Recession

Haha I love this place, that's what I'm talking about! I'm ready to go also when it all falls down. I was more seeing if the peeps of PC are on the same page and it seems so. Probably hold off buying until there's some cheaper properties about.

 

The recession talk has been around since the GFC, but hasn't affected Sydney and Melbourne so much. Though Perth was oversupplied and prices have dipped. My argument is if we had a higher unemployment say 15%, there will be more renters than buyers, so yes prices will come down a bit. But if my IPs are continuously tenanted due to higher portion of renters, am I really going to lose out, if I refuse to sell my property and take a loss?

 

And it never, ever will pick up again. Because...it's different this time

 

Of course it won't pick up again because past performance is not an indicator of future performance.

 

I think the concerns are valid but if we manage our finances well and buy well, we ca weather the storms.

 

It depends on how deep a recession is, if its just 2 quarters of slightly negative growth then it could happen before anyone realises.
A 1990 style recession would be different though.

 

Thanks for all of your insights guys. I guess from a buyers point of view, it would be a little more beneficial to hold off until property is marked down so to speak. I understand it's all speculation and the old 'when is a good time to buy' question will enter the minds of many. Always good to ask the masses

 

If the property purchase is sound, the price is good and you can service the loan no reason not to proceed.

 

I believe we are a lot closer to that scenario than is being let on.

Our unemployment rate is at an official rate of over 6% currently;
http://www.abs.gov.au/ausstats/[email protected]/latestProducts/6202.0Media Release1Jul 2015

This is despite record low interest rates and the recent $20k Gubb incentive...

Employment rates don't take into account those who are not even participating in looking for work anymore, and there has been a lot of reshuffling of full-time jobs into part-time and casual jobs instead.

Even rentals; I live in a seasonal Coastal area approx 1 hour from the CBD, and have had to recently look for a place to rent after having to sell our PPoR. It is hardly yer metro suburb with a huge population.

The interest in acquiring a rental was surprisingly strong - we missed out on 3 properties we were interested in, and on the opens for them there were multiple parties inspecting.

The dingo-ugly and bad value properties still rent - but take a while longer to attract any punters we've noticed - but anything decent and well-located is gone very quickly.

 

This article was wrote a couple of months ago but it is still very relevant particularly for outer metropolitan suburbs, which will no doubt be hit the hardest if a recession does occur.
http://www.smh.com.au/business/the-...facing-another-recession-20150311-140tzx.html

In a shopping centre full of sale signs in Broadmeadows, a Melbourne suburb with 27 per cent unemployment, Soney Kul is struggling to shift half-price jewelry.

"People don't want to spend," the 27-year-old said, gesturing at the sparsely-filled display cases in his family-owned store, Altinbas. "They're too scared to spend because they don't know what the next day will hold."

After a decade-long mining boom powered by Chinese demand, Australia's economy is falling back to earth fast. Among the worst hit are industrial areas like Broadmeadows, whose Ford Motor plant will shut after a record-high currency made operations untenable.

And the slowdown is spreading. Only four months after economists were forecasting interest-rate increases in 2015, the country's central bank has cut its benchmark to a fresh record low.

Goldman Sachs estimates a one-in-three chance Australia will fall into recession in the next 12 months, while a Bloomberg survey of economists shows the probability of a contraction has risen in recent months. Australians' wage growth last quarter matched a record-low pace and prices of the country's key commodity exports were down 27 per cent in February from a year earlier.

"You're at stall speed," Tim Toohey, Goldies' chief economist in Australia, said of national income growth. "It's that level of uncertainty, and excess capacity in the labour market, that is continuing to be the main story on why consumers aren't engaging."

Rate cuts

The nation's jobless rate stands at a 12 1/2-year high of 6.4 per cent and there are a growing number of pockets in the nation where it's much worse. Suburbs like Broadmeadows and Elizabeth in South Australia are dominated by manufacturers that received little benefit from China's surging demand for raw materials, while suffering the fallout from an overvalued currency driven up by the commodities boom.

Across Australia, regions with unemployment of 10 per cent or more of the workforce rose to 13.3 per cent of all areas in the third quarter, up from 10.9 per cent of the total a year earlier, according to government data released in December.

In response, the central bank cut its benchmark interest rate last month for the first time in more than a year, saying growth would stay "below trend" and unemployment peak at a higher level for longer than it previously expected.

Traders are pricing in almost two more reductions over the next 12 months from the current record low of 2.25 per cent.

Recession risk

Businesses drew little comfort from the lower rates with National Australia Bank's index of confidence falling to about zero in February from 3 points in January, its lowest level since before the Abbott government was elected in 2013, according to the bank.

"Unfortunately, we don't have a confidence lever, we do what we can by having interest rates low," the RBA's Assistant Governor Christopher Kent said in Hobart on Wednesday. "The Australian economy has good prospects for growth over the longer term."

Combined sales at the Broadmeadows shopping center were down 13 per cent in the 12 months through June compared with three years earlier, according to calculations based on presentations by the mall's owner, Novion Property Group.

While most economists see only an outside chance of a recession in Australia, the probability of a contraction has risen to 18 per cent in February from 11 per cent in August, according to a Bloomberg survey of 11 analysts.

Iron ore

Households and businesses aren't spending as their earnings are barely growing. Real net national disposable income for each Australian hasn't been above a peak set in the third quarter of 2011 at any time since - the longest such stretch in 21 years.

Australia's terms of trade - its export prices relative to import prices - also peaked in 2011 as Chinese demand surged for iron ore, the country's most valuable export. Since then, growth in that demand has softened, sending the price of ore with 62 per cent content delivered to Qingdao to a record low of $US58.58 from a peak of $US191.70 in 2011, according to Metal Bulletin.

Consumer confidence, which fell 1.2 per cent in March from a month earlier, has been in pessimistic territory for 12 of the past 13 months, according to an index compiled by Westpac Banking. Households are now paying down their credit cards at a record rate.

"Over recent years many more households have focused on paying down their debts, rather than borrowing more, and the saving rate has increased," RBA Deputy Governor Philip Lowe said in a speech in Sydney earlier this month. In the decade to the mid 2000s "the level of interest rates that we have today would have caused a large boom in borrowing, but this has not occurred."

Crime rate

The difficulties in Broadmeadows are reflected in a higher crime rate. The suburb ranked among the worst in Victoria state for burglaries in 2014, averaging one in 32 homes, according to an analysis conducted by the Royal Automobile Club of Victoria.

In the South Australian suburb of Elizabeth, site of General Motors' Holden unit that is due to close in 2017, unemployment has climbed to 33.3 per cent. There too, crime rates are the third-highest in the greater Adelaide metropolitan area.

The impact of job cuts on confidence and spending are compounded by government efforts to rein in a ballooning budget deficit, which if left unchanged would see debt equal 60 per cent of gross domestic product by 2055 from 15 per cent currently, according to a long-range government report released last week.

Labour costs

The outlook isn't all doom and gloom. A 30 per cent decline in the Aussie dollar since it peaked above $US1.10 in 2011, and smaller wage gains are helping to better position domestic producers against imported goods. The local dollar traded at 76.40 US cents midmorning Wednesday in Sydney.

Australian labour costs, which were higher than any Group of Seven economy when Ford announced the planned closing of its Broadmeadows plant in 2013, are now lower than in every G-7 country bar Japan, Canada and France, according to data from the Organisation for Economic Cooperation and Development.

"In our liaison program a number of businesses have reported that they see the lower exchange rate as opening up new opportunities," RBA's Lowe said. "In time, we should see the effect of this on domestic production and spending."

Early transition

Broadmeadows could also be seeing an early transition from old manufacturing to newer products. CSL, the world's largest maker of blood plasma-derived therapies, expands a manufacturing plant in the area. It will employ 200 people during the construction phase and a further 190 high-skilled workers once it's up and running.

Back at the Broadmeadows shopping centre, women's retailer Envy You was holding an end-of-lease sale and kids clothing retailer Pumpkin Patch a final clearance. About a third of jeweler Kul's neighbors in the centre had sale signs in their windows during a visit on March 1, not traditionally a discounting season in Australia.

"Every day is a challenge," said Kul. He estimates the typical purchase in his store is down by about a half from a previous average of $400 as traffic through the shopping centre slows down and impulse purchases fall. "Consumer confidence is the biggest issue."

 

yep. This is true.
And even if there is a recession, it will be mild.

 

Provided your employment is secure and your not buying in a overheated market there's no reason not to buy presently IMO

 

We usually don't know about about a recession until after it happens because of the way the data is analysed and reported. So it could happen before anyone realises is literally correct.

 

Yep that's what I was alluding to

 

No recession while the yield curve remains positive.

Chances are we will follow the US and, historically, they hit recession 2-3 years after rates initially rise (on average). Study the past and you can then ignore the current noise.

 

In this day and age, there is no such thing.

And my advice is to plan for that possibility.

 

I think there are some types of employment which is extremely secure, though nothing is 100% secure, 100% of the time. Many jobs in health if you lose it today you will get another one next week. Accounting, if your a really good accountant then your sitting pretty too. Its not easy to find a bilingual accountant who is native in English, talented at their job AND doesn't take sickies every other day, getting along with everyone. They are in high demand.

 

Not taking sickies every other week is a stand out feature in today's workplaces. Given the poor caliber of so many these days, competent hardworking employees will stand out.