VIC Recession?

Discussion in 'Where to Buy' started by qwerty13, 11th Mar, 2020.

Join Australia's most dynamic and respected property investment community
  1. qwerty13

    qwerty13 Member

    Joined:
    5th Mar, 2020
    Posts:
    11
    Location:
    Melbourne
    Hi all,

    Just wanted to gauge your thoughts on the possible recession we're heading into. Last crisis the government dropped interest rates + fiscal stimulus + demand from China. I know the Morrison government is currently talking about a 5 billion $ stimulus package but i can't see any demand from China in the short to mid term and rates are approaching 0.0%.

    I am only just figuring out the economy for myself. I've been looking for an IP for 4 months now but am shying away from it now. Thinking holding cash and injecting some into the stock market instead down the track.

    Thoughts on the state of the Vic/QLD property market are welcome.
     
  2. kierank

    kierank Well-Known Member

    Joined:
    10th Oct, 2005
    Posts:
    7,726
    Location:
    Gold Coast
    Who cares - life will go on ...
     
    WattleIdo likes this.
  3. willair

    willair Well-Known Member Premium Member

    Joined:
    30th Sep, 2009
    Posts:
    5,540
    Location:
    ..Village Idiot...
    The only way is look what 500k buys in Vic,then what 500k buys in Qld ,then what 1 mill --3 mil buys and rather then investing in the equities markets right now just have a think you can drive past the property not matter what the value is..Unlike some of the photos on my office wall like that great company like OneTel Which is worth zero..
     
    wylie likes this.
  4. qwerty13

    qwerty13 Member

    Joined:
    5th Mar, 2020
    Posts:
    11
    Location:
    Melbourne
    I'm thinking along the lines of:
    - will banks tighten lending/line of credit if we enter recession
    - Decreased Chinese demand
    - decrease in demand and hence a decrease in price which is obviously better for investors

    Sorry if this is a very basic question.
     
  5. kierank

    kierank Well-Known Member

    Joined:
    10th Oct, 2005
    Posts:
    7,726
    Location:
    Gold Coast
    I have lived through lots of scary events including the likes of (in no particular order):

    Vietnam War
    GFC
    9/11
    Brisbane Flood 1974
    SARS
    Pig Flu
    Queensland Floods 2010–2011
    Victoria Bushfires, Black Saturday 2009
    1990s Recession ("the recession we had to have”)
    ...​

    I have highlighted two above because:
    • During the 1990’s Recession (aged 34+), I bought my first IP and I started my first business
    • During GFC (aged 51+), I bought my most expensive property investment (a block of units) and borrowed the full purchase price PLUS bought my 4th and largest business investment.
    The world is a scary place; from time to time, it gets really scary.

    Some people will use this as a reason/excuse to do nothing; others will get on with life.

    I belong to the second group.

    Sorry if this is a very basic answer but it is my best answer:
     
    Bo Li, NHG, housechopper2 and 24 others like this.
  6. spoon

    spoon Well-Known Member

    Joined:
    17th Nov, 2016
    Posts:
    1,014
    Location:
    Time-dependent
    I think it is basically the best answer. The list should include Covid-19 to make life complete :D
     
    MTR and kierank like this.
  7. kierank

    kierank Well-Known Member

    Joined:
    10th Oct, 2005
    Posts:
    7,726
    Location:
    Gold Coast
    Covid-19 is not really scary, at least not yet ;).
     
  8. larrylarry

    larrylarry Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    5,138
    Location:
    Sydney
    a lot of fear...everywhere i go. Achoo!
     
  9. Lizzie

    Lizzie Well-Known Member

    Joined:
    9th Jul, 2015
    Posts:
    6,315
    Location:
    Planet A
    I got some Arrium shares I can sell you cheap ...

    Australia was already heading for a recession, and sometimes they are necessary to re-align the economy. This one is simply bought forward and presented in such as way that the government can't fob it off or kick it down the road.

    That's why I like property and our SMSF is heavily leaning into property. Even if it's value drops temporarily, you still get an income from it and it will never become "non-existant"
     
    spoon, sumterrence and willair like this.
  10. JL1

    JL1 Well-Known Member

    Joined:
    24th Dec, 2016
    Posts:
    576
    Location:
    Melbourne
    I think VIC and NSW will be hit hardest despite any good efforts of the government. Reason being these two states are the ones that have benefited from recent population surges, and have massively increased new property supply as a result. During recessions people do not migrate and move as much (particularly for Corona). In the 2008 recession population growth fell by 34% across the 5 major states, and that was without travel restrictions and pandemic fears.

    VIC and NSW are the most exposed and will take the biggest hit, and this will spur a short term over-supply of property. IMO if you're looking to buy in these states, hold out. Even if there's no technical recession, there's enough evidence on the table to know demand is going to be lower.
     
    WattleIdo, MTR, Sruiphs and 2 others like this.
  11. qwerty13

    qwerty13 Member

    Joined:
    5th Mar, 2020
    Posts:
    11
    Location:
    Melbourne
    Thanks, that's what i was thinking. I might look to buy in the next few months in Brisbane and re-assess Melbourne in a couple of months
     
    AlphabetSoup likes this.
  12. qwerty13

    qwerty13 Member

    Joined:
    5th Mar, 2020
    Posts:
    11
    Location:
    Melbourne
    Interesting times ...
     
  13. Sruiphs

    Sruiphs New Member

    Joined:
    16th Feb, 2020
    Posts:
    2
    Location:
    Melbourne
    Thank you for your great response. We have been looking to buy our first home. Would you know how much to hold on?
     
  14. JL1

    JL1 Well-Known Member

    Joined:
    24th Dec, 2016
    Posts:
    576
    Location:
    Melbourne
    There's going to be a lot of mixed market messages over the coming months. It won't be immediate that we see the effects so anything you hear in the immediate term will be purely speculative. There will be a lag between people losing jobs, exiting lease agreements and moving in with friends/family, burning through liquid cash and taking advantage of incentives, and of course change in sentiment. There will be a balancing period as all this happens.

    The sales market will also be unpredictable. Given the announcement to suspend auctions there is a huge unknown in the impact this will have and for how long. I imagine we will see only more desperate/motivated sellers hit the market in coming months - its unlikely that anyone with options would actively chose to sell in current conditions. that creates a fair bit of downward pressure over the short term. Further, unemployment is forecast to hit between 10-25% which under any event in history tells you there is going to be a considerable fall in property values.

    The best gauge will continue to be the rental market (even for owner-occupiers). Q1 of the year is the most active in the Melbourne rental market (people moving to a new city at start of year) which means many leases will be up for 12 month expiry this quarter. If available rentals stay low then i wouldn't expect notable drops in property values. But if the market floods, which is my personal expectation, prices will be coming down for buyers.

    Personally i wouldnt think about moving on property before June - clearer view on the rent-o-meter and also on Covid.
     
    SarahSydney, Stoffo and MTR like this.
  15. berten

    berten Well-Known Member

    Joined:
    12th Jul, 2018
    Posts:
    600
    Location:
    Melbourne
    And to be fair... you havn't LIVED through it yet
     
    SarahSydney and MTR like this.
  16. MTR

    MTR Material Girl Premium Member

    Joined:
    19th Jun, 2015
    Posts:
    22,038
    Location:
    My World
    i would be holding off .....too many unknowns, ie oversupply houses, rents falling??

    Worse thing an investor can do is buy at the beginning of a downturn/recession, easiest way to lose capital and then who knows how long it will take to recover.
     
    Jana, Serveman, SOULFLY3 and 4 others like this.
  17. kierank

    kierank Well-Known Member

    Joined:
    10th Oct, 2005
    Posts:
    7,726
    Location:
    Gold Coast
    That is why I wrote “at least not yet”.

    What I have found really, really scary is the attitude and behaviour of some of our fellow Australians.

    A couple of examples:- toilet paper hoarding, Bondi Beach, St Kilda Beach, people not self isolating, people spitting at police, ...

    Over the last couple of months, I have lost respect for these bloody idiots.
     
    Perthguy, AlphabetSoup and LeeM like this.
  18. Stoffo

    Stoffo Well-Known Member

    Joined:
    14th Jul, 2016
    Posts:
    2,706
    Location:
    Sydney
    We were talking about the looming recession a few months ago
    Covid-19 must now be Govco code name for recession as we are not hearing the R word much........
    Stimulus = debt by the way :confused:
     
  19. showtime94

    showtime94 Well-Known Member

    Joined:
    15th Jun, 2016
    Posts:
    159
    Location:
    Sydney
    How long should we wait before starting to buy ?
     
  20. MTR

    MTR Material Girl Premium Member

    Joined:
    19th Jun, 2015
    Posts:
    22,038
    Location:
    My World

    No idea

    I put my development on hold until I feel comfortable that buyers are back in the market buying and there is some sort of normality.

    I will review the numbers over next six months
     
    SOULFLY3 likes this.