KPMG: Property prices about to bottom

Via The Australian comes KPMG catching the falling knife:

Peak-to-trough adjustments in dwelling prices are expected to be minus 12.9 per cent in Sydney and minus 4.5 per cent in Melbourne.

KPMG chief economist Brendan Rynne said tighter lending standards by APRA and less investor financing had taken its toll.

“There has been a falling away in foreign interest, notably from China, and lending to domestic buyers is stricter, while housing supply has increased. This is why prices have declined — but we believe that process will reach its peak over the next few months and then go into reverse later this year,” he said.

Sydney house prices are predicted to fall 4.3 per cent in FY19, followed by a further decline in FY20 of 1.3 per cent. Growth of 3.5 per cent is expected in FY21.

A dip of 2 per cent is likely in Melbourne in FY19, before growing 2.4 per cent and 4.7 per cent over the following two financial years.

One can never rely on journalists to get the facts right and I’ve not got this report. But given Melbourne is already down nearly 8% and Sydney approaching 12% peak-to-trough somebody has something very wrong.

As for the future of prices, I see no reason to predict a bottom. When the RBA cuts we ought to see some stabilisation but not for very long unless something drastic changes from today’s outlook:

  • structural change to tighter lending standards;
  • negative gearing reform;
  • fleeing Chinese and
  • a structurally slowing China and a weakening local economy.


  1. Kpmg accounting for the banks and business types. They are hardly going to say things look dreadful and dont buy now are they

  2. Journos probably got KPMG’s report wrong.

    KPMG probably got house prices wrong.

    Business as usual in the MSM!

  3. Brendan is not a dumb guy. But he works at a place that does business with banks and developers and similar all the time.

    His messaging is therefore tempered. He can’t say what he really thinks. Not to the national press.

    • Brendan is not a dumb guy???? Really? Here is one of his quotes from an AFR article a few days ago regarding public sector creating all the new jobs ( )
      “You would anticipate a lot of those are in the areas of healthcare, teaching, aged care services, all the value-adding activities that are necessary for the continual growth and welfare of our society,” Mr Rynne said.
      I’m sorry but if you think healthcare, teaching, aged care services are value-adding activities, you are flat dumb.

      • But if you tell half truths/lies for a large pay are you really dumb, or is the person blabbering on about the truth for nothing on some obscure economics blog?
        What are you hoping to get from the economics bog? Knowledge leading to some sort of financial gain? Seems tell BS is the path to that.

      • I’m sorry but if you think healthcare, teaching, aged care services are value-adding activities, you are flat dumb.

        I think you either don’t understand what ‘value-adding’ means, or you are in fact ‘flat dumb’.

      • @Kleenex
        Teaching adds value if it is something useful and you actually use those skills. Growth in teaching in Oz is driven merely by the population ponzi immigration machine.

        You can defend your charlatan mate all you want but these people are going to cause suffering because of their selfish behavior. They need to be called out. But you are obviously emotionally attached to this guy in some way.

        Great to see the every man for himself society in full swing. What’s more sad again is to see those weak souls who cheer on the slimy practitioners of it.

        I don’t know the strict definition of value-added but if you think an economy whose growth is based mostly on healthcare, teaching, and aged care is going to add value over time you’re an idiot. Try to think a bit more pragmatically rather than being told what to think if you are capable of understanding concepts beyond book learning them.

      • Such an optimist.
        I guess you are either too young or too “flat dumb” to realise that the world is how it is, not how you think it should be.
        You’ll fit in well here.

      • Thanks XPJ. If it were not for you, I wouldn’t know how the world works!

        Idgaf that people will be mislead to their dooms and slaughter. I look after myself, they can look after themselves.

        That’s how it is. It’s been A very long time since we’ve lived in a “community”. It’s a Hobbesian “bellum omnium contra omnes”.

        Thanks to that d!ckhead Howard, mostly.

      • @Peachy
        I don’t really care if people are mislead to their dooms either. But it won’t be fun to live through and ‘looking after yourself’ will become a whole lot more difficult if not impossible in a doomed society. All I’m saying is let’s not give the charlatans any excuse at all. Let’s call them what they are. It’s more cathartic that way anyway.
        Thanks for the Hobbes quote by the way. I had to look this guy up but at least I learned something today. I’ve always been more of a Machiavelli guy myself for a dose of realism.

        I don’t see how healthcare and aged care are value adding. Value maintaining maybe. Nonetheless thanks for the comment on the multiplier effect of manufacturing. I would argue service jobs can only be useful for the most part if they are supporting some kind of manufacturing including agriculture, energy, minerals.

    • Yes, the man’s gotta eat. But the same could be said of just about every talking head economist. The problem is really institutional – ie. the discourse is dominated by players that are hopelessly conflicted.

    • He’s not the only one. We only see the truth by following the trends and right now it’s down. How it’ll swing around soon even with big rate cuts I can’t see.

  4. As for the future of prices, I see no reason to predict a bottom.

    Indeed CoreLogic ‘s index for Sydney and Melbourne both show falls slowly accelerating. About a week ago, Sydney crossed the 9% falls in a year threshold. You’d want to at least see a moderation there before calling a bottom, I’d have thought.

    • Nah. It’s like wile e coyote. He smashes into the bottom of the canyon. And just keeps going down!

  5. We all love DFA because it’s about data, can be wrong but probability is measurable. Everything else is just dross for the fools who have been possessed by avarice.

    Nothing will avert a monumental reconning, I feel guilty that I won’t be sad for those who are about to suffer

  6. Let me enlighten you folks; Basing your investment strategy on the forecasts of those types of people is a serious wealth hazard. The only professions benefitting from this will be lawyers and liquidation experts. Wanna get rich, put your savings in a balanced superfund and be patient.

      • If you believe most of what is written here on MB you probably shouldn’t be in a balanced fund, choose one of the other options eg capital guaranteed until risk subsides, I’d say

    • ” Wanna get rich, put your savings in a balanced superfund and be patient.”
      Unless you have a very high income, that is unlikely to make you rich.

    • The bottom was called numerous times during the Pilbara house price falls as with Perth (although house prices are rising in Perth according to REIWA…LOL)

      People in Perth look at me like I have two heads when I tell them house prices have dropped more than 15% and falls are accelerating.

  7. I dont think we’ve seen anything yet – the MSM has only just started to report on falling house prices. Up til now its either been kept quiet, or people who have heard about it have been in denial. Now we are about to see what happens when fear replaces greed. This is usually the period when the most damage is done. The bottom is in when normal people actively abhor the idea of investing in property, and a few canny investors start taking advantage of bargain prices.

  8. “a structurally slowing China”
    This will actually stimulate Chinese purchases of our property, when things go badly in the mainland, more and more Chinese look for a bolt-hole. Take a visit to Box Hill VIC or Chatswood NSW and you won’t see any evidence of a slowdown.

    The worse the future looks in China, the higher Ozzie property will go.

  9. Is the original report able to be accessed or is this only for journos to review and report on? Would be good to read and understand the rationale.

  10. We need to be keeping a record of who is predicting what falls at what time
    Core logic

  11. Wishful thinking by banks there will be no serious consequences for easy credit they issued during the last “boom”. $700bil only in 2014-15 according to AFR few days ago.

  12. Peak-to-trough adjustments in dwelling prices are expected to be minus 12.9 per cent in Sydney and minus 4.5 per cent in Melbourne.

    That’s just flat out nonsense.
    CoreLogiic has Sydney’ peak to trough so far at 11% and Melbourne peak to trough almost 8%. So Melbourne hit bottom about six months ago according to KPMG, and Sydney will hit bottom in a little less than a month based on current rate of decline (1.8% fall over December).
    It’s so far off base it’s like they’re talking about somewhere else entirely, or its a typo.

  13. even if they are right and Sydney prices only fall 4.3% in 2019, why would anyone buy now when waiting a year could save them a year wage (4.3% of $1m + interest over 30 years)

    • Perhaps.
      In the meantime I observe they refer to financial year – F19- which began on 1/7/18. and Sydney house prices have dropped 6.3% since then, so unless they are predicting prices will go up 2% over the next six months (presumably implying a bottom right now) something is up the creek.

      I honestly find myself wondering if this was a release intended for last September or similar that has surfaced recently somehow. It really makes no sense otherwise.

  14. Lots of mixing of words, numbers and dates here.
    They mention “dwellings” in one sentence then “houses” in others.
    No mention what figures that are based on, ABS or Corelogic.
    No mention of where they believe we are now in peak to trough price falls.
    Also note that they are quoting FY (Financial Year) which we are already half way through.

    I believe ABS has peak to trough falls so far of -5.8 so far up to the september QTR.
    Lets say December QTR is the same as the previous drop of -1.9, then peak to trough is -7.7
    If the next 2 qtrs (March and June) is more of the same, then at the end of FY 2019 Sydney will be at – 11.5
    Add their -1.3 decline the next FY and that gets us to -12.8, very close to their quoted figure.

    Core logic is much more bearish.

    But who really knows. All I know is I need to find out how to make some more money to afford a place.

    • I should also point out that based on their figures, they are saying in other words; whatever you feel happened in term of price drops now, we are 60% to the bottom. An interesting way to look at it.

      • Requires a huge leap of faith.
        Their forecast of a further 2% decline for Melbourne will lead to a total peak to trough of 4.3% (implying a 2.3% fall when they made the forecast) simply makes no sense when the last quarterly fall ABS reported in Melbourne was 2.6% to Sept ’18, for a total decline of 4.0% up to that point, and no one is seriously suggesting there weren’t further falls from September ’18 up till now.
        Effectively they are predicting no further falls for Melbourne from 1 October last year onwards. It doesn’t make sense unless there is a mistake somewhere.

      • Its a similar accounting error with Sydney as well (or a typo)
        KPMG is saying that the FY19 will be down 4.3%.
        We are half way through FY19 and its already probably down 3.8% with 2 more quarters to go. (probably even 4%)
        So they are predicting the next 2 quarters to be down 0.25% each?

        I don’t think so but lets assume they are right.
        That would bring the losses down to 8.2% END FY19
        Add their 1.3% down FY20 and that equals – 9.5%; Well short of their maximum fall from peak to trough.

        KPMG / What do you want to hear

      • My point is the errors mean I genuinely don’t know what they mean. I doubt that what this extract is saying is what KPMG intended to communicate, unless, as I said elsewhere, the date is wrong, and this was supposed to have been published six months ago, in which case you need the proper date to know what to think.

        I don’t think they are predicting 0.25% falls for Sydney over the next 2 quarters, or they would be more explicit in saying it, for example. That forecast not adding up to their final peak to trough is another example of what’s presented not being what they actually think.

        Hence, I think you basically can’t draw any conclusion from it, and need to set it aside.

  15. Well Darwin has stopped accelerating to the bottom.

    It actually seems to be stabilising – bugger.

  16. Upton Sinclair seems appropriate to quote at this time “It is difficult to get a man to understand something, when his salary depends upon his not understanding it!”

  17. I thought KPMG were primarily an accounting and consulting firm?!. They are already behind the times and their opinion is worth diddly squat.

  18. All looks like an exercise of drawing lines in the sand and wondering if the tide or another large wave will erase your last and final line. logically if you just keep doing the same thing you’ll eventually be proven right however a slightly more scientific approach (for determining when the low tide will be) is to look at the rate-of-change. If we apply this method to house prices than I’d conclude that we’re no where near the nadir of house prices. Of course that’s not what you’re being paid to say
    sooo the next never to be crossed line is….(F’it a wave just took out that line but basically it is still correct and averaged over just the right time period I can guarantee i”ll be spot on with my predictions)

    The only real logic in any of this is the belief (maybe realization) that the average Aussie hasn’t lost faith in Housing as the best possible longer term investment. We can’t see a return to sensible values until this belief dies. RE needs to be viewed with the very same risk that one would associate with any other long term illiquid investment….unfortunately until this happens a rebound is guaranteed and those that keep the faith will be rewarded.

  19. Skin in the game!! it’s not far fetched to think that most ‘experts’ providing predictions probably have decent IP portfolios themselves. So they have zero incentive to tell the truth. They are really providing what they wish the best case scenario for their own sake – things to quickly stabilize before boom times resume.

    So expect more stuff like this:

    NOW is the time to buy!

  20. Jumping jack flash

    Whew! Just in the nick of time too. So did they bulldoze some houses? Increase immigration?
    All to get that dire shortage happening again, of course.

    I thought the house prices were underpinned by the sound foundation of a dire shortage exacerbated through out of control immigration. Pretty sure there’s not an oversupply of houses, or at least nobody has said there’s one. Pretty sure we’re still bringing in immigrants and they haven’t been cut back.

    House prices falling? What’s happened?

    Oh, of course, the debt dried up….
    So the shortage was actually debt-foam demand? Seriously? Who’d have ever thought?

  21. They’re confusing themselves with their decimal places. They really meant Sydney house prices are predicted to fall 43% per cent in FY19 – which is a far more saner and sensible prediction.

  22. Found the actual report:

    Just as mystified as to what they are talking about as before.
    However, I do note this comment on page 4:
    “Data is now available for the period up to the end of FY2018; … KPMG Economics has updated our modelling results for this data, ”

    I take this to mean that this forecast has been prepared as if there was no data available for 1 July 2018 onwards, and the charts included, such as Charts 12-17 back this up – the three months to 30 Sept ’18 available from ABS and the CoreLogic data up to roughly now are completely ignored.