The 2018-uplift has already begun

Most of the herd don’t realise it yet, but the 2018 lift off we’ve been expecting has already begun.

It’s not showing up in the official data yet. The official data is still throwing up shadows on the wall that frighten the young children.

Prices are consolidating, sure. But they’re not losing their footing

And as the effect of credit restrictions pass, prices will begin to surge.

That’s the inside word from the economists at Macquarie Bank.

“It is now looking very likely that housing prices at the national level are again rising modestly,” the analysts said in a note to clients.

Their analysis is based on an assessment of seasonally adjusted house price data from Domain’s APM and CoreLogic’s RP Data.

“Dwelling price growth and activity are quite seasonal so the data must be seasonally adjusted to get a clear read on housing price trends.”

“After seasonal adjustment, monthly growth in APM’s measure of capital city dwelling prices has picked up modestly in recent months.”

And it’s the same for CoreLogic.

“Utilising CoreLogic’s data to mid-January shows a clear improvement in seasonally adjusted dwelling price growth, with the caveat that sales volumes in January are very low.”

That last point is interesting. Low sales volumes could mean a number of things, but it could also mean that a limited amount of supply on the market could push prices even higher.

But if all these words are too much for you, I’ve copied their chart in here:

 

That’s looking like a very solid bounce back.

And that’s what we’d expect. The recent slowdown wasn’t ‘natural’. It wasn’t just the market doing its thing.

It was laced with artificial sweetener. APRA put in the boot and the banks got more reluctant to lend.

One mortgage broker I spoke to reckons the banks are knocking back twice as many applications as they normally would.

So of course price growth slowed.

But the fundamental, organic elements of the market were and are still pointing to a boom: population growth, interest rates and strong employment growth.

So all this means we’re looking at a sweet spot in the market. The market has bottomed but most people don’t know it yet.

If you’re buying, there’s still lots of opportunity to push your case for a discount.

And when the herd finally does cotton on, they’ll rush in and push prices even higher.

2018 is not going to be stellar by recent standards (which set the bar pretty high). But price growth will be solid, and it’s a market that will give investors plenty of opportunity.

That’s my tip.

Spiro Kladis
Managing Director, Cashflow Capital

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