Louis Christopher has been a bullish holdout:
“We’re very close now to seeing the next slowdown,” said Mr Christopher, arguably Australia’s most accurate forecaster of housing prices. “We need to see just one more trigger in the market.”
If borrowing costs rose as a result of Reserve Bank rate hikes, that would boost mortgage stress levels. However, a similar trigger could come from commercial banks passing on the cost of the budget’s $6.2 billion bank levy to borrowers in the form of higher rates, Mr Christopher said.
“The market is, as we’ve noted in the past, significantly overvalued in Sydney and Melbourne. It will not take much of trigger to create the next downturn or slowdown,” he said.
“If the banks do pass on the bank levy in the form of higher interest rates, that could be trigger to create a downturn in Sydney and Melbourne.”
Even so, a downturn was likely to be “relatively light”, and it would take an “aggressive” rate rise to trigger a crash, Mr Christopher said.
Yes, it’ll be light at first given the RBA will cut again.
Then comes the next election as soon as one year away (owing to the senate) which will be fought on the grounds of cutting immigration versus cutting negative gearing (or not, and Labor will win in a landslide). That’s the trigger for phase two of the downturn.
Phase three arrives with the next global shock which we also think might be 2019 as the Fed tightens (could be sooner or later) and Australia finds itself with exhausted monetary, fiscal and immigration policy levers.
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