This Housing Downturn is Over

For context, I've simply laid out what I think will happen and why. Any predictions like this are usually best weighed up against demand and supply factors.

Reading around the papers since the trifecta of changes (rate cuts, assessment changes & ScoMo), most of the country's economists don't believe there'll be a recovery in prices in 2019/2020 even factoring in the rate cuts. Citi seem to be the most bullish in predicting that prices will begin to rise at the end of 2020. Most expect it to stabilise around then (i.e. another 18 months of falls). They probably have more sophisticated supply analysis and a different assessment on the demand increase from these changes (which I think will be larger than expected).

So as noted in the OP, it's an outlier position. Except for Joyce @ the AFR - who seems to have a very similar assessment. As also noted, if it does occur, I'm not necessarily sure this will be a good thing in the longer term (pushing up asset prices, trading off financial stability for growth).

 

Yashou....he must be a big "m".......

 

Yasouuuuurayyyyyyy! He is like me and you hahahaha

 

Indeed...
"And, to again quote Joe Hockey from 2013: “They’re not cutting interest rates because the economy is doing well. Interest rates are being cut to 50-year lows because the economy is struggling.”

Except that a 1.25 per cent cash rate wouldn’t be a 50-year low, it would be an all-time low."
source

Cheers,
Inertia.

 

I don't particularly care about prices, but what's everyone's crystal ball saying about when rents are finally going to increase?

 

Legally its getting harder and harder for new immigrants to settle in big cities.

 

Ya mean bou tso

 

When supply goes down. High supply is one of the main reasons yields are so pitiful.

 

For all those people comparing Australia with Ireland. I think Australia has got some advantages/luck on its side

1) We are a commodity rich nation and there is plenty of demand for what we have. Iron Ore, LNG, Coal, Uranium, Lithium.

2) Immigration. There are nearly 160K immigrants arriving here each and every year. Most of them in their prime working age, highly skilled and some even have deep pockets.

3) We have a federal budget that is in good shape and if need be fiscal stimulus is a option that can be used effectively.

So yes there is always risk of deep recession but I would be careful in jumping to any conclusions that Australia will end up similar to Ireland.

Cheers,
Oracle.

 

I built a $500k house for a client in the Vive estate in Craigie. Land was $300-$400k then everyone put two storey homes on there around 2013-ish?

Here is one for sale today. Ouch

6 Vive Avenue, Craigie, WA 6025

 

I think this balancing of opposing views is a good sign we are at least near the bottom. Propertychat is like a little daily live survey of sentiment. The tide seems to be turning.

 

RBA starts buying RMBS.

We are like kids at a birthday party, a sugar hit is nice, but just gives us a taste for more!

 

I'm going to say it's over because I'm not buying.

Of course if I was buying I would be saying the drops will continue.

People can get as granular as they want in order to motivate people to buy, sell or cast opinions on behaviour for specific streets, precincts, suburbs, LGAs, cities, regions, states, countries.

See this behaviour in all markets and all asset classses. Everyone has vested interests.

 

Wow Westpac (Evans), saying there'll be three rate cuts in the next 6 months. His typically been one of the best at this too.

I think, some of this is predicated on regulators fears of unemployment in an environment when house prices have fallen 10% nationally, and 15%+ in major capitals. Its easy to see why there'd need to be an over-reaction. Simply employment falling significantly would be very dangerous. Some of this appears to be a downside to letting prices get away in the first place. When they come down, which fundamentals should eventually do, things get a lot worse, so regulators get forced to intervene (like now).

Interestingly the actual content of Byres letter provided guidance on this. He specifically noted that interest rates are likely to persist for longer than expected. Allowing the interest rate assessment buffer to fall is somewhat of a concession that neutral rates are lower than they were (rather obvious I guess).

The big major downside of this type of change (two or three rate cuts + assessment rate changes) is the potential consequences to financial stability.

Historically asking Australians to take on debt works (hence my demand predictions). Nonetheless, there's costs to doing so and can easily lead to debt problems that begin to bear out as things begin to slow (or cause the slowdown).

Incentivising debt increases too many times/too hard...the stock of debt is higher, the household sectors resilience to changes is lower & financial stability is weaker.

 

Ireland had almost twice the population growth rate as Australia right through 2007, and it only went down in 2008 when the bust picked up speed.

 

Did you not get the news of labor losing the elections?

I know the situation on the ground and it’s now really a race back to the peak prices. It’s just a matter of how quickly banks pass on policy changes.

A lot of buyers are now in ‘regret’ phase thinking they missed out opportunity of a life time not buying before elections and you will see the herds unleashed as early as this Saturdays’ opens.

 

18 months of house price falls happened under the Liberal government...

 

It's all Greek to me

On topic, I think there will be a slight increase in sentiment with a clearer more stable direction from Govt post election (perceived or otherwise). I don't think APRA changing the rules will augur well short term. It may cause a little recovery spike........ most commentators that report in the datasphere are screaming Yippee Ki yay from the rooftops that these signal a recovery to the housing market.

My question is WHY? Why should housing recover to it's previous 2018 highs right now? A softening after a hard run such as that exhibited by Sydney and Melbourne needs some consolidation. Some reversion to a more favourable income/price point is necessary to restore a bit of equilibrium. Record levels of immigration haven't harmed Harry T and cohort to flog sky homes. I think 6-12 months of mild increase before another leg down to actually restore the correction that had started. Markets within markets caveat, however I think that peak to trough in Sydney and Melbourne might be circa 20% (units to soften more than well located houses on land). This might take us out to 2021. All APRA's back-tracking will do now is restore temporary confidence and maybe lead to excessive borrowing again. Sco Mo's 5 % deposit guarantee is going provide a sugar rush to those who qualify and they too may bite off more than they can chew. I think Brisbane might just chug along and not really correct as it never had the upswing of it's southern brethren. Don't follow Adelaide or Perth or Canberra, so cannot comment

Merely my 0.02.................

 

if (when) we do get a couple of rate cuts, does anyone have any idea how much the banks will pass on? surely its in their interest to pass on the majority? i.e. generate more business, spending borrowing etc

 

Perception is reality and the perception is the LNP is good for high property prices, even though there's not that much evidence to support that. But if people believe it, it'll will be true.