Smoke and mirrors 1.0?

Economic uncertainty, a slowing construction industry, the federal election…..and a declining house market….

Pre start caveat: Obviously this is a condensed post and I’m not going to sit here and write every single little piece of information as I’d end up writing an essay!

2019 is proving to be a very interesting year for all the wrong reasons. Economic growth has stalled and slowed well below the RBA’s predicted target, the construction industry is slowing due to tighter lending criterion as a result of the banking royal commission, all whilst the federal election looms with the potential to throw any current economic stability into turmoil. There is great potential for seriously tough times ahead. Throw in the fastest housing market decline since the GFC and things are not looking rosy.

So what does all this mean?

Simple; until the election results are in very murky waters lay ahead. Not to mention, the outcome of the election could possibly turn those murky waters into some serious mud, making any economic navigation more difficult than it actually needs to be….in other words a difficult economic recovery.

Labour is proposing some serious changes to negative gearing, money handouts and tax policy…none of which I see as being very beneficial to the construction industry. That is simply my opinion and I’m not trying to convince anyone that they share the same belief but its represents food for thought.

The construction industry relies heavily on consumer confidence and the “negative wealth effect” created as a result of declining house prices, which coupled with tighter bank lending criteria has made people think twice about spending money on property and or property enhancement/renovation. Who wants to spend money on a depreciating asset???? This is the root of the problem for the construction industry and we are slowly seeing the implications of these declines with the construction of new homes/units down and DA approvals floundering from their 2017 peak. Confidence in the property market is dwindling and whilst the great Australian dream of owning your own “castle” remains it is looking less attractive to those who already have their foot in the door.  No one enjoys seeing their home equity disappear! (Hence the “negative wealth effect”)

The likely hood of a property/housing market recovery in the near future is dependent on the RBA/cash rate, government/fiscal policy and the banks loosening their “credit crunch” criterion which isn’t easy as APRA’s regulations have made lending tighter than ever before.  If these things come to fruition there is a great possibility that a housing market recovery is likely and things can once again begin to flourish….however only time will tell and how long it will take is anyone’s guess.

So what do we do?

Well; we know that the housing market in Australia over time has been a solid investment and whilst the current market situation looks bleak to say the least, we know that it’s an investment that needs to be considered over the medium to long term. Once you get your head around that fact then you can look at the positives:

  • The cash rate is still the lowest in Australian history and looks set to get even lower with most banks and economists predicting two interest rate cuts from the middle of 2019 until the end of the year.
  • The federal budget is coming into surplus thanks to commodity prices commanding higher than expected tonnage rates and increased demand from China.

These are two considerable points; the first offers a great opportunity to those who can access credit to invest in their current property with a renovation and or add to their property portfolio; remembering that property needs to be seen as a medium to long term investment. Who doesn’t like an upgrade, right? 

The second point is important because the budget coming into surplus will allow for greater government re-investment in infrastructure and restructured tax policy. This should allow the economy to keep ticking along and provide more money for mums and dads to spend.

So what are we doing to counter the current economic situation?

Although MBS can’t guarantee the outcome of the election, we can guarantee that we appreciate all our customers and acknowledge that your success ultimately drives our success; we see it as a mutually rewarding business relationship!

Therefore we are working hard to improve on our current product range with our existing suppliers, looking at possible new suppliers and expanding our product/material base to better cater to your building needs.

Your time is a valuable commodity, the ability to offer greater convenience through an expanded product range with competitive pricing, coupled with excellent transport logistics ensures you’re getting maximum value for your time and money.  

We also understand and appreciate that in the current economic market you need as much help as possible to keep ticking along so please do not hesitate to contact the MBS team if you are requiring any help in quoting/pricing a job with materials and or site logistics. Anything MBS can do within reason to better help you and your business is our prerogative!

We endeavour to go above and beyond to ensure our success reflects yours!

 

Fernando de Sousa

General Manager