Is this a V-shaped recovery?

Sep 18, 2019

In recent times the Aussie economy has been through a disruptive banking Royal Commission and a credit squeeze, and growth in the economy has accordingly been running at the slowest pace since the financial crisis.

The housing market has experienced quite a sharp recovery, though, effective almost immediately after the election result was announced.

Prior to this post0election bounce the base case scenario seemed to be a housing downturn and a likely U-shaped recovery, which – a bit like a bathtub – traditionally has slippery sides, bumpy stuff along the bottom, and can take a long time to drag yourself out of.

Some of the uber-pessimists even predicted the dreaded ‘L-shaped’ downturn, where no recovery could be foreseen or expected for years into the future.

That’s not going to happen, and although some are still talking about dead-cat bounces and perhaps a W-shaped recovery, in Sydney and Melbourne the recovery has been far more ‘V-shaped’, at least in the scarcer and more desirable assets of the inner suburbs.

Housing prices are up by more than 3 per cent in both Sydney and Melbourne over the past quarter, although as always the medians can mask significant variations in fortunes.

The Reserve Bank possibly even fears a parabolic ‘J-shaped’ outcome from here, with housing prices running sky-high without looking back for thought, but that doesn’t look too likely.

And in fact much of the underlying market data has barely improved at all, especially for new apartments and the construction outlook.

So, it’s a real mixed bag!

I discussed this a little further in the short video here, ahead of our live coaching call this week.

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