Macquarie: 100% chance of house price bust

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The Silver Donut pumped up the gloom yesterday:

And how about this for an honest clanger:

Chief financial officer Alex Harvey said the company’s base case – with a likelihood of slightly more than 50 per cent – was for a 9 per cent fall in GDP by mid-year sparking an surge in unemployment to 9 per cent and a 15 per cent slide in house prices.

There was slightly less than even chance of a less optimistic scenario – a jobless rate of 11 per cent and a 30 per cent crash in the property market – occurring.

Mr Harvey said the company wasn’t betting on an economic snapback. “I’m not saying it’s zero [per cent chance] – it’s unlikely,” he said. The company said it was “unable to provide meaningful guidance” for its earnings over the coming year.

In short, the Donut sees a 100% chance of a major property price correction, which strikes me as about right.

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About the author
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.