Pete Wargent Blogspot| 9 August 2021
There were solid preliminary auction results for Sydney over the weekend, with only slim pickings for buyers to choose over as stock listings have tightened.
Melbourne had more than 1,300 auctions scheduled, and with only a low percentage of results reported the final clearance rate for the Victorian capital will presumably land somewhere in the low 60s.
No time to hit the brakes
Last week a survey of economists revealed a couple of talking heads calling for limitations on investor speculation in the housing market.
I’m not sure how this is even a thing with investor credit literally just bouncing off all-time lows.
More pertinently, rental markets around many parts of the country are cripplingly tight, and rents are surging.
That’s especially been true across regional markets, but now it’s even happening in the capital cities too (ex-Melbourne, to date).
With lockdowns looking set to persist for some time to come, some of the head of steam appears to be coming out of the housing market in any case.
As for affordability concerns, it’s been excellent to see a surge in first homebuyers taking home ownership rates higher, which is something we haven’t been able to say for some years.
Source: Charter Keck Cramer
Full employment remains elusive
As I’ve argued many times, macroprudential settings should default to ‘set and forget’ unless there is clear evidence of a procyclical deterioration in lending standards. There really hasn’t been.
Moreover, a salient lesson from the COVID should be that when households can’t spend on certain discretionary items, then income is quickly reallocated elsewhere.
Mortgagors don’t default when rates rise, but when they don’t have an income – which is why the focus should be on full employment (the trend in interest rates has been down for 30 years now, so mortgage rates could easily be lower a decade from now, if current patterns persist).
At an often fairly jovial House of Reps virtual meeting this week, there didn’t seem to be a huge commitment to getting back to the inflation target quickly.
After all, Dr. Debelle knows full well that headline CPI was only above target due to the base effect from fuel and childcare costs.
The reality is the economy could’ve run plenty quicker than it has been since 2015.
Unfortunately with half of the Aussie population back in lockdown, payrolls have been falling again, and the promising declines in unemployment have probably reversed.