Why smaller capitals will drive the property boom

By in Australian Property

| 96 comments

Dr Cameron Murray is a good friend of the site and one of the few commentators in the country to tip a property boom mid last year during the height of the COVID-19 pandemic.

This week Dr Murray was interviewed by The Guardian where he tipped that smaller markets will lead this property cycle:

Our macro-stabilisation policy works by juicing house prices”…

“This is a policy most central banks have adopted. Secondly, we’re just at that point in the cycle. The best parallel to the situation now is 2004. I think we’re in a very similar phase right now. Sydney boomed early, then it tapered off. Then the rest of the country shot up for four years in line with the broad global house price cycle.

“The economy runs in cycles and a lot of regional Australia hasn’t been through that boom cycle. Now it’s their turn.”

My view is that pretty much all markets outside of Melbourne and Sydney will lead the boom.

There are two primary reasons for this view: 1) affordability; and 2) juicy rental yields.

To illustrate the first point – affordability – below are charts plotting median house prices in the five main capitals against the weighted average of the other capital cities.

Melbourne’s ‘relative value’ is poor based on this metric with its median house price tracking at 108% of the other capital cities as at December 2020 – close to the highest level in nearly 50 years of data:

It’s a similar story in Sydney where its median house price was tracking at 165% of the other capital cities as at December 2020 – well above the historical average of 153%:

A polar opposite situation exists in Perth whose housing market was the ‘cheapest’ in nearly 50 years in comparison with the other capitals.

Perth’s median house prices was tracking at 61% of the other capitals as at December 2020, well below the historical average of 81%:

Brisbane’s relative affordability is also excellent, with its median house price tracking at 65% of the other capitals as at December 2020, well below the historical average of 77%:

The story is similar for Adelaide whose median house price was 63% of the other capitals as at December 2020, again way below the historical average of 74%:

While I don’t have data on the other capitals or regions, we can infer that the situation is similar across most locations across Australia by looking at rental yields:

Rental yields are typically much higher outside of Sydney and Melbourne. They are also typically growing at a much faster pace.

The upshot is that if you are looking to invest in the Australian property market, you will likely achieve better returns looking outside of the two major capitals.

Unconventional Economist
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Comments

  1. adelaide_economistMEMBER

    Based on rents for basically identical properties in the block I recently purchased in (within Adelaide), my raw yield is currently just under 5% based on my purchase price (haven’t even settled yet). When the alternative is about 0.3% on savings (or risky investments), I can see the attraction.

  2. bcnichMEMBER

    The property boom is just a 6/9 month FOMO, because the RBA manipulated interest rates to 2%, then started the propaganda machine, via MSM TV and newspaper.

    The same propaganda as they came out with in 2019 after the election when there was another stampede then prices fell, then they started over again in September

    RBA & Banks lowered term deposits to zero, so everyone would chase yield through housing and sharemarket

    Absolutely nothing has changed they’ve just delayed the inevitable fall

    This stampede will end in the next 3 or 4 months after everyone has stuffed their face full of debt again and historical low interest rates

    It’s just a rediculous rush for FOMO, that’s going to end in tears,

    Property prices will be falling in second half this year.

    Everyone chasing yield in any asset class is going to get slaughtered in H2

    They are trying to stop natural forces

    You can’t go and borrow money constantly with no consideration of the future or paying back… I hope everyone checked if they can afford the repayments on 6%….minimum

    Anyone over probably 50 years old, knows it’s not so exciting paying a mortgage when rates are 7%. They want be rushing to auction when they hear banks putting up interest rates later this year.

    The TV are telling people that interest rates are staying low for ever ….. unfortunately interest rates are going to steadily rise over next few years

    Anyone who is borrowing at 2%…. when rates rise and prices fall, the yield won’t look that attractive

    There will be no more buyers in 4 months, the frenzy will be over

    This is just the final euphoric rise of the greatest debt bubble in history, that is going to burst in H2 with no one prepared

    Unfortunately from July onwards there will be a lot of pain with people stuffed full of debt they won’t be able to pay back

    There are queues of people lining up to buy way over priced prices actually in everything

    It’s going to be a very sad time for many.

    This is the very final stages of not only property but the “EVERYTHING BUBBLE”

    This is the parabolic melt up, it’s always what happens at the very end

    This is all driven by the liquidity the central banks have pumped into the system… mostly FED…. trillions

    This is the very very final stages of the greatest financial bubble in everything which is months away from ending.

    Ps not even gold will be a safe haven

    Ireland 2.0 into Xmas this year.

    • happy valleyMEMBER

      bcnich – you’ve been away from MB for quite a while and obviously did not get the memo. Under Josh the Pawnbroker’s irresponsible lending laws and PB Tim Wilson’s strip you super to ponzi up house price scheme, there will never again be a requirement to repay debt as sure enough no Strayan treasurer will ever be repaying the debt load that the Pawnbroker has taken on in the last year and also as the RBA has the printing presses working 24/7/365 to fund the gubmint and our questionably strong banks.

      • bcnichMEMBER

        HV
        They’ve just delayed the inevitable, they can say what they want, they’ve just made the problem way worse than it would have been,. Once this frenzy stops which it will, prices will just keep falling
        Most of these borrowers now will be in negative equity for years trapped in higher interest rates
        Flogging a dead horse here

        Time to move into commodities, 2020s is all about commodities which will be good for AUST

        AUD will sit up high for many years with strong commodities higher inflation and higher interest rates
        Owning a home with high interest rates will just be a hard life of pain and misery

        We are going to have a meltdown first to clear a large part of global debt, major property crash

        The other side is stagflation, which ask abound over 50 to 55 will tell you is terrible

        The RBA and MSM can feed everyone what they like

        This always happens at the high

        The can now is an oil drum full of concrete

        Good luck kicking that

        The frenzy going on now is pure insanity

        This is the parabolic melt up phase which is the end

        Enjoy it while it lasts but this is going to end in tears from Q3

        No change to outcome it’s now going to happen much quicker

        By mid 22 we will be down by 50% on core logic measurement scale

        I’ve been around every time I switch the TV on I hear about the major boom

        It’s going to be an absolute mess when job keeper finishes in 6 weeks, unemployment will start to go through the roof, we are heading into the SOLVENCY phase of the pandemic.

        I don’t think our banks will be able to withstand this meltdown, I know RBA is quietly bailing them out now but the biggest banks in the world are going under from July onwards, leading by Germany Italy… also Asia … we will see some of the very big banks go down – large insolvencies in Airlines…. big Airlines are going to file for bankruptcy, commercial retail real estate etc, the banks cannot withstand
        The global derivatives market is going to unwind. This is all coming ..

        55% of small business in US won’t te open

        We are going to open up but we haven’t yet paid the economic price yet

        It’s coming and it’s painful

          • bcnichMEMBER

            That’s ok every time I switch the TV on it’s the Reusa fan club

            “The big property boom”

            I heard a major property person say “property will be on fire this year” I didn’t say anything but I thought yes but not the fire 🔥 you think the other one

            Major institutional insolvencies are yet to take down the global banking system

          • bcnichMEMBER

            @ maun re timing ….. just wait, I think you’ll see warning signs June maybe a little earlier, but carnage H 2

        • bjw678

          Interest rates won’t be 7% for a VERY LONG TIME.
          0% or negative retail rates are more likely to appear first.
          Rates aren’t going up H2 because as you say there will be carnage, and the one thing that is constantly been reinforced is that no-one will allow that on their watch, so expect bigger and bigger can kicks to infinity.

          • Tassie TomMEMBER

            “Interest rates won’t be 7% for a very long time”

            … unless our foreign funders lose faith in our banks’ ability to repay, and start demanding more for the risk associated with buying their bonds.

            Of course, the RBA could print money to pick buy the bonds that are not rolled over, but then the bondholders of Australian Government bonds might lose faith in the Australian dollar. Which could become very interesting.

          • bjw678

            Sure, the rba will just buy more of those as well.
            At some point it goes pear shaped, but not for quite a few years yet, at the minimum. Especially while all the other CB’s are doing it as well, to a larger extent.

        • Goldstandard1MEMBER

          Your logic makes a lot more sense than the quagmire (Gigidy) of boomy, cheap debt forever lies that are being vomited at the moment…..and people are falling for it!
          I have no idea on timeframe but I know it’s short enough for me not to buy my next family home in the next 12 months that’s for sure. Have to make money in equities and try and get out before the crash, a lot harder to do that in property.

          • bcnichMEMBER

            We all know the property is so different
            It’s guesstimate because some rural might be better than city and house better than an apartment
            I don’t know Perth but everyone is going to be fighting higher interest rates over time
            I don’t believe anything in 2 years will be higher than now
            I wrote in the bank profit post just now, can’t see the big 4 surviving in their current structure so I guess that will disrupt the lending
            I think falls will be quick half over 3 to 6 months maybe Q4 this year into Q1 next
            But mortgage rates will just keep rising as bond prices fall
            I understand you have to live somewhere
            Property and bond 40 year or so bull market started when volker jammed up US interest rates and they just kept falling
            Much of the fall in bond yields over 40 years will be reversed maybe 10% home loan rates not overnight and not in a straight line but the bond bull market is finished
            Fixed income funds are going to get slaughtered
            Think commodities so probably Perth will come good but it’s very hard no matter where you are to pay 6 to 8% in a few years
            Your guess is as good as mine
            Think major jolt down in Q4 21 Q1 22 maybe a bear bounce but there won’t be any love in RE
            It’ll be on the nose right through 20s with bonds and traditional retail commercial property ETC
            Higher interest rates are poison to RE and bonds
            The days of sitting in the bath watching your inv propety and bond fund go up is finished
            It’s normal that these things happen
            You won’t be able to sit in passive equity ETFs because in a high interest rate environment PE multiples contract
            ACTIVE FUNDS MANAGEMENT will outperform PASSIVE
            Time will tell but changes are coming
            Ask any portfolio manager who worked in 70s and 80s about stagflation

    • Mike Herman TroutMEMBER

      Welcome back. The bears have been executed around here. I fear you may be right but that the time is 5+ years, maybe even longer. MMT, negative rates, super….who knows what else they come up with. I’m close to capitulating down here in locked up Melbourne. Probably give it to May or June to decide…. the FOMO is rife… I can smell it….

      • skippy

        MMT has been around since before the Orange county RE scheme started doing the rounds [decades], hence its not new and its not some band aid, its just a description of the monetary system in use for sometime by developed nation currency issuers. The only difference in acknowledging MMT is the policy framework up for debate E.g. its administration I.e. corporate/wealthy freebees, MIC, or anything that advances neoliberalism or … concrete social benefits and investment in socially productive enterprise ….

        Now some seem to prefer shooting themselves and others in the foot or heads just so their wonky world view is correct …

  3. bcnichMEMBER

    I think what Cameron Murray meant was it’s the small capitals turn to get themselves into the sane mess Melb and Syd are in

    It’s a real pity, the small capitals are now going to suffer the same pain Melb and Sydney will , they probably could have avoided it

    The insolvency phase will be Lehman on steroids now, there will be too many too big to fail to be able to bail out

    It’ll be a domino of large backs collapse probably starting in Europe and it’ll just spread around the world, airlines, large retail trusts etc huge derivatives meltdown

    I’d get prepared if I was you for H2

    The unwind is going to come so fast, I don’t believe they can stop it until after the fact, they’ll do something, MMT jobkeeper 2.0 or what ever

    They’ll have to it’ll be so devastating

    I say this with sadness, it’s going to affect mavy peole I know family and friends along with everyone, no one can escape this

      • bcnichMEMBER

        I think I’m dragging a few out of the woodwork

        Unfortunately it can’t be avoided

        I needed to come back to give you a reality check

        We are in the greatest bubble in history and everyone has been hypnotised

        I need to shake you all out of the transe

        • happy valleyMEMBER

          There is nothing that the shysters that are CBers, private banksters and treasurers, among which our lot rank highly, will not do to prevent the asset price bubbles that they have created, from collapsing. The RBNZ last year had NZ private banksters working on their systems to deal with negative interest rates and the BoE has just insisted that UK private banksters have their systems ready by this June and we know how screwed the UK economy is. Also, the western world CBers and treasurers couldn’t give a rat’s as to high inflation (the piddly bits they measure) goes as long as asset price bubbles grow exponentially.

        • TailorTrashMEMBER

          Welcome back BC it’s always good to have a real bear pop in to give us a view contrary to what most media is pumping out . I have long believed that the housing thing in Straya is insanity ( NZ is a lobotomy ) but every time it trembles the governments find away to prop it up
          So if and when your predictions come to pass in H2 and it all turns to sh1t what might a chap or chapess
          do to protect at least a few shillings .. not asking for financial advise just your opinion. You mentioned commodities….do you mean shares in commodities companies ?

          • bjw678

            If his predictions come true, buy guns and ammo because it will get REALLY NASTY.
            Other than that not sure there is anything to do, commodities demand will tank because no one will have any money ala great depression.
            Which is why absolutely everything will be done to prevent or at the least minimize it.

        • skippy

          I have to agree with coming on this bcnich … just from the perspective of your misapplied hard money optics E.g. the same people that were absolutely wrong about the 34T-ish in liquidity and back stops post GFC. Look if some are adamant on starting off from the wrong base assumptions, because they have some deep seated emotional baggage from some theory they mistook for fact then you’ll get that.

          Then to top that all off the reliance on some very dubious econometrics applied cookie cutter style just ends up as a premise leading the observation E.g. first and foremost before one even gets wobbly about IR they should consider lending standards as they lead the issuance of credit no matter what the IR is … Duh … its not like Volcker used high IR to crush labour because taxes were off the table and derivatives were the magic sparkle pony that made anyone Greece in the long run … largely due to corruption and the insurance was not mature enough … had it only been a bit later … eh …

          So the only pertinent question – is – what enabled all this and why … to what end … and how does one change that agenda without blowing everything up just to satisfy some wobbly notion based on some ridiculous theory of stuff …

          • WiZZ of Ozz

            They will share the power on digital world currency set at a price keep your currency but buy digital currency to trade this is good for everyone still competiton

        • NorthMEMBER

          They say a market only collapses when the last bear capitulates.

          Bcnich, if you could just hurry up and buy an over-priced house in Sydney or Melbourne the whole thing will fall in on itself.

          BTW I want to believe you but right now I can’t see storm clouds on residential property’s horizon.

          The reduction in interest rates is already priced into houses and then some. This FOMO boom is now priced for deeply irrational participants.

    • Pessimist

      Welcome back bcnich!I was feeling a bit lonely out here with almost every bear turning bullish!Even Martin North does not seem to believe what he is saying on his channel.

        • astrolin

          “”He who goes a borrowing will a soon a go a sorrowing” – Margaret Thatcher. I am in agreement with BC. My investments are all defensive, now looking at removing a fair amount of cash from the banking system in the next six weeks

          • bcnichMEMBER

            Bj, I’m correct/will be correct on everything
            Just my timing out
            My mistake I underestimated the extent central banks would go to
            FED balance sheet is 7 trillion or something
            Absolutely no change to the final outcome

            It’s now going to be much much worse than even I said last year

            So a few things that I have changed my view on from seeing what they’ve done

            **** There won’t be guns and violence because they’ll print and give people money, FED is now looking at opening accounts for people directly, there is no mad max
            ***** cash notes aren’t as important they’ll close banks, think probably bail out no bail in, think cash in bank safer, they’ll just print

            I’m not concerned about the guns etc now, won’t happen to that extent

            It’s not the end of the world, we will see huge fiscal and monetary expansion but it won’t be in time

            The crash will be extremely aggressive and fast, much bigger than 2020 and 2008, probably bigger than 1929 but won’t be as prolonged

            It’s going to be all in 2021/22, July 2021 to June 2022

            We will bounce out but we will bounce out and economy financial markets will improve later 22 into 23 but we will never see the highs again in property or equity prices again for many many years

            2020s is inflation higher interest rates similar to 70s 80s, many on here won’t have much knowledge of stagflation

            It’s worth to study around oil shock paul volker etc

            You’ll see 10 and 30 year bond yields head back to highs 10/15% over a long time maybe 10 years

            QE will only make inflation higher and MMT will also exacerbate inflation

            Central banks will learn “there is no free lunch” you can’t do this without consequences and they are inflation and higher interest rates

            You can’t have your cake and eat it

          • bjw678

            “Central banks will learn “there is no free lunch” you can’t do this without consequences and they are inflation and higher interest rates
            You can’t have your cake and eat it”

            Inflation almost certainly, Higher Interest rates I really can’t see happening. Part of the point of printing is to lower rates.
            I do love your unshakable faith despite being proven wrong though, you’ll be right any day now.

          • bcnichMEMBER

            I’m really sorry to tell you
            Unfortunately High inflation comes High interest rates

            I’ve asked DLS to post a video, it’s on the AUD post

          • bjw678

            “Unfortunately High inflation comes High interest rates”
            Would you care to justify why that is the case? And why it MUST be true?

          • bcnichMEMBER

            Short bonds equals higher interest rates if you don’t know
            If you don’t think there is value in listening to one of the greatest investors you must be very ignorant
            Maybe it’s a bit above your level
            Commsec Craig James or Peter Switzer might be better for you
            I really enjoy talking to a lot of guys on here but quite a few aren’t the sharpest tools in the shed

  4. working class hamMEMBER

    The LNP will stop at nothing to feed the RE machine. This is only the tip of the insanity iceberg, they still have a huge pile of super that can be used, nothing the Govt loves more than providing stimulus with other peoples money. Trashing lending laws is already on the cards, extensions to all the profit keeper packages, rebadged and with larger loopholes for the “lifters”.
    The barrel is almost full, but when it gets too heavy to kick, they simply just afterpaid a bulldozer.

    • bcnichMEMBER

      The debt can’t be serviced on higher interest rates, I don’t think households can withstand 5% and it’ll be painful for government at 3% bond yields, government will be ok it’s private that will suffer

      On a smaller note, we are going to have a major amount of small business file for bankruptcy from Q2 throughout the year

      • PalimpsestMEMBER

        Here is the dilemma. You are correct about the huge amounts of debt new borrowers face. Nor can this go on for ever. The challenge is timing. We can all see what must happen … at some time, but when? Those who borrowed to the hilt over the last two decades are so far in front they won’t be touched. Those who have paid off 50% or more of their mortgage, say, should handle 5% easily, with a small flow on effect of reduced consumption. Many could handle 7.5%. The effect on new borrowers with low equity – devastating for them, but not necessarily catastrophic for the economy as a whole.

        There are many negatives for property prices, but the bear view has been on the wrong side of the ledger because it has been “fighting the Fed”. The other side, the Reusa view, has been that the Government will throw everything at propping up the market. I, for one, have seriously underestimated the lengths they would go to. I fear you may be a ‘prophet in the wilderness’ for a while to come. October has been a classic month for markets to throw a fit and has potential this year. For property, however, that is when the vaccine should have been distributed enough for the Government to not only throw the borders open, but actively subsidise the import of any warm body with breath in it. If they can sign their name, they must be University material.

        I sympathise with your views, and expect that one day you will be proven correct. But I can’t bet my future on when.

        • SwampyMEMBER

          Banks are offering good interest rates for low LVR. Unadvertised in many cases.

          CBA tells me we can refi 595 (D/I 4.5, LVR 67) on their std variable 2.62 or 1.99 4yr fixed. That 4yr rate is a whole lot of certainty.

          Higher LVR confers higher rates which means lower borrowing, ie lower risk.

          Would you agree?

          • bcnichMEMBER

            The unfortunate thing about AUST is 4 year fixed expires

            Why US will be ok they can take a 30 year fixed rate at 2.5%

            Unfortunately in 4 years everyone will go from 1.99 to 5

            It’ll be like the adjustable mortgage reset in the US in 2007 here in AUST

          • bjw678

            The banks clearly don’t believe that.
            The fact that they are offering 4 year fixed at lower than the variable indicates they think rates will be lower than that in 4 years time.

        • Matilda Jonas

          Could not agree more. I’m observing this madness since 12 years now (never planned to buy) and like you, I’ve underestimated the ingenuity of politics and the system to keep this insanity going. There is also a good chance that this will go for many years to come. The switch to digital currency will probably buy another one or two decades.

  10. bcnichMEMBER

    I’ve spent the most part of this year heavily studying my astrology. True …
    It’s been a very big 3 months

    Are you all aware of the The Great Conjunction on DEC 21 2020 just passed

    Saturn Aligned with Jupiter at zero degrees in AQUARIUS
    Only happens every 800 years that close

    TRUE, we have now entered true the “Age of Aquarius”

    We’ve moved from an Earth sign into Aquarius (AIR), people think Aquarius is water but it’s AIR.

    The last time was 1226 we had this change

    Aquarius is AIR, very hard to contain air, it’s truth & transparency

    In Greek mythology Saturn is Jupiters father

    This period is about handing the reins to a young new beginning

    Saturn is associated with tradition, Jupiter younger newer

    You can hide in EARTH but you can’t hide in AIR

    The truth in everything is going to come out over the next few years

    We are headed for a major change in society

    It’s very in depth but you can look up

    Much of this insanity is coming from the major shift in energy due to the great conjunction, this is contributing to the insane moves in markets

    Anyway it’s very interesting to at least keep an open mind

    It’s a very big period

    I believe last major mid point in the 800 year cycle of Great Conjunction”, was 1623, caught by Galileo Galilei,

  11. C3POMEMBER

    Yeh nah.
    I sold out of XRP at 31c. Sold LYC at $5.31.
    Pascometer has nothing on my performance.
    Just bought an IP in Brisbane.
    Welcome back BCNICH and I think this could be the big one – we settle in a few weeks so it’s close I tell ya.

  13. pfh007.comMEMBER

    The only genuine flies in the ointment of the asset price pumpers is the AUD and monetary system reform driven from offshore.

    The AUD is vulnerable to the Chinese deciding to teach us a lesson for not showing enough respect / toadying to the CCP. If the Chinese seriously crimp our exports such that we slip back into trade deficit / CAD territory then the AUD will start sagging and there will come a point where the RBA hands are tied (re interest rates) if they don’t want people paying lots of Aussie Peso for imported products. Will our pollies decide on the brown nose strategy to avoid this outcome?

    Monetary system reform would involve reform as to who gets to use electronic central bank liabilities in the form of an account or a CB digital coin. This issue is alive offshore and even our RBA is aware of the issue (though working hard with their local bank buddies to corrupt the concept). Naturally the banks will try to kill it or hijack it but they may find it difficult to preserve all of their lurks. Though the ignorance of most in Oz and/or their affection for bank bondage means this may be a limited risk.

  15. Hugh PavletichMEMBER

    New Zealand …

    Average asking price for homes reaches all-time high; lack of supply to blame — Trade Me … TVNZ

    https://www.tvnz.co.nz/one-news/new-zealand/average-asking-price-homes-reaches-all-time-high-lack-supply-blame-trade-me

    The lack of supply means New Zealand’s overheating housing market is showing no sign of slowing, with national asking prices reaching all-time highs, the latest Trade Me Property data shows. … read more via hyperlink above …
    .
    .
    Exclusive (VIDEO): Data proves lack of supply is driving New Zealand’s housing crisis … Katie Bradford … TVNZ

    https://www.tvnz.co.nz/one-news/new-zealand/exclusive-data-proves-lack-supply-driving-new-zealands-housing-crisis

    A lack of supply has long been blamed for as a key driver for our housing crisis. … view and read more via hyperlink above …
    .
    .
    When can young Kiwis and Aussies expect to be able to buy their first home like Dallas based (daughter of Thai immigrants) 25 year old teacher Lani Huang on $US 58,400 a year, who bought hers for $US 155,000 or 2.66 times her annual SINGLE EARNER income.

    The boyfriend is being educated in Asian ways of thrift and financial discipline and is required to pay reasonable board … as Lani sees it !

    When do the Aussie and Kiwi polies and planners intend to lift the current artificial regulatory bans on the construction of affordable housing ? …

    How a 25-year-old teacher making $58,000 in Dallas spends her money … CNBC

    https://www.cnbc.com/video/2020/12/17/58k-a-year-dallas-millennial-money-lani-huang.html

      • Hugh PavletichMEMBER

        You are correct Jeb.

        In case you haven’t seen the heaps of additional stuff on my archival website http://www.PerformanceUrbanPlanning.org . I suggest you check out the front page 2020 Section … by scrolling down to ‘Further Updates’.

        Note in particular the Zillow US Dwellings Total Value, the States and Metros too. Relate them to Gross Domestic / State / Metro Product . Note the US overall about 1.5 times, Atlanta, Dallas and Houston about 1.0 times … and (Leiths article above) Aussie about 3.5 times … NZ now about 4.5 times.

        It sure is shaping up to be a Housing Horror Show with the unstoppable Remote Working and Bond Yields on the rise.

        • Hugh PavletichMEMBER

          New Zealand Government Bond Yields Soar …

          A review of things you need to know before you go home on Thursday; Crown accounts edge back into surplus in December month, median age rises, bond yields rise, swaps firm, NZD slips, & more … David Chaston … Interest Co NZ

          https://www.interest.co.nz/news/109120/review-things-you-need-know-you-go-home-thursday-crown-accounts-edge-back-surplus

          … extract …

          … INVESTORS GET HIGHER RISK-FREE YIELDS

          Today’s NZGB tender brought noticeably higher yields, but investor demand was lower than recently. The April 2025 $200 mln attracted $270 mln in bids and the winning yields averaged 0.60% pa, almost double those of three weeks ago or 0.34%. The April 2029 $150 mln offer attracted bids of $390 mln and the winning yields averaged 1.25% pa, well above the prior 0.81%. The final $100 mln for the April 2033 offer attracted $268 mln in bids and the yield was 1.67%, a jump from the prior 1.18% three weeks earlier. Overall there were 91 bids, but only 19 succeeded, and that left $578 mln unsatisfied, the lowest in a long time.

          • Tassie TomMEMBER

            Thanks Hugh. Great comment (no sarcasm implied). I’ll keep my eye on our own bond tenders a bit more closely (if I can figure out how to)

  17. LSWCHPMEMBER

    I don’t really give a sh1t one way or the other. My partner and I need a roof over heads, we got our money together, looked around and bought a nice place. The previous, current and future state of the market don’t really matter to us. We wanted to pay cash for a place, but we ended up getting a small mortgage that we’ll pay off in 4 years. Prices may go up or down, interest rates may go up or down, we don’t care. We have a place to live where we can’t be kicked out because the owner decided to sell to somebody else, and where we don’t have to let somebody in to inspect it every 6 months, and that has more than a postage stamp back yard overlooked by the neighbours.

    I hope house prices fall for the good of the people of this country, particularly the young. I think it will happen one day, but I’m not optimistic that it will be in the next year or so. Still, the end of Job Keeper is going to result in Interesting Times(tm).

    • Tiliqua scincoidesMEMBER

      They won’t fall in nominal terms – the political class will not allow it.

      Inflation will take hold in time which will impact real values. I plan to load up on as much debt as possible now while it’s cheap and let the value of the debt be inflated away over the next 15 years or so.

    • Tassie TomMEMBER

      Well done LSWCHP! 9 years ago when we bought our house I was in the same boat. House prices were too high then, and they’re too high now, but some things have value that money doesn’t describe. I’ve got lots of equity now, but I could have none in a couple of years if house prices halve. But that’s ok, as long as I keep in a job.

  18. Ben Elias

    I can’t believe you are using the word ‘affordability’ in that way after what has been written on this site (and the some of the precursors unconventialeconomist.blogspot) for at least the previous decade. Might as well read Domain. ‘Relative affordability’, you might as well get your real estate license and start spruiking.

    • Tassie TomMEMBER

      1.

      To me, “affordability” means “how long does it take you to save up to buy a house?”.

      NOT “how long does it take you to save 7% of the price of a house, then use government grants to get you up to 10% with your LMI capitalised onto your loan, then keep your head just above water so long as you stay in your job, keep the hours you’re currently working, and your car doesn’t break down for the next 30 years”.

      Most people who buy a house today are never going to pay it off in their working life. The bubble has got to pop. The question is “when?”

      There’s a saying: There’s only one thing worse than being wrong. That is being right … too early … and then changing your mind.

      • bjw678

        The real question is what does a pop actually mean. A 30% reduction? Even 50%?
        even at 50% someone who has been holding out waiting for the crash since 2012 will have higher prices after the crash than when they started waiting.
        Or do you think 90%? That will be greater than great depression level disaster to cause.

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