I’ve spent 25 years researching and commenting on the Australian residential property market, working with some of the sector’s biggest names. Now, I’m offering my expertise directly to businesses and individuals through Kusher Consulting. 1/

The next increase in the cash rate will take it of 4.85% (or higher if they decide to increase by more than 25 basis points). I expect this will happen next week. This would be the highest cash rate since late in 2008 when the RBA was aggressively cutting rates during the GFC - that was 18 years ago now! The RBA has said that inflation outcomes have proven to be worse than their forecasts just 3 months ago so it seems like it should be an easy decision next week, but who knows. My focus is the property market and the RBA has been at pains to state they don't worry about lower house prices, which they shouldn't. But the longer the market falls and the longer sales volumes are depressed the greater the risk of a broader economic slowdown because housing is our largest asset class and largest store of wealth. I know the RBA was in front of the Senate today and said they see no signs of a recession. I strongly believe these signs will come as interest rates remain elevated, likely increase again next week, and possibly rise further in early 2027. Cash rate futures pricing doesn't have any rate cuts priced in for the next 18 months. I think they are significantly underestimating the hole that the economy starts to fall into in 2027 as rates remained elevated and economic activity slows. The big question will be what happens in the Middle East and whether inflation can be contained. How do you see things?

At least the cost of buying an established home isn’t rising because the cost of most other things are.

YET! If rates keep rising and the largest asset class keeps falling the signs will come.

If you are going to bet Melbourne Cup day, The Cup is a terrible race to bet on, bet on a rate hike from the RBA.

The largest quarterly jump in headline inflation (+2.3%) since the GST was introduced in the Sep 00 quarter. Not good.

Look at these falls but also understand that even daily home value indices lag actual market conditions (just look at how much lower falls are being revised each month) the decline in these markets are quite a bit larger than what these indices show (and they are already showing large rapid falls).

Just because we are said to have an undersupply of housing in Australia, it isn't a guarantee there is a floor on housing prices or that prices will rise. Many inner city apartments, particularly in Melbourne, sit at prices well below replacement price. Personally I'd like to own several properties, one at the beach, one in the country and one in the city but I can't afford them all. The price of housing matters a lot, just because there's an undersupply it doesn't guarantee that prices will rise, especially if the price of homes is out of reach of purchasers. People will choose to stay where they are, choose to not buy and they will form larger households. None of these options are neccessarily the preference of that person, but the price of housing weighs on everyone and will for many force these decisions on them.

I don't know that I really agree here. Sure 50 years ago somewhere affordable might have been 15km from the CBD, today somewhere affordable might be 60km. Even if the outskirts over the next 50 years ends up being 120km from the CBD the property 15km away will be significantly more desirable and valuable than the one 60km away.

Housing demand limits supply not construction productivity. kusherconsulting.substack.co…

It’s just very disappointing the RBA didn’t have the gumption to seriously tackle inflation in 2022 and 2023, sure the Middle Easy would be causing issues now but domestic inflationary pressures (of which there are still many) would have largely been contained.

Just reading the transcript of the Sarah Hunter interview with 60 Minutes, another rate hike is clearly coming, quite possibly several more too.

Is it just me or is it very weird how many times it is mentioned in this article that Tim Gurner is a billionaire?

I think this is spot on. Albo and Chalmers are big fans of Keating, what if they actually came out and said our economy needs a reset and it’s going into a downturn? It will be painful w’re going to do what we can to help those struggling but we’ll come out the other side stronger. Never in a million years do I think they would do that but it’d probably be the right thing to do.

Double whammy predicted for new home building - from the AFR. It's hard to see how there is a short-term recovery in the new homes market. Interest rates are up, construction costs are still rising for new homes whilst established prices are falling, substantially and rapidly in some markets. Buyer numbers have evaportated and for those that are still looking to buy it is going to be hard for them, when borrowing capacity is reduced, to justify the premium for new homes if existing homes are cheaper (even if they aren't getting exactly what they want in an established property). My sense is that what is going to happen is rates will increase again and then possibly another time next year. Buyer numbers will reduce even further, some developers will end up selling sites and projects at a discount to what they purchased it for and land prices will reset lower. It's hard to imagine construction prices reducing but there is certainly scope for land prices to fall especially considering how much they have escalated over recent year. What do you think? afr.com/property/residential…

Our cities have to grow and we have choices how that should be but I think it is a discussion that needs to be had with the whole community. How do we want our cities to look in 50 years? High rise towers everywhere? Medium density everywhere? Urban sprawl? A mix of all three? People are just trying to impart their preferences on the rest of the community I think it is a very important discussion that needs to be had and not just at an individual council area or city level, nationwide.

Good summary of Hauser's comments this morning. In terms of the dual mandate, we accepted an unemployment rate of 5% or more every single month except for two months between Feb 09 and Jun 21. Jobs werr still created and the economy still grew too. The dual mandate is putting too much focus on the unemployment rate when it is still sub 5%. Annual underlying inflation has now only been back in the RBAs target range for two months since March 2022. I don't want to sound heartless because unemployment sucks (I've been through it I know) but unemployment hurts some people, ongoing high rates of inflation hurt everyone. IMO the RBA and the government should get serious of doing whatever they can do to curtail inflation. Even still I think they won't hike in November but may in December. afr.com/policy/economy/hard-…

Hauser with some extremely hawkish comments in this Fireside Chat. I wonder if the RBA reflects on their narrow path and realises they have made things worse for longer? (I realise even if inflation was back in target we'd possibly be looking at rate hikes still).

Yesterday I shared some thoughts about rising construction costs, the Housing Accord target and the outlook for home construction with @MackenzieJScott at @australian. In basic terms construction costs are rising, this along with rising interest rates is probably going to result in a dmapening of commencements and leave the Housing Accord target further away. For developers and builders it is going to be hard to pass these additional costs on to purchasers given how much costs have risen in the past five years and the fact that established housing prices are falling. theaustralian.com.au/nation/…