We recently published a new podcast episode where Tiffy (Wealthi CEO) and I discussed the current property market. In our chat, we discussed previous cycles and the fear, uncertainty and doubt, that dents investor sentiment.
There’s no doubt the RBA in Australia’s decision to move rates up again is the primary driver for property price declines. But as I’ve argued in previous months, property prices have a natural floor because the cost of construction is rising while supply becomes harder to deliver every single month.
This is confirmed by Neoval’s data this week which shows Sydney house prices have stopped falling. They only grew by 0.1% over the past month, hardly an increase. But its a flattening of the decline, which is most important.
Neoval is part of the Ray White family and they publish great data. They also have an interesting vantage point into property transactions through their agent network. There’s no doubt that two more rate rises are going to hurt sentiment and prices.
But the market is forward-looking, not backward-looking like the RBA.
One of these forward looking factors is the US election, where as I write, it looks like the Democrats are going to sweep across the board and control both houses of legislature in the US. This will have a profound impact on US politics and policy.
Could the factors that have contributed to global inflation start to unwind?
Tariffs, AI data centres, foreign policy have all impacted global inflation. If markets sell off and asset prices come down in response to the US election outcome, we could see a very different 2027 picture starting to emerge.
And that brings me to the crux. The RBA has always been a rear-view mirror central bank. Moving too late, very often. On the way up and also on the way down, where at 0.1%, they said they couldn’t see rates rising for at least two years. We all know how that ended up.
The RBA voted 6 to 3 to hike rates. No doubt, fearful of inflation. But inflation is a rate of change and next year, the base effects will be very different. Sydney’s property market always moves first, up or down. First to decline, first to recover. It might be in the foothills of a recovery, despite consensus forecasts of more pain.