We deep dive on the thorny question of household finances and the proportion of disposable income going to pay the rent or mortgage, using data from our core market model.
We find that conditions are quite severe in many parts of the country, but it is not uniformly spread. Which households are most under the pump in terms of these critical ratios?
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Details of our one to one service are here: https://digitalfinanceanalytics.com/blog/dfa-one-to-one/
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More households are feeling the pinch in the run up to Christmas according to our latest research and as demonstrated in the results to the end of November 2024, which we look at today.
We start with an overview of “financial stress”, defined in cash flow terms, then look at mortgage, rental, investor and overall stress across the country, as we dive into the top postcodes and consider the future scenarios for interest rates.
If you want a deep dive into a specific post code, drop it into the comments below, and I will make a subsequent show including the granular data I hold.
The full detailed set of data is available via our Patreon programme: https://www.patreon.com/DigitalFinanceAnalytics
Details of our one to one service are here: https://digitalfinanceanalytics.com/blog/dfa-one-to-one/
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This is an edited version of a live discussion about the conundrum of property investing. Some are selling as quickly as they can, others are piling in. We look at the latest data to figure out what is going on. The key is a realistic assessment of net investment yield, which varies across locations and property types.
You can ask a question live!
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https://digitalfinanceanalytics.com/blog/dfa-one-to-one/ for our One to One Service.
Following my live show on Tuesday I had a number of requests for mapping of the Rental Stress story across the country. So in this show we look at the distribution of rental stress both in count and percentage terms, based on DFA modelling and surveys.
Live show was here: https://youtu.be/c8rTWEEw2KU
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We are at a significant point in the spring auction market as the prospect of early interest rate relief for home buyers becomes more uncertain in the months ahead, even though weekly clearance rates are so far holding steady, as overall property listings rise.
But within that less expensive property is shifting faster, driven by a further rise in those buying with the help of the family bank – with money from parents, grandparents or siblings, easing the purchase path, whilst other first time buyers are clubbing together to become joint owners of a new home, despite the potential risks.
More generally it’s another symptom of the broken housing market. If you want to learn more about this, and get the latest on our modelling, join us next Tuesday for my live stream at 8pm Sydney, where you can ask a question live. You can see the latest post code level analysis and we will also look at the broader trends.
This is a time for caution, given the rising levels of uncertainty, but that said, for many jumping from the rental sector to buying their own home could be equivalent to jumping from the frying pan into the fire in the current environment.
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Go to the Walk The World Universe at https://walktheworld.com.au/
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In our surveys we include a question on whether households trust the federal and state governments to do the right thing for them. And the answer is a resounding, no. The question of whether we do trust those elected officials who theoretically at least should be looking after our interests, seems to highlight that in many countries, from Australia, UK, Canada, New Zealand and America, Government is on the nose.
Perhaps this is one reason why there are attempts in train to close down free speech, as illustrated by the misinformation and disinformation bill currently on the books in the Australian parliament. See my earlier post about this MAD bill and why it must be resisted.
In our surveys we find many households struggling with rising costs and flat real incomes, an ability to get ahead, or find a place to live, and ever more pressure on family relationships as a result. In other words, many blame bad government policy for their own predicaments. They are right.
The recently released report on Government action during the COVID period cuts to the heart of the question of trust as the three-person inquiry panel slammed the approaches towards such issues as lockdowns, vaccine mandates, and school and border closures, saying they lacked transparency and compassion, and were often not evidence-based. Now let me say straight away the scope of this inquiry was deliberately hobbled to avoid key questions around vaccines, and other issues, which is in itself shameful, but even so, the COVID-19 inquiry found that heavy-handed, inconsistent and insensitive pandemic restrictions meant people were unlikely to accept such measures again.
Economic modelling presented to the inquiry found that inflation could have peaked at about 6 per cent, instead of 8 per cent in December 2022, if the federal government’s more than $300 billion of pandemic spending and Reserve Bank of Australia’s near-zero interest rate policies were less stimulatory.
So all up, we can draw three conclusions.
Too much tax payer money was thrown at the problem in a poorly targeted inflation stoking manner. This is why inflation loomed to the fore in the past few years.
Too much was through directly and indirectly at the housing market, stoking home prices and rents, and exacerbated the distortions which were already in the market. No wonder prices have accelerated relative to incomes. No wonder too the construction sector is all but wrecked, with many firms subsequently failing while construction costs rise.
And there is still a resistance to admit errors both from Government and the RBA. Those in positions of responsibility may have done their best, but it was simply not good enough.
We expect, and rightly demand more from our elected leaders. They collectively failed us and the fallout continues to this day.
The right critical observation is that trust will be hard to recover. Given recent behaviour, it may never be healed, which spells risks to democracy itself. Queue the MAD bill.
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This is the second in a series of posts showing our latest mapping of rental stress. For our methodology see our recent live show https://youtu.be/YIl4sh-WxIA
Part 1: Default Risk Mapping https://youtu.be/JSk0I7n-gXI
In today’s show we deep dive on the rental stress across the country. The results are not pretty.
Next time, we will look at property investor stress – the Ying to Yang of rental stress!
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One of the factors I see in my household surveys is wealth transfer from one generation to another, stoked by the paper wealth created by the massive upswing in home prices. We see more first-time buyers being assisted by the Bank of Grandparents, alongside the Bank of Mum and Dad. This means there is a historic wealth transfer is under way in Australia, for those fortunate enough to have parents or grandparents with assets, tough on those with none of those onramps to property and wealth. With a large chunk of that wealth stored in residential property assets, the shift is already reshaping property market activity, and will intensify in the years to come.
In my surveys I encounter a theme quite often, households who cannot get into the property market while their friends and colleagues seem able to do so. So how come some can and some cannot?
Well, it could be that others are simply just better at saving. Hustling. Investing. Negotiating salary. The second: they’ve got a loan of cash injection from the Bank of Mum and Dad or Grandparents (though often its not clear whether they will have to pay it back. And third, they are a beneficiary of the great intergenerational wealth transfer.
Demographic research firm McCrindle just published a report and they say Baby Boomers are passing on an estimated $6.2 trillion of capital to their children and grandchildren.
Since 2013, the percentage of 25 to 34-year-olds who think that Australia is a land of economic opportunity, where hard work brings a better life, has fallen from 80 per cent to 51 per cent. The same trend was observed across all age groups.
“Belief in the fair go … appears to be declining. We estimate that overall agreement that Australia is a land of economic opportunity has declined by 16 percentage points since 2013,” the researchers found.
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