Martin North – Page 11 – Digital Finance Analytics (DFA) Blog

Where Property Is Falling (and Rising)… And Why…

The gap between average prices and affordability has widened substantially, and it is unlikely things will turn around anytime soon. And rate cuts are far from certain in the short term.

If you deep dive into where home prices have risen and fallen over the past year, it reinforces the need to go granular to understand what is really going on.

A long period of higher interest rates has put significant pressure on prices in wealthier areas, with some investors forced to sell adding to stock on the market, even as prospective buyers become more reluctant about taking out a large mortgage, coupled with a fear of buying in at current heady levels.

Many properties in areas traditionally been held by investors, have begun to sell as interest rates made breaking even more difficult.

Younger Australians are facing to get into the market unless they previously owned a home (and have accumulated housing equity) or receive money from family members (the bank of mum and dad).

Thus, as never before its important to go granular to understand what is really happening and also avoid simplistic fixes which are politically popular. Fixing housing affordability will take a generation and will require some degree of price correction. Generally, stand alone houses will do better than units in this environment, but again it is important so study the local area and avoid generalisations.

Finally, perhaps its time to move away from the fixation on rising property prices, and regard a home as a place of shelter, not a financial investment. That may not be a popular view, but to me it has great merit. Though the question is – can the genie be put back in the financialisation bottle? Not unless politicians change tack.

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

If you are buying your home in Sydney’s contentious market, you do not need to stand alone. This is the time you need to have Edwin from Ribbon Property Consultants standing along side you.

Buying property, is both challenging and adversarial. The vendor has a professional on their side.

Emotions run high – price discovery and price transparency are hard to find – then there is the wasted time and financial investment you make.

Edwin understands your needs. So why not engage a licensed professional to stand alongside you. With RPC you know you have: experience, knowledge, and master negotiators, looking after your best interest.

Shoot Ribbon an email on info@ribbonproperty.com.au & use promo code: DFA-WTW/MARTIN to receive your 10% DISCOUNT OFFER.

Uncertainty Rules As Markets Face A Wicked New Year!

This is our weekly market update, starting in the US, Europe, Asia and ending in Australia, covering crypto and commodities along the way.

2024 ended up as an eventful year for markets, as many stock indices recorded sizeable double-digit gains, though with significant volatility. But the start of 2025 could well mark a shift in tone, with the MSCI global index down 2.08% over the past week. US stock indices were slightly in the red at the start of the new year too, encapsulating the overall market uncertainty about the short-term outlook. Inflows into U.S. equity funds fell sharply in the week through Jan. 1 hit by rising Treasury yields and year-end profit- taking, along with concerns about a slower pace of Federal Reserve rate reductions this year. U.S. equity funds received just $490 million worth of investments during the week, significantly smaller than the $20.46 billion in net purchases in the week before.

But on Friday The Dow Jones Industrial Average rose 0.80%, to 42,732.13, the S&P 500 gained 1.26%, to 5,942.47 and the Nasdaq Composite gained 1.77%, to 19,621.68. Even so, all three indexes posted modest declines for the week, with the S&P 500 logging its third weekly loss in four.

Australian shares shrugged off a decline on Wall Street to close higher on Friday, buoyed by a rally in energy stocks. The S&P/ASX 200 closed at 8250.50 up 0.6 per cent. The All Ordinaries index closed at 8511.9. On Thursday and Friday, the benchmark pared back earlier losses in the holiday-shortened week for a flat four-day return.

Australian investors looking to the US for better returns, with Wall Street focused exchange-traded funds reportedly pulling in at least $5 billion from Australian investors in 2024, eclipsing the record of $2.5 billion set in 2021, according to preliminary flows data compiled by ETF provider Global X. The billions of investor capital flooding into the world’s No.1 market represents a bet that US equities will continue to outpace their global peers – including Australia – for the second year running, capping a 23 per cent gain in 2024 atop a 24 per cent rise a year earlier.

http://www.martinnorth.com/

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Australian Home Prices Teeter On A High Cliff…

Well, there should be no surprise that home price growth is easing, and indeed prices are falling in some places up to the end of the year, as a combination of higher for longer interest rates, broader financial pressures, reduced borrowing capacity and even easing migration are all taking their toll. This despite assurances from Clare O’Neil that prices would not drop.

The reality is that gravity is finally catching up with the market. Many observers expected home prices to fall in response to the Reserve Bank of Australia’s (RBA) aggressive interest rate hikes, which made property significantly more expensive. However, prices defied gravity and increased due to record net overseas migration and acute stock shortages. But as a result, Australian property values have decoupled from borrowing capacity, resulting in historically low affordability. Realistically, home prices will continue to fall until the RBA cuts interest rates, increasing affordability and borrowing capacity. But even then, growth will be anemic at best, This is consistent with our three scenarios and our base case as reported in recent months.

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

If you are buying your home in Sydney’s contentious market, you do not need to stand alone. This is the time you need to have Edwin from Ribbon Property Consultants standing along side you.

Buying property, is both challenging and adversarial. The vendor has a professional on their side.

Emotions run high – price discovery and price transparency are hard to find – then there is the wasted time and financial investment you make.

Shoot Ribbon an email on info@ribbonproperty.com.au & use promo code: DFA-WTW/MARTIN to receive your 10% DISCOUNT OFFER.

From Here, Where For The Markets?

This is our weekly market update where we start in the US, cross to Europe and Asia and end in Australia, covering commodities and crypto on the way. And as this is the last full trading week, we will also look back at the last year.

There is a nice meme going round, highlighting that high priced stocks attract, others do not, but that does also beg the question, should we follow the crowd – and is the smart money or dump money lurking there? Sometimes its better to zig when everyone else zags!

The MSCI global index was down 0.59% on Friday, through up 0.88% across the week, and the one-year return was 17.14%, as we will see, driven by tech and US markets in the main. Remember though that light trading and short hours mean the markets are capable of giving deceptive signals this past week.

AMP’s head of investment strategy, Shane Oliver, is warning of a “volatile ride” given the sharemarket’s stretched valuations – the ASX 200 is trading at more than 18 times forecast earnings – and heightened geopolitical risk as Donald Trump returns to the White House. Still, Dr Oliver is tipping the ASX 200 to achieve 8800 points. He said the prospect of better growth in late 2025 should deliver “ok investment returns” with the caveat that a 15 per cent market correction during the year was “highly likely”.

JPMorgan’s Jason Steed is adopting a bearish footing, tipping Australia to be the only major sharemarket to decline in 2025. His target of 7900 implies a decline of about 6 per cent from current levels because of a weaker economic backdrop with gross domestic product below 2 per cent, and a softening earnings outlook.

Finally, in crypto. The overall cryptocurrency market capitalisation approached $3.8 trillion, nearly doubling over the past year. To the surprise of many, 11 bitcoin (spot) ETFs were approved by the SEC early January. Since launch, they have attracted more than $40 billion net inflows and their cumulated assets under management are almost as large as those held by Gold ETFs.

Looking ahead to 2025, an especially complex and uncertain future awaits. Expect a reacceleration of US inflation which will cause the FED to pause more cuts, and add-in the possibility of serious geopolitical shocks, and it is easy to get anxious.

The future is complicated by the advent of the new Trump regime, which renders so many different potential paths and potentially false signals. The partnership between Trump and Elon Musk could be key, if that relationship survives. But given the stretched market valuations and rising inflation risks, as global debt expands further, perhaps its not that surprising that some are taking profits, and waiting to see what happens next. Time will tell.

http://www.martinnorth.com/

Details of our one to one service are here: https://digitalfinanceanalytics.com/blog/dfa-one-to-one/

Go to the Walk The World Universe at https://walktheworld.com.au/

Get Your Finances Sorted This Twix-Mass!

The space between Christmas and New Year is often a nothing burger, as we wait for the old year to finally go and new one to arrive.

But this offers the perfect opportunity to check over your finances and ensure you have a clear plan in mind for next year. Over the next few days, I will offer some suggestions which may help you to keep your finances in fine fettle. The trick is to avoid the inertia which financial companies rely on to bolster their profits. But it does take a little work.

A good place to start is to make sure you know how your cash flow sits. My surveys should that more than half of households do not have a good handle on the money coming in and going out. Remember that financial stress as measured by cash flow in registering as high as ever, so more people would do well to get a grip on their cash flows.

Next look at the date for car and house insurance renewals. Write them down. This is important because most will auto-renew, but it is likely your existing company will be price walking you up meaning you will likely be paying more than a new customer would.

Third make a note of your current mortgage and savings rates on your accounts. Keep a note of the current rates you are paying or receiving. And keep up to date with the deals as they come and go. Many banks change rates on their products at odd times, and often do not pass full savings on. Funny that!

Finally, today make sure you know the type of credit card you have, if you have one.

Collect all this information and make a note somewhere you will remember and revisit it often. This could save you thousands across the year and help your finances survive in 2025.

http://www.martinnorth.com/

Details of our one to one service are here: https://digitalfinanceanalytics.com/blog/dfa-one-to-one/

Go to the Walk The World Universe at https://walktheworld.com.au/