Experts rubbish Macquarie Bank's price decline forecast: Terry Ryder

Experts rubbish Macquarie Bank's price decline forecast: Terry Ryder
Experts rubbish Macquarie Bank's price decline forecast: Terry Ryder

The overwhelming weight of expert commentary has rubbished Macquarie Bank’s forecast of major price decline in the next 12 months. 

Some media has presented Macquarie’s simplistic analysis, based on Australian as a single property market with a very specific price prediction, as the gospel according to irrefutable economists. But most coverage has been a counter-attack from credible commentators presenting more considered and realistic views of next year’s markets.

Aussie Home Loans chief John Symond said "there's buckley's chance of a price correction." As Property Observer reported on 22 October, Symond told a Sydney investment conference that Sydney's market was nearing its peak, with “steam coming out of the market and sanity coming in”, and predicted a more flat market – but no across-the-board decreases.

And he observed, quite correctly, that there would be differences from one area to the next. "Hot areas will still see a 7-9% gain, in other areas you might see 3-4% and in some other areas a 5% drop," he said. "You have to do your homework." 

Yes, indeed. That is a far more reasoned assessment of the near future than Macquarie’s prediction of a blanket 7.5% decline, apparently everywhere.

Louis Christopher of SQM Research has predicted house price growth in 2016 but at a slower pace than recent years. As an experienced analyst, he knows better than to make a generalised forecast that covers the whole nation as a single market. He has different forecasts for each city and includes three different forecast scenarios in each case, dependent on key events including economic growth, interest rates and the value of the Australian dollar.

In the latest edition of Housing Boom and Bust Report from SQM Research, he predicted Sydney prices will rise between 4% and 9% next year. Melbourne is forecast to overtake Sydney and be the best-performing capital city in 2016 with a rise of between 8% and 13%. 

Christopher said the market overall is unlikely to see price decline for a number of reasons, including the Australian dollar, which is tipped to stay at current low levels or fall further, providing a buffer to the economy and the housing market. 

Raine & Horne executive chairman Angus Raine believes the Macquarie prediction is difficult to substantiate given the current performance of major property markets. He said the level of demand for property and the depth to the market do not indicate a major correction.

Veronica Morgan, the principal of Good Deeds Property Buyers based in Sydney’s inner west, quite rightly criticised the bank for broadcasting the prediction without considering markets on a micro scale.

“It really annoys me when bank PR people get hold of some economic data and suddenly an impending drop in the property market is front-page news,” she said. “Why can I say that this latest prediction will not come true? Because there is really no such thing as an Australian property market. Look at any national property data and you will see that no two capital cities perform in the same way. 

“And then there are regional markets that all have their own cycles to consider. So how can anybody make a claim that the entire country is over-priced or ready for a fall? Even within Sydney there are dozens, probably hundreds, of micro markets."

Business commentator Peter Switzer said the bank forecast "bordered on being stupid", while Andrew Wilson, the senior economist at Domain's Australian Property Monitors, said it was “unbelievably unlikely”.

Wilson noted that, in the past decade, there had not been any national annual drops of more than 5%. “Even in periods where we had prices falling, such as during 2008 when it was the global financial crisis, the national house price fell by just under 4%,” Wilson said. 

Stockland chief Mark Steinert expects house prices to continue to rise next year. His forecast is 3% to 5%.

"There has been quite a lot of talk going on for quite a long time now about the imminent downturn in housing, but no one has mentioned that it hasn't actually eventuated," Steinert told a Property Council lunch in Melbourne. 

"The reality is the economy in Australia is growing at a moderate level of around 2.5%. We have a low Australian dollar, continued population growth (albeit at a slower rate) and metro housing markets that are generally under-supplied. These are not the pre-conditions for some sort of general correction in housing."

There have numerous other commentators on the issue and the general theme is that there will be price growth in 2016 - but, in the case of Sydney especially, the rate of growth will be less.

An alternative view has come from accident-prone Shane Oliver, AMP Capital’s chief economist, who is predicting price decline but not until 2017.

Oliver has probably the worst track record of any economist in predicting real estate events. I could fill several pages with examples, but basically he believes housing is “over-valued” and has been predicting a significant correction for most of the past 10 years.

He clearly is one of those, not unlike another failed forecaster Steve Keen, who believes that if you keep making the same prediction year after year, you’ll eventually get it right.

So Shameless Shane was out there in the media again recently expounding his bubble theories, with claims of over-valuation of housing and predictions that property prices would fall “between 5% and 10%” - which might happen “around 2017”.


Terry Ryder is the founder of You can email him or follow him on Twitter.

Terry Ryder

Terry Ryder

Terry Ryder is the founder of

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