House price watch: Prices down 1.4% from peak

Thu, 04 Jun 2015  |  

There appears to be at least a tiny bit of heat coming out of the house price market as a mix of tighter regulations, stretched affordability, common sense, lower underlying demand and a surge in new supply all start to bite. Weak wages growth and low income growth is also acting to dampen demand for housing with about the only thing in favour of stronger house prices being low interest rates.

Everyone knows the fickleness of the daily house price series from Corelogic, but I like there data. Knocking it is a bit like heaping criticism on the stock market where share prices change every day, often by quite a lot, for no obvious reason. But data are data and nonetheless there is important information in price moves in most time series be they annual, quarterly, monthly, weekly or daily.

Given the importance of house prices to economic policy and even the political debate – Prime Minister Abbott is hoping that “house prices keep increasing” – it is enlightening to see how the Corelogic data is showing that prices in some areas have fallen in recent times.

A big caveat.

It would be wrong to use this information as a sure sign of an imminent free-fall in houses prices and a bursting of the proverbial bubble, but the trends outlined below are sort of interesting. And as someone once said, a march of 1,000 miles begins with a single step.

Here are the data on house prices falls from the recent peaks.

                    Peak         Fall since peak

Sydney        May 2015       -1.3%
Melbourne    Apr 2015        -3.3%
Bribane*      Feb 2015        -1.0%
Adelaide       Apr 2015        -0.1%
Perth           Dec 2014        -2.4%

Five cities   Apr 2015      -1.4%

* including Gold Coast.

Of course, many of these falls come after huge increases, so the moves are generally small beer. There could be some seasonaility or just a pause, as there is in every price boom. If this is the case, new price highs will be reached in the months ahead. And interestingly Adelaide prices are only just off their peak, but prices there were never really super-strong to begin with.

Every now and then I will update these house price falls and it should be very interesting to see if or when or by how much the house price bubble bursts.

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My house price bet with Tony Locantro - an update

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This article first appeared on the Yahoo Finance web page at this link: https://au.finance.yahoo.com/news/aussie-property-crash-looking-even-unlikely-heres-021138614.html 

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My house price bet – I’m very happy and getting ready to collect

I recently made a bet with Tony Locantro, Investment Manager with Alto Capital in Perth on the extent to which house prices would fall over the next three years.

Just to reiterate, the bet centred on Locantro’s view that prices would drop 35 per cent or more by the end of 2021 from the peak levels in 2017, a forecast that looked absurdly pessimistic given the raft of factors that influence house prices over the course of years.

For Mr Locantro to win the bet, house prices measured by the Australian Bureau of Statistics on a quarterly basis in either Sydney, Melbourne or for the average of the eight capital cities would need to fall by 35 per cent or more from the peak levels by the time the December quarter 2021 data are released. The ABS released the latest residential property price data last week which presents an opportunity to see how the bet is unfolding, admittedly with three years to go until it is settled.

As everyone knows, house prices are falling in most cities, reversing part of the boom over several decades.

Get ready for a cash rate cut in April

Mon, 25 Mar 2019

This article first appeared on the Yahoo Finance website at this link: https://au.finance.yahoo.com/news/get-ready-cash-rate-cut-april-193244245.html

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Get ready for a cash rate cut in April

The data is in and it is compelling.

The Australian economy is faltering and the risk is that it will weaken further if nothing is done to address this decline.Not only has there been recent confirmation of a per capita GDP recession – that is, on a per person basis the economy has been shrinking for two straight quarters – but inflation is embedded below 2 per cent, wages growth is floundering just above 2 per cent, house prices are dropping at 1 per cent per month and dwelling construction is in free fall.

Add to this cocktail of economic woe an unambiguous slide in global economic conditions, general pessimism for both consumers and business alike and a worrying slide in the number of job advertisements all of which spells economic trouble.Blind Freddie can see that there is an urgent need for some policy action. And the sooner the better.For the Reserve Bank of Australia, there is no need to wait for yet more information on the economy.

It has been hopelessly wrong in its judgment about the economy over the past year, always expecting a growth pick up “soon”. Instead, GDP has all but stalled meaning that inflation, which is already well below the RBA’s target, is likely to fall further.In short, no. It is not like a 25 basis point interest rate cut on 2 April and another 25 in, say, May or June will reignite inflation and pump air into a house price bubble.

Such a claim would be laughable if there are any commentators left suggesting this.