House prices are rolling over around the world and Hartnett is right: the fall in Australian prices is grim.“Aussie house prices in August fall by fastest rate in 30 years,” Hartnett wrote in his famous staccato style, pointing to a chart of the same.
He argues that “nominal growth continues to be boosted by inflation, fiscal stimulus, past era of wealth accumulation” but a recession is coming, starting in Europe and spreading to the US. With household debt levels higher than they’ve ever been, prices will have less scope to spring back as they’ve done in the past.And if Hartnett is right about persistent inflation, a return to the ultra-low rates that pushed prices sky-high is likely over. A deeper fall in house prices could well be followed by a slower recovery.The first is history: there are reasons this has beenAustralian investors love dividends and they love their banks, which are among our most consistent dividend payers.
The other counterpoint to Hartnett’s view is that the banks are likely entering a period of margin expansion as interest rates rise.