House prices falls are coming to an end – and my house price bet is looking safe

Thu, 07 Nov 2019  |  

This article was written on 17 September 2019: It was on the Yahoo Finance website at this link 


House prices falls are coming to an end – and my house price bet is looking safe

About a year ago, the melodramatic Martin North from Digital Finance Analytics made the sensational claim on 60 Minutes that house prices “could fall 40 to 45 per cent” over “the next 3 years or so”.

This outlandish forecast was so reckless and irresponsible, that I offered Mr North a chance to put his money where his mouth was, offering him a bet that his forecast would be wrong. Having some ‘flesh in the game’ when making forecasts like that really focuses the mind and tests the resolve of those making headlines and scaring the general population who may actually believe such snake oil.

Surprisingly, Mr North was unwilling to take up my offer.

This was disappointing until Tony Locantro, Investment Manager with Alto Capital in Perth, stepped up to take the bet.

I was generous, offering odds of 6 to 1 that house prices would fall by more than 35.0 per cent over a 3 year period. The bet is framed on dwelling prices, measured by the Australian Bureau of Statistics on a quarterly basis in Sydney, Melbourne or for the average of the eight capital cities. If prices fall by 35.0 per cent or more from the peak levels by the time the December quarter 2021 data are released, in either Sydney, Melbourne or the average of the eight cities, I will lose.

It is as simple as that.

The ABS has just released the June quarter 2019 house price data.

The data show that prices fell in the June quarter but at a slower pace than in earlier quarters. Prices were down 0.7 per cent in Sydney, 0.5 per cent in Melbourne and 0.7 per cent across the eight capital cities.
According to the ABS data, and in terms of the bet with Mr Locantro, here is the latest scorecard of peak to trough per cent changes:

Sydney -12.7 per cent

Melbourne -9.9%

Capital cities -8.0%

For the weakest market, Sydney, a drop of 12.7 per cent over two years is below the run-rate required for Tony to win the bet. For Melbourne and the 8 capital cities, the price declines are well short of the speed needed to hit the 35.0 per cent plus price falls by the December quarter 2021.

Alas for Tony and in good news for my side of the bet, there is a raft of news on house prices since the end of the June quarter which are pointing to house prices rising. Most notably the Corelogic daily house price series and the weekly auction clearance rates are suggesting a buoyant housing market, at least in terms of price changes.

Both of these indicators are showing that house prices have started to rise in the September quarter. The Corelogic house price series shows that with less than two weeks lift in the quarter, prices are up approximately 2.5 per cent in both Sydney and Melbourne in the September quarter.

If these sorts of results are reflected in the next quarterly release from the ABS, the ‘hopes’, if we can call them that, of a 35 per cent fall in house prices by the end of 2021 will be so remote that to be fanciful.

More importantly, interest rate cuts are still impacting the housing market, as is the recent relaxation of credit conditions for potential borrowers. Fresh supply of new dwelling is about to plummet as the recent falls in building approvals dive which, in concert with strong demand from rapid immigration inflows, is also positive for prices.

While the finish line for the bet is still 2 and a half years away, it seems that 35.0 per cent house price falls are highly improbable and if anything, at the end of 2021, house prices will be higher than when the bet was made!

I wonder what Martin North and Tony Locantro will think of that when it happens?

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How Labor lost the federal election SO badly

Thu, 07 Nov 2019

This article first appeared on the Yahoo Finance website on 20 May 2019 at this link: 

How Labor lost the federal election SO badly

The Coalition did not win the election, Labor lost it.

The tally since 1993 for Labor is a devastating seven losses out of nine Federal elections. By the time of the next election in 2022, Labor will have been in Opposition for 23 of the last 29 years. Miserable.

The reasons for Labor’s 2019 election loss are much more than the common analysis that Labor’s policy agenda on tax reform was a big target that voters were not willing to embrace.

Where the Labor Party also capitulated and have for some time was in a broader discussion of the economy where it failed dismally to counter the Coalition’s claims about “a strong economy”.

In what should have been political manna from heaven for Labor, the latest economic data confirmed Australia to be in a per capita recession. This devastating economic scorecard for the Coalition government was rarely if ever mentioned by Labor leader Bill Shorten and his team during the election campaign.

This was an error.

If Labor spoke of the “per capita recession” as much as the Coalition mentioned a “strong economy”, voters would have had their economic and financial uncertainties and concerns confirmed by an elevated debate on the economy based on facts.

This parlous economic position could have been cited by Labor for its reform agenda.

Why animals are a crucial part of the Australian economy

Thu, 07 Nov 2019

This article was written on 31 October 2019: It was on the Yahoo Finance website at this link: 


Why animals are a crucial part of the Australian economy

Animals are a critical part of the Australian economy, either for food, companionship or entertainment.

But every month, millions of sheep, cattle, pigs, chickens, fish and other animals are bred and then killed. Most of them are killed in what we define as ‘humane’, but no doubt tens of thousands are horribly mistreated, as are a proportion of the animals we keep as pets.

Animals are slaughtered to provide food for human food consumption, to feed other animals (your cats and dogs are carnivorous) and for fertiliser.

The Australian Bureau of Statistics collects a range of data on animal slaughterings and the most recent release of the Livestock and Meat data release included the following facts.