Dick Wakelin demands you buy property right now

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Property tragic Dick Wakelin has some advice for you today:

So let’s have a reality check. In most capital cities, property prices have gone up in the last quarter, while Sydney prices fell just 0.6 per cent, according to CoreLogic. And this is occurring in the second half of the year, a period when the market tends to slow. Moreover, it is likely that interest rates will remain steady in 2018, a highly supportive environment for property.

Sure, the market will one day go through a downturn, which may last six months, a year or even two. But it hasn’t yet. And regardless of the guessing game around the timing of this short-lived retreat, as future retirees, we all should invest in property when we can afford to.

Prospective property investors have to face the world as it is, rather than as they wish it to be. The reality is that there is strong competition from a growing population for scarce housing resources and it isn’t a temporary thing. So yes, the outcome is likely to be large mortgages and monthly repayments, but that’s the least bad option. Following advice to stand aside from property will lead to disappointment – a truly dismal outcome.

Now Dick, can we at least have argument here? Lending conditions are already tight enough to cause price falls in Sydney, Perth, Darwin, Brisbane, weak growth elsewhere, and a clearly slowing Melbourne bringing up the rear. We have entered a downturn. The debate is over how deep and how long. As it happens, courtesy of Lyndsay David, we have some nice maps to look at of property sellers advertising the word “motivated” in capital cities.

Perth has adolescent killing acne:

Brisbane is pretty bloody ugly:

Sydney has been eating too much chocolate:

Adelaide is a clean skin:

And Melbourne is Prom Queen:

The West and North are advancing but the major south east capitals have only just begun. Prospective property investors sure should face the world as it is and this is what it looks like:

  • mass immigration support for prices is extant but under increasing political stress;
  • first home buyer grants are failing to prevent price falls for the first time ever suggesting extreme overvaluation;
  • macropruduntial 2.0 and retreating Chinese buyers have taken out the marginal bidder;
  • both are still getting worse;
  • Chinese developers are dumping stock as they flee with some local developers doing the same, triggering sizable apartment and land discounting;
  • negative gearing, capital gains discounts and SMSF mortgages will get the chop in 2019 at the latest, plus
  • we’re at the tail end of the business cycle.

There is one other positive. If things get bad enough then we’ll see more rate cuts but we don’t have many left so that’ll empty the monetary cupboard. Not great. As well, fiscal policy is being drained as we speak ensuring limited stimulus during the next external shock.

I won’t offer advice but the reality suggests that you should only touch Dick Wakelin’s advice if you’re wearing an airtight radiation suit.

About the author
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.