Rainbow Realty Deal August 2013

“Content makes poor men rich; discontent makes rich men poor.”
Benjamin Franklin

Well you could hardly say that the local property market is ‘dead’ at the moment with over 15 sales recorded in Rainbow Beach over the past three months. Yes – we would still describe it as a “buyer’s market” and supply is still above that of demand however; prices do not appear to be getting any lower now so those that have been watching the market for a while are definitely starting to make their move.

By the time this edition of the Community News comes out, the Auction at the Rainbow Beach Hotel will have happened and there may well be a new owner of the Pub. It is such a great building and it would be great to see it stay in local hands. Since the Pub was completed alongside the Plantation Resort apartments in late 2008; there has been a lot of local talk and conjecture about the style, design and layout of the complex. But, at the end of the day – it cannot be disputed that the development is iconic and beautiful. The Hotel itself has been built to the highest standards with no expense spared on features such as marble bars, pressed tin ceilings and double hung windows. We are very lucky to have such a great development in our small town and if it hadn’t of happened when it did; we probably would’ve waited another 20 years for such a thing.

No one could’ve predicted the fallout from the GFC would be so severe and last as long as it has.

However; in spite of the GFC; overall our national economy is actually in pretty good shape – especially when compared to some economies overseas. For example – the US city that was once the symbol of America's industrial boom, Detroit, has filed for bankruptcy with debts worth $15 billion (Yep….. $15 BILLION), after a long, slow decline in population and in the auto manufacturing industry. The decision to file for bankruptcy could result in civil servants being made unemployed, selling off assets, raising fees and scaling back basic council services such as rubbish collection and snow ploughing.

Public services had already been drastically slashed, leaving health and education departments in turmoil and over 70,000 properties have been abandoned as the population decreased. An estimated 40% of street lights do not work and only a third of ambulances in the city are in service, leading to massive delays in answering emergency calls. (Source: news.com.au)

The move had been feared for months, and marks a turning point for city and state leaders, who must now confront the challenge of rebuilding Detroit's broken budget in as little as a year. The decline of the motor manufacturing industry has largely been blamed for the financial problems in Detroit as that is what has sparked what has essentially been a ‘mass exodus’ of citizens and affiliated businesses from the city.

Property prices in Detroit have obviously plummeted and there is not much hope of this changing in the near future.

In contrast, at the end of the last Financial Year, the Australian economy achieved a remarkable milestone - closing off the books on 22 years of consecutive economic growth. That is a remarkable achievement. Despite enormous challenges, the Australian economy has largely ‘weathered the storm’.

It it is important to recognise the period of intense economic change we have all lived through since the GFC hit is 2008. For example, on the eve of the GFC, the Australian economy was growing between 4 – 5% per cent a year. Economic growth today is running at 2.5% - far from recession territory - but below its long term average of about 3.25%. (Source: news.com.au)

The high Aussie dollar over the past 4-5 years has sounded the death knell for many large manufacturers. Ford Australia is closing its doors and Holden is warning of more to come. In addition, the mining boom appears to be winding down. But there are silver linings to a lot of these economic storm clouds. For example, it might be a good thing if China's maturing economic growth could be made more sustainable by authorities there curbing a recent credit boom.

As the rest of the world recovers, other currencies are becoming more attractive to investors, meaning the Australian dollar has gone back down to a more sustainable level of around US92 cents. Again, this is a good thing. The falling Aussie dollar will relieve pressure on our struggling industries such as manufacturing, education services and tourism, all of which are significant employers.

Meanwhile, Australian households are sitting on a war chest of savings, having spent the last five years using lower interest rates to pay off their mortgage faster. All these things are positive and point to an optimistic outlook for Aussies. Despite the doomsayers – the sky didn’t actually fall in because of the GFC and the best thing we can do for our country right now is to inject some consumer confidence and go out and buy stuff. Buy a new car, go on a Aussie holiday or – best idea of all – buy a beach house!