Redefining “A Pivot”…

The Bank of Canada lifted the cash rate by less than expected – and people are now redefining “a pivot”. But what does this mean for inflation and future rates, and broader economies. We also look at the market movements.

Go to the Walk The World Universe at https://walktheworld.com.au/

FINAL REMINDER: DFA Live Q&A Investing Now With Damien Klassen 8pm Sydney Tonight

Join me for a live discussion about the current state of the financial markets with Damien Klassen, Head of Investments at The Walk The World Funds and Nucleus Wealth.

You can ask a question live.

Go to the Walk The World Universe at https://walktheworld.com.au/

Operation Antispruik In Sydney’s Inner West

More analysis courtesy of Cookie, looking at price falls in Sydney’s Inner West, and mapped to the DFA data for the relevant areas. More evidence of price falls, and big ones at that. This is not a scientifically selected set of properties but were reported on the portals.

Go to the Walk The World Universe at https://walktheworld.com.au/

The RBA Has No Idea About Home Price Falls!

The RBA has lifted the cash rate by 2.5% and more rate hikes are expected in the months ahead as they try to head off inflation. The budget on Tuesday is expected to show inflation is expected to peak at around 8%, but stay above their target range of 2-3% right into 2024, with no real wages growth in the immediate outlook.

One factor which is being debated is the potential impact of home prices across the country, as we see higher cash rate costs translate into higher mortgage rates and lower borrowing power. The RBA recently showed a reduction of around 20% could be on the cards, though my analysis and conversations with prospective borrowers suggests that some are seeing their ability to borrow on the same set of income and expenditure parameters falling by as much as 30%.

And as I need to keep reminding you, availability of credit is the single most powerful influencer of home price moves. If you cut rates, and allow borrowers to leverage up with greater borrowing power, prices will rise, but on the other hand, if rates rise and borrowing power will fall.

Which then takes us to the question of what the direction of travel on home prices is expected to be.

Again those following my analysis will know we run three scenarios, a Best case, which assumes rates drop mid next year as inflation is conquered and wages rise – now largely discounted by the latest coming from Treasury around the budget, a Base case, which assumes higher rates through next year and beyond, inflation start above target into 2024, and no real wages growth, but no local recession, despite recessions appearing in Europe and possibly the US; and a worse case, where we get into recessionary territory here, causing rates to go higher initially, then fall back later as the RBA tries to dial back its over tight stance.

When I last ran my model, we suggested a base case fall in average house prices would fall by over 20% in the next couple of years, while Units, on average would fall by a little less because their run up in the past couple of years (driven by ultra-low rates and stimulus) was a little less. And I should say these are national averages, there are different outcomes across individual states and post codes, as well as property types. Check out our other shows for more granular information on this, or our Patreon programme to get the underlying data.

But our central view is a significant drop, which by the way will hardly be offset by higher migration, and additional Government incentive programes. Availability of credit is the main driver as I have explained.

Which takes us to the RBA. Now, on Friday there was a very interesting FOI release from the RBA. I will put the link in the comments below.

The request was for “documents from 1 May to 30 August 2022 about the impact of interest rate increases on the Australian property market (including any of: how far prices could fall under various scenarios; impacts on consumption and/or wealth effects; impact on construction employment and/or other related employment).”

https://www.rba.gov.au/information/foi/disclosure-log/pdf/222308.pdf

FINAL REMINDER: DFA Live Q&A Property Now With Chris Bates 8pm Sydney Tonight

Join me for a live discussion about the current state of the property market, with Mortgage Broker Chris Bates from wealthful.com.au

You can ask a question live.

Links to upcoming events:

Meet the Managers Forum Wednesday 19/10/22 6:30-8pm:
https://www.eventbrite.com/e/meet-the-managers-tickets-410294761677?aff=wtw to register.

Go to the Walk The World Universe at https://walktheworld.com.au/

Inside The RBA’s Interest Rate Policy Sausage!

From the latest minutes we get a view of the deliberations which ultimately drove the RBA to 25 basis points a couple of weeks back. Not that we necessarily want to see the sausage being made. But there are some key points which signal no intent to pivot, and expectation of more rate hikes ahead, and the potential fall out in terms of employment and wages.

https://www.rba.gov.au/monetary-policy/rba-board-minutes/2022/2022-10-04.html

Go to the Walk The World Universe at https://walktheworld.com.au/

Its Edwin’s Monday Evening Property Rant!

My latest Monday evening chat with our property insider, Edwin Almeida.

We look at the latest numbers, so unusual properties for sale, and discuss that landlords and tenants need to consider.

https://www.ribbonproperty.com.au/

Go to the Walk The World Universe at https://walktheworld.com.au/

Your Top Property Questions Answered…

A short segment where I answer some of the top questions from my inbox relating to the current property dynamics in Australia.

Go to the Walk The World Universe at https://walktheworld.com.au/

https://digitalfinanceanalytics.com/blog/dfa-one-to-one/ for the One to Pne Service we discuss.

Find more at https://digitalfinanceanalytics.com/blog/ where you can subscribe to our research alerts