In the wake of the global recession, societies the world over have suddenly turned to the Japanese model of conservationism, choosing to place their trust in banks and the interest returns they offer. Australia has been blessed in it’s ability to stand steadfast amidst this financial crisis, even trumping the revered US dollar, a feat not seen since 1983.
However, the strange phenomenon that is sweeping across Australia is that whilst the dollar is strong, investments in property have dropped drastically. There might be a willingness to spend on everyday items but long term, ‘liability heavy’ spending is at a minimum. This observation is substantiated by the table below, which shows the number of days taken for a property to be sold from the time it is placed on the market to the point of sale over the past 8 years.
Whilst Sydney and Canberra boast the lowest number of days, it is clear that since the previous year, the turnover rate for property sales has increased dramatically overall, with Melbourne, Brisbane, Adelaide and Perth experiencing their highest rates in the past 8 years in 2011. This is unusual, especially in regards to Melbourne, as not only one of the major cities in Australia but the one with the most potential for growth, in all aspects of life.
The mentality governing this phenomena is that everyone is waiting for the prices to bottom out before buying; the problem is where will that bottom be and between then and now, what could or would those funds be doing otherwise? The banks offer safe but meager returns on interest, term deposits can only do so much and most unmanaged super funds are not as super as they seem.
If share prices begin to go in reverse, property prices plateau, and if the trusted interest on term deposits fall, what will be left to fall back on?
