Property Bubble? — I Don’t think Aussie Property is About to Collapse
Five years ago, I moved to Camberwell.
It’s pretty. It’s leafy. It’s 8km from Melbourne. Surrounded by public transport. It’s full of people who own Range Rovers who can’t park them.
It’s also pricey.
I told myself not to worry. When property crashed, I’d be ready and waiting to snap up a house in the area.
So, I waited…
Houses I refused to buy three years ago in the high $800,000s, now come with asking prices well over a million. And almost all of them will need a couple more hundred thousand to get them out of the 70s and into now.
The crash that I thought would come, has yet to find me.
Perhaps, my digital desk buddy is right after all.
Double double toil and trouble
‘Double double toil and trouble
‘Fire burn and cauldron bubble’
For some reason whenever I think of the Aussie property market, the ‘song of the witches’ in Shakespeare’s Macbeth plays in my head. Hopefully my Year 10 English teacher is proud.
I’m not entirely sure how I made that correlation. But that incantation rolls around my head whenever I read about house prices in Australia.
But contrary to what you think, this isn’t an article about how I think property is about to pop.
In fact, it’s the exact opposite. Take today as a warning even. You think we’ve got a property bubble now? You ain’t seen nothing yet.
Even when prices dipped in 2018 and 2019 there was no crash. Down, yes. But no crash.
When the pandemic finally made its way to our shores, banks braced for the worst. Generous mortgage holidays were handed out. To be fair no one knew what to expect.
While I’m not anticipating enough mortgage defaults to rock the banks…I do think we will be looking at higher 30–90-day arrears rates.
The problem is, I don’t actually think Aussie property is about to collapse.
In fact, I think we are about to see the fire burn and the cauldron bubble.
Blowing bubbles from first home owner tears
For a few years now, my digital desk buddy and editor of The Daily Reckoning Australia, Callum Newman has often talked about Aussie property.
Callum follows property cycles; he has long said that a massive property crash is a long way off. The way he sees it, Australia’s property boom is set to peak in 2026. Then we will face some troubles…
…but until then, it’s full steam ahead.
You see, I never really disagreed with his thoughts. My issue was I looked at the data around me and I was baffled that our spectacular property bubble could continue to grow.
Wage growth has been stagnant for years. Property prices continue to climb. Australians are highly indebted. Though the pandemic did speed up the trend of falling personal credit growth.
Slowing personal credit growth (like credit cards and car loans) is actually a sign that people have reached their peak debt levels.
Throw in slowing immigration in 2019 — and utterly wiped out by the hard international boarders in 2020 — the evidence seemed to all point towards a property crash.
Yet Callum stuck to his views. A crash wasn’t coming. It was years away.
It was then I realised the Australian government will create policies to make sure that property prices don’t fall. At least not on their watch.
Make no mistake, we are witnessing the birth of policies that will not only put a floor under property prices, but enable them to grow even higher from here…
The tone has changed
In 2019, a writer over the Australian Financial Review started talking about our retirement pot, which was a shift from previous discourse. Sharing her thoughts on how the rules might change.
Suddenly what to do with the three trillion dollars hiding in stocks, cash and infrastructure was on the table.
Furthermore — while I’m not sure that was the first article — it certainly marked the very obvious time the tone changed.
This chatter was exacerbated by the pandemic finding us.
Suddenly, the ‘super is for retirement not bricks’ language shifted. A few brave editorial pages in the financial rags were dedicated to the possibility of all that super money being used in housing.
Then our mates in charge of the federal government began to change their views.
And in the middle of last year the mood shifted.
Just how could politicians make sure everyone owns a home before they retire? Perhaps — some pollies mused out loud to media mics — we let them take larger chunks of money out of their super.
Of course, the outcome of these thought bubbles haven’t turned into policies yet.
Whether the changes to super will be made remain to be seen.
But make no mistake, making sure property prices continue to increase is something the government are keen to support.
After all these years, I reckon Callum is right. It’ll be a few more years before we see a property crash in Australia.
Until next time,
Editor, The Daily Reckoning Australia
PS: Australian real estate expert, Catherine Cashmore, reveals why she thinks we could see the biggest property boom of our lifetimes — over the next five years. Click here to learn more.