Lol, there’s always an upside in sell side land, From The Australian:
Increasing risk in house prices could trigger a shift in asset allocation away from property, and significant sector rotation within the equity market, as investors seek to diversify away, or protect themselves against housing risk, according to Credit Suisse.
The broker says Australian housing is getting de-rated on the back of macro-prudential tightening, and a cyclical slowdown in Chinese investor buying.
By comparing S&P/ASX 200 volatilty to the dispersion of housing sentiment across states, it says housing has now become riskier than equities.
“From a policy perspective, the RBA and APRA welcome a cooling in the housing market, and a greater private sector appreciation of the risks from excessive housing leverage,” Credit Suisse strategists Damien Boey and Hasan Tevfik say.
“But the RBA would not like to see a sharp fall in NSW housing demand, as the sentiment indicators are suggesting, as this would severely inhibit growth re-balancing efforts, and indeed, create systemic risks. In lieu of this, we believe that the RBA will need to cut rates further. This favours bond proxies over housing exposures. It may also favour defensive bond proxies over highly-geared companies with re-financing risk—like some of the REITs.”
As I have said before, there is a little hope that investors will rotate into banks as rate cuts return. But, let’s face it, if it is in the context of falling house prices it is not going to last more than the half life of a poisoned mosquito before the banks get hammered.
As for some wider rotation into stocks as the economy falls apart owing to house price deflation I’d say get your hand off it. It’ll be risk off.
The major potential beneficiaries of weak house prices are non-mining dollar-exposed industrials but given the mature global cycle I’d be selling into that rally as well.
It’s simply a time to build your war chest for what’s to come and fixed interest is the way to do that.
