Getting back to fundamentals

23.10.08 With a lot of talk this week again focused on the world economy and whether or not we are headed into global recession I wanted to take a look at what the impact some of these global issues will have on our local market. I’ve ranted on before about the simple economic principle of supply and demand and how property prices are driven purely and simply by this maxim. That hasn’t changed and nor is it likely to. But exactly what does that mean? Well, the good news is that we don’t have an excess of supply. In fact, we don’t have enough dwellings to meet demand. The consensus is that housing demand is continuing to grow at around 180,000 units per annum across Australia with supply averaging out at about 150,000 representing a shortfall of almost 17%. Locally it’s not much different. For example, in Chapel Hill about 220 homes are sold every year whereas estimated real demand sits slightly higher at 250 homes per annum. With similar levels of demand remaining unmet across the area modest price growth is most likely. Another reason why we aren’t likely to suffer the same fate as some other countries, most notably the USA, is that we aren’t likely to see a large number of forced sales at any price hitting the market. In Australia sub prime loans are known as non conforming loans and they account for a little over 1% of the mortgage market. In the USA they are estimated to represent about 15%. Should all of them fail at the one time then we would see a spike in activity but the net effect would be short lived. Now is as good a time as any to consider making a move and you should do so knowing with confidence that the fundamentals are still strong. If you would like more information on what your market place is doing, or if you would like to discuss how to make a smart move today please feel free to call us anytime. Till Next Week...