The house price slowdown is creeping up on you!

Wed, 26 Nov 2014  |  

The CoreLogic RP Data home value index is pointing to an on-going slowing in house prices.

So far in November, house prices have actually fallen 0.3 per cent, with the annual increase easing to 8.6 per cent from levels near 12 per cent a few months ago.

Interestingly, in the almost 8 months since the end of March, house prices have risen by just 3.5 per cent – an annualised rate of increase of around 5.25 per cent. It is not only possible but highly likely that during the first half of 2015, annual house prices growth will be well under 5 per cent and possibly – probably - even close to zero.

Of note, in the past three months, house prices have fallen 1.7 per cent in Melbourne and have recorded zero change in Adelaide. Prices in Perth are up a paltry 0.4 per cent and Brisbane, just 0.6 per cent. House prices in these cities are just fine.

The issue remains Sydney where prices on the last three months have risen 3.1 per cent – annualised 12.5 per cent or so, which is high, but even this is down on the 15 per cent plus annual growth a few months ago.

Once the Sydney house price euphoria subsides – and it looks to have in recent weeks with a glut of property on the market and auction clearance rates easing lower – house prices could well start to fall.

The initial stages of this decline would be welcome news. It would take away an imbalance in the economy, improve affordability and eliminate some of what is clearly a speculative element in the Sydney price boom.

It would also allow the RBA to cut interest rates and foster a lower Aussie dollar, essential issues if the overall economy is to maintain a 3 per cent growth pace in 2015 and for the unemployment rate to stabilise at 6.25 per cent.

The fear of course would be a sharper fall in house prices with all of the problems that entails, but that remains low risk and something to be discussed another day, once we get a few more months of flat or falling prices, especially in Sydney.

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Change of view on interest rates

Fri, 24 May 2019

Having been the only economist to correctly anticipate an interest rate cut from the RBA when close to 50bps of interest rate hikes were priced in to the market last year (See Bloomberg 17 August 2018), I have agonised over the exact months the cuts would be delivered and then how many rate cuts would be needed to reflate the economy.

Recently, I was of the view that the RBA would need to cut 100bps from now, to a level of 0.5%, but I did so with relatively low confidence. This is why I recommended all clients to close their long interest rate positions on 17 April 2019 (when the implied yields were 1.10% for the mid 2020 OIS; 1.35% on 3 year yields and the Aussie dollar was just over 0.7000 at the time).

Like in most good trades that were massively in the money, I left a little money on the table while I reassessed the outlook.

Since calling for interest rate cuts from the RBA, a lot of water has passed under the bridge, especially in the last few weeks.

Events mean I am changing my view on interest rates and have been placing / will be looking to implement new trades.

Watch out Australia: There's a flood of dismal economic news on the horizon

Wed, 01 May 2019

This article first appeared on the Yahoo Finance website at this link:


Watch out Australia: There's a flood of dismal economic news on the horizon

The Australian economy is in trouble and Scott Morrison and the Liberal Party government need to come clean and acknowledge this and outline a framework how this period of economic funk is to be addressed if they win the 18 May election.

The Liberal Party is campaigning in the election on a “strong economy” and being “good economic managers”, bold claims that fly in the face of the latest score card for the economy.

That scorecard shows a flood of what is, frankly, disappointing or even dismal economic news. Australia is going through a very rare recession in per capita GDP terms and last week saw data showing zero inflation in the March quarter. Contribution to these indictors of economic funk is the fact that well over half a trillion dollars of householder wealth has been destroyed as house prices have tumbled.

Add to that the fact reported by the Australian Office of Financial management last week that gross government debt is $543 billion, almost double the level that the Coalition government inherited in September 2013, and the scorecard is looking very ratty indeed.

As the ad man used to say, “but wait, there’s more”.