Doug Goodwille from Kayne Anderson speaks to Drew Meredith from The Inside Network on market thinkers.
While a surging gold price is on hold as the world adjusts to a Trump presidency, all the factors that saw its price rise more than 50 per during his first term in office – trade disputes, fiscal deficits and geopolitical tensions – are almost certainly guaranteed the second time around.
As cracks appear in H2, expect buoyant property market to deflate, researcher says
Property prices across Australia are set to fall in the second half of the year, with rough economic conditions likely to wipe out sharp increases in both houses and units.
After a bumpy start to 2022, the property market has defied inflation and rising interest rates to post increased valuations in most major capitals.
Combined house and unit prices accelerated 6.6 per cent across Sydney over the last year, while Brisbane (6.9 per cent), Perth (9 per cent) and Adelaide (8.7 per cent) all experienced similar increases, according to data from SQM Research. Only Melbourne (0.7 per cent) and Canberra (-1.4 per cent) did not see significant increases in the past 12 months.
Overall, capital city average property prices rose 5.2 per cent during the period.
The economy is reaching a tipping point, however, with high interest rates and fears of a recession starting to spill over into the property market. Even with rates tempered by staggered pauses in the Reserve Bank’s program of increases, the 4 full percentage point increase since May 2022 has reduced confidence and applied layers of pressure on besieged mortgage holders.
“The probability is that most likely the property market will weaken,” SQM Research CEO Louis Christopher tells The Inside Adviser. SQM is a Sydney-based research outfit best known for the data and insights it produces on property, shares and managed funds.
“Rate rises have seriously dented confidence, and our expectation is that the overall economy will slow in the second half of this year. The September quarter could end up showing negative GDP, and that would flow into negative unemployment.”
The employment figures are a critical factor, given the RBA will look to this as a core economic indicator along with inflation. And while headline unemployment is hovering at a low 3.6 per cent, Christopher believes cracks are already beginning to show.
“Anecdotally, there is a sense out there from the recruiters we speak to that there is already an increase in unemployment that hasn’t quite registered yet,” he says. “Recruiters are telling us there are a lot more candidates out there.”
Rising unemployment, combined with a wave of homeowners coming off generous fixed interest rate periods, is likely to lead to a swathe of forced sales. “Generally, in a slowing market, the top end is more affected,” Christopher says. “But when you’ve got falling employment, it affects the lower end equally.”
The expected property market decline will affect the cities that have benefitted most from inflated prices, he says. “In Sydney, housing prices this year have gone up about 4.5 per cent to date in 2023, but by the end of the year it should be a net even result.”
The predicted fall will not distinguish between houses and units, Christopher says, because the overarching economic factors are shared. “It would affect more houses and units in a similar way because this is a macro event that is occurring, so all property types will feel the brunt of it.”
*This article was first published in The Inside Adviser.
