MB Fund Podcast: Will the Australian Property Market Crash or Climb? With Martin North

Will the Australian Property Market Crash or Climb? Financial markets have disconnected from economics over the last few weeks, and so we dive into Martin’s mortgage stress indicators to get a real-time view on what is really happening on the ground. We’ll then look at what this means for the Australian Property market and the Australian economy as a whole going forward.

Join MB Fund’s Head of Investments Damien Klassen, Head of Operations Tim Fuller and Martin North of Digital Finance Analytics investigate the question “Will the Australian Property Market Crash or Climb?”

View the webinar slides here

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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.


  1. Martin’s work is appreciated. His analysis and scenarios rely very heavily on perceived financial stress and unemployment but these factors are really not that important and it could be argued that they are irrelevant to Aussie house prices.

    As Cameron Murray points out, this perceived stress has risen at the same time house prices have risen.

    The real factor that has driven the price growth in the last decade and the only factor that really matters has been foreign buyers. Take it away from the market and house prices correct. It’s as simple as that.

    It only takes one foreign buyer with one sale to support prices in an entire suburb which flows on of course to surrounding suburbs etc. The seller gets a mountain of cash to go spend on whatever next home they move to and pay generally whatever price is demanded or more. The foreign buyers are hugely underestimated on their effect to the whole market.

    A distant second factor is ability to borrow and service large amounts. Low interest rates, interest only (which can be refinanced continuously), etc. 2.2% interest of a million is 22k pa.. like half of what the current dole is for a single…??

    But as long as there’s a constant supply of new net buyers flowing in (from China), prices will be supported and increase.

    • darkasthunderMEMBER

      I think Martin’s analysis puts the availability of credit ahead of NOM as the primary driver of house price inflation.

      • I think credit and NOM should be thought of the evil twins. Take NOM away and the availability of credit is nowhere near as powerful. High(er) NOM is IMO the first born of the evil twins, ie the more powerful of the two. However the real damage is done when they are together

      • I should also point out that credit growth is not required to maintain price growth. Evidenced by negative credit growth in Australia and higher and higher prices over periods of longer than 12 months. People like Keen just can’t get their head around this.. brain just doesn’t compute or they can’t let go of their strongly held beliefs or some notion of “laws of economics” which are false in reality.

        • Ian ArunMEMBER

          Sorry i thought we still have a positive Credit growth for housing, yes personal Credit growth is negative..

        • DominicMEMBER

          Negative credit growth (declining money supply) and higher home prices over a sustained period are impossible. However, it’s a free world …

    • Les
      Interest rates wont be 2.2
      2.2 x 3 plus

      I cannot believe everyone is assuming interest rates will stay in the 2s

      What’s wrong with you all ?..?

      • DominicMEMBER

        Part of the issue with these beliefs is that people think that policy rates are all that matter i.e. if the RBA wants to keep rates at 0.25% then they’ll do so (no argument from there). People don’t understand that there are market rates as well as policy rates – and they can diverge markedly.

    • Les, that is interesting. What causes the high house prices in Australia? Is it the excessive immigration or the excessive lending?

      Longtime readers would know that I strongly disapprove of the corrosive immigration and the corrosive lending that is going on, and of the corrosive high house prices.

      However, have you stopped to consider the underlying problem – the housing shortage?
      For a moment consider what would happening if the following factors occurred:

      1) Immigration is run at a fixed rate of 400,000 rich immigrants per year.
      2) Interest rates are moved down to 0.001% and banks are encouraged to lend to insanity
      3) A massive house building project is commenced by govt:
      *** 7 new cities are created per year – one in each state
      *** 1,000,000 great new houses are created each year and sold directly to people who wish to live in them – at production cost.
      *** any structure that meets sound structural standards is allowed to be built on any private property
      *** the housing shortage is solved.

      You tell me how house prices could possibly rise under this scenario.

      • You can build a million new houses / dog boxes / new estates every year for another 100 years.

        Destroy habitats of native animals and trees, ruin the ecosystem, put strain on water supply, public transport, roads, pollution, and all manner of negative social detriment to existing Australians’ and their well-being and welfare… As long as you allow foreign buyers such as, for example, a market of a tens of millions of Chinese citizens with cash to buy them and leave them empty or whatever or any foreign citizen who so wishes to launder any amount of ill-gotten money (e.g. tens of millions in single transactions) with no questions asked and even encouraged by a proportionally enormous RE industry and easily buy existing properties through a myriad of loopholes with the black cash; then there will be never be enough supply to meet the demand and prices will be supported and continuously rise.

        The supply argument has long been a big immigration / foreign ownership / property developer propaganda lie.

        • You did not read my post well enough
          great new houses are created each year and sold directly to people who wish to live in them

      • DominicMEMBER

        “400,000 rich immigrants per year”

        Lol, a few % of the immigration total would be classed as ‘rich’ in any Western setting. The rest are either dirt poor or aspiring rich.

      • Will never happen under LNP and hardly likely under Labor for political reasons. LNP in particular has no interest in housing people beyond them a)paying an increasingly higher price to suit their own personal portfolio’s and b) for the peasants, renting from their tax and vote favoured specufesters of which, near on 100% of LNP politicians and everyone they play golf with are. They will do everything to keep the status quo and nothing to improve the housing situation for the poorest, FTBuyer grants serve no purpose in housing people. The idea of 400K people immigrating each year will be on their agenda but only to put pressure up on house prices and rents and pressure down on wages.
        Only when things break will it change and that will not be on purpose.

    • Assuming everything you say is correct, then the property in Australia is grossly undervalued. If one Chinese buyer can support prices in an entire suburb, and indirectly influence surrounding suburbs, and China has a virtually unlimited supply of buyers willing to pay anything to acquire property here, then we can assume prices will go to the moon, and then keep rising.

  2. I think the Australian Sydney & Melbourne ‘low end established housing bubble’ in Sydney & Melbourne will continue.

    Nothing has changed.

    And contrary to what the media report, the vast bulk of foreign dirty money is not flowing into new developments/ off the plan, or the ‘trophy houses’ by say mega rich Chinese.

    It is Chinese, North and South Asian & Indian or other foreign criminal syndicate money pouring in to acquire our very low end old established Sydney or Melbourne housing:

    Over $80 billion of foreign dirty money has been washed into Australia via the ‘PR proxy model’ in the last 8 years alone and almost all is into very low end established Australian residential housing in Sydney or Melbourne.

    To expel the Australian tenants and convert it into migrant only cash in hand bunkshare.

    Real world example:
    The grimy little 2 bed unit in Burwood in an 40 year old apartment block – worth say $400,000.
    The tenants a young Australian couple paying $300 a week rent.
    Rental return of $15,600 a year or 4%.

    Bought by a Chinese criminal syndicate via a local Chinese PR for $400,000.
    Leased by a Chinese real estate agent to some no name transient.
    Then sublet to 8 Chinese migrant foreign students guestworkers in bunks, each paying $150 a week.
    Now the PR owner collects $1,200 a week or $62,000 a year or 15.5% rental return.

    4 x times as much.

    $250 a week rent declared, the PR gets a $100 cut & $850 a week or $44,000 cash goes back to the Chinese criminal syndicate.
    And the PR claims taxpayer funded negative gearing as a kicker…

    Any issues?
    PR owner blames the letting agent.
    The Letting agent blames the transient lease holder (long gone).
    Why any attempted prosecutions fail.
    Then wait a little while.
    Do it all over again.

    Repeat that now by over 750,000 low end modest dwellings in just Sydney or Melbourne alone.

    👉🏻There is your Sydney and Melbourne housing bubble.
    👉🏻That’s why our house prices and rents for Australians are unaffordable.
    👉🏻That’s why we have 116,000 Australian permanent homeless and another 340,000 without affordable housing.

    And it’s a ‘dirty money made legitimate’ and its ‘cash flow’, not a capital gain model.
    🔹Still no foreign repatriation treaty.
    🔹Still no proceeds of crime treaty.
    🔹Australia & NZ the new target for dirty criminal money as the US, UK or Canada put in controls.
    🔹No FIRB or other checks & controls on a PR purchase of an Australian established dwelling.
    🔹No checks on actual occupancy, rental income or illegal housing usage.
    🔹We still have 2.5 million migrant TR onshore.
    2.25 million or 90% in Sydney or Melbourne & 98% still ‘rent in private shared accommodation’, (ABS code for bunk share) 🔹We still have another 1.9 million migrant PR, 87% are in Sydney & Melbourne and over 80% or 1.4 million who rent in ‘private shared accommodation’.

    So that’s 4.5 million non citizen foreign nationals onshore who rent in Sydney or Melbourne with an average occupancy of 6 per dwelling, or over twice the Australian average. 750,000 dwellings.
    (Where do people think they all live?)

    Nothing has changed for the foreign criminal syndicate to easily buy a low end established dwelling via a onshore proxy PR with zero checks or controls.

    Nothing has changed to have a highly lucrative cash return of +11%. in migrant guestworkers sublet cash in hand bunkshare.


    The Australian recession is now just the opportunity for the foreign criminal syndicates to continue and expand their money laundering into Australian established residential property.

    Both as a safe haven for their dirty money and a goldmine of cash tax free income return for the offshore foreign criminals.

    The underlying nutrient remains.

    The importation by Australia of millions of third world migrant guestworkers with no funds, assets or skills.

    An introduced migrant low socioeconomic tenant base who need housing, and who will live in filth and congestion to provide that 11%+ cash flow return for the foreign criminal syndicates dirty money.

    Talk to any Australian homeless.
    Most lost their jobs to the influx of migrant guestworker TR being paid cash, labor rings, squeezed out by foreign ethnic hiring of a non Australians.
    And then their housing was stolen from them because of this.


    So that is why I think the whole Sydney & Melbourne ‘house price bubble’, overpriced rents, the congestion, and the conversion of whole Australian suburbs into third world migrant guestworker slums will continue.

    Our Australia border force and DHA will continue to stand idle and not enforce even basic visa or COe conditions.
    The State and local councils are all on the take or are migrant controlled.

    You do wonder why the Australian citizens, particularly our youth who are most disadvantaged in renting impact or their ability to acquire housing…..

    … Why aren’t they out on the street demanding these millions of parasitic migrants (many in blatant visa & COe breach in working and living illegally) are rounded up & deported?

    Why isn’t this their public issue #1?

    • Add in 5 to 10% interest rates into your calculation as a possible scenario
      Tick tick tick 💣

      • Yep – higher rates & ‘additional default risk’ interest –
        That will knock out even more Australians who are already in massive mortgage debt, with lowered wages higher cost of living due to the migrant influx, or no job and no ability to service that debt. And negative equity and the Australian home owner or family with a large mortgage is wiped out & made homeless.

        Versus the foreign criminal syndicates that will prey on a distressed housing market, laundering their dirty money via a PR proxy – often cash or with plenty of buffer..
        To convert that Australian housing into additional migrant only cash in hand bunk share.
        Now if that foreign criminal syndicate did get the proxy PR owner to take up a mortgage – the migrants renters at 2 or 3 times average occupancy density in that dwelling can feed a cash flow up to double the repayments if interest rates were to go up.

        The migrant criminal syndicates are running a cash flow model / not capital gain and their model is interest rate rise proof.*

        The real answer is to deal with the nutrient feeding all this.
        The 4.5 million low income new migrants renters in Sydney and Melbourne (previous comment has detail) that provide the lucrative cash in hand sub let rental income via the proxy PR for the criminal foreign investors.
        Deport at least 2.5 million of these unwanted TR.
        Force occupancy inspections and the money flow.

        *I went thru the Negative gearing stats when that was a debate a while back.
        630,000 PR or recently arrived migrants with negative gearing. Many with multiple properties. Invariably on low or no incomes.
        Again real world / A Chinese PR who’s job is fixing phones in a shopping centre on $40k a year and he has 6 investment rental properties worth $3 million all running at a loss in below market rents.
        In Auburn,,, which has barely an Australian citizen left & is packed full of Nepalese, Chinese, Pakistani & Bangla.
        Go figure where that PR got his money from & who is living in those properties..

        • Why are you angry with the migrants Mike? You should direct your anger towards the government. These people do what are in their interests just like whites making hay in Asia. Your problem is blaming the wrong people, you should blame SFM and Co for letting these people in.

          • I agree.The 3rd world immigrants and criminals from China are just chancers however our governments collectively have sold us out for their own personal financial reasons and to keep the scheme/scam of expanding house prices going they have avoided imposing long agreed money laundering restrictions. They know this is going on. They also know that mass immigration of any sort is good for landlords (ie their focused constituent ‘mum and dad’ investors, more literary meaning the richest 10%) and house prices in terms of their own portfolio’s. This would be very easy to fix but there is zero will to do it when our leaders see themselves with future Harbourside mansions, bank accounts in the Bahamas and seats on the boards of companies who they have favoured. ie we have a 3rd world structure to our political class.

        • Rorke's DriftMEMBER

          Great analysis and eye opener mike. You propose a solution but political will pulling the other way. You can feel and see the effects of this on the crush loaded streets and in many suburbs of Sydney, but not many can articulate why and what is going wrong. Peoole can intuitively know Sydney is in decline, but is our population and institutions too diluted with special interests now and economy too tied to destructive models to recover.

        • If there were many living in overcrowded dwellings, COVID should have flushed some of these out. Heard about another of these shonky landlords claiming a widow’s pension despite their spouse being alive and well overseas – there’s no low they won’t stoop to to rip of the system.

    • No-one knows this is happening & if they were convinced it was true they would say nothing, You cannot question bulk immigration into Australia, that would be racist.

    • billygoatMEMBER

      @mb mike
      Your comments nail this bubble:)
      Please keep posting. 100% resonate with my experience.
      I lost a well paid job to Irish national on sponsored visa. Made redundant on poor performance. This was a lie and done out of 5K bonus. Smoke & mirror govt agency to challenge fake redundancy. Single, rent & storage costs rapidly rising. Friends & family in long held mortgages or inherited $ slyly suggested I should stop being a snob & move from inner city to outer suburbs where rent cheaper. Sure Melb or Sydney doesn’t matter for single inconevat the margin rent takes 30-50% income whether share or rate solo option.

    • The FNG.MEMBER

      Pacified by progressive ideology. Blinded and defenseless. They cheer it on.

    • Why isn’t this their public issue #1?
      – because they have no idea about the truths that you just explained in your post
      – because they (Aussie youth) are too busy/naïve working three dead-end jobs as they aspire to ‘save a deposit for a house’
      – because if your post went mainstream, whoever delivered it would be cast as a racist

    • Right.. I am wondering why everyone’s talking like there’s no virus around in context of immigration.

  3. Start a petition mike mb. I’ll back it and if you get a rally going, I’ll turn up with a few.

  4. No one is including in their analysis the possibility that home loan interest rates will rise to 5 to 10% or higher

  5. Love your work Martin, thank you. Anecdotally… friends have a small business, learn to swim so hit hard. Thing is, when they got finance, the bank took their home as security. Their business is sunk and loans unlikely to be repaid post moratorium. No jobs as back up. When i read about the troubles of small business i can’t help but wonder how much is secured against owners’ homes? Adding to defaults, pressures to sell, and price. correlation?

    • DominicMEMBER

      This will be Hiroshima for a lot of small businesses.

      The banks have been quite good about helping people and businesses through hardship – be curious to see if this continues. I think the ‘lost causes’ will be wound up pretty quick though – grab those assets quickly while they have value etc.

  6. @P13 no-one in small business ever gets a loan that is not 100% secured against Australian Property. It is always against the property. No Australian bank knows anything about lending to SME’s all they know is how to be a Building Society & lend via property. In Australia you cannot practically borrow money to run a business unless you have sufficient equity in a property. Simply cannot happen.

    • Rorke's DriftMEMBER

      I remember about 13 years ago I had a consulting business with a pretty good cashflow and good clients. I saw an entreprenurial opportunity and thought I might be able to borrow some money to exploit this. I went and had an informal coffee with a guy who I was loosely socially connected who was in factor financing, just to have a general chat about sources and types of business borrowings. He wanted to be helpful and asked about my assets. I had shares but no house but a good cashflow, no debt.
      The tone of conversation became a bit awkward, he was sort of embarrassed for me, their was no money accessible for me but his attempts to try and be nice in letting me down gently was sort of humiliating. Felt like I was a second class citizen getting above my station. I think I told him how well I done on some land sales in prior years and we hung around the minimum amount of time over coffee to be polite..

      • And what we are going through at the moment just reinforces the banks’ view.
        A good cashflow might mean $zero under lockdown, but a good house? Well, that will have some sort of residual value at sale.
        Covid19 has been the worst thing to happen SME present and future financial options.

        • Rorke's DriftMEMBER

          Fair point, but just reinforces how dependent our economy is on house prices, underwrites everything. And to get a house you go into so much debt how can you fund a business unless owned for many years. Its a form of market failure that the govt would be better off addressing with some underwriting or similar rather than handouts.