You can be forgiven for believing that the Reserve Bank of Australia is expecting, and is predicting, that our house prices will drop 20%.
After all, that’s what media is telling us, constantly, of late.
Many news media outlets have stated, categorically, that the RBA has forecast a 20% drop in prices.
In fact, many journalists have gone a step forward and stated that house prices WILL fall 20% – without any possibility of it not happening – because the Reserve Bank says so.But here’s the thing: it’s a lie. The Reserve Bank has not made that forecast.
Even if it had, there is little cause for alarm because the RBA has a remarkably poor track record in predicting housing market outcomes – or indeed any other subject, including, rather surprisingly, what the Reserve Bank will do with interest rates in the near future.
Remember that the RBA governor, the dismally untalented Philip Lowe, was telling us as recently as January 2022 that he would not be lifting interest rates any time before 2024.
And then within a matter of months he and his board of boffins started aggressively lifting the official interest rate.
They failed to predict their own actions just a few months into the future – because they failed to accurately forecast what would happen with inflation.
But all of that is academic in this instance because the RBA has NOT forecast a 20% drop in our housing values.
What happened is this:-
The RBA, in the course of its normal activities, is conducting ongoing daily research into a range of topics and then constructing theoretical models of what might happen as a consequence.
It does modelling on what might happen to house prices in certain circumstances, making various assumptions.
Not very successfully, I might add, because its forecasts are seldom correct.
But one of the models put together by some of the RBA boffins was a worst-case scenario – what might happen to property prices if a series of very negative things happened in the economy and the community.
It’s NOT what the RBA is predicting, it’s simply one very negative scenario that was considered a possibility in the worst of circumstances.
The RBA did not publish this because it’s not its central position or expectation.
But journalists got hold of it and, in publishing it, misrepresented it as the RBA’s basic position and what it thinks is the likely outcome.
Journalists do that, quite commonly, and they think it’s okay.
But it’s not okay. It’s dishonest and it’s highly misleading and it causes unnecessary angst and anxiety to everyday consumers.
Australians have been dealing with way too much in the past couple of years.
Bushfires, cyclones, floods, a pandemic, war in Europe, escalating prices for petrol and electricity, soaring supermarket bills, and a lot more.
They don’t need media piling on with outrageous claims that the value of their homes will collapse.
I am certain – and I mean 100% certain – that it won’t happen.
I firmly believe prices will rise in 2023, for a host of reasons.
But many consumers absorb the media soundbites and believe what they’re hearing and reading.
They assume it’s true because it’s the Reserve Bank – and they’re credible, right? – and they read it in The Australian, and they’re credible, right?
But, let me repeat, it isn’t fact.
It’s a wilful distortion of the truth by journalists who don’t give a damn about the impact they have on Australians.
