VIC Recession?

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.

 

Who cares - life will go on ...

 

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..

 

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.

 

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:

 

I think it is basically the best answer. The list should include Covid-19 to make life complete

 

Covid-19 is not really scary, at least not yet .

 

a lot of fear...everywhere i go. Achoo!

 

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"

 

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.

 

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

 

Interesting times ...

 

Thank you for your great response. We have been looking to buy our first home. Would you know how much to hold on?

 

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.

 

And to be fair... you havn't LIVED through it yet

 

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.

 

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.

 

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

 

How long should we wait before starting to buy ?

 

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