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Seniors Weekly International Survey
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Australia
The property market deepens the gap between the rich and the poor, the boomers and the others

Mis en ligne le 28/01/2008

The Newtonian wisdom of property watchers is that a share market slump must have an equal and opposite effect on property prices. In 2000, the Nasdaq collapse gave rise to Sydney's biggest and most widespread property boom. This time it will be different. The cheaper end of the property market simply will not be invited to the party.

A tanking share market is going to have divergent effects in Sydney. On one hand, in our eastern suburbs and the North Shore there is an army of baby boomers and wealthy business owners with high discretionary income and asset wealth. Property will continue to look good. In this demographic, many nervous nellies will tip out of a volatile share market and retreat to the safety of property. For some, the tax-free haven of a more expensive family home is a compelling place to park cash. For others, rising rental returns will provide the reason to transfer equity from shares to bricks and mortar. Fuelling this trend, apartment prices in inner-urban Sydney markets are starting to look cheap compared with other capitals. Undervalued Sydney apartments will be on the shopping list of many investors and capital growth over the calendar year should exceed 5 per cent. House values are also forecast to grow by 5 per cent, propped up by the top end. Remember, the spectre of falling share markets has loomed large for some time. Despite this, the house prices in blue ribbon markets nationally have accelerated, achieving double-digit growth in all state capitals. While Sydney's enduring obsession with beach and harbour will ensure the top end of the market continues to record ridiculous prices, there is strong evidence that this year lower- to middle-income mortgage holders and first-home buyers will be further squeezed out of well-located property markets. House values grew by 10 per cent last year in lower North Shore suburbs but Sydney's south-west had a 2 per cent drop in house values over 2007.
Those pinning hopes of a recovery in outer suburban property markets off the back of a faltering share market will be sorely disappointed. In mortgage land, few will be influenced by the fortunes of shares when they do not even hold any. Rising interest rates and record petrol prices do not leave room for such luxuries. In 2000 a softening share market, buoyed by cheap interest rates and easy credit, was perceived by some to have triggered the frenzied property market that followed. Meanwhile, aggressive mortgage market competition helped baby boomer mums and dads to become landlords. Low interest rates helped. They competed with droves of first-home buyers. We are sadly slipping down the slope toward a highly divided US-style city characterised by a shrinking middle class. We already exhibit the main feature : fabulous affluence at one end and an army of working poor at the other. The credit crisis has delivered a lending market more cautious and risk averse. As the yawning gap between rich and poor widens, the complexion and social cohesion of this city will change.

(The Sydney Morning Herald, 18/01/2008 : "The money's on the move, but this time the wealth divide will deepen")

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