September Market Update
Let’s take a step back in time … After the Hawke/Keating era, Australia stepped into the free market, an increasingly globalised economy where the government did less and the market was trusted to do more. The dollar was floated at near parity to the US dollar before relaxing to its familiar position at around 77 cents. Now we have entered, somewhat abruptly, into a time where the free market has been immediately shut off. Tourism, gone. Trade, low. Jobs, in jeopardy. So what is the future of our economy?
There are two camps:
Our global-free market economy has vanished, and we must establish a new, insular economy; and,
We must get things back to how they were to climb out of this mess.
But it is worth looking a little closer at the current situation before ratcheting the doom and gloom out of reality.
Let’s look at the debt. This has been a topic of conversation over the last few weeks, and unfortunately (because of its complexities) many young people have been deceived into thinking that they are going to be lumped with a massive tax bill for the rest of their working lives. But the truth is more attractive. Our current debt is roughly 36% of GDP, two thirds of which was borrowed before COVID-19. To make a bad situation not so bad, money is very cheap for governments to borrow at the moment. According to Australian journalist George Megalogenis, if the current government can’t reinvest the money they have borrowed and receive a rate of return up to 5%, they aren’t even trying.
This means simply: the government is paying very little interest on the money they have borrowed to support schemes like JobKeeper and JobSeeker. The interest charge is so much less than the money they stand to make by investing it back into the economy, it isn’t worth worrying about.
What George said on the ABC recently was that young Australians should be more concerned about the government establishing a “full employment” future for the country, where our current 10% unemployment rate ceases to exist.
So: don’t worry about the debt, worry about jobs.
What’s all this got to do with the property market, you ask? Apart from the obvious economic connections, the reason that I wanted to explain the facts around our country’s bank balance is because general uncertainty has disrupted a lot of people’s decisions to sell this year.If we return to the “two camps” on the future of our economy, I think it’s obvious that Australia is not going to abandon the global free market. Yes, COVID-19 may be around for a long time, but going backwards is not an option, and to permanently close borders to trade and travel is impossible. So the government’s ambition is obvious: return to normal as soon as possible.
That means that this disruption, although seemingly world-ending, will not end the world. And if your work is secure, you should not be concerned about selling your property. Buyers certainly aren’t, and there are plenty of those.Most sales taking place at the moment are taking place privately. With a lack of advertised listings for sale, buyers are walking through our door asking what we have on the books – and buying. At least they were before the current lockdown restrictions. This means it will be like Cup Day in a few weeks’ time, when buyers (generally cashed up and backed by government incentives) want to move away from the rat race.
That means that the next few weeks is your chance to get ready. It sounds like a cliché, but it’s true: buyers want more space and fresh air. For a while I thought it wouldn’t be the case, but the current situation has shone a light on Australian priorities and it goes to show that we don’t like to be too close to one another all the time.The peri-urban north east fringe of Melbourne is a location of intense buyer focus at the moment, with very little to offer. So if you have considered selling, the next few weeks of Lockdown are very important for your presentation priorities. We are talking to our clients all the time and giving advice as to what to do to improve the saleability of their properties. Now is the time to give us a call. Come September, we’ll be ready. Will you?
Prices haven’t dropped because of COVID-19. It’s that simple. Call us today for your specialised market advice: 5786 2033.