Mr Armageddon: Armageddon postponed

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A month ago, we saw Mr Armageddon go nuts at News:

With Sydney and Melbourne’s falling house prices infecting other capitals such as Brisbane, Darwin and Perth, some doomsayers say property prices could slump by as much as 50 per cent by 2022.

Digital Finance Analytics chief Martin North says Sydney and Melbourne houses will suffer price falls of 20 to 30 per cent, while high-rise units could slide by up to 50 per cent from their peak prices in 2017.

North says prices in Melbourne, parts of Brisbane, Perth and Sydney will fall the most between now and 2022, but it is outer suburbs that will be hit with the largest price falls.

“Prices will unwind in Sydney and Melbourne for at least another three years,” he says. “The problem is a lot of the high level data is averaged and averaging tells you nothing at all. Prices are not dropping by the same rates everywhere.

“In some places, for example western Sydney, prices are 23 to 25 per cent down or more, but areas closer into the city, particularly houses, are probably only 3 to 5 per cent down.

“If you look at Newcastle or the Illawarra, it’s 7.5 per cent down but there are other areas out in those regions where prices that have hardly moved at all.

“Perth is down 15 to 18 per cent on average. And if you look at Darwin, it could be 25 to 28 per cent. So these are big movements, they really are.”

Economist former government adviser John Adams — who once worked for Liberal senator Arthur Sinodinos — believes economic armageddon is coming.

Adams says Melbourne’s falling house prices are in a devastating slide that will go beyond Moody’s forecasts and could reach more than 40 per cent from peak to trough.

I concluded the following:

This leaves me cold. Martin North’s stuff is good but John Adams is way over the top. Indeed, it makes me think we’re close to the bottom in this first leg down.

Last night, Mr Armageddon postponed Armageddon:

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A few tips guys:

  • don’t be surprised at the corruption, it is integral to the system;
  • it’s the thin end of the wedge of stimulus. We ain’t see desperate yet;
  • RBA, APRA and fiscal stimulus will keep on coming;
  • the AUD will fall so long as the Fed doesn’t cut but, to be honest, it could halve and we still won’t get any inflation. First, it will simply be absorbed by importers amid weak demand. Second, the RBA will look through it. Third, domestic demand will be so weak that non-tradable deflation won’t matter.

Still too conspiratorial on stuff but it is sensible enough to switch when the data does.

That said, it now makes me wonder if I should turn more bearish…

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.