Is Australia heading into a recession?
As our economy limps through its worst year since 1991, property investors are starting to get nervous. The harbingers are out there, spreading the word – the next recession is coming.
These tough economic conditions need to be ridden out. There will be no Rudd style stimulus on the horizon as the Coalition focus on their budget surplus.
Is Australia on the brink of a recession?
It has been over 25 years since the 1991 recession, which leads many to believe that one is looming. Looking at our delicate economy and scary media coverage… Many Australians are feeling reluctant to take on extra investment till they have a clear idea about what’s going on.
A recession is defined as 2 consecutive quarters of negative economic growth defined as two quarters with a negative GDP. Our GDP growth has drastically slowed in the last year. The IMF estimating growth of only 1.7% for 2019, less than half of what it was in October 2014 (4%). If the prediction for 2020 stays true at 2.3%, then this will be the worst 2-year period since 1991.
When you look the conditions surrounding Australia’s recession in the 90s, the situation today is very different. High-interest rates were employed in the early 90s to slow the 80s asset boom. As a result, a large number of businesses went under, causing unemployment to increase from 5.9% to 7.9% in 1991. Today, our interest rates are at an all-time low, making mortgages more affordable.
If we look at the last 12 months our labour market has performed far better than it did previous to the 90s… Unemployment is holding firm at 5.3% (only up 0.1%).
Don’t listen to all the doom and gloom
The economy is cyclical, so at some point in the future, Australia will go through a recession. Events overseas, particularly in the US and China have the potential to tip us over the edge. But right now, it is unlikely we will see a recession in the near future.
In times of economic uncertainty, is investment property a safe investment?
After having one of our worst downturns in recent decades, things are starting to look up. Our overall median house price dropped 8.4% in the period from July 2017-May 2019. Hitting Melbourne and Sydney’s prestige markets the hardest. Prices in these two areas were overinflated and needed an aggressive price correction. With Sydney seeing an average price drop of 22.5% and Melbourne, 32.1%.
Despite this many investors were still seeing great returns in both Melbourne and Sydney. The key to doing well, even if the economy isn’t, is a clever investment strategy. Finding the right property at the right price in a growing area can deliver fantastic returns for investors.
Zaki Ameer, Director of property investment company, DDP Property has helped 1 200 Australia successfully invest in property. Ameer says one of the key ingredients is “a smart and detailed investment strategy to provide the best growth without overstretching yourself financially”.
Ameer and his team have the expertise to help their clients find promising investment opportunities. They undertake thorough research, both of the property itself, and the location.
With experts predicting property prices will increase by at least 4.5% 2020, the investment market looks like it’s getting back on track. This boost is being helped by interest rates being at all time low and income tax cuts.
Our “bricks and mortar” fixation is still strong and investors are helping to push up the market, particularly boomers are buying properties as they start their retirement journey.
With the right advice its still possible to get capital gains of 250%.