Finally a few sell-siders are catching up to monetary reality. From BS, Mac Bank sees:
“Clouds looming over the domestic property market.
Recent announcements around macroprudential regulation represent a significant change in view from the RBA.
Likewise the Government appears about to get serious about foreign buyers. While this is unlikely to result in a ‘train wreck’, international experience points to 2 to 13 per cent underperformance by banking sectors faced with these kinds of interventions.
Domestically we believe the sector hasn’t skipped a beat mainly due to ‘dividend harvesting’leading into FY14 results. Investors should be wary though given stocks may give back the dividend and more post results given the headwinds (property and capital) surrounding the sector.
We have factored in the mid scenario which sees a 3 per cent reduction in investor credit growth resulting in up to a 1 per cent reduction in cash NPAT and target prices for each of the majors.”
My own view is that the looming measures will stall the property market and threaten to reverse the Sydney investor mortgage rocket. In a normal market MP measures would only slow things down but given the mania is Sydney a sharp reversal cannot be ruled out. More broadly, a soft landing for property ala 2003 is more difficult to engineer given the broader economy is weighed down by the capex cliff and income shock, the reverse of what transpired after 2003. I therefore expect further rate cuts as well as a falling dollar will be needed to keep property aloft.
Given these risks then flow into my view that the global cycle is maturing and likely to end in the next two years, likely resulting in the loss of Australia’s AAA rating and bank downgrades, I conclude that we’re near enough to the peak of the property cycle right now and the downside risks on the other side are larger than usual.
