The recent Australian Housing report from CoreLogic shows Australian Property has seen a powerful rebound in the past 6-12 months. Today we covered what the data shows, the reasons for the rebound, Catherine’s thoughts on the landscape, and most importantly, is it sustainable?
In today’s webinar, hear from MB Fund’s Head of Investment Damien Klassen, Chief Economist Leith van Onselen, Head of Operations Tim Fuller and special guest Catherine Cashmore as they cover the “Is the Australian Property Boom Sustainable?”.
Additionally, we’ve included timestamps in this week’s episode – see the episode description
Apologies to those who wanted to watch live, technical difficulties impeded us today unfortunately
Take us on your daily commute! Podcasts now available on iTunes and all major Android Podcast Platforms for Nucleus Insights.
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Tim Fuller is Head of Operations at the Macrobusiness Fund, which is powered by Nucleus Wealth.
The information on this blog contains general information and does not take into account your personal objectives, financial situation or needs. Past performance is not an indication of future performance. Tim Fuller is an authorised representative of Nucleus Wealth Management, a Corporate Authorised Representative of Nucleus Advice Pty Ltd – AFSL 515796.
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The way I would summarise is this:
Catherine is explaining what she’s seen the last 3 months (a boom on low supply), Leith is factoring in what is probable in the future in terms of economic fallout from the WuFlu in China (we can all agree Australia relies heavily on China).
You can tell that Catherine is so far away from the virus updates that she can’t comment as she even says it’s going away last she heard. It’s all continued boom times for her (Fair enough, that is what she’s seen).
So, if the rise has been simply because of a property obsessed government propping it up with cheap money with relaxed lending rules which has given confidence, this virus on top of our very weak economy can do precisely the opposite.
Let’s watch…..
To be fair, we are all just making educated guesses. The coronavirus is a black swan. Nobody knows how it will turn out.
Normally a house price boom would have flow on effects to the rest of the economy via an increase in total credit growth. It can be self sustaining as the new money flows through the economy producing wage rises. This mechanism is currently broken as debtholders are repaying their loans quicker. Along with bushfires and coronavirus impacting the economy it is likely that households will further tighten their pursestrings, damaging confidence and increasing unemployment. It is unemployment that has the greatest potential to puncture this new boom. It has held up remarkably well the last 12 months but we will see how it pans out over the next 6 months or so.
With respect, such a mechanism is not self sustaining – which is precisely why credit booms turn into credit busts, without exception. The evidence is clear. Granted there are economists who believe that deficit spending is a great thing for the same reason – they believe that if you just boost the economy with some deficit spending it’ll set in motion a chain of positive economic events which will feed on themselves i.e. spend $1 and it becomes $1.5 of GDP thereby ‘growing one’s way out of debt’. Why this belief persists is beyond me because, again, there is precisely zero evidence for this and plenty of evidence for the polar opposite. Stimulus boosts GDP for roughly the length of time the stimulus is being deployed and then it dies.
All rising house prices do is con gullible home owners into thinking they’re wealthier than they really are and spending money they don’t have. That’s what passes for ‘sound economic policy’ these days, but educated people actually think this shyte is legit. It’s beyond comprehension, it really is.
Catherine is a Georgist and a Real Estate Agent. Unique? Must be an interesting story there.
What’s a Georgist?
I think you can figure it out. Thanks for your interest.
@ Swampy
MacroBusiness does not like direct google search links posted in the comments section
If you wish to be enlightened, google “Henry George economist”.
I don’t expect a thanks, but, it would be good karma.
18 months (according the WHO) before we get a viable, safe, working, vaccine. Rising infections and deaths in the mean time.
And the reality of this calamity is yet to announce itself on charts. It’s too brand new.
And we need to consider the political angle here in terms of the US and it’s struggle against China (“The Chinese Communist Party presents the central threat of our times,” Pompeo 30/1/20), this virus and the economic damage it will cause (to China mostly) is an absolute gift to Trump and his sycophants, They’ll exploit it to the absolute maximum. Turn the screws. They won’t give 2 ______ about Oz.
Australia is 3rd most exposed to China globally.
I dunno. Do the math people.
And if you where china watching that unfold and could drive a wedge in the Aus/ US relationship wouldn’t you exploit it?
More Chinese students.
More Chinese travellers.
More currupt Chinese money into property.
The Chinese won’t left themselves blow up they will stimulate that hard it will make the 2008 effort blush.
Do the maths.
So… is the current pricing gouge sustainable – say, without the virus event? I didnt get it.
Henry George, the American philosopher in the 1880s, worked out much of the real solution to economic woes, This is NOT to tinker with the type & mix of taxes but rather to ditch the lot next 30 June and collect instead Site Revenue [“SR”]. SR is the collection of the annual rental-value of sites privately occupied as the sole source of public income.
This would be simple to assess (using expert valuers, never politicians) and collect in monthly instalments, so hordes of accountants & lawyers can find useful work. SR is actually not a tax, so much as public collection of the price for monopoly rights granted over cadastral sites and natural resources (renewable & non-renewable). Land price would reduce to nil (plus value of improvements), which it should be as Creation gave it for free.
Land price is actually theft from Creation, from others in the community and from future generations. People who practice site-profiteering are parasites perpetuating a crime. No civilization or economy that is based on theft can be healthy or survive in the long term. Let the losses & banks lie where they fall; they have no moral standing.
With easy access to land, especially at the unimproved margins, anyone willing to work could earn a living (even if just building own home & growing own food) and labour would have independence & equal bargaining power with capital. There would be an outbreak of equality, peace & plenty. A raft of socialist programs would become unnecessary. We will be able to consolidate local self-management without politicians (just have recallable delegates).
These beneficial effects will only be felt when the entire SR is collected and all taxes (which invariably warp the economy) are ditched. This would be no more difficult to achieve next 30 June than was bringing in the GST impost. Of course, wealthy people, the media & politicians & academics they manipulate, the middle classes locked into an endless treadmill, and the ignorant masses with no time to study & cohere anything, will not or cannot think straight about this.
So, driven by various perversions & perverts (some of them well-meaning), the entire globe (infected by site privatization & speculation, ruthless grabbing of raw resources and financial indebtedness) is likely to descend into increasingly irredeemable monetary, environmental & military chaos. In due course, chastened by that experience, simple clear facts & logic may become obvious to all; a state of knowing will prevail.