The short version is because the economy is shit.
The new scheme by the government will provide a boost in the $600-750k bracket but it has a cap on the amount of people that can get it so it will run out and we'll go back to general economic sentiment driving house prices.
And look at what else is going on:
- Negative interest rates are now a real possibility, with people starting to advocate for them here in Australia (albeit quietly, to begin with);
- The government is looking to put a "cash ban" in, where you can't make cash purchases above $10k (has that already been passed?);
- (That will make cash more useless, locking it into banks, where there could be a negative interest rate situation);
- The banks have all started changing their T&Cs so that they can run bail-ins if necessary;
- HSBC, for example, now has T&Cs that say that they are not responsible for losing your money even if they could reasonably foresee that they were going to lose your money.
Unemployment is hovering around 5% and not dropping below that, wage growth is stagnant around 2% and GDP Growth is seemingly stuck under an annualised 2.5%. Sooner or later this will take over sentiment again.
In regards to bail-ins - if you're not familiar with that, it essentially means that a bank can take your savings to keep themselves afloat, rather than getting a
bail-out from a government etc. Because you are in essence giving your money to the bank as a loan (you are a creditor to the bank) and the bail in allows the bank to cancel debts it owes to stay afloat, that means it can take your money, which is essentially a loan to the bank. The
Financial Sector Legislation Amendment (Crisis Resolution Powers And Other Measures) Bill 2017 was passed at the beginning of 2018 and now, with the banks starting to change their T&Cs, it starts to have some power.
3 of the 4 big banks have recently changed their T&Cs - not to specifically allow bail-ins but, rather, to allow them to further change their T&Cs immediately, without giving you notice, if they face financial hardship. Now, looking at what HSBC has done, you can see maybe why they have done this...
Now, a lot of the above is nightmare scenario stuff that might seem pie in the sky, however...none of it was there 12 months ago and now all of it is. Negative interest rates being a real "solution" for Australia, the cash ban and the banks maneuvering their T&Cs...the foundation is there for them to all switch to a new financial situation in the blink of an eye.
This wouldn't have been set if the future was all rosy.
Does it mean it will all happen? No, but it means the government and the banks think it's now a real possibility, and that's scary enough in itself.
Now, negative interest rates will help
home owners (by giving them even smaller repayments) but it won't help the
housing market (as no one will be confident enough to buy homes when everything else is going to shit.
Now, if the banks and the government have put in mechanisms for a radical switch to the financial environment, then one can only assume that the forecast for the back end of 2020 is not good.
