Social Trends – Page 10 – Digital Finance Analytics (DFA) Blog

Is Property Springing Into Life, Or Catching A Cold?

Whilst data should be immutable, interpretation of said data can be tweaked and turned, to spin a particular story. As we have seen in the press this past week. Take, for example auction clearance results.

The preliminary auction clearance rates for this past weekend in the biggest markets of Sydney and Melbourne came out tracking nationally at 71.4 per cent of homes listed for auction based on CoreLogic data. Sydney’s clearance rate was 74.9 per cent and Melbourne’s 68.7 per cent, more or less in line with the previous week. Among the smaller capitals, Adelaide led the way with a clearance rate at 79.5 per cent, followed by Brisbane at 67.3 per cent and Canberra at 56.5 per cent, according to CoreLogic data. But these are on very low counts, so again not that meaningful.

Domain on the other hand reported a Sydney clearance of 67.8% up from 64.2% last week, and below the 68.7% from a year ago. Melbourne was at 62.4% compared with 59.6% last week, and 61.9% a year back. The national number was 63.5%, a significant divergence from CoreLogic’s higher 71.4%.

There are a few points worth making here. The final numbers tend to settle lower, because agents are always keen to promote successful sales, while those passed in are either never reported, or reported later. Some properties are withdrawn before auction, either because they are sold prior, or because the vendor changes tack. As such auction clearance rates do not tell us much at all.

Of course, the spring selling season is now ramping up, and about 2300 auctions are scheduled in the coming week, compared with around 2,000 this past couple of weeks. And listings are rising as vendors decide to sell or are forced to sell. We will chat about this again on Mondays Rant with Edwin. But we do continue to see a spate of ex-investment properties listing, especially in Melbourne, as I reported recently, and the trend is widening.

The bottom line of course is potential buyers should be careful what they purchase, especially as price growth ahead is not assured, especially if the weaker demand for iron ore puts the economy into recession. And prospective sellers would do well to select their agents carefully, as some are still pushing the auction route, one which does not necessarily guarantee a better net sale price, but which does guarantee more income for agents via their additional marketing and auction fees. Just saying!

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Is Melbourne The Property Problem Child?

You may recall that I often say, there is not one property market but many micro markets that behave in quite different ways. But at the capital city level, Melbourne appears to be in some strife in terms of price falls at the moment.

Overall, it certainly looks like the combined impact of state policy, higher interest rates, and also bad planning decisions, combined with significant interstate migration away from Melbourne, which is offsetting still too high net overseas migration, is translating into property weakness. That said, of course property still remains over expensive relative to income to a stupid amount, while the restriction of international studies this year will weaken demand for rental property, so while the currently rental growth is still 7.8% over the part year according to CoreLogic, it may well begin to weaken ahead, putting more pressure on property investors in the area.

It does indeed look like for now Melbourne is a property problem child, but it also to me highlights the exposure that Perth has given the risks to mining demand from a weaker China. And as the RBA minutes reinforced yesterday, its not likely we will see rate cuts anytime soon.

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Return To Plan A (For Now) Says The Market As New Data Swings!

This is our weekly market update where we start in the US, cross to Europe and Asia and end in Australia, while also covering the action in commodities and crypto along the ways.

My analogy of traders on a boat, running from one side of the deck to the other still holds, as the recession iceberg melts away for now, and an immaculate US soft landing is back in vogue. The change in sentiment was driven by a flurry of data which showed US economic resilience, and this drove stocks to their best week this year, coupled with dip buyers stepping in after the recent rout. So, Wall Street posted its best seven-day run in almost two years while the VIX slid back to 14.80.

Of course, traders have struggled to forecast where the economy is headed – and the recession fears that helped drive the recent pullback could resurface again just as quickly as they faded. On top of that, the US elections and geopolitical tensions are adding other elements of uncertainty.

But beneath the surface, there are some reassuring signals. Specifically, the latest jobs data was better than previous ones, the CPI data showed a drift in the right direction, along with producer prices, consumer sentiment improved with the August University of Michigan consumer sentiment survey reading of 67.8, up from July’s 66.4. and retail sales were up. Just don’t mention the poor construction data with weak July housing starts and building permits data. Central bankers are being quote, data dependent, so no surprise then when new data arrives traders change tack.

Federal Reserve Bank of Chicago President on Friday told National Public Radio that the U.S. economy is not showing signs of overheating, so central bank officials should be wary of keeping restrictive policy in place longer than necessary. “You don’t want to tighten any longer than you have to,” Goolsbee said. “And the reason you’d want to tighten is if you’re afraid the economy is overheating, and this is not what an overheating economy looks like to me.”

Note also the earlier selloff hit a relatively small slice of the market, with nowhere near the breadth of the routs set off by the Fed’s rate hikes, the pandemic and other pivotal events. And while valuations are at risk of another recalibration if the economy does wind up sputtering, the S&P 500 during the recent retreat held above a threshold that – to technical analysts, at least – telegraphs investors’ continued confidence.

The Dow ended up 0.24%, the S&P 500 rose to around 5,555 up 0.2% For the year, the S&P 500 is up more than 16% and is within about 2% from its July all-time closing high. The NASDAQ rose 0.2%. Most megacaps gained, with Nvidia leading the charge, up 1.4% and has bounced more than 20%, while the Philadelphia SE Semiconductor index has gained more than 14% from recent lows. Small-cap shares, which had been strong performers in July, have also recovered from recent lows, with the Russell 2000 up nearly 5%. Nike had its longest winning streak in more than eight years and up 0.88% on the day though Applied Materials sank 1.86% after a sales forecast that disappointed investors looking for a bigger payoff from artificial intelligence spending. If you are an AI fan, like Wedbush, then the outlook looks rosy, saying the tech sector is on the brink of substantial growth, underpinned by the expanding influence of AI. Just remember Cisco, though. The firm emphasized the foundational role of cloud and AI technologies in the ongoing “4th Industrial Revolution.”

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Australian Employment Booms Even As Unemployment Rises!

You have to ask the question: are the ABS stats on employment, which were released today, meaningful? Because according to the data for July, a record share of Australians are either working or looking for a job and about 58,000 people found work last month. The increase in employment was not enough to stop the jobless rate from rising to 4.2 per cent last month from 4.1 per cent in June, (though less than 1% on a two decimal rounding) as the share of the working-age population with a job or looking for one climbed to a record high of 67.1 per cent.

This was better than market expectations for gains of 20,000 and accorded with the RBA’s view that the labour market is cooling, but only very gradually, so it appears to show its holding up in the face of a rapidly cooling economy. This will keep pressure on the Reserve Bank of Australia to maintain high interest rates.

The first question of course is where did all if the extra workers come from? Perhaps the mega high immigration where the influx of migrants, who are relatively likely to work, helps to explain the data, as well as financial pressure on local workers to grab more work, and multiple jobs to try and make ends meet. There is no good analysis to split these two factors apart, perhaps surprisingly, or perhaps not! But we know multiple job holders continues to rise.

Across the states, Victoria had the highest unemployment rate of 4.6% in seasonally adjusted terms. Western Australia had the lowest at 3.7%, reflecting the very different economic stories across the states. The participation rate was highest in the NT and ACT, at 73.6% and 72.9% respectively and lowest in Tasmania at 60.3%.

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Today’s post is brought to you by Ribbon Property Consultants.

Kiwis Get A Rate Cut As The Reserve Bank Pivots!

Interesting question, who you believe more the markets, or Central Bankers. Of course those in Central Bank land, will claim data dependence, and moving targets, and as RBA Deputy Governor Andrew Hauser warned recently it’s a risk to listen to “false prophets” on interest rates; and yet after several false dawns, New Zealand’s central bank cut interest rates, embarking on an easing cycle much sooner than previously indicated as The Reserve Bank’s Monetary Policy Committee lowered the Official Cash Rate by a quarter percentage point to 5.25% Wednesday in Wellington.

The RBNZ’s pivot to easing is a rapid change of tune after it said in May it considered raising rates and wouldn’t cut them until the second half of 2025. The bank’s concerns over sticky domestic inflation are being alleviated as the economy teeters on the brink of its third recession in less than two years and unemployment rises. The RBNZ’s new forecasts show the OCR falling further in the fourth quarter and by about 100 basis points by the middle of next year.

So will the RBNZ’s move influence Australian interest rates. Probably not because inflation in Australia is way worse, and Government spending and support significantly higher. RBA governor Michele Bullock last week ruled out the prospect of rate cuts this year. But the RBA’s significant lag in monetary policy will catch up to the Australian economy as it has done in New Zealand.

Generally, I think Australia will see rates higher for longer because of poor Government policy, as I discussed in yesterdays live show with Leith van Onselen. But the rate trend will be lower ahead, but not back to close to zero, which was in its own right a policy error and helped to fire up inflation in the first place. At least Kiwi’s can breath a little easier, though you can probably thank lower migration for that – Australia please note!

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