House prices
hhhmmmm, maybe.
When you are talking insane rises over the last 3-5 years of over 100% then a 10% drop looks like a very, very mild correction.
We'll see what happens next year when immigration skyrockets again.
I predict that 10% fall will quickly be erased.
My mate, who is getting divorced is about to put their home on the market, with the real estate still predicting an eye-watering price for it.
we'll see what happens.
https://thenewdaily.com.au/finance/finance-news/2022/08/17/property-pric...
It’s starting and I love how they’re forecasting price rises again in 2024. Wasn’t this supposed to be when rates were starting to rise!!! Lol
The key paragraph in that article is:
“With the cash rate target headed north of 2 per cent, ANZ said mortgage borrowing capacity will decline by more than 20 per cent by the end of the year and by nearly 30 per cent during 2023.”
What do you think a 30% reduction in borrowing capacity will do to the housing market!!!
meanwhile in the UK
https://www.thetimes.co.uk/article/50-year-loans-so-normal-people-can-bu...
For The Term Of His Natural Life
The new serfdom (see Class System)
velocityjohnno wrote:meanwhile in the UK
https://www.thetimes.co.uk/article/50-year-loans-so-normal-people-can-bu...
For The Term Of His Natural Life
Paywall
title gives it away
more UK, retail inflation 12.8% surprised to the upside, I wonder what blunt stick could be used to combat that
oof
Most of that is energy cost.
so, nothing.
That could be the case. This source seems to think it's spread beyond fuels into food:
https://www.bloomberg.com/news/articles/2022-08-17/uk-inflation-rises-mo...
"Rising food prices made the biggest contribution to the month’s increase, indicating inflationary pressures are spreading beyond energy. Investors moved to price in 2 percentage points of increases in the BOE’s key rate to 3.75% by May next year."
and
"Core inflation -- excluding energy, food, alcohol and tobacco -- accelerated to 6.2% from a year ago in July, more than the 5.9% reading that economists had expected."
Fuel surely plays a massive part in most prices rising given its used in production and transportation.
donweather wrote:Fuel surely plays a massive part in most prices rising given its used in production and transportation.
In economist speak “oil push inflation”
300 home builders, families and young couples? The fallout continues.
Wrap up of Fed Chair Powell's short speech at Jackson Hole:
https://www.zerohedge.com/markets/pain-coming-pro-powell-pivot-positioni...
It seems he does want to follow through on continuing to raise rates hard, as he said in the initial interview I linked here months back. Market positioning for a pivot got pantsed. Important to Oz, as it's the Fed's rate that drags the RBA, kicking and screaming, higher. They own Bartertown, after all.
This is why the commentary that rates will be cut after the tightening phase will actually blunt the impact of the raises in the first place, meaning they may need to go harder or for longer. And to assert that any hikes will overstep to the point they need to be corrected by drastic easing? If anything and by design, rates will hit the level that is required to keep inflation/ growth at the correct pace. Once that happens, the intention is, they’ll stay at that level. The only way they’ll ease after raising is if this state of market and consumer denial endures, and they have to go nuclear to get the message through.
Since the rates went up I’ve only seen an increase in spending on discretionaries eg entertainment and tourism.
0.1, 0.45, even 1.5% is surely not to be seen again for a long time
Here you go Kaiser, I found these guys' take astute - with some eyebrow raising stats like the 774 CEOs and 89% of revenue ploughed into buybacks (edit: this will look like extremely foolish capital misallocation in hindsight). I also note the energy/70's allegory and the looks back to March 2000.
"Today’s restrictive Fed policies in a rapidly deteriorating economy are the preconditions for a steep recession. Contrary to the unprecedented monetary and fiscal support we had following the last economic downturn, we are currently experiencing a major withdrawal of liquidity at a time when corporate fundamentals are starting to contract. Despite the deepest yield curve inversion in decades, the Fed is raising rates at its fastest pace since 1984 as it prepares to shrink its balance sheet by $90 billion per month, starting next month. Already, in the last three months, M2 money supply also contracted by its largest amount in 63 years!"
https://www.crescat.net/a-vicious-stagflationary-environment/
"This is why the commentary that rates will be cut after the tightening phase will actually blunt the impact of the raises in the first place, meaning they may need to go harder or for longer. And to assert that any hikes will overstep to the point they need to be corrected by drastic easing?..."
yep
they clearly want (need) a shock effect to get the message through...
then they go and undermine it all talking the effects / course ahead down
gotta get their dudes on the same page
which is almost impossible with biden fantasy land running the show...
Just want to clear up the Bartertown allegory - Fed is Master, USD is Blaster and together they run Bartertown. At times it might look like Tina or her sycophants are in control, but MasterBlaster controls the flow, so runs Bartertown. This is all prior to 'two man enter, one man leave' and I can't see a Max who will defeat Blaster at this stage... Max as BTC, Gold, or CNY - I just can't see it at present. 90Bn per month withdrawn from the flow - who runs Bartertown?
I’m still expecting one last BIG hurrah later this year before the world crashes in 2023.
Oil/energy is the only thing delaying this BIG hurrah. And coming into northern hemisphere winter the Ukraine/Russia debacle needs some form of resolution before the oil/energy stops driving inflation and hence means Fed will have to stop rising interest rates.
At the same time, as per the link below, some properties are selling well.
As usual it's hard to know how this will pan out.
FWIW, sale prices round here don't seem to have faltered much at all though I expect volume of sales have dropped.
"While prices are falling fast pretty much across the board, it is not yet stopping homes from changing hands.
In the end, the auction was a contest between two other bidders and the property sold for $1,605,000, which was about $200,000 above the reserve, to an investor who lives nearby."
https://www.abc.net.au/news/2022-09-01/house-price-plunge-continues-core...
..
There’s still a lot of denial out there. Particularly amongst those who had the hardest belief in the exceptionalism of Australian real estate. Some crew don’t accept the ship is going down until their shoes get wet.
Still looks like a mild correction to me, in the context of the last 5 years.
yep. nothing to see here.
Your whole proposition was that East coast house prices don’t go backwards because…reasons.
They’re going backwards. Reasons turned out to be hollow. So what’s your belief that the average punter will soon return to ever-increasing piles of debt beyond their ability to repay?
Pretty sure the 50 year / 100 year / inter generational Al mortgages aren’t far away but I also believe there is impetus to rid the world of private property ownership for the plebs.
Who knows?
All that’s certain is that it’s not a good time to be an average Aussie with $800K of debt hanging over your family.
DudeSweetDudeSweet wrote:There’s still a lot of denial out there. Particularly amongst those who had the hardest belief in the exceptionalism of Australian real estate. Some crew don’t accept the ship is going down until their shoes get wet.
I guess we will see.
3 years ago, these tiny blocks were estimated to be worth $350-400 K.
Lot 326, 78 Hutley Drive, Lennox Head, NSW 2478
450
m²
Residential Land
$940,000
Almost a million, just for the block.
SW facing. Cold in winter, hot in summer.
DudeSweetDudeSweet wrote:Your whole proposition was that East coast house prices don’t go backwards because…reasons.
I said they don't go backwards long term.
There might be some dips and mild corrections but the $500K family home on the East Coast (5-10 years ago) that is now worth a million, will never be going back to $500K.
You can bet that just as Bernie Madoff was about to get arrested there was still crew desperately trying to round up funds to invest with him.
Faith is like NYPD Detective Lieutenant John McClane ….it dies hard
DSDS, what's your definition of the ship going down?
10% dip?
20% dip?
Complete collapse and it's time to buy seeds and fishing lures?
freeride76 wrote:DudeSweetDudeSweet wrote:Your whole proposition was that East coast house prices don’t go backwards because…reasons.
I said they don't go backwards long term.
There might be some dips and mild corrections but the $500K family home on the East Coast (5-10 years ago) that is now worth a million, will never be going back to $500K.
After the Victorian land boom/ bust of the 1880’s it took decades for prices to recover., so I suppose you’re correct in saying that prices won’t go backwards LONG term. How long is the question.
Once crew have been seriously decoupled from this confected culture of venerating real estate speculation, it’ll be a slog to rebuild the confidence needed to ever see the sort of outrageous mania experienced over the past twenty years.
Not faith, facts.
There's plenty of graphs out there which go back decades.
Through depressions, world wars, recessions, Global Financial Crises and pandemics.
AndyM wrote:DSDS, what's your definition of the ship going down?
10% dip?
20% dip?
Complete collapse and it's time to buy seeds and fishing lures?
I’d call a return to historic norms of 3-4 multiples of annual income for a mortgage as a collapse. Definitely a worthwhile ambition.
freeride76 wrote:Not faith, facts.
There's plenty of graphs out there which go back decades.
Through depressions, world wars, recessions, Global Financial Crises and pandemics.
It’s all a bit trite if you’re discounting the carnage suffered through real estate wealth destruction during these periods. Of course it’s all good to show a graph which shows a dip in a rising line representing the Great Depression.
This does not do justice to the many people shouldered with debt who literally couldn’t give their houses away during this period as their low worth combined with routine real estate taxes rendered them a negative investment.
Places abandoned. Families on the street. Destitution.
Yet the historical graph shows house price growth on a slow climb when the granular detail is overlooked.
freeride76 wrote:Not faith, facts.
There's plenty of graphs out there which go back decades.
Through depressions, world wars, recessions, Global Financial Crises and pandemics.
Aus property prices and interest rates going back >40yrs:
US real home prices:
US home prices relative to median income:
US (similar scenario in Aus?) appears to be in the most gigantic property price bubble of all time.
DSDS yeah that'd be a collapse, and the end of our current understanding of society.
With an average (not median) national income of $93 500, we can see where 3-4 times that figure gets us.
It's totally unfathomable.
A worthwhile ambition maybe, and one that I was hoping for and pretty much expecting through the 90s.
But it didn't happen, quite the contrary.
And I can't see it now.
And if in doubt, firehose in a couple of hundred thousand migrants a year to prop things up.
It hurts for me to say that, it's ugly but true.
The government and the powers that be will do anything to prop up the housing and building industry.
There will be missteps but even a 20% dip seems unlikely.
A drop in the volume of listings will mute the effect for the short term. Supply side reacts as demand side drops a bit. It’s a symptom of a tightening rather than a collapse. Only when something drastic happens will we see the herd move as one. When selling isn’t a choice but a necessity. Investors will jump first. Think margin calls, currency collapses, business closures, crypto crashes, rampant(er) inflation. Feels like there’s enough in the tea leaves to imply what lies ahead, but nobody is reading them.
The wave of money that has washed across the economy has seen a huge amount of speculation. It’s been a gold rush across EVERY asset class. Even ones that have been invented during said rush (ie crypto).
"Feels like there’s enough in the tea leaves to imply what lies ahead, but nobody is reading them."
What do you reckon kaiser?
I’m baffled that we have seen such an outflow of people from CBDs, with such low immigration to fill those ‘vacated’ properties, that we haven’t seen corrections in capitals sooner. And bigger than what we’ve seen so far. Anecdotally there has been as much investor buying as owner occ in the regions. If they’re leveraged across multiple asset classes, then their fate could be linked to performance in those classes. Equities has already fired a warning shot, crypto stared briefly into the abyss. Prop markets worldwide are feeling the pinch, but we carry on BAU?
I just feel like there’s strong denial. I’m sure people will do whatever necessary to hold property above all, but the cost of holding is gonna suck a lot of money out of the broader economy. And at the same time central banks are pulling money out. The number and variety of discretionary enterprises out there that rely on flippant expenditure is alarming.
To be honest, I don’t know what I reckon, but surely the music stops at some point. It has been a crazy period of ease and excess.
I think it was VJ who pointed out that everything eventually returns to the mean or long term trend. That in itself could be a big correction, given the run we’ve had
Re: GSCO's graph above.
Clearly shows availability and cost of credit shapes the curve.
Reason that red line keeps going up though, is demand.
People need a roof over their head.
Australia sits - a wealthy, democratic country with education, health, surf, climate, food etc etc- at the bottom of the most populous region on Earth. Asia.
Our fastest growing source of immigrants is India, followed by China.
Expect to see Indonesia join that list as they develop a middle class.
150-200000 people a year entering Aus need a roof.
And most of Aus is barren, and arid.
Which leaves a thin strip around the East Coast.
Demand for this thin strip, especially if you want surf, schools, hospitals, cafes etc etc isn't going anywhere.
Thats why the line keeps going up, despite short term dips and corrections.
Short of Australia shutting down immigration and allowing prices to become tied to wages again, it will remain tied to large demand forces involving billions of our near neighbours.
Canada?
NZ?
Worthy algorithms FR. But it’s playing out right now. I reckon we’re not fully immune
freeride76 wrote:Re: GSCO's graph above.
Clearly shows availability and cost of credit shapes the curve.
Reason that red line keeps going up though, is demand.
People need a roof over their head.
Australia sits - a wealthy, democratic country with education, health, surf, climate, food etc etc- at the bottom of the most populous region on Earth. Asia.
Our fastest growing source of immigrants is India, followed by China.
Expect to see Indonesia join that list as they develop a middle class.150-200000 people a year entering Aus need a roof.
And most of Aus is barren, and arid.
Which leaves a thin strip around the East Coast.
Demand for this thin strip, especially if you want surf, schools, hospitals, cafes etc etc isn't going anywhere.
Thats why the line keeps going up, despite short term dips and corrections.
Short of Australia shutting down immigration and allowing prices to become tied to wages again, it will remain tied to large demand forces involving billions of our near neighbours.
I agree with your philosophy here Steve but it assumes one big thing. The world economy continues as we know it today. With a world economy crash who can afford to flee Asia and immigrate to Australia AND buy a $1m house?
"With a world economy crash"
GFC?
Global pandemic?
kaiser wrote:I’m baffled that we have seen such an outflow of people from CBDs, with such low immigration to fill those ‘vacated’ properties, that we haven’t seen corrections in capitals sooner. And bigger than what we’ve seen so far. Anecdotally there has been as much investor buying as owner occ in the regions. If they’re leveraged across multiple asset classes, then their fate could be linked to performance in those classes. Equities has already fired a warning shot, crypto stared briefly into the abyss. Prop markets worldwide are feeling the pinch, but we carry on BAU?
I just feel like there’s strong denial. I’m sure people will do whatever necessary to hold property above all, but the cost of holding is gonna suck a lot of money out of the broader economy. And at the same time central banks are pulling money out. The number and variety of discretionary enterprises out there that rely on flippant expenditure is alarming.
To be honest, I don’t know what I reckon, but surely the music stops at some point. It has been a crazy period of ease and excess.
I think it was VJ who pointed out that everything eventually returns to the mean or long term trend. That in itself could be a big correction, given the run we’ve had
"surely the music stops at some point"
Sooner or later, yes. But what's the real catalyst going to be and is it now?
I still feel there are enough levers to be pulled that we can carry on the Ponzi scheme for decades yet.
Maybe the real catalyst will be environment issues i.e. global warming.
war with china.
that would do it.
Yep, surely it would have to be huge and overarching.
freeride76 wrote:"With a world economy crash"
GFC?
Global pandemic?
but they didn't happen...
the reality was staved off by money printing
you know what happens when you keep and keep putting off something you really really need to do...
only when there was literally nothing left in the can (0.1 % & even -%) ...did they a stop the kicking...
Financial contagion.
GSCO’s chart on previous page shows what that could look like for house prices
I hear ya Syp.
The facts are though, barring a world war, a billion middle class Asian people will keep improving their material circumstances and part of that will have a huge influence on Aus, including RE prices.
I remember, like Andy, in the 90's still in the delusion that RE prices here would be limited by wages.
Yes, they are limited by credit, but only in the short term.
I'll ask again: where do you think 160-200000 people a year will live, and what do you think that demand will do for RE prices?
House prices - going to go up , down or sideways ?
Opinions and anecdotal stories if you could.
Cheers