Westpac: House prices to boom for years

Bill Evans at Westpac:

The housing market upturn that emerged in the third quarter last year has strengthened and broadened materially through year-end with all aspects now showing strong gains. Turnover is up 25% over the year, prices nationally are pushing above their pre-COVID levels, dwelling approvals surged 22% in the final quarter of 2020, and new lending for dwellings lifted by 16% in the December quarter following a 20% gain in the September quarter.

Some of this reflects transitory factors – a catch-up on last year’s virus disruptions, an unusually active holiday period for markets (no doubt in part due to many Australian’s staying home due to travel restrictions), and a temporary pull-forward in construction associated with the Federal Government’s HomeBuilder scheme.

However, even allowing for this, the picture is unambiguously strong. Most tellingly, buyer demand has run well ahead of ‘on market’ supply, with sales outstripping new listings by 34% over the last six months and ‘stock on market’ down to just 2.5 months of sales – the long run average is 3.8.

A lift in new listings will no doubt be forthcoming but for now this is clearly a seller’s market. Coupled with the very high auction clearance rates recorded in Sydney and Melbourne over the first half of February (averaging 85% and 76% respectively, the latter despite another brief virus lockdown) and what looks to be a 1%+ rise in prices for the month, the picture is of a strong lift in momentum carrying into 2021.

Price detail suggests limited drag from weakest sub-markets

The geographic mix is also notable. Gains are strongest in the smaller capital cities and in regional areas that have been largely unaffected by virus disruptions and in many cases have benefitted from related shifts in internal migration flows.

These areas also have limited direct exposure to the drop-off in international migration inflows. Rental vacancy rates are very tight, again pointing to substantial ongoing price momentum.

The performance of sub-markets within Sydney and Melbourne also suggests that the wider drag from the drop-off in migration and apartment oversupply may be quite limited. Unit prices in these markets are clearly underperforming, especially in areas with high concentrations of ‘high rise’ apartments.

However, unit prices look to be moving towards stabilisation and houses – which account for 80% of the dwelling stock in these cities – are showing consistent, robust gains. While there have been periods of relative underperformance for units, to date there are no instances in which unit and house prices have moved sustainably in opposite directions (one falling, the other rising).

That suggests we are unlikely to get a material further correction in unit prices while house prices in these markets are seeing gains.

It is also worth noting the wider make-up of the Australian market. Across the five major capital cities ‘high rise’ in Sydney and Melbourne accounts for about 5% of the total stock of dwellings while other units account for a further 10%. Houses in the Sydney and Melbourne market account for just under 60% of the total with dwellings in Brisbane, Adelaide, and Perth accounting for the remaining 25%. The weakest sub-markets – Sydney and Melbourne high rise – are comparable to Adelaide in terms of their overall share of the dwelling stock across the five major cities.

Expiring loan deferrals less threatening

The stronger than expected momentum in markets means they are better placed to absorb any additional headwinds from the end of temporary loan deferrals. These headwinds also look likely to be much milder than previously feared. As at December, around 120,000 housing and SME loans (worth $50bn) were still in deferral. That compares to 460,000 ($167bn) in September and a peak of 630,000 ($240bn) back in May.

Above-trend economic growth

This positive market momentum is combining with a positive outlook for the economy. Australia is expected to see growth well above trend this year and next. The unemployment rate is forecast to decline steadily to 6% by end 2021 and 5.3% by end 2022.

Activity is already rebounding strongly from local COVID disruptions. For consumers, a large savings buffer built up over the last year – estimated by the Reserve Bank at $200bn, or 15% of annual income – suggests they are well-placed to cope with the withdrawal of fiscal support measures such as JobKeeper. With an election on the horizon, no political pressure to bring the Budget back to surplus and clear evidence that sectors affected by the foreign border closure are still struggling there will likely be more significant support measures in this year’s Federal Budget.

It is also pertinent to recall that the estimated ‘cliff’ over the first half of 2021 will be around $20bn compared to the ‘cliff’ at the end of the September quarter in 2020 of around $70bn when job support measures and other direct subsidies were reduced.

Westpac expects the December quarter to show 2.2% growth in the economy – a view supported by hours worked and partial data available to date. Momentum is coming from the reopening of the economy; a drawdown in household savings; and strong confidence that has more than filled the fiscal ‘gap’.

Meanwhile vaccine rollouts, already underway, promise to bring the pandemic under control globally over the course of 2021, providing additional impetus to confidence and growth.

Note that the vaccine developments will also influence the relative performance of different housing markets. The smaller capital cities and regions are well placed to continue to outperform in 2021 but growth will swing towards the three eastern capitals – Sydney, Melbourne, and Brisbane in 2022 as the end of the pandemic allows international borders to reopen.

The upswing is also likely to see a rebalancing towards investors, particularly as affordability constraints re-emerge for owner occupiers, including first home buyers. The investor segment accounted for less than 25% of new home loans over the second half of 2020 but usually averages over 35% and rises in periods of
housing upswings. Some tentative early evidence here is the 15% increase in new lending for investors in the last two months.

There are also some early signs of a shift emerging in housingrelated consumer sentiment. As we noted in the latest Westpac Melbourne Institute Consumer Sentiment survey, the House Price Expectations Index – a key gauge of investor sentiment – is at a 7year high but the ‘time to buy a dwelling’ index, which is more reflective of affordability assessments and owner occupier sentiment, is positive but off 8% from its high in November.

Monetary policy to stay highly stimulatory but prudential policy to tighten in 2022-23

The monetary policy backdrop will remain highly supportive. The RBA has committed to keeping the cash rate unchanged at 0.1% for an extended period – indicated as likely to be at least through to 2024.

Other policy measures are also supportive of housing.

The Term Funding Facility, which provides 3year funding for banks and other financial institutions at 0.1%, is still to be fully drawn down with around $100bn available until June. It is then set to expire but will be maintained in the unlikely event that there are concerns about disruptions to credit supply.

We expect the RBA’s Yield Curve Control policy to be extended through 2021 with an adjustment likely in 2022H1. That will see some lift in the Reserve Bank’s 3-year bond target (it is possible the target may be phased out altogether) with a spill over impact on fixed mortgage rates.

That said, any associated lift in term rates is likely to be relatively small. Even if the Bank is no longer prepared to continue committing to ‘three years on hold at 0.1%’ rhetoric in 2022,\ our analysis of their forecasts for inflation and wages suggests official guidance at that point will still be to expect rates to remain on hold ‘for a number of years’.

This adjustment will increase fixed term mortgage rates and may take some heat out of the market at the margin but is unlikely to derail what will be a very well-established price upturn by 2022.

That in turn points to the RBA and APRA needing to revisit macro prudential policy to rein in the cycle. They have clearly developed more confidence in these tools following their successful deployment in 2015 and 2017 and the RBA has already indicated these policies are an option if housing market concerns resurface.

Note that these concerns are not directed at price growth per se but rather the potential for excessive risk-taking as leverage starts to rise. Housing credit will continue to see robust gains with investor activity becoming increasingly prominent – stoking fears of ‘overheating’. Through 2022 new lending is likely to peak around 50% higher than the previous peak in 2017.

Exactly when and how the Council of Financial Regulators (chaired by the RBA Governor) chooses to deploy prudential policy is not clear. The Governor is clearly comfortable – pleased even – with the housing upturn to date. Our sense is that the Council will remain broadly comfortable with a 10% price gain in 2021 but will start to become uneasy with a similar gain in 2022 and the associated surge in new lending.

The profile of relative strength moving back to the major cities and led by investors will be of particular concern.

We expect the Council to take a measured approach to prudential tightening, much like 2015, when annual growth in new lending to investors was limited to 10%, rather than the more expansive approach we saw in 2017.

The net result is expected to be a ‘successful’, throttling back of price growth, with some small price declines in some sub-markets but without precipitating the sort of price falls seen in 2018- 19 (when macro and micro-prudential tightening inadvertently coincided with fears around potential changes to tax policy for investor housing in the lead up to the 2019 election).

Migration inflows a key area of uncertainty

One aspect of the forward view that is particularly uncertain is the potential for wider market impacts from the slowdown in migration. Aside from the direct effects on specific segments, the slowdown will also mean new dwelling construction will have run well ahead of population-driven requirements in 2020 and 2021.

If borders remain closed for longer or migration inflows are slow to restart that could lead to a market-wide physical oversupply of dwellings by 2022. How that may influence market conditions and price growth is unclear. For example, rental vacancy rates may remain elevated for longer, perhaps even pushing higher, but that may not do much to deter investors seeking expected price gains, particularly as rental yields are likely to remain above funding costs.


The bottom line is that Australia’s housing upturn now has strong momentum that looks to be lifting further and will remain well supported by monetary conditions and an improving economic backdrop. We now expect the upswing to generate stronger, double-digit, price growth near term while our expectation, back in September last year, remains that a policy response can be expected later in 2022 which will settle markets into 2023.

Houses and Holes
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  1. adelaide_economistMEMBER

    It’s weird being a new ‘home owner’ (bank debtor). Articles like this used to make me despondent (or outraged) and now I’m just thinking, wow, going all in on this ponzi was possibly the most sensible thing I could ever have done. Not sure that the ending is going to be a good one though.

    • Even so, those in the scheme/scam/ponzi dont necessarily feel like winners on account that most are up to their necks in a mega mortgage for longer than any time in history (little wage inflation to take care of mortgage on top of obscene prices) and what is the next half-generation going to do in 10 years time? ie what next, minus -5% rates on mortgages? We know the government likes this as the rising prices makes people feel richer and then spend more into the economy, perverted thinking that just leads to a scam on top of a scheme or perhaps ponzi²

      • happy valleyMEMBER

        -5%. Pfft – in 10 years’ time the rate will be -10%, after the angels of death RBA happy clappies have fully done their experiment on the financial system. Captain Phil’s Sydney home is probably only worth $5m now but he won’t be happy unless it’s worth $20m in 10 years’ time.

        • boomengineeringMEMBER

          The banks will still make money if they can lock depositors in via cashless society and make them pay more than it cost them to pay a mortgagee.

          • lol, the banks will still make money as the RBA PAYS THEM to lend you money. Depositors no longer required.

      • A lot of FHBs in their 30s, with parents in their 60s, are getting 30-year mortgages and thinking that they will use the inheritance to pay it off after 20 years.

        Getting a mortgage now (potentially with a parental guarantee) is basically getting an early look into your inheritance.

        • So somehow or other the corrupt system and parasites that run it have captured 2 generations worth of combined work to pay for 1 house. One to pay the interest for 30 years and the other to pay it off.

          • Govts will approve euthanasia, then a combination of pressure from poverty-stricken offspring and the horror of nursing homes will do the rest……

      • 0 sum game, as a home owner, booming prices just means my next place costs me more in stamp duty and probably a larger or extended mortgage too.

    • I drove down a street in Melbournes inner north the otherday and every single block of flats had for sale / for lease signs. Most had two or three.

      I am seeing solid brick apartments going for around $150k less than 2 minutes from the CBD in Parkville.

      I am seeing houses on offer in the $300-$390k range (760m2) less than 5 minutes from the beach in some of Australia’s fastest growing cities. (Close to a million).

      The housing boom underway right now is the single greatest act of propaganda in Australias history.

    • Jumping jack flash

      Im with you. I was lucky enough to be able to buy into the ponzi a few weeks ago and I’m fairly confident that if anything was to go wrong then I’ll be included into the “solution”.

      Debt reprieves during COVID was proof enough that this ponzi economy of debt is far too big to fail.

      • adelaide_economistMEMBER

        Yep, the GFC was the first round of ‘new rules’ to my mind and Covid just showed me that ‘they’ will throw everything at it, including destroying the country, to keep home owners (most especially debtors) whole. Society ain’t what it used to be and the idea of 1930s style throwing people into the street doesn’t work when society is already barely holding on when things are ‘good’. Not that ‘they’ care, but civil insurrection vs throwing the currency, the country’s mineral assets and anything else they can sell off or give away is a no brainer.

    • Prior to home ownership this stuff used to trigger me bad too lol.. But even now, I still don’t believe we can have never ending housing booms. It will all end badly and I suspect within the next couple of years, but things about bubbles as we know they can go on far longer than anyone thinks possible. So glad I bought and as much as I want a regional house (with a large shed) I think I’ll avoid adding more debt for now. Just keep plugging away at my existing mortgage, get it paid off and see how this all plays out.

      • adelaide_economistMEMBER

        Agree with this. I am ‘banking’ (lol) on 2 to 3 years of things staying OK (and my fixed loan portion keeps things for me reasonable over that period) but beyond that, I think all kinds of bad things could and probably will happen. Still, I was at the point where my deposit was such a decent proportion of the purchase price that renting was no longer viable when interest rates on savings are close to zero and I can offset a significant portion of the debt and lock in another hefty part at 2% or thereabouts for a few years. I had to make a decision between paying $10k or more a year – after all ownership costs – extra in rent or buying and pinning my hopes on the sinking ship we call Australia. I sound like a spruiker I guess but at least a house can be lived in which is more than I can say for my electronic credits in a bank account.

    • The Traveling Wilbur

      Articles like this…

      Stood by the bonnet
      of my best friend’s car
      Next thing I knew
      We were gone
      And he was on it.

      Tried to hold him back
      But he bought the farm
      Two much torque
      Not enough arm.

      Wrestled my conscience
      Into comfortable settlement
      Sold ice to Eskimos
      And mis-deeds to lawyers

      Traced my path back
      To the houses I holed
      Parties out the back
      Seaching for that which I lacked

      Building bridges
      Building constructs
      Building fear
      Smashing hope
      Smashing articles of faith.

      • boomengineeringMEMBER

        Keeping powder dry sounds like a good idea not believing some talking their security up.
        btw on top of North Head hill atm

          • Correct, the term comes from Canon’s and the Gun powder used to fire them. But of course it won’t make much difference if the ship (Ship Australia) is under water in future.

    • reusachtigeMEMBER

      LOLOLOL! Are the sun rays going to change direction automatically or do I need to lift my butt too a different angle to get that perennial tan?

      • It’s not the sun reuse, it’s a very dark storm, it’s going to get very ugly in H2, the declines are going to be very deep and very quick, they have now taken this way too far, we are past the point of no return. There may be a period where mortgage lending is frozen until they can restructure. I’m not sure there will be the big 4 as we head into 22, nothing has changed from what i said just 6 months later, and the meltdown will be much quicker probably now in a 3 to 6 month period. There may be a bounce in later 22 but it won’t be much and prices will just keep struggling, interest rates are just going to continue to rise up to double digit similar to 1970s/80s,The years ahead are going to high inflation driven by rising commodity prices, We will probably see the Australian 10 year bond yield fall this year into the meltdown but home loan interest rates will be much higher, All of the BIG 4 won’t make it until Xmas Q1 22. I’m not sure they can do much this time the problem is they’ve let the problem get too out if control. The landscape in 22 will look very different. Unemployment will probably reach 20% or more by Xmas this year. It’s going to be a very painful Xmas for everyone.
        With higher government bond yields it’s going to be very hard for the government to borrow and hand out money. Higher taxes, the years ahead won’t look anything like the last few, the warning signs will be if we see house prices start rolling over mid year, it’ll just keep snow balling from there

        • reusachtigeMEMBER

          Bloke 6 months wrong? You said April last year. It’s almost a year. H2 means 18months. LOLOLOL 18 months!!! You need new tea leaves hey bloke!

          • Part of it true, they did start falling but true I didn’t know the extent they’d go to keep the Ponzi scheme, no change to outcome other than much worse and much faster. It’s not a competition for me, I’m just telling you what’ was always eventually going to happen, they have just constantly made the problem worse. I don’t have to even convince you interest rates are going to rise. They already are

            Anyone who can even say interest rates will remain low, is either stupid or lying

            REUSA I said prices will reach bottom my mid 22 ahd they will

            Interest rates are going to rise into this meltdown……not even using crash, meltdown is quicker, crash drags on.

          • The more they print and hold down the higher inflation, the global financial system is going to implode in H2, major bank failures and huge corporate bankruptcies….
            I’m not sure what will be left standing.

          • “And you are relying on the government to save you, you are really in trouble
            The debt levels are now so extreme that the momentum down is too powerful.
            When the economic crash comes in next 2 months cash rate will be zero
            That’s it home loan rates are 3% already
            You wait NS in 6 months, the falls are coming
            The bubble is going to burst before June 30 this year”

            March 3rd 20, bcnich

            Funny because the government did save people and here you are predicting another 6,12,18 months

          • “I didn’t know the extent they’d go to”

            oh ffs anyone saying that deserves to be punched in the mouth

        • The super bear is back with more predictions of doom!

          Meanwhile interest rates & mortgage rates are at their lowest levels ever, aren’t going to rise in the near future and nothing that you mentioned is going to happen in the timeframe stated.

        • Bcnich, I also underestimated to what length the government would go to keep it alive and this can go for many years to come. Look at Europe, the German government for example: they suspended bankruptcy for companies so they cannot default and get the banks in trouble. About 20%+ of European companies are zombies. Just don’t let them die, problem fixed. You can do the same with houses.

        • Bcnich, the generally unknown and unrecognised key to the crash/meltdown will be resources.

          We’ve deluded ourselves for so long that it’s the economy that underpins civilisation that we’ve disconnected from the reality that it’s energy and resources that drive and underpin the economy and always have; and that without affordable resources, or with just less of them, the economy collapses.

          The now much-vaunted V-shaped recovery and impending boom may have worked at any time between 1929 – 2000. But having picked the low-hanging fruit first – increasingly in the last 50 years, but particularly since 2000, the cost of exploration/extraction/refining/transportation of resources has steadily eroded profits, making many now scarce and/or increasingly expensive/unaffordable..

          Remember when oil reached $147 p/b in 2008? Many other resources were also at all-time highs too then – which some recognise may have been the real underlying cause of the GFC.

          What followed was a giant propaganda Ponzi on fracking and tar sands, which are now only 12 years later, predictably sputtering from un-profitability and debt.

          Recent news articles across a broad spectrum now report rising costs of construction; shortages of silver, copper, computer chips, uranium, cobalt, rare earths, concrete sand etc. – at a time that will require unprecedented amounts to build the so-called ‘green’ economy and kick off the new ‘boom’ in commodities.

          To top it off, BP, the IEA, Bloomberg and Oil Watch to name a few, are now saying oil production most likely peaked in 2018 – so that each year going forward there will be less…..something that hasn’t happened in any meaningful way for 250 years.

          This is the real reason behind 50 years of inaction over GW – but we look the other way and tell tall tales of a brave new ‘green’ economy rather than stare down the slippery slope of depletion and decline.

          So the real story behind the debt bubble for the last 20 years is that it’s merely served to disguise and compensate for resource depletion, providing an illusion of growth by bringing future consumption forward.

          So I agree with you bcnich, the much-vaulted ‘boom and V-shaped recovery is doomed by physical restraints that will bring the consumption bonanza of the last 250 years to a grinding halt pretty soon, and with it globalisation and a whole lot more, because we’ve not as yet even been able to bring ourselves to acknowledge the problem – so within months perhaps, but certainly within 2-3 years, what you write will undoubtedly unfold.

          One day soon we’ll wake up and realise it’s not the economy, stupid, but resources.

          Article is behind a paywall – here is a freebie:

          “The economy is an energy system, and prosperity is a product of the economic value that we obtain from the use of energy. The established orthodoxy – is that the economy is a financial system, a persuasion that has sometimes portrayed natural resources in general (and energy in particular) as little more than incidental contributors to economic activity.”

          There will be no coming back from this.

    • Disagree, and the reason predictions on this website have been wrong for so long, and it comes down to the cost of money. The most obvious candidate is the widespread adoption of unorthodox MMT measures globally; the result being, there is >US$17Tn (out of a total ~$35Tn globally) of negative-yielding debt, and for the first time, in all likelihood, that short-term US bond yields will soon be negative. Which means holding costs for cash will even more more strongly negative (i.e. NPV works in reverse as well). And explain why China sold negative-yield debt (in Euro’s) for the first-time last week, with particular investment demand from European financiers.

      What does all the above mean? Ignore the term house, because its emotive, and its great to see so many grown men here in tune with their emotions. Substitute “House” with the term, “Bond”, and realise that the convexity curve of bond pricing increases as you approach zero – and increases especially once you go below zero. In Denmark, mortgage rates are -0.5% pa. Savings rates are way lower again. You cannot afford to leave money in the bank.

      Fiat money isn’t real, is just financial oil…

          • RBA and FED will be forced to tighten, small increase in Fed Funds and they’ll we be forced to taper…..drain liquidity, from the system,
            The US has way overdone both fiscal and monetary, the US economy is really going to pick up steam, it’s going to be on fire they’ve let the USD fall too much, we will see inflation up around 3/4% in Q2 if we see DXY well into the 80s they are going to stop the falls in the dollar, it’ll be a 20% decline in less than 12 months, too much….interest rates are already shooting up…..market knows exactly what’s going on

            I don’t think Bill Evens has received the memo from the Aust 10 year bond yield,… or if he has he doesn’t understand what it’s telling him …….AUD at 90 or close to parity won’t help

          • The real driver of the changes coming up Simon, is energy and resource depletion that the debt bonanza of the last 20 years has disguised. (see reply to bcnich above)

        • Display NameMEMBER

          Great bear p0rn.

          I would like you to be right, but cannot see it. I am buying in the next few months, outside Sydney so at least I have a primary residence. I am not waiting for this madness to play out. Nothing looks like a safe place for investment. If it goes as I think it will I might get to exit my investment properties with some great gains. Not fussed either way as they are owned outright and are income these days.

          • The bears are finally capitulating, enticed by Homebuilder (Im not missing out this time!) hence the housing surge. If immigration remains suppressed for a couple of years then maybe – maybe! – the mutli-decade run is finally over.

      • The change in rhetoric from the banks is what gets me. How pathetic that 6 months ago they’re forecasting a 30% slump and now it’s boom forever. With all the other inconsistencies that seem to exist, you wonder whether Joshy and SmokoCorruptoGoneMissingMo have hauled them into line by threatening to isolate them from the TFF MONEY FOR NOTHING SCAM if they didn’t back them in on the propaganda.

        • Not all them will be standing this time next year , some will be gone The Q is which ones will be and which will be gone

      • Morwell. You’re example is Morwell? Seriously, ice denizen, socially dysfunctional moribund Morwell. How far from the front door to the gaping coal open cut? Perversely, the best lignite is under Morwell itself and If lignite had a future Morwell would be compulsorily acquired like Yallourn was. Instead, the thing that is killing it is providing the only source of worthwhile economic activity, for now.

      • Well, that’s great if you desire to live in Morwell.

        In what appears to be a place that needs 100-150k spent on it, and probably has asbestos.


        Houses in Bangalow circa Covid/AirBNB shutdown last April under 1M. Good luck finding anything under 1.5M now. *

        *Cherry picking Bangalow as a counter to the Morwell example.

    • The fed broke it. Now, they own it.

      I bought in at a 13% discount on 2011 prices in June last year. Look at the CoreLogic index for Perth. It is still 10% below where the index started in 2011. Perth has the best weather and most modern infrastructure in the country at prices lower than 15 years ago. I have no idea why anyone would pay the prices being asked East when prices are so much cheaper here.

      • boomengineeringMEMBER

        Yes dry is better than humid plus good roads etc but,
        Too windy,
        Sometimes too hot,
        Too many low class poms ( the ones East are much nicer) but that may have changed for the better by now.
        Too many flies.
        Police state.
        Less remuneration except for the mines.
        btw I was brought up at North Cottesloe, and lived in S W WA, and later moved married to Waikiki/ Safety Bay/ Shoalwater for a while.
        The day I arrived in Sydney 1971 it felt like home (freedom),
        Now off the the Central Coast factory to pick up some VFD’s stored there.

      • Just bubble mania, no one has experienced Perth on east coast, maybe Gold Coast. Everyone over here in the east will say the same thing next year. it’s just bubble mania, FOMO. Also wait until home loan rates are 7%…. people won’t be climbing over each other

        WA will get hit, but this decade will be a commodity super cycle, WA Perth will be the strongest again, big cities in east m and S the worst but overall everything down.

      • Left Perth for Hobart in 2017 and bought here. Best move I ever made.
        I’ll take water and working NBN over “good roads” any day. It’s also pretty here.

    • Swampy history will show the rise over the last 5 months will ne the high, think there is a 3/4 solid months left, that’ll be it

      • Time will tell, I guess.

        I am ambivalent, as I simply bought / downsized from acreage for a roof over head.

      • Goldstandard1MEMBER

        People seem to forget that the gov is running out of tools (and fools) to keep printing and borrowing more to keep this going. I agree, this appears to be the last hurrah and it’s so so sad that people are piling in thinking they have to. This is great depression stuff.

        • How does the money printer run out? It doesn’t even need paper given it’s all electronic these days…

          • Try stuffing paper in ya petrol tank, paper for ya concrete drive and bricks for ya nice new house….

        • We need the banks in between and if they aren’t all standing, gov and rba can think what ever they want

          • Governments and central banks still have many tools to keep the Ponzi going, especially if they operate in a globally coordinated way to prevent sudden currency collapse and uncontrolled inflation – whats to stop them offering government guarantee of mortgage loans like they do in the UK for business loans (bounce back loans) – all bad debts could be off loaded to government. Eventually the system will collapse but this could be decades away.

          • Weeks or months not decades
            Gov RBA might have a tool box but with a few less banks standing, those tools aren’t much use
            Kerry Packer isn’t around to buy Westpac this time

  2. happy valleyMEMBER

    Good old Bill – possibly in his sunset years with Westpac (?), all that’s left to see on his economist’s bucket list is seriously negative interest rates? A job well done and his brilliant career.

  3. pfh007.comMEMBER

    “.. That in turn points to the RBA and APRA needing to revisit macro prudential policy to rein in the cycle. They have clearly developed more confidence in these tools following their successful deployment in 2015 and 2017 and the RBA has already indicated these policies are an option if housing market concerns resurface…”

    So Bill is now doing comedy?


    • In some places it’s 40% higher than it was at the recent last peak when there were …”housing market concerns”

      Where does it end?

  4. Back in 1998, just before the current house price boom started, 1 kg of gold was worth about AUD$15,200 (about AUD$470 per ounce). A typical house back then was about 10 kg worth of gold.

    Fast forward to 2021 and now 1 kg of gold is worth about AUD$75,000 (about AUD$2300 per ounce). A typical house today is still worth about 10 kg of gold.

    The city boundaries had shifted outward over the last >20 years with the population growth, so you would need to find a house farther away from the city center today than you would have needed back in 1998.

    • Yes but kilos of gold dont buy houses, people do. People that didnt have houses then also didnt have kilos of gold.
      What has peoples wages done in the same time?

      • Of course, Strayan people became poorer over the last >20 years. As I detailed elsewhere (I cannot immediately find the link), poverty is a slow *process* of sinking. In Straya’s case, her chronic CAD ensured this (where has flawse been?).

          • I sometimes wonder if all that has transpired in the sorry Strayan house price boom saga was by design or not.

            “I refused — to be a fool — dancing on the string held by all those…. bigshots.” Vito Corleone

          • Arthur Schopenhauer

            It could be that house prices are more a symptom than a cause.

            The lack of investment and policies that created productive industries, led to land speculation as an easy remedy?

            Like selling off a piece of the farm to make up for shortfalls, until all that’s left is a parcel of land too small to be economic.

          • That is right. I once wrote about negative gearing being designed to increase the government revenue without being seen to be increasing taxes. I think I wrote the posts back in 2012 or 2013, you may be able to find the link somewhere on the macrobusiness site.

          • David Suzuki warned of this, particularly depetion of the giant Ogallala aquifer over thirty years ago. Nothing new.

            India’s and China’s ground water, Straya too, all depleting. News articles 15 years ago on future large Gippsland land collapse due to draw down ….

            A good book is “Food or War” by Australian, Julian Cribb.

    • 1Kg of gold in 7 or 8 years will buy a home, and I think you will be able to pay in gold

      The 40 year bond bull market is going to start reversing, with property and land prices

          • Correct. After all, once upon a time different commodities served as money in various parts of the world – metals, gem stones, sea shells, salts, etc.

            Gold is a good commodity because it is compact (dense) and it does not rust/corrode and hence will last long.

      • Just sold enough kgs to buy some land, couldn’t risk it going down any more….kept some tho, so fingers crossed.

  5. I just don’t get it

    Only a couple of months pre-CoVID we were staring at a slow grind downward despite immigration and already low rates. The debt suckhole was overwhelming and wages were going nowhere

    Now, with no immigration, ever so slightly lower rates, the same debt suckhole and the same stagnant wages, we are seeing a megaboom

    • Delraiser, if one is to understand the great mystery, one must study all its aspects, not just the dogmatic, narrow view of the economists. If you wish to become a complete and wise leader you must embrace…… a larger view of the Force. Be careful of the economists, Delraiser. Only through me can you achieve a power greater than any central banker. Learn to know the Moron Side of the Force and you will be able to save your wealth from certain death….


    • Printer goes Brrrrrrrrrrrrrrrrrr.

      See the gold comparison above.
      And also the lower the rates get the smaller an absolute change is needed for the same effect.
      A change from 0.1% to 0.05% DOUBLES serviceability, all from 0.05%.

      • two plus twoMEMBER

        Not a true reflection of servicability… That would only be true if there were indefinite interest-only loans. What’s the longest interest only term available – 5yrs, 10yrs?

        • agreed, but it gets the point across simply.
          People always say there is no ammo left as we only have 1% of reduction left. 1% at 2% is massively more than 1% at 8%.

          • Jumping jack flash

            Look at the bigger picture. Interest rate manipulation was a means to an end. What end? Cheaper debt? What else can achieve that?

            Myriad possibilities.

            Debt is the product of the banks and interest is its price. Think about other products and methods of price manipulation, because that is essentially what is happening.

    • As you say, immigration means nothing.

      Rates fell by a lot in relative terms, especially the fixed new loans market. It wasn’t driven by the negligible fall in the cash rate, but by the Term Funding Facility, which gave the banks a blank funding cheque at only 0.1% (0.25% originally). AKA it meant the banks could slash mortgage rates and lending criteria’s.

      It’s another wave of credit binging, spurred by: deregulation, monetary easing (stimulus) and direct government fiscal stimulus.

      • Yes cheap debt ahoy-hoy, but wages are going nowhere, we still have yet to see what happened in terms of Bludgekeeper ending and the pile up of pending insolvencies and remember, households are at record debt levels (the savings numbers are suss given super tapouts and rent/loan deferrals, Bludgekeeper etc.)

        I’m yet to be convinced that this has any legs long term

        • True, but the credit cycle is not driven by wages, it is driven by falling rates. Understand that in the medium term (next year or 2), house prices will be rocketing. You can see it in housing loan commitments. Frustrating as it is, we are in another short term debt cycle, which will take household debt to new extremes.

          What happens beyond this latest cycle is anyone’s guess, but i don’t think it will be pleasant.

          • But eventually wages will determine not only the ability to repay, but also how much is left to keep the rest of the economy going

            This was my point about pre-COVID in that we were seeing the slow death of retail and yet more household income pouring into debt can’t help, along with all the pull-forward purchases funded by the freebies in the last 9-10 months. Bludgekeeper also propped up a lot of failing businesses but this can’t go on without an axe taken to some other part of the budget.

            Soon enough, people will be able to travel with vaccination but will they be able to afford it? This was a big chunk of the pre-COVID economy as well, so that’s why I’m a little apprehensive about celebrating boom times as the boom may soon become a pop

          • “but this can’t go on without an axe taken to some other part of the budget.”
            Or some serious money printing directly at the gov to spend.

          • Jumping jack flash

            “True, but the credit cycle is not driven by wages, it is driven by falling rates. ”

            No! Falling rates was a symptom of an insufficient debt growth rate.
            They went at it too softly
            Interest rates needn’t have fallen so far but the problem was that everyone was too spooked from 2008 to admit problems to justify more aggressive measures to restart the debt engine.

            Plus wage theft, which was their poor substitute for wage inflation actually suppressed CPI.

            The missing link between debt growth and wages growth is CPI.


      Jobseeker, JobKeeper, Super withdrawls, Homebuilder, FHB grants, temp. removal of stamp duty (VIC). All this free cash (and more) leveraged into fresh DEBT: Relaxing of lending laws (banks back to lending 7x plus on income), short term rates pegged low and fixed lower with TFF, 5% deposits/LMI Waviers, 30 year mortgages. Couple this with an external shock that has forced many folks to search out greener/alternative pastures and you’ve got some real price action. Welcome to the only game in town.

    • Exactly Delraiser. The flow of animal spirits makes a difference in the short term. One might pose the same for Bitcoin.

  6. H2 2021 is going to be a boom. The spring has been wound since 2017 with the pressure ratcheting up last year. Rates have fallen significantly since 2017, fixed rates massively. The rates falling usually correlate to significant price increases, but that didn’t happen over the last few years, the market softened due to the RC and associated credit tightening. APRA had investor rules in place there was whole bunch of interest only loans expiring etc. What we are seeing now is the low rates price into the asset prices as confidence returns with some FOMO on top. All the money thrown last year hasn’t really been spent, it’s been saved as per the increase in savings rate. Now that the unemployment rate has recovered significantly since April/May confidence is back and most ppl who received Jobkeeper and took money out of super are now in a relatively stable financial position with additional savings to boot. This is all supercharged with a FOMO for houses. Very few ppl actually like living in apartments, and anyone who did like it now hates it after 2020. There’s significant demand without enough supply, this will continue to play out, it’s not going to run out of steam until prices hit their next ceiling. Saying that, regional prices could go up a lot now as their prices are a function of the average wage x available leverage. As professionals working from home move there both average wages goes up as well available leverage (with the low rates) so price explosion. That’s going to power the market for a couple years. Vaccine rollout will enable greater numbers of people to enter Australia. No doubt once they have inoculated all the quarantine workers they will expand capacity significantly enough to restart a migration program and students.

      • The Traveling Wilbur

        Are you secretly bcnich? bc’s comments on this page have reached the point where one would hope he’s operating from a double-bluff ironical-uberbearchen-perspective and trying to drive readers into the gracious saintus church of propertyology (i.e. your arms) without their realising it.

        If not, we should probably send him a fruit basket or something. A stack of prunes maybe?

        • I read bc as completely sincere.
          Delusional, but sincere.
          The great irony being following Reusa’s advice for the last 5 years would be much more beneficial than bc’s.
          Except the parties, that could leave a nasty rash…

      • There have been times in history when all the banks go under. Don’t discount possibly no banks surviving

        • Oh cmon, it’s not hard to see that all the recent things RBA has done is to bail out the banks. They will stop at nothing to save them and so far it seems to be working quite well. “Privatise the gains, socialise the debts” is every bit real.

        • The Traveling Wilbur

          If it’s got ‘date’ in it then he’s got it covered. Or his ‘date’s’ taken one for the team. One or t’other.

  7. I think they’re underestimating for Brisbane, Perth and Adelaide. Feels like they’ll play catch-up this time around and pull bigger numbers than 8-10% YoY…. unfortunately for those places.

    • RobotSenseiMEMBER

      Depends on when you get in I suppose. I feel like I’m about to buy in Brisbane, but all I’ve learnt in the last six months is to take on the largest number of zeros I can on my mortgage and the government with nationalise the rest.

      • Brisbane’s best days are behind it and I read that one in five would leave if they could. The traffic heading north and south every weekend is horrendous as are the new enclaves of new arrivals. Buy an inner ring house if you can, near transport if you are locked in to the idea. I arrived there in 1990 and left in 2015 and every visit back sees amenity noticeably diminished.

        • RobotSenseiMEMBER

          That’s pretty much where I’m looking. If I wasn’t for work I’d leave in a heartbeat. The NIMBYism of this place is next level. Can’t move around the place because nobody wants a bridge running through their little enclave of freehold houses 2km from the CBD, read a local newspaper snippet last month deriding the flight paths over New Farm and Bulimba and “something must be done”. The same suburbs that probably make up a disproportionately large number of bums on aircraft seats, no doubt. But aircraft noise is for poor people.

        • The diminished amenity was quite noticeable in Brisbane between 2010-2015 especially. Started to remind me of Sydney. Not that it stopped in 2015.

  8. When reported in the SMH yesterday, the comments of outrage at this unfortunate outcome dominated-https://www.smh.com.au/politics/federal/seller-s-market-house-prices-could-climb-20-per-cent-over-next-two-years-20210222-p574ph.html
    There is pushback against the Ponzi but I doubt the greed will be overcome until interest rates start to rise.

  9. News.com.au

    WESTPAC PREDICTS 20% jump in house prices, people will be paying any price over next 3/4 months
    This is going to end in tears 😭

  10. The Traveling Wilbur

    With apologies to Sool.

    Ah, look at all the loanee people
    Ah, look at all the loanee people
    Eleanor Rigby
    Picks up the rice in the openhome where a renter has been
    Lives in a dream
    Waits at her window
    Saving the face that she keeps in a jar by the door What’s that deposit for?

    All the loanee people
    Which bank couldn’t they get one from?
    All the loanee people
    Where should they all belong?

    Father McKenzie
    Writing the words of an article that no one will hear
    No one comes near
    Look at him working
    Polishing his prose in the night when there’s nobody there
    What does he care?

    All the loanee people
    Where could it all come from?
    All the loanee people
    Where should they all belong?

    Ah, look at all the loanee people
    Ah, look at all the loanee people

    Eleanor Rigby
    Died at an openhome and was buried along with her name
    Nobody came
    Father McKenzie
    Wiping the dirt from his hands as he walks from the grave
    No deposits were saved
    All the loanee people (ah, look at all the loanee people)
    Where could they get one from?
    All the loanee people (ah, look at all the loanee people)
    To which bank should they belong?

  11. Jumping jack flash

    Thanks, COVID.

    I would take what westpac Bill says under the proviso that a couple of things happen.
    1. They DON’T restart wage theft until at least after the US stimulus bill goes through and starts being turned into debt, triggering a global debt tidal wave
    2. CPI starts heading up which should convert into wage inflation which will support debt growth, which will support house price rises. (And they dont panic and “slay inflation” like last time)

    If these things happen then we could boom for years on the back of perpetual debt triggered by unprecedented global simulus to get the debt machine running again, ahem, to combat COVID.

    • Well, you can nearly bet #1 will happen as soon as the virus / vaccine allows it. So that’s a given.
      On 2, the bond yields are a result of inflationary expectations, not growth in the economy. So I don’t know what that means for wages inflation..

      • Jumping jack flash

        Itd be a shame if they couldn’t operate their system as it was designed and as nature intended, but they make the decisions i guess.

      • Jumping jack flash

        Furthermore, in a debt economy, inflation (as long as it is powered by debt growth) is economic growth. There is little distinction.

  12. Moments like these you need a Minsky

    …….. and a riff on an epic rant!

    You know you ‘SunShines’ are scared as Sh1t, y’all don’t got the balls Reusa got.

    Been reading MB all summer long…… “Burn It Down”.

    “It’d be way different if we had that rentier free Capitalism!”……… Yeah right!

    The problem is, you ’Shines’ like to pick ’n choose your ‘market freedoms’. Gold , Crypto.
    You heard what the Man said, the price for freedom is DEBT.

    Y’all should ride your rugged individual @sses up that goddamn private capital and get you some real property ‘drip’.

    “Things be WAY different with that old-timer Capitalism” my @ss……… ever since that other good lookin’ bloke in fancy garb sailed into the harbour we been whitewash’n the joint and fillin’ it with liberty-less “migrant” workers……..….it called indentured servitude. ”doin it since 1770 – MuthaFu$$a”

    Respect. Reusa.

  13. innocent bystander

    fortuitous timing for the banks for all their customers who have to sell (and there are some due to covid rampage in certain business sectors). being able to sell into a strong market. /cynic

  14. Arthur Schopenhauer

    It’s gonna blow the day Bcnich buys a house. Gav tried valiantly, and failed.

    This time, it’s really gonna happen. We should get a kickstarter going! 😉

  15. Ailart SuaMEMBER

    Australian federal governments would sever the heads of their children before they allowed the housing market to implode.

    • They actually already have with the house price inflation, it comes at the cost of your children’s heads that have to be now bowed to a bank through their lives.

      • Ailart SuaMEMBER

        At the end of the day, there’s only one fix. The citizens have to get on the same page (unite) and demand changes to the Constitution and electoral system that will A. bring about genuine accountability – and B. ‘sever’ the covert relationship between the two majors and their elite donors.

    • It’s not just Australian federal governments, it’s also some people on this site. And some of the same squeal for handouts from that government.

      • Ailart SuaMEMBER

        One of the best weapons governments and elite donating puppeteers have that ensures their longevity, is their ability to divide and weaken the constituency (divide and conquer). Think the ALP/LNP battle, where many ‘welded on’ voters are blinded by loyalty to their choice of party. Then we have the war between the sexes, racial division – as well as the war between the generations; the vitriol from gen x towards the boomers is as frightening as it is ridiculous. Governments and their puppeteers would be rubbing their hands with glee. To believe someone born on December 31, 1964 (boomer), is going to be radically different in regards to generational thought processes, from someone born on January 1 1965 (gen x), is just plain bull shyte.

        Governments and their puppeteers create policy, not members of the so called generational demographics. Boomers totalled around 5.5 million people. They were targeted and ‘bribed’ for their votes by both major parties. Their sheer numbers gave them political clout. If they’d known how the vote ‘bribes’ were going to effect housing affordability for their children and grand children, I’m sure many of them would have rejected the bribes outright.

        Citizen unity is the first step in restoring genuine democracy. You’re as weak as piz if you remain divided and conquered – and quality of life will continue heading south – guaranteed.