Of course the situation is far from normal, and the clearance rates are very low, and some results appear to be a couple of weeks old! Domains models are broken as their scale stops at 40%. We are looking at around 34% clearance rates, which are probably overstated. This is significantly down on this time last year.
They note “the number of auctions withdrawn is unusually high at the moment due to the temporary ban on holding onsite auction gatherings. A withdrawn auction is counted as unsold, which will pull down the clearance rate”.
Canberra listed 66 auctions, reported 32 with 20 withdrawn and 25 sold. 7 were passed in giving a Domain clearance of 48%.
Brisbane listed 133 auctions, reported 26 with 21 sold and 67 withdrawn and 5 passed in to give a Domain clearance of 23%.
Adelaide listed 68 auctions, reported 15 with 13 sold and 51 withdrawn and 2 passed in to give a Domain clearance of 20%.
The latest edition of the DFA household surveys, up to 31st March 2020 reveals in painful detail the impact of the current health emergency. Not that confidence was particularly strong beforehand, thanks to the high costs of living, and flat real incomes for several years.
But the shock of the economic freeze, and rising joblessness has dropped the index to levels I never expected to see. Last month it had fallen to 80.2, the latest read is 73.2, well below the average 100 level last seen back in May 2017.
The 52,000 household surveys asks whether their employment prospects, income, costs, loans, savings, and net worth were higher or lower than 12 months ago. Coupled with the other demographic data we collect, we are able to examine the results across a range of dimensions – though this month, it hardly makes a difference, as every age group, state, property status, and more were down. We normally display the results, before looking at the drivers, but this time we examine the individual elements first.
Job security fell by 25% compared with the previous month, with 64% of households now less secure than a year ago, and 4% more secure. The economic freeze which has impacted over this period explains the sharp movements.
There was also a spike in those indicating a fall in incomes, with 60% of households reporting a real fall, up 7%. 38% saw no change, but this was down 3%.
Significantly more households were concerned with their debt burden, with 60% of households now more concerned than a year ago, up 15%, 4% more comfortable and 37% about the same, down 3%. Whilst lower interest rates are helping those still employed, it is irrelevant to those who have lost employment (it would be even worse but for the Government support and mortgage repayment holidays).
The costs of living continue to climb, with 95% of households reporting higher costs than a year ago.
Households comfort with their level of savings dropped significantly, with 59% less comfortable (up 16%), with 37% were about the same. Not only are lower deposit rates continuing to impact, but significantly more households were caught by the sudden drop in earned income, and so are more reliant on savings. Many of those who have income said they will now save more, given the current uncertainties. More bad news for discretionary spending!
Overall net worth (assets minus loans) fell for 64% of households, thanks to drops in share market prices, falls in the value of superannuation, and some property price falls. This was a rise of 17% compared with last month. 27% stated their net worth was higher, down 3%, and this was directly connected with the still reported property price rises in the eastern states. Households tend to over estimate the value of their properties, especially given the near collapse of auction clearance rates and property sales. This may well be a case of hope over expectation!
So in summary, the moving parts have showing a shocking shift in a short period. This translates to significant adjustments to the index results.
All property owning segments reported a significant drop, with owner occupied property holders reporting the biggest fall, as they had been relatively more optimistic than other groups, until now.
Across the states, they all fell, though NSW and VIC reported the largest new reductions in confidence. No state was immune from the falls.
All age groups reported a fall, with older aged groups showing greater falls – not least because of the stock market falls, and risk of job loss. People above 50 were more concerned about never getting another job, with all the implications for retirement, and many said they will need to work for longer before retiring.
Finally, our wealth segments all reported a fall in confidence, but the “free affluent” group, those without a mortgage, with property and market investment dropped the most. This was the segment which was most insulated from events up to this point.
You can also catch up on my discussion with Nucleus Wealth from yesterday where we discuss these results in context.
The full mortgage stress results will be released next week.
You can join our podcast live tomorrow 12:30 on the link below. I reveal our latest mortgage stress results for March and discuss my latest scenario modelling. You can also ask a question live!
Robbie Barwick from the Citizens Party and I discuss the need to create a National Bank to support the economic reconstruction which with country needs.
In the halcyon days of February (remember when the stock markets hit all time highs), total mortgage lending growth from the banks was already weak, with investment lending balances falling slightly, and owner occupied lending growing, on a net basis. Some of this was driven by households choosing to pay down loans thanks to their own financial uncertainty. This could have proved to be very smart. The share of investment mortgages in the portfolio dropped to 36.8%, with the total exposures up to $1.75 trillion dollars, with owner occupied loans at $1.10 trillion and investment loans $0.64 trillion.
In percentage terms, investment balances fell by 0.03% or $170 million and owner occupied loans rose 0.3% or $3.3 billion, giving total loan growth of 0.18% or $3.17 billion. Ahead of course, interest will be rolled up into balances for the duration, but the number of new mortgages may slow. Hard to predict, as some seek to switch loans, or even sell quickly.
Portfolio movements within the banks, as reported by APRA, is subject to a range of potential input errors. but with that caveat it seems that CBA, Macquarie, Bendigo and HSBC were lending more freely, while NAB and Westpac saw their investor balances fall, whereas ANZ dropped both sets of balances. ING and Bank of Queensland dropped investor loans, while Suncorp dropped owner occupied balances while growing investor loan balances once again.
Meantime, the RBA aggregate figures are also out today. They reported total credit grew 0.4% in February, and 2.8% over the year, compared to 4.1% a year before. More signs of slowing.
Within that, lending for housing rose 0.3% in February to 3.2% over the year, compared with 4.2% a year ago. Business lending rose 0.9% in February to reach 3.5% over the year, compared with 5.1% a year back. And personal credit dropped 0.5% in February, and is down 5.3% over the year, compared with down 2.6% the previous year.
More granular analysis shows that lending for owner occupation is where the growth is, at 5.1% annualised, up from a low of 4.8% back in October last year, so hardly a stellar recovery. Investment lending is still falling slightly.
Broad money is falling, down to 4.1% annualised, despite the rise in credit. All signs of weakness before the current health crisis is freezing the economy.
All pretty academic now, but there is the data for the record!
