Open home queues
There have been some examples of surprisingly strong property sales in recent weeks, confounding the expert observers, and Sydney actually recorded a preliminary auction clearance rate of above 75 per cent yesterday.
Source: Domain
CoreLogic put the preliminary clearance rate for the week in Sydney at 78 per cent, the highest in a year.
Stock levels are very low, and buyers are getting out and about.
You can argue about the underlying reasons for these dynamics.
'System one' thinking, as described by Daniel Kahneman, is that interest rates have been rising, so asset prices must decline equivalently.
But with full employment and stamp duty exemptions reinvigorating the housing market in New South Wales, some homebuyers appear to be looking further ahead with a 'System two' mindset at projections for record high population growth, soaring rents, declining dwelling starts, and a possible imminent peak in interest rates.
Zooming out
Moreover, the trendline for interest rates over the past four decades has only been one-way travel...towards zero.
Although the global lockdown measures implemented due to the pandemic and the Ukraine war have caused massive - and perhaps unprecedented - supply shocks and supply chain disruption, today Australia's 10-year bond yield is still only trading at a bit under 3.8 per cent.
Arguably not too much has changed from a structural perspective since the low inflation world of 2019 and before, while accelerating technology developments - such as in the AI and ChatGPT space, for example - could prove to be a significant deflationary shock.
Historically, monetary tightening cycles always break something sooner or later, and perhaps we could be back on the way towards near-zero interest rates earlier than we think?
