FOI: RBA terrified of its own housing bubble

Via the ABC:

Reserve Bank economists considered urging the Federal Government to shut down the real estate industry, “pausing” sales of established homes to avoid perceptions of a coronavirus-inspired housing market crash.

Highly classified documents from inside Australia’s central bank also suggest house prices could slump up to 15 per cent.

The internal reports contradict a much rosier public view the Reserve Bank of Australia has been displaying about the billions of dollars and millions of jobs tied up in housing, construction and real estate.

Minutes of the board’s May 5 meeting, released publicly, noted “demand for both new and established housing had fallen” and falling incomes, confidence and population growth “were expected to affect demand for new housing for an extended period”.

But inside the RBA, which sets key interest rates and economic direction, the warnings were clearer and more severe.

“It’s become clear that there has been a big drop-off in demand for new housing,” said speaking notes for assistant governor (economic), Luci Ellis, which were obtained through a Freedom of Information (FOI) request.

Beyond difficulties inspecting and selling houses, people were worried about job security.

“Contracts are being cancelled, early-stage buyer interest is very weak and the pipeline is emptying,” it noted.

“Anything that hadn’t already been started has been deferred”.

A day earlier, there were more stern warnings in a “COVID-19 liaison messages update”.

“Demand for new housing has declined substantially since mid-March and is expected to decrease further,” it read, with “sharp falls in sales, enquiries and foot traffic [and] increases in contract cancellation rates”.

A sharp fall in house prices is predicted in a note marked “highly restricted” and created on April 18.

“Housing prices are expected to decline by around 7 per cent over the next year. Prices are expected to remain around 10 per cent lower than at the February Statement over the forecast horizon,” it read, putting most of this down to a loss of confidence because of COVID-19.

The overall security of the banking sector — and its ability to weather some mortgage failures — will “mitigate larger declines in prices caused by forced sales and financial stress”.

The fall in house prices could be as little as 2 per cent in the best scenario, “in the downside [worst scenario] prices fall by 15 per cent”.

Real estate shutdown considered

In April, economist Nick Garvin wrote to colleagues, warning them the RBA should stop discussing the housing market as if it were operating normally, and calling for a halt — as happens to stock market trading in emergencies.

“I think it’s dangerous for regulators to be reporting on housing prices as though the market is currently functioning,” he wrote.

The “pause” would not mean there was no activity, he wrote, “although it could indeed be wise to recommend that the [Government] temporarily halt all sales of established dwellings”.

Shutting down real estate sales would send a statement that “we’re in a different category of situation” and that normal reporting of clearance rates and average prices was “misleading”.

Even without shutting all sales, pausing reporting on the market would “be a fair classification” because real estate agents could not work normally.

“If people start mistakenly thinking that we’re experiencing a housing market crash, it’s not going to help things,” he added.

Bank may have prompted HomeBuilder scheme

The RBA’s reports on the deteriorating situation in construction may have influenced the announcement of the Government’s HomeBuilder program in early June.

In an April report marked “highly restricted”, the Reserve Bank warned the industry was staring at a cliff.

“Although some builders and developers have sufficient work for the next four to six months, the weakness in demand for new housing and the potential deterioration of financing conditions pose downside risks to future activity,” it said.

In Melbourne, some of the RBA’s contacts have seen new home sales drop by half.

By May, things were worse: “Builders of detached housing expect weak demand to weigh on construction activity and cash flow beyond their current pipeline (around four to nine months). Builders and developers report that domestic banks and non-bank financiers have become more conservative in their lending.”

“Most firms intend to defer or cancel investment, many firms have reduced staff hours worked (more so than headcount) and an increasing number of firms expect to implement a wage freeze in the year ahead.”

Talk about desperados. Here is the latest forecast from the FOI:

There’s 88 pages of pearl-clutching to go through.

David Llewellyn-Smith
Latest posts by David Llewellyn-Smith (see all)

Comments

  1. DominicMEMBER

    They are terrified of a 15% fall? Lol.

    Fckin dunderheads. They are more stupid than I originally thought. Dumb as dogshyte.

    • BrentonMEMBER

      True spoken lol.

      They’re not terrified about 15%, they’re terrified about the CBA figure of 32%.

        • DingwallMEMBER

          The powers to be only care about Sydney, Melbourne and Canberra and their surrounds as well as where their beach houses and investment properties are ………….. and those ain’t in Perth.

          • innocent bystanderMEMBER

            exactly.
            Perth agent told me yesterday they have had a record month. 30 or 40 groups thru home opens in some (more desirable areas) not unusual. MY area is a little more subdued, maybe 10 groups thru but houses still selling in one or two weeks.
            when the world is diseased Perth iso looks pretty comfortable.

      • I agree, and if the RBA are terrified, then there should be a lot of over leveraged speculators who are changing their undies often.
        The real question is – do these speculators reduce risk and sell, or do they still believe its all good and property can only ever go up??

        • Super Phoenix

          Its all good and property can only ever go up. Search your feelings. You know it to be true!!

        • billygoatMEMBER

          Hopefully they’re insolvent & house prices imitate Coles model…down down prices are down 1997 1987 1977 1967 1957 1947 or whenever it was they were giving them away:)

        • Banks have been bailed out already. RBA already purchased most of the riskiest junk subprime liar mortgages from banks and it’s still buying.

          • i doubt this very much…..i know first had as my sister is subprime in my opinion. we are only scratching surface. royal commission revealed 25% of loans are fraudulent……that we know of……….

          • does your sister know who owns her mortgage?
            she has no idea, it’s probably already with RBA via RMBS, her bank collects 3% interest pays RBA 0.25% and keeps the rest. If she defaults and her house doesn’t cover the loan it’s RBA that’s going to “suffer losses” not the bank

          • doctorX. That’s a significant claim. Sources, please. If it’s not referenced, it didn’t happen

      • Many economists blamed the GFC not on reckless lending on overpriced housing, but rather on M2M accounting. You can be sure there will be no M2M insolvency. It will need to be much deeper house price falls leading to a realised insolvency, followed up with a bail in/out.

      • I don’t disagree with that – the issue with any house of cards (pun not intended) is that once it starts collapsing and gains momentum there’s really very little you can do to stop it. Home-buyer confidence is the issue and no amount of inducement aside from a monster discount to existing prices is going to get the buyers flocking in. Every day that goes by now, you’ve got to imagine that aggregate confidence has been dented somewhat. There’s still pent up demand for shelter and there are still people who decided ages ago that buying an IP was high on their list of priorities, but there are plenty of people out there now who have a very jaded view of the property market.

        • Super Phoenix

          But the RBA can prevent the fall of the nominal house prices by printing like mad – and shift the problem to the collapsing AUD and import-led-inflation. After all, AUD has already lost 98% of its value since the Nixon shock, so what is the big deal with slightly increasing the losses to 99% or 99.9%?

          Most won’t care if the nominal house prices stay high. Besides, they will be too busy trying to cope with the new problem of skyrocketing petrol prices and other price rises.

          • DominicMEMBER

            Perhaps. But if they’re going to do it they’d better get a move on as other central banks are printing more heavily than they are which means the AUD will only strengthen against the majors. Send everyone a cheque for $100k, I say, and you’ll never have to worry about low inflation again.

          • Reply to Dominic. I would have agreed with that 3 months ago. Now I am not sure whether stimulus via printing actually has a negative effect on the currency. It is beginning to seem that all stimulus is interpreted as good for all things involved, including the currency. Perverse, of course, but markets do what markets want to do

    • truthisfashionable

      Wasn’t Sydney down by almost that much last year and nothing collapsed.

      I’d be curious to know what they think maintaining excessive house prices aligns to within their remit.

      • Fair point. Maybe the RBA thought if the 15% threshold cracked there’d be trouble. It kind of drifted down to that level over 12/18 months but the economy was otherwise steady (if slowing). The economy is more brittle now and the Chinese economic engine is sputtering — the bedrock of the long-running property bubble. I would say they have every reason to be fearful.

      • Prices are already down to 2016 levels, so if they grew 10% lastvyear they are now down 15% again since March

        RBA is afraid of real possibility of 50% or 70% fall

  2. BrentonMEMBER

    Completely normal for a central bank to be considering a freeze on real estate sales.

    If only there were still some bears that had a more bearish view than our largest residential mortgage bank and the bubble blowing CB itself.

    facepalm.jpg

    • The scary thing is the only reason the stupid chûnts decided not to freeze the market is not because markets are markets and they are meant to fall as well as rise. And not because 15% is fck all. It is simply probably because an actual freeze would have REALLY caused panic. Even they are (just) clever enough to realise that.

      • working class hamMEMBER

        Thought the same thing. The sink and the plumbing have been thrown. If this story gets some legs, might be just as bad as doing it.

      • According to his resume, that stupid pr1ck Garvin has only ever worked at Uni and the RBA doing theoretical modelling and other such nonsense. Completely divorced from reality.

        • That seems harsh. You can’t get divorced from something you’ve never encountered in the first place! 😉

  3. Those places in new development suburbs are pretty much only bought by Indian migrants. The RBA knows this.

    • BrentonMEMBER

      Funny how specufestor credit drove the 2012-2017 boom (prices doubled), and when they went AWOL as of 2017, the market never recovered… the exponential growth was not driven by immigrants, it was driven by crazy lending into speculatively crazed investors. Immigrants just topped up the demand and added fuel to the fire. Debt cycle type stuff.

      Like I said to you yesterday, immigration flows have been relatively stable, while the ebbs and flows of the property cycle have been entirely driven by the RBA’s ability to ease credit and debt servicebility (which will be tested this cycle!).

      • Brenton, I believe you believe that credit drives RE prices in Australia. Steve Keen and a number of others believe this in their minds also.

        I disagree. Foreign money drives RE prices in Australia. Credit growth doesn’t. Prices in fact dive credit growth and loosening of credit. Crazy right? It’s probably difficult for you to believe but one day you will get it.

        Foreign cash pays for Australian real estate through various FIRB circumvention methods and has done so since 2017. The marginal effect of RE price setting means that volumes of foreign cash are not so important as the fact that foreign cash exists in the market at all.. I hope it’s starting to make sense for you.

          • fitzroyMEMBER

            The foreign money doesn’t show up in the data. I agree with Les. I don’t think Martin North is right in this regard. Neither are the FIRB or the NAB figures. Often the foreign investors are “Australian”. It is the same in Canada, the US west coast and the UK.
            Reference Mike Martins out of Vancouver. My son has been heavily exposed to Chinese investors and there are ways of getting funds out of China without troubling the powers that be.

        • Jumping jack flash

          Its a bit chicken and egg i agree but the interest rate manipulation starting in the late 90s, before the immigrants were a thing, kicked this all off.

          Houses in my area went from 80K to 250K within a few months.

          The immigrants were only needed after the GFC killed the mining boom

          • The early 90s was a result of the rise of the dual income household. Female participation in the slave trade / empowerment utopia, I mean career world. Thank feminism and destruction of family for that 👍🏼

          • Jumping jack flash

            early 90s yes.

            Late 90’s in the midst of the dotcom bust, and under intense pressure, Greenspan decided that it couldn’t possibly hurt to lower interest rates a little bit. Never been done before outside of a complete economic emergency, and it was completely taboo, but hey, what could it hurt? Up until that point interest rates were driven by the economy, not a driver of the economy.

            Aaand here we are. It took a while I’ll give it that, but the mess we are in is undeniably the direct result of that decision.

        • BrentonMEMBER

          Steve Keen was wrong because the RBA had a 7.25% cash rate going into the GFC and we never entered a recession (high unemployment to further smash debt serviceability),

          Notice how the property price cycle perfectly matches RoC in housing credit, with the frothiest period of the mania (the doubling) coinciding with a huge surge in credit, specifically into the investor class.
          https://www.rba.gov.au/chart-pack/credit-money.html

          That is why the RBA is sh!tting itself, because they have no rate cuts left with which to relieve the overindebted investor class, and now, the overindebted and out of work OO class.

          • BrentonMEMBER

            Throughout this entire period immigration has been relatively stable at historical highs (until very recently), so cannot account for the fluctuations in house prices

          • Jumping jack flash

            Agree completely.
            The interest rate cuts are not to relieve the repayments – although many probably welcome the relief, the cuts are to make more people eligible for the larger amounts of debt to bail out the bad eggs’ debt plus the interest.

            If they can’t lower the rates, people can’t take on more debt, and the bad eggs can’t liquidate and clear their debt + interest (+ capital gains) and that is bad news for the banks.

          • Brenton, you’re ignoring what I’m trying to explain to you and you’re going off on your credit orgasm again.

          • @JJF Good points, but debt serviceability is still a big thing imo.

            Like at present, the banks still have the same capacity to create credit, they are only pulling back due to rising arrears and debt serviceability problems in their books. A large rate cut would immediately relieve this.

          • How am I doing that mate? I acknowledge that immigration is a factor on the demand side, but think that it is completely dwarfed by the supply & demand of credit.

            The RBA is not sh!tting itself because of immigration flows, it’s because they’ve blown a humongous debt bubble and now we’re in a recession with no more rate cuts.

          • Brenton, why do you think the RBA wanted a RE trading halt when immigration stopped? Interest rates and credit availability stayed the same.. right?

          • No, what happened is that we entered our 1st recession in 30 years at a time of record HH debt (2nd highest on the planet) and with no more rate cuts. They have blown a debt bubble, which Lowe has previously described, and now are effectively trapped.

          • what does credit growth being higher than broad money growth pre 2009 as opposed to credit under broad money post 2009?

        • I see no reason why they can’t all be factors Les. There’s no need for a p!ssing match.

          • BrentonMEMBER

            I don’t know, A2, i strongly believe immigration is WAY overblown as a factor in the bubble.

            Credit fueled bubbles are always about the credit flow and debt serviceability (gravity). It is the debt cycle, not the immigration cycle. Japan didn’t come usntuck due to immigration (non-existant), it became unstuck due to debt dynamics.

            I put credit/debt at about 95%, immigration fits in amongst the other factors for the remaining 5%

          • Not immigration! But foreign buying. Lots of Chinese millionaires buying into Box Hill in Melbourne as 1 example and prices there exploded. Box Hill and Glen Waverely were always nothing suburbs of Melbourne but now command $3-4M for average blocks. NOT NORMAL. That’s the foreign money factor which pushed prices up. Then you have the RBA juicing credit. It’s like a perfect match. Then you have Jimmies desperate to live in Australia and paying $700k+ for Tarneit.

          • Gav’s right and Brenton is right too, there are foreign rich buyers (who do not need credit) and there are regular Jimm!es who do need credit but who add to aggregate demand if they get that credit, and as many of them are owner occupiers it is a slightly different dynamic to the Aussie specufestor who also needs credit but is in it for different reasons.

        • ErmingtonPlumbingMEMBER

          It’s both.

          This selling Freeze is a fascinating proposal
          Who is that really directed at?

          How will property settlements from the family court be enacted after divorce or what about all those small businesses who had to put their house up as collateral to get supplier accounts and need to sell to prevent bankruptcy.
          Or just all the potentially large numbers of mortgage defaulters Who have just stopped paying?

          Surely concessions would be made for owner occupiers to sell if needed.
          Maybe this freeze is only directed at investment property ownership or more like to stop the banks selling
          the the large number of repossessed properties they are likely to end up holding.

          • Right. Doesn’t mean mean credit drives prices in an extremely unique situation.. i.e. AU with foreign money laundering, billions in cash flowing from other sovereign nations for residential real estate…

            Did you consider that prices may in fact drive credit growth in a self-reinforcing cycle?

          • credit rises too fast > debt serviceability becomes problem > credit tightens > RBA cuts rates > loop ….. until rates hit zero

            Perfectly describes every debt fueled bubble, including ours.

            There are no changes in foreign flows and immigration rates that correlate like the debt cycle. The bubble predates the high immigration rate of recent times.

        • yes les we have all heard of feedback loops and velocity of money. it got dubbed using your house as an ATM during the us sub prime cycle as asset prices rose. captain obvious has now left the building

          • FFS. A recession is a technical term meaning GDP falls in two consecutive quarters.

            What predominantly drives up Aussie GDP?

            Hint: it starts with IMMIG…

          • There’s no such thing as a “debt bubble”.. it’s made up BS by fools who fetish about some armageddon scenario in their minds.

            I would love Australian RE to crash as much as you but it’s just not going to happen as long as there are any foreign bidders remaining.

            Credit growth is a side effect not the cause.

          • Where is the long term correlation between immigration rates and changes in credit growth? We’ve told you how the credit cycle functions and how closely correlated it is to asset prices, now it’s time for you to show us how your theory functions in the real world. Put up the data.

            Debt bubbles are absolutely a thing and a standard feature in financial history.

        • The90kwbeastMEMBER

          Yeah, nah.

          Credit growth is the primary lever, immigration just exacerbates the issue. Read Steve Keens analysis, this has all been covered a bunch of times before.

          • yeh nah yeh i know right? Les have you been living under a rock for i dont know 400 odd years. asset bubbles dont exist? really……i guess the tulip bubble, mississipi bubble, souths seas bubble, japan RE bubble, sub prime bubble bitcoin bubble, tesla bubble etc etc doesnt exist……let me guess short sellers are bad mmmmmmmkay, markets only go up and its different here……….seriously dude, you need to do some homework and get back to us. its all been done to death here and you seem in over your head? i will repeat this one more time for you, there appears to be a .82 R value between house prices and credit in this country, i think you will find almost all speculative frenzies are credit driven, in all of human history………..your dissonance does fascinate me though……..i have an electric vehicle company that loses 7k/vehicle and trades at over $1000usd/share that you might be interested in….or a ride sharing business that needs to raise prices 50% just to break even, or maybe a rental car business that is insolvent? these are symptoms/red flags that we are in the biggest super bubble in all of human history. and all asset bubbles end the same way. you will learn the hard way i guess.

          • Does it matter what causes it? Credit driving prices or immigration driving prices that then drives credit? The result is the same – stress on repayments for people who have borrowed too much and forced sales.

          • The90kwbeastMEMBER

            @Alexey, yes the result is the same but if you can’t work out how pricing works, any estimate or forecast is akin to throwing darts. You’re just guessing and might occasionally get one or two right but you never know why.

            The other factor in housing (or rather, the input to the next input in the process of credit growth) is government policy.

  4. Can you imagine the carnage if the RBA did put a trading halt on residential real estate?! That would be game-over.

    • Jumping jack flash

      It would immediately draw attention to the debt bubble and our debt creation machine.

        • Jumping jack flash

          Yes, see my comment below. No house sales, no new debt and no debt growth.

          In general its all about passing the debt eligibility criteria. There’s a ton of ways to do that.

          But once someone takes a close look at how we achieve our economic miracle, and the reasons why we put a halt to it they may get that uneasy feeling in the pit of their stomach.

          It won’t take too much for our banks’ banks to put their interest rates up and then its all over.

    • They were advocating for a circuit breaker style “trading halt” just like the NYSE does to prevent extreme price falls.. as I described in this blog in my comment back in March.

      • Yep. Would have caused absolute panic. And a gap down the likes of which are rare in an asset class like property. Happy days. Oh well.

        • Maybe a good thing. Current people are left holding the bag instead of more people being sucked in (if any still exist).

      • A central bank advocating a block on price discovery… Some animals are more equal than others and all that. When will they walk past a mirror and see what they have become. And we all know it doesn’t work in the long run, just causes painful market distortions in the short run.

        To heck with this, I’m going back to my new board game:

        “New Edition: Monopoly for Millennials – Special Edition – Forget Real Estate – You Can’t Afford It Anyway – Family Board Games – Ages 8” and up.

    • Super Phoenix

      A trading halt on residential real estate…. that would mean nobody who are desperate for cash would not be able to sell…..

      It will be quite a sight to behold. But nah, will never happen.

    • I would like to see it, just because it would be so insane that I’d have to pinch myself to make sure I wasn’t dreaming. This year feels like everything we’ve been talking about for ages (being 18 months away) is actually happening.

  5. Hill Billy 55MEMBER

    And that’s the reason Corelogic decided not to report its daily indexes. Can’t have reality hit the populace. Amazingly, even Martin North’s scenarios from Tuesday night are starting to paint a fairly rosy picture. Cannot understand that.
    Anecdata from the weekend in Toowoomba was that there are very few people out and about looking at properties.

    • If you want anecdata… the quality of stock on market seems to be going up, subtle but may indicate the smart and old money are currently thinning portfolios.

    • codeazureMEMBER

      There’s a lot of variation between suburbs, let alone states. In my area (middle ring suburbia Sydney), I have seen lines of 50+ people for basic family homes (mostly 50s-70s), because there are so few of them on the market. But with volume so low, it’s really hard to get an overall fix on the market, like a flapping sail on a becalmed yacht.

      Martin North still has 80% probability of falls. He has just increased the positive from 10% to 20%. That’s probably fair enough.

      • I did note that the “Armageddon” scenario has been re-labelled to “Second wave pandemic”. The original scenarios were also likened to Ireland and Iceland.

  6. GeordieMEMBER

    Statements like this really worry me:

    The overall security of the banking sector — and its ability to weather some mortgage failures — will “mitigate larger declines in prices caused by forced sales and financial stress”.

    Firstly, they relying on limited damage to the banks in order for things to go ok. Secondly, if “overall security of the banking sector” is how the RBA materials have implied context, then are they commenting on the strength of the banking sector or the mechanisms they have in place to covertly bailout the banks in the event of disaster?

    Combining those two points paints a picture of a mob looking to good luck firstly, and then acting a captured government entity second, which is not how this is meant to work at all.

    And lastly, once again we have a estimate of price decline viewed in a vacuum. If prices fall and remain depressed, the negative feedback loop is going to tear away as soon as price falls last longer than the financial resilience of the marginal sellers. Status quo forecasts are great when it’s all SNAFU, but worthless when things are clearly FUBAR.

  7. Jumping jack flash

    The debt really isnt growing fast enough but if they think shutting down sales is going to help they really have lost it.

    To begin with, there’s still 2.4 trillion dollars of debt that requires interest to be paid! Have they forgotten? Surely not. Or is that all going to be deferred forever, or until things return to “normal” whatever that is?

    One could then argue that for things to return to “normal” the debt will need to start growing at an astounding rate to make up for the last 7 years of inadequate growth, and the only way thats going to happen is by mortgages and… property sales!

    Its a bit of a slippery pipe they’re walking on i think, unless banks have disvovered a bigger debt bucket than a house, that the average quiet Australian is interested in filling with debt.

    • SoMPLSBoyMEMBER

      They never anticipated this would happen as its never happened before.
      But it’s happening; mortgage debt assumption ( the leaf blower under the property price bag) is not advancing anywhere near enough to keep prices aloft. And worse, with the extraordinarily leveraged banking system’s reliance on the fragile elevated prices as security, the long burning fuse that everyone can see ( and the RBA thought they could manage) is frighteningly close to the powder keg now.

      It’s the MBA class lecture where the student in the back of the class slowly raises his hand (palm open and elbow on the desk) and explains to the professor what WILL happen if future debt cannot support present debt.

  8. They should be terrified.
    65% of all bank lending is for mortgages.
    The freakshows of banks we have in this country is a terrifying thing.

    • Jumping jack flash

      2.4 trillion is only 65%? Holy cow thats a lot of debt we all have.

      To be fair im sure some of it is productive debt. That stuff’s ok.

  9. NEWSWIRES: China bans all flights from Beijing due to return of Covid-19. Australia to take up the slack.

  10. “I think it’s dangerous for regulators to be reporting on housing prices as though the market is currently functioning,” he wrote.

    They think the market only just stopped functioning…..how cute!

  11. It was pretty obvious HomeBuilder was designed for the outer suburb house and land package deals. Now we know.

    • Reus's largeMEMBER

      It does explain the “developersaver” and the push to open teh gates again to get buyers in the door, this bubble needs ever increasing debt in order to survive, without that it is goneski

    • Yep, but you forgot the nice FU of you and I paying taxes to tart up Scomo and other rich people’s bathrooms during a recession… Italian marble anyone?!

  12. Display NameMEMBER

    The more ructions we have in the financial markets the clearer it is that the Central Banks have NFI. They are reacting. And this makes me think that the chances for unintended consequences are high and no doubt already present. You get the feeling the more interference into the financial markets the CB’s initiate, the further we are from a working, sustainable system, the higher the chances that the compounding effects of their meddling will become unmanageable.

    Welcome to ponzinomics.

  13. Bedwetters. If Covid has delivered one thing, it is power to those in the public sector who never had a real job to dictate over those in the private sector who do.

    Enough.

  14. Check out listings in Wellard 6170 and Aubin Grove 6164. Hundreds of empty lots unsold. Methinks houses in these new developments will have no neighbours for a while to come. FK the property market!

  15. So it’s OK for the housing market to rise wildly, causing untold economic damage across the nation and ruining the prospects for a generation of young people, but as soon as worst case falls of 15% appear they start thinking about trading halts? Trading halts in the real estate market? I sometimes wonder if these people live on planet Tharg. They don’t seem to live on the same planet Earth that I live on.

    I soooooo want to line them all up on the stop butts butts and use them to zero my scopes.

    • Totally agree. If property doubled from 2012-2017 as mentioned above, and that was all good, WTF when it goes down 15%, then they have to loosen lending standards and lower rates to support it. back up again, and it worked!
      The only positive from this 100% price increase (apart from the obvious rentiers and banks) is that normal Joe Blow and the missus went out and started living the life of the ‘wealthy’, on the back of their (unrealised gains), which then supported the overall economy when there was little else to do so. So, now that there is even less to support the overall economy, the only weapon left in the arsenal is the property market, even 15% drop will stop the perceived wealth effect, and then the snowball starts rolling down the hill……

    • They all depend on property prices rising, it lines everyone’s pockets! Screw young people, they are fodder for the great debt machine. But surely you’ve figured this out by now? Watch what they do, not what they say.

  16. Well someone connected to RBA must be really worried about her/his investment properties. Probably leveraged to high heaven if worried about such a tiny fall.

  17. Good stuff..

    2010-2020: house prices rise 100%
    Everyone: *crickets*

    May 2020: house prices decline 0.4% as per corelogic
    Everyone: OMG nobody move. We need tax payer paid renos, We need super to pay for deposits. We need $50k grants because people are getting cold feet about buying a 350sqm block 60km from the cbd

    • ‘people are getting cold feet about buying a 350sqm block 60km from the cbd’
      and who could imagine that this would be a problem for the house/land package amazing price of only $700k for 20 squares!!!

  18. Ignoring the absurdity of the proposal, and doubts as to whether the RBA could actually lawfully do this, my thoughts turned to subsequent enforcement actions.

    I envisioned heavily armed strike teams of chubby middle aged bankers with soft, flabby and pale bodies and thick spectacles thundering up to illegal house sales in fleets of fast moving BMWs and similar high end Euro vehicles. I can see them now, leaping clumsily out and storming slowly into the house where the desperate illegal vendors and buyers are thrown to the floor at airgun point, gently roughed up by soft manicured hands with lots of gold rings, cuffed and then led in a shameful perp-walk out into the street past silent crowds of other people who desperately want to sell their plummeting houses and investment properties. Etc etc…

  19. Despite this showing how truly stupid and corrupt the RBA is… I think there’s a long way to go in the Oz property bubble game. The RBA/ govt have plenty to throw at it before it’s done, bankrupting the country in the process. Off the top of my head:
    – Full super balance to pay mortgages/ house deposit
    – Further vendor stimulus eg. FHOG grants, homebuilder upped to $100k
    – Negative gearing for OOs
    – IO 10-20yr terms for all
    – 50yr intergenerational loans
    – Negative IRs
    – Pumping immigration and money laundering purchases to the moon
    – RBA buying all junk/ subprime loans (maybe already occurring)
    – Finally, direct govt/ RBA buying of property or mortgagee sales from banks

    Please, someone convince me why some/ all of these measures won’t succeed in pushing prices a fair way above where they are now, let alone crashing. (from a capitulated bear)

      • I was thinking along these lines the other day, and the option of extending existing loan periods seemed like the simplest and easiest way to extend the Ponzi so 50 year intergenerational loans seems like a very likely option to me. Imagine being in debt the day you’re born eh? The new serfdom.

        All the other things you mention are also plausible.

    • The90kwbeastMEMBER

      Agreed, this ponzi has a good 2 decades in it, maybe more with these sort of creative economic policies ready to go! Go straya (and NZ, which is just as bad if not worse)!

      As I keep commenting on this blog, the property market is a command controlled market, and is in no way a free market. Meanwhie, in 10 years time we’ll be hearing from Martin North about stress levels…

      • Except Martin North’s stress levels will be the ones he’s talking about! 😀

  20. Surely a shutdown on property sales would only cause more panic, encourage FONGO and likely be subject to legal challenges.

    I think spreading this and ABC article may change the attitudes on some unsure about selling and hoping to ride things out, as there would definitely be a first mover advantage from doing so.

  21. TailorTrashMEMBER

    Straya RBA …go you good thing …your house is worth a million dollars but your dollars will be worth sh1t …
    Garn straya !

  22. rob barrattMEMBER

    Transaction pause? Who would possibly panic? In our calm, collected and mature country a panic is about as likely as a hysterical run on toilet roll… never happen.