My Thoughts for Economy and Property in 2024

@Nobody aka somebody and @Graeme the Oxheart ... ...have asked for my thoughts in the economy and property in 2024 as per below in the 2023 thought thread.

My Thoughts for Economy and Property in 2023

So here it is

Property
Sydney -I feel that Sydney will do maybe 3-4% and stabilize. Sydney households are heavily indebted and they will feel the pressure the most..with rents at ridiculous levels this is going to also limit saving for a home. The real elephant in the room is what happens with jobs. If this side deteriorates further then the impact on Sydney will be even more. Immigration cuts will also impact things.

Melbourne - Melbourne is pretty much at the bottom and the only way is up...it will do 3-6%growth. It is now looking cheaper than parts of Brisbane and a lot cheaper than Sydney. The rental market is really heating up. Again immigration and jobs will have an impact on way things go. This is future star market possibly early as 2025.

Brisbane - I feel that Brisbane is seriously over valued ...it does not make sense in most parts it s more expensive than Melbourne and rents are higher. A lot of price increase were due to people migrating up North from Sydney/Melbourne. This has now slowed. And there are signs this is slowing and oversea migration favors Melbourne. The rental market has been red hot but there are signs it is slowing primarily due to affordability compared to wages.

Hobart -I reckon we could see another 5% come off Hobartas migration reverses not only internal but also due to overseas migration. A lot of price increases were due to COVID and working from home. This has now slowed a lot. The rental market has been red hot but there are signs it is slowing primarily due to affordability compared to wages and less demand.

Adelaide - its still growing and expect another 3-5% growth in 2024. The rental market has been red hot it will slow but rents will continue to grow more slowly. I feel that a lot of Adelaide's growth was due to overseas immigration...as this is rapidly dialed ...it will flatline.

Perth - This is the star market 10-15% growth in 2024 is real possibility . The rental market has been red hot and doubt it will slow as wages are high. Perth is much less reliant on mining and the defense industry will keeping things moving. There is also a massive shortage of houses...currently Perth builders have a capacity to buld 16k homes when demand is sitting at 25k per annum. Whilst international immigration is important...most come from the Eastern states and New Zealand.

Economy
Interest Rates - Interest rates will come off very late this year...early next year. Don't get too exited as rates will not get below high 4 to low 5s this time. The RBA will be very very cautious...unless the economy tanks....even then it will no go down as low as COVID.

Inflation - Inflation is already at just under 4% ....by Q3 of the year it should be just below the 3% mark.

Borrowing Capacity - borrowing capacity will increase but not as much as people think. The banks will tighten their processes to ensure loan quality is maintained.

Repossesions - this ill trend up mostly due to insolvencies in the small business space. People have held off a long time...this could be the year thing come out of the wood work.

Mortgage Rates - i reckon mortgages for OO PI will sit on average at 5-5.5% by mid next year. Initial cuts will happen later part of this year. But I cannot see rates dropping much past 5%.

Unemployment - cost cutting is already happening and as a result jobs are going. The rate of jobs growth has slowed. I can see unemployment sit at between 4.5-5% by year end. Jobs have held up surprisingly well...lets see if it holds up...with corporate cost cutting and insolvencies.

Fixed Rates Coming Off - the mortgage cliff ...it will continue for some...adding further pressure.

I expect the peanut gallery will now go into overdrive.

Happy to hear your constructive views.

PS - ChatGpt /Google Gemini eat ya heart out........

 

Thoughts on Bitcoin and Joe Biden's deteriorating memory?

 

nice. Tho I feel your Perth numbers are rather pedestrian given the heat in the market.

So in summary, after Perth it's all into Melbourne!

 

—— 2026. perth continue to boom

2026 Melbourne

 

With unemployment increasing faster than expected, inflation coming down quicker than expected...

Without rampant population growth - we may be heading for a negative QTR in Dec 2023. This qtr doesnt include the last 2 rate rises into repayment calcs either. Negative in actual amounts would suck.

• Jim Chalmers warns over weak economic growth

This will be the final nail in the coffin for any rate rises. Pivot in RBA words will come within 1-2 meetings.

And then another 90 days of prints like these (inflation slower, unemployment higher, and growth slower) --- that will all but put inflation back in the 2-3% range over a 6 month period --- the rate cutting cycle will begin.

Scarily, the above outcome of events may put us in a small official recession too.

 

On the ground, definitely feel like job cuts are happening and not slowing down.

Anecdotally, lots of companies including big 4 consultancy did not do the normal performance management during COVID to now. There is a big layer of fat and many workers who are complacent. Knives are coming out now.

Top of cycle is definitely in, but how long and how deep will this be will be interesting.

 

Ya never know with way things in Vic we may see it as the horse to bet on from late 2025.....

 

I don't think that anything @sash said was unreasonable. I was expecting him to predict a collapse in prices, interest rates to spike, and property investors being forced to do OnlyFans to make ends meet!

I'll throw in my thoughts, but I've been consistently wrong about everything for so long that you'd probably be best to do the opposite.

January's CoreLogic figures show Sydney being flat over the last quarter and Melbourne falling. The ABS lending indicators for December show a big drop for loan commitments to buyers, down 4%. That's only one month, so it's too early to determine whether it's a trend, but it's generally signals the direction that property prices will move in.

Jeremy Grantham, who is an even bigger bear than I am, has been arguing that property prices make sense for a world of zero percent interest rates, and will have to fall by 30% to reflect the current levels. He thinks that any adjustment will be slow. Borrowing costs are up 60% since 2021, and borrowing capacity is down 30% or 40%, so I think that he's got a point.

I suspect that interest rates aren't going to come down significantly unless we have another major crisis. The RBA estimates the neutral rate to be around 3.8%, so we're probably at a new normal rather than in a spike.

Lastly, I believe that there's a massive bubble building around AI and related stocks. I'm not sure sure when that's going to blow.

 

Biden will remember that he's actually Satoshi Nakamoto...

He should probably step down in favour of someone like Gavin Newsom. But he still strikes me as a better option than Trump 2.0.

As for cryptocurrencies, there's been a lot of money pumped into that space, but I'm yet to see a successful project. It's just gambling on a speculative asset, that has no intrinsic value...

Which means it'll probably triple in value this year.

 

You spelt 10x wrong

 

Just put a photo of the moon.

 

My thoughts:

Inflation YoY number to be a bit choppy this year (expected due to base effects), but clearly, high inflation is dead - The media and propertychat "shock jocks" will scream victory at every upswing or downswing CPI print, ignoring "X doesn't happen in a straight line"... High inflation woes will be obviously dead to all when it's already too late.

Yet again, economists, central banks, will be wrong - Maybe it's not a hard landing - But it's a short sharp return to the mean - That is, slow, downward global growth among western economies. Our economies have not changed. Unemployment trajectory will be higher than expected into 2025/2026.

China will look to be recovering this year, but at some point, there's no saving China's dismal domestic demand, shrinking population, stale government, and slowing demand from the west as consumer bank accounts are drained negative (see above) - Can't save the country with dying domestic demand and noone to export over-production to (their current state). At which point, if iron ore prices haven't already collapsed, they surely will, impacting our government, economy, jobs.

The "impossibly low" downward cash rate trajectory of the past 15 years will continue - everyone screaming "never see zero rates again!!!" will be forgotten. Back we go to pre-COVID business as usual, albeit with a severe hangover. Low rates here to come. Property prices will continue up, but I won't pretend to know at what rate...

And after all this - People will look back and say "it was obvious!" - Just as we do for the COVID anomaly.

Don't get me wrong - This year won't look all doom and gloom, until it does. The beginnings of all this toward the end of Q4 / start of Q1.

A gloomy outlook yes, sorry

The caveat: War.

 

Been to quite a few opens in Sydney.....lots of stock and people on the market. Things are actually selling well for the moment...

But I reckon as stock increases and if the job situation goes south....it is likely the pain will be felt there.

A lot of the smarter money has listed homes particularly in the top end.....lets see...

 

7-8%, Just my 2 cents worth of opinion.

 

Could do...but it is getting expensive relative to wages.

The other issue is immigration has been but down dramatically...I reckon they will over correct for previous years. Would not be surprised if we only get 180-200k immigrants in 2025 and 2026. This will affect Adelaide disproportionately.

 

Thoughts on Darwin and NQ @sash ?

 

I reckon there will be some more growth in both these locations.

I like Darwin a bit better than Townsville. Medians are about 500k and 440k respectively. Can see medians of 600-650k in the next 5 years.

 

I know we're talking about 2024 only but for the newbies reading this thread, a majority of investors are in it for the long term.

Property investors are aspirational and committed to the long term (page 10)
Long-term capital growth continues to be the most important aspect when choosing an investment property, followed by long-term rental income.
Short-term tax benefits continued to be seen as the least important driver when choosing an investment. Property investors are looking to improve their lot and have a financially secure retirement.
When asked why they choose to invest, the most important reason was to be self-funded in retirement without any reliance on government support, followed by a desire to provide a better life financially for themselves and their family, and adding to their retirement nest egg.

 

Back on topic.



Be prepared for bad numbers: Recession staring at us in the face.

 

You forgot to add that the wages growth has been extremely strong. And the Labour government in power this trend will continue. And this will invalidate your dreams that you listed.