What ‘real’ experts are saying about property prices

So 60 Minutes really threw a cat in the pigeons with their sensationalist claims about “a 40% fall in house prices”.

I’ve debunked their arguments here, but the question then is, if the house price crash isn’t happening, where are prices actually going?

Now I could tell you some stories, but why don’t we check in with one of Australia’s leading property experts, Tim Lawless from CoreLogic.

The short of it is, he just can’t see a house price crash playing out:

“Overall, it’s hard to see a scenario where Australian housing values could fall off a cliff. For this to happen we would need to see a material about face in labour market conditions, a global shock or a material rise in interest rates – none of which seems to be a likely outcome at the moment.”

He admits there are headwinds, and prices are falling at the National level already, but there is nothing really unusual about this.

In fact, compared to previous slow downs, this is really middle of the range stuff.

He presents the charts here, that compare the current down-turn (in black) with all other market peaks, for both Sydney and Melbourne.

As you can see, nothing alarming there. “Unremarkable” as he puts it.

He also looks at some forecast modelling done by Moody’s Analytics, based on CoreLogic data.

What their number-crunching points to is a “relatively mild” downturn, with national house and unit prices returning to growth in mid 2019.

As Lawless says, “Their upbeat assessment of dwelling values is based on rising business investment, particularly in the non-mining sector, a rise in infrastructure spending, above trend jobs growth, and ongoing low interest rates.”

And as he says, even with the headwinds property currently faces, many powerful boosters still remain in effect.

“In balance, even with mortgage rates edging higher, we are still in the lowest mortgage rate environment since the 1960’s. Population growth remains strong and maintaining a consistent migration policy seems to have support from both sides of politics which will continue to support demand for housing. Labour markets are reasonably healthy with unemployment holding at 5.3% and likely to trend lower, underemployment at the lowest rate since May 2014 and jobs growth above the long term trend.”

On balance, I think all this is right, and is pretty much what I’m expecting. Momentum will remain to the downside through the rest of the year, but will start to pick up going into 2019.

And for me the big swing factor here is regulation. If APRA and co. are happy with the measures they’ve had in place so far, and you get the sense they are, then we should start to see them backing off reasonably quickly, and credit conditions begin to loosen, probably early in the new year.

Price growth should follow after that, probably making Moody’s growth scenarios the most likely.

And of course, there’s always the potential for upside surprises in there too.

There. Put those expert opinions in the mix with those Current Affairs talking heads.

Spiro Kladis
Managing Director, Cashflow Capital

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