8 Apr 2019
Australian Residential Property: Balance Sheet Recession
- Posted by Dejan Pekic BCom DipFP CFP GAICD, Senior Financial Planner
‘History doesn’t repeat itself, but it does rhyme’ is a famous quote by Mark Twain.
Attached is research on what has actually happened in Japan, Spain, United States, United Kingdom and Ireland after the peak in household debt to GDP and the start of the Global Financial Crisis.
Each country cut interest rates and still entered a recession. Interestingly property prices continued to fall even after the end of the recession.
The big problem with balance sheet recession is that consumers stop spending and the focus becomes debt reduction which is bad for economic growth and perpetuates further declines in property prices.
If the history in Japan, Spain, United States, United Kingdom and Ireland repeats in Australia then we are in for 6 years of falling house prices which started in 2017.
Remember, when fear and panic take hold during the next financial catastrophe, investors will be presented with the opportunity to buy more quality assets at discounted prices.
Click for charts.
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