Property Insider Edwin Almeida and I discuss the latest shocks from the new cycle (don’t shoot the messenger!) and pick over the latest from the property market. Who are the winners and losers?
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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.
Today I want to look at the question of refinancing after the RBA rate cut, and whether a long term fixed rate mortgage in Australia would be a good idea.
While the ‘big four’ banks have committed to passing on the full 0.25 percentage point RBA driven rate cut to their customers, meaning those on variable rates will have their interest rate reduced by that amount in the next few months, if your mortgage rate is currently in the high sixes or 7 per cent, then you should definitely look and see if you can get a better rate following the RBA’s rate cut on Tuesday.
Beyond that, there is a fundamental difference between the mortgage markets in the US and Australia. A 30-year fixed mortgage is a dominant product in the US, where they account for about 70 per cent of outstanding mortgages but in Australia the bulk of loans are variable rate loans, which move in line with market rates, and indirectly the RBA cash rate, together with short term fixed rates which are again priced off the yield curve.
In the US, In the US, government-backed institutions like Fannie Mae and Freddie Mac provide liquidity to banks so they can sell 30-year fixed-rate mortgages. As a result, Banks in America are able to offer the riskier loans because of the existence of these so called government-sponsored enterprises (GSEs).
BlackRock chief executive Larry Fink suggested that Australia should introduce 30-year mortgages. The chief executive of the $18 trillion investment giant BlackRock said “We believe Australia should be building a 30-year fixed-rate mortgage market,” in an interview reported in the AFR. Fink, who was a pioneer of the mortgage-backed securities market during the 1980s, says Australia is uniquely positioned to pursue such a development because of the size of its $4 trillion superannuation pool.
Seems to me that engineering long term fixed rates in Australia may sound attractive to the big investment houses, the banks, and even the Government, but I am not convinced it is good for ordinary Australians. And it is worth remembering that through the GFC, US mortgage borrowers defaulted in droves, due to rate resets from low teaser rates, allowing those same investment houses to subsequently hoover up stressed property for a song. They are on the side of investors not prospective home owners.
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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. This is a data rich tour as stocks finished lower on Wall Street but edged higher in Europe on Friday amid uncertainty about U.S. President Donald Trump’s rapid policy initiatives, including spending cuts and tariffs, and Germany’s upcoming elections. Oil prices settled down more than 2% while gold eased from record highs.
The Global MSCI index was down 1.04% on Friday, but MSCI’s broadest index of Asia-Pacific shares outside Japan jumped 1.35% to its highest since November 8 and gained 1.47% for the week. The S&P 500 shed 1.7 per cent at the closing bell. The NASDAQ Composite slumped 2.2 per cent. The Dow Jones tumbled 1.7 per cent as twenty-three of the Dow’s 30 components fell, paced by United Health, Nvidia and Amazon. Crypto stocks sank after Bybit reported a hack with estimated losses of $US1.5 billion. Coinbase fell 8.3 per cent and Robinhood fell 8 per cent. The CBOE Volatility Index, which measures the implied volatility of S&P 500 options, was up 16.28% to 18.21.
The S&P/ASX 200 fell 0.3 per cent, and retreated 3 per cent since it closed at a record high last Friday. However, In Europe, shares have been volatile this week ahead of Germany’s election on Sunday, while talks between the U.S. and Russia on ending the war in Ukraine helped underpin a surge in European shares to record highs earlier in the week. Europe’s broad STOXX 600 climbed 0.52%, reversing two days of declines. It ended the week up 0.26% and the Hang Seng in Hong Kong lifted 3.99% on Friday. Investors piled into emerging market countries’ debt to the tune of $45 billion and bought up $2 billion of Chinese stocks in January, a closely followed report from the Institute of International Finance showed on Tuesday.
We could well be in the midst of a rotation to European and Emerging Markets and away from the over-valued US market, but given the sky-high level of uncertainty now exposed for all to see, we should expect more volatility, and we do risk dropping into correction territory in coming weeks.
Investors, as opposed to Traders might want to take risk off the table as the waves break over the assumptions many have about how the world works. As I will discuss on my upcoming Tuesday Live show, we are entering an era of global disorder, where powerful but transactional players try to rule the roost. And in so doing things will get broken, and markets disrupted, big-time.
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Would you prefer to be living in New Zealand or Australia? The New Zealand story on monetary policy and home prices is a million miles away from the RBA’s approach of keeping rates lower, to protect jobs even if inflation remains above target.
Across the ditch the Reserve Bank’s approach of “no regrets”, took interest rates much higher, lifted unemployment and pulled home prices lower, and because of the more aggressive action appears to have left the land of the long white cloud better placed in the months ahead.
The New Zealand Monetary Policy Committee this week agreed to lower the Official Cash Rate by 50 basis points to 3.75 percent.
The RBNZ have been cutting for a while and and house prices haven’t been rising. The 40% run up in prices over the pandemic has been followed by the sharpest price crash in generations. Even so, price-to-income ratios remain elevated relative to historical experience, especially given the current interest rate settings. Whilst median home price to median household disposable income are coming down, we are still around 10 times in Auckland, and over 8 times nationally.
So standing back, the different path between the Central Banks of Australia and New Zealand really stand out. Which begs the question, is a shorter sharper shock, or a slow grind with no clear way out the better path? And should stronger controls on mortgage lending be imposed to keep home prices under control? Oh, yes and the elephant in the room, should migration be dialled back – as in New Zealand, where Stats NZ reported that 72,000 citizens left the country while just 24,900 arrived, and the overall net loss of citizens in 2024 is the largest in a calendar year – or should migration still be pushed hard, despite the rhetoric as in Australia? Frankly to me on so many fronts New Zealand seems in better if imperfect hands than Australia!
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The RBA adjusted down their expectation of the level of unemployment across Australia to 4.2% this week, a level which they expect to remain unchanged for at least two years. Then today we got the latest from the ABS on this frankly fuzzy series of data which showed that the seasonally adjusted unemployment rate rose by 0.1 percentage point to 4.1 per cent in January. 44,000 people found work last month while the number of unemployed increasing by 23,000 people. In short, the jobs market remained “incredibly strong”. That said, some of the increase in unemployment reflected more people than usual with jobs in January who were waiting to start or return to work.
Indeed, the ABS hinted the rise in the unemployment rate in January could reverse in February, saying there were more people than usual with jobs who were waiting to start work last month, but who were technically counted as unemployed.
The employment picture is more complex than might first appear. Given the still high migration levels into Australia, there are more people looking for work, and this is putting the squeeze on some older, perhaps more experienced and therefore expensive locals.
Second, the continued growth of the non-market sector, funded by Governments at federal and state levels means a continued expansion of jobs in specific sectors, like the care sector, but which are not necessarily improving the poor levels of productivity in the economy.
Third as the ABS hints at, the numbers are a bit wobbly given changes to seasonal factors, and also the swapping the sample groups.as well as their strict definition of who is classed as unemployment. Roy Morgan’s alternative method gives a different picture.
Finally, the significant gap between Victoria with unemployment rates of around 4.7%, and other states, suggests that state policy is also important, and on that measure, Victoria is failing again.
Bottom line, overall the jobs market will continue to hold the RBA back from cutting rates again, even if under the hood things are far from rosy. To that extent, words and figures do differ.
Yesterday we got the first RBA rate cut in four years rate of a quarter-percentage point to 4.1% as inflation has eased from more than 6% to 3.2% underlying, but the bank also stressed it won’t ease as aggressively as the markets anticipate and also flagged significant but as yet unquantifiable geopolitical and policy uncertainties globally.
The media seemed almost over jubilant at the cut, talking of massive relief for households with the much-recited data from Canstar showing that a million dollar mortgage would be $154 dollars a month cheaper in interest payments. Remember most Australian mortgages fluctuate with the RBA rate.
Then today we got the latest wage growth data from the ABS which showed that Australia’s wage growth slowed further in the final three months of last year, up an annual 3.2% in the fourth quarter of 2024, compared with an upwardly revised 3.6% in the prior period and matching economists’ estimate, the biggest wages slowdown for any full year since 2009.
Politicians are quick to see any opportunity to spruik, and in a press conference in Canberra Treasurer Jim Chalmers said that the rate cut was “the soft landing that we have been planning for” and offers a “relief that Australians need and deserve.” Bullock distanced herself and the board from politics, but I suspect they are all too aware of the political currents. The recent JWS opinion poll shows and cost-of-living and housing have been among the top concerns for the electorate.
Like the RBA, the treasurer didn’t declare victory in the fight against inflation, sharing the central bank’s concerns about the uncertain economic outlook going forward.
Forget the media hype, there is a long slow road for households mortgaged up to the hilt, and little here to reignite the fuse on the housing market; at least for now.
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This is an edited version of a live discussion with Leith van Onselen, Chief Economist at Nucleus Wealth and Joint Founder of MacroBusiness.
We reacted to the RBA rate cut decision, plus looked at the expected trajectory of the economy, ahead of the election. What could blow us off course, and what are the implications for property, monetary and fiscal policy? We touched on energy strategy and housing strategy in particular.
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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/
This week we look at the list of property “announcables” from Labor and talk about the elephant in the room – demand for property, which is not being addressed. The consequences of all this is obvious for those willing to look beyond the headlines.
Ahead, looks like demand will stay strong, and with more people waiting for the election and RBA cuts, supply of quality property is on the decline.
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.
The political games are in full swing now, ahead of the RBA’s rate call on Tuesday and if they do cut, many are calling the starting gun for the election which must be run by May 17, will go off very soon.
So, no surprise at all then to see that housing was in the spotlight again over the weekend, as Housing Minister Clare O’Neil announced that Labor would ban foreign investors from buying established homes for at least two years, replicating the promise made by Opposition Leader Peter Dutton in his budget reply speech last May. The housing minister, said the government had to orient all its efforts into securing home ownership for more young Australians. Nice dog-whistle, right there!
Australia’s housing is some of the most unaffordable in the world and soaring property prices will be a key election issue amid a broader cost-of-living crisis, especially among young voters who fear they will never be able to buy a home.
The government recently passed housing reforms, including a shared equity scheme and tax incentives for developers, to ease cost pressures and achieve a target of building 1.2 million new homes by 2030.
The truth is, throttling back migration to better match the number of new homes being built, and reducing the tax breaks for property investors, and build to rent schemes would have a far greater impact. But then to remind you again, O’Neil all but said she does not want to see prices fall, which they would need to do if more normal affordability ratios were reestablished.
All up this is more about annoucables, than real strategic policy change.
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.
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 along the way. This week markets were bullish, with the MSCI global index up 1.7% across the week, and up 0.3% just on Friday. Even the European STOXX 600 which fell 0.24% on the final trading day of the week managed another rise of 1.96% across the week, for a year-to-date gain of 8.82%. Australia’s ASX joined the party with a new high, and up 0.52% across the week.
But why, we should ask? Well, traders seem caught in the Trump announcement blizzard, though some are still asking is the market about to peak? Did DeepSeek mark the end of the AI bullish cycle? Are tariffs about to slash market gains? And is this the time for a Big-Short type of move?
Clearly no one knows – despite all the opinions out there among the talking heads. And frankly, if you are running your investments chasing these headlines, you will probably be in for a rude awakening when the market suddenly flips on its head, as it will at some point, because valuations do not support current levels, period. Meantime rules are being broken.
In the US, the fabled soft landing is morphing into a “no landing” as the 100 basis points worth of interest rate cuts from the Federal Reserve boosts the US economy, and keeps inflation sticky. Further Fed rate cuts are rapidly being priced out for the rest of the year, with just one more expected in December. Some economists are even muttering darkly about the possibility of a rate rise, if Donald Trump makes good on his moving feast of tariff threats. The latest of these would see the US place reciprocal tariffs on any country that currently taxes US goods
Australia’s ASX 200 rose 0.5% to a record high of 8,615.20 points, on gains across most heavyweight sectors. Local stocks were boosted by growing confidence that the RBA will likely cut interest rates by 25 basis points at a meeting next week, and kick off a shallow easing cycle on concerns over a slowing Australian economy. Though its not a done deal, as core inflation remained well above the central bank’s 2% to 3% target range after Government support for households pushed inflation down, at a cost, ahead of the upcoming election.
The RBA will also release new economic forecasts in an updated Statement on Monetary Policy. On Friday, RBA governor Michele Bullock will appear before the House of Representatives Standing Committee on Economics in Canberra. [She also will hold a press conference on Tuesday.]
Not to be outdone, across the ditch the Reserve Bank of New Zealand’s policymakers will meet on Wednesday, and they are expected to approve a third straight 50 basis point cut in the official cash rate.
In Crypto, Bitcoin is still muddling around the sub USD 100,000 level and was last at USD 97,576.
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/
