Australia is officially in recession for the first time in just three decades. Listen to an economist’s recommendation on how to survive.
Housing credit expansion from 2010 to 2020 Source: Supplied
There is a massive response that Australians must answer: what happens next to space prices?
The majority view is that the costs will sink. Australia’s largest bank expects space costs to fall by 10% over the next six months. The fall, according to Commonwealth Bank analysts, will be “driven by weak sentiment, emerging unemployment, social estrangement measures and
a sharp slowdown in migration abroad. »»
For many Australians, the end of the relentless increase in space costs would be welcome. Housing costs are incredibly high, especially in capital cities. I come with me here. I don’t have a space, I’d like to.
But in those tumultuous times, there is a threat. Prices of endangered homes are not doing what economic forecasters expect. The threat is that they will continue to increase. It wouldn’t be the first time that the costs of space in Australia defy expectations, and it’s not an unusual, even more expensive sense.
RIQUEZA EFFECT
Two things ask me about the emerging prices of space. The first is the effect of wealth. Many Australians are paradoxically in an even greater situation in this crisis. The rich are the ones who spend the most on restaurants, cafes and holidays. Now all that cash is stuck in your pockets, piling up and looking for a way out.
Sydney-based investor John Hempton put him on Twitter:
A tweet from John Hempton summarizes why some other people are better off facing the pandemic. Picture: Twitter Source: Twitter
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Luxury cars are anything the rich spend on. Sales of Mercedes Benz cars reached a record in June, as shown in the chart below. BMW, Audi and Lexus too. Which is in times of recession, if you think about it.
Luxury sales skyrocketed when the recession hit.
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Now, this is partly due to the immediate asset cancellation policy, which has accentuated the same year-end boost. But if it were just this policy, every type of car would have set new records. Instead, it was the German luxury brands that did it. The explanation will have to be that the leftover money is a lie in the wallet of the rich.
The definition of a recession is declining incomes. But obviously, some other people end up with cash. It would be better to expect them to end up more in the houses. There may be no more Australians.
OFFICIAL POLITICAL SUPPORT
The government also made it to the party. The RBA has sent interest rates to traditionally low grades of 0.25 consistent with the penny and has promised that rates will remain low for a long time. Mortgage rates have never been consistent with. The government also gave us the HomeBuilder grant. $25,000 for other people to build a new house. These policies give home buyers the ability and confidence to continue shopping.
As the next graph shows, owner occupiers are still hitting auctions hard. Lending to owner occupiers is up 6 per cent, even though investor lending is actually falling.
Expansion of housing credits from 2010 to 2020. Image: supplied. Source: supplied
REGION BY REGION
Now, I don’t think there’s a threat of space costs rising everywhere. In some parts of Australia, the downward tension is too great. I’m thinking specifically of regions that are as dependent on foreign tourists, foreign academics and new immigrants.
Places like Melbourne’s CBD. In Melbourne’s CBD, investor sentiment matters, and rental prices have tumbled. I’d expect apartment prices to fall further with the latest restrictions in Melbourne.
This is spreading notoriously to some extent. Cheap apartments in the city are substitutes for downtown apartments, which upgrade downtown apartments, and in turn upgrade downtown houses, etc. other people competing for the circle of family homes in the right suburbs.
These suburbs are those where space costs seem high maximum, probably to stay or increase. Suburbs with many public sector workers (total jobs were reduced through only 0.9 consistent with the penny); finance and insurance workers (jobs up to 0.9%) or electric power and fuel workers (jobs up to 1.4%).
The government has done a smart task of supporting the economy in some places, JobKeeper has worked well, and as long as the treasurer doesn’t cut it too much when it’s updated next week, it deserves to keep seeing the Australian economy fall heap.
That’s smart news. It also means that the drop in space costs that so many Australians hope would possibly never materialize.
Jason Murphy is an economist. @jasemurphy. It’s from the Incentivelogy eBook.