Are you ready for the ‘great reset’?
Thursday, 2 August 2018
By Bernd Struben
- Property declines accelerating
- US$50 Billion in New Tariffs Could Lock China Out of US Markets
‘You probably sense we’re at some kind of juncture… Australian property is teetering.’
Harry S Dent
You may be familiar with renowned economic futurist Harry Dent. Perhaps you’ve even read his latest book already.
His forecasts might not be the most uplifting. But his track record in predicting major crises is second to none.
That includes forecasting Japan’s 1989 crash at a time when every other analyst believed Japan’s economy was an unshakeable powerhouse. Not to mention accurately foretelling the dotcom crash, the GFC and many other looming events that mainstream analysts couldn’t wrap their brains around.
Harry’s not like the vast majority of economists, who prefer to make safe calls closely aligned with their peers. Quite the contrary. He’s not afraid to put his neck — and reputation — on the line to make the tough calls when the evidence stacks up.
Harry has long had his finger on the pulse of the US economy. But lately he’s taken a professional interest in Australia. And what he’s uncovered is enough to keep most Australians awake at night.
But closing your eyes to the truth in exchange for a good night’s rest won’t make that truth go away.
In his new bestselling book, Zero Hour, Harry explains exactly why he sees Australia heading into ‘Economic Winter’. And why house prices in the capital cities won’t just fall by 10–20%, but by 50%…or more.
(You can find out how to get your discounted copy here.)
More after the markets.
Overnight the Dow Jones Industrial Average closed down 81.37 points, or 0.32%.
The S&P 500 fell 2.93 points, or 0.10%.
In Europe, the Euro Stoxx 50 index finished down 16.26 points, or 0.46%. Meanwhile, the FTSE 100 lost 1.24%, and Germany’s DAX dropped 68.45 points, or 0.53%.
In Asian markets, Japan’s Nikkei 225 is down 225.22 points, or 0.99%. China’s CSI 300 is down a whopping 3.09%.
In Australia, the S&P/ASX 200 is down 26.11 points, or 0.42%.
On the commodities markets, oil nudged down overnight. West Texas Intermediate crude oil is US$68.00 per barrel. Brent crude is US$72.83 per barrel.
Turning to gold, the yellow metal is trading for US$1,220.24 (AU$1,647.19) per troy ounce. Silver is US$15.44 (AU$20.84) per troy ounce.
One bitcoin is worth US$7,7661.63.
The Aussie dollar is worth 74.08 US cents.
Property declines accelerating
I opened with a quote from Harry Dent today for a reason.
That’s because the Australian house price crash he predicts for 2019–2020 may already be unfolding as you read this.
This headline comes from Bloomberg, ‘Australia House Prices Fall the Most in 7 Years’. The article continues:
‘National dwelling values dropped 0.6 percent last month — the biggest fall since September 2011 — as declines in Sydney and Melbourne accelerated, according to CoreLogic Inc. data released Wednesday. Prices have now fallen for 10 straight months due to a combination of lending curbs, stretched affordability and reduced investor demand…
‘“We can’t see any factors that may halt or reverse the housing markets’ trajectory of subtle declines over the second half of 2018,” CoreLogic’s head of research Tim Lawless said. “The availability of housing credit has been a significant factor contributing to this slowdown.”’
Melbourne suffered the biggest monthly drop, down 0.92% in July. That fall was enough to send Melbourne dwellings into negative territory — down 0.52% — over the past year.
That’s not great news to Melbournian property owners. Though Sydneysiders have fared significantly worse. The average Sydney dwelling is down 5.39%, while the average house price has fallen 7.01% year-on-year, according to CoreLogic.
You can see the sharp reversal in trend, commencing one year ago today, in the graph below:
Source: CoreLogic / Bloomberg
Click to enlarge
CoreLogic’s Tim Lawless doesn’t foresee anything that will stop ‘subtle declines over the second half of 2018’ from continuing.
I’m sure Harry Dent would agree with the view of continued price declines…except for the ‘subtle’ part.
Here’s what he writes about the Aussie property market:
‘As I show on page 203 of my book, the “high-end” economies tend to collapse the fastest and hardest in ‘Zero Hour’ events. And Australia is right up there in the top five…
‘I believe your property market, for instance, is very much like Manhattan’s right at the dawn of the 1930s. Real estate there dropped 64%. It took until 1954 — 21 years — to return to bubble highs.
‘Can you imagine that happening in Sydney, Melbourne, Brisbane and Perth?
‘Sydney’s real estate bubble, for instance, began to inflate exponentially in 2001.
‘It’s taken 17 years to advance well over three times.
‘Like San Francisco, Sydney was already expensive before the bubble.
‘Now it’s just ludicrous.
‘Same in Melbourne and Brisbane.’
If you look at what $1 million will buy you in the leafy inner suburbs of Melbourne or Sydney, ludicrous is exactly the word that comes to mind.
If you have another look at the graph above, you’ll see that in May 2017 alone, the average home prices leapt 11.4%.
Driven by a decade of ever-lower interest rates, a surge in foreign investors, and tax incentives like negative gearing to draw in local investors, rocketing prices were never going to be sustainable.
Last month my wife and I decided to test the waters and went ‘window shopping’ for free standing homes in Melbourne’s Bayside area. And we discovered that $1 million will get you…nothing. Even a quarter acre empty lot within walking distance of the beach went for more than that.
As we didn’t fancy living in a tent — and weren’t keen to buy near the height of bubble territory — we decided to pass on that one.
Time will tell whether waiting for the bottom to fall out of the housing market pays off.
But Harry Dent isn’t alone in predicting a major correction.
From The Australian Financial Review (AFR):
‘Sydney and Melbourne house prices could fall by 15 to 20 per cent in a repeat of the late 1980s and ’90s, an independent equity research firm has argued, citing the “largest regulatory credit crunch in 30 years” as the cause for the slide in property values.
‘Endeavour Equity Strategy said in a detailed 30-page report that more evidence had emerged to support its claims that about 40 per cent of all mortgages were “non-prime”, based on the level of borrower’s income relative to debts…’
Then there was this, also from the AFR:
‘LJ Hooker’s Peter Tannous has his work cut out for him in Sydney’s west, where he is now either coaxing desperate homeowners to close the sale of their properties quickly before the market dips again or consoling those who have sold at a loss.’
This time last year, who would have thought we’d be hearing about ‘desperate homeowners’ being urged to sell before the market dips again. Or those who’d already sold for a loss, for that matter.
Harry Dent. That’s who.
In his new book, Zero Hour, you’ll discover exactly how he’s able to make his uncannily accurate predictions.
But it’s far more than just doom and gloom.
As Harry says, ‘There won’t just be financial losers when “The Great Reset” hits.’
To discover how to place yourself on the winning side of ‘The Great Reset’, go here.
Finally, here’s the latest on the brewing trade disputes from The Australian Tribune:
‘US$50 Billion in New Tariffs Could Lock China Out of US Markets’
‘If the Chinese government was hoping to see US President Donald Trump blink in the ongoing trade dispute, those hopes have been dashed.
‘Trump is seeking to ratchet up pressure on China for trade concessions by proposing a higher 25% tariff on US$200 billion worth of Chinese imports, his administration says.
‘A bit of quick maths reveals that…’
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