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Consumers concerned about 'significant' housing correction

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Australian Broker | 06 Nov 2015, 06:25 AM Agree 0
More than two thirds of Australians are concerned that Australia's housing market is vulnerable to a significant correction in values, a new survey has revealed
  • Alex Sapounas | 08 Nov 2015, 01:33 AM Agree 0
    No one has a crystal ball all we can do is assess what is happening and what is transpiring internationally and domestically to see through the haze. The market in Australia is finely balanced. The amount of debt carried by governments and individuals are at their historical highest. The problem will be the timing and degree of price retraction in financial and property markets. Most governments will continue expansionary policies as they have no solutions to increase growth or political will over the last twenty years to temper the financial expansion. My belief is quality property with land content near diverse drivers of economic activity and lifestyle will hold their own. But for poorer quality properties, or lack scarcity value such as mass produced units off the plan, if the market psychology and a swan event join together hold onto your hats. Unfortunately, people do not know what to do with their money at the moment most financial and real assets have taken off in price since the GFC created by even looser monetary policy not seen since the Great Depression. Australia is a great place but we cannot hide from the rest of the world.

    I will break my forecasts into four categories: Optimistic, Neutral, Pessimistic, Concerned.

    Optimistic view: Governments worldwide continue easy money and no loss of confidence in economic growth. Prices to grow above inflation for next few years. Probability 20%.

    Neutral view:
    Easy money continues with some economic rumbles and property prices stay flat or plateau for the next few years.
    Probability 40%.

    Pessimistic view:

    Sydney and Melbourne will be down 20 percent in real terms over the next five years taking into account the positives and negatives for our economy, local conditions and world events. This would be a soft landing rather than a hard landing.

    The reasons we may have a softer landing is the record infrastructure spending occurring in the Eastern boards main states. Sydney is now viewed internationally as a global city, low Australian dollar making our assets looking more attractive internationally, movement of workers from mining states to Sydney And Melbourne seeking employment thus creating demand for accommodation.

    Probability: 30%

    Concerned view:

    However, it could be a lot worse if United States of America cannot continue selling their debt, loss of global confidence in the US Dollar, shift of oil pricing from US dollars to other currencies, the potential loss of US money hegemony by other nations i.e BRICs creating their own currency. Other negative factors could be buyers US debt dump it back into the US market, Commodity prices spike, a credit collapse occurred, interest rates rise, EU countries default on their debt, the worlds largest nations introduce tariffs thus diminishing trade, loss of confidence in paper money leading to deflation or hyperinflation. Increased conflict by major powers in middle east asserting their diminishing power.
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