Property Investment, Success & Money | The Michael Yardney Podcast Our property markets are experiencing a crisis of confidence | Dr. Andrew Wilson
Is the media killing our property markets and the economy?
Something is causing a crisis of confidence -- and it’s not the economic fundamentals.
But homeowners and property investors are scared.
They’re reading headlines like:
- Melbourne and Sydney house prices are falling $1,000 a week.
- A Shorten government will decimate the property market because of its proposed tax changes.
- One million investors will need to sell up their homes because their loans will convert from interest only to principle and interest.
No wonder they’re scared.
But should they be? Are the headlines right?
Today I’ll chat with Dr. Andrew Wilson, Chief Economist of MyHousingMarket.com.au and we’ll tell you what’s really going on.
Crisis of Confidence
The regularly reported ANZ-Roy Morgan consumer confidence index is below the longer-term average of 113 held since 1990
Investors are asking us at Metropole if they should sell
So, what’s changed? What’s scaring investors?
Remember, different consumers can be scared about different things but here are the factors that could explain it:
- I’ve never seen the media with as much negative press about house prices heading south – not even during the global financial crisis
- Headlines talk about rising interest rates.
- It’s harder to get money from the banks due to the restrictions placed by APRA and the Royal Commission has scared the banks,
- The Wentworth by-election result and the fact that we now have a minority Government. This may mean we have another Federal election, which might come sooner than the one expected in late May.
- The uncertainty of State elections in Victoria and NSW
- The stock market is pretty negative and crazy right now, with the S&P/ASX 200 index down over 6% in October.
- Low wages growth – increasing Petrol prices are now at the highest level in a decade, which has to be scaring households on tight budgets.
Highlights of the Interview With Dr. Andrew Wilson
- You would have to go back to 2008 to see clearance rates consistently below 50% at this time of the year, and that was at the time of the global financial crisis.
- Currently, however, the drivers of the housing market are on the opposite end of the scale. We have a strong economy, unemployment numbers show that performance in the labor market is best in six years. We’re creating jobs, we have strong migration, there are booming first home buyer numbers, rents are increasing, interest rates are low and not increasing. Yet the market has lost its nerve.
- Banks have tightened their lending which means fewer buyers, which means fewer sellers, and banks see the decline and tighten lending again. It’s a self-perpetuating cycle.
- When consumer confidence is high, it can take a while to shift it back. It’s even harder to shift low confidence to high confidence.
- Interest rates will probably go down before they go up again.
- We have strong fundamentals for property. There’s no financial crisis.
Links and Resources:
Metropole Property Strategists
Some of our favourite quotes from the show:
“Those who can see the big picture opportunities and invest based on fundamentals, rather than making investment decisions based on the media, are going to take advantage of the opportunities the market offers them.” – Michael Yardney
“The best way to reflect on your failures is to focus on the lessons that you’ve learned and the person that you’ve become, rather than spending your time avoiding failure.” –Michael Yardney
“It’s not the events that define who you are. It’s how you choose to react to what’s happening to you that defines who you are.” –Michael Yardney
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