Bloxo folds again

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From Bloxo today:

A cooling was expected, but the price falls have been larger than previously forecast.

The cooling is not unlike developments elsewhere, such as in London, New York and Vancouver, suggesting some common global factors.

So far, the cooling has been orderly, with very few forced sales. This partly reflects that the key fundamentals that support housing demand remain in place − strong population and jobs growth and low interest rates. In addition, although housing supply has been boosted, the market does not appear to be oversupplied. Our central case is for a soft landing, supported by these fundamentals.

While the housing market correction remains orderly and jobs growth remains solid, we expect it to have a limited impact on consumption growth.

As we have noted previously, there was little evidence of a positive wealth effect during the boom, and consumer spending has held up well recently, despite the housing market cooling.

In our view, the consumption outlook is much more dependent on the labour market than the housing market.

Bloxo is now hindcasting 12-17% peak-to-trough house price falls in Sydney and Melbourne when he previously projected price rises for 2019.

Just how one can erase so much household wealth without expecting any impact on the macro is quite beyond me. Bloxo is still hindcasting RBA rate hikes mid-next year into the teeth of the price falls.

Perhaps he’s right but it looks like nonsense to me.

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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.