MB Fund Podcast: Coronavirus to kill Australian property (updated with podcast version)

The strong rebound in Australian property values has come to a shuddering halt with the Coronavirus lockdown. Auction clearance rates and buyer sentiment have collapsed, unemployment is surging, and mortgage availability is tightening. All of which points to declines in Australian dwelling values. Yet these headwinds pale next to the looming headwind of heavy falls in mass immigration over the medium term…

Listen in as MB Fund’s Head of Investments Damien Klassen, Chief Economist Leith van Onselen, Chief Strategist David Llewellyn Smith and Head of Operations Tim Fuller discuss the ultimate victim of Coronavirus, Australian property prices

Topics include:

  • Coronavirus a unique challenge to Australian property and growth model as a whole
  • Mass immigration and international students
  • Foreign buyers’ role in Australian property
  • Rental crash
  • 1.3 million loss making landlords
  • Policy exhaustion and options
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.

Comments

    • Yep. That’s it. $10M of taxpayer money so far down the sh1tter that even Ermo couldn’t retrieve it for a fancy Covid image.

      At least we can console ourselves that the money has no doubt funded the acquisition of lots of lattes and glasses of chardonnay and euro cars etc for the muppets who came up with that fcked up idea.

      • Arthur Schopenhauer

        Why didn’t they run an open competition? Oh, that’s right, it takes skill & limits the flow of money to mates.

    • billygoatMEMBER

      Yep doesn’t that new logo reveal the gold plated joke that is the vira$$
      Nation shaming getting rid of the roo, Skip:)
      Made in Woo han – no need for shipping cos all the labour soon to be here, gear up our factories (the ones that haven’t been bulldozed into glamour dog boxes) Victoria to be the new Woo Han province complete with golden numbers of of imported virus & factory workers

  1. I’m sure that the mainlanders are going to come streaming in to buy property any moment now… any . moment . now….

  2. Emergency permanent Visa for HKers (hopefully only for those born there, not mainlanders) to the property rescue.

  3. BrentonMEMBER

    48:26 on is all that matters.

    It is telling that the last crash was forestalled by rate cuts and credit deregulation by APRA banks.

    – No more rate cuts.

    – Credit already relaxed beyond banks (un)willingness to lend; as Damo identifies, the recent government backed business loan program fell flat due to banks unwillingness to take on excessive risk

    – Fiscal incentives already off the chain, but hitting demand wall and/or credit supply crunch.

    – Massive specufestor class negatively geared for capital gains… gains that have not been seen in years, and wont be seen for years to come.

    • BrentonMEMBER

      Damo/DLS is spot on about the BLM type protests sucking oxygen out of the wealth inequality movement.

      All part of the identity politics being pushed by elites, from both sides of the aisle. Keep the proletariat fighting one another.

      It just means more civil unrest, as the root cause goes untreated.

      • Huh? Identity politics on both sides.. sheesh.. makes no sense. Cultural Marxism is the Lefts baby and no one wants shared custody.
        Ironically Marxism is inequality too. Alternative being where.. if you don’t work you don’t eat. I.e. fair play

        • BrentonMEMBER

          Yeah mate, both sides. Cultural Marxism as a term is the right wing playing identity politics. No one identifies as a Cultural Marxist, mainly because the framework for that identity came from the right.

          • Actually, it came from the Frankfurt school.
            Don’t let the facts get in your way Brenton.

          • BrentonMEMBER

            What facts? The modern use of Cultural Marxism has nothing to do with the Frankfurt School. The hint should be that it is used exclusively by a certain sub-sect from the Right as a means of identifying their socio-political enemies.

          • BrentonMEMBER

            For every AOC type playing the race/gender card, there is a Trump type lamenting the ‘glory’ days of white conservatism.

          • It is the idea Brenton. Get out of your own way. Of course, the extreme right can be guilty of (mis)using it too. Definitely I agree whoever uses it, this is NOT a good outcome. But there is no doubt it emerge from the Left and it is the Left’s baby.

          • BrentonMEMBER

            You said the Right don’t play identity politics, it’s the so called “Cultural Marxists” of the Left. I am saying the use (abuse) of that term is telling you it’s not just the Left playing at this divisive game.

          • I may have over-egged it and for sake of progress, happy to take your criticism @Brenton.
            At the same time you cannot pretend you are being fair-minded. You say Right. I say extreme right and Left cause its their ideology. Yes there’s fault on both sides. Others know you are extreme when you show you cannot own your own fault.

          • BrentonMEMBER

            I’m not being fair minded? Might be time for some introspect on your part, as I am not the one that is sinking into partisan politics.

            Instead I am decrying both sides that play at this petty game, because while all this is happening, the elites are making off like bandits with the combined wealth of both the middle and lower classes.

          • @smithy, yes of course (as before) the idea was not badged as cultural Marxism. It plainly is an extension of economic marxism. The focus is still power and patriarchy.

          • drsmithyMEMBER

            It plainly is an extension of economic marxism.

            No, it’s not.

            It’s just conservatives trying to squeeze the (amazingly in 2020 still not withered and dry) teat of McCarthyism in their culture wars by associating feminism and other s0cial just1ce movements with the (almost uniquely American) idea of reds-under-the-bed “socialism”.

            Outside of America, where “socialism” and “marxism” are words that are understood as something other than “boogeyman”, the whole “cultural marxism” thing is even more idiotic and nonsensical.

            Even within America it’s fvcking stupid, given things like women’s suffrage happened a century ago and emancipation half a century before that, long, LONG before the term “cultural marxism” existed *at all*, let alone with the paleoconservative/alt-right definition.

            But there are few ideas that drive more fear and contempt into the hearts of conservatives than equality, so here we are.

          • Ask yourself what it would take to rethink your ideas @smithy. Else there’s little point engaging with others. Equality is no doubt a causality of your method and ethics of redistribution.

          • drsmithyMEMBER

            A moral position, logically consistent reasoning, and evidence.

            You fail all three.

  4. Come on – there’s never been a better time to buy. There will probably be a Second and Third Home Buyers Grant soon. And then there is Chairman Dan’s Belt and Road money. Whilst we are buying long range nautical missiles to target ships built with Aussie ore, Dan will help build the transport and communications network and conjoin with Chinese industry as an extension of a foreign state’s programme of expanded global influence. It would be racist not to.

    What next? A new policy to make pokies losses tax deductible if they use loan money as part of an expanded negative gearing incentive? Banks charging by the minute to put you on hold to listen to their propaganda? Pre-emptive parking fines randomly allocated by postcode?

    The business model is broken but none of the usual players can admit that we’ve spent 30 years on the wrong track. The real estate insanity is a metaphor for a collective insanity. It must collapse before people will be willing to turn around and make up for these lost years. None of the politicians of the last 30 years are willing to admit that they were fools who bet the farm on a pyramid scheme and the hope of a utopia with the CCP.

  5. Segregate Victoria

    I’m not so sure. Anyone with a job is probably saving more than at any time in their life. Travel out of the question for several years. People look at the world in chaos while Australia relatively untouched. Government won’t allow forced sales they’ll tell the banks to put repayments on hold even longer.

    • The key being “anyone with a job” AND those same people having an expectation they will keep the same job/income – this latter point shrinks the pool of people willing to take on more debt (and the lenders being happy to lend to them).

      • kiwikarynMEMBER

        All that demand destruction will soon show up as businesses are forced to cut costs and make more people redundant. Thats the problem with recessions, people stop spending and start saving, thus deepening the recession.

  6. innocent bystanderMEMBER

    I don’t have 1h20m to watch at the moment
    But I had a flick thru the slides.
    How much of this is Melb/Syd centric?
    Stats published by MB indicate Perth is doing poorly on the r/e front but on the ground (annecdata and some personal observation) some Perth areas are in demand. Quick sales and no price drops. Listings are down probably 15% and plenty of punters at the home opens.
    The latest WA grant seemed unwarranted as builders and tradies seem flat out.
    Maybe markets within markets?
    Some suburbs up, some down?
    Investors in trouble but PPOR in demand?

    • Segregate Victoria

      Most of their analysis only goes up to the end of May. A lot has changed in the last month.

      • innocent bystanderMEMBER

        I replied but it went into a black hole.
        probably cause I used the phrase “whats comming in the next few moths”…

    • Ian ArunMEMBER

      You are right I also got the same impression about perth…closer to cbd suburbs with desirable schools appears to have gone up in value..outer suburbs are still falling as far as I can see…it appears to me certain suburbs in Perth won’t crash as bad even if we have a crash over east…

      • innocent bystanderMEMBER

        some outer suburbs too. I am in Perth Hills and a lot of stuff selling fast.
        maybe ppl want away from ppl?
        a lot of dynamics at play.

  7. Steve Keen says property going up 10% this year, i think he’s taking the p1ss now.

  8. The Penske FileMEMBER

    My two cents worth.
    – I’m only half way through the podcast however some points made in it about the number of payment deferrals isn’t what I’m seeing. I’m very close to some low doc books which have a 44% and 33% deferral rate. One lender stated that they feel that 1/3 of these clients are already paying repayments again, 1/3 will be problematic but muddle through…. and 1/3 will just have to sell. I’ve done some work in these books with these clients and agree albeit on a small sample size.
    – I’ve heard that listings in the Hampton area of Melbourne are currently “like spring time”.
    – I’ve spoken to a RE agent this morning about a property that I’m interested in…. at a price. It’s listed at $2.7M and he told me he’s had interest at $2.5M…. I told him the client should take it and after a slight delay he agreed. Interestingly he told me his average sale was down from circa $1.4M to under $1M on the same unit number.
    – Developers are in pain and so are a lot of private lenders.
    – The September cliff will hurt no matter what is thrown at it.

    • Hill Billy 55MEMBER

      Re September cliff, I couldn’t believe Martin North’s last scenario had quite an upbeat tone to it. Listening to a podcast from yesterday it seems his likely scenarios are going to be weaker going forward. It seems that the momentum for the economy had already reached its high point, even before the Victorian shut downs of the past couple of days. We are in for a load of pain. Mind you, Brisbane house prices are hanging in there for the moment, staying level quarter on quarter per CoreLogic.

      • working class hamMEMBER

        Not in the NE of Brisbane. 6 or so suburbs I have been following for the last 12-18 mths.
        10% down across the board, properties over a million are down 15%. Very few even have prices, most are just “for sale”.
        The lower end, sub $500k is starting to really heat up, with multiple new listings daily and seeing better quality homes in better positions.

        • DominicMEMBER

          I’m in the western burbs and it feels pretty hot to me. Anything in the 500k – 1m range.

          Units obviously tea-bagging as there’s heaps of choice.

    • Hadron CollisionMEMBER

      Thanks for posting

      Things would have to be a bloodbath for Hampton sandy black rock beauy to crash

    • annualize_this

      Penkse,
      I’m looking in Hampton/Sandringham. When restricting searches to 2 bed & above houses there are only 29 listings at the moment. The majority of those listings are older. They also include a number that have failed at auction & are still trying to sell. There are only 2 new listings this week across both those suburbs – the remainder would be at least 6 weeks old at the newest. There’s been a few sales, but in the segment I’m looking at there hasn’t been a lot of listings.
      Having said that there are more listings in Brighton & Brighton East than usual.
      I’m hoping things grind lower for a while yet.

    • Thanks for the comment PF

      1. An investor generally doesn’t buy a property for over 2m (unless they’re a Chinese money launderer.. but Hampton and surrounds are not preferred for that.)
      2. An FHB does not generally buy a home for over 2m. Nor does a newly arrived subcontinental person.

      Whoever is going going to buy the properties you’re taking about is someone who’s moving from one abode to another. These people have basically zero influence on prices. It doesn’t matter if prevailing prices are $4 million or $40 million or 415k. They sell one and buy another – at whatever the prevailing prices may be. Virtually no new credit required (if any) either.

      No. 1 and 2 set the market and keep it afloat. If a crash will happen, it will be caused but a lack of 1 or 2. Not by the currently 90% transactions being already owners.

      I know Brenton is still on his way to learning this.

      • annualize_this

        Les, I can tell you my situation.
        We are renting & have a chunky deposit – enough to by a number of places that have sold recently outright. We want to build, so will be buying an established place that we can live in for a few years before knocking it down. In order to facilitate that we’ll be borrowing 80% lvr and then throwing funds into the offset. We want to avoid a construction loan in a few years time, as the interest rates on those are higher. So, there will definitely be credit creation in this scenario.

      • working class hamMEMBER

        I still think the setting the price at the margin is a little more nuanced than what you suggest.
        New credit, which is what I believe you’re describing in points 1 and 2, as you say, has a large influence on setting price. FHB, investors and foreign investors do provide a floor for the market in a time of positive growth. But uncertainty, stagnation and declining market that floor falls away. No more FOMO, why would anyone pay more than market value?
        Transfers also have a much larger impact.
        Not every transfer is a one for one exchange. Some may take a loss on current property and pay overmarket on the new place. Others, sell at market, wait, buy in at later date lower. Some transfer into completely different markets.