If you’re looking for a read on the herd, and what property prices will do this year, this is it.
Just when you thought there couldn’t be any more gas in the tank, the Australian property market finds another gear and slips into the overtaking lane, horns and hazard lights blaring, and couple of pretty girls in the back seat throwing their arms out the window.
Sydney is growing at an annualised clip of 16.5%!
Zooom.
And when you look around, most of the data is pointing to fairly pumping conditions – definitely in Sydney and Melbourne. The more resource focused states are lagging, but if the commodity boom-let continues we might see that all turn around.
Vacancies are low, auction clearance rates are high, price expectations are strong.
The price expectations one is interesting, and I haven’t tuned into it for a while. You might say, ‘who cares what the herd is thinking. The herd can be (and often is) wrong.’
But really, the market itself is a herd. At the ‘fundamental’ level of economic activity we’re grinding grains into flour and trading pretty beads with each other. Everything else is a social construct.
What the herd thinks, the market does.
And so where’s the herd’s mind at these days. What kind of start to the year has it had?
Well, if you look at the property price expectations component of the latest Westpac survey, it says the herd is pretty bullish on property prices right now.
Since the beginning of last year, expectations for future price growth have been trending upwards, and now they’re on a quick march north.
As far as the herd is concerned it’s 2013 all over again.
There’s been a sharp recovery in NSW. In Victoria and Queensland expectations have held at high levels, while over in WA, price expectations are actually picking up quickly.
This WA story is particularly interesting. I’ve noted before that Perth has become a buyers market – which is exciting for deal-makers like me – but now it seems the herd thinks that prices are already bottoming out.
That’s interesting. I don’t know what would have driven the change in sentiment… Maybe they just figure they’re due.
Anyway, when you look at the expectations data and the actual results, they line up pretty closely.
So fairly broadly, across the country, 2017 looks like a very solid year for prices.
If there was a downturn coming, like some people keep saying there is, it’s not on our radar just yet. On these figures, expect price growth to continue through 2017.
That means Sydney and Melbourne should continue to hold their double-digit clip.
Staying with the Westpac index, it’s interesting that on the ‘Is now a good time to buy a house’ question, the herd is pretty agnostic.
The index is hovering around 100, which means that there are as many people who think it is a good time to buy as there are who think it is not.
How do you square that away with the expectation that prices will rise?
Perhaps it just comes down to how expensive prices are. Now is not a good time to buy because things are just to pricey. It will be a better time when prices come down. But I don’t expect them to come down. I expect them to go up.
It’s going to get worse.
Maybe… I’m speculating here. But the point is, taken together, the indications from the Westpac survey is that the herd is pretty bullish right now.
At the same time, we’re starting to see lending standards begin to loosen.
Last week, National Australia Bank dropped the rate it uses to ‘stress test’ borrowers by 15bp to 7.25%.
That is, if you want a loan from NAB you need to be able to show that you could handle your mortgage repayments even if rates were hiked to 7.25%.
In practice what that means is that any given borrower can now borrow a fraction more than there were able to a few weeks ago.
More borrowing capacity, across the board, means higher prices.
NABs move brings them into line with ANZ and CBA, but it shows that competition in the mortgage market is getting a little hotter.
Of course this is at the same time as banks are hiking rates to cover increased funding costs, so it’s not all one-way traffic. But still, it shows that the mortgage market is competitive, and the banks feel that the APRA dog is on the chain for now.
So put these all together, and the picture starts to look rosy.
We’ve got
- A market entering the year with strong momentum already behind it
- A bullish herd
- And a competitive mortgage market.
That’s starting to look like a pretty good year.
Did anyone say ‘double-digit’ growth?
Has the herd got the wrong end of the stick? With Perth?
Either you have “No-Idea of what is happening” in the Sydney market , or you are doing it intentionally…. Dear friends why are you talking only about the “houses ” and totally avoid the “units” market ? You should know the state of affairs in this sector – and the coming downward spiral – but you totally avoid it … or perhaps you don’t know about it – in which case you should not post anything… To be honest I do actually believe that your knowledge is very limited ; I have been to 2 (tried you twice) of your so called seminars , and asked 4 or 5 questions in each – The answers that I received were childish and hilarious to say the least…. gents grow up , not everyone is naïve , and as Abraham Lincoln said : “You can fool , all the people some time …. …………etc… Take this from someone who is “Project Managing ” in the construction industry…..
‘its going to get worse’. sure is jonno. so the average oz battler is a gonna pay more for a roof over his/her head. oh what wonderful bliss! that is real progress indeed! so the ‘government’ gets richer with increased stamp duties, and more ‘workers’ in the government workforce to cope with increase demand on services and the banksters make more because of increased loans and more than likely interest rate hikes. (7.25%?). oh happy days. so the poor and under privileged will sink further into the mire and we all rejoice because of INCREASED home prices. there is something wrong here lol we already have nearly 40 % ‘public service’ nitwits, so we have 60% in private enterprise supporting 100% including those out of work or too old to work. our unemployment rate is around 6% so maybe 54% are shouldering the onerous burden. oh happy days jonno! and where is a national debt of nearly $500 billion gonna land us? i have forever held the belief that people here in oz are living in ‘lotus land’. its now even more apparent. now malcolm has joined the chorus..oh the world owes us a living sayeth malcolm. that naughty donald trump has turned his back on us, he cries. and bill shorten agrees. bugger me! whenever is oz gonna ‘grow up’? bring our troops home to PROTECT OUR COUNTRY, not to fight other peoples’ wars as we have been doing for over 115 years. its time!! we CANNOT I REPEAT, CANNOT expect usa to come to our aid anymore. we have become a supine nation. all we worry about is house prices!!! donald trump, in case you don’t know, is more concerned with self preservation. the next couple of weeks will determine many things. the m.s.m. is full of death threats on donald trump. on tv in newspapers across the nation the newsreaders are saying ‘get him, assassinate him’ true!! its unbelievable that a segment of sore losers uses the mass media to try to impeach him, like many commentators are pleading. why impeach the man? so they wanna assassinate him. so don’t expect the donald to down tools and come across to oz and say to malcolm oh malcolm of course we will help you. thats all i care about. anyway theres a gonna be a major confrontation in usa before this month is out. dear pope frances will see to that. he is the first jesuit priest to take the mantel of pope ever, and boy is he gonna cause some trouble. it will be freemason forces(trump) vs catholics with islam helping with the mayhem and the jews as always standing on the sidelines cheering and making dosh. stupid fucking goyems they say.
go for it jonno make lotsa dosh oz style, but watch out for overhead missiles. oh dear it cannot, will not happen in oz. more wilfull blindness.
cheers, ron
http://www.smh.com.au/business/property/home-prices-will-rise-dont-expect-a-crash-economists-20170201-gu35ta.html
http://www.smh.com.au/business/the-economy/australias-property-boom-showing-signs-of-slowing-as-buyers-hold-back-20170205-gu65mz.html
Who do you believe? Economists? Auctioneers? Jonno? It’s all spin, by different spinners. All trying to look out for themselves, and grab a good fat feed out of the herd.
How do you usually turn the herd? Ahh, flock…
Create FUD… Chuck a firecracker in the middle. They will run in all directions for a while, then whichever direction is showing as the most popular will become dominant. Of course, a couple of strategically placed dingo cutouts is all you need to manage the turn, once panic has started. Sheeple don’t have time to check if it’s a real dingo when running in a full-on panic. All Power to the legs, minimum power to the frontal lobes…
Isn’t this just the normal pattern, repeating? The market has “peaked” (Reached the point of maximum potential “yield”, for now.) The powers that be have been signaling to their friends “it’s time”, they act, then the flock catches on (too late), and changes direction once the killings are already all set up.
We’re not cynics, right Ron?
Hi Harry F. Would you like to live in a unit? If you don’t know the past, you will never know the future. Show me where house prices have failed to rise above the last high, and I’ll show you a fabricated mining con.
Hi Ken,
Interesting that you use the word “fabricated”.
Isn’t the 7 to 10 year ‘Property Cycle’ just as “fabricated”?
What, really, drives the house price cycle? There is plenty of history (the past you mention) to analyse… Volatility creates opportunities to make (and lose) money. Isn’t that what it’s really all about?
no kiwi al..we just thank jonno for somewhere to air our ‘profound knowledge’. i don’t know how he puts up with my shit. still most of it is true. i read the other day ‘Global Warfare.org.’ very interesting articles.
i think that mr trump is sick of being involved in wars overseas. so he will bring most of his military back to usa soon and the rest of he world can get stuffed. also if he survives the m.s.m. threats and the very real 179 mexi snipers in ‘harboring’ cities sent by the mexi pres. (one of the drug cartel in mexico). trump has told mr. mexi that if he doesn’t get the 179 snipers out el pronto they will go going back to mexi in pine boxes. he has a great(tremendous amount of support in america) next comes the assassins; nizari
hashshashin from the caucasis area of iran, the most feared assassin group of all time to assist trump. plus all of the other trump protectors, arriving as you read, into america. should be quite a show. its a shame you won’t get the mainstream press to cover it and they will probably blame the russians for the mess. of course oz house prices is the key. the whole world is focusing on sydny/melbourne prices, and what malcolm will do next. and bill shorten..he must surely qualify for the guiness book of records as the dopiest opposition leader of all time. not bad even for oz.. cynical? no. oz is ok., just a bit high on weed.
Hi Ron,
Yes, 100% agree – how does Jon put up with us!?
GlobalWarfare – the link didn’t work, and globalwarfare.org (not sure if that’s about the game, or the one you mean) is down at the moment.
As for The Don, I dunno. He doesn’t seem to be doing as well as I was hoping he would. If you believe the MSM version of events (and other e-mail lists I subscribe to), he’s created, and creating, (with plenty of help from MSM) a huge groundswell of opposition. There could be a Revolution in the US, but an assassination would take care of that, no doubt. Anyway, whatever happens, America will never be the same. That’s a good thing!
hi al, i cannot find it on normal websites, so i guess it must be a link to one of several other sites that comes through. i will let you know when it returns.. i hope its sooner than haley’s comet!