At the time of writing this the share market has fallen approximately 35%, with the ASX 200 dropping from 7,162 points, down to 4,546 points within the last 40 days. The pandemic that has caused this crash will pass, and the economy will recover.
No financial crisis or economic downturn is identical, but we thought we would have a look at the five most recent crises, review the share market movement, and what the corresponding effect was on the national property market.
In 1972 Australia experienced a short recession, the sharemarket fell -23% in 1973 and -27% in 1974. While in 1973 the national property market rose +39%, and then went up the following years +24%, +24%, +20%.
In 1982 Australia experienced a short recession, the sharemarket fell -13.9%, during that year the national property market rose +7.8%, and then went up the following years +5.8%, +12.9%, +10.55%.
In 1990 Australia entered quite a severe recession, the share market fell -17.5%, during that year the national property market rose +4.1%, and then in following years rose +1.5%, +4.8%.
During 2001 we had the September 11 terrorist attacks & the dot com crash, the following year the share market fell -8.1%, during that year the national property market rose +13.9%, and then in following years went up +19.4%, +16.2%.
Most recently we had the GFC in 2008, that year the sharemarket dropped a whopping -40%, during that year the national property market rose +7.5%, and then in the following years went up +1.9%, +13.7%.
So as you can see in every recent crisis, when the Australian share market fell, the national property market rose. Now the impacts of each economic downturn are felt differently across the capital cities or regional towns of Australia. That is why when building our strategies we always buy into markets that show value, and we bring diversification into the portfolio as soon as possible.
As part of our investing strategy we anticipate these events, they are part of the cycle – which is the reason we advocate cash buffers and why these are so important.
This crisis will pass, and the economy will recover – our business is here to assist people in making good decisions during this time and into the future.
All supporting data below, please feel free to forward onto your friends, colleagues and clients.