RECESSION: WHAT ARE THE FACTS?





“We’re going into a recession,” an accountant says as she spends $4.20 on her regular coffee.

“Sure,” the barista answers, run off her feet with takeaway orders.

The accountant returns to a pile of work from young clients requesting more information on the huge range of new government incentives available for buyers.

End of story.

People love to throw around the line “We’re going into a recession” but the real question is: what are the ramifications on your personal life?

A global recession is one thing to monitor, but it does not always guarantee a local recession, and even when a local recession occurs, its effect on jobs is another thing altogether. It has been 30 years since we have seen a local recession to the scale of the one we are currently in.

There was a recession in 08-09 (remember Kevin ’07?)  but we paid our way through that one. I expect the same will happen now.

Although the coronavirus is new, the recession is cyclic – only the causes are different. We have a recession every ten years, although some people are unaware of it: Corona 2020, GFC 2009, 9/11 2001, Keating’s recession of the 90’s – we’ve been here before. So what are the facts?

Let’s look at the early 1990’s:
Unemployment rate: 6.9%
Dow Jones Stock Price Fall (19th October 1987): 22.6%

Compare to 2020:
Unemployment rate: 6.2%
Dow Jones Stock Price Fall (16th March 2020): 12.9%

As you can see, compared to the “recession we had to have”, unemployment is on par. But the stock market registered a smaller drop.

When you look at this history, it becomes evident that if you take coronavirus out of the picture, this is nothing new. So if someone says to you, “We’re going into a recession”, you can say, “What’s new?”

I think it is likely that unemployment will rise beyond 6.2%. IT IS A FACT coronavirus has had more of an effect on jobs than the 08-09 GFC. The reason for this is obvious:
Coronavirus has had a material impact on the way human beings work and physically interact with one another.

The question is: are the types of job losses Australia is experiencing affecting the real estate market? The answer is, not hugely.

This is why we have seen so much market confidence. Let me flag: conditions have been tough and stressful. There is no doubt about that. I’ve got plenty of friends who have lost their jobs. Looking at the facts does not mean I am any less aware of how hard the last few months have been. That being said, although industries like hospitality, contract work, and tourism have been hit hard, just as many people have deferred to work-from-home arrangements without their hours changing very much. A sharp loss of employment does not guarantee a direct impact on real estate, because not everybody is in the market to buy. The people who are now in the market to buy are reaping the benefits of government incentives as well as riding a wave of positive sentiment.

So I don’t think it is misleading at all to say that conditions are good, and just in time for Spring.

So if you are thinking of selling and you want informed advice, the team at Integrity is happy to talk about all things – not just real estate. We consider it our obligation to help people make informed decisions, and we do this out of our own time.

If you are feeling a bit overwhelmed with conflicting information, or with all the changes that are going on, give me, Will, or Jordyn a call on 5786 2033. We’re here to help.