After years of being overshadowed by the local economies and housing markets in faster-growing parts of the country, New South Wales is now in the best position to weather the global financial crisis, said a leading economist last week.
All the pieces are in place favouring Sydney, said BIS Shrapnel Chief Economist Frank Gelber, including a falling Australian dollar and a housing market that hasn't really risen for more than five years - and can't keep up with demand.
"The housing prices [in NSW] are still the highest, but they haven't increased as much as the other states in the last five years," Gelber told an audience at the annual BIS Shrapnel Research and Forecasting Conference in Sydney. "We're set for an upswing."
That might not happen immediately, but at least in the short term, NSW won't see much of a downturn - like Queensland or Perth, where housing prices have risen more dramatically in recent years backed by the resource boom, he said.
"In New South Wales, we're not going to see the negative shock as in those other states," said Gelber, "but we've got three tough years to live through, and then we've got a strong recovery coming."
That's in part because the NSW economy is more diverse and has a focus on tradable goods that will benefit from the low Aussie dollar and encourage more export demand and profit. NSW also has no ties to the currently declining minerals market. In recent years, the state had struggled with tradables due to a high-valued Aussie dollar - which was almost on par with the US dollar last year.
"The rise of the [Australian] dollar is over, yes - and we've got a demand shift," says Gelber. "Once we get through that, the shoe will be on the other foot and we'll see a much higher-growth demand in tradables. It's nothing fundamentally to do with the states - it's to do with the dollar."
Gelber also pointed out an overwhelming housing demand in NSW and said the stock deficiency could reach 77,900 homes in NSW by 2010 according to one BIS Shrapnel chart - more than double that of any other state or territory. In South Australia and Tasmania, supply will actually outstrip demand this year, and the next. Although there's also a significant shortage of housing in Queensland and Victoria, Gelber said, Queensland would be hurt by its ties to mining. BIS Shrapnel predicts overall mining investment to halve in the next two years throughout Australia.
"I'm really worried about the minerals investment states," he added. "I'm less worried about NSW - and Victoria will be OK too."
With interest rates at their lowest for more than 50 years, there are some great rates available. The best thing to do is to compare rates from all the lenders. Let us help take the leg work out of doing this - Compare Home Loans now
Top Suburbs :
Get help financing your investment
Do you need help finding the right loan for your investment?
When investing in property, it is important to make sure that you not only have the lowest available rate that you can get, but also have the correct loan features for your needs.
Just fill in a few details below and we'll then arrange for a local expert Aussie Mortgage Broker to contact you and work out what features or types of loans are right for your needs. We'll even help with the paperwork. Plus, our mortgage broking service is at no cost to you.
We value your privacy and treat all your information seriously - you can check out