The Australian Property Market and the Global Recession

Australia is one of the few countries, along with Canada, who has felt the credit crunch less than the rest of the world. There may be many reason for this, such as stricter property lending rules or because there is such a large amount of space and supply of land to be able to be used for homes that the vast increases the majority of the world saw from 2004 – 2006 did not happen.

While Australia has not been completely sheltered by the economic downturn, it has weathered the storm quite well. There is a divide amongst experts as to how the property market will react in 2009 and 2010 in Australia. Most financial analysts tend to think that property values will fall from 5 10 . Most agree, however, that an increase in value to the property market is not likely before 2011.

In the end, the Australian property market will be affected, either positively or negatively by four overriding factors: debt, employment, the global economy, and housing price stability. In reference to debt, the main issue that is facing the majority of Australian households is that the debt levels are at record highs. In a property market where housing prices are rising, the number of eligible buyers may drastically fall as people are financially unable to take on any more debt.

Employment is a very strong factor in whether the Australian property market will rise or fall. Unemployment rates are on the rise, but because there have been labour shortages in the mines, there has been work for those able to do manual mining labour. Unfortunately, due to the uncertainty in the economy, some businesses are protecting themselves by making full time employees part time, as this saves on health care and tax expenses. If the economy does not begin to strengthen, more business will have to move to measures such as this, in addition to redundancies and lay offs.

The global economy, but specifically the economies of the US and China, needs to strengthen in order for the world to come back to financial order. Many countries are introducing stimulus plans to help revitalize their country, get spending under control, and to help bring financial strength back to their currencies. While the Australian property market will not feel the immediate affects of a strengthening US or Chinese economy, the medium term affects will help to maintain or increase property values.

In order to keep housing stability in Australia, interest rates have to remain low and repossessions must remain few. Banks that are working with their customers in order to allow them to keep their homes are helping bring back the economy. If banks repossess a majority of homes and hold on their books a large amount of overvalued, non saleable stock, the market will surely fall.

Half way through 2009, the Australian property market has been able to maintain a solid ground. If employment can continue and the stimulus packages of other countries begin to kick in, the property market will remain strong. Although significant rises in the Australian property market should not be expected, a modest increase next year should be an attainable goal.
Author Resource:- Michael Sterios is a writer for http://www.moneynet.com.au