Shane Oliver revises fall prediction

Australian housing downturn Q&A – how bad will it get? | AMP Capital
A pretty good summary of the situation as it stands...

 

This is crash territory. Arguably if prices fell by ~25% (total) in these cities that would be a busting bubble.

 

But Sydney and Melbourne went up 75 and 50% in few years, so maybe a correction that had to happen? Either way, it's all semantics

 

Totally agree, a good summary.

I always like to read Shane’s articles. I have a lot of respect for what he says and writes.

Far better reading than the doomsayers on PC who would lead one to believe the “end of the world” is nigh.

As an old fart of an investor, I have lived through many “end of the world” situations (GFC, 9/11, ...).

Looks like I will be surviving another one .

 

Agree with Kierank.

An interesting question for me is whether the impact of the ALP's changes to NG and CGT is already baked into the sharp falls we have already seen? Or if it will represent another leg down that hasn't started yet.

I think the former, but curious to see what the forum thinks?

 

I personally think the former as most Aussies believe BS is a shoe-in.

I am hoping the ALP and the BS Team think the latter and they decide to file their NG and CGT changes in the RB .

If things keep deteriorating and ALP keeps flogging these policies, it might be enough to scare the Aussie voters and get ScoMo over the line. If that happens, we might see the end of BS .

 

Mostly baked is my guess, people who follow the market would be expecting Bill to get in. That said I think pending tax reform is a small piece of the puzzle in terms of driving the downturn.

@kierank I agree, I like Shane as he doesn't just beat the same drum regardless of what is going like some economists. 25% or so will only take us back to 2014 (I think?), whilst not the end of the world for most, I expect it would be enough to cause difficulty for many and spillover into the wider economy. Esp with China slowing.

 

Assuming there is a 25% fall from peak,

Lets take 75% gain scenario as an example,
buy price = 100
peak gain = 175,
25% fall from peak = 175* 0.25 = 43.75
43.75/75*100 = 58%
so a 25% fall from peak in this case equates to a

• loss of 58% of the total gain.
• loss of 43.75% of buy price
• or left with 38.5% profit from buy price

Lets take 50% gain scenario as an example,
buy price = 100
peak gain = 150,
25% fall from peak = 150* 0.25 = 37.75
37.75/50*100 = 75%
so a 25% fall from peak in this case equates to a

• loss of 75% of the total gain.
• loss of 37.7% of buy price

I am highlighting the fact that a 'fall from peak' number is bigger in reality then what it seems just from headline number.

 

Very generalised and these are all book losses/gains unless crystalised..

 

It’s a retail market, partially priced in at best. If it was an insto market, very different story.

 

What is new in the article?

 

I like Shane and his level-headed analysis - wish he had a youtube channel or similar.