Australia remains one of the most popular overseas destinations with Britons dreaming of a new life abroad. It embodies the dream with its near perfect climate nationwide, its strong economic record to date, the lovely Aussie laidback lifestyle, and the outdoor centric way of life.
However, ever since at least 2008 economists have been consistently talking the nation down, warning of an economic cooling, of rising interest and inflation rates and a property bubble about to burst.
Against this backdrop of doom and gloom however, Australia was continuing to rise – defying all those who said the real estate market was overvalued, and that the fundamentals were not in place to support the nation’s economic ascension. But…things are finally beginning to change…for the worse. But don’t panic – it’s certainly not all bad. Here are the 3 things that expats and would-be emigrants need to know about Australia’s cooling economy, and how it may affect jobs and property in Australia.
1) Australian Property Values are Cooling
Last year a leading authority on global property markets published its findings and advised that despite exceptional growth throughout 2010, 2011 was going to be the year for a cooling in Australia’s real estate economy.
The Global Trends in Real Estate report from Canada’s Scotiabank returned the following comment from economist Adrienne Warren : –
“While Australia’s close trade ties with Asia and resource wealth will continue to underpin a solid pace of domestic activity, higher interest rates will worsen already strained affordability.”
Well, it turns out she was right! According to the very latest figures, property prices Down Under have fallen for the sixth consecutive month pretty much everywhere, (except Sydney)!
Brisbane and Perth have seen property values fall by 6.3% and 4.7% respectively over the past year for example, and average price falls for the past few months have been 0.5% in March, 0.4% in April, 0.3% in May and 0.2% in June – according to RP Data-Rismark Hedonic Home Value Index.
For migrants this is great news on the one hand – it means that they will pay less for their property dreams in Australia. On the other hand however, interest rates remain high and are at least partially responsible for this cooling…and whilst they remain high they affect overall affordability for anyone requiring a mortgage to purchase property in Australia.
For would-be expats it’s a case of renting before you consider buying, the market is not booming out of control anymore therefore it’s no longer the case that if you don’t jump onto the property ladder you’ll never own your own home. For those already living in Australia and looking to move or purchase their own home, perhaps you’re still better off taking a wait and see approach.
According to The Economist, the Reserve Bank of Australia’s current house price-to-rent ratio graph looks very similar to Ireland’s right before their property market imploded!
2) Employment Growth in Australia is Cooling
The Herald Sun has reported that in Australia “employment growth is now at its lowest level in 15 months as the economy matches the drop in consumer confidence and weak retail sales.”
The unemployment rate reached 5.1% in July, an eight month high: it went against forecasts. In addition, Australia’s central bank has been forced to cut its annual growth forecast from 4.25% to just 3.25%, proving that the nation’s economy is no longer immune to the pressures of high interest rates and weakened consumer spending.
Whilst some are calling for a cut in interest rates, others point out that high inflation means rates need to remain high. The dilemma facing the Reserve Bank of Australia is that “surging commodities exports to China boost expectations for growth and inflation, while consumer confidence is in its deepest slump since the global financial crisis of 2008.”
It seems that this deep division runs right through the employment landscape as well. As the BBC points out, on the one hand you have high employment rates in the mining and commodities sectors, whilst elsewhere there’s a slowing down of demand for workers, and even job cuts which are affecting many employment sectors countrywide.
Would-be expats need to be aware that according to this year’s ‘Outlook for Net Overseas Migration’ report from the Australian Immigration department, immigration numbers are going to be carefully capped to ensure Australia does not take in more migrants than it can conceivably cope with.
As emigration statistics have remained low with fewer Aussies heading off abroad, so the numbers of inward migrants will be carefully checked to ensure the economy doesn’t end up with a surplus of workers.
If you want to emigrate to Australia therefore, you need to look carefully at the skills still in demand, and you need to be realistic about your employment prospects. Certain sectors of the economy remain strong as stated, whereas many others are being impacted by high unemployment, high inflation and high interest rates.
Don’t Let the Doom and Gloom Put You Off
The reason why everyone’s happy to talk down Australia’s prospects is because the nation is still doing better than the UK, the US and most nations in Europe. Jealousy is a terrible thing…
Let’s contrast all of the above figures and findings for Australia against Ireland, the UK and the US to help put things in perspective.
Unemployment is running at 9.1% in America, 7.7% in the UK and 14% in Ireland!
Property prices have fallen in Dublin by 53% since their peak in 2006! US house prices fell for the eighth month in a row to February 2011, and according to the Halifax, British prices have fallen on average by 20% since their peak in 2007.
So, in reality, Australia isn’t doing too badly is it? Yes expats and would-be expats need to tread cautiously as there are some fundamental issues likely to affect Australia’s economic strength going forward, but at least the country has got things in much better order than most other nations in the industrialised world!