On the residential real estate investment side, the clearest thing I've read in ages about the market outlook was in last weekend's Sun Herald, a column by Louis Christopher, the head of property research at Adviser Edge.
It's so good I won't try to paraphrase it, I'll just reprint what Louis submitted to the paper (but please read it carefully - he's not predicting there's going to be a recession and he sometimes writes with his tongue in his cheek):
I have been reading with interest how some of the more "optimistic" economists and analysts believe there will not be any substantial housing price declines because this country is experiencing a shortage of available property. This opinion has gone all the way to the very top with our Federal Treasurer stating the same belief.
Often, they state that our rising population will aggravate the current shortage and so the theory goes, we won't have a house price crash.
The facts are that this week, the online real estate listings portal Domain.com.au had over 33,000 property listings within the greater metropolitan Sydney region. This compares starkly with the number of listed properties back in November 2005 when the count was just 12,000 listings.
Far from a shortage, the Sydney market is actually flooded with properties for sale. Mind you, spare a thought for south-east Queensland, which currently has the same amount of listings, yet a population size of just 60% of Sydney. But of course, there must be a shortage there as well, right?
It truly is staggering the lengths some so-called "economists/analysts" will go to try to talk the property market up. We even had one economist last week suggest affordability won't improve despite house price declines because of the shortage!
The house price declines that Sydney and the rest of the country is now experiencing are themselves the ultimate indicator that we have too much available property given the current level of demand. On the positive, existing price declines means affordability has already improved.
There is also now much choice to be had for the home buyer. There is no shortage of property and there isn't likely to be for some time, especially if we enter into a recession.
The truth of the matter is that if we go into a recession, it won't matter if we have a population increase. Even as the population grows, if people don't have jobs, they can't go out and buy a house. And those that lose their job will be forced to sell up, thereby adding to supply. Would-be buyers will be cautious and conservative in their property selection. Young people will stay with their folks. They won't go out and rent or buy a home. Families will move in together. People will be forced to accept the economic reality and lower their standard of living.
This is what happens in a recession.
That all said, we haven't entered recession yet and it is clear the Rudd Government and the Reserve Bank of Australia are doing all they can to prevent us joining the global house price crash. Let's hope every tax payer's cent is worth it. After all affordability will no doubt improve if house prices rise!
Either way, all real estate participants are better served by more objective and analysis and information and not spruiking from some industry commentators that should know better. Real estate is a great asset and can be a greater asset still if this principle is adopted across the entire industry.