry poor and use that as an excuse to raise rates. One main difference this time is that the Royal commission is still fresh and the politics at play might make it pretty hard for the banks not raise any rates.

 

wouldn’t think so , but it’s possible .
What is mega high risk is any form of business or evelopment loan facility or line of credit

I had a development loan secured against properties owned outright.

the pulled the Development loan, zero warning, couldn’t sell the properties as the market had tanked (as it will here) , half completed site , total **** show .
Got through by the skin of my teeth

expect your overdrafts to be pulled , they might not but Expect credit to dry up in the next month of two


DO NOT TRUST THE BANKS , in a time like this

(that’s in capitals for a reason)

 

I agree this is a shock to the system, but creating more panic and being an alarmist, stampeding and creating chaos will not help, especially if we are in lock down like most what will all that cash do? I would think the government here has considered this situation hence they are already proposing in UK 3 month interest free loans instead of raiding people's funds, this would collapse the banking system and in some cases whole countries wealth too.
Three things we need to consider in this crisis, hospital, timing and liquidity.
What we know so far from:
1. CASES:
Mild - 81%
Heavy - 14%
Hospitalised - 5%
2. Our health system numbers:
95,100 beds, 32,718 spare hospital beds, 2,023 ICU beds only, 667 spare ICU beds (assumed)
So timing will be very important indeed and probably lockdown of 2 weeks or so will soon occur.
3. So then the question of liquidity comes into play, interest rates probably to be cut to .25% or even 0%, QE measures lowest in history, deposits will get smashed, yields will collapse 45 - 2%, so IMHO property prices from past history tend to rebound.
Just wait and see what Reserve Bank will announce tomorrow and take each day as it comes, no need to panic more people instead?

 

It’s not panic or hysteria , as I have said many times I have lived through a situation where unemployment went from 5% to 19% in 8 months
2 banks went bust
And 2 nationalised


It’s simply my opinion based on a situation that could be argued was not as bad as this .

Has anyone else shared a similar first hand expierence of anything similar , I don’t proclaim to be smart , I’m Not an economist I simply have some relevant expierence and I’m sharing , I could be miles off the mark who knows (but I doubt it )

t

 

In my opinion we are weeks off Lock down , and when it does come it may be announced as 2 weeks but it will Be longer

Again just a view point , but follow what’s happened elsewhere it’s the only benchmark we have

 

Lockdown will be a lot longer than two weeks. Two weeks is pointless.

 

Interesting times indeed but let's live and see, I certainly do not have a crystall ball into the future or what will happen as some?

 

why?

 

Because the incubation period can be two weeks or more. If you physically separated and individually quarantined every person in Australia so nobodyhhad contact with anyone else (obviously impossible) you would do it for a month just to be safe. But people live together, some will still work, some will see friends / relatives even in lockdown. It will take months.

 

Thanks Albanga,

Great post. I hear you. I am just questioning whether the response in terms of the panic is justified or productive.

 

The problem is that a decade of destructive monetary policy and excess liquidity has made the system more fragile. That fragility has made this situation much worse.

 

Cash is king right now (ouch on the exit)
I want out I dont care

Vanguard cranks up exit costs on Aussie bond fund

A major corporate bond fund managed by Vanguard has raised the cost imposed on unitholders seeking to take their money out by up to twelve times, the latest twist hinting at genuine distress in the fixed income market,

The sell spread on the Vanguard Australian Corporate Fixed Interest Index Fund blew out to 1.79 per cent, from 0.15 per cent, meaning the underlying investor has to accept a 1.79 per cent haircut on what the underlying investment is worth to exit.

Also Various articles on distress debt swapping has been very active last few days
and so it begins

Maybe this is the beginning of a properties down turn we now must face

expensive debt, people don't want to lend, if they lend they want a good ounce of flesh

 

Commercial lending yes, banks can pull their lending any time and ask for their money back and if you don't have the money or cant refinance game over for you, hand over all your assets

unlike for PPOR mortgage holder though

 

Correct won’t happen PPOR ,
And very unlikely to happen on IP and commercial properties where the loan is being serviced

But it’s where you are using property as security on a business or development loan , a development loan in particular that’s where it will happen , they will pull any further stages , you are dead in the water then , you cant sell your property , you haven’t got the cash , your snookered


same with a business that relys on an overdraft, they’ll pull it , they are no longer interested in it despite what security they have ,

 

Qantas stands down two-thirds of workers