Recession over - Things looking Up!

how many downturns do you expect in your lifetime that hotels that were built for €25m were sold for €4-5m, not 1 but plenty. Capital inner city blue chip assets down 50%, wholesale across the board , you only had to throw a dart at a map to double your money


I still expect that to be once in a lifetime event

 

That’s not what your posts said a few months ago? You said you have seen it all before and this time was going to be worse. Do you still hold that opinion?

 

the reply was in response to a query where it said that i would have surely excepted to see another downturn in my life time. Of course i did expect to see one, but not of the scale of what i have seen before which is a possibility again albeit limited .

for your query, no i don't think it will be, not in Australia anyway, or certainty not in the near future, but i don't think the long term prospects for Australia are great, but not on that scale . Hard to tell elsewhere, but unlikely is my guess. It'll have been a once in a lifetime

 

I'm no economist but I agree, the global economy is going to take a huge hit for sure. At what point does the global Stock Markets start pricing this in instead of reaching new daily and weekly highs?

Had a chat with my brother in France earlier today....President Macron announced France's new lockdown measures and basically said that this is life for France until at least June next year...in and out of lockdown. Laid it out, apparently that there is pretty much nothing left to be done and the actions are to save the health system from collapse.

Next June will be approximately 18 months since wave 1 commenced and they and many parts of the globe will have been receding or at best, 'treading water'. Its also no surprise that all of the big Euro countries are making their announcements almost simultaneously, including the former poster-child, Germany.

 

RBA is talking up the economy. NSW is due for a second wave, they can't keep contact tracing perfectly forever. Just like Europe and the US entering another wave, we also have the risk. We may be out of a recession but we won't be booming.

 

Anybody prepared to say that’s its a “W” recovery ? I heard some even call it a “k” curve which I think is code for, “who knows what’s next’”

 

Maybe it's 'L'

 

Very true, though there are not as many getting the opportunity to go through quarantine. A family member is having trouble despite being a citizen and her partner being stuck overseas (non-citizen).

 

For now. Things can change for the better. Or worse.

 

another very solid indicator..

Property prices, jobs jump as RBA gets radical

"A sharp rollback in mortgage deferrals at Westpac, the country's second-largest mortgage lender, suggested the economic effect of the coronavirus pandemic had passed its peak.

New home loan commitments also surged to a 3½-year high on Monday and dwelling prices rose nationally into positive territory for the first time since the pandemic hit.

The bank's peak $54.7 billion of deferred home loans had fallen to $16.6 billion by mid-October. Its $9.5 billion of deferred business loans was down to just $1.4 billion, Westpac said while reporting full-year 2020 earnings on Monday.

"More than two-thirds of Westpac's home loan customers on deferral packages have started making repayments again," chief executive Peter King said."

 

The recovery accelerates..

House price hopes, buyer confidence surge

"The Reserve Bank's interest rate cut and quantitative easing measures, along with the first easing in Victoria's restrictions, have pushed nationwide consumer confidence and property-buying intentions to seven-year highs.

Expectations on property prices have also returned to within pre-COVID-19 levels.

The Westpac-Melbourne Institute Index of Consumer Confidence is now 13 per cent above the average over the six months before the economy-wide shutdown in March, while Victoria's consumer confidence surged 9 per cent as the first round of easing in restrictions began"

and

"The "time to buy a dwelling" index surged 8 per cent from 122.2 to 132 – the highest reading since November 2013. The index is 11 per cent above its level from a year ago. Westpac's house Price Expectations survey also strengthened. It jumped 12 per cent to be only 7.3 per cent below its level in March and 5.5 per cent above its long-term average.
“Without doubt this survey is signalling a strong resurgence in the housing market," Mr Evans said."

 

I'm seeing properties flood the market in inner east/south Melbourne in the 1 to 1.6 range. Prices advertised at 5-10% lower than pre-covid. Likelihood they sell for 2 to 5% lower and many being sold pre-auction.

 

I have to agree that what I’m seeing in the inner city doesn’t appear strong? In Kensington and Brunswick prices are lower than pre-COVID for sure but the media and some posters say otherwise

 

$4m+ and sub $750k are doing very strongly (not apartments). Anything in between is where the sentiment is turning. Given this Westpac Consumer sentiment survey was pre-Pfizer vaccine, this will be added into the mix as a further catalyst to speed up the recovery.

Combine the above with the just reported:

The pandemic hit to mortgages is easing

"Mortgages under COVID hardship measures fell across the country in October – including in Victoria – with non-bank lender Firstmac saying home loans subject to repayment freezes or reduced payments fell to 3.12 per cent of its loan book.

The decline in COVID hardship loans from 3.79 per cent in September – and down from a mid-June peak of 5.71 per cent – reflected an improvement in every jurisdiction apart from Northern Territory, where a relatively small number of loans may have skewed the data, Firstmac said."

And you have a perfect cocktail of ingredients supporting an increasingly buoyant resi market across most capital cities.

 

It's not strong.... yet. Supply is increasing and with it demand. One can pick up a terrific deal at the moment but this is likely to gradually change as we head into 2021.

The market is in an unusual position in that properties dried up over the busiest period and are only now, so late in Melbourne's usual busy season, hitting the market. Will this continue through summer? Possibly. It might be that people wishing to sell are also waiting to see how things pan out and may drop properties in the market in autumn.

I also think COVID-19 will make a return next year as the cooler weather sets in. We've seen this across the world. Melbourne will likely spike resulting in another lockdown, as this is how governmenta react. If the case, it will again impact the market.

This is also assuming no cure for COVID-19 is rolled out fully till end 2021. And a cure is no guarantee with the way seasonal respiratory infections work.

I'm crystal ball gazing.

 

A house I’ve been tracking in Brunswick has just had (a very small) price reduction but it’s already great value. What are others seeing on the ground?

 

Also following Brunswick, Kensington, Ascot vale, St Kilda, the cheap end of Middle/albert park IE single fronted tiny block cottages for 1.5m

Im seeing discounts and plenty of opportunity

Even the development opportunity around spotswood is amazing if you have the cash, you can buy a 600-700sqm house/block for 1m - Yet new build townhouses (mid-high end $15k per sqm) are going for 1.3-1.4m

There's literally 20-25% profit in a DV like this.

 

Sat through Westpac's Chief Economist Bill Evans' presentation today. This will be reported in tomorrow's press.

Key points:

• Massive Budget deficit of $214 billion; but average stimulus from new policies announced on Budget night only 1.2% of GDP.
• Government could and will do more; fiscal cliff in 2021.
• Budget lift in growth forecasts in 2021 to 2.8% and 3.5% in 2022.
• RBA cuts rates to 10 basis points on November 3 (on hold to 2024 & beyond).
• AUD to move towards USD0.75 in 2020 and USD0.80 in 2021.
• Strong lift in global growth in 2021 – led by China!

• 4% growth in H2 2020 as states reopen; 2021 to 2.8% .
  
  
• Spending booms on household goods; food; Vic storms back. 7 year high for
  
  consumer sentiment and housing sentiment.
  
  
• Very weak (1% at best) growth in wages.
  
  
• Unemployment rate to peak near 8% in early 202; little change in 2021

• Dwelling in 2022/23 +15% (AUST); Bris. +20%; Perth 18%; Sydney 14%, Mel 12%
  
  
• Market sentiment will turn to vaccine progress- Pfizer first.
  
  
• Big lift in housing sentiment; first headwinds; then boom in 2022 and 2023.
  

Overall quite bullish on recovery, property sentiment and values and the headwinds (forecasted earlier by all and sundry of sky falling) being almost all mitigated. Sees 2021 Q3 onwards to be incredible growth period for property + business and boom times.

 

You mean $1.5k (not$15k) per sqm! $1500 psm wont remotely get mid, let alone high spec for a turnkey project. I am in midst of developing 34 Town houses and 23 apartments this year (all around Frankston) and cheapest is $1700 psm and averaging overall at $1800 psm. Consulting costs are outside of that - architects, councils, services etc charges are on top which will take the psm closer to $1900 sqm for a large dev.

 

What assumptions did he make about Vaccine progress? Australia's International borders? or is this all before that?