Olly Newland’s Column, January 2010
A Happy New Year to you – and hopefully a prosperous one as well.
Last year was not a particularly good year. There were times when we thought that the end of civilisation was at hand. Prospects look a lot better now – but I feel that any real recovery could be brittle. Having said that, I’d estimate there is a 50/50 chance that the economy and property prices will remain FLAT during the next 12 months.
As suggested in my last column (available here) I think there’s a 25% chance of another round of recessionary events and maybe a 25% chance of massive inflation (or hyper inflation) … especially considering the jaw-dropping amounts of funny money central banks around the world are pumping into economies.
So-called ‘experts’ humbled
At the beginning of last year several ‘expert’ commentators predicted falls in property prices of up to 30%. The media loved it, of course, and published breathless, lurid stories based on these silly predictions. In contrast, I came out and predicted a flat market and that, more or less, is what it has been.
Average prices dipped a little – virtually within the margin of error – and have now, according the statistics, recovered almost all their notional losses. Not so lucky were developers and finance companies who took the brunt of the day the bubble burst.
Predictions are always tricky, but even so, those so-called experts have been discredited – revealing, in some notable cases, that they possess only a shallow understanding of how the property market actually works. In the same vein, whatever you may think of the pointy head at the Reserve Bank, they have got one thing right in my opinion: low or moderate interest rates are the key to recovery and prosperity.
To be sure, there are dangers in too-low interest rates, just as there are dangers in too-high interest rates. These dangers are: