The Kouk soothes as Aussie house prices tank

After CoreLogic’s 5-city daily index recorded its biggest monthly decline in nearly 40 years, AMP Capital’s chief economist, Shane Oliver, entered full doomsday mode, tipping possible 4% monthly falls for Sydney:

“The pace of decline is gathering speed, so it’s conceivable we could be seeing monthly declines of 4 per cent in a few months which would surpass the peak monthly increase of 3.7 per cent in March last year,” Dr Oliver said.

“You have to say it’s pretty worrying as we’re only three months into the downturn and prices are already falling this fast. The previous occasions where it came on this rapidly and early on was during the mid-80s before a severe recession and during the GFC, but the RBA were able to turn it around quickly by cutting rates.

“But there’s not much relief on the horizon just yet, so there’s a high risk of further acceleration in price declines as the possibility of a rate cut is more than a year away.”

Not so says Stephen Koukoulas (“The Kouk”), who posted the below video on Twitter claiming there’s “nothing much in these numbers” and that the RBA would only give them a “passing glance”:

The Kouk also maintains his forecast that national dwelling values would only decline by 7% “give or take” – i.e. another 5% from their current level. At the same time, he’s calling on the RBA to be more aggressive on interest rates because “unemployment is incredibly low” and “wages are picking up at a rapid pace” (despite no actual evidence of this being the case).

The Kouk concludes his video by stating there’s “nothing particularly disconcerting in these numbers. We would need to see many, many, many months of declines of this sort of order of magnitude to be at all vaguely concerned”.

How deep the correction goes will obviously depend on how aggressively the RBA hikes rates. If it follows the Kouk’s forecast of a 3% cash rate (implying an average discount variable mortgage rate above 6%), then Australia will likely experience its biggest house price decline in living memory – certainly well in excess of -7%.

Unconventional Economist
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Comments

  1. never underestimate vested self interest. ive lost about $20k shorting this basket case since 2008. expect unexpected can kicking incentives is what ive learned. house prices to the moon.

  2. Really enjoying the weekly updates on the Kouk’s housing views. It makes you wonder how much this kind of stubborn attitude is pervasive within the RBA. We can all see house prices are going to go way past another 5% lower, and i don’t think its a bad thing, but to be able to formulate effective policy you need to be realistic about where prices are going.

  3. There’s a chance that Labour will bring back into consideration implementing the Hayne RC recommendations.

    After all the banks will get blamed for letting thousands of useful idiots over lever themselves into the Pandemic property boom.

    Naturally none of these useful idiots (Aussie property heros) will shoulder any personal responsibility.

  4. Assuming the working age cohort is peak spending and investment e.g. on housing, finance etc., but the demographic sweet spot for working age was passed pre-Covid i.e. more retirees and fewer workers. Join the dots…… where are the mass of future buyers coming from?

    Any increase in temporary churn over of students etc. will only or mostly benefit the rental market, they are not purchasing homes of baby boomers….

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