The Global Financial Crisis touched down in Sydney – and promptly left. In 2009 one quarter of economic activity experienced contraction – followed by a robust rebound. Already the Reserve Bank of Australia has increased interest rates to slow growth. Australia is faring well.
In the USA, signs of life are emerging. Yet the “green shoots” of economic growth promised by President Obama appear to be weeds in the lawns of foreclosed homes. The New York Times contains an exposé on real estate in Cape Coral Florida. There houses that once sold for $850,000 are available for under $300k. Of the 64,000 single family homes, more than 18,000 have been foreclosed. Today an entrepreneur drives an air conditioned van around with potential investors. The tour is of foreclosed homes.
Most striking in the article is the human element.
Kevin Jarrett seems a lot like me. He’d relocated for work and initially found selling real estate a good profession. (Change the name, change the city and change the profession and pretty soon you might relate, too.) He and his wife and daughter settled into a good life with a nice home and a few investment properties. But when the bottom fell out he was hit. Hard. After the three investment properties were taken by the bank, his wife left – taking their daughter. He tried to maintain his home. One day when washing his face the water was turned off. He lost his home and is on the move.
The Grapes of Wrath 2010.
Looking at the level of hardship in previously well-off communities like Cape Coral makes it apparent this recession will take a decade to heal – so long as a double dip doesn’t occur. The “floor” of this drop is a long, long way from the heights before the plunge. The way back up takes a lot longer than the drop.
Australia (again) was well sheltered. Even housing prices retained their gusto. Some outer-west suburbs in Sydney dropped by double digits. Yet by the September quarter 2009 housing starts had increased 10% nationally. Prices have increased in most Sydney suburbs. Of the major global economies, Australia was one of three to record growth (alongside Singapore and South Korea).
All that said, Australia has seen pockets of hardship – and for every Kevin Jarrett of Cape Coral there’s a similar hard luck story Down Under. Thankfully strong economic leadership and underlying demand for Australian products and services mean there are fewer of them.
