{"id":6733,"date":"2015-12-22T01:00:21","date_gmt":"2015-12-21T14:00:21","guid":{"rendered":"http:\/\/realestatetalk.com.au\/?p=6733"},"modified":"2015-12-22T01:00:21","modified_gmt":"2015-12-21T14:00:21","slug":"7-reasons-the-market-wont-crash","status":"publish","type":"post","link":"https:\/\/channels.realty.com.au\/realtytalk\/7-reasons-the-market-wont-crash\/","title":{"rendered":"7 reasons the market won\u2019t crash – Michael Yardney"},"content":{"rendered":"

 
\nThere is a property debate raging at present \u2013 some say the future for property is bright while others suggest our markets are set to crash. In today\u2019s show Michael Yardney<\/b><\/a> gives us 7 reasons why it won\u2019t crash.
\n <\/p>\n

Transcript:<\/h4>\n

Kevin:\u00a0<\/b> A few weeks ago on the show, I spoke to Michael Yardney about what happens when property markets around Australia correct? It was a great interview. Go back and have a listen to it. It was two weeks ago. We originally broadcast that in very early December. So have a listen to that.
\nMichael, I\u2019m keen to talk to you now because we have had some comment about the reasons why the Australian property market won\u2019t crash. I believe you\u2019ve looked into this. You have some reasons that you\u2019d like to tell us about.
\nMichael:\u00a0 <\/b>Sure. What we were saying was that in general, when interest rates go up, when the economy stops, when the cycle runs out of puff, in the big capital cities where there\u2019s market depth, property values don\u2019t crash, they fall over a period of time slowly, and then the individual economic factors catch up, the market catches its breath and goes up again. There are reasons why property values don\u2019t crash as opposed to share markets or other commodities, Kevin.
\nKevin:\u00a0 <\/b>What are they, Michael?
\nMichael:\u00a0 <\/b>I think one of the big factors that\u2019s going to help support our property markets is our robust population growth, particularly immigration and to a lesser extent, strong natural population growth. Kevin, immigration levels have dropped, but they\u2019re still growing at a faster rate than most other developed countries. And these people are going to require some way to live, whether it\u2019s to buy or as tenants.<\/b>
\nKevin: <\/b>Does the economy support our property markets, Michael?
\nMichael:\u00a0 <\/b>Kevin, we have a reasonably healthy economy. Sure it\u2019s slowing a little bit, but it\u2019s continuing to perform at a level that\u2019s envied <\/b>by most Western nations. And what that\u2019s doing is creating jobs for almost anyone who wants one. That\u2019s another reason our property markets aren\u2019t going to crash; we\u2019re not going to have massive unemployment.
\nKevin:\u00a0 <\/b>You\u2019d have to think too, the banking system is probably the envy of a lot of countries, as well.
\nMichael:\u00a0 <\/b>It has become even more sound over the last year or two. We\u2019re all a little bit unhappy that APRA has tightened the screws and put up interest rates a bit and made it a bit harder to get loans. But our sound banking system, with a level of reasonable interest rates, is going to mean that our property market isn\u2019t going to collapse like it did in the United States, and in some European countries, Kevin.
\nKevin:\u00a0 <\/b>Yes, a little bit of medicine, Michael. That\u2019s all it is, really.
\nMichael:\u00a0 <\/b>Yes, it does. I think the other thing that\u2019s going to protect us over the next couple of years is rising business and consumer confidence. The business confidence has increased with the stability of state and federal governments, and consumer confidence is the reason considerably over the year, especially since Malcolm Turnbull was elected as Prime Minister.
\nThat, again, is a reason why, even when the market eventually slows down, there will still be people buying, selling, moving home, getting married, having kids, and that\u2019s going to support our property markets.
\nKevin:\u00a0 <\/b>Yes. Michael, I have heard, too, that household debt is increasing. Is that a concern?
\nMichael:\u00a0 <\/b>Well, it\u2019s still at healthy levels. Sure, we\u2019re borrowing a bit more, but the debt tends to be in the hands of those who can afford it. Many Australians are saving more, they\u2019re taking on less credit card debts, they\u2019re slowly paying off their mortgages. But those who have turned to debt are usually the people with high net worth \u2013 often in their homes \u2013 so this reduces the risk of house prices collapsing if interest rates rise because the people who have got the debt can afford it.
\nKevin:\u00a0 <\/b>Yes. We have a very healthy attitude toward homeownership as well. Does that help?
\nMichael:\u00a0 <\/b>It definitely does, Kevin. What makes the stability in our property market is the fact that around 70% of properties are owned by owner-occupiers, and half of those have no debt against them. So when the economy falters, when interest rates go up, when job unemployment rates go up, it doesn\u2019t mean that people suddenly sell off their homes.
\nThis is a different culture, as you say, from overseas, so with such a large percentage of owner-occupiers, property investors are actually investing in the only market that\u2019s not dominated by investors. This gives us a level of stability, Kevin.
\nKevin:\u00a0 <\/b>Michael, just round out this conversation for us, I guess bearing in mind, too, that it\u2019s not just one Australian housing market.
\nMichael:\u00a0 <\/b>Well, what\u2019s ahead \u2013 I guess there\u2019s no sugar-coating it \u2013 probably prices will slow down in 2016. I think the decreasing affordability, changing sentiment, the oversupply in some of the inner CBD markets, all that\u2019s going to create a volatile mix that\u2019s going to give us very fragmented markets and, in general, slow our property markets. Some are going to move from sellers\u2019 to buyers\u2019 markets. We\u2019re already seeing that with the fall of auction clearance rates; aren\u2019t we, Kevin?
\nKevin:\u00a0<\/b> We are indeed, mate.
\nMichael:\u00a0 <\/b>But yet there\u2019s still going to be a large demand from people who are getting on with their lives, and those who can\u2019t afford to buy homes are still going to be renting them, and this will start to force rents up.
\nSo I think as our economy bumbles along over the next year or two, we\u2019re going to be moving into a period of slower capital growth. Melbourne, Sydney and Brisbane will still do pretty well. I think Perth and Darwin are going to have a more rough year in 2016. Adelaide and Hobart are starting to pick up and keep going up in values along the lines of inflation. But I am concerned that these very few growth drivers for regional towns and mining towns. I\u2019d be avoiding those areas.
\nKevin:\u00a0 <\/b>Mate, this is the last show for the year. I want to wish you and your family all the best for Christmas and the New Year. Michael, thank you for your contributions right throughout 2015. It\u2019s been fabulous to be able to talk to you in this way.
\nMichael:\u00a0 <\/b>My pleasure, Kevin. I look forward to having a fun 2016 together.
\nKevin:\u00a0 <\/b>I have a bit of homework for you over the break, too, because when we come back, our first show is going to be in mid-January, and what I\u2019d like you to do is join all of our other experts and give us your predictions for 2016.
\nMichael:\u00a0 <\/b>We have to put our necks on the line, do we, Kevin?
\nKevin:\u00a0 <\/b>Yes, you do.
\nMichael:\u00a0 <\/b>Okay. I\u2019ll have a think about it.
\nKevin:\u00a0 <\/b>Good on you, mate. All the best, and thanks again, Michael.
\nMichael:\u00a0 <\/b>My pleasure. Great.<\/p>\n","protected":false},"excerpt":{"rendered":"

  There is a property debate raging at present \u2013 some say the future for property is bright while others suggest our markets are set to crash. 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