Let’s stop the unhinged property and interest rate hysteria

Even if house prices have fallen 15 per cent since the RBA started its latest round of rate rises, the vast majority of homeowners are sitting on huge tax-free gains over the past 10 years.

Please. Enough already. Can we stop the utterly unhinged hysteria over supposedly catastrophically plunging property prices?

Can we also stop with the associated hysteria over the Reserve Bank’s interest rate increases – so far, from all-but free money to only slightly less than all-but free money for borrowers?

And still a negative real interest rate for home loan borrowers. The co-hysterics-in-chief - among many - seem to be the Financial Review’s occasional columnist Christopher Joye and the boys at the macrobusiness website.

Their - I was going to write ‘comments’ but really the only accurate word is – ravings are drenched with words such as “free-fall”, “horrifying”, “smashes”. Their use of words like “collapse” and “plunge” seem also mild in comparison.

What is completely lost in their unhinged rantings is any sense of context or even basic arithmetic. The sheer blinding stupidity is rather neatly and of course utterly unknowingly captured by macrobusiness, which is simultaneously – again the only word is – raving about the punishing “housing affordability” for first home buyers.

Gee, I wonder if there’s a connection. Maybe houses are “unaffordable” because they are - what’s that word? = expensive?

That, despite the recent – in the broader scheme of things mild - price falls, house prices generally are ludicrous multiples of incomes. OK, let’s accept that house prices might – and I stress that word might – have fallen 10-15 per cent since the Reserve Bank started raising interest rates. Maybe even 20 per cent in Sydney.

The vast majority of home owners would still be sitting on huge tax-free capital gains over the past 10 years.

But that is off prices which, according to the Australian Bureau of Statistics has increased – I might even venture the word “leapt’ –between 65 per cent (Brisbane) and 120 per cent (Sydney) down the east coast since 2011.

The average for Australia, according to the ABS, was 84 per cent – just about the 86 per cent average property price rise in Melbourne in the 10 years.

So, if house prices have fallen 15 per cent – and that’s by no means clear – Sydney prices would still be nearly 90 per cent up on 2011 and Melbourne prices by nearly 60 per cent up.

The vast, and I mean, the vast majority of home owners would still be sitting on huge tax-free capital gains that were way, way ahead of ordinary inflation over the 10 years.

As I have to keep explaining, the overwhelming majority of people who go out to buy a property each weekend have either already cashed in a massive tax-free gain or are moving into investment properties off the back of massive unrealised gains on existing properties.

For the first time in pretty close to 20 years, first home buyers are actually getting – just a bit of – a break.

Yes, they have to trim their expectations because those rate rises mean they have to borrow less than when money was almost literally free through Covid.

But they might be getting the property at a more realistic price level, relative to income and values in the economy generally.

It seems to be that commentators like Joye and the MB boys – as boys they are; they seem to have a collective memory going all the way back to around 2009 – are essentially demanding two things.

That property must never – and I mean never - fall in price.

If rises have been galloping, thanks to zero interest rates around the globe, that must be the base for prices going forward.

Secondly, interest rates must never go up; even from the ludicrous free money level of the Covid era – albeit, all the way back, disgracefully, to 2008 in the US courtesy of the thoroughly corrupt Fed.

Right now inflation is 8 per cent. Can they understand that an official RBA rate of 2.35 per cent is negative 5 per cent-plus.

Apparently not.