With shares currently in the sea of red in the wake of corona virus outbreak, will the effect actually touch the property market? Looking at the graph, outbreak just started in certain places and could be a while before it's subdued? Happy to be wrong in that regards.
Will House Price Be Affected by Corona Outbreak
Bargain-er on 01/03/2020 - 10:06
Last edited 01/03/2020 - 10:07
Last edited 01/03/2020 - 10:07
Comments
So jump into the shares bandwagon (if u got strong stomach)? š
wait for it….wait for it….not quite yet…..could be a wave of margin calls go out on Monday which will trigger another sell off, not to mention the yanks got smashed again on Friday so we were already due for another bad day.
I saw this comment below a ZeroHedge article today. It's certainly a possibility since there's no way the rest of the world can instantly pick up the slack in China's manufacturing.
"Steps:
1. Entire supply chains collapse->
2. Businesses all over the world go bankrupt and default->
3. Workers of said businesses go bankrupt and default->
4. Banks go bankrupt and default->
5. More banks go under->
6. Global economic collapse.
We are only in stage 1 right now."If we hit #3 then mortgage defaults will skyrocket and/or panic selling will kick in forcing house prices down.
Unfortunately, i agree with you that the condition atm is the tip of the iceberg. Share market still have a long way down to go. And if business starts going under, the sit in strategy while house market is slow can no longer work since many many will default. Just really hope it won't be a great depression scenario.
@Bargain-er: Yeah interesting times. Starting hear to hear about flow on problems already, not sure if true or just rumours though.
60 odd people getting laid off because they cannot get windows. This is a major building site in Melbourne.
Cement powder is in short supply and in some areas has already run out. Apparently cement powder comes from China as well.And this from ING
https://think.ing.com/snaps/china-manufacturing-pmi-will-shoā¦
China: Manufacturing PMI will shock the market on Monday
China's manufacturing PMI has plunged to a level worse than that reached during the global financial crisis. This is enough to shock the market, especially the USDCNY. Manufacturing PMI at 35.7
The official manufacturing PMI in February was 35.7, worse than the lowest reached previously during the global financial crisis during 2008-2009 when the PMI was in the range of 38.8 - 45.3, and it is the worst in history since the data has been compiled.Sub-indices show weakness not only in production, which was an astonishingly weak 27.8 but also in orders. Export orders were 28.7 and new orders, which represent domestic orders, were 29.3. Covid-19 has not only stopped production but has also broken the supply chain of production, which explains the very low PMI, export orders and new export orders.
Non-manufacturing was if anything even worse, with the official PMI index dropping to 29.6, and the composite index coming in at 28.9. Altogether, an eye-watering set of weak numbers.
The broken supply chain will still be broken
In the press release, the government reported that bigger factories' resumption of work reached 85.6% as of 25th February. This isn't as positive as it sounds.Even if Chinaās factory production can recover in March, it will still face the risk of a low level of export orders. This is because the supply chain will continue to be broken, this time in South Korea, Japan, Europe, and the US, where Covid-19 has begun to spread.
Exports will, therefore, continue to be weak in 1Q20 and even into 2Q20.
This data will shock the market on Monday
The worst China manufacturing PMI in history will shock the market on Monday.USDCNY could go to 7.05 or even higher to reflect the yuanās weakness due to Covid-19, from Fridayās close of 6.9920.
We may revise our GDP forecast downward for 1Q20 if other activity data reflect a similar weakness as even fiscal stimulus cannot defy gravity. Our existing GDP forecast is 5% year on year for 1Q20.
@EightImmortals: From experience, i cannot get a laptop from office due to low supply from China (2 months backlog). Some friends working in supply chain had told me most Chinese suppliers had declared force majeure. So yeah, it's going atm. What's PMI anyway? Thanks
@Bargain-er: PMI= purchasing managers index.
https://www.investopedia.com/terms/p/pmi.asp
What is the Purchasing Managers' Index?
The Purchasing Managers' Index (PMI) is an index of the prevailing direction of economic trends in the manufacturing and service sectors. It consists of a diffusion index that summarizes whether market conditions, as viewed by purchasing managers, are expanding, staying the same, or contracting. The purpose of the PMI is to provide information about current and future business conditions to company decision makers, analysts, and investors.
Key TakeawaysThe Purchasing Managers Index (PMI) is a measure of the prevailing direction of economic trends in manufacturing. The PMI is based on a monthly survey of supply chain managers across 19 industries, covering both upstream and downstream activity. The value and movements in the PMI and its components can provide useful insight to business decision makers, market analysts, and investors, and is a leading indicator of overall economic activity in the U.S.@EightImmortals: Ah, thanks mate. Doesn't look promising, isn't it? Monday market opening will be interesting.
@Bargain-er: Yeah we usually follow the U.S. markets (not for any logical reason I've ever been able to figure?) and they didn't finish up too badly on Friday. The rest of the world not so much, although Canada and China were up a bit.
@EightImmortals: Yeah, i got what u'r saying (asx follows wall Street). But not so good news over weekend may affect sentiment as well imho. But i may be wrong.
Maybe push them up as the Chinese decide to get out of apartments and into houses for safety reasons?
Maybe remove some mainland Chinese from the market for a while, but maybe incentivise them to look more at offshore property too.
I think no actual impact unless the wider economy is badly impacted with layoffs/unemployment. Hard to see that happening, but if I was a casual worker Iād be planning for some lean times ahead.
I read the other way around. Some Chinese business /investors will need cash for months of inactivity. Well only time can tell. Property market is overheating atm. It's scary how people are willing to be locked in high mortgage nowadays. And sadly, it became the norm.
The morons are incapable of voting for their own interests.
And by "interests" I mean wealth.
The Australian population has spent the last 30 years voting to lose their own money to big business.
Iām converting one of my bedrooms to a negative pressure isolation room to increase its value
Ahhh good reno idea š
If you build on and rent it out it could be Corona[Free]Airbnb…
14 days between customers though
You only need it to be negative pressure if youāre setting up as a Level 4 bio lab to keep the bugs in.
Surely you want to keeps the bugs out, so would make it a positive pressure area?
I've been thinking about this myself and cant reach a conclusion.
Currently for apartments:
Shipment of building materials from China are having a delay to aus. So I'd think apartments that are being built/to be built, may have a delay to settlement.
A lower supply will not cause prices to drop, but the opposite way.BUT What if:
If there's an outbreak then demand for housing will go down (people dont want to move when there's virus going on)
Then price will dropUnemployment will go up in the later half of the year (my guess) due to bush fire and Corona virus, which causes lower economic activity
If more people are out of job, there might be a higher default rate then house prices will drop? (i think)
Apartments in Wuhan going cheap, but have some tough "lock in" clauses.
https://www.dailymail.co.uk/news/article-7960471/Police-BARRā¦In Australia, no. The media and politicians are being overtly negative because there's no upside to actually being realistic about what the risks are.
If you predict doomsday and doomsday comes, then you are applauded for predicting it. If doomsday doesn't come, then you are applauded for at least preparing for that scenario.
If you predict that this is all just rubbish, then you are universally criticised. If it does indeed come, then your career is over. If it doesn't come, then you'll still be criticised for not preparing and that it was all just "luck".
The incentives are such that everyone will always predict the next big virus outbreak, next big market crash, next big natural disaster…etc.
So far, the media has also been quite dishonest in its reporting. Rather than reporting the number of active cases, it reports the number of total cases. Of course, the total cases can never go down. The good news is that the number of active cases has been decreasing quite rapidly over the past week and a half. Every day more people are recovering from the virus than those who get the virus. If anything, it looks like the strict quarantining has worked.
Right now, the biggest concern is what's happening in Italy, given that it's the most "connected" country that's had an outbreak. However, I would be keeping close watch on France and Germany, as they'd be the most likely places of an outbreak following what's happened in Italy. If there's no news from France or Germany within the next week, then I think that we're pretty much safe.
There's pretty much no chance that we will have an outbreak in a country like Australia or the US, with very strict border controls. China is in a good position, with their number of active cases falling rapidly. South Korea seems to have controlled their outbreak after the initial huge spike. Europe is in the red now, but if it's contained within Italy and doesn't spread to neighbouring countries, then it'll be well controlled like Korea soon. If these trends continue, it'll be out of the news and the consciousness of most people within a month.
That's not to mention the progress being made on understanding the virus and the potential development of a vaccine.
In terms of how widespread it actually is right now, only 5 countries have more than 100 active cases currently (that's China, Korea, Italy, Iran and Japan).
If you predict that this is all just rubbish, then you are universally criticised. If it does indeed come, then your career is over. If it doesn't come, then you'll still be criticised for not preparing and that it was all just "luck".
Wasn't there one guy who took back that global warming crap but it was too late to take back because everyone was already on that bandwagon? I watched it on youtube…. They say nothing's happening as there is no trend of it and backed it up with some evidence and media talking about it are all lies….
Yes
I think that our economy is a basket case. Currently only supported by high commodity prices. Share markets were highly overpriced and nervous, and that contributed to the 'correction'. The US is now going to drop interest rates. We have a government that will not spend on long term infrastructure projects that would stimulate the economy now, but help the economy into the future.
I put my money on a recession. Unemployment much higher, imported inflation, and house prices drop due to these, and loss of confidence. In short, the corona virus may have just sped up the process.a growing country that doesnt spend on infrastructure is just poor planning.
Mate, if the virus starts mutating and wipes out 90% of the worldās population, forget about house prices falling cos you wonāt even be able to give your house away. Iām not scaremongering because I saw exactly this in a movie once. I canāt remember the name of it, but I think it was from the ā70s and there were big Hollywood actors in it.
Down for a recession
Yes…. a lot of Chinese investors will be unable to invest… leaving more room for Ozzies.
The effects are being felt all over the world.It is a buyer's market bc of all the vacant properties.
Not only corona will have a effect but im sure this will.
https://www.abc.net.au/news/2020-01-02/australian-expats-facā¦
Our economy and store of wealth is (more or less) built around the housing market. My concern is that large number of people who have, recently, taken out large loans on homes due to the insanely low interest rate. A lot of these people make these ridiculous āinvestmentsā (?gambles) on the basis of ever-increasing house price. Should they hit a rough patch, such as losing some work/their entire job or their tenant(s) go through a similar situation (and therefore donāt pay rent) then this will lead to pressure to sell the property, if not eventually forced; a default. It gets really dicey when people see a dip in the prices, from the initial sellers, and the potential panic selling ensues.
The problem is that our economy (and many others) is pure speculation and debt. Whilst my particular investment (read: debt) is āsafeā, when itās based on the debt of another person which, itself, is based on the debt of another, youāll eventually reach a point where the given debt is āriskyā. If that portion of the chain fails, and the higher levels donāt have the capacity to ride it out, then the domino effect begins. It might get stalled, at various points, as people manage to cope, but I fear there are too many people who have over-leveraged themselves and wonāt be able to ride it out.
NB - Iām not an economist, nor have any formal training. Itās just my uneducated observations of something which is likely vastly more complex than what I comprehend.
/Cletus voice
Oh noes! My eck-wit-teeees!This virus has shown up how ridiculously dependent we are on China; whether it be importing goods we use, or our educational institutions. A bit like the property moving from a "home" to being a ponzi scheme vehicle, it seems our Unis have gone the same way (so much for a place of learning and supposedly being smarter).
As much as I'd like housing prices to drop to something damn realistic, Governments are in the same "paper money" boat, dependent on higher property prices so I don't expect anything long term to happen sadly.
Only way it affects the housing market is if it causes mass unemployment due to businesses not being able to do business.
At least most Austrlians can get night-fill jobs at Coles or Woolies, they need 7 people just on the tp aisle these days.
According to the media hype, social media and political scare mongering - yes
In reality - no
Stock market prices are more fluid and volatile. By the time housing prices are influenced by carona virus it will all be a distant memory.
Source : just me sh!t talking.