Housing bears now endangered species...

Christopher Joye

Coolabah Capital

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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Investment Disclaimer Past performance does not assure future returns. All investments carry risks, including that the value of investments may vary, future returns may differ from past returns, and that your capital is not guaranteed. This information has been prepared by Coolabah Capital Investments Pty Ltd (ACN 153 327 872). It is general information only and is not intended to provide you with financial advice. You should not rely on any information herein in making any investment decisions. To the extent permitted by law, no liability is accepted for any loss or damage as a result of any reliance on this information. The Product Disclosure Statement (PDS) for the funds should be considered before deciding whether to acquire or hold units in it. A PDS for these products can be obtained by visiting www.coolabahcapital.com. Neither Coolabah Capital Investments Pty Ltd, EQT Responsible Entity Services Ltd (ACN 101 103 011), Equity Trustees Ltd (ACN 004 031 298) nor their respective shareholders, directors and associated businesses assume any liability to investors in connection with any investment in the funds, or guarantees the performance of any obligations to investors, the performance of the funds or any particular rate of return. The repayment of capital is not guaranteed. Investments in the funds are not deposits or liabilities of any of the above-mentioned parties, nor of any Authorised Deposit-taking Institution. The funds are subject to investment risks, which could include delays in repayment and/or loss of income and capital invested. Past performance is not an indicator of nor assures any future returns or risks. Coolabah Capital Institutional Investments Pty Ltd holds Australian Financial Services Licence No. 482238 and is an authorised representative #001277030 of EQT Responsible Entity Services Ltd that holds Australian Financial Services Licence No. 223271. Equity Trustees Ltd that holds Australian Financial Services Licence No. 240975. Forward-Looking Disclaimer This presentation contains some forward-looking information. These statements are not guarantees of future performance and undue reliance should not be placed on them. Such forward-looking statements necessarily involve known and unknown risks and uncertainties, which may cause actual performance and financial results in future periods to differ materially from any projections of future performance or result expressed or implied by such forward-looking statements. Although forward-looking statements contained in this presentation are based upon what Coolabah Capital Investments Pty Ltd believes are reasonable assumptions, there can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Coolabah Capital Investments Pty Ltd undertakes no obligation to update forward-looking statements if circumstances or management’s estimates or opinions should change except as required by applicable securities laws. The reader is cautioned not to place undue reliance on forward-looking statements.

Christopher Joye
Portfolio Manager & Chief Investment Officer
Coolabah Capital

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...

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