News
Why the property market won't crash
Tue, 21 Feb 2012Hypothetically, if you had a series of levers at your control, being one lever for interest rates; another for taxation; and others for immigration, foreign investment rules for property ownership; land supply regulations; a lever for spending power for whatever you deem important; and finally one controlling our housing policy (for example allocation of First Home Owners Grant).
If this control panel was at your fingertips, do you think you could control the property market to perform in any way you needed it to?
In fact our Government has all these levers. When the pressure was on in the “GFC Mark I”, the Government reacted in such a way that supported the residential property market and hence this in turn supported the loan books of the financial institutions who as lenders rely on this market. What we saw occur was an aversion of a housing market crash.
The market didn’t crash for many of these reasons and that time has since passed.
The reality is that housing market crashes bring down banks, bring down Governments and result in making people very unhappy.
So I ask you – who does control the levers and what is their motivation in doing what they have done and are continuing to do?
Policy makers don’t want a crash but equally, they don’t want a boom or too greater level of growth in what is already in global terms an expensive property market.
What is needed is a slow decline /no growth / or very low growth in order to bring it back into alignment – some call this a “soft landing”.
What all of this means is don’t buy “the market” – any property has to have a reason to go up in value in its own right rather than rely on the market to deliver its long term growth.
Written by Gavin Hegney, Executive Chairman, Hegney Property Group.