Digital Finance Analytics (DFA) Blog
"Intelligent Insight"
The latest from our property insider – Edwin Almeida. We look at the latest numbers, and incentives to drag more into the market. Got to save those property prices!!
http://www.martinnorth.com/
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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!
http://www.martinnorth.com/
Go to the Walk The World Universe at https://walktheworld.com.au/
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.
http://www.martinnorth.com/
Go to the Walk The World Universe at https://walktheworld.com.au/
This is an edited version of our latest Live show, with Leith van Onselen Chief Economist At Nucleus Wealth, and Founder Contributor to MacroBusiness. Go to the Walk The World Universe at https://walktheworld.com.au/
Another dose of reality from our Property Insider Edwin Almeida.
https://www.ribbonproperty.com.au/
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My latest chat with our property insider.
https://www.ribbonproperty.com.au/
Go to the Walk The World Universe at https://walktheworld.com.au/
My latest chat with our Property Insider, as prices in NSW get a kick-up from the stamp duty changes, China stops more migration and auctions are not what they seem.
https://www.ribbonproperty.com.au/
Go to the Walk The World Universe at https://walktheworld.com.au/
Another rant from our property insider Edwin Almeida. We look at some of the property auctions in Western Sydney, including some where there was a real crowd, and others where there were no bids.
We also look at the latest from China, the listings down the east coast and another tip for prospective buyers.
https://www.ribbonproperty.com.au/
Go to the Walk The World Universe at https://walktheworld.com.au/
The latest from our property insider, Edwin Almeida, as we look at the latest property listings, the China factor, and sub-room divisions. https://www.ribbonproperty.com.au/ Go to the Walk The World Universe at https://walktheworld.com.au/
The RBA has lifted the cash rate by 2.5% and more rate hikes are expected in the months ahead as they try to head off inflation. The budget on Tuesday is expected to show inflation is expected to peak at around 8%, but stay above their target range of 2-3% right into 2024, with no real wages growth in the immediate outlook.
One factor which is being debated is the potential impact of home prices across the country, as we see higher cash rate costs translate into higher mortgage rates and lower borrowing power. The RBA recently showed a reduction of around 20% could be on the cards, though my analysis and conversations with prospective borrowers suggests that some are seeing their ability to borrow on the same set of income and expenditure parameters falling by as much as 30%.
And as I need to keep reminding you, availability of credit is the single most powerful influencer of home price moves. If you cut rates, and allow borrowers to leverage up with greater borrowing power, prices will rise, but on the other hand, if rates rise and borrowing power will fall.
Which then takes us to the question of what the direction of travel on home prices is expected to be.
Again those following my analysis will know we run three scenarios, a Best case, which assumes rates drop mid next year as inflation is conquered and wages rise – now largely discounted by the latest coming from Treasury around the budget, a Base case, which assumes higher rates through next year and beyond, inflation start above target into 2024, and no real wages growth, but no local recession, despite recessions appearing in Europe and possibly the US; and a worse case, where we get into recessionary territory here, causing rates to go higher initially, then fall back later as the RBA tries to dial back its over tight stance.
When I last ran my model, we suggested a base case fall in average house prices would fall by over 20% in the next couple of years, while Units, on average would fall by a little less because their run up in the past couple of years (driven by ultra-low rates and stimulus) was a little less. And I should say these are national averages, there are different outcomes across individual states and post codes, as well as property types. Check out our other shows for more granular information on this, or our Patreon programme to get the underlying data.
But our central view is a significant drop, which by the way will hardly be offset by higher migration, and additional Government incentive programes. Availability of credit is the main driver as I have explained.
Which takes us to the RBA. Now, on Friday there was a very interesting FOI release from the RBA. I will put the link in the comments below.
The request was for “documents from 1 May to 30 August 2022 about the impact of interest rate increases on the Australian property market (including any of: how far prices could fall under various scenarios; impacts on consumption and/or wealth effects; impact on construction employment and/or other related employment).”
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