{"id":9721,"date":"2016-11-01T01:00:24","date_gmt":"2016-10-31T14:00:24","guid":{"rendered":"http:\/\/realestatetalk.com.au\/?p=9721"},"modified":"2016-11-01T01:00:24","modified_gmt":"2016-10-31T14:00:24","slug":"triggers-to-a-crash-michael-yardney","status":"publish","type":"post","link":"https:\/\/channels.realty.com.au\/realtytalk\/triggers-to-a-crash-michael-yardney\/","title":{"rendered":"Triggers to a crash – Michael Yardney"},"content":{"rendered":"

 
\nWhat needs to happen in the economy to cause dwelling prices to fall significantly? According to Michael Yardney there are 8 things that would need to happen and you will hear us talk about all 8 today.<\/p>\n

<\/h4>\n

Transcript:<\/strong><\/h4>\n

Kevin:<\/b>\u00a0 Well, there is so much uncertainty in the market right now, isn\u2019t there? People are concerned about a crash, and we\u2019re hearing it about it. I have to say all the talk about a crash is always coming from people overseas who don\u2019t really fully understand the Australian market. Also, what\u2019s happening with Asians and they\u2019re being discouraged from buying property here and how difficult it is for first-home buyers.
\nLet\u2019s get a bit of a handle on what really is happening. Let\u2019s get our feet on the ground here. What could possibly cause the market to crash? I\u2019ve asked Michael Yardney from Metropole Property Strategists to address this for us.
\nHi, Michael. Welcome to the show.
\nMichael:<\/b>\u00a0 Hi, Kevin. Thank you for having me.
\nKevin:<\/b>\u00a0 Michael, what are the things that could cause the market to crash?
\nMichael:<\/b>\u00a0 Well, Kevin, it\u2019s not as simple as some of the pessimists are thinking because for house prices to collapse\u2026 Now I\u2019m not talking about the cyclical correction where things slow down, as they always will and they are to an extent now, but for property markets to crash, to collapse, people are going to have to be forced to sell their homes and there is going to be no one willing to buy them so that property values will drop substantially.
\nNow, there\u2019s no doubt that some segments where property markets are losing ground \u2013 in particular, the new and the off-the-plan markets where you are right; as you said a moment again, foreign investors are having difficulty getting financed but so are local investors.
\nBut in the general world, where most people who own properties are owner-occupiers, homeowners, many without a mortgage or with a little mortgage, they don\u2019t just sell; they simply remain in their home waiting for things to pan out, Kevin.
\nSo I don\u2019t think people are going to outright sell their home and take a loss \u2013 unless you have some major shocks. Can we go through what those shocks could be?
\nKevin:<\/b>\u00a0 Please, let\u2019s do that.
\nMichael:<\/b>\u00a0 What could cause people to be so desperate that they\u2019re forced to sell their home? Firstly, high unemployment. That could trigger a wave of forced sales. We know have our economy is doing reasonably well. Unemployment hasn\u2019t gone up. In fact, there\u2019s been considerable jobs growth.
\nA lot of the jobs being created currently are part-time jobs, but there are still significant jobs growth in Sidney and Melbourne, in particular \u2013 and in fact, in all our capital cities \u2013 and employment data is coming out positive, so I don\u2019t think that\u2019s going to happen.
\nKevin, another thing that could force people to significantly get into mortgage stress and have to desperately sell their homes to cause property values to crash would be high interest rates where a raft of homeowners default. Kevin, it\u2019s not on the radar of any of the economists or any of the banks.
\nInterest rates interestingly probably wouldn\u2019t have to rise a lot, not to the 7% or 8% \u2013 or the 16% we had years ago. Just a 0.5% or 1% interest rate rise will stop this market dead, but it won\u2019t cause people to sell out.
\nKevin, a credit squeeze. In the old days we used to have that where people just couldn\u2019t get financed but our banking system is underpinned by residential property lending \u2013 and the banks, the system, the government has a vested interest in keeping dwelling prices at least stable. The government, Kevin, doesn\u2019t want the constituents to lose value.
\nThe only people who want to seem to want it, Kevin, are the overseas people \u2013 or have you noticed a lot of those who have missed out on the market; they\u2019re hoping that values will fall so that they can buy in cheaper.
\nKevin:<\/b>\u00a0 Absolutely. Definitely.
\nMichael: <\/b>\u00a0The next thing is a severe recession. That could cripple our economy. It could create unemployment. It could mean that people lose confidence, they default on their mortgages. But while we may well have a little recession one day \u2013 because we haven\u2019t had one for years \u2013 it\u2019s really, really unlikely in the foreseeable future. It\u2019s not on the radar of the Reserve Bank or any economists of us having a severe recession that would cripple our economy.
\nOf course, an oversupply of property could create a fall in property values, and that could occur in a few isolated markets \u2013 the Melbourne high-rise market, particularly in the CBD; the Brisbane inner-city high-rise apartment market also is suffering from an oversupply \u2013 and suddenly a lack of purchasers being able to settle. But that\u2019s a sub-segment of the market, Kevin; it\u2019s not the whole market.
\nOur rising population has been one of the things that has driven our property markets, and population growth is slowing, but it\u2019s not slowing so much that it\u2019s going to cause a crash in the market. So I can\u2019t see that being an issue.
\nOf course, the slowdown in foreign investment could well significantly affect certain sub-segments of the market, as we\u2019ve already said. I guess another one could be changes in government legislation. It came up earlier this year with the concept that maybe negative gearing wouldn\u2019t be allowed or superannuation funds couldn\u2019t invest in property.
\nI don\u2019t think that any of these things are on the medium-term radar. I can\u2019t see a crash in the property markets in the foreseeable future.
\nKevin: <\/b>\u00a0Okay, Michael, what are the positives?
\nMichael: \u00a0<\/b>Kevin, I see quite a few of them. Our population growth is robust, and that\u2019s bringing new people in, plus we\u2019re making more babies, so that combination of more people and basically a wealthy nation \u2013 our economy is healthy \u2013 is going to mean that these people are going to be able to, and want to, afford to buy properties.
\nWe have a sound banking system, so it\u2019s unlikely we\u2019re going to have the problems of a lot of overseas countries had.
\nWe have rising business confidence and rising consumer confidence. When businesses feel confident, they employ people, they buy inventory, and the economy moves on. When consumers feel confident, they make decisions like buying houses, buying cars, buying investments.
\nWhile we\u2019re taking on more debt, we\u2019ve actually got a healthy comfortable level of household debt because interest rates are low, so in general, we\u2019re managing those well.
\nI guess the last thing is just our culture of homeownership. Kevin, 70% of us own or are paying off our home.
\nI see a lot of positives for the property market in general in the future, but of course, I can see a few little issues ahead that will give us some speedbumps to stop this strong rise we\u2019ve been having.
\nKevin:<\/b>\u00a0 So the bottom line, Michael?
\nMichael:<\/b>\u00a0 Well, for a number of years, property bubblers, doomsayers, property pessimists have been predicting that our housing market is going to crash. They have told us, \u201cWe\u2019re denying the impending gloom, blinded by the consistent performance of our property markets.\u201d
\nI think what I\u2019ve just explained is that it\u2019s unlikely for our property markets to collapse, but I do agree that in certain segments, they are going to correct. So it\u2019s important to be vigilant, be aware what\u2019s happening in the world economies that are affecting Australia, and take a strategic approach to investment and get good advice along the way.
\nKevin:<\/b>\u00a0 Great advice. Thank you very much for your time, Michael Yardney from Metropole Property Strategists. Thanks, Michael.
\nMichael:<\/b>\u00a0 My pleasure, Kevin.<\/p>\n","protected":false},"excerpt":{"rendered":"

  What needs to happen in the economy to cause dwelling prices to fall significantly? According to Michael Yardney there are 8 things that would need to happen and you will hear us talk about all 8 today. Transcript: Kevin:\u00a0 Well, there is so much…<\/p>\n","protected":false},"author":176692471,"featured_media":9722,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[10,11,13,36,17,22,25,27],"tags":[101],"class_list":["post-9721","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-kevin-turner-sponsored-channels","category-kevin-update","category-latest-story","category-property-investment-topic","category-property-investment","category-research-topic","category-sponsored-channels","category-trends-topic","tag-podcast"],"yoast_head":"\nTriggers to a crash - Michael Yardney - Realty Talk<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/channels.realty.com.au\/realtytalk\/triggers-to-a-crash-michael-yardney\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Triggers to a crash - Michael Yardney - Realty Talk\" \/>\n<meta property=\"og:description\" content=\"  What needs to happen in the economy to cause dwelling prices to fall significantly? 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