Will overseas turmoil adversely affect the Australian property market? - The Adviser (22 September 2011)

Thursday, 22 September 2011

It's an increasingly globalised world, but how does economic and social unrest in countries such as Greece, Spain and the United States have an impact on our economy? It's for this reason that we ask:

Will overseas turmoil adversely affect the Australian property market?

STEVE WESTON, Advantedge

Any instability in the global financial markets tends to impact confidence, which can negatively affect property prices. If this occurs, people are more inclined to sit on the sidelines longer and there is a general reluctance to enter the market. That said, we still have a reasonably material undersupply of property in Australia. The fact that we have that is a positive thing, as it puts a floor on property prices to some extent.


Despite being subject to the effects of overseas turmoil, Australia has a very strong housing market which performs well over the long-term. Overseas turmoil will, at most, cause a slight deceleration in national income and demand for housing. Over time the fundamentals are there for continued growth. The drivers for this growth will come from lack of supply, population growth and changes in the household formation rate.

TIM BROWN, Vow Financial

The share market volatility and the ongoing concerns with the debt levels of the EU and the US will see property become the favoured investment vehicle for the average Australian. The recent major fall in the share market would be concerning many Australians, especially those close to retirement. The RBA will come under enormous pressure to reduce interest rates to help lift consumer confidence.


People often refer to the property market in Australia as being homogenous, that it performs the same in every area and in every state, which it doesn't. What's interesting is that we are seeing a correction in property prices in some areas. Yes, we are going to have influences from overseas in terms of our broader economy, but the property market domestically will perform at different levels according to the demand for property in that area.


I think that in terms of the Australian property market there is no direct correlation between the issues happening abroad and property prices in this country. The Australian property market is driven by demand and supply on a domestic level, and a lack of supply coupled with increased migration has kept the market more buoyant than others, both now and over the past few years.

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