The stock market is in in turmoil, the Aussie dollar is falling like a stone and media commentators are unsure where interest rates are going to end up. Our politicians are more perturbed about what one politician will say in parliament today about his private life, than debating the budget issues and constraints.
It is important to the people of this country whether we assist the Afghanistan people to achieve independent self-ruling. It is important whether Greece leaves the Eurozone. IF Greece opts out, then it is perceivable their banks will go bust. If this occurs then many of its businesses can’t borrow money or even get the money they have in savings. If Greece is converted from Euros to Drachma, then Greece’s population loses a huge amount of the wealth literally overnight. This thought may cause a run on the banks of Spain, Italy and eventually France. If everyone tries to pull all their savings out of these countries then this will exacerbate these issues to the point Europe will most likely enter a very deep, very prolonged recession. This would decimate the recovery in the US and UK and potentially effect a Chinese economy that is already slowing down, albeit running at about 7%.
It is the last statement that should make everyone in Australia sit up and take notice. Our economy is based on commodities. Whether it be minerals or food, we export our wares to the world. If the world economy slows down, if people fear failing currencies they will retreat to what they know. The US Dollar will strengthen and the Aussie dollar will falter. Share prices here will plummet and people with money will look for safe havens. Property is far less volatile than the share or currency markets.
Property prices in the Melbourne and potentially in Sydney will hold their value and slowly increase. I believe turnover will remain relatively low. We will not see the numbers we saw in 2009 or 2010, however good homes will sell for very good prices. Owner occupiers will still buy property as their families grow, retirees will still sell their large family homes in order to downsize. Over the next twelve months the median price statistic will become increasingly unreliable as more erratic sales numbers occur. (Median price is useful only when there are consistent sales numbers in each area you are looking at.)
Further to this our illustrious Treasury is forcing people back into property investment. As of June 30 this year over 50’s will only be allowed to put $25,000 into Superannuation at the 15% concession rate. This means many people will again be looking for tax effective ways to invest their money outside Super. One of the better avenues is Negative gearing property. This will force many investors back into the market place later this year.
The most important thing to remember in the purchasing of property is to pay the right amount. You need to buy well in order to solidify future capital gains.
If you are considering a property purchase please feel free to contact us for a free no obligation chat
Ian James
Director
JPP Buyer Advocates
