There are now a number of property commentators suggesting we are near the bottom of this property cycle, and as you’ll hear in my chat with Dr. Andrew Wilson in today’s podcast for two months in a row, he has found house asking prices are holding steady or rising.
Asking prices are a leading indicator and turn before eventual sale prices do, but as you’ll hear in our chat today, these are not the only indicator that our markets are finding a floor.
You will also hear us discuss the latest employment data, the fact that we’re starting to spend less and what this may mean for interest rates, the Reserve Bank’s apology to those who listened to their forward guidance, and the auction market trends which suggest our markets are close to the bottom.
One of the lessons I learned years ago was that if you read last year’s predictions and see how they transpired, you will never take this year’s predictions seriously.
I think you should read fewer forecasts and more history because there is a lot to learn about how the fundamentals of our property markets work.
So how have our property markets performed over the last month?
In today’s podcast, you will hear Dr Andrew Wilson explain that capital city housing markets remain on the road to recovery, with buyer and seller confidence gradually returning.
All capitals, with the exception of Sydney, reported marginally higher asking prices for established houses listed for sale over November compared to the previous month, according to the latest data from My Housing Market.
Asking prices for established units listed for sale produced mainly positive results over November.
Capital city housing markets have gradually revived over spring, with rising buyer and seller activity supported by a booming economy with record low levels of joblessness and rising wages.
Clearly, undersupplied housing markets will struggle to house the wave of migrants impacting overall demand, with upward pressure on prices and rents a clear consequence.
The outlook for interest rates has also improved, with official rates now more likely to peak lower and sooner than predicted, which will bolster housing market confidence.
The unemployment rate eased to 3.4% in October from 3.5% in September, hitting a 48-year low (the lowest since August 1974).
Employment rose by 32,200 people in October, with full-time jobs up by 47,100, but part-time jobs fell by 14,900.
Wage growth, as represented by the Wage Price Index (WPI), grew by 1% in the September quarter — the fastest quarterly growth rate in 10½ years!
Reserve Bank governor Philip Lowe has apologized to Australians who took out too much debt based on the bank’s flawed guidance that rates would not rise until 2024, saying he was “certainly sorry if people acted on what we’d said and now regret what they had done”.
Speaking at a senate estimates hearing, Dr Lowe also said he was “very glad” that workers were receiving higher pay and that he “didn’t think” increases in labour costs would go high enough to trigger a 1970s-style wage-price spiral, although he insisted it remained a risk that must be avoided.
The RBA board in late 2020 and through most of 2021 told the country it did not expect rates to rise from their historic low of 0.1 per cent for “at least three years” or not until “2024 or later”.
Clearly, the RBA’s “forward guidance” policy was part of a suite of policy measures aimed at providing maximum support for the economy during the pandemic and at a time when many forecast unemployment rates could rise to as high as 15%; however, the cheapest loan rates in history a strong labour market and pent up demand drove an Australia wide property boom that sent home prices soaring.
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“I think there’s going to be some property pessimists who are going to be disappointed as we finish off this year that once again, their forecasts were very, very wrong.” – Michael Yardney
“Over the last year, emotion has really been clouding a lot of people’s investment decisions.” – Michael Yardney
“While it’s important to get things done, it’s equally important to avoid things that actually stop you getting toward your goals.” - Michael Yardney
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