All parties want the same thing.

So the polls are showing that Dutton is now neck and neck with Albanese, and the LNP is probably well placed to win the next election.

(Classic Labor. How do they burn political capital so quickly?)

The interesting thing for my mind is that there is no policy-child of any party in Canberra that doesn’t boost property prices after the next election.

Labour seems to be opening the way to corporate landlords through built-to-rent tax incentives. Can you imagine what happens when you add a mass of American money to the market?

They’ve also got their shared-equity scheme, which is just another way of funnelling public money into the property market, and will do very little except boost the prices of entry-level homes (which these days start at $750K!)

They’ve also got their pie-in-the-sky housing targets, which possibly might help at the margin if anyone thought they were realistic. They’re not.

So under Labor the housing shortage will get worse, while demand gets juiced.

Up go prices.

The Greens have zero chance of getting anything done, but if they did, they’d be boosting prices too.

Scrapping negative gearing might help a little at the margin, but combined with a rent freeze, it will disincentivise and crash private housing construction.

They’re also committed to pushing demand higher through even stronger immigration levels, all while forcing the RBA to cut interest rates regardless of what’s going on with inflation.

Again, supply shortages and juiced demand.

And on the LNP side of the fence? Same story. But for the LNP it’s all of the above, plus releasing super for housing and reining in APRAs powers to regulate responsible lending, making credit easier to come by:

The Coalition is considering stripping the prudential regulator of some of its powers to regulate mortgage borrowing, and overhauling credit laws that MPs fear are locking first homebuyers out of the property market.

… Of particular concern among Coalition MPs is APRA’s mortgage serviceability test, which assesses whether a prospective borrower would be able to afford loan repayments if the RBA raised the cash rate by 3 percentage points above its current level of 4.35 per cent.

Some MPs also want to scrap responsible lending laws which put the onus on the banks to verify borrowers’ ability to make mortgage repayments, a requirement critics have called overly conservative.

While he said APRA had done a good job, Senator Bragg said the regulator had been given a lot of delegated authority that was “exercised in the dark” away from parliament.

Yep. Politicising APRA is just the housing solution the nation is crying out for.

But this is always the way. No party that presided over a 10% fall in house prices would be in power for long.

But unless we’re talking about 10%-plus, we’re not talking about genuine affordability.

Which is why you get all this fussing about at the edges.

While prices go up, year after year after year.

JG.

The cycle hasn’t turned yet. But the smart money is already buying.  

The old saying goes that you should be greedy when others are being fearful (and fearful when others are greedy.) 

Right now, if you had to take the pulse of the herd, you’d have to say that the general vibe is fearful.  

Interest rate hikes are still being digested, and there’s possibly more on the way. Property prices have fallen and are still falling in most places. Consumers are bunkering down and there’s a good chance we’re headed for recession.  

So yeah, spooky vibes.  

So is anyone being greedy? 

Well, how about Stockland, one of the largest property developers in the country? They’re betting big and buying big: 

Stockland picked the top of the housing cycle in 2021 and has kept its powder dry since. Now, with prices falling and buyers nervous, CEO Tarun Gupta is changing course. 

… Gupta says Stockland picked the top of the housing cycle in 2021 and has been cautious ever since; for example, it hasn’t acquired much in the way of new land for residential developments since September 2021. 

But in a classic contrarian move, Gupta is now putting his foot down. He’s planning to launch 15 master-planned communities over the next 18 months, and on Tuesday announced Stockland has extended its relationship with Mitsubishi Estate Asia, with the pair aiming to replenish Stockland’s pipeline of potential projects over the next couple of years. 

The theory here is that Stockland will look past the cyclical housing downturn and focus on the structural positives for the market. 

“We’re going into this cycle with chronic housing undersupply – we’ve got rents rising because of it. Net overseas migration is going to exponentially increase compared to the last three years, and we’ve got high employment levels, even though the employment market is softening a little bit,” Gupta says. 

It’s a big bet, and it will obviously be a while before the housing clouds clear. But the fact Gupta correctly picked the top of the cycle, and Stockland’s focus on the affordable end of the market, should provide investors with confidence the group can ride through the storm and into the sunshine. 

Exactly. Look at the structural factors he’s pointing to.  

This will be around for a long time after the mood in the market has turned, fickle thing that it is.  

Property’s fundamentals are sound. Amazing even.  

If had Gupta’s guns – if I had that much capital behind me – I’d be buying up big too.  

We can let go of the idea that property is in for any sort of crash. It didn’t happen. It’s not happening.  

And sure, maybe prices will run a little further south. If the RBA gives us another couple of rate hikes as expected, they almost certainly will.  

But on the other side of that, the clouds will clear, and we’ll al see that the outlook for property remains exceptionally solid.  

If it’s not time to be greedy, it’s definitely time to start thinking greedy. 

JG. 

Everywhere is still booming, but some booms are bigger than others…

Which city do you think is going to dominate 2022?

My guess is Brisbane, but I could be proven wrong.

One of the interesting things about the property market in 2021 was that everywhere was booming. It was pretty consistent.

It didn’t matter where you went – city to city, out bush. Every property market was going gang-busters.

That’s actually pretty unusual. You normally have a bit of variation from one locality to the next. But that wasn’t the case in 2021.

But that was last year and now it’s 2022. And it’s starting to look like we might see a bit of variation open up again.

Corelogic just released the price data for January, and it continues to point to a booming property market, although price growth is coming off the hectic boil we saw mid to late last year.

Nationally, prices are up a fairly monstrous 22% year on year.

But scroll down the leader board and there’s some pretty astounding results. 30% in regional Tasmania and NSW. 30% in Brisbane. 26% in Sydney.

They’re some big numbers.

When you zoom into the monthly data, you can see there’s a bit of a gap opening up between the leaders and the rest of the peloton.

The rolling three-month average shows that Brisbane and Adelaide are storming ahead, with some of the strongest growth numbers those cities have ever seen.

I’ve been waving a flag for Brisbane for a while now. Not only has Brisbane had a better Covid experience than most of the other capitals, but it is also relatively cheap.

When you plot Brisbane’s price relative to the other capitals, you can see it’s almost as cheap as it’s ever been.

That’s at the same time as Brisbane’s lifestyle advantages and relatively peaceful Covid experience will be exerting massive pulling power on people in the southern states.

With that going on, I just can’t see how property prices won’t keep growing, and growing strongly.

The other city to watch for on this basis is Perth. Perth is the cheapest its ever been by a long way.

For now I think WA’s closed borders will keep a bit of a lid on this, but once they open, I would expect prices to get a spurt on.

The other interesting divergence that’s opening up is between the capitals and the regions.

While capital city growth is starting to slow a little, regional growth is holding at what is (for the regions at least) stratospheric levels.

It seems that the lifestyle factor is still fully in play, and as Covid drags its heels into 2022, I would expect the regional exodus and the price gains it’s delivering to continue into 2022.

So they’re my picks for the year: Brisbane, Perth, and the regions.

Aren’t we just spoiled for choice.

JG.

There’s a new world being built. These are exciting times.

So, have you clocked how much the world has changed in the last few months?

I know it’s hard to keep track of. 2020 was such a roller coaster that most of us came out of it with no idea which was up.

(Just follow house prices. They’re definitely heading up.)

Anyway, one of the things that the pandemic has done is totally overturn the global economic order of things.

I know that probably sounds dramatic, but it’s actually hard to over-state how massive the change has been.

And I think the key signpost for the new world order is this quote from the most powerful woman in the world.

No, not Beyonce. I’m talking about Janet Yellen.

Until recently she was the chair of the Federal Reserve. Now, she’s Biden’s new Treasury Secretary.

(It’s fair to say she’s the most powerful woman in the world, right? I can’t think of anyone else that even comes close.)

Anyway, she’s laying out a pretty ambitious agenda. It’s active, it’s progressive and it’s green.

In just one paragraph in a recent speech she lays out the mission that she and the Biden administration are on:

… over the years, new problems developed that were not properly addressed. In the push to grow our economies, we neglected our environment. As we embraced new technologies, we didn’t do enough to prepare our workers and our education systems for the changes underway. While we embraced trade as an engine for growth, we neglected those who did not benefit. And in the most recent period, when we might have adopted policies at home to face these issues and joined with our allies to address issues abroad, we isolated ourselves and retreated from the international order that we created.

Over the last four years, we have seen firsthand what happens when America steps back from the global stage. America first must never mean America alone.

Boom.

It is true that this is a political speech by a person in a political role. So there’s no surprises there that’s she’s sticking the boot into Trump’s “America First” version of isolationism.

So the last bit there is squarely aimed at Trump and his legacy within the Republican party.

But the rest of it is much broader, and is a criticism that could just as easily been levelled at Obama.

In fact, the anger that Trump rode into the White House precisely came from those that had been left behind by the rush to globalised trade.

Remember, in rust belt America, if you’re working class, your life expectancy has actually been falling in recent years.

The so-called “deaths of despair” – drug and alcohol abuse, opioid abuse, and suicide – were on the rise, as “off-shoring” hollowed out working class communities.

And as I said, working class life expectancy (those without a BA degree) has actually been falling:

That’s a terrible result in ‘the greatest nation on earth’. That’s a dismal failure.

But if working America was in pain, no one seemed to be listening. Democrats seemed to be off fighting for the rights of gay pandas in Tibet.

But then came Trump, and Trump seemed to get it. He wanted to make America great again, where great just meant that working class men weren’t dying lonely, broken deaths.

(It was a radical vision.)

But this totally blindsided the Democrats. They didn’t get that people were angry. They just thought that Trump’s supporters were neanderthal racists pining for the good ‘ol days of the KKK and lynch mobs.

They weren’t. They just didn’t want to see their loved ones cut down in the prime of life. They didn’t want to see their communities destroyed.

And they didn’t want to be called “deplorable” for wanting something so basic.

No wonder they were angry.

So Trump spoke to these people, and he channelled that anger and rode it straight into the White House.

But as George Bush famously said, “Fool me once, shame on you. Fool me twice and shame on… well you won’t do that again.”

The Democrats, at least on the face of it, have learnt the lesson. They’re listening now too.

Yellen’s statement here is that we now see the pain that was caused by neglecting America’s workers and neglecting those left behind by new trade orders.

And it’s time to do something about it.

Now, politicians’ promises normally aren’t worth the paper they’re written on, but when it comes to Janet Yellen, they’re actually written on about $5 trillion worth of new paper.

Fiscal spending is literally off the charts. It makes the response to the GFC look like a drop in the bucket.

Covid has given them the excuse they needed to open up the wallets and spend, but now they’re saying that it’s no longer good enough to just get the economy ‘back on track’ and back to ‘normal’.

There’s a new world to be build.

There’s a new world that that doesn’t destroy the environment. One that doesn’t leave working people behind. One that doesn’t see America retreating into isolationism.

There’s a new world to be built, and it’s going to cost a lot of money.

But Yellen’s got the money.

And she’s not afraid to use it.

This is nation-building stuff. Suddenly, and ironically, it’s the 1950s again, when the entire world had to be rebuilt out of the rubble of World War II.

And what followed then was a generational economic boom.

This is history repeating. This is America saying that we found the money to remake the economy in 1950. We can find it again now.

Let the generational boom begin.

If this doesn’t get you excited, you’re missing the point.

JG

A shocking theory about what’s driving the new banking policy.

I was talking to a banking industry insider the other day about the irresponsible lending obligations, and I’ve got a bit of a conspiracy theory for you.

But first, let’s zoom out a little bit.

So I noted last week that the government has reversed the responsible lending obligations on banks, in an attempt to free up the flow of credit into the market.

While the policy details are still landing, it now seems that banks will no longer be on the hook if a borrower takes on more debt than they can handle.

That gives banks the power to take mortgage applications at face value, and to rely on spending benchmarks, rather than going through and calculating a borrower’s actual living expenses.

Now, obviously anything that gets the credit flowing more quickly is a boost for property prices.

In fact, one analyst reckons it could add $70K to the median house price in Australia.

The average buyer could expect to have an extra $70,000 to spend on a home after changes to responsible lending rules, one consumer expert says, in a move that could push up property prices.

Responsible lending laws are set to be wound back in a bid to allow banks to lend money to customers more easily, Federal Treasurer Josh Frydenberg announced last week.

Although the details of the change are not yet clear, customer expenses have been in the spotlight after banks clamped down on lending practices under scrutiny from the financial services royal commission, refusing to grant loans to borrowers who spent too much on Uber trips or takeaway.

If requirements to assess borrowers’ expenses ease, an average buyer may see a jump in their purchasing power by about $70,000, Canstar group executive of financial services Steve Mickenbecker says.

Based on an average income of about $80,000 and a 20 per cent deposit, he said a would-be buyer might have the amount they could borrow increase from $440,000 to about $510,000.

“I don’t have a crystal ball for this,” he said. “That’s a hypothetical number.

“The banks were grilled rather ferociously over their assessment of lending [during the financial services royal commission], in particular their assessment on people’s budgets.

“[They] will be likely to move some distance from that and return to formulaic thinking.”

I think that could be right. Remember when the APRA restrictions came in, prices fell about 10% over the next 18 months. So a 10% rebound is definitely within the realms of possibility.

But where is this coming from?

Remember, no one was talking about this a month ago. No one thought these changes coming.

But my mate has a theory.

He reckons that the big banks are worried about the borrowers they currently have on deferral. Remember about 20% of them are ghosting the banks – they’re not returning calls.

So the big banks are wanting to off-load these customers on to other banks, before the crap really hits the fan.

But there’s a problem. These borrowers are problematic by definition, and if a smaller lender looked too closely at their situation, they wouldn’t want to lend to them, and that would leave them stuck on the big bank’s books.

The solution?

Remove the requirement to look closely at their situation.

Remove the responsible lending obligations, let these borrowers mis-represent themselves to their new lender, and bon-voyage – it’s no longer a problem for the big banks.

Maybe, these changes are purely about helping the big banks offload their worst customers onto smaller, unsuspecting banks, and preserve their profit margins.

What do you think?

We’re in the realm of conspiracy theory here, but you know, I wouldn’t put it past them.

Banking profits are banking profits, after all.

Oh, did I mention there are space lizards involved?

JG