Australia probably escaped the GFC is because its economy is tied more into the Asian region than the Atlantic (Europe and the Americas), and it also indirectly benefited from the massive Chinese stimulus programme.
As such I think that a hard landing in China is more likely to have an impact than a slow-down in Europe.
The real risk is (IMO) that the international credit markets freeze up again. Australia is hugely dependent on inflows of foreign capital, and I've got a feeling that roughly two thirds of borrowing is funded by funds that the banks have raised overseas.
If there was a sudden drop in credit because of this, then I'd expect several things to happen:
- Getting a mortgage would become much more difficult.
- Interest rates on loans would shoot up.
- The property market would grind to a halt. Look at the UK where activity is around half of what it was four or five years ago.
None of these would be good for the property market.
It's possible that rents could rise, as few would be buying, but prices could fall sharply. A lot would depend on the RBA's actions, and a 0.5% base rate could support the market.
Macrobusiness published
an article last year that makes my points in a more economically literate fashion.
I'm not sure if Eurogeddon has been overdone.
The right wing press in the UK (i.e. most of the daily papers) continually have stories describing how it's going badly wrong, but they're always written from a xenophobic point of view so I don't generally believe them.
However
Soros thinks the game is up, so perhaps I'm being a bit too sanguine.[/QUOTE
well put. we may well be entitled to be on the edge of our seats, but let's face it, the great dilemma these days is where to invest your money. in the current scenario, cash is king and many many folks have stashed their kanga into term deposits, treasuries, bonds, mortgage offset accounts, etc. People in the sharemarket are mostly getting ripped apart if not with wild share price swings, then with brokerage fees. What's left you may ask; well IMO, discounting art, gold, and other collectibles, then property is left standing yet again by itself.
If people are going to invest then property is a safe-ish bet, particularly in the residential space where 70% of the market are owner occupiers which provides some sort of stability and price support. These people generally hang onto the bitter end before selling and potentially taking a loss.
Quite a good point re; the UK press but then what investment credentials, or even investments, would most of these ignorant (mostly junior) journos have, who in the midst of meeting yet another deadline, print any crap as long as it bleeds all over the place with an armegeddon or eurogeddon flavour. Have you ever seen a positive, glowing article on the merits of real estate investing; I'ver not seen one and I've been doing this for 15 years. This is notwithstanding the fact that total real estate total returns (cap growth and rent) always ticks along annually over 10% / year. Property is after all a long term game.