Interesting article in The Conversation looking at how wealth inequality has been amplified due to home price distortions and how this flows into some households at the expense of others.
They suggest tax reforms and planning reforms, but are silent on the main driver of this inequality – monetary policy, credit availability and lending policy. This is not the first-time analysts have chosen to ignore the elephant in the room.
The truth is the financialisation of property, as a policy, coupled with ultra-low interest rates and ultra-loose policy caused the problem. Question is, will this be addressed? We think not, given the power of the financial and construction sectors and their influence on governments of all persuasions.
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In the first Antispruik show of 2023, we look at recent price falls across the portals covering areas of Western Australia. This is data from the property portals extracted by Cookie, and whilst they might not be statistically accurate, the more than 100 examples tell a compelling story.
Thanks as always to Cookie for his efforts.
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My thesis and modelling show that availability of credit – driven by interest rates and borrowing capacity is by far the largest driver of home prices. Cut rates and flood the economy with cheap money and property prices are pushed higher, as happened through the COIVD period. Lift rates, tighten borrowing power, and remove stimulus, and prices fall. This thesis has been proved over the pst three years, with Australia’s housing market suffered its biggest annual decline since 2008 last year as sharp interest rate hikes sapped buying power and put off investors.
CoreLogic released their latest national Home Value Index which fell 5.3% in 2022, the first decline since 2018. Annual falls were the biggest in the bellwether market of Sydney, which slid 12.1%, followed by an 8.1% drop in Melbourne. National values declined 1.1% in December, according to the report.
Remember that The Reserve Bank raised interest rates by 3 percentage points since May to 3.1% and is widely expected to hike one or two more times this year. RBA officials have generally publically expressed confidence in Australia’s housing market, highlighting that prices are still higher than at the onset of the pandemic, though recent FOI data underscores their concern falling prices will sap confidence. This despite unemployment at the lowest level in almost 50 years, so they argue most borrowers are well placed to meet their commitments and so loan arrears are likely to be limited.
But overall Australia’s A$9.4 trillion housing market has declined 8% from the recent peak reached in April, after surging 28.6% from a pandemic-induced trough, CoreLogic said.
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My first 2023 Rant with Edwin Almeida, our Property Insider. Edwin takes a look at the latest numbers, and tables his suggestions for what will happen in this potentially prickly year!
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A review of the performance of our channel last year, with the top 12 shows and main themes emerging, plus some thoughts about our focus for 2023. Thanks for all your support through the year!
Property prices are political not economic. So, while analysts are talking about property price corrections in 2023, and higher levels of defaults; and the IMF talks of a dysfunctional market; the truth is most politicians prefer to sit on the fence and mouth platitudes, to avoid upsetting voters.
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This is a recording of a recent interview I gave on ABC New Radio, where I discussed the latest IMF report which highlights the risks to the Australian Property market. Australia has one of the most “misaligned” housing and rental markets in the developed world, leading to high priced land and houses.
Property prices in Australia may be as much as 50 per cent above what an average household can afford as interest rates rise, a global analysis has revealed while warning the market is at risk of a major crash as interest rates are pushed up to bring inflation under control.
We hold the prize for unaffordable housing, and rents, and the IMF believe we are due a correction. Is this likely? Will the Government save us?
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This is an edited version of our latest Property Rant, and live Boxing Day show in replay, discussing the latest from the property market and looking ahead to 2023.
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