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Unemployment & Property Prices In A Post Covid Sydney

This week the ABS released the unemployment statistics for May. Now economic forecasters love stats and often declare the employment rate as a key driver of house price action. 

 

But is there really a correlation? 

 

First, lets look at the numbers. Unemployment increased by .7pts to 7.1% whilst total monthly hours worked decreased by 9%. 

 

Over the same month auction clearance rates & total transactions increased nationally, with house prices pulling back fractionally. 

 

No real correlation so far.

 

In Australia during the early ‘90s recession and more recently during the 2008 GFC we did see unemployment increase and property prices decrease but we now know price moves were more directly related to the tightening of credit policy, and property prices rebounded as lending and interest rates eased.

 

We also witnessed this more recently in 2017/18 where tough lending due to the financial services  royal commission pumped the brakes on the property market. 

 

So why keep an eye on unemployment? Well lenders are concerned and so should we because lending policy is based on how it is perceived we can service debt. Right now lenders are taking extra time and precaution to assess lending so if you’re preparing to buy now  factor this into your time line and be ready to come under extra scrutiny from the banks. Higher unemployment numbers really can affect you, when they lead to defaults and a change in credit policy. 

 

Sources: ABS | Corelogic |Macrobusiness

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