“Mad” Adam Carr takes housing bears to the woodshed today at Dad’s Army:
On the read of one, the current house price spike will come to an abrupt halt over the next 12 to 18 months, as the construction boom picks up and an oversupply takes hold.
On the other, households are constrained by high debt levels, so they are unable to take advantage of the ultra-low interest rate environment.
…the greater probability is that the real house price boom hasn’t even started…there really is no medium-term threat to house price growth.
And on it goes with low interest rates and the supply shortage driving prices into an absolute frenzy henceforth.
I don’t see it coming given:
- unemployment and income weakness emanating from the mining bust
- macroprudential such as it is
- policy-led crimping of Chinese buyers
- weakening marginal markets
But one can’t discount it. Rates are going to fall much further as the economy deteriorates and asset prices could just levitate over the carnage for a little while on confidence alone.
I will only add that if Mr Carr is right about the boom then he is wrong about one other kind of housing bear. That is the one that looks past his nose and realises that the monetary and fiscal policy exhaustion arising from one last great push higher in house prices means the next global shock will leave the housing market fully exposed to the worst the globe can throw at it.
