01 Aug Market Downturn: House prices fall at fastest annual rate since 2012
So it looks like the housing downturn is at the beginning of its run. We have seen this coming for some time. Whilst some may have seen us as doomsayers we certainly saw it as forewarning to enable others to be prepared. It is often said those who fail to understand the mistakes of the past are bound to repeat them.
History Shows Us
I can only comment as far as my experience allows me. I left school and moved straight into the banking sector in 1985 (albeit 2 days before the end of 1985). The 80’s were a tumultuous time for the finance market.
5 asset bubbles, 2 smaller residential bubbles, one spectacular commercial collapse culminating in the stock market collapse of 1987. Housing prices escalated approximately 40% during the 2 years 1987-1989 – phenomenal growth. Unfortunately it led inevitably to the early 1990’s recession. After the recession the housing market bounced back…phenomenally, right through to late 2009/10 with average housing price increases during this decade up over 100%.
CoreLogic figures released today show National house prices fell for the 10th consecutive month. House prices are nearly 2% lower than their September 2017 peak. Five of the eight capital cities have posted median house price declines over the past three months, with Melbourne and Perth seeing the steepest falls.
Boom and Bust
Historically every boom is followed by a bust – such is the cyclical nature of housing markets in Australia. The GFC of 2008 took a little time to hit Australia but it did.
We were ‘lucky’ (some say well managed) to escape the entire wrath of it on the back of the Chinese mining interests in our country, allowing us to emerge relatively unscathed. Not completely, but we managed to bounce back with Australians and foreign investors having a voracious appetite for our property. In 2012 we reached what we thought was the absolute peak property market – surely prices couldn’t get higher and still, not a downturn in sight.
Talks of bubble’s and a downturn infiltrated every day conversations but we brushed it off and entered into a massive bull market, pushed along by foreign investors with a seemingly unlimited access to cash and local banks willing to accommodate them.
However all good things must come to an end and for some months now the RBA, along with the government, have been doing their best to curtail household expenditure. The Royal & Productivity commissions, foreign investment laws and market uncertainty have tried their best to pull the housing market back in line – with some modicum of success.
So are we in a bear market? Well not really but we are showing signs.
We have seen recessions or an economic slowdown in the 1960’s, many in the 70’s, 3 in the 80’s, late 90’s, a few in the 00’s culminating in the 2008 GFC. Statistically we are due one in the 2010’s.
The words ‘this time is different’ are often thrown around. Only time will tell if this is the case. We rarely hear the phrase ‘you prepared too much’.
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