What happened to property after the ’87 stockmarket crash? Does anyone have a story to relate?
forwards ever
backwards never!!Hi Wullah,
The graphical representations I have seen indicate that the Perth and Sydney markets had a surge in growth in in 88/89 period. Brisbane had a ‘jump’ but did not spike as much as Perth and Sydney – which coincidentally dropped in the early nineties.
Now whether or not this pattern can be attributed partially or totally to the share market plunge of 87′ is debatable. I am sure it played a part but not the whole part.
Derek
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Skype – derekjones2113Not a personal story, no. Just the big picture generalisations and oversimplifications I’m so very average at. Here goes:
The Reserve Bank crapped itself, opened the liquidity floodgates, and at the same time reduced the cost of borrowing money. Growth in currency jumped from ~10% in 1987 to a peak of 15% in 1989. The broad M3 measure of money supply increased from 10%pa to 19%. Interest rates were reduced, with standard variable rates falling from 15.5% to 13.5% in just 6 months. Much of this cheap and plentiful money flowed into the perceived safety of real estate. The increased demand for real estate led to unsustainable increases in house prices, which self-perpetuated as an orgy of additional borrowed money tried to wedge itself into already over-inflated assets. The end result of all these excesses? The recession we had to have.
Notice I called it the recession we had to have, without quotation marks? That’s an indication of my lack of sarcasm. When we, collectively, spend more than we earn, the economy has a historical habit of biting back our excesses in a most brutal fashion.Hope this helps somewhat,
Cheers, F.[cowboy2]References:
M3 Monetary Aggregates – RBA http://www.rba.gov.au/Statistics/Bulletin/D03hist.xls
Housing Loans – Indicator Lending Rates – RBA http://www.rba.gov.au/Statistics/Bulletin/F05hist.xlsI remember the events well. I even remember I was on vacation in Sydney when I heard news of the crash.
Many inexperienced investors were caught in the sharemarket crash – many having invested near the peak of the boom, egged on by the normal hype and greed that occurs during booms.
The crash wiped out lots of investors and for a few months everyone lost confidence – in shares , in business, in the economy.
So there was a period of property bargains – I remember well because we bought our family home in November 87 just after the crash and there was no competition.
The government helped things move on and lower interest rates to stimulate the economy and starting in 1988 we had a serious property boom particularly in Sydney, Melbourne and Brisbane.
An unsustainable boom that led to the recession we had to have that wiped out lots of businesses and property investorsMichael Yardney
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