Its Edwin’s Monday Evening Property Rant!

More coherence from our property insider as we continue to debunk some of the property myths, and focus in on the data.

This week, we touch on official and unofficial scams…

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Today’s post is brought to you by Ribbon Property Consultants.

Life Lessons From Mascot Towers Leaky Lifeboats!

Property owners from Sydney’s infamous, evacuated and faulty Mascot Towers development have until March 20th to react to the NSW government’s multi-tier approach to compensation.

The 132 residential and nine commercial owners of the inner-south apartment block have a chance to walk away from the legal and financial nightmare since the towers were evacuated in June 2019 due to structural cracking.

But owners will lose hundreds of thousands of thousands of dollars if they choose to sell their defect-riddled apartments.

There will also be two support packages available to both owner-occupiers and investors, as long as they meet the means-tested criteria.

But owner occupiers and property investors are in different lanes. And the approach tabled could also have ramifications for owners of apartments in other faulty buildings. This is significant, given that up to half of all new units built could have “serious” defects.

But it also shows how the NSW Government are separating property investors from owners, arguing that investors are taking a commercial risk, and potentially can offset losses from other investments.

Clearly there are no winners here, other than perhaps the original developers, but more broadly this is another warning to anyone considering buying into a high-rise development, either off the plan, or in a subsequent sale purchase. With limited Government capacity to solve the problem, many risk losing hard cash, remember Caveat Emptor, Let the Buyer Beware!

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Today’s post is brought to you by Ribbon Property Consultants.

The Market’s Uncertainty Principle…

This is our latest weekly market update.

Formulated by the German physicist and Nobel laureate Werner Heisenberg in 1927, the uncertainty principle states that we cannot know both the position and speed of a particle, such as a photon or electron, with perfect accuracy; the more we nail down the particle’s position, the less we know about its speed and vice versa.

I think the same can be said of the markets, as light is dawning that its hard to pin down the true vectors of inflation, and so market value as bonds yields are tending to rise, despite the expectation of rate cuts from Central Bankers soon. As a result, the US$ and US markets, alongside Japan seem more in favour than Europe, while gold and crypto might be risk shelters, or not.

But overall, the past week was an object lesson in uncertainty, as emerging data questioned analysts’ assumptions as we saw weekly declines that snaped seven straight weekly gains, while the dollar rose and was on track for its strongest week since mid-January, as U.S. inflation data has diluted hopes for interest rate cuts. Plus, we had the triple Witching, which always adds uncertainty.

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Duck Shooting Season For BNPL?

Buy Now Pay Later loans are finally being finally recognised and regulated as a form of credit, despite the industry saying they do not provide credit. But as I have said before, if it quacks like a duck and swims like a duck – it’s a duck.
Given that up to one third of households have used some form of Buy Now Pay Later in the past year, these reforms are long overdue, not least because we see a high correlation between financial stress and the use of these facilities, and a proliferation of BNPL being used for everyday expenses, energy bills and other essentials, as well as for bigger items like solar panels.

And more than 20% of users end up paying late payment and other fees, and many also can hold multiple BNPL debts at the same time, meantime their finances are not under control. The regulations have come about after concerns that the unregulated nature of BNPL was resulting in lenders charging excessive late payment fees and engaging in unaffordable lending practices that led some customers to experience financial hardship and stress.

So now the government has announced its plans to regulate the buy now pay later (BNPL) sector and consumers could see some big differences to the fees they pay, how they apply for credit and the impact on their credit rating and is now consulting on its plans until mid-April before finalising the legislation, which will probably be introduced into parliament in the second half of this year. The new laws will take effect six months later.

I think the arrangements for small loans of 2000 and below are still too weak, because we see households holding multiple loans at the same time, so the regulations should be higher here. On the other hand given the current tight financial conditions it is important not to cut desperate people off from some financial options other than going to unregulated loan sharks, which do still operate in some more deprived areas.

The underlying issues are the fact that use of credit has now become normalised by society and the financial services industry, when for some households this just creates problems, which ultimately put them in a worse financial position, and of course high inflation costs and low wages growth are a catalyst for financial distress. This is not nanny state intervention, but rather a further small but critical steps to help people make better financial decisions.
However, a bigger emphasis on financial education in schools and a more cautionary approach to debt would ultimately improve the lot of so many Australians. But at least this particular duck is now being recognised for what it is.

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Only A People’s Bank Will Tame The Savage Beast: With Robbie Barwick

Robbie Barwick and I parse the latest from the Regional Banking Inquiry. The Senators are on the scent now, and Bankwest got a right pasting…

Here’s the press release this is from:

https://citizensparty.org.au/media-releases/bankwest-betrayal-west-aussies-test-government

Here’s the details. What you can do: Call and email WA Labor MPs to demand they stand up to BankWest and CBA and tell their boss Anthony Albanese to re-establish a People’s Bank:

Member for Tangney Sam Lim Ph: (08) 9354 9633 Email: Sam.Lim.MP@aph.gov.au
Member for Hasluck Tania Lawrence Ph: (08) 6245 3340 Email: Tania.Lawrence.MP@aph.gov.au
Member for Pearce Tracey Roberts Ph: (08) 6500 6499 Email: Tracey.Roberts.MP@aph.gov.au
Member for Swan Zaneta Mascarenhas Ph: (08) 9355 0099 Email: Zaneta.Mascarenhas.MP@aph.gov.au
Member for Cowan Dr Anne Aly Ph: (08) 9409 4517 Email: Anne.Aly.MP@aph.gov.au
Member for Burt Matt Keogh Ph: (08) 9390 0180 Email: Matt.Keogh.MP@aph.gov.au
Member for Perth Patrick Gorman Ph: (08) 9272 3411 Email: Patrick.Gorman.MP@aph.gov.au
Member for Brand Madeleine King Ph: (08) 9527 9377 Email: Madeleine.King.MP@aph.gov.au
Member for Fremantle Josh Wilson Ph: (08) 9335 8555 Email: Josh.Wilson.MP@aph.gov.au

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Are You Feeling Wealthy?

The ABS says the total value of residential dwellings in Australia rose by $196.8 billion to $10,397.1 billion in the past quarter.

But these gross values are misleading because they are not equally distributed across all households. To illustrate this, I extracted current value data from my household surveys and created a distribution chart across all households, including both investment and owner-occupied holdings, based on a mark to market at end February 2024.

So we can see, standing back, that while some households will be feeling wealthy and celebrating the massive rise in home prices in recent years, many others are excluded, will be paying more for a rental, and will have very little or no financial assets at all.

So, it seems that Australia’s egalitarian roots have been sacrificed on the property population Ponzi. No wonder, those is charge do not want to rock the boat – the truth is there is a majority of potential voters benefiting from the property game. Its all a bit of a mess.

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Today’s post is brought to you by Ribbon Property Consultants.

Look No Home Loan! Another Market Distortion!

PEXA just released their second edition of their Cash Purchases Report which highlights residential property transactions that were funded entirely with cash. That is, residential properties purchased without a home loan. The share of mortgage-free transactions rose by 2.9 percentage points to 28.5 per cent of all home sales.

And this is important, because it helps to explain the apparent contradiction between the rise in property prices at a time when mortgage interest rates have also risen, a weird combination to say the least.

Some migrants, from the near 1 million arriving, come with sufficient cash to buy, as well as many downsizing Australians who have enjoyed the capital growth in recent years. So there is an ever larger portion of buyers that will be relatively unaffected by rising interest rates. This is another example of unequal access to housing, at the expense of mortgaged borrowers, especially in a higher interest rate environment.

Mortgage borrowers are being punished for the exuberance in demand for cash buyers. And more broadly, interest rates will remain higher for longer, because the interest rate lever is less powerful which gives the RBA and every Australian an inflation headache.

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Today’s post is brought to you by Ribbon Property Consultants.

DFA Live Q&A HD Replay: Household Financial Stress Analysis: Deep Dive

This is an edited version of my live discussion about the latest from our surveys, as we look at mortgage, rental, investor and financial stress across the country, down to a post code level.

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Its Edwin’s Monday Evening Property Rant!

Another chat with our property insider Edwin Almeida, as we look at the latest from the market. More supply questions, as construction costs rise, while some plan to offer zero deposit loans to attract voters.

Meantime the rental crisis deepens and opinion is divided in the WeeChat sphere.

The craziness continues…

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Today’s post is brought to you by Ribbon Property Consultants.

“Deaf” Bankers Called To Account!

The Commonwealth Bank subsidiary Bankwest, the 130-year-old former Bank of Western Australia bank announced last Wednesday that it was moving to become a digital-only bank and would close 45 locations in the state. The 45 Bankwest branches that have been earmarked for closure will close their doors by October this year. There are 28 locations in Perth and 17 in regional WA. A further 15 branches will be rebranded under the Commonwealth Bank banner and are expected to finish their transformation by the end of the year.

Yes, this is the same CBA whose CEO Mat Comyn on 20th September 2023 in a statement to the Senate Inquiry into regional branch closures promised not to close more branches until at least 2026, even though they specifically excluded Bankwest from their statement, while saying “we recognise the unique and important contribution that regional Australia makes to our country”. “Our decision to pause regional branch closures is also predicated on customers and communities valuing our decision to stay”.

Committee member Senator Richard Colbeck said the Senate committee has been hearing plenty of people raising concerns about the vital banking services being lost.

“Every week in our hearings we hear from local communities how important these essential services are and how their communities are affected, yet those who are given a license to provide those services, the so-called service sector, continuously ignore those pleas and withdraw services – it is as though their ears were painted on,” he said.

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