Martin North shoots his housing super-bear

New scenarios from Martin North:

Given the amount of money being thrown to the construction and property sector and incentives (or bribes as they should be called) to prospective purchasers, there is a path to higher home prices, especially away from the high-rise disasters in our main urban centres. We now give this a 20% probability, as the Government and Regulators attempt to keep the balloon in the air until after the next election.

However, at the other end of the spectrum falls of more than 30%, or worse are are in the cards if we get a second wave of COVID, or if the Central Bank support for the financial system starts to trigger a range of unintended consequences. Perhaps the truth lays somewhere in between, but anyone who takes a definitive stance on where prices will be ahead, are not understanding what is really going on.

These scenarios are much stronger than earlier guesstimates. Seems to me that we’re headed firmly into the “best case” now. -5 to -15% in nominal terms. I remain bearish on:

• high unemployment;
• permanently lower migration;
• plunging rents, and
• bank tightening.

Eventually, I see prices falling much further in real terms but not until China runs out of puff and iron ore sinks back to $20.