Property Armageddon scenarios revisited

Via Martin North:

We have updated our scenarios, driven from our core market models.

The drivers are rising unemployment, and business failure thanks to the impact of the virus. We discussed these scenarios in our live stream event last night. This is the full version with live chat. The show starts formally at 32 minutes.

We estimate that mortgage stress is set to rise significantly in the months ahead as household cash-flows are interrupted.

Given we’re already at a Pandemic scenario, I don’t get the split of cases. Still. I agree that we’re headed for some kind of scenario around the “global disruption” numbers, though some of those price falls will be real not nominal.

David Llewellyn-Smith
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Comments

  1. Martin_DFAMEMBER

    My Pandemic scenario is uncontrolled exponential growth – not as defined by the WHO. And the key difference is bank failures versus bail-outs/central bank support.

  2. I hope the bail outs lead to the government owning a share of the banks that are bailed. It would be fair since the public will have to pay for them. Same for any other industry that needs a bail out (looking at QANTAS).

  3. ” Mnuchin warned the Senate GOP members that without action, the US unemployment rate could spike to a stunning 20%.”

    Tick, tock, homeowners, IP owners, property pumpers ….

  4. When I was a kid back in the 70s, I remember my family going to look at a holiday house in Philip Island. It was on a marshy type block on stilts, weather board. old. They wanted $3,000 for it. My mother was horrified at the swamp house so we passed on it.
    Looking back I think $3,000 even in today’s money would represent an appropriate price to reflect the economic and cultural opportunities in Philip Island.
    I reckon we will get to those numbers and even negative numbers like USA with houses going for $2 but having $5k back taxes owing.

  5. though some of those price falls will be real not nominal.

    Lols – what ? Have you made a mistake with this assertion – of course prices are going to fall nominally as well – are you imbibing the pipe with that ?

  6. I purchased an apartment and put down a $60k deposit (10%). Its due to settle in May. Im seriously thinking of forfeiting the $60k to minimise my exposure to the loss.

  7. The principle for getting a Bailout should be set early, and should have applied in 2008. If you need a Bailout then you are broke and your equity is worth zip. Therefore the Rescuer (Govt) should get 70-90% of the equity. That’s what happens in the restructuring world. Should apply irrespective of size. So, NRL, Qantas, AFL, Banks …. how do feel about asking for public money in those circumstances?

  8. My wife and I had been actively looking right up until mid-Feb. We had even bid on a couple of places. We’ve since put a pause on the looking. What we have noticed is a surge in real estate agents texting us “off-market offers”. Anyone else noticing that? Or is this just frequency bias?

    • Goldstandard1MEMBER

      I had to add to my voicemail “If you are a real estate agent, please sod off until at least Christmas”.
      No there will be no bounce off this crash so cash is king once more.

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