What's in store for 2009?

What’s in store for 2009.

Seems like everyone is giving their predictions for 2009. It also seems everyone has a different opinion. If you go down the street and ask someone what’s in store for 2009 every single person will give you a different response. Some people are positive, some people are negative. Some have very strong views but one thing I have noticed is there is not many that don’t care. This varied response is actually in my view what’s going to happen in 2009. It’s going to be varied and unpredictable in the whole.
Let’s look at 2008 and what’s been. I am not going to get into this too much because we all know what’s happened. The global credit crunch has hit and it has hit us hard. We started the year on the peak. It was the peak of almost every single market, not just the real estate market. The dollar was high, the stock market was buoyant, petrol prices were well over $2 a litre, house prices had just hit their peak,  but everyone knew that that was the peak by this time. We have been in a year of constant downward trends. Consumer and business confidence has been at an all time low with sales volume and capital have steadily been lower and lower and unemployment levels this year have risen 2%. I know three of my friends who lost their jobs in the last week because of less business turn over.
The global credit crunch started by dodgy subprime loans in the states has had a ripple effect around the world and instantly devalued the price of all the assets we use to trade on. The stock market plummeted, oil prices have fallen 138% this year, our New Zealand dollar went into a free fall loosing almost 35c of the American in less than 2 months. New Zealand’s housing market went into dire straits with sales volume bellying out to levels not seen since 1992 (16 years ago) with only approx 55,000 sales being transacted in 2008. Real Estate prices have fallen by up to 10% – 15%in some areas already from their peak in late 07.
The world reserve banks have slashed the official cash rates all around the world. In the states its now the lowest in history at under .2% and in New Zealand it’s almost the lowest level at 5%. Interest rates on houses have come down a considerable amount.  But the banks are not going to lend on any risk at the moment with most of them putting their minimum deposit amounts up to 20% on all new loans. So all up it’s been a year of considerable change and a year that has hurt and seen many people become closer to financial hardship.
2009 is not one that will bring pleasure or happiness to many people caught up in this economic downturn. As credit lending gets tighter and banks put on the pressure  to repay loans on property that has decreased in value and in some cases decreased to levels below what they owe on the property. Unfortunately this is going to be a reality for some people and there will be more and more forced sales from it. Banks will step in and won’t be accommodating if you’re in a position to not pay them back.
I think in 2009 that the economy will start to bottom out a little. I don’t think we will see the prices of oil drop to much further, or the stock market crash to much further. There will be a lot of fluctuation though that will cause consumer confidence to remain low for a period of time. The New Zealand dollar although risen against the US Dollar in recent weeks will remain around in my opinion the 50c mark and will remain around there. But there is still too many uncertainties to place too much  weight on this.
There are still factors I believe in America that could pan out either way. One of the bigger ones is the car industry and the almost total collapse of that. GM and Ford America are part of one of the biggest industries that feed the American economy. This industry is looking at almost completely shutting down. Already workers are taking pay cuts, working less hours just to try and help the companies stay afloat. But the reality is if the government doesn’t bail them out there is going to be a catastrophic meltdown of the economy in America. And it’s not just the car industry that I am talking about. It’s all the suppliers, all the people who service and or repair the cars, the distributers, shipping companies, you name it they will be affected. If the car industry goes under their will be job losses in the millions. They expect there will be more people lose their jobs than people that live in New Zealand. At this time all we know is that the government have given a reprieve till March 09 and we will have to wait till then to see what will happen.
Back to New Zealand what this really means is 2009 will be a year of consolidation for all I think. It will be the time when people who have borrowed on easy credit will need to take a reality check and downsize and live the life they can afford. I think we have in New Zealand seen the huge falls of commodity prices. It’s now a case of waiting and letting that filter though the system. What I think we will see a lot of people tightening up and living more economically. Not because of want but because of having to.
There are things that could happen in 2009 that if did happen will change everything that I have spoken about. The fact of the matter is that the world is on tender hooks in regards to the economy. It’s almost like balancing a car on a pin, it could go any way and we won’t know till it happens. This uncertainty is going to mean though that volumes of sales and consumer spending is going to remain low into 2009.
For the housing market there will be more and more forced sales in the coming year as the pressures of day to day living and the tighter economic conditions start to mean more job losses and less money for families. There is going to be a need for huge cooperation in 2009 between everybody who provides services and products. As sales volumes drop and bottom lines drop costs are going to be cut and this will mean suppliers are going to need to be flexible with their costs just to keep their existing clients. Food costs need to come down as people find it harder to buy for them and their families, and more people start eating less expensive foods. We will all need to help each other. The boom years have been a selfish time when people have made easy money but now for people to get ahead they will need the support of others. 
For first time buyers in 2009 you will have to creatively think how you are going to service and in the first place get a loan to purchase your house. Thats if you dont have 20% of savings. Use the help of faily that already have high equity in their homes and ask to borrow some of it. Its a risk for them but it also will make you accountable for your repayments. There are many ways and its just about getting that help and support and it applies not just to housing as well. We could all save so much money if we worked together in some things instead of fighting to get the most as we have selfishly done in the boom times. This is not the time do do this.
For the aggressive investor and purchaser I think there could be some good opportunities coming up in the property market. There are already properties you can buy that are positive cash flow. And if you’re going to sit on them for a number of years until the economic climate stabilizes to normal again you will do well out of them. Although I do think that property prices will fall further as there will be time when wages come into line with property prices and may not stablise during 2009. I base this on the prediction that there will be increased forced sales which will put pressure on normal sellers to meet the market where the forced sales are if they want to achieve a sale. It will come down to sellers if you want to sell your house for a good price you need to display added value for the purchaser against the one down the road for similar money.
It will be tough out there for anyone in the next year but if you can ride it you will be fine. 2009 will be a year along with 2008 for global change. People will come out of this and look differently upon how we treat both money and the world. I think there will be a lot of good come out of next year. It’s just a case of taking the hit now and getting on with life. We have all lost out but we will all reap the benefits when they do come around.

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