Article 14 August 2020 by Tonya Davidson Dare we say it, Recession. Let's debunk it, because the economic metrics around the technical recession we find ourselves now in, are recording vastly different figures to the last recession. We appreciate one can glean insight from past recessions and their recovery however how reliable are these past examples when the very fundamentals that shape a recovery are so different from past experiences? When we focus on property we simply can not look at the state of play in isolation.The Drivers When we consider the drivers of economic growth, that in turn underscore our property landscape, we consider the following:Consumer confidence - How do people view how we are tracking economically?. Are they optimistic about the future? This leads to spending, driving the engine room of any economy. Obviously confidence is currently at low levels. Interest rates - Tick, no complaints there. Our last recession in 1990, the cash rate reached 17.5%. Population growth - Here we have a sticking point. Our immigration has been significantly curtailed. Migration contributes to about 60% population growth. Unemployment levels - Ideally 3%, we are now around 7% and trending toward 10%. When comparing unemployment levels to other world economies we appear to be doing OK however unemployment numbers are being held artificially low due to job keeper. Government Policy- Currently our government appears to be proactive, as evidenced in the fiscal stimulus packages released before we had even officially reached a recession. Te government appear to be pivoting with this every day. Economic Growth - Ideally we want to be sitting at 3.5 - 4% and currently we sit at 1.4%. Australias GDP has retracted by 1.32% in comparison the the GFC peak where we witnessed a 5.2% retraction.. It’s only the third time annual inflation has been negative at -0.3% - the last time being in 1997. The cost of living has gone down which we all agree is good in the short term however if it continues, production will recede which will trigger further rises in unemployment and affect economic growth. Wages Growth - Here we sit at 2.1%. Wages growth underpins spending, production, investment and ultimately economic growth. Money Availability - Here criteria will tighten. Supply- a double edged sword. Currently the low supply of properties is propping up the market but it’s not sustainable.As we entered the first quarter of 2020 after a very strong second half of 2019, we found economic metrics to be favourable for a prosperous year in property…..then we found ourselves in a Health crisis that has led to an Economic Crisis.The First LockdownThe April Lockdown triggered a slump in property listings as well as clearance rates. Recovery was swift after the lockdown lifted and consumers could forecast a beginning a middle and an end to the lockdown. Confidence was restored……. momentarily. When analysing the figures the only real dip in property supply was April. We then found ourselves in new economic territory with a stimulus taking place before the economy had registered any significant economic impact.The Second LockdownLock Down 2 is now upon us and recovery from this lockdown depends largely on how long we will be under this directive. The longer the lockdown the longer the economy will take to recover. Negative economic reactions start to become more stubborn to shift if we remain incapacitated for too long. June saw a property values recalibration when we witnessed an average 34% of sellers reducing their asking price. That figure on its own is meaningless but when we compare it to the same time last year, it is 5 times greater. That said annual Melbourne median house price for the 19-20 Financial Year finished 6.1% higher despite a 3.5% drop in the final financial quarter of the 2020 Financial Year.Where to from here?Currently property values are on a downward trajectory, stock is low, the government stimulus is entering the economy, however it is all dependant on how quickly we can resolve this health crisis, how long the stimulus lasts and just how deep this economic low will be. If getting control of the health crisis is too drawn out unemployment, immigration, and consumer confidence will weigh on the economy like a ball and chain. Who knew wearing a mask could affect the value of your home?