The banks think conditions are fantastic, and it’s nothing but up from here for house prices.
I don’t always listen to the proceedings of the House of Representatives Standing Committee public hearing into the banks, but when I do, it’s because they’re talking about house prices growing at 25% pa.
The bosses of the big banks were back in Canberra last week for a strong dressing down for their baby-eating practices, amongst other things.
Shayne Elliot, CEO of ANZ, channelled his best grumpy Skeletor:
But he also said, that from where the banks were sitting, it was the most bullish economic conditions he’s seen since Canberra foisted this pathetic charade of oversight on them.
“As we sit before you today, we are facing the most positive economic conditions that we have seen in the six years this committee has been inquiring into the major banks,” he said.
“While many are doing it tough, including CBD businesses, Australia is emerging from one of its hardest periods quicker and stronger than many expected,” Mr Elliot said.
Meanwhile NAB chief Ross McEwan was channelling American sit-com dad:
He also said that if state and local governments didn’t do anything about helping bring more supply to the market, a ferocious boom in property prices was inevitable:
The boss of one of Australia’s biggest banks is urging state and territory governments to revamp planning rules to encourage more housing development amid forecasts of double-digit price growth for 2021.
NAB chief executive Ross McEwan told MPs at the House of Representatives Standing Committee public hearing into the banks on Friday that while he strongly supported first-home buyer incentives, the lack of new homes was an unsolved problem for housing affordability.
“We know supply is restricted and the states need to streamline approval processes for land development and residential construction,” Mr McEwan said.
“Without decisive moves to increase housing supply, demand side incentives will inevitably act to push up house prices further and faster.”
Yeah, we’ve heard it all before. And local governments reflect the will of local people, who prefer leafy streets to higher-density development, and so we remain stuck.
Despite the abundance of space in Australia, developable space remains in very short supply, and we continue to struggle to bring enough supply to market.
This isn’t new. This is the same story we’ve been facing for decades now.
And yet prices just keep marching higher and higher.
On that front, some boffins at Coolabah Capital of reverse engineered one of the RBA’s house price models, and they reckon it’s pointing to something like 25% in the next few years.
House prices will rise 25 per cent between now and the end of 2023, according to research that uses similar analysis to the Reserve Bank’s own scenario modelling.
Coolabah Capital Investments chief macro strategist Kieran Davies applied research developed by former RBA economists Peter Tulip and Trent Saunders to produce house price forecasts for the next few years.
The forecasts pencil in an increase of 8 per cent over 2021, with a range of 1 to 15 per cent for that year. They expect another 9 per cent increase in 2022, with a range of between 9 and 26 per cent. A final 8 per cent is predicted for 2023.
The total accumulative range of price growth over the next three years is between 14 and 36 per cent.
That’s a pretty wide range, but there are still a number of unknowns. If immigration returns to normal much quicker than expected, for example, that could definitely drive prices to the high end of that range.
Anyway, that’s the view from the C-suites of money town.
It’s the best economic conditions in years, and house prices are going to grow by 25%.
… if not more.