So Why So Glum?

With the numbers of properties for sale at record highs and the number of properties actually selling at (almost) record lows, you would think that we are all spooked. But why?

To try and make sense of what is happening now, we need to take a look back in time.

For the majority of the 1990’s, the property market (and economy) was flat but you could appreciate why this was the case. We had

• High inflation
• High interest rates
• High unemployment

All this led to low consumer and business confidence. This is understandable as many Australians were out of work, especially blue collar workers and middle management. You see, without a job or good prospects of securing a job, people have no hope of borrowing money to purchase a property. Unemployment in this era was hovering around 10%. In addition to this, those of us with mortgages were paying a very high interest rate, well over 10%. Some people who purchased commercial property had to pay interest rates of around 20%!

Now, fast track to today. We have

• Inflation under control
• Relatively steady interest rates, with a likely rise in the future (but only a small one)
• Very low unemployment.

But still, we have low consumer confidence! Not only is unemployment currently at 4.9%, the Federal Government, through their next budget are forecasting an extra 500,000 jobs and an unemployment rate of 4.5%. I can’t remember the last time the unemployment rate was so low. Most Australians who want a job either already have one or it won’t take them long to find one.

I can understand why the consumer market lacked confidence in the 1990’s as the economy wasn’t doing very well at all.

But why so glum now?

I know there are a number of factors contributing to a low confidence level but the main one is the delayed aftershock of the Global Financial Crisis (GFC). However, when you look at the economy, we are performing exceptionally compared to most countries in the world. The reality is that Australia’s economy is currently one of the best in the world but consumers’ perceptions are different. As your perception is your reality, it is very hard to convince consumers otherwise.

The big question is how long will this last? Months or years? I don’t think we will have another repeat of the 1990’s as the economic fundamentals are too good. In my opinion, this slow period will last for a number of months, not years. How many months? Well, that would be a good topic for another blog!!

•Written by Peter Koulizos. A lecturer and author of The Property Professor’s Top Australian Suburbs (John Wiley & Sons). For more information, go to www.thepropertyprofessor.net.au.

This blog article first appeared in The API magazine online blog. To view other API online blog articles click HERE

To return to the INFRONT Newsletter click HERE

Listen to Our Podcast

The Property Planner, Buyer and Professor

74+ 5tar Reviews, Over 100,000+ Downloads

Join Our Newsletter

Subscribe to “The Property Planner, Buyer and Professor” Newsletter

13 + 8 =

Email us your questions or any topics you would like to be covered off on in future episodes:
Follow the podcast on social media