Housing bears now endangered species...
The hunt for that increasingly endangered species known as the "housing bear" continues. Thus far we've managed to track-down and clinically dispatch Westpac, CBA, Capital Economics, UBS, ANZ, HSBC, and, belatedly, those big bears over at NAB, who have all finally carked it and embraced their inner bull...
In May 2020, NAB told its customers that “our view is that dwelling prices will likely see significant falls over the next 12-18 months”. “We expect house prices across the capital cities to fall by 10-15%... a sharp rise in unemployment to 11.7% by mid-year.”
By way of contrast, Coolabah forecast the jobless rate would quickly settle between 6% and 7% (it is currently 7%) and projected house prices would only fall 0% to 5% (they declined 1.7%) over 6 months following which we argued they would start increasing again---as they've done in September and October.
As recently as July 2020, NAB’s huge economics team was confidently declaring, “We have not changed our view on property prices – we expect the impact of the COVID-19 downturn will see a decline in prices of around 10-15% from peak to trough".
But alas a sheepish NAB this week was forced to do a long overdue 180 degree turn, conceding, “we have changed our view on property prices for the next year and now expect rises of around 5% over 2021 and 6% over 2022 – with house price growth likely to be stronger than the apartment segment.” In fact, they are forecasting house price growth of 1% in 2020, 5% in 2021 and 6% in 2022.
As with all the other banks, that's strikingly similar to Coolabah's long-held projection for house price growth of at least 10% to 20% over the next few years.
In recent days two other bears have run for the hills. ANZ were very vocal in broadcasting their gloomy view on the market, which anticipated house price declines of greater than 10%. Yet they have changed their tune: "We now expect house prices at the national level to rise modestly over the rest of this year. Next year, we expect price gains of just under 9% across the capital cities."
And HSBC have likewise discarded their similarly bearish views. HSBC was expecting a national house price fall of ~7% in 2021 (-2% to -12%), projecting a chunky 5% to 15% price decline in Sydney and a 7% to 17% loss in Melbourne. Now they believe prices will rise in 2021...
The economics and investment communities have not exactly covered themselves in glory when it comes to predicting the future of Australia's biggest asset-class.
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Chris co-founded Coolabah in 2011, which today runs $7 billion with a team of 33 executives focussed on generating credit alpha from mispricings across fixed-income markets. In 2019, Chris was selected as one of FE fundinfo’s Top 10 “Alpha...