real estate South Coast Property Specialists (Carlene Franzen) Tips #1074:
Not Everyone Agrees with the Banks Last week we reported how the major banks are predicting a likely Vol 16 September 15th 2017 28 April December 7th, prices 2017 in 2023. Just as a quick recap, the ANZ Vol 48 2018 reduction in27th house predicted 4% reduction, Westpac 5% reduction and CBA 10% reduction (with 12% reductions in Sydney and Hobart). But no sooner had these predictions been made we are now starting to see other analysts differ from these opinions, with one analyst describing the bank’s predictions as “nonsensical”. The reason for the different opinions is based on the questioning of two key assumptions both of which have the ability to change the market quite significantly:
An increase in interest rates with the Reserve Bank progressively lifting the cash rate to around 1.25% by the second half of 2023.
A lowering of demand (a key component in the “supply and demand” equation)
Dr Andrew Wilson from Bluestone Home Loans questions both of these assumptions stating that the RBA itself had outlined expectations for the cash rate to remain at the current level until 2024, based on the central bank’s wage rise requirements and inflation targeting. Now obviously the RBA can change their mind, but he did go on to say that “For wages growth to meet the RBA requirements for a rate rise by November 2022 – the date predicted by those forecasting record price falls in 2023 – would require an unprecedented surge in incomes over coming months.” (Wouldn’t it be nice to get an “unprecedented surge in comes”?) On the second issue of a lowering of demand, he agrees with the comment we made in last week’s “tips” that opening international borders will lead to high migration levels which is set to “again place upward pressure on home prices in our still undersupplied housing markets”. I guess both these factors (and probably others) will certainly impact the housing market but at this stage it is evident that jury is still out on just how big or small that impact will be. Dr Wilson did note that “since 1987, Australia’s capital city housing market has experienced only three years where home prices have fallen – 2008, 2011 and 2018. And the price declines were clearly modest, falling by just 4.0 per cent, 4.1 per cent and 5.1 per cent, respectively”. So, if the CBA is correct at 10% (12% for Sydney and Hobart), that would certainly be a correction in the order not seen for many, many years. Obviously, time will tell.
beagle weekly : Vol 237 December 10th 2021
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