Expert Interviews with Kevin Turner. 05/11/2018
Recent out of cycle increases by some of the banks has caused a bit of a panic amongst some property buyers, and there’s a prediction now that values in Sydney and Melbourne in particular, are going to drop by as much as 6% and that those markets will be in decline for the next two years. However Graham Cooke from Finder says there has been a change in the affordability sentiment.
Listen to the interview now:
Kevin: Recent out of cycle increases by some of the banks has caused a bit of a panic amongst some property buyers, and there’s a prediction now that values in Sydney and Melbourne in particular, are going to drop by as much as 6%. Some saying that this going to last for about 20 months to even two years. Joining me from finder.com.au is Graham Cooke. Graham, thank you very much for your time.
Graham Cooke: G’day Kevin. How you doin?
Kevin: Yeah good mate. I’ve got to say that the recent increases from the banks have not been all that substantial.
Graham Cooke: No, no they haven’t been, and they’ve been a bit slow to be honest. So that’s quite interesting. I don’t know whether they’re going to kind of follow suit. We have seen some smaller lenders follow suit, such as Suncorp, but I do expect them to fall into line, maybe even by the end of the week. But it’s going to be interesting now because the falling house prices will provide some cushioning to the increasing rate rises for first home buyers who have a deposit saved.
Kevin: If the banks do actually put rates up or the RBA puts rates up in particular, that’s almost a reflection that the economy is improving.
Graham Cooke: Yeah, yeah but I don’t think that’s going to happen for quite a while. We’ve been conducting a survey of leading economists in Australia for several years now, every month, and we ask them when they expect the next rate movement is going to be. Now for the whole of the last two years they’ve been saying rate movement happening every month is not going to happen. But the prediction of when it will actually move, has been moving forward, and forward, and further forward. Now we’re not seeing any predictions of a movement this year. In fact most of the economists are predicting the earliest movement we’re going to see is towards the second quarter of next year.
Graham Cooke: But across the board the expectation is that will be a movement in the positive direction. So 88% of the economists are thinking there will be an up, but not for a while. If you’re a first time buyer and if you have a deposit saved, now is a good time to be in that position. But you know it’s a question of when the market’s going to bottom out. I mean I’ve seen some research from Capital Economics in the paper, over the last couple of says, saying they expect a fall by 12% over the next four years.
Kevin: It’s so difficult when you know we hear about price drops like that, in such a general sense, because each market is totally different. You know we might see Sydney come off a little bit maybe compared to Brisbane, Brisbane doesn’t fall off as much, and Perth seems to be improving. Graham, in the survey you asked economists their impression of the market, how they felt consumer confidence was, what did they say?
Graham Cooke: We asked them this time, how long they expect the market to be in a downturn in the two most heavily hit markets in the country, which are Sydney and Melbourne. I found the results quite surprising. The average came back at 20 months, and it’s about the same for Sydney and Melbourne. So we’re looking at probably a two year downturn across the two capital cities, is what the economists are saying. But who knows what’s going to play out next year. Inflation is still low, wage growth is still low, so because of that they’re not thinking that the RBA is going to drop cash rates any time soon. So we’re probably looking at a kind of stagnant period ahead of us right now.
Kevin: Was there any comment from any of the people you spoke to about the jobs situation? That’s always a big trigger for what’s happening with the economy and with property prices too.
Graham Cooke: Yeah. There’s been a fair bit of commentary on the fact that inflation is low, in terms of jobs growth. We do do a sentiment tracker as well, as part of the survey. So we ask the economists, what their kind of feeling is negative or positive on the economic sentiment, in various different areas of the economy, and wage growth is one of the things that’s in there. It’s kind of mixed to be honest. So one third of the economists came back feeling positively about wage growth, and the other 57% were kind of in between, so they’re neutral. We also asked about unemployment specifically, and this one came back quite positive. So 57% of economists are feeling positive about employment in the Australian economy.
Graham Cooke: Looking at these metrics over time is quite interesting, the positive sentiment on unemployment has remained relatively steady since March to September this year, kind of hovering between 50% and kind of 65%. Everything else has been relatively steady. But the one metric that they’ve changed their views on, massively, since March this year was housing affordability, that’s gone from only 4% of economists feeling positive about it in March this year, 50% of economists feeling positive about it now. So that is the one aspect of the kind of economic situation that’s changing rapidly.
Kevin: Graham, always good talking to you mate. Graham Cooke from finder.com.au. Thanks for your time Graham.
Graham Cooke: Thank you very much Kevin, cheers.
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Kevin Tuner worked in radio as General Manager of various east coast radio stations. He started in real estate in 1988 and was ranked in the Top 10 Salespeople in the state until he was appointed as State CEO 1992.
He operated a number of real estate offices as business owner and was General Manager of several real estate offices in Christchurch.
He now hosts a real estate show on Radio 4BC and a weekly podcast at www.realestatetalk.com.au. He is the host of a daily 7 to 10 minute podcast show for real estate professionals at www.reuncut.com.au.
To hear more podcasts by Kevin Turner, click here
Disclaimer: while due care is taken, the viewpoints expressed by interviewees and/or contributors do not necessarily reflect the opinions of Your Investment Property.