The March quarter of 2017 is when we might hear that Australia has moved into recession mode. So what does this mean and how could it affect property prices?
Concerns re-emerged of a recession hitting in the first half of 2017, following the release of the September quarter gross domestic product figures (GDP) which showed the economy was weaker than many had anticipated.
There are now predictions that the next set of GDP data which is due in March, could also produce another negative growth result. If this happens, it has the potentially to tip the economy into a technical recession, which is defined as two sustained periods of negative growth.
A recession is likely to affect business and consumer confidence, and in turn buyer behaviour.
Andrew Wilson senior economist Domain Group says if a recession is confirmed, it might be better to sell property sooner rather than later.
“We have the prospect of perhaps a recession next year that is likely to be announced in March. This could affect market confidence but I don’t think it will affect the housing market too much.
Australia hasn’t seen a recession in more than 25 years, however the 1989/90 financial year stands out as the largest annual fall in transaction numbers on record across Australia’s housing market.
“At this time, year on year dwelling sales fell by 25 per cent across the combined capital cities,” says CoreLogic research director Tim Lawless.
“Substantial downturns in housing demand have occurred outside of recessions as well.
“Year on year sales were 23 per cent lower over the year ending October 2004, they fell 2 per cent during the GFC and were down 16 per cent over the year to June 2011,” he said.
As it stands, property price growth is expected to stabilise in the year ahead after what’s been a boom period, particularly in Sydney and Melbourne.
Both of these major capital cities are expected to see a strong shift back to there being just as many buyers as sellers, plus a pull back in investors.
Many economists believe that with the US raising rates earlier this month that this will keep the Reserve Bank of Australia on hold with rates a little while longer, but it doesn’t rule out another rate cut in 2017.
Property price growth in Sydney and Melbourne is expected to come out of its boom-phase next year with forecast growth of 3-4 per cent for these markets.
Nationally property price growth of 2-3 per cent is expected but popular regional hubs such as Wollongong, Newcastle and Byron Bay are likely to see stronger price growth of 4-5 per cent in the next twelve months.
Nicki Hutley chief economist at property consultancy Urbis believes that if a recession does occur, a property price pull back of around 5 per cent is likely next year.