The devastating floods in Queensland continue to bring heartache to thousands of people as the true extent of the loss of life and property is revealed. It has also led those involved in property investing to re-evaluate their purchase suitability criteria.
Australia has managed to stay out of recession throughout years of drought and challenging economic times. The Queensland floods of 2011, however, are expected to add immense pressure to the Australian economy, affecting diverse business sectors, including property investing.
In a recent interview, Australian property investing expert, Rick Otton, outlined the inflationary pressures that will be direct consequences of the Queensland floods.
“The affect of the floods on Australia’s agricultural and transport sectors will be seen on supermarket shelves immediately.” says Mr Otton. “But the cost to the whole economy in terms of rebuilding devastated communities will not be felt until the second half of the year.”
He went on to explain that the emotional cost of the floods will dramatically affect the property sector, with many people wanting to divest themselves of their properties quickly. However, buyers will be very hesitant to enter a troubled market, with increased insurance costs and, potentially, interest rates.
“The Australian and Queensland governments will be injecting a huge amount of funds into the rebuilding of whole communities, and this alone is inflationary.” explained Otton. “The Reserve Bank will see the immediate increase in spending as a post-disaster ‘spike’, but the ongoing injection of funds will put pressure on home loan interest rates in the second half of 2011.”
Evaluation Time For Property Investing
Property investors need to re-evaluate their strategies for the year ahead, taking into account the economic pressures that will come to bear on the Australian economy. The Queensland floods have affected:
Mining contractors - as projects have been halted during heavy rain and flooding
Mines - coal mines have been closed, with some suffering massive loss of plant and equipment. Others have been unable to get their coal to ports.
Rail and Ports - rail lines have been damaged and ports closed causing coal to be stockpiled.
Sugar Industry - flood damaged crops have resulted in increased imports from Brazil
Summer clothing and lifestyle - have all suffered as a result of the downturn in tourism due to inaccessible holiday destinations.
Environment - the fragile corals of the Great Barrier Reef are under threat from the flushing of toxic sediment into their habitat
The Rick Otton property investing approach has always been considered innovative, but in uncertain times such as these, the more traditional ‘experts’ in the real estate industry will be flying blind. Because they have been operating in a relatively stable property environment, most do not have the ability to be flexible in their thinking.
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