House price falls are a drag but other parts of the economy will power on.
Trees don’t grow to the sky endlessly and house prices don’t go up forever but some people seemed to think they would. And now that it’s clear they won’t, the fallout will drag on the economy.
Ever since the mining investment boom ended, an upswing in the housing cycle has helped keep the Australian economy moving forward. The housing cycle has now turned down though, as record supply hits the market, lending conditions have tightened, foreign demand has retreated and there is uncertainty about negative gearing and capital gains taxes.
This is naturally causing angst about the outlook for the Australian economy and sharemarket, particularly against the backdrop of various global threats. And after 2018’s dismal sharemarket performances, it’s natural that investors feel a bit wary.
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