Bloxo runs screaming from house price forecasts

From Bloxo at HSBC today who still has deluded house price forecasts of 5-9% this year:

Every element of economic forecasting will change.

…There is nothing that will be left untouched by the extent of the macroeconomic shock we’re faced with. To latch on to a particular number at this point is hard. But there is significant downside risk.

…Australia is set to have a recession and the unemployment rate is set to rise.

…Migration is a key driver of population growth, which in turn supports housing demand – and with all travel banned, new migration has stopped.

Without new household formation, housing demand will fall, but the housing supply remains. Before the COVID-19 shock, most estimates suggested that housing was moderately over-supplied anyway.

…The question is more around the medium-term outlook.

At some point, the forebearance measures will be lifted. If unemployment is higher, there will be questions about how many of the repayments do present a challenge and what does that mean for the housing market.

I’ve got a foreacst for ya: down.

David Llewellyn-Smith
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Comments

    • So they are moving out (somewhere cheaper or Mum and Dad’s place) and trying to get a renter to pay the mortgage they can’t afford?

      Is that a ridiculous price for your area? To me it seems utterly ridiculous. Do they know how markets work?

      I smell a house on the market in 12-18 months due to a divorce.

      • haroldusMEMBER

        Good houses seem to be 850-900, but they seem to sit on the market for a bit.

        We pay under 700, but the house is dilapidated. I like that about it though. Agents don’t nit pick, and seem to have given up inspections.

        We had a whinge when the rear power circuit kept tripping (kitchen and laundry!) the other day and the response was “it’s an older house”. Sigh.

        • When you burn it down upon vacating you can shrug and say “it was an older house”.

        • just had a chat with my son and he says you should unplug everything from the kitchen and see if it still tripping. If that is the case it could be issue with the wiring to the kitchen. If that’s not it then it could be faulty appliance.
          Is it only tripping when it rains? That could be a leak.. water getting to exposed cable.

          • haroldusMEMBER

            Thanks fcken. It did do it in the last rains but not the big ones before.

            I will try and be more scientific next time it does it.

            Just house is very dodgy, but we understand that is why cheaper.

          • Could be a fire risk, too – that’s a wiring and older house risk, too…they therefore have an obligation to you. Raise it in writing, and insist on an inspection at a minimum. Better than being woken during the night by fire…

      • my guess is moving with mom and dad. many are doing it and that will also flood the rental market and make things even worse. many that are leveraged to their eyeballs won’t survive this as lot of renters are also moving with mom and dad.

    • Alternatively I smell a scam. Move out. Rent it to a mate for $1000 a week. He loses his job the next day and gets the rental assistance from the government and pays it to you. He gets a free place to live. You get your mortgage saved!

      As a taxpayer who is paying for this, I feel so happy.

      • Zombie Apocalypse

        Don’t forget the tax payer funded repayment holiday, many of these good looking investors see strategy in taking the deferral and loading up the offset.

      • Jumping jack flash

        Using the government stimulus the way it was designed!
        Bank bailout on the sly…

    • Do people seriously fork out $1k / wk for a rental?
      If I was going to fork out that much I’d prefer a mortgage – $1 million @ 3% is $972 per week. Obviously can’t live as close to the city but at least you’d getter a bigger house and more land.

      • C.M.BurnsMEMBER

        Yes. This part of Sydney, rent is calculated on the assumption of student / shared accomodation.

        So ~ $200 per room for a rundown place, ~$250 a week for a renovated / nicer place.

        $300 per bedroom is definitely on the extremely high side, especially with no car park.

    • Display NameMEMBER

      I am around the corner from that place and paying 1000 a week for a 3 bedroom place in not as good condition as that but has off street parking for two cars. I deal directly with owner and he is pretty good fixing anything.

      • haroldusMEMBER

        We moved here from Newtown when we discovered Wilkins public by voting there last year – Newtown was too packed to vote so we looked for other polling places.

        No one wanted the place we are now renting, so we were the only ones applying I think. It’s dilapidated, but I’m allowed to kill vegies in the garden, so I am happy.

        • C.M.BurnsMEMBER

          I’m a couple of blocks away back towards Lewisham. Also renting. Once quarantine ends we should organise beers nearby

    • China PlateMEMBER

      what about that roof structure at the back
      why would you not raise it above the roof line and fix it to the rafters/top plate of back wall, with some stub posts, and get some height under there

  1. The final test and chapter for the Australian housing miracle! With basically no economic activity, no employment, no migration can we keep our constant march to ever increasing prosperity growing just by selling houses to each other! The ultimate challange but we have all been training hard for this moment the last 20 years and now the gloves are off.

    TVs set up for virtual auctions – whole quarantined families crowded around the glow – replacing the 8 hour working day as banks, spew forth unlimtied credit, capitalising all interest into the never never future!

    “I’m making more in captial growth per day than I used to earn in week!”

    Each sector knows exactly what it must do:

    Media – “We’re all gunna be rich!”

    Boomers – “We’re all gunna be rich!”

    Youngsters – “Shut up and cop it sweet!”

    Pollies – “Pick me, pick me. I’ll say whatever you want!”

    C’mon Australia time to shine and lead the world to a new dawn. Yes, we can!

    • Jumping jack flash

      The future has simply been brought forward by the virus. What they’re doing now is what would have needed to be done in another 5 maybe 10 years after QE lost its gleam.

      Whoever points to QE and says, “now there’s a robust solution that will really fix everything and in no time at all the whole joint will be jumping (just like in 2006)” has got to be stark raving mad. Completely bonkers.

      The new model is that half the population stays huddled down, working from their homes, endlessly panic buying using unlimited QE-cheapened debt. The other half delivers their purchases between panic buying themselves, with endless amounts of QE-cheapened debt.

      The government ensures the debt grows fast enough by buying it directly from the banks and distributing it to the people using a thinly-veiled UBI. The interest on the debt is repaid using taxes.

      In summary, we all become battery-hens, fed on debt.

      The reason for this is simple – the economy wasn’t behaving according to the banks’ narrative so they decided to whip it into shape. Enough was enough! Debt wasn’t growing fast enough. (A lot of this was because of the banks’ upholding their “standards”). Things were careening towards collapse and nobody had any ideas. QE was the best they could come up with and it was crap. QE solves nothing if nobody takes on the cheaper debt it creates.

      In a few weeks though, after the whole world goes into lockdown, the New Utopia, the Age of Aquarius, will finally arrive and it will be glorious.

      • Peachy Bagholder

        seems to me like plandemic is only way to smash austian-model-breaking disruptive tech… bye bye uber/airbnb/bitcoin.

  2. Point BreakMEMBER

    I’m one of the dumb one’s who tried to play the contrarian card. I put all my super in cash 6 months ago, saved a 200k house deposit and shorted the S&P around 6 months ago. I thought property would finally come back to a traditional average of 4-1 debt to income, but it seems the govt will do everything in its power to stop that.. Market forces are no good when they affect property. Off to Bunnings to buy a pitchfork.

      • Point BreakMEMBER

        I sold the short a month ago mate. Tempted to have a go again as the bear market fades, but it’s choppy out there haha.

    • Jumping jack flash

      There’s over two trillion reasons why houses will never be allowed to fall significantly in price.

  3. In the interests of science I sent an email to my agent saying could not pay. Results:

    Thanks for your email and we are sorry that you are experiencing difficulties as a result of the Government Covid-19 restrictions.

    Prior to any consideration of modifying the current lease arrangements, we will require the following:
    • A formal letter of redundancy or changed working conditions from your employer;
    • Letter from Centrelink confirming that you are entitled to Government assistance and the extent of that assistance;
    • Complete attached Tenant Financial Hardship form.

    It is understood that the Federal Government will be making announcements very soon regarding specific rental support to residents who may be impacted by the Government restrictions. Some Government support may already be available to you, which is why it is essential that you contact Centrelink to confirm your eligibility for any existing or future support.

    Please find attached copy of the “Income Support For Individuals” issued by the Federal Government.

    Once you have registered that you wish to apply for assistance, the government will backdate any available support to the date when you registered your interest.

    The owner is not in a position to adjust the required rent at this time. Your situation can be reviewed, however, once the full scope and details of Government support arrangements have been announced.

    In the interim, it is important that you provide the requested information as soon as possible so that our office may properly assist you.

    Thanking you for your cooperation.

    • If it’s actually that strict, that’s quite encouraging.

      Why do I doubt it will be that strict for landlords when they want a handout?

    • What I find puzzling is that these property managers / landlords are requesting all of this invasive documentation and the line is, “The owner is not in a position to adjust the required rent at this time. Your situation can be reviewed..” as if they control all the power in the contract.

      But with these eviction bans, you can just say “how about no, I’m not going to give you all that sh)t and you are going to have to take my word for it”. What can they do? It’s not as if they can evict you. They should be glad they even have a tenant right now.

      The wording and requesting of all this onerous documentation and evidence is a total BLUFF. It’s also subtle intimidation and manipulation. They’re making up rules as they go along and trying to sound “sensible” or “official”. It’s garbage and they have no leg to stand on.

      • Yep choice architecture from pure pond scum. Probably doing a disservice to pond scum.

    • Just respond back and say:

      You mention you prior to any consideration of modifying the current lease arrangements, you need documents.
      However, I am not asking you to change my lease arrangements. I am just letting you know, I will not be able to pay rent from next week. Work didn’t give me a formal letter and neither has centrelink, so will not be able to provide letters that do not exist.
      ——–
      If you have submitted documents to centrelink, let them know you have submitted but first payments dont start until end of April so won’t be much happening before then.

    • Point BreakMEMBER

      Good luck with it mate. The negatively geared landlords get bailed out risk free, yet renters are still getting f*$%ed over. There must be what.. 50% of the population that rents? When is there going to be some sort of backlash.. Can negative gearing survive the chopping block when we have to repay 500B? Who knows.. I like Divya’s advice. Just say no! They’ve been screwing us for years, it’s time for some of their own medicine.

  4. Jumping jack flash

    Mountains of cheap debt is up for grabs, more than ever now that QE has started, but debt eligibility criteria and ponzi buy-in cost are preventing the people who desperately need the debt to succeed in the New Economy, and make more people instantly rich from their debt mountain, from obtaining the debt they need.

    The problem is that the banks’ debt eligibility criteria, and the prohibitively expensive “buy-in” will end up destroying them. They need to all relax and completely trust the system they have carefully constructed for themselves. There is no risk now, and any risk diminishes as more debt is added to the system. The key is to keep the debt expanding fast enough. The only way to do that is to get the debt out there by any means possible, and give as much is necessary to anyone who wants it.

    • Thats the key – who want debt. What you will find when people are forced to face their mortality with a virus is that they wont want to take on more debt.
      Tell me who wants to take on debt now to buy an IP with a tenant they cannot kick out if they dont pay rent?
      Govt just killed the IP market.

  5. ‘Migration is a key driver of population growth, which in turn supports housing demand…’
    Such waycism from Bloxo. And we are meant to believe that the rate of immigration hasn’t been pushing up shelter inflation.