Changes are happening - please bear with us while we update our site.

Changes are happening - please bear with us while we update our site. Click here to give us your advice and feedback.

Analysts Say House Prices Are Going To Keep Falling

Australian house prices are going to keep falling according to analysts at National Australia Bank Ltd (ASX:NAB). 

Australian house prices are going to keep falling according to analysts at National Australia Bank Ltd (ASX: NAB).

The prediction that dwelling values will keep declining is based on a comparison to full time worker earnings in Sydney and Melbourne.

How Bad Will Things Get?

The Australian Financial Review quoted a note from National Australia Bank director of Securitisation, Ken Hanton to clients, ““With price-earnings multiples in the major Sydney and Melbourne markets still above their 10-year averages and comfortably above their bottom 25 per cent quartile levels, further declines should probably be expected.

However there is still some way to go before these multiples fall outside the ranges that have existed in the post global financial crisis period.”

According to the AFR, NAB said that dwellings are priced at 5.8x annualised weekly full-time earnings, which is more than the 20-year average of 5.5x. This suggests that house prices could fall by another 5% by my rudimentary calculations.

Over the past five years wages have barely moved after you account for inflation, but house prices have gone up significantly due to falling interest rates and rampant speculation by some investors.

The NAB analysts say there is nothing to be worried about in the residential mortgage backed securities (RMBS) market, however that’s not the view of Christopher Joye from Coolabah Capital Investments, a fixed interest investment manager.

Mr Joye recently wrote in an article in the media: “We’ve updated our analysis revaluing recent RMBS bonds with the latest house price movements to end March, and the results look very ugly indeed with one widely held 2018 issue now 11.5% underwater. That is, 11.5% of all the loans in the one ostensibly AAA rated RMBS issue have negative equity.”

He continued: “The bad news is that as house prices continue to fall, and mortgage arrears continue to climb, these risk metrics are certain to deteriorate…And in 2019 RMBS has been the worst performing sector in the Aussie fixed-income market.”

What’s for certain is that Australian house prices continue to drop every month and with banks continuing to implement tougher lending conditions it is likely house prices will drop for at least a few months yet.

I am certainly wary of investing in shares of NAB, Australia and New Zealand Banking Group (ASX: ANZ), Westpac Banking Corp (ASX: WBC) and Commonwealth Bank of Australia (ASX: CBA). Instead the reliable ASX shares in the free report below.

[ls_content_block id=”14945″ para=”paragraphs”]

[ls_content_block id=”18380″ para=”paragraphs”]

$50,000 per year in passive income from shares? Yes, please!

With interest rates UP, now could be one of the best times to start earning passive income from a portfolio. Imagine earning 4%, 5% — or more — in dividend passive income from the best shares, LICs, or ETFs… it’s like magic.

So how do the best investors do it?

Chief Investment Officer Owen Rask has just released his brand new passive income report. Owen has outlined 10 of his favourite ETFs and shares to watch, his rules for passive income investing, why he would buy ETFs before LICs and more.

You can INSTANTLY access Owen’s report for FREE by CLICKING HERE NOW and creating a 100% FREE Rask Account.

(Psst. By creating a free Rask account, you’ll also get access to 15+ online courses, 1,000+ podcasts, invites to events, a weekly value investing newsletter and more!)

Unsubscribe anytime. Read our TermsFinancial Services GuidePrivacy Policy. We’ll never sell your email address. Our company is Australian owned.

Information warning: The information on this website is published by The Rask Group Pty Ltd (ABN: 36 622 810 995) is limited to factual information or (at most) general financial advice only. That means, the information and advice does not take into account your objectives, financial situation or needs. It is not specific to you, your needs, goals or objectives. Because of that, you should consider if the advice is appropriate to you and your needs, before acting on the information. If you don’t know what your needs are, you should consult a trusted and licensed financial adviser who can provide you with personal financial product advice. In addition, you should obtain and read the product disclosure statement (PDS) before making a decision to acquire a financial product. Please read our Terms and Conditions and Financial Services Guide before using this website. The Rask Group Pty Ltd is a Corporate Authorised Representative (#1280930) of AFSL #383169.

Skip to content