Long-term readers will recall that one MB’s favourite share market whipping boys is McGrathmageddon. Who can forget the 2015 listing of the real estate glamour stock, underwritten by Bell Potter at $2.10, only to immediately crash 94% on a string of profit warnings.
Never since has McGrathmageddon managed to peak above down 76% from its listing joke:
There’s not a lot of credibility in that price action. Especially since McGrathmageddon has already traded through another full-blown real estate up-cycle.
Today it released half-year results that included its real estate outlook which, frankly, does not pass the laugh test:
“Possibly”, “our view”, “we expect”. This is hardly hard guidance.
As it happens, I agree that property prices will enter a new rising cycle in 2024. But, I, at least, have some reasoning for it:
- The RBA has already over-tightened for the sustainability of the politico-housing complex, driven by external inflation factors, the bank’s search for its lost credibility, and the Albanese Government’s egregious energy shock.
- However, it is now raining cheap foreign labour that will crush wage rises in due course as wage theft explodes so no wage-push inflation cycle will transpire in Australia.
- As the fixed-rate mortgage reset brings havoc, consumption will collapse and Australia slump into per capita recession (at best).
- The terms of trade will also continue to fall with China going ex-growth (unless Emperor Xi panics again), and as the Ukraine War impacts subside, denuding national income.
- These two will shove Australia rudely back into its lost decade dynamics, which will lead to deeper interest rate cuts than elsewhere.
- Mass immigration is also forcing a second dimension to the property adjustment today via skyrocketing rents which will revive Australia’s indefatigable army of specufestors in time.
But, no, I still wouldn’t buy McGrathmageddon to play it.
