What will happen to property prices if we have a recession? – MCD Advisory Service Skip to content

What will happen to property prices if we have a recession?

There’s talk of a recession – a global recession, an Australian recession and a US recession. If this happens, how will it affect us? How will it affect property prices?

Firstly, we agree with some of the other experts that don’t think we will have a recession locally. We don’t have the usual markers that precede a recession.

These pre-recession markers can be listed as:

  • excessive optimism and boom conditions in the preceding years,
  • raising interest rates to slow down economies and boost inflation
  • huge surge in household debt

Many parts of the Australian economy are doing quite well with strong infrastructure spend, solid demand for our exports and job growth.

So, given this information, we’re sitting quite well.

But, it all really depends on consumer activity.

If the media starts talking gloom and doom, boom or bust, then the public will lose confidence and stop spending. This will bring our economy to a halt faster than anything.

The biggest concern, if we do have a recession, is jobs. If jobs are lost, then people won’t be able to spend or pay their mortgages. That’s when we will see an impact on property prices.

Again, the markers for unemployment rise aren’t there. In fact, there has been strong employment growth for the past three years and forecast for more job growth as a result of the many major infrastructure projects across the country.

This could change if there is a global or US recession as multinational companies may be forced to reduce staff or pull out of Australia altogether.

The bottom line is that we all need to keep paying our mortgage. Property prices may slip in the short term, but long term the forecast is still good for strong capital growth.

Don’t get caught up in media hype. Keep with your financial plan, keep with your budget. Put some away for a rainy day. Make extra mortgage repayments when you can and, most importantly, don’t panic.

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