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A whole article on why prices won’t fall, yet only two reasons provided. Historical market resilience & an easing of restrictions.
In response, off the top of my head, I could name you at least 9 reasons why house prices should fall. https://www.news.com.au/finance/real-estate/coronavirus-in-australia-surprise-outlook-for-property-prices-as-covid19-wreaks-economic-havoc/news-story/644adec004a12eb51feb4027e2547a92
In response, off the top of my head, I could name you at least 9 reasons why house prices should fall. https://www.news.com.au/finance/real-estate/coronavirus-in-australia-surprise-outlook-for-property-prices-as-covid19-wreaks-economic-havoc/news-story/644adec004a12eb51feb4027e2547a92
1. Rising protectionism & declining globalisation.
As a services based economy, Australia is heavily reliant on free trade, particularly from China who makes up 30% of total exports. The recent proposal of tariffs & export suspensions is a significant impediment to our economy.
As a services based economy, Australia is heavily reliant on free trade, particularly from China who makes up 30% of total exports. The recent proposal of tariffs & export suspensions is a significant impediment to our economy.
2. A global & domestic recession.
We escaped a recession during the GFC by binging on private debt & shipping rocks overseas. But this time we won’t be as lucky. So how will we navigate a recession with 29 years of built up excess amid the largest housing bubble in the world?
We escaped a recession during the GFC by binging on private debt & shipping rocks overseas. But this time we won’t be as lucky. So how will we navigate a recession with 29 years of built up excess amid the largest housing bubble in the world?
3. Rising unemployment.
Treasury/RBA are forecasting an unemployment rate of 10% by the June quarter.
Research highlights:
1.Slow growth leads to higher unemp
2.Unemp rises quickly, falls slowly
3.There’s a strong negative relationship between house prices & unemp (Pinter,2015)
Treasury/RBA are forecasting an unemployment rate of 10% by the June quarter.
Research highlights:
1.Slow growth leads to higher unemp
2.Unemp rises quickly, falls slowly
3.There’s a strong negative relationship between house prices & unemp (Pinter,2015)
4. Wealth effect (WE)
17/10 Guy Debelle states how reliant the economy is to a WE fuelled by house prices. Subjected Industries include construction, retail, biz/HH services, distribution, manufacturing etc.
WE is an unsustainable way to grow GDP as it turns -ive in recession.
17/10 Guy Debelle states how reliant the economy is to a WE fuelled by house prices. Subjected Industries include construction, retail, biz/HH services, distribution, manufacturing etc.
WE is an unsustainable way to grow GDP as it turns -ive in recession.
5. Stretched affordability
Australia ranks:
1st In DSR 15.1
2nd HHD/GDP 120%
ABS shows Australia’s HH debt to disposable income is 200%!
So how much debt is too much debt? RBA admits they don’t know. But we do know that over-indebtedness burdens turn-over & GDP in long-term.
Australia ranks:
1st In DSR 15.1
2nd HHD/GDP 120%
ABS shows Australia’s HH debt to disposable income is 200%!
So how much debt is too much debt? RBA admits they don’t know. But we do know that over-indebtedness burdens turn-over & GDP in long-term.
6. Slowing pop growth.
The Government is expecting a fall of up to 300,000 people moving to Australia over the next two years with NOM declining 30% this FY & then 85% in FY 20-21.
I don’t to elaborate how this effects the ratio of supply & demand, & thus house prices.
The Government is expecting a fall of up to 300,000 people moving to Australia over the next two years with NOM declining 30% this FY & then 85% in FY 20-21.
I don’t to elaborate how this effects the ratio of supply & demand, & thus house prices.
7. Rental vacancy % yields
According to SQM, national rental vacancy rates have increased to 88,668 or 2.6% in April. Meanwhile, rental yields are 3.76% down from 4.1% a year ago.
Less incentive to invest puts downside pressure on prices.
According to SQM, national rental vacancy rates have increased to 88,668 or 2.6% in April. Meanwhile, rental yields are 3.76% down from 4.1% a year ago.
Less incentive to invest puts downside pressure on prices.
8. Tighter credit availability.
During exogenous shocks, lenders reevaluate risk & often tighten credit accordingly. The move in house prices is subject to the change in new mortgage debt, not the sum of exisiting credit. As credit tightens, prices fall. https://www.google.com.au/amp/s/amp.heraldsun.com.au/business/companies/westpac-tightens-home-loan-lending-rules-what-it-means-for-customers/news-story/cd7f74aae4f3eb210433b0a4b55459f9
During exogenous shocks, lenders reevaluate risk & often tighten credit accordingly. The move in house prices is subject to the change in new mortgage debt, not the sum of exisiting credit. As credit tightens, prices fall. https://www.google.com.au/amp/s/amp.heraldsun.com.au/business/companies/westpac-tightens-home-loan-lending-rules-what-it-means-for-customers/news-story/cd7f74aae4f3eb210433b0a4b55459f9
9. Pent-up supply,
Volumes of transactions are low & spruikers use this as a means to justify stable house prices. But what they neglect to mention is that pent-up demand was mostly released post election due to macroprudential & fiscal policy. Whereas sellers refused to list.
Volumes of transactions are low & spruikers use this as a means to justify stable house prices. But what they neglect to mention is that pent-up demand was mostly released post election due to macroprudential & fiscal policy. Whereas sellers refused to list.
