This is an edited version of a live discussion about finance and property, as we look at the latest data and ask where has Australian gone wrong? Prices relative to income are off the charts, property listings are rising, and despite the hopium of prices rises off the back of a single rate cut, the truth is rather different.
So tonight, as the budget speech is rolled out, we will take questions live.
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The narrative has turned quite negative recently despite the first rate cut in years, thanks to cash flow pressures, the overhang of poor housing affordability, high migration and the tariff wars coming from the US. And yet, if you look closely, there might just be some signs of green shoots. But then you need to ask, is this signal, or noise?
For example, the latest Westpac-Melbourne Institute sentiment bulletin, released today reported a solid 4% rise in March, lifting to 95.9 from 92.2 in February which we note though is still in negative territory, as the survey detail shows the score is still 4% off the ‘neutral’ level of 100, where there are the same number of optimists as pessimists.
The latest ANZ-Roy Morgan Consumer Confidence data showed that Australian Consumer Confidence fell 2.9pts over the past fortnight but is still 1.8pts higher than before the RBA cut the cash rate.
Elsewhere, after last months SQM Research released data showing that the national vacancy rate fell to just 1.0% in January 2025, down 0.1% year-on-year SQM Research’s latest rental vacancy report shows that the national vacancy rate rose to 1.3% in February, to be 0.3% higher annually. Capital city asking rents also rose by 0.4% over the month. SQM Research managing director Louis Christopher was surprised by the result and expects the vacancy rate to tighten in March. He also believes the “country remains in a rental crisis”.
And according to CoreLogic, The rolling 12-month change in national rental values has continued to slow, with rents up 4.1% over the year to February, down from an 8.3% increase seen over the year to March 2024.
So is this signal or noise?
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This is an edited version of a live discussion as I go through the latest from our household surveys to end February 2025. In this show we look in detail at the post code level data, and specific post codes to examine, across income, financial stress, mortgages and rents and property price movements ahead.
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We look at the latest from our surveys ahead of our live show on Tuesday 11th March, where we deep dive on post code analysis.
Despite the political spin, many households are caught in a cash flow crisis, thanks to rising prices, interest rates and frozen tax bands which means that despite of some small income growth (not for all though) households are exposed to cash flow pressures.
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The DFA surveys have been tracking the rising pressure on households, thanks to rising pressures from costs of living inflation, higher mortgage and rental payments, and static or falling real incomes, which are not expected to catch up with past peaks for years. Our latest release to end February 2025 is out, and I will make a show on this shortly, as well as cover the post code level analysis in next Tuesdays live stream. https://youtu.be/FUmpN6eKjsM
One of the points in our analysis is the rising levels of financial pressure for some households, while others are doing just fine, thanks you, with net wealth rising from home price growth, and investments thanks to stock market rises. Roughly one in three households are in financial clover, a third are hanging on just, but a third are continuing to fall behind, and getting into deeper financial do do.
But now the mother of all household surveys, the Household, Income and Labour Dynamics in Australia (HILDA) Survey was released today. They reported that financial inequality in Australia is at its highest since 2001 just a young people find themselves shut out of the housing market. The report says there was a fall in home ownership between 2002 and 2018, but home debt across all households rose in a “sustained fashion” regardless.
And things are getting harder for single parents, who have seen a 76% increase in childcare costs per child since 2006 and more than half (51.2%) of respondents said their real income decreased between 2021 and 2022.
They now have released their 19th annual report with data from 2001 to 2022 called wave 22. Wait, you say. Surely, we are in 2025, so is this really that relevant? This is indeed one of my bug-bears about the HILDA reports, they are so lagged as to be seriously misleading.
But all up, the HILDA data does confirm the trends in our surveys, but the true impact won’t be seen until future releases of their surveys. But ahead of the upcoming election, it is important to recognise the rising disparity between those households under financial pressure and the rest of the community. Unfortunately politicians tend to be in the doing well category, (from property portfolio or other investments), not to mention any specific member, nudge nudge wink wink…
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Those in the rental sector of the property market, a growing proportion of the population, are in the crosshairs of the affordability crisis. Indeed, as discussed in my live show on Tuesday, around 76% of those renting have a cash-flow deficit, or are in rental stress.
The latest data from the ABS reported that Rental prices Rental prices rose 6.4 per cent over the 12 months to the December quarter, down from 6.7 per cent in the September quarter. Rental price growth continues to reflect low vacancy rates and a tight rental market. However, the September quarter results showed a partial impact of the CRA changes, while the remaining impact has been reflected in the December 2024 quarter. Excluding the changes to CRA, rents would have increased by 7.8 per cent over the 12 months to the December 2024 quarter.
The recent headlines about Australia’s rental crisis is easing on the back of data from both the ABS and CoreLogic. “Finally, renters are seeing some relief after a period of extreme rental growth,” Tim Lawless said. “Over the past five years capital city rents have surged by 37%. The previous five-year period saw rents rise by just 5%.”
And to cap it all, according to a recent Yahoo Finance article, some rental properties in Sydney and Melbourne are offering free rent to try and entice new tenants, as the market passes its recent boom.
Let’s be clear, the data shows that growth in rents is moving up faster than overall CPI, which is falling, somewhat, and real wages growth. So, can we really say things are improving in a sustainable way?
Now, SQM Research managing director, Louis Christopher said the sharp decrease in rental vacancies strongly indicated Australia’s rental market crisis was not over and could deteriorate further. “It looked like there was an easing in the vacancy rate at the end of 2024 and we were coming out of the rental crisis, but that’s not the case now,” he said.
“Could there have been another surge in migration levels in recent weeks? We don’t know for sure but clearly something has driven this retreat in rental vacancies”, Christopher said.
If the federal government continues growing the population faster than new homes can be built, the rental market will remain tight. The number one solution to Australia’s rental crisis is to significantly lower net overseas migration to a level compatible with the nation’s ability to build housing and infrastructure.
But don’t expect to hear that as a policy platform in the upcoming election, because more people flooding into the country is the only way to avoid a real recession. Expect the rental crisis to continue and Australian tenants to bear the brunt.
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This is an edit of a live discussion as I walked through my latest analysis at a post code level, looking at financial pressure, and future price scenarios. We focused specifically on property investment by looking at gross and net rental yields, including heat maps of major urban centers. Some are deeply under water!!
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This is an edit of a live discussion as we deep dive into my latest mortgage, rental and investor stress modelling across Australian post codes. Property for many is turning into a nightmare!
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Please consider supporting our work via Patreon: https://www.patreon.com/DigitalFinanceAnalytics The full detailed set of post code data is available as a subscription service.
Yesterday I went through the latest ABS data on retail and highlighted that the Black Friday sales supported household spending growth through November. This is an important indicator on the state of the economy and is a factor which will influence the RBA’s February rate cut call.
But just like the proverbial Schrodinger’s cat – a famous thought experiment that demonstrates the idea in quantum physics that tiny particles can be in two states at once until they’re observed. It asks you to imagine a cat in a box with a mechanism that might kill it. Until you look inside, the cat is both alive and dead at the same time, its hard to tell what is really going on.
Actually, analysts are all over the place on these numbers, and the household spending indicators we got today from the ABS continued the confusion.
So it remains to be seen whether this uplift will be carried into 2025 or if it is a result of price-sensitive consumers capitalising on bargains and the typical festive season spending surge.
Let me know in the comments below, did you spend big over the holiday period, or hunkered down seeking bargains through the sales, along with many I see in my surveys?
I suspect both is true, which will make the RBA’s job hard next month. Though the simple truth I come back to is more are being sucked into the negative cash flow vortex thanks to the higher for longer interest rates. Which is not good news for the cat in the box!
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In this episode we review our most viewed shows from 2024, and identify the key issues and themes which got the most attention. Interestingly there are clear connections and observations…
Let me know in the comments what your favorite shows were, and what you would like me to cover this coming year.
Thanks to all those who supported us last year, and I look forward to sharing daily shows through 2025.
Happy New Year!
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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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Find more at https://digitalfinanceanalytics.com/blog/ where you can subscribe to our research alerts
Please consider supporting our work via Patreon: https://www.patreon.com/DigitalFinanceAnalytics The full detailed set of post code data is available as a subscription service.
