Coolabah Capital’s Chris Joye phoned me yesterday to tell me that Sydney dwelling values are crashing at their fastest monthly pace in at least 30 years, according to CoreLogic’s dwelling values index (which he helped create).
So I went and checked, and it turns out that he’s right!
As shown in the next chart, the CoreLogic daily dwelling values index, which captures price changes across the five major capitals, tanked by 0.43% in the week ended 28 July – the 12th consecutive weekly decline:
Weekly house price declines are getting steeper.
Once again, the weekly decline was led by Sydney where values tanked another 0.67%; although all major capitals recorded losses:
Sydney leads across-the-board house price falls.
So far in July, Sydney dwelling values have crashed 2.03%, with Melbourne (-1.25%) and Brisbane (-0.70%) also posting falls. These markets have driven a 1.29% decline at the 5-city aggregate:
Big house price falls in July.
With three days to go in July, Sydney’s 2% monthly fall is already the largest in at least 30 years, according to the CoreLogic index (Chris Joye notes that the CoreLogic dwelling values index is unreliable prior to 1990).
Quarterly value declines have also accelerated, down 2.5% at the 5-city aggregate level, driven by heavy falls across Sydney (-4.5%) and Melbourne (-3.0%):
Accelerating declines across Sydney and Melbourne.
The final chart shows the peak-to-trough declines, which have accelerated since the RBA first commenced its monetary tightening cycle in early May:
Rising rates is driving house prices down.
Sydney dwelling values have tanked 5.2% from their February 2022 peak, while Melbourne’s are down 3.2%. Brisbane dwelling values only began falling in mid-June, but are already down 1.0%.
The RBA has so far only lifted the official cash rate (OCR) to 1.35%. With ANZ, Westpac and the futures market each tipping an OCR above 3% by year’s end, Australian house prices are set to record heavy falls.
While Sydney and Melbourne values will fare worst, given their status as Australia’s most pricey markets, soon the correction will spread to nearly every housing market across the nation, both capital city and regional.
Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.
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Brisbane catching up as expected…soon to be the leader.
Hope so. Been waiting a long time for the madness to end.
Been watching the market for my sons and the change in the way agents are responding is amazing. Show even a vague interest in a house and been getting multiple calls back.
Wait for 2 more 50bp hikes
That’ll be 6 weeks
Grey
You were asking about equities bull run
S&P futures over 4100 now & we hit a low in June 3629 around
All the big names that MB posts BOA etc are now very underweight equities
Big hedge funds are extreme short
Put call ratio extreme highs
Small trader put volume extreme
High cash levels
You can see the 10 year has dropped to 2,67 touched 3.50
US is in recession & big names have said the downturn in the US is accelerating
J Powell will be forced to pivot before the Sept FOMC
So US are ahead in the tightening cycle
US will cut first
RBA has a few more to go
Fed will be cutting from SEPT TO OCT & RBA maybe 2 months later
That might support the AUD & support equities
Big players that are underweight equities have to make a decision whether to get back in
Going to be an interesting 6 months
Property here is fcked, 2 more rate hikes & it’s going to tip people over
Not to mention the other elephants in the room, high inflation for food, fuel and rent. As well as a large percentage of mortgages ok fixed interest rates roll over mid next year.
Spot on BtB.
Interest rates are only part of the overleveraged property owners problems.
Time to put the jet ski on gumtree.
Thanks Bcnich.
Your view on the market appears to align with this bloke.
https://twitter.com/DaveHcontrarian/status/1552309126943985669?cxt=HHwWisC-0aW79IorAAAA
No that guys a lunatic. Proper. Unfollow immediately
No pivot in the USA before September.
Would that line up with voting in the mid terms?
I live on the Gold Coast, brought a house here 9 years ago, it has been nuts the past two years. Got a call out of the blue last night from the RE agency who we brought the house from. He asked if we had plans to buy, sell or do anything. He sounded really desperate and looked like he had spent the whole day doing this.
So inflation is not expected to settle into the 2 – 3% target band until 2024…hopes and prayers. Difficult to see any interest rates cuts before then.
They’ll be forced too as the world economy goes off a cliff
Biggest crisis in history next year
Inflation will come down next year as demand goes off a cliff
RBA look like they’ll just keep tightening maybe 3 by 50bp, will they do 75 bp next week probably not but 150 bp hike by Oct is decent
The charts look like US 10 year could break down to 2.50 from 2.67
Let’s look at our bond yields too
I still think iron ore 300
@Bcnich…I agree that it will take a crisis for the RBA to cut rates while inflation remains outside the band.
That’s interesting
Looks like RBA will hold course .
They’ve embarrassed themselves on inflation
You’re right they probably won’t reverse that early
~400 sleeps to go for Captain Phil to September 2023 when the Captain leaves the RBA sheltered workshop after 40 years, with an Armaguard truck coming to take away his multi-million dollar pension in the folding stuff. How good is the RBA.
Surely they would want to wait at least until the point they forecast they would start raising rates, before they start cutting them. Then again the RBA are completely off their chops.
“Inflation will come down next year as demand goes off a cliff”
Demand will certainly crater but i dont believe that will affect inflation all that much.
There are two inflationary forces at work. The first is the trillions of dollars of highly suspicious stimulus plonked into the economy at around the same very opportunistic time as we all hit zero interest rates. The other force is rising energy prices caused by physically constrained supply.
The “demand for everything” spike from the stimulus may well abate, but the energy doesnt look like it will be turned back on again anytime soon.
But who knows? Maybe all the factories will close down as soon as everyone stops buying excess stuff they dont actually need, and the energy simply wont be required at current levels?
It may actually be good for diabetes and obesity if nobody can afford to buy excess food as well, leading of course to farmers dropping out.
Energy demand is quite inelastic vs energy prices. This is why REALLY high prices are needed to cause demand destruction and bring inflation back down. Interest rate rises bring down the elevated price (of energy) at which demand destruction commences.
Please focus on other markets. Why Oz housing market is your obsession? You are not trading that.
Good question since the debt was siphoned into the economy through houses it makes sense that any reduction in the flows of debt would affect them first.
Everything else gets affected in turn. Eventually general demand takes a hit leading to mass layoffs and wage cuts.
Those waiting for a cheap house better make sure they have the cash – and stuffed under their mattresses of course.
Property is Australia’s biggest asset. It has the biggest impact on the economy. They are the most read and commented articles by a very wide margin. MB was built off it. Why would I stop covering it?
There’s plenty of other articles on MB covering the other markets. That’s most of what Dave does.
I think I found my way here though bubblepedia…………sigh.
And you still don’t own a house you looser.
Fair enough.
Yep came for the ‘off the charts’ house price/cost/value p0rn via bubblepedia & another now defunct inter web thing I can’t recall name of…stayed for the commemts & didn’t renew subscription when writers bought into covid narrative & reported like it was happening IRL and as though Dans daily updates meant anything. Lurked in comments recently & will renew membership when housing downturn commenced free fall:)) Happily DONT own a house or responsible for BS mortgage on a jerry built sh1t box in the north east south & west boondocks of Hellbourne. Happy also not to have paid via mortgage on house a recent arrival built for $14,000 – $40,000 K early – late 70’s to pay their BS nursing home fees or adult children Hawaii/ Bali / Aspen holiday depending on suburb.
…MB is an Australia-centric economics blog…
MB would be crazy not to be covering the Aussie housing markets at the moment.
If there is one thing that was rarely discussed over the last decade it was the likelihood that inflation would rise so quickly that it would force the RBA to raise interest rates fast.
Even with all the QE and ZIRP etc the general view was that labour markets and free trade were so well oiled that almost no one had any pricing power.
The idea that we would have a world wide pandemic, incredibly loose fiscal and monetary policy worldwide, Russia would attack the Ukraine and China would start growing muscles and attitude ALL at the same time was “fonzie jumps a shark’ material.
It has been interesting reading the analysis of the current situation particular the many stages of asset fluffers grief.
1. Deny that inflation exists
2. Insist it is just a supply shock and tight monetary policy will do nothing
3. Insist it is transitory
4. Deny that unemployment of 3.5% indicates a tight labour market
5. Deny that unemployment of 3.5% gives workers ANY bargaining power
6. Demand that an ALP government flood labour markets with imports so that monetary policy can stay absurdly loose.
All of the above is made even more interesting because of the LUNATIC insanity of the last decade where the RBA, APRA and a series of clown army LNP governments tried to run a mining boom economy hot on extreme household leverage poured into the prices of existing housing (mostly) and keep the hot mess going with scads of imported cheap labour.
it’s funny cause MB are at stage 5. To their credit they have long railed against the population ponzi, so can’t see them getting to stage 6 of the asset fluffer grief
I’ve basically stopped caring about property prices because the system will never change. The 2019 federal election was the last straw.
However, I still care greatly about the population ponzi; although that will probably never change either. Energy is now the “big issue” though.
I am a poster child for lost causes.
Keep up the fight.
Yeah, like stopping Adani, LOL
PS dont you think housing needs to come down 30 – 50 %, that will take us back to where we were 2 years ago.
pfh007.com, Nobody denies that the labour market is tight. I’ve written about it constantly (though I refer to it as “the best labour market in generations”, because I believe the tightness is positive).
But there is zero evidence of a ‘wages explosion’. Check out CBA’s latest wages chart (based on a bigger sample than the ABS).
The federal government can do more to ease inflation than RBA rate hikes by copying WA and fixing the energy mess.
UE,
When I refer to asset fluffers I am not referring to MB as I know you guys hate unproductive capital allocations to suit rent seekers as much as anyone. My references to asset fluffers are to the mainstream Aussie economic status quo / received wisdom as to how to manage an economy.
And I know you guys appreciate the existence / importance of tight labour markets to the bargaining power of the low skilled and least paid members of the workforce which is why you oppose the fake ‘skilled’ worker shortage complaints of the Big Business Big Australia lobby.
My understanding has always been that MB needs to discuss what is happening and what is happening is that interest rates are rising in an environment of heavily indebted households and that has real consequences. A development that MB has warned about for a decade.
Probably the only real point of difference is whether putting the asset price fluffing model under pressure is a genuine problem or just a necessary adjustment that was alway going to happen at some point if sensible less rent seeking public policy was to flourish.
Having seen up close (ouch those wage rises!) the power of the increased bargaining power of workers in lower skilled occupations when unemployment is at 3.5% I consider maintaining low unemployment in the range of 3-4% to be of far more importance than protecting some households who made bad decisions (on the basis of bad advice including from the RBA) and are entirely free to exit those decisions any time they choose.
The point has often been made recently that the decline in union membership and centralised wage fixing is a good explanation of why real wages have stagnated over the last 20 years …even when unemployment was circa 5-6%…. which the RBA considered approximately NAIRU.
Well the obvious conclusion to draw from that is that if we want workers to have real bargaining power so they can fight hard for a better share of profits then the unemployment target in an environement where there are few structural protections must be at the very least 4% and probably less than 3.5%.
If that CBA data is reliable and I suspect it is not given the very high movement of workers between jobs at the moment then the conclusion is simple. 3.5% is still not tight enough. Lets go for 3% or even 2.5% if that is what it takes to get some solid wage rises happening and a better share of profits flowing to workers. Certainly beats bringing back unions power and centralised wage fixing that secured better wages but also came with higher unemployment.
And if that requires monetary and fiscal policy to be tighter than so be it.
With unemployment at or near 3.5% there is a limit to the damage that can be caused by a deflating asset bubble.
Even if letting air out of the asset bubbles results in some job losses in unproductive asset fluffing isectors – redeploying that labour with losser fiscal policy or monetary policy to things that matter more is the appropriate response. But at ALL times the goal must be a tight labour market with workers able to pick and choose employers and thus forcing employers to work harder.
Serious question: Is the WEF & WHO plan for a Great Reset ie Build Back Better etc enacted by graduates of Klaus Schwab Young Global Leaders program a con $ piracy theory or the real deal? Fear mongering. Expensively produced fake plan as illustrated on their websites? Are the Dutch farmers really protesting, blocking highways & dumping loads on roads in protest of carbon neutral legislation? Is ambulance activity indicative of covid emergencies, Pfizzer et al related [email protected] emergencies, already [email protected] & going to morgue. Ambulances like a vexxine induced rash all over the Bellarine Peninsula roads with sirens & lights?? Just a ruse for the covid narrative or real emergencies? Granny houses being dumped on rental market untouched 3weeks prior to settlement then rented out over the odds to anyone of the desperate crowds if 60-80 parties attending viewings…the sad & unwitting participants in Victoria’s Housing Games: 7 9 or 10 should do a reality show: blood sweat & tears & plenty of housing p0rn for those already strapped to a mortgage. Rhetorical question: do property developers have an inside contact with morgues, funeral parlours, retirement villages & nuring home palliative care staff… sure looks like it where I’m standing: Anecdata of course:))))
I still believe 1 to 5 but don’t think it is the consensus.
The rate hikes are a huge policy mistake.
Labour market is patchy not tight and changes are all happening on the supply side.
There was a leftward shift in customer facing labour supply curve during pandemic with stimulus, mandates, early retirement, move to wfh, changes in industry etc. staff in certain sector reduced the number of hrs they wanted to work at current wage.
It has a huge effect if all employers in one industry are trying to compete for 5% of hours. But it’s not as though they have increased rosters. They just can’t fill the old rosters.
Then a reallocation (but not general increase in demand post pandemic).
If you look at sales volumes, expectations the economy is not booming it is just adjusting.
We also don’t have inflation in an exploding nominal GDP sense (like 2005 or something). It is all supply related and will be transitory. Powell was right but was wrong to but a date on it.
An overheating economy looks like 2005. 6.5% deficit on current account. Now we have have a current account surplus. It is very different.
Your point (2) “Insist it is just a supply shock and tight monetary policy will do nothing” is spot on and cannot be stressed enough. It is by and large the single biggest common misunderstanding in all the arguments I have seen for not hiking rates. For example, this argument is always used in Chris Joye’s articles.
Whether it is a (drop of) supply or a (increase of) demand shock, monetary tigthening via interest rates will have exactly the same effectiveness: it is completely symmetrical.
He phoning prices through daily now?
Wasn’t he the creator of that stupid daily house price index?
https://www.urban.com.au/expert-insights/investing/14301-stand-by-for-worlds-first-daily-house-price-index-christopher-joye
If anything epitomised the madness it was that.
Like it or not, it’s the leading index now.
There’s nothing like watching a price crash in real time. Thanks to the daily index, we can do that. So grab the popcorn.
The data is still delayed though right? Read a few people on here say 8 weeks or something.
Yeah, it’s not perfect. But it’s as “real time” as you can get.
The question is: at what point do they switch it off, a la 2020?
https://www.macrobusiness.com.au/2020/05/corelogic-pulls-daily-property-price-index/
A very minor correction given the crazy house price increases of the last 2 decades.
Wake me up when its down 30% and the banks are in trouble.
You’ll be woken early next year the banks are going to be bailed out
As soon as LIBOR rises and interbank lending stops its pretty much over for the banks. They’ll start popping off one by one.
I suppose we’ll see whether that results in a 2008-esque about-turn in policy.
Don’t forget the derivatives…nobody is talking about the derivatives.
… by depositors this time? APRA’s letter a couple of years to a Senate Inquiry saying to the effect that there was no intention that depositors ever be bailed in will probably not be worth the paper that soon-departing Captain Wayne Byres wrote it on?
Agree. Until stock on the market doubles or triples, this is just noise. I spoke to a “property speculator” a few days ago. He said, and I quote, “it will be a good time to buy another property in 3 months from now”.
Until this type of attitude changes with the property mad speculators, its just all short term noise.
Yes I won’t be convinced until we are down 30% from peak.
If it turns we will hear dead cat bounce but it will likely take off on lower rates
I bet he didn’t call you to highlight the dwelling values when they were going up and up.
This. According to that graph there have been more months in the last week year itself where values have increased by 2% per month. How come an increase doesn’t get a phone call??
Prices of things usually rise, even if only through inflation. Heavy price falls are unusual.
Is a price retraction of 5%, of the back of a price increase of 25% that unusual? If we were referring to any stock I’m sure it would hardly warrant a mention, or would be touted as a good thing because there are always retractions after a big run which appears to be how a healthy market operates.
Well said
I was reporting that already.
No need to marshall the troops with price rises. What next, the Property Club reforms to march on and placard the RBA meeting next month? Not the first time they’ve done that.
When dwelling values were rocketing in price it was front page news before Chris Joye got out of bed to go for his morning run. Prices usually go up to some extent, so for them to be going down at all is unusual but for it to be at the current pace is worth a phone call.
I see no drop in prices in the Bris area – still uninhabitable houses outside town asking 400+ in one case the blub stated – floods went through this property in 2013 still asking over 400k. These are houses not even close to Brisbane. No change in extreme pricing and all offers are over.
Those that can stay will sell in the mass immigration wave which hasn’t even started yet – I don’t think prices will fall certainly not by much, and when the Russians are defeated they will have to sell cheap oil to pay for their war crimes so an even worse situation. Dropping energy costs and lower interest rates == houses and grannies to the max.
What you’re reporting is Seller delusion. Tom Panos let slip this week that Sydney prices are down 10 to 15% already…
Hi mate. Have you got a link to Tom Panos’ comment? I must have missed it.
This may be of some use?
https://www.news.com.au/finance/real-estate/selling/were-back-baby-stressed-auctioneer-says-market-is-settling-but-slams-bottom-feeders/news-story/c4e5feeb467ad84b21517c154fee0977
Here you go.
https://www.google.com/amp/s/www.news.com.au/finance/real-estate/selling/were-back-baby-stressed-auctioneer-says-market-is-settling-but-slams-bottom-feeders/news-story/c4e5feeb467ad84b21517c154fee0977%3famp
Cheers mate. Missed that one.
Panos also said property prices rose 35% between Oct 2020 and Jan 2021 based on a sample size of 1 distressed sale which was then resold at profit
Wait until we head into spring with a 0.5 next week & 0.5 Sept
That’s 1% up from here in 5/6 weeks time
They need to do 75 next week
Get it over & done with
That may be so, however, these wrecks are selling as they do not stay up for long or have offers on them quickly. I agree with some here that until you see adverts without offers above and submit offers on them the prices are not dropping in fact I would say they are rising still.
Lots of the imported – we must have multiple houses to exploit the local’s types and the slum lords renting uninhabitable shacks for $$$$$$$ until they can double their money by simply land banking.
Interest rate rises will not stop this only a shrinking population or a massive build of social housing can stop this mania.
And anyone with six houses would be terrified of that sort of thing – wait until mass immigration reboots if you think the last two years were bad they are just a taste of rises to come.
In the ‘affluent Surburbs’ I’m tracking in Bris, I can see prices coming off. You need the maddness to stop in these areas first before it spreads to other areas.
1% hike within 5/6 weeks will hurt
Well, you don’t expect them to give it away, do you?
😀
United States …
Are there any lessons being learned about the serious consequences of excessive ‘multiple stretch’ (to rate as affordable housing needs to be at or below 3.0 times annual household income) from the US now and too the GFC ? …
House Prices Are Falling in These 10 U.S. Cities as Market Shifts … Newsweek
https://www.newsweek.com/housing-market-prices-falling-10-cities-united-states-1728749
U.S. Facing ‘Perfect Storm’ for 2008-Like Housing Crisis: Economist … Newsweek
https://www.newsweek.com/us-facing-perfect-storm-2008-like-housing-crisis-economist-1728011
Zillow Reports BIG Home Price Crash in 10 Cities (50% in One Year) … Reventure Consulting … Youtube
https://www.youtube.com/watch?v=zLWSXpAhIGY
… What I wrote back in 2010 … noting that Californias building approval rate per 1000 population per annum in 2009 slumped to 1.0 / 1000 … likely the lowest in history … anywhere. Currently Australia is about 7.0 / 1000 … New Zealand 10 / 1000 Canterbury 13 / 1000 (at NZ record set near 50 years ago Dec year 1973 during the Kirk Labour government era) and Selwyn County adjoining Christchurch to the south a staggering 26 / 1000 …
A 1.0 / 1000 pop pa would mean about 26,200 approvals pa for Australia … 5,100 for New Zealand …
Housing Bubbles: Jumbo Mortgages = Jumbo Problems … Hugh Pavletich … Scoop NZ News(March 2010)
https://www.scoop.co.nz/stories/WO1003/S00019/housing-bubbles-jumbo-mortgages-jumbo-problems.htm
… and China …
China’s property sales are set to plunge 30% — worse than in 2008, S&P says … CNBC
https://www.cnbc.com/2022/07/27/chinas-property-sales-set-for-a-worse-plunge-than-in-2008-sp-says.html
China property sales could plunge by one-third, analysts say, as crisis deepens … The Guardian
https://www.theguardian.com/business/2022/jul/27/china-property-sales-could-plunge-by-one-third-analysts-say-as-crisis-deepens
The New Zealand Initiative (NZ Think Tank) Insights this week … with an emphasis on the globally widely read Wheeler / Wilkinson Report on monetary policy failings triggering general inflation …
https://nzinitiative.outreach.co.nz/?Ns=&Na=view-msg-public&SMESG-oid=25414&Scontact=2149250d
New Zealand: In case you have missed this global housing inflation graph on the IMF website …
Global Housing Watch – International Monetary Fund
https://www.imf.org/external/research/housing/
https://www.imf.org/external/research/housing/images/housepricesaroundtheworld_lg.png
Some big price drops in US, and they aren’t at the extremes we are, generally (?). At least the American market seems to function more like a free market, unlike our completely corrupted & government controlled one.
Every market is controlled by govt. Some markets are controlled to be simple and fair. Other markets like our housing are controlled to be complicated and egregiously unfair.
Must be only a few days now until house prices reach their fundamental genuine rinky dink true “no more room to negotiate” values.
Even a soufflé stops falling when it hits the bottom of the pan.
What are we going to talk about when true value is finally reached?
A good analogy.
All we don’t know is what to call the events that are upon us?
“All we don’t know is what to call the events that are upon us?”
Just Desserts?
How to build a resilient economy? 🤞
Nah. Just real estate, real estate, real estate, real estate, always and forever! 🤯💯🤯💯🤯💯
Can you imagine going to a neighborhood BBQ where nobody discusses house prices?
Are Aussies even capable of socializing without the lead-in. Did you see what Jim’s house sold for?
The typical response being wow my house must be worth at least double Jim’s after all the renovations I’ve done.
Honestly what would you do? what would you say? it’d probably be a Vegan affair so even just eating your way through the tucker would be super dodgy.
You’ve got to imagine there’d be a lineup of neighbors at MickeyD’s all pretending they were not there.
I wonder if that’s what it will be like when the bottom falls out of Sydney RE, a bunch of neighbors pretending they’re not there. It’ll be the new kind of PTSD, catatonic neighbors with shell shock, mumbling something about insanely low house prices . Nobody will want to hear that Jim’s house sold for $250K less than the last house which sold on the street. I can see it already, my neighbor with his hands over his ears having a tantrum screaming waw waw waw I can’t hear you… Every neighbor will admonish the sell-outs who settled for a price of 10 times average household incomes (we all know that 14 times is the new metric)
It’ll be a weird world but in truth no stranger than the world we’ve all been living in.
Did you hear? Jim just gave his house away, can’t believe we used to invite that **** to our BBQ’s!
Imagine the conversations as they line up at Bcnich’s soup van…
I hadn’t though of that twist
What do you say when you’re lined up at the soup van
Do you just stare at the ground, pretend that you’re not there, pretend that your neighbors aren’t there, pretend that this isn’t reality.
I like it, maybe we need to replace the house price index with a soup van index.
“I’ll have the ibis and choko bouillon thanks”
Those spiky cucumber things that grow everywhere in a salad. 😀
MmmMmmm!!
Well consider the alternative which is a 10 million dollar median by 2050.
And then consider what would need to happen to be able to support levels of debt that large.
It was either one or the other.
Hyperinflation or bust.
It looked like they were choosing hyperinflation for an ever so small amount of time there, and then someone decided that bust was a better option.
Hyperinflation is the long way to Bust. Better off going there directly.
Tomarto tomayto.
If hyperinflation is done right then a bust can be avoided perpetually and everyone gets to eat infinite magic pudding. The last 20 years was just a practise run.
It is a bit of work though, but they’re just numbers in a computer.
True. If Jim said, “I just listed the Company I have spent the last 15 years working slavishly to establish, and received a windfall profit, while creating hundreds of ongoing, well paid jobs…”, there would be a collective mumbling of “fvk wit”.
‘Straya!
This is true……………sigh.
Yep and a double Fvk wit if he admitted that the company was founded on the back of his PhD research.
I can still remember when I used to proudly tell others about my thesis work, Aussies BBQ’s cured me of such vanity.
Did Jim list with Macquarie? Just want to know if I’ll read about him in Rear Window.
True value is what someone is willing to pay for an item.
True value is the price that can be paid without requiring debt.
Save up 5-10% of earnings over 5 years. Thats full price.
Pretty low hey?
Same goes for everything people presently use debt for. Not just houses.
I hope the government and powers that be heed your warnings and act NOW to end this cyclical negative sideways movement and creat the next boom!!
Wow the truth comes out
You are calling on the government
You really are a commie leftie that wants bail outs
All along you’ve been a commie wow
Hey it’s only a government handout if given to the poor who will waste it. This is investment for the right sort of outcomes in our society!!!
Gerry Harvey…………I knew it!
Or Joe Hockey, maybe?
Love your work.
Indeed, If only it wasn’t all true.
Elevator up, escalator down still…………… we will see if they elevator down comes into play
Base jumping is faster
It ain’t over until it is elevator up and jump out the window down” because the buildings on fire now
Has anyone done the sums on the holding cost of an investment property with mortgage rates at 7%? Jesus a $1m home around here rents for around $500-$550 a week, no more than that.
At 7% and a 900k mortgage that’s $1200+ a week just on interest, plus $50 to the RE agents, plus $50+ to insurance, then repairs/depreciation?
Minimum $800 a week behind before you even start to read about the prices dropping at 1% a week.
Ouch.
Likewise, the Kouk arguing the added employment in the economy is what drives these prices not interest rates, lol, he will be proven embarrassingly wrong (well as the data keeps getting worse I wonder if he’s thinking about changing his tune soon). It doesn’t matter how many new $80k a year jobs you add (that’s like $1050 a week cash after tax btw (I think the Kouk has it in his delirious mind it’s more like $2000 a week or something)), none of them can come even remotely close to supporting a mortgage at these prices.
The maths just doesn’t work, we will have to gap down massively with each rate rise from here.
It really comes down to how many mortgages have an earnings to mortgage ratio of those proportions.
Anecdata suggests there are more stressed borrowers and developer/builders than the RBA has anticipated.
“Likewise, the Kouk arguing the added employment in the economy is what drives these prices not interest rates, lol, he will be proven embarrassingly wrong”
The debt drove everything and it was pushed into the economy through the houses.
The fact that we have “full employment” despite massive advances in automation and the whole globalisation and outsourcing thing is only possible due to the demand caused by the growing debt pile.
This recent spike in global demand that has pushed global unemployment to around 3% is almost certainly a result of the recent multi-trillion dollar stimulus, highly suspicious given the reactions to it and the prevailing conditions at the time, and slipped in under the cover of COVID
That’s perfect for all those who are taking advantage of negative gearing! Now can get more back on their tax return, win win for landlords!
Yup. Now imagine you own an investment property in NZ and can no longer deduct interest from that rent so you have a 30% tax bill to pay as well. And no negative gearing to cushion the blow of holding costs.. Ahh, its going to be fun over this side of the ditch. No wonder everyone is selling up and leaving.
Oh dear….
No capital gains tax rather softens the blow as well.
Investment property hardly ever made sense based on rental income in most of Australia.. its all about chasing capital growth.
Nonsense. Rents have risen enormously over the years.
eg. Buy a unit that rents for $200 per week. Repayments might be $300 per week. So $50 tax deduction. $50 out of pocket. Get clever with depreciation and it can be even better.
Keep this up for 30 years and now the rent is $500 a week.
Still not enough money? During the 30 years you get regular valuations done. Rising rents justify rising valuations. Use the increase in equity to secure borrowing on more units. You now “own” 3,4,5 units all bringing in $500 per week each.
None of this would work without our disgraceful high rents.
the bigger the loss the more you stick it to ATO and the gubbermint.
Winning in Australia !
The wealthy and retired with no debt will be fine, they will hold their assets through the crash. Will be hard for them to sell though, as no new buyers will qualify for the debt unless we have runaway wage growth.
And Gareth gets the prize for the most important short comment if the day!
It is all about what the next buyer can pay
Just Desserts?
A great name for a franchise.
Accidental Creampie is my pick.
I recently drove 100 miles round trip (Manhattan-Riverhead-Manhattan) just to get a Briermere Farm peach cream pie.
Hedonic Jetski Index
Currently: 292
How does that compare? Historic 2 year trend data?
Other correlating data for this demographic could be tattoos and V8 utes.
Prices went up over 50% in my area over the last year. If they fall by that much then thats not the end of the world except for the recent buyers i guess.
And of course thats how it all starts. The “110% LVR NINJA loans” or equivalent are revealed as values fall, the debt gets downgraded, the banks get downgraded, LIBOR rises, and banks start imploding. Pretty much in that order I’m guessing.
As house prices drop they suck in more and more victims, what will really compound it is people’s inability to pay the mortgage whether interest rates simply exceed their income, or they become unemployed.
I feel this has a while to run downward, a big hit will be felt by those currently on fixed interest rates. Assuming people have a buffer it could keep them running for a little while, but I’m expecting to see a rush of property onto the market with people seeking to exit but all this will do again is suck in more victims. This is going to get real nasty for many people once it gets a decent head of steam.
Don’t forget those people who purchased prior to the last 2 years and have leveraged into major reno’s, equity mate SUV’s, boats, jet ski’s, land cruisers and caravans, private schooling for the kiddies, etc? I contend many would have found it hard to resist the magic pudding given stagnant wages for the past decade.
Yep 👍 and chuck in over budget renovations to that list of lament
Fck those cnvts.
Melbourne is now about as overpriced as Sydney.So it is interesting to note that Melbourne crash is much slower than Sydney.Is the Sydney economy now much weaker than Melbourne?
Sydney always front runs Melbourne in these things
And Brisbane, Gold Coast and Sunny Coast are leveraged to both.
Don’t forget Noosa (North Toorak).
Was in Brisbane yesterday for a client meeting over lunch. Every second car pulling out of the car park was a Porsche SUV….times must be good.
For much of Sydney you could take $1,000,000 off the current price and they would still be expensive by [insert almost any metric or comparison].
Fck yeh. House behind me (Petersham, I think not semi) went for 2 million at the beginning of the year. They would need to lose 80% to revert to 4* wage.
Do you have a semi in Petersham?
His place is solid wood.
until he gets 2 bottles of chardy into his friday afternoon
Going to be some great buying opportunities, moving forward! 🥰
I dont care what this stupid manipulated index says, or what CJoye says, and neither should anyone else. Until stock on market is increasing very sharply, and when it reaches record highs, only then can you say we have a problem. Stock on market is currently low, and no one is panic selling.
I trust my eyes more than I trust this Corelogic Index numberwang chit!!
And unemployment at >8%.
Have a look at the Gold Coast unit market. Mostly AirBNB or holiday rentals. That’s the canary. 43 added in the Surfers to Broadbeach stretch since I last checked. Which was yesterday!
Yeah the Airbnb model won’t work too well with high interest rates and a dire economy. Either sell or back on the long term rental market
^This. It’s early days but I’m already seeing ‘fully furnished’ apartments advertised on long-term leases, but at a reasonably competitive price versus an equivalent unfurnished.
Possibly ex-Airbnbs where the Ll can’t be bothered putting the chattels into storage.
Chill out! I’m sure all their fancy models predicted these fast falls, they know what they are doing! 😜
Going to crash even faster with moar of this
https://www.abc.net.au/news/2022-07-29/aemo-reports-record-wholesale-power-price-customer-nightmare/101279554
How do you spell “Clusterfvk” in Australian?
I’ll have a go: debt-fueled materialism.
I’ve lost touch with my Aussie roots but my best guess would be Snafu.
The correct spelling is AEMO
Rents are so high, property yield is an even higher incentive to buy now. The RBA know this whole place is a RE state so its not going to voluntarily crash it. Higher interest rates would have be forced on this country from outside.
Higher interest rates would have be forced on this country from outside.
Isn’t that what’s happening ?
Tru, but it’s got to be sustained. US already talking lower rates end of yr.
Lol
https://twitter.com/unworry/status/1552821161700245506
Yesterday we briefly touched on Control Systems Theory wrt to RBA’s incompetent management of IR’s
That had me thinking about a control system failure called “Integrator Windup”
https://en.wikipedia.org/wiki/Integral_windup
A couple of years back there was discussion that Boeing’s 737Max MCAS failure looked like classic Integrator Windup. Basically an Integrator is the place where the system error accumulates. Desired output is 5, actual output is 6 than Integrator increments by 1 (i.e. output error)
The assumption is that the control system has some way of adjusting the output based on the magnitude of the Integrator error.
So what happens if the system gets stuck in an Error condition for a prolonged period. Well the Integrator just adds all the errors together and keeps adding errors when maybe it should have recognized that 6 is now the desired output not the 5 value we had as a place holder.
Wrt to the 737Max we all know the story of Pilots fighting to pull the nose of the plane up while the MCAS system doubled down with the opposing force. In the end MCAS won the battle in what looks like a text book case of Integrator Windup.
With this in mind: What form does our Societal Integration Error take? How do we as a people react when our economy produces errors year in and year out for 30 consecutive years? Think of the insane Integrator windup error that would result from such a continuous string of “social / economic errors” (deviations from sustainable/desirable).
Clearly the Monetary system will have insanely large errors circulating, but to be honest what truly interests me is the Social system.
Can you simply reset a Social system when you discover that it contains insanely large (irrecoverable) errors?
What form would these errors take? (education, job selection, business development, lost opportunities….)
Logically our skills deficit would be the place where these errors accumulate (the things we can’t do for ourselves, the businesses we didn’t/can’t start, the knowledge/capabilities we just don’t have)
Ah yes Integrator windup, it’s a very tricky condition, I just hope I’m wrong with my assumptions….
Wake me up when we are back at 2019 prices. If it starts falling below those prices then maybe we can start a discussion.
More like 2015.
https://www.news.com.au/finance/economy/interest-rates/nab-hikes-rates-for-owneroccupiers-and-investors-by-as-much-as-06-per-cent/news-story/2e9641970d5f55384895ff0faf013949
“People on three-year fixed rates will see those go up by 0.55 per cent, borrowers with four-year fixed rates are in for a 0.4 per cent hike.”
how are they actually raising rates for fixed borrowers ? Does News have 8 yr olds writing this crap, they can’t get the inference correct??
Yield curve is already inverting in the US and it is just of matter of time when it happens here. That means we will be back to a lower interest rate regime in less than a year and the Australian housing rocket will be relaunched again. So the fall will be limited to just under 20% in all probability.
Not with out of control inflation we won’t.
Yep, the hyperbole and panic over such a small drop compared to last 10 years of rises is laughable.