MB Fund Podcast: 2021 Australian Property Price Boom

Australian property prices are set to boom in 2021. Why? Australia’s successful elimination of COVID-19, the economy’s better than expected recovery, and the unprecedented fiscal and monetary support have stars aligned for strong Australian property price growth in 2021
In today’s episode, MB Fund’s Chief Economist Leith van Onselen, Head of Investments Damien Klassen and Head of Advice Tim Fuller dive into the upcoming 2021 Australian Property Boom.

 

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Tim Fuller is Head of Advice 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.

Tim Fuller

Comments

    • 1. Every-day folk realising they cannot service the million dollar mortgage when they take a pay cut or small business fails?
      2. A return to mass-immigration isn’t realised due to COVID-19, and hence supply surpasses demand for dwellings?
      3. The wind-back of Job-Keeper/seeker leaves tenants defaulting > Investors start fire-selling non-performing investments?

    • The gyrations in the mainland Chinese owning in Straya market.
      Do they exit apartments and go for standalone homes?
      Is there a large enough departure (never to return) of recently arrived (last decade) mainland migrants who were here for a good time but not for the tough time, to move the market? (the proportion of this type of migrant among the overall mainland Chinese who migrated this century is significant, if they feel uncomfortable here and don’t think things will improve, they’ll go home, will they sell is the question?)
      Does the ccp give social credit for selling os property and bringing money back to China? (and would people take them up on that? If they think China is strong and the west is weak they may sell and repatriate cash. If they think Straya is cactus but there are options in other parts of the world they’ll sell and park their money there)
      Is the Chinese foreign student market really dead? (Very good chance this is the case)
      Do moneyed Chinese migrants stop coming here? Are they replaced by poorer Chinese or none?
      Has the modern mainland Chinese love affair with Australia (which was based on their incomplete understanding of us) really ended or has it just hit pause? If they were the marginal buyer post gfc to 2017 that moved the market will they do the same again in these ‘challenging times’?
      So many Chinese questions!

      • Anecdotally from a politically well connected Chinese friend
        – the student market is dead. They will not come back.
        -buying property in Australia is wildly discouraged( although the diaspora will have no such constraints).
        I don’t know if there will be social credit for selling property here and repatriating the mone
        – didn’t think to ask, but I suspect that will happen.
        The Chinese are amazingly pissed off. They see us as offensive, ungrateful and rude. Loss of face is such an important issue in many cultures, including our own.

        • Thanks for that. I’ve been telling people the Chinese foreign student market is dead based on my understanding of the culture, but if there is one lesson I learned above all others while living there it was to NEVER make assumptions, to at least triangulate your sources of information and to always question what you were seeing/hearing/experiencing even after you’d done your homework. It just stunned me for years the depth of the urban middle class Chinese obsession with Australia which is why I’m waiting for confirmation of the students not actually arriving once they are able to (ghough I do really think the market is dead). This obsession with traveling to, living in, getting PR from and buying the products of Australia came out of nowhere (and believe me I lived in China for long enough before it started to say that) and it was so strong (it appeared unshakable though you knew it wasn’t). It was like a psychosis. It also deeply disturbed me. From extensive conversations with them you figured out pretty quickly that it was all based on deep push factors from China and the most superficial of pull factors from Australia and that there was so much misunderstanding on their part about reality in Australia and a desperate desire to believe they could attain the modern mainland Chinese version of nirvana over here (and this is one reason why I think the CCP had no choice but to make an example of Australia: the group that benefited most from the CCPs poverty alleviation efforts and China’s globalisation drive were disloyal traitors in love with jumped up upstart Straya who were the supplier of the commodity that kept the CCP in power – that love affair needed to be killed in such a way it could NEVER be revived). I’m not surprised to now read on the ABC that some are now going back and have no plans to return. The other thing I also learned is that the Chinese can be viciously vindictive (the chip on the shoulder of the Chinese soul is carefully nurtured by the propaganda machine), which is part of the reason why this mass obsession with Straya scared me so much. So yeah I expect as much teaching us a lesson as they can possibly manage and it will be as painful and as humiliating as they can manage to make it.

          • I have absolutely no reason for wondering this( apart from being a pessimist)
            – I wonder if China will decide not to sell us various items.
            – so much electrical, it related stuff, food processing, pharmacy stuff is imported from China.
            I’m sure we could source much of it elsewhere, ( or take up home preserving again!lol), but there would be delays and gaps that could be seriously ugly.
            But it would make so many things so much more expensive, and I suspect subject to quantity controls at point of sale.
            And we are not that large a market for the Chinese.
            Like you, I take a lot of complementary medicines( my immune system is permanently shot after some chemotherapy), and I am stockpiling.
            A lot of that stuff is made in China, or the base product it is manufactured from is made in China.

        • I stockpiled all my vitamins etc from Jan and in doing that I alerted my naturopath to the risks as we ended up quite a long phone call at one stage. I found out a few months ago that she had stockpiled based on my concerns. Anyway long story short her practice didn’t run out of anything but she said that quite a few other places had difficulties getting all their usual order filled. I’m going to restart my restocking as I’m down to only a few months left. I doubt that China will refuse to sell us products just yet. They may have overplayed their rare earth sale embargo to Japan over a decade ago as that has spurred the rest of the world to do something about developing a non China supply. I think if China stopped supplying medical products directly to us, it would be viewed as a declaration of war on Australia by the rest of the world and that introduces a level of uncertainty that many wouldn’t want.

          • That’s good to know. Thank you Poppy.
            The person I was speaking with seemed almost afraid of the vindictiveness of the anger, and it made ma a little nervous,

    • The realization that 30 years is a very long time and many things can go wrong during that time and the realization that mortgage serviceability is not equal to affordability.

      • Jumping jack flash

        Income depends on prices and prices depend on being able to pay them, and being able to pay them depends on adequate amounts of debt. If enough debt is created quickly enough then everyone will be able to pay higher prices. Higher prices will enable higher wages, and higher wages will enable higher debt.

        A 200K household median income will be easy to achieve if debt is created at the correct frequency and amplitude.

    • Jumping jack flash

      Nothing except the rate of debt growth stands in the way.

      If the rate of debt growth is the correct rate, then it will result in exponential “economic” growth forever. Some say this is hyperinflation. I say this is the New Economy working exactly as designed and as is completely necessary. The end result of this path is everyone becomes instantly rich from someone else’s debt pile, in turn.

      If the rate of debt growth isn’t correct, then it will result in severe deflation as debt is repaid / obtained using money that usually would be used for spending in other areas of the economy. This is mitigated somewhat using the wage theft / mass immigration model which is hopelessly inadequate, but conveniently hides the decline well enough to prevent a recession being announced. The end result of this path is pretty much all disposable income being used for obtaining/servicing debt and oligopoly-controlled essential living costs.

  1. Sydney and to a lesser extent Melbourne is as good as it gets.
    Once you hit 9x income lending then you need to find other streams of income to keep prices sustained.
    Unless banks start saying 10x is acceptable you need some other stream of income to sustain the prices.
    Price moves happen at the margins so a new home buyer maxed out at 9x with a household income of $150k and holding say $250k in savings can only purchase so much. So domestically prices are capped.
    However foreign buyers and transfers of wealth from Boomers to next generations are external forces that could push prices up.

    Other major capitals especially Perth (as you mention) are going to see a good increase as they have some catching up to do.

    • The90kwbeastMEMBER

      “Sydney and to a lesser extent Melbourne is as good as it gets.”
      No they’re not. There can be more to go. I don’t look forward to when the Average Sydney house price is $1.5m this decade but it’s coming.

      “So domestically prices are capped.”
      No they’re not. Tell that to anyone living in HK with price earnings at 18.1:1

  2. Zombie Apocalypse

    In 2012 I took what I read here as gospel, “don’t buy now” I told my friends, families and co-workers. I had every opportunity to buy a house in my home town, a beachside village at the northern end of the Sunshine Coast. I looked but I low-balled, had agents who wouldn’t even present my offers to vendors. I laughed it off, comfortable in my conviction that there would be a correction, that the big CSG projects were the only thing holding the QLD economy together. Now here we are in the midst of global pandemic and MB is telling me that property will boom in 2021. I don’t think the area I grew up in could possibly boom much more MB, prices are at least 50% higher than when you called crash. You’re late to the party calling any sort of boom. You’re the guy standing in a tin shed who loudly exclaims that it is raining at the onset of a torrential downpour. Ma! The rains are ere’…

    • Do they even realize how much credibility they lose for making this call? What is to say in a few more months they don’t just switch back? All their reasoning in this podcast was shoddy work too. Seems they jumped on the train as they are too emotionally weak to hold out, not for any logical reason. Would be hilarious if in a few months markets crash again. That would be the end of MB for good.

    • working class hamMEMBER

      Sunny coast has always been a sleeper. Only hour north of Brissy, surf, sun and plenty of rain. Upgraded airport and now Covid bolt hole. But most importantly, not the GC.
      If you look at any beachside areas within an hours commute to a capital city on the East coast, it has boomed over the last decade.
      Surf coast/ Mornington peninsula- Melbourne
      Central coast/ Illawarra- Sydney
      Sunny/ Gold Coast- Brisbane

      • Sunshine coast may be a money maker but it has turned into a horrible place to live. The traffic is worse than Brisbane and all the new residents are the worst representitives of Sydney and Melbourne.

        • Zombie Apocalypse

          Couldn’t agree more, left in 2017 and only miss the sunny coast of old, the ghost of a good thing.

        • working class hamMEMBER

          The same as the Tweed/Byron area. But what most capital city dwellers will accept as standard daily traffic, drives most original locals bonkers. The same crushing affect they are trying to escape, they forcing others to endure.

  3. Yep, scum-central on the Sunshine Coast. I’ve lived up here for a few years and I have no idea what the attraction is. I’d head back to a nice suburb in Brisbane any day.