S1: Our four biggest banks have reported a drop in the
S1: numbers of people taking out mortgage loans. One has even
S1: forecast a significant drop in house prices in two cities.
S1: But then came the reserve Bank governor last week with
S1: a stern warning. I'm Samantha Zellinger Maurice, and you're listening
S1: to Morning Edition. From The Age and the Sydney Morning
S1: Herald today, senior economics correspondent Shane Wright on whether the
S1: housing bubble is finally beginning to burst. It's August the 18th. Shane,
S1: welcome back to the podcast.
S2: Oh, why wouldn't I come back to see your happy
S2: face again, Sam?
S3: Well, I'll tell you, I think I'm happy as a
S3: result of reading your last feature. Tell me if I've
S3: read it right. First off, let's start by you telling
S3: us what the economics team from the ANZ Bank has
S3: said about housing prices in Sydney and in Melbourne falling
S3: going forward.
S2: That's right. We've had a lot of new forecasts out
S2: from the big banks and the ANZ. Their economics team
S2: is predicting it's like a 14.5% fall in Sydney's median
S2: house prices between this year and into next. Just under 13%
S2: for Melbourne and smaller falls across all the other capital cities.
S2: And this would then be corrected in 2028, with house
S2: prices supposedly going up. They're the most bearish of all
S2: the big economics teams, and the history of predictions on
S2: house prices is pretty terrible from most from most analysts.
S2: It's very difficult to pick because you also have to
S2: take into account what the reserve Bank might get up
S2: to and other big macro effects. So always difficult. But
S2: these have generated a lot of interest because a lot
S2: of people seem to think that house prices never fall
S2: in this country. And my goodness, I could sell these
S2: people a bridge over Sydney Harbour because there is a
S2: long history of price, corrections, price, downfalls and most infamously,
S2: an absolute crash which precipitated probably our worst depression. But
S2: neither you or I were around for the 1890s depression
S2: of Melbourne where, uh, where house prices actually fell 50%. Wow. Yeah,
S2: it was all tied up with the financial system in
S2: Melbourne at the time. Very different world. Um, and it
S2: was one of the reasons that Sydney became larger than
S2: Melbourne and became the financial centre of the, of the
S2: country because of what happened in the 1890s.
S1: It's interesting. And there's also been some other metrics out
S1: there that you might help us, uh, read into to
S1: sort of find out how our housing market is at
S1: the moment. So I guess just tell us about our
S1: country's other biggest banks besides the ANZ. What have they revealed?
S1: In particular, I guess, about how many loan applications they
S1: have received or not, because they also have released financial updates, right?
S2: Yeah. So all the banks like the ANZ, NAB and
S2: Westpac released their their quarterly results last week. And the
S2: Commonwealth Bank released its annual results. And all of them
S2: have picked up that there's been a big fall in
S2: applications for mortgages since the budget. Now they were there
S2: had been this had been slowing beforehand because of the
S2: reserve Bank starting to increase interest rates in February. And
S2: there was a little thing like the war that kicked
S2: off on February 28th, which has really affected the global economy.
S2: Anyone with a petrol driven car or a diesel driven
S2: truck would clearly understand what's been going on in that space.
S2: But really sizeable falls in applications predominantly amongst investors, which
S2: is effectively exactly what the government was expecting. And that
S2: was on the top of the box saying, we're going
S2: to do these changes. We're going to have fewer investors
S2: competing against first home buyers. There is some conflicting advice
S2: about what's coming out in terms of first home buyers specifically.
S2: Some have picked up a big fall, others have not.
S2: Have said no, it hasn't. There hasn't been a big
S2: drop off in first home buyers accessing it. The government's
S2: own 5% deposit scheme, which is managed by Housing Australia.
S2: They were. pre-Budget getting 188 applications a day. It's fallen
S2: to 186. So yeah, I think that's just a little
S2: bit of noise. But it wouldn't be the biggest surprise
S2: that first home buyers might be a little reticent at
S2: the moment, given how much like it's hard to open
S2: a paper or listen to a talkback radio star talking about,
S2: oh my God, end of days or oh my God,
S2: how affordable. A lot of conflicting advice for first home
S2: buyers who are on the precipice of diving into their
S2: probably their biggest personal investment ever.
S1: But like you said, I mean, lots of a slide,
S1: I guess. In mortgage applications, the NAB reported a 15%
S1: slide in those applications, the ANZ at 12% dip and
S1: the Commonwealth Bank 15% drop in loan applications, uh, and
S1: a 28% plunge in applications from investors. So bigger than
S1: expected declines. Is that right? Even though they were expected
S1: to decline, given that the reserve Bank had begun lifting
S1: interest rates earlier this year?
S2: Yeah, no one was really sure in terms of how
S2: many investors would come out of the market. And we
S2: don't know how long term this is, because on Friday,
S2: the Bureau of Stats, which actually tries to collect information
S2: on every mortgage that gets issued, they also showed a
S2: fairly sizable fall in the June quarter. So that's covering
S2: the like the 6 or 7 weeks from between the
S2: May budget being released and the end of the quarter.
S2: But it also picked up a sizable increase, in fact,
S2: to record levels, the number of mortgages taken out by
S2: investors to build new homes. Now, that was also part
S2: and parcel of the government's changes. Like the most important
S2: in this case is the negative gearing one, which is
S2: you can negatively gear as long as you build a
S2: new house. So you can. These are preliminary. So I'm
S2: really reticent to go, oh my God, we've got absolute
S2: proof of everything. It's like seeing a video of a
S2: Sasquatch wandering around, uh, parts of Northern America. Uh, let's
S2: get a bit more evidence in before we. We declare
S2: that sasquatches are real. Uh, next we'll be talking about yetis. Um,
S2: but there is a preliminary sign that that's working as intended.
S2: Of course, all the big banks have noted this. You've
S2: still got the reserve Bank. Uh, its rate rises now
S2: rate increases take between 12 and 18 months to fully
S2: work their way through an economy. So they've only been
S2: they've only increased them between February and May. So we
S2: have still got a long way to go on that one.
S2: And the other, of course, is the flow on flow
S2: on impact from the war, what it's done to petrol prices.
S2: So petrol is back over $2 a litre in just
S2: about every capital city at the moment. We can see
S2: what's happening there. Like we've had a huge increase in
S2: the number of people buying electric vehicles. So that is
S2: churning around in the in the in the background as well.
S2: I suspect between you and I, Sam, that there are
S2: some people who've pulled out of the housing market but
S2: are using their cash to change over into an EV.
S2: I would not surprise me because EVs, some of the
S2: higher end ones are not cheap. But we've actually had
S2: a record number of vehicles being new, new vehicles being
S2: bought over the last three months, and half of them
S2: have been EVs. So that is telling us something that's
S2: going on in the economy as well.
S4: Okay. And you mentioned.
S1: Yetis and sasquatches just there. So I wanted to ask
S1: you about what is possibly the ultimate sort of, um,
S1: confirmation of the Yeti or the great white Sasquatch, which is,
S1: of course, watching to see if the housing bubble is
S1: finally starting to burst. Now, this is a game we've
S1: all played for, I don't know, 30 years or so.
S1: So is it finally coming to pass all of this
S1: data you've walked us through? Is it happening? Is the
S1: bubble finally starting to burst?
S2: Look, I want to I want a hair sample. I
S2: want to be able to talk to the Sasquatch first
S2: before I declare, I think Shane Oliver, the AMP chief economist,
S2: talks about the property super cycle that has been running
S2: since 1996 and since 1996 we've had, well, it's a
S2: 450 500% increase, huge blowout in the sizes of mortgages
S2: like the Bureau of Stats. Data actually showed. Yep. That
S2: the size of new mortgages actually come down, came down
S2: over the last three months. Of course, the average is
S2: still $841,000 in New South Wales. Um, and so if
S2: you discount non Sydney you're looking at more than $1 million. Uh,
S2: average new sized mortgage. So whether it's finally come to
S2: an end. Look, uh, you and I will have to
S2: go out into the bush and keep looking for our
S2: our unusual animals, because, look, I'd love to say it,
S2: but I'm not sure. I'm not sure you can say
S2: it quite yet.
S5: After the break.
S2: More than 60% of people actually support lower house prices,
S2: and those who are opposed is around 10%.
S1: But there has, of course, like you've said earlier, there's
S1: been this sizable decline in investors taking out home applications.
S1: We haven't seen a rate rise in a bit. So
S1: is now the best time for a first home buyer
S1: to get into the market?
S2: Was it? Matt Coman? The head of CBA actually said ah,
S2: over the next 6 to 12 months might actually be
S2: the prime time. Of course, if that happens, you have
S2: more first home buyers coming into the market that they'll
S2: push up the price, particularly at the bottom end of
S2: the market. And so the prices may not fall as far. Um,
S2: this is you're into the whole argument about affordability. And
S2: there are some who like the political argument is very
S2: weird at the moment where all sides of politics profess. Yes,
S2: we're worried about our first home buyers, but they don't
S2: want actually say house prices have to fall. Now our
S2: resolve political monitor. I have been asking for the last
S2: three months whether people can what their feelings are towards
S2: a fall in house prices. And this has been interesting
S2: because it is it has not changed. And it's more
S2: than 60% of people actually support lower house prices. And
S2: those who are opposed is around 10%. And we've been
S2: asking this consistently, and we're getting the same answers across
S2: every sort of voter, like labor coalition One Nation. They're like,
S2: it's more than I think it's 54% of One Nation
S2: supporters say, yep, happy with house prices to fall and 16%
S2: opposed Greens. It's 68 supportive, 5% opposed. Like, I don't
S2: know how many times we can ask this question and
S2: think the answer will change. Like if we went back
S2: to the 1890s and asked Melburnians whether they want to
S2: see house prices continue to fall, they might have had
S2: a different perspective because housing had got expensive at that
S2: point of time, but it was tied up with a
S2: big speculative bubble that filtered right through the property, the
S2: financial system in Melbourne at the time. This one is
S2: a bit different in terms of. This is all about affordability.
S2: This is all about whether people have a chance of
S2: getting into a home tie in. What's going on with
S2: the rental market, of course. And like we've seen, there's
S2: been some absolute terrible reporting, not in this masthead, of course,
S2: but this commentary about rents went straight up like the
S2: week after the budget was announced because investors decided, right,
S2: I'm not going to be able to negatively gear if
S2: you've got a if you've got a landlord who's making
S2: a change on something that they were actually protected from. Well,
S2: I think take it up with the local tenancy advisory
S2: organizations at the state level because you're being sold an
S2: absolute pup.
S4: And Shane, just to wrap up, I wanted to.
S1: Ask you how you think we're going to be faring
S1: with regards to the reserve Bank inflicting another interest rate
S1: rise on us, because last week the bank held the
S1: cash rate steady for a second successive meeting. And the
S1: reserve Bank governor, Michele Bullock, she made some comments last week.
S1: So what can we read into those?
S2: Look, we could delve into the ins and outs of
S2: monetary policy and communication, which I think this is really interesting.
S2: Michelle Bullock sounded as if like, I thought she was
S2: like a newspaper holding a rolled up newspaper, talking to
S2: a dog, saying, you just wait, I'll get you.
S6: So we will need still need to see some further
S6: progress before the board can be confident that we are
S6: going to get inflation back to target. With current monetary
S6: policy settings, the board will raise interest rates further if
S6: that is what is required to bring inflation down in
S6: a timely way, the board will be closely watching for
S6: evidence of upside risks to inflation materializing. Now, I understand
S6: this is a difficult period for some households.
S2: In central banking terms. There's a there's a term for that.
S2: It's called jawboning. And Jawboning is talking really solidly, either
S2: hawkishly or dovish but not actually moving rates because. And
S2: like Michelle Bullock and lots of other central bankers, say
S2: I've only got one lever to inflict pain upon people
S2: or reduce pain. They don't Jawboning is is a very
S2: well documented way, and I've seen Australian central bankers use
S2: it as well. They've they've got their own pulpit to talk.
S2: Michelle Bullock has a whole hour after the post, the
S2: press conference to talk it up because the forecasts she
S2: released actually say no, these guys have they've done for
S2: rate rises. Start thinking about rate cuts next year. A
S2: whole host of asterisks next to those. The war gets worse.
S2: We get some other inflationary pulse. People decide to people
S2: go out and striking, get huge wage rises all sorts
S2: or the economy slows much faster than we than the
S2: bank and others anticipate. Put it this way, the bank's
S2: major last major forecasts were released first week of May,
S2: and they said inflation is going to be 4.8% by June.
S2: It was 3.8. Now, in macroeconomic terms, that's missing by
S2: the side of a barn like they missed by a
S2: long way. And there's really good reasons for that. And
S2: they missed their other key forecasts as well. So I
S2: think Bullock has used Jawboning to try and make sure
S2: people don't get ahead of themselves, knowing that she may
S2: not have to use rate rises, given that's how the
S2: bank itself thinks the economy is going to play out
S2: over the next 12 months or so.
S1: So her jawboning, that's her way of saying, just you wait,
S1: you better not go crazy on the spending. Otherwise I'm
S1: going to hit you with a rate rise.
S2: Yep. Exactly. Exactly. And look, you're living in fear immediately
S2: after hearing Michelle Bullock say that. So it might have worked.
S2: You put off that really expensive coffee, uh, last Wednesday
S2: because oh my goodness. Michelle Bullock warned me if I
S2: spend too much. So you can see like there's a
S2: lot of dealing with people's emotions because economics, it might
S2: it is called the gloomy science for a particular reason,
S2: but it does deal a lot with consumer sentiment, business sentiment,
S2: business emotion. That's that's why it's such a fascinating topic
S2: to always talk to you, Sam, about.
S1: Well, thank you so much, Shane, for your time.
S2: Look, and we've got a date to go looking for some,
S2: some maybe fictional, maybe real, uh, wild animals out there
S2: next time.
S1: Till next time, Shane.
S2: Until next time.
S1: In other news, today, first of its kind scientific modelling
S1: forecasts that more than 2.6 million Australians will be living
S1: with a cancer diagnosis by 2050, an increase of a
S1: million people over the next 25 years, and a $5
S1: million learn to Swim program will be launched today by
S1: the federal government with Royal Life Saving Australia. The We
S1: Swim program will be led by local community leaders, including
S1: those from India, China and Korea, who understand the particular
S1: risks and the culture of their own people. You can
S1: read more at the age.com.au or smh.com.au. Today's episode was
S1: produced by Kai Wong. Our executive producer is Tammy Mills,
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