Why I think house prices will keep going up
Australia is in the grip of its biggest property price boom in more than a decade. The boom is motivated in no small part by a fear of missing out. But there are also other important factors at play, leading me to believe that this trend could continue for some time.
Last year I outlined my bullish thesis for Australian property: cheap rates, a lack of stock and COVID losing its grip on the economy. But these all pale into insignificance compared to the impact of the easing of credit by banks if the government’s legislation relaxing responsible lending rules goes through.
Roger Montgomery is the Founder and Chairman of Montgomery Investment Management. Roger has over three decades of experience in funds management and related activities, including equities analysis, equity and derivatives strategy, trading and stockbroking. Prior to establishing Montgomery, Roger held positions at Ord Minnett Jardine Fleming, BT (Australia) Limited and Merrill Lynch.
This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564). The principal purpose of this post is to provide factual information and not provide financial product advice. Additionally, the information provided is not intended to provide any recommendation or opinion about any financial product. Any commentary and statements of opinion however may contain general advice only that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and should consider seeking independent advice from a financial advisor if necessary before making any decisions. This post specifically excludes personal advice.
John
:
Roger, you have so far been quite right about housing.
Three points…
1) ‘We remain in the grip of a property boom, motivated in no small part by a fear of missing out.’ – this is probably true but I have heard buyers say it is cheaper to pay off a mortgage than rent a place.
2) You say.. ‘Property buyers in this country are a protected species’ – I think you mean property owners?
3) The price of land will increase while access to credit improves (i.e. interest rates keep dropping) but once that stops (i.e. interest rates hit zero) then prices will have to drop unless the government hands those who have a mortgage yearly cheques worth tens of thousands of dollars (which seems unlikely).
Roger Montgomery
:
Thanks for sharing your thoughts John
Ian
:
These trillions of fiscal dollars are quite different to the FED QE that only increased bank reserves. This is real money from nothing pumped into the community. The bond traders are onto it. I would not be so sanguine about interest rates.
Roger Montgomery
:
Thanks Ian. Really helpful distinction.
richard vidal
:
I think the last point on post covid migration will see this boom continue for many years to come…….50 year loans are just around the corner, that in my opinion, is one of the only ways (unfortunately) that our kids and grandkids will be able to afford to pay a mortgage into the future……the bust, which will come eventually will be horrific!!!!
Andre
:
Roger,
A little off topic but recently my neighbours property sold by auction. As per normal operating procedure, the agent’s estimated guide wasn’t in the same solar system as the eventual sale price.
Anyway, surely someone is working on disrupting this industry. How can they charge close to $70,000 to unlock a door 4 times?
The wage increase of the beloved real estate agent must be 20% per year.
I look forward to the day that the cost of selling a house isn’t so prohibitive
Roger Montgomery
:
Andre, if the strong real estate prices persist there will be another agent ‘oversupply’ and most will be competing again for business.