And quite rightly. Mortgage finance is getting slaughtered:
Investors -28% y/y; but owner-occupiers also -16%; while developers weaken
The accelerating fall in home loans shows tighter credit is playing out. Looking ahead, while the Royal Commission didn’t make material changes, we downgrade our long-held forecast peak-to-trough drop in home loans from ‘20% with risk of 30%’, to ‘25% with rising risk of 30%’; meaning housing credit growth will likely slow to 2% y/y by 2020, with risk of flat. We also cut our peak-to-trough forecast of home prices from falling ‘ 10% or more if regulators don’t ease’, to dropping ‘14%, even assuming the RBA cuts’ (with Sydney & Melbourne closer to -20%). This is double the ~7% decline so far. Hence, we reiterate our non-consensus view that GDP growth slows sharply to 2.3% y/y in 2019, unemployment drifts up to 5¼%, & the RBA cuts in Nov-19.
If anything that is still conservative. This is beginning to resemble a bona fide housing crash.
That Australian markets rallied on this data tells you only that sometimes they are very stupid indeed.