Recent Home Living Property Culture The Team North Shore Living
Recent Home Living Property Culture The Team North Shore Living
Although we are in a time of uncertainty due to the coronavirus pandemic, compared with previous recessions and times of financial uncertainty, the Australian government is putting in a lot of positive steps early on.

What effect this has on the economy and the housing market is yet to be seen, but if we can take comfort from the lessons learned from the global financial crisis of 2008 and the recession Australia experienced in the early 1990s, we should see a relatively small and short dip to the house prices before the rebound and growth kicks in again.

Lessons learnt from the 2008 global financial crisis

Many commentators are drawing parallels between the coronavirus pandemic and the 2008 GFC. During that period, Australia fared a lot better than most of the world and early indications are that, again, we'll fare a lot better than America and many parts of Europe.

In 2008, although Australia avoided a recession, the property market did dip for a period. This was mainly due to the banks taking lessons from elsewhere in the world and reducing their risk level.

The property market, in general, dropped from its height in March 2008 for four quarters (although never lower than June 2007 prices). This was true for the upper north shore for the most part.

Lessons learnt from the last recession in Australia

The Australian economy performed remarkably well during the global financial crisis, but that doesn't mean the country has never experienced economic strife.

The last official recession hit Australia in the early 1990s, but around most of the country house prices actually rose during that period.

The only exception was the Melbourne property market, which dropped and didn't recover to 1989 prices until 1996. At the other end of the scale, the Gold Coast saw property prices increase because of the influx of people moving from the rest of the country.

Should we see price drops across the country, this shows that the recovery won't necessarily be uniform.

What were the key factors in these times of crisis?

There were two main factors that helped and hindered the recovery of the Australian housing market.

The first was the interest rates and lending policy. The more easily people can borrow money, the more likely we are to see buyers in the market. Low-interest rates are enticing for buyers, but lending policies need to be safely lenient to let them get the money they need to buy a property.

However, countering this is the possibility of a high unemployment rate. This is one of the main factors that slowed the recovery in Melbourne in the 1990s. With the government funding so many stimulus packages like JobKeeper during the COVID-19 pandemic, the hopes are that businesses will be able to restart after their hibernation with fewer job losses than previous financial crises.

On top of this, banks are prepared. They have been offering mortgage deferrals and other benefits to lenders to make sure that people can get through this period relatively unscathed.

Although stock market prices tend to dictate the news headlines, it's important to remember that house prices and the stock market aren't always linked. Since 2003, the Australian stock market has grown by 69% overall, while house values in Ku-ring-gai have grown by more than 150%. And while a dip in the stock market might shake up real estate prices, they are not tightly correlated.

How can we help you today?

Despite these challenging times, we continue to help people realise their property dreams, whether that’s finding the ideal home or locating or managing an investment property.

McConnell Bourn, an independent agency working across four offices, has proudly represented clients selling and managing homes across Sydney's North Shore for the past 20 years.
Find out more about what we can do for you by calling 02 9496 2777 or emailing info@mcconnellbourn.com.au

The information in this article was collated from several sources as noted above. We do not take responsibility for the accuracy of this information. Should you choose to act on it, we recommend that you do your own research and talk to us or your accountant.

Sources:
Finder.com.au
Motley Fool
Property Analytics
Realestate.com.au

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