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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The latest auction clearance rates data confirms what we already knew, the traditionally busy spring selling season is ending with a whimper as it falls to the lowest this year amid weak buyer demand. Of course, clearance rates are a poor proxy for property market health, but the low quality of many listed properties, combined with over aggressive pricing are part of the story.
Add in expectations of higher for longer interest rates with ANZ pushing out a rate cut to May 2025, “We are shifting our view on the start of the RBA’s easing cycle from February 2025 to May 2025. We now also only expect two 25 basis point rate cuts in total [down from three],” said ANZ Bank’s Adam Boyton on Friday.
In addition expected falls of say 5 per cent in house prices in Sydney and Melbourne next year are reinforcing the trend. Borrowing capacity is also continuing to be crimped.
Also, costs of living pressures are hitting home, with an article over the weekend covering a Red Bridge survey which said that more than one third of Australians have delayed medical treatment because of the costs of living crisis, while almost half have put off buying a home, car or other purchase. 28 per cent of those polled say economic conditions have caused them to put off having children, while 20 per cent say they have delayed their decision to get married.
As the AFR says, this week was a big test of demand, with more than 1000 auctions scheduled in Sydney and Melbourne, and over 2600 scheduled nationally. However, just 63.4 per cent of homes sold under the hammer, based on preliminary auction numbers tallied by CoreLogic, down from 65.3 per cent last week. This matched the result of the first week of November, which was the lowest early clearance rate of the year. Once all the results are collected, it is expected that the final clearance rate will be below 60 per cent for the seventh consecutive week. “The auction market ended the spring selling season with a whimper,” said CoreLogic research director Tim Lawless.
Domain preliminary results also mirror the decline in clearances, mirroring price falls in some markets especially in Melbourne and Sydney, and on Monday, CoreLogic will release its monthly Home Values Index, which will show further declines in house prices in both Cities.
The two leading indicators for housing prices – auction clearance rates and the amount of stock on market – suggested price drops in those cities would persist, SQM’s Louis Christopher said.
Bottom line is the property market is taking an early holiday, and 2025 looks pretty shaky especially in the major markets.
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Note Edwin’s RANT will be on Wednesday this week!
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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 along the way.
Global stock markets rallied on Friday, with Wall Street crowning November with its biggest monthly gain in a year on post-election growth hopes, while the dollar eased amid prospects for firmer rates in Japan and easing in Europe. MSCI’s broad gauge of world stocks rose 0.52%, securing the best month since May, up 3.63%. Europe’s STOXX share index rose 0.58% on the day and was up 0.96% across the month, recording its first monthly gain since August. Technology stocks were the biggest boost to the index, gaining 1.6 per cent.
Of course, U.S. trading was thin the day after Thanksgiving. Many investors made it a long weekend and stocks and bonds closed early, so most month-end position adjustments were done before the holiday. The S&P 500 rose 0.56% to mark the best monthly gain since November 2023 of 5.14%, as investors ploughed $US141 billion into US equities, the heaviest inflows for a four-week period on record, according to EPFR Global data. The US is currently an investor magnet. Nvidia and Apple helped pace the S&P 500 to its 53rd record closing high at 6032.38. The DOW was up 0.42% on the day and 7.54% for the month. The Nasdaq’s 0.83% rise Friday secured a 6.2% gain for the month, it’s best since May.
The stars of the month, though, have been the small-cap stocks, with the Russell 2000 index being very close to achieving the second 10%+ monthly return of 2024. This small-cap index, often seen as a “risk-on” gauge, has broken through key resistance levels and reversed its underperformance trend versus the broader market. This rotation suggests increasing participation across sectors and a broadening of market strength, reinforcing the bullish market thesis.
In Europe, auto stocks were among the worst hit in November, knocked down by concerns that U.S. President-elect Donald Trump’s proposed tariffs on Mexico could be more damaging for European car makers than any direct tariffs on EU goods. Defence stocks on the other hand, gained the most among sectors, largely due to the Russia-Ukraine conflict.
Speculation about Japanese rate hikes drove a rebound for the yen, which ended with the biggest weekly gain vs the USD since July. The dollar fell 1.18% on the day to 149.76 yen, under pressure after Japan’s government finalised a stimulus budget and inflation in Tokyo came in hotter than economists forecast.
ASX property stocks were the worst performing, sliding 0,7 per cent. Goodman Group shares dropped 0.8 per cent to $37.91 and Westfield parent Scentre was down 1.1 per cent to $3.68.
The falls come as economists from three Australian banks – ANZ, AMP and Bank of Queensland – push out their forecast for a first cut from the Reserve Bank of Australia to May, from February previously.
In cryptocurrencies, Bitcoin briefly traded above $US98,600 btu was last at $96,534. Regardless of the current price level, some predict significant growth is possible with growth through the remaining days of 2024 to hit a high of $200,000. This is of course the point, markets can hope, but Bitcoin and the markets more widely continue to be driven on hopium. Just don’t look down.
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The latest monthly CPI data from the ABS showed headline inflation going sideways and underlying inflation rising, despite the massive Government support to households across electricity and rents.
Nothing here to signal rate cuts in the short term, and the RBA will continue to look through to the underlying rate of 3.5% which is up from last month and higher than their target.
Of course, politically speaking we will hear loads about Government support, and bearing down on inflation, despite the fact that many of the actions of Government are driving inflation higher.
Its another classic case of numberwanging, because the real costs for people are so much higher.
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Another week and what a week its been, with the complete failure of the Misinformation and Disinformation Bill (yeh!). Pity about the U16 Bill!
Property related Bills will be passed though, underscoring the narrowing base of the Australian economy, even as more small businesses go out of business.
In this show Edwin, our property insider looks at the latest in listings, and sales with dramatic differences across locations. We also discuss the price of property relative to Bitcoin and Gold, and also consider whats ahead.
Edwin’s tip of the week in a warning relating to car insurance.
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This is our weekly market update, where we start in the US, cross to Europe and Asia, and end in New Zealand and Australia, covering crypto and commodities along the way. This is data heavy, so strap in.
Global stocks registered a strong weekly gain on Friday while U.S. Treasury yields slipped as markets eyed President-elect Donald Trump’s likely policies and their impact on the U.S. economy, even as bitcoin traded near the $100,000 threshold as bets that Trump’s administration will take a lighter-touch approach to regulation as chairman Gary Gensler plans to step down on January 20, the day Trump is inaugurated.
MSCI’s gauge of stocks across the globe rose 0.33% to 854.13 and gained about 1.4% for the week. Europe’s Stoxx 600 share index ended the week 1% higher, snapping four straight weeks of losses.
All three Wall Street indexes finished higher and each notched a weekly gain. Industrials, consumer discretionary, financials and consumer staples drove gains while communication services, utilities and technology equities were the biggest losers.
Nvidia (NASDAQ:NVDA), the world’s most valuable company, ended down 3.2% after the artificial intelligence chipmaker reported strong quarterly results but issued lacklustre sales forecasts having hit a prior record high.
European equity markets closed higher on Friday, despite investors digesting weak economic data as well as the intensifying conflict between Russia and Ukraine. Data released earlier Friday vividly illustrated the economic woes that Europe is currently suffering, pointing to further interest rate cuts by both the European Central Bank and the Bank of England. Germany’s DAX rose 1% and the UK’s FTSE 100 gained 1.4%, while France’s CAC 40 climbed 0.6%. The pan-European STOXX 600 jumped 1.2%, its best daily performance in nearly two months.
Most Asian stocks rose on Friday, buoyed by strength in chipmaking and cyclical stocks, which helped markets weather heightened tensions over the Russia-Ukraine war.
A rally in oil prices on fears of an escalation in the Ukraine-Russia conflict pushed energy stocks higher, sending the Australian sharemarket to a fresh closing high on Friday. Australia’s ASX 200 benefited from a shift into economically sensitive sectors despite Australian PMI data showing a contraction in both manufacturing and services activity.
The S&P/ASX 200 jumped 0.9 per cent to 8393.8 at the closing bell, resetting Tuesday’s record of 8374. The index climbed 1.3 per cent this week. The All Ords rose 0.8 per cent.
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Last week I published a show titled “The rental stress pips are squeaking” where I did a deep dive into rising rental stress across the country, to underscore the crisis we have in the rental sector. I called it the hidden crisis, because we get massive coverage of mortgage stress in the mainstream, media but rental stress not so much.
To underscore the crisis, new modelling from Impact Economics and Policy, a group of expert economists and policy specialists, estimates that back in 2022, as many as 3.2 million people were at risk of homelessness across the country, where one negative shock could result in them losing their home. This represents a 63% increase between 2016 and 2022 in the number of Australians at risk of homelessness.
A recent survey showed that 39% of Specialist Homelessness Services had to close their doors to people seeking help because they were unable to cope. With the homelessness services unable to cope despite the increase in people needing help, not enough are being assisted, and many are not even seeking help because they know they won’t get through.
Now, SGS Economics and Planning has release the tenth edition of the Rental Affordability Index (RAI) today, which shows that since 2015, rental affordability has declined in most cities, limiting where people can live and work and reshaping communities nationwide. Once affordable areas like South West Sydney and South East Melbourne are now increasingly out of reach for average rental households. Their analysis based on a different approach aligns with what I have been reporting.
The report lands as the Albanese government struggles to get support to pass two key housing bills, dismissing a last minute offer from the Greens as more about politics than progress.
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OK folks a rant warning. It seems you are better placed financially and socially, if you are old with property compared with being young with none or a massive mortgage! And its structural thanks to bad policy across the board. One reason why younger people are turning away from the major Uniparty.
If you are one of the many thousands of younger Australians struggling to try and get on the property ladder, you will already know there is a war on youth, thanks to mass immigration, a permanent per capita recession, the rent shock, the energy shock, unaffordable homes, crushed wages, rampaging mortgage repayments, destroyed and expensive education, plus a ruined built environment a wrecked natural environment, oh and a dying planet.
But Older Australians are in a completely different world. CBA says Australians are freeing up more of their wallet for discretionary purchases with a focus on value and convenience, according to the latest CommBank iQ Cost of Living Insights analysis. Overall spending continues to trail inflation, up by just 1.5 per cent compared to the same time last year.
The combination of higher prices and mortgage rates has pushed the percentage of median household disposable income spent on mortgage repayments on a median-priced home to a record high of 50.6% nationally.
But on another planet, far, far away, cash sales in property surged 14 per cent to $138 billion across NSW, Victoria and Queensland over the past financial year, fuelled by wealthy downsizers, retirees and investors, a new report shows.
So it’s better to be old, with property, than young with no property or a massive mortgage, and the intergenerational gap is continuing to grow. Trouble is, unless things change trends are set to deteriorate further. Sure if you have parents with property who will fall off the perch sometime in the future, you may gat a look in, but if not, permanent renting is the order of the day. So much for the Australian dream of property ownership.
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This is an edited version of a live discussion with Robbie Barwick from the Australian Citizens Party, as we pick apart the latest developments across economics and banking.
We will explore the latest on cash availability, the postal bank, the misinformation bill as well as broader financial and economic reform. No doubt we will also touch on the latest international developments too, because that is also part of the picture.
You can ask a question live!
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https://digitalfinanceanalytics.com/blog/dfa-one-to-one/ for our One to One Service.
