No I don’t have a definitive answer but I do think the immigration led house price boom in Australia is going to come to an end quite soon. It’s already happened in NZ and Canada according to MB here and here (free articles).
ON is now leading laberal in primary votes. One way or another, migration is going to fall. Some questions that need answering to prepare:
- Will this mean that house prices fall?
- If so by how much and at what rate?
- What will be the consequences for the wider economy (ie jobs)?
Thoughts on these:
1 & 2: House prices look to have stabilised in NZ under low population growth after a steep fall. In restricted immigration Canada they are grinding lower after a steep fall. I reckon house prices in Australia will follow a similar pattern: a 10-20% drop in the first year followed by either stabilisation or grinding lower depending on the government of the day. Under ON, I expect griding lower. If low population growth is delivered by LNP, or god forbid, Labor, I expect stabilisation. Interest rates should fall, at least initially, since demand will be lower compared to supply, keeping a lid on consumer prices and preventing forced owner occupier sales.
3. Lower immigration should good for employment rates and wages, but low quality service roles (uber eats and nail salons) should become uneconomic. I note how inflation in groceries has reaccelerated. Not entirely sure why, but maybe our argicultural system is coming under pressure. After all, farmers and market gardens have been fed cheap migrant labor for so long they haven’t had to innovate. Productivity should rise, hence wages. I don’t know if the growth in wages will be enough to compensate for the attenuation of migrant demand in terms of housing. I think wages are likely to lag productivity growth.
There are more and more pieces in the AFR on how young people are being denied housing. Here’s 3 I found on the afr.com on one day:
The political pressure will only grow as older housed people become outnumbered by younger renters. I have long said that when home ownership rates drop below a threshold, house price boosting policies will come under pressure. A lower bound for that threshold would be 50% of the electorate. There’s a nice chart on this page showing how the decline in outright ownership has been non stop since 1995. I think that is the key number. I think it’s already crossed the threshold. Pressure to stop house prices rising will continue to mount. Young men have been breaking for a while now. If they decide to work together and fight back instead of pretending to be women, things will change fast.
Can you protect the value stored in your house with hedging? Yes. You could sell a call option on your house, although there isn’t a liquid market for trading such things, you might find a buyer using an internet forums, or even facebook marketplace. I’d go for exercise only at expiry (european style), set after the next election. Otherwise you could refinance or redraw, and invest the money in things that will go the other way as house prices fall, probably defensive stocks (HALO is the flavour right now) or gold.
In the background is simmering geopoliticial and ideological tension. AI and robotics are going change everything, including agriculture and war. Not an easy time to be allocating capital.