Did the house price 'crash' start in April?

Fri, 12 Jun 2015  |  

The absolutely fabulous Corelogic house price series is showing falls in house prices. To be sure, the falls are from a staggeringly high base, but compared with the peak in the series in late April, house prices are down 1.9 per cent. What is interesting is where the price falls have been concentrated.

While each capital city had a different point for the recent price peak:

  • Melbourne prices are now down a not insignificant 4.0 per cent since April.
  • Sydney prices have eased by 2.2 per cent since the early May high.
  • Perth prices are 2.6 per cent down from their December 2014 peak.
  • Brisbane prices are off a more moderate 0.7 per cent while Adelaide prices, well here’s a shock, have reached a new high, having generally lagged the boom cities for the last few years.

It would be wrong to be excited about a modest drop in house prices for a couple of months after such a strong and unrelenting rise in recent years. But the Corelogic data is telling me that the house price boom is almost certainly over. The debate will soon start to shift about what sort of price drop we are likely to see.

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THE LATEST FROM THE KOUK

Why the RBA is wrong, wrong, wrong

Tue, 14 Nov 2017

This article first appeared on the Yahoo 7 Finance website at this link: https://au.finance.yahoo.com/news/2024247-032933611.html 

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Why the RBA is wrong, wrong, wrong

The latest Statement on Monetary Policy has confirmed the failure of the Reserve Bank of Australia to implement monetary policy settings that are consistent with its inflation target and objective of full employment.

It used to be the case that the RBA could never have a medium term forecast for inflation other than 2.5 per cent – the middle of its target range. The thinking was that if the RBA had a forecast an inflation rate of say, 1.5 or 3.5 per cent, that was based on current policy settings, it would adjust interest rates to ensure inflation would not reach those levels, and instead would return to the middle of the target.

The middle of the target range is an important goal for policy because it means the risks to the forecast are symmetrical. A forecast of, say 2 per cent, means that a 0.5 percentage point error could see inflation fall to a troublesome 1.5 per cent as much as it could rise to a perfectly acceptable 2.5 per cent, while a forecast of 2.5 per cent that turns out to be wrong by 0.5 per cent would still mean the RBA meets its target.

And even if the 2.5 per cent forecast turns out to be wrong as economic events unfold in ways not fully anticipated, it would adjust policy again to keep the focus on the 2.5 per cent. The RBA did this well until the global crisis came along and changed the growth, wage, inflation dynamics.

Which is where the recent RBA policy settings have been so wrong.

It has been well over a year since the last interest rate cut.

Getting out of property and into stocks?

Thu, 09 Nov 2017

Getting out of property and into stocks

That seems to be a theme developing in the Australian market at the moment, with further evidence of a cooling in the housing market and a coincident lift in the value of the ASX hinting that those with money to invest are avoiding the ultra-expensive, low yielding housing market and instead are looking to the stock market for opportunities.

The Australia stock market is moving higher to the point where the ASX200 index is poised to break above 6,000 points for the first time since 2008. The past decade has been a rocky one for the Australian stock market. There has been the GFC, a commodity price boom and bust, speculators have jumped into and out of bank stocks based on extreme calls on the housing market and many local firms have been dealing with an unrelenting threat from foreign competition.

Some of these issues remain, but a combination of factors appear to be at play in the new found interest in the share market.