More soggy conditions in 2011 – Christopher Joye

Another opinion piece on the short term future of the property market I thought was worth sharing. This one from Christopher Joye. It's an interesting article for a couple of reasons...

Firstly, Joye's key predictions that:

  • once the RBA’s current tightening cycle ends, fundamentals (rising incomes & tight supply) will rapidly reassert themselves via an unprecedented housing construction boom underpinned by solid, through-the-cycle capital gains.
  • but we can expect weakness over the next 12 months if the RBA fulfils the consensus economist’s expectation of 3-4 cash rate hikes.
  • this will likely lead to nominal and real dwelling price declines, which is no bad thing and would help dismiss the myth that asset prices always rise.
  • looking ahead, 2011 will afford astute investors some attractive buying opportunities as stress levels rise.

Secondly, pictures tell a thousand words! Its worth checking out all the charts on:

  • the relationship between house prices and interest rates (below)

House Prices versus Interest Rate_RP Data_to Jan 10

  • ‘partial’ indicators like the stock of unsold homes available for sale (supply),
  • the average time between listing and sale - the amount by which vendors have to discount their homes below the list price in order to effect a sale, and
  • auction clearance rates

I love graphs.

If you think it may be a bit too premature to be throwing words like "boom" and "housing" around in the same sentence, then Joye qualifies his bone fides by making a point of noting...

"We got 2008 right by projecting only trivial national nominal dwelling price declines. According to our market-leading hedonic index, the actual peak-to-trough correction was slightly less than four per cent. In late 2008 we stated that we thought the 2009 recovery would surprise on the upside, as it did. And we got a little ahead of the curve with our projected 2010 soft-landing, which we thought would come near the start of 2010 rather than in the second quarter."

To read the full article click here

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