In my opinion, 2011 was annus horribilis. For those of you who aren’t up to speed with your Latin, ‘annus horribilis’ is a Latin phrase meaning ‘horrible year’. I don’t know how your year went but so far as property investment is concerned, I have never known the property market to behave as it has this year.
BY PETER KOULIZOS
It hasn’t been catastrophic, but to have dwelling prices in all the major Australian capital cities fall over the past 12 months is almost unheard of.
The table below gives us an idea of the performance of each of the capital city property markets. It shows the annual change in dwelling values for the year ending September 2011.
If we can understand why this has happened, it can provide an insight into what we can expect in the future.
Property markets are affected by many factors. These include interest rates, unemployment, inflation, etc. The majority of these issues lead to one thing: consumer confidence. In my opinion, this is the most influential factor on the property market – and the economy. If we feel happy and confident, we’re more likely to spend money. If we’re feeling unsure and remain cautious, we’re more likely to save money. It’s the increased demand for property, which is a result of spending money, which helps prices to rise.
So, what has caused us to be so cautious and pessimistic and display such a low level of consumer confidence?
Firstly, it’s the overseas money crisis. Even though Australia and its economy is in excellent shape compared to the rest of the world, it’s the constant bad news that we hear/see/read about faltering overseas economies that’s been the biggest factor influencing the national property market. Up until early this year, all eyes were on the US and their debt problem. Midway through the year, attention turned to Greece and its political and economic woes. Now it’s Italy.
Secondly, there’s the uncertainty that’s brought about by the current balance of power in Canberra. It’s very difficult for one major party to be decisive when there are so many other parties, lobby groups and independents that need to be pleased. Unfortunately some of the major decisions that have been made have created even more uncertainty – for example, the carbon tax.
Finally there are individual state issues that impact on their local markets.
Queensland has been very unlucky with not one, but two major natural disasters in the space of a few months. Western Australia is still suffering the lagging after effects of the huge property boom it experienced last decade. Darwin and Melbourne are in the early stages of a price downturn as their property boom came to an end early this year.
The frustrating part of the current situation in the property market is, as I mentioned before, Australia and its economy is in excellent shape compared to the rest of the world. Our markets (and economy) should be much better than it is but at the moment the bad news is outweighing the good news.
Enough of the bad news, I can hear you saying. You want to know when things will turn around. The answer is simple; it will be when consumer confidence returns. The hard part is trying to pick the time when consumer confidence will pick up. Stay tuned for my next blog which should give you an insight to what we can expect in the future. It will be titled: ‘2012 – Annus Betterus’ (it’s not a Latin phrase!).