So said Bottom.
There’s another bottom around, apparently:
Sydney’s biggest correction in house prices since the 1980s should be over by year’s end but there is no sign of a return to boom times, according to new forecasts.
Ok. I’m sceptical but let’s hear their reasoning behind this.
Domain’s property price forecast for June 2019, released on Wednesday, expects median house prices in Sydney to bottom out at just about $1 million and median unit prices to dip just below $700,000 in spring.
I don’t want to play the man not the ball here but isn’t Domain’s entire raison d’être to sell property?
The market is tipped see a modest turnaround next year, a forecast supported by low interest rates, strong population growth and ongoing low unemployment.
House prices are expected to increase by 3 to 5 per cent over next year, while unit prices are forecast to rise by 2 to 4 per cent.
The thing about predictions, as the American mathematician Stanislaw M. Ulam famously said, is they are notoriously difficult, especially about the future.
Domain economist Trent Wiltshire said the trifecta of an interest rate cut, the Coalition’s election win and potential lending rule changes helped the market bottom out sooner than expected.
Yes, all three of these are potentially good news for property prices. I suppose the missing question and answer is, are any of these actually the most important factor driving rises and falls in the asset class?
“The big factors contributing to prices bottoming out is what has happened in the past few weeks … it turned around the market’s thoughts,” Mr Wiltshire said. “People will be able to borrow more and that should follow through.”
Quite, Mr. River for a Firstname, County for a Lastname, “economist” for a property services website.
Perhaps people are able to borrow more, having the resultant flow on for prices as demand increases. It doesn’t necessarily follow they will borrow more though.
More on that later.
By the way, who knew that a market was a sentient being with thoughts? Hello Skynet.
Sydney’s auction clearance rate is at its highest in more than a year.
Don’t, whatever you do, mention that volumes are half of what they were at the peak and those few properties that do sell at auction (rather than sold privately earlier and then added to the highly-fictitious figures) are sold because they are being greatly-discounted to meet the market.
ANZ senior economist Felicity Emmett said the forecasts were in line with her expectations.
There’s a prediction we will return to in a year or so then.
Economist Stephen Koukoulas said it was more likely for property prices to see zero or negative growth than a dramatic turnaround next year.
Nice to see The Kouk has stopped trolling and returned to reasonable market commentary now he’s come to terms with not landing a plum government advisory job for the duration of this Federal term.
One has to love the use of “negative growth” there, if only there was a shorter, more commonly used synonym in the vernacular. I don’t know, something that rhymes with tall and is a homonym for autumn in American-ese….
Anyway, back to that minor factor impacting property prices; lending.
For reasons of incompetence or mendacity, most commentators talk about supply and demand as if the latter is simply a function of sentiment.
In a real world where most purchases are leveraged through borrowing, demand is less about what one would like to buy and more about what the bank will lend me in order to buy.
So, the RBA’s lending figures have been published for calendar month May. What’s the data saying?
Oh dear, that wasn’t supposed to be story.
Here’s the updated Are We There Yet, Mum? Index;
Now, obviously I’m not as educated and clever as someone employed as the “senior economist” for ANZ or “economist” for Domain but it would seem to me one of two things need to be true for property prices to stop falling and then begin to rise, either;
- The blue line on that chart needs to reach the 0.4% hurdle and stay there or above for at least a couple of months, but probably much longer, or
- A new magical source of funding is found that doesn’t involve domestic banks.
As you were, people, as you were.