Another deep dive into property and politics with our Property Insider Edwin Almeida, as we look at the latest spin on affordability and “hot suburbs”.
The drive towards high-rise density has consequences, but even the quality of low-rise is a concern. Meantime, listings are still in the doldrums, while rental availability is largely shot.
And recent DFA coverage stirred up the Chatterers….
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Today’s post is brought to you by Ribbon Property Consultants.
The ABS released data on the total number of dwellings approved in February recently. They say that despite growth in private houses in the month, the total number of dwellings approved fell 1.9 per cent in February (seasonally adjusted), after a 2.5 per cent fall in January. The trend estimate for total dwellings approved fell 3.0%, following a 2.7% January decrease. Specifically, approvals for private sector dwellings excluding houses fell 24.9 per cent in February in seasonally adjusted terms, driven by a fall in the number of approved large apartment projects. In contrast, approvals for private houses rose 10.7 per cent in February.
This continues to confirm the massive gap between the Government aspiration of 1.2 million new homes over the next 5 years. On a straight-line basis, this translates to a target of 240,000 each year – which by the way is still way under the number needed to house the surging migrants and fill existing shortfalls.
So why not tackle the root cause issue here, too high migration? Entrepreneur Dick Smith fears today’s young people will have no savings and be forced to live in Chinese-style high-rise apartments unless immigration is urgently slashed, according to an article in the Daily Mail.
The veteran businessman and philanthropist says they need to understand the connection between a surging population and climate change. The entrepreneur, who turned 80 last month, fears homes with a backyard in Australia’s capital cities will no longer exist by 2050.
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This week will I think mark a critical turning point across markets, as the higher for longer mantra finally took root on sticky inflation fears, geo-political tensions flared and the first flush of 1Q US results highlighted pressures on earnings ahead. All this drove a flight to the safest corners of the market such as bonds and the dollar while equities fell. Oil rallied but Wall Street’s “fear gauge” – the VIX – spiked to levels last seen in October with a surge of 16 per cent.
It’s hard to unpick the prime reasons for the falls, but US Equities had their worst day since January. The report that Israel was bracing for an attack by Iran on government targets certainly did not help. US President Joe Biden said he expects Iran will attack Israel sooner rather than later – and his message to Iran is “don’t” do it. A direct confrontation between Israel and Iran would mean a significant escalation of the Middle East conflict and would lead to a significant rise in oil prices, according to Commerzbank. Escalating geopolitical tensions, also including attacks on Russian energy infrastructure by Ukraine, have spurred bullish activity in the oil options market. There’s been elevated buying of call options – which profit when prices rise – in recent days, with implied volatility jumping.
Also, Investors have pushed back their expectations for the start of the Fed’s easing cycle as March nonfarm payrolls crushed expectations and US inflation climbed to 3.5%, up from 3.2% and above the forecast of 3.4%. The markets have lowered the odds of a June cut to just 24%, compared to 54% a week ago. A September cut was priced in at 91% a week ago but that has dropped to 72%, according to the CME FedWatch tool.
Fed members are sounding hawkish and the markets have slashed rate cut expectations. Fed Bank of Boston President Susan Collins reiterated she sees no urgency to cut rates in the near term, given elevated inflation and the resilience of the labor market. Her Chicago counterpart Austan Goolsbee repeated that housing inflation will need to come down in order for overall prices to cool to the central bank’s target.
Meantime banks’ results offered the latest window into how the US economy is faring amid an interest-rate trajectory muddied by persistent inflation as JPMorgan Chase and Wells Fargo both reported net interest income that missed estimates amid increasing funding costs. Citigroup’s profit topped forecasts as corporations tapped markets for financing and consumers leaned on credit cards – signs that a prolonged period of elevated interest rates will benefit large lenders.
“Many economic indicators continue to be favourable. However, looking ahead, we remain alert to a number of significant uncertain forces,” JPMorgan’s chief executive Jamie Dimon said. He cited the wars, growing geopolitical tensions, persistent inflationary pressures and the effects of quantitative tightening.
And the latest economic data did little to alter the reduced risk. The Michigan consumer sentiment index fell to 77.9 in April from 79.4 a month earlier, missing forecasts of 79.0 and the data also showed that the 1-year inflation expectations and 5-year expectations rose to 3.1% and 3% respectively, piling on worries about higher for longer interest rates.
So all up, MSCI’s gauge of stocks across the globe was last down 1.2%, its biggest one-day drop in about six months, dragged down by U.S. performance. Wall Street’s main indexes all slumped well over 1% with the S&P 500 posting its biggest one-day drop since Jan. 31. The Dow Jones Industrial Average fell 1.24%, to 37,983.24, the S&P 500 lost 1.46%, to 5,123.41 and the Nasdaq Composite lost 1.62%, to 16,175.09.
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Our latest Friday Afternoon chat with journalist Tarric Brooker as we look at the current data, which questions potential rate cuts, and housing trends, as demand stays strong while supply is limited.
Below the water line we examine some of the underlying assumptions behind the numbers, and how politics have changed.
Worse, the structural issues can be traced back to a series of political decisions, which were policy errors – when will they come clean?
Tarric’s charts are here: https://avidcom.substack.com/p/dfa-chart-pack-12th-april-2024 if you want to follow along.
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This is my edit of our latest economic update with Nuggets News. We look at the latest across markets, and talk about some of the big picture issues which are driving the agenda.
We touch on the US inflation (before the figures were released), as well a Australian property and some of the current waves of regulation locally.
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The latest decision from the New Zealand Monetary Policy Committee was released on Wednesday, which was to leave the cash rate at 5.5%. Their key messages were little changed since the February MPS, showing little hurry to change current restrictive settings despite overall CPI inflation expected to fall below 3% this calendar year.
Upside short-term risks to the inflation outlook were largely downplayed, with the RBNZ expecting sub 3% inflation later this year. Despite the economic outlook evolving broadly as expected and inflation on a cooling trend, the RBNZ chose to defer any decisions on when to pivot to an easing bias until more clarity emerges.
Higher for longer…. again!
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More insights from our property insider, as we look at the issue of supply and migration, plus the impact of the recent flooding rains, and also the latest on listings and prices.
How broken in the market at the moment, and how are agents playing psychological games with prospective purchasers?
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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.
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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.
In the second part of our series on March 2024 results from our surveys, we deploy our mapping tools to display the hot spots across the country for mortgage, rental and investor stress, as well as defaults and net rental yields.
For a description of our approach, watch our earlier show here: So Who Is Really Feeling The Pinch? https://youtu.be/xvE-jPsGQUk
On Tuesday at 8pm Sydney we will deep dive on the post code level analysis. DFA Live Q&A: A Deep Dive On Post Codes Feeling The Pinch https://youtube.com/live/GmSKvYYQI1k
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https://digitalfinanceanalytics.com/blog/dfa-one-to-one/ for our One to One Service.
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Today’s post is brought to you by Ribbon Property Consultants.
Banking is a game of confidence, in that if fears of a potential bank collapse arise, then naturally people who hold money at that institution will try to grab their cash, and run. The Global Financial Crisis, where many banks were saved by the use of public funds.
But this means taxpayers are on the hook, and so post the GFC, there were attempts to develop alternatives which would transfer risks from the tax-payers to other parties, including shareholders bond holders and even depositors of an affected bank. The so called bank resolution – or living will – includes the deposit bail-in regimes which were proposed (initially by merchant bankers by the way) and adopted by the G20 to allow deposits held at banks to be grabbed and converted to equity. This happened of course in Greece a few years later.
In the IMF Global Stability Report from October 2023, there was a section which highlighted that the March 2023 bank runs in Switzerland and the United States were unusually large and fast with their speed and size facilitated by rapid online deposit withdrawals and the rapid spread of worries among important groups of depositors via social media and other digital channels.
I am often asked if bail-in is a real risk to savers, and my reply remains the same. It’s a theoretical risk for sure, thanks to the likes of the IMF and others, but practically, its unlikely to be activated because the collateral damage would be enormous. But understand that those bankers who dreamed up bail-in and the QANGO’s who are pushing it, are still pushing Governments to give the financial regulators ever more power, never mind democracy. Its a cautionary tale of who is actually calling the shots, and the risks to democracy are real.
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