WHILE some pundits are predicting a recession by Christmas, a new report says that a downturn is not always doom and gloom.
At least for some of those in the property market.
Simon Pressley from Propertyology says “Australian real estate is safe as houses”, and that even during significant economic shocks it has proven to be resilient, with some markets even experiencing an upswing in house values.
“The research confirmed that the property markets of various locations in Australia produced growth as high as 20 per cent during our last national recession (1990-91) and during the Global Financial Crisis as well (2008-09),” Mr Pressley said.
“For as far back as property data takes us, there’s never been a single year when property markets didn’t do well in many locations — never.”
Propertyology managing director Simon Pressley
Australia is staring down the barrel of what is called a “technical recession” or a per-capita recession, where the rate of economic growth fails to keep up with population growth.
In other words, a recession is defined as two consecutive quarters of negative growth in GDP.
While that sounds dire, Mr Pressley said that since 1985 every individual state and territory had been through a technical recession at least three times, however, property prices did not stagnate.
He pointed to New South Wales which has experienced a recession four times in the past three decades, according to the research.
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“While we all remember Sydney’s 2013-2017 property boom where property prices increased by 70 per cent, most have forgotten that New South Wales’ economy produced three out of four quarters of declining GDP in 2012-13,” Mr Pressley said.
Mr Pressley said Australia’s last recession started in the fourth quarter of 1990 and continued for 12 months.
Despite this, property prices strengthened in both capital city and regional locations at the same time, he said.
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In the 1991 national recession year, there were mild real estate price declines in Sydney (0.7 per cent), Melbourne (2.3 per cent) and Perth (one per cent), the research found.
On the other hand, other capital cities such as Brisbane (6.8 per cent) and Hobart (4.3 per cent) produced quite solid growth in their median house prices.
“There is much, much more to Australian real estate than eight capital cities, because the research showed that spectacular growth in 1991 median house prices occurred in Rockhampton and Shoalhaven (both 20 per cent), Goondiwindi (19 per cent), Kempsey (18 per cent), and Newcastle (17 per cent),” Mr Pressley said.
“Meanwhile, Mackay (17 per cent) and Tamworth (15 per cent) were also outstanding and Toowoomba, Margaret River, Wagga Wagga and Hervey Bay each had 13 per cent growth in 1991.”
Mr Pressley said that while a technical recession within the next twelve months was looking more likely, that didn’t mean that the nation’s overall economy or its property markets were on the nose generally.
But what about the southeast, and Queensland overall?
Ray White New Farm Matt Lancashire remembers the last big downturn — the Global Financial Crisis of 2008 — well.
Matt Lancashire Pic Annette Dew
“I started in 2006 and sold a house in New Farm under the hammer for $670,000 … the following year, in October, I sold an identical one across the road for $1.8 million,” he said.
“On March 8, 2008, I sold a property for $2.4 million at auction and then by October 2008, an identical house next door went for $1.87 million.
“The credit crunch hit and there were a few fire sales … but the good thing about inner Brisbane is that most people just cut back on their luxuries and held on to property and about 18 months later we were seeing good prices being achieved again.”
Mr Lancashire said the boost to the First Home Buyers Grant, which was also extended to established properties at the time, probably saved the local market.
“Suddenly I went from selling $2 million properties to entry-level houses,” he said.
Looking ahead, Mr Lancashire said there was little doubt house prices nationally were seeing a “price correction”, but there were still plenty of willing buyers and sellers in Brisbane.
He also said the length of time owners tended to hold on to properties in Brisbane meant most were able to weather any downturn.
“We did $40.5 million in sales over 30 transactions last month, and have already had $20 million this month which is awesome,” he said. “We are also seeing a lot of interstate and overseas migration … I alone sold to eight interstate or overseas buyers last quarter and I have a team of 34.”
The suburbs of Paddington and Petrie Terrace are seen with the Brisbane CBD skyline in Brisbane, Tuesday, January 15, 2019. (AAP Image/Darren England) NO ARCHIVING
Mr Pressley said the resources sector in Queensland was also showing signs of recovery and there had been a number of projects announced by the government and private enterprise.
“If we end up in a recession it will be 100 per cent self-inflicted stupidity,” he said. “If the credit supply improves to what it was two years ago, and we have seen some loosening up already, then Brisbane could, in all reality, be heading towards double digit price growth within a few years … many of the underlying fundamentals (for growth) remain.”
Samantha Healy
