This is an edited version of a live discussion about the state of the Australian Property Market, with Sydney based Mortgage Broker, Chris Bates from Flint.
Chris started as a Financial Adviser back in 2007 and sold his Financial Advice business in 2020. Over the past 9 years, Chris has grown into one of Australia’s top Mortgage Brokers and is passionate about taking the product providing industry to a trusted advice based profession.
He is known for regularly airing his views on sound property investing on both LinkedIn and popular property industry podcasts The Elephant in the Room and Australian Property Podcast. You can find him on LinkedIn https://www.linkedin.com/in/christopherbates
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Digital Finance Analytics (DFA) Blog
DFA Live Q&A Replay: Property Snakes And Ladders: With Chris Bates
In this week’s Rant we look at forecasts for future property prices (and who makes them), some of the recent changes in the dynamics of property listings, and a warning for those considering a new kitchen. We also consider the latest stats on foreign property transactions.
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High migration is putting pressure on home prices and rents, and lifting the demand for more infrastructure, and diluting the GDP per capital (share of wealth generated in the country across an ever-increasing population, 84% of which growth came from migration. So this is a big political hot potato.
Many are calling for a cut in migration to fall to a level consistent with the current capacity to build new homes, though of course the corporate and university sectors want ever more people in the country to keep wages low, and boost the number of households to sell things to, while the tax take rises, which is why The Federal Treasury want more people too.
There has been some lip service to attempt to streamline and better target Australia’s immigration system, though mainly focussing on a reduction in student numbers. But now, Home Affairs Minister Clare O’Neil says regional communities should benefit more from overseas arrivals, including through changes to cumbersome occupation lists and settlement rules.
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This is weekly market update, starting in the US, Europe, then Asia and then the US, as I get my thoughts organised!
This week, punctuated by a Wednesday US holiday, saw markets taking a breather following recent volatility and record highs. The Nasdaq had hit record highs on Thursday, boosted by strong gains in tech, and indications of a gradual easing in the labor market and inflation levels.
But on Friday, in New York, the S&P 500 closing modestly lower thanks to the quarterly expiration of about $US5.5 trillion of options during the quarterly “triple witching” in which derivatives contracts tied to equities, index options and futures mature. Around 18 billion shares changed hands on US exchanges, which is 55 per cent above the three-month average volume. The options’ expiration coincided with index rebalancing as well.
Remember that S&P 500 is up 14.6% this year, but most of the broader index’s gains have been concentrated in the information technology and communications sectors – up 28.2% and 24.3%, respectively. The rest of the market has been more subdued: the next best performing sector, utilities, is only up 9.5% year-to-date. More than 7% of stocks are down this year. So the huge price gains, including Nvidia’s 155% year-to-date run, have stirred worries that the tech rally might be overheated.
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Digital Finance Analytics (DFA) Blog
Markets Calm Before The Storm, As The AI Wave Wains?
As I discussed on my live show, on Tuesday night with Leith van Onselen, the RBA decided to hold the cash rate at 4.35%, but there were signs of a more hawkish tone from the meeting notes, and the subsequent press conference (which I might add is becoming less useful each time thanks to weak questions supporting weak answers, come on MSM do your job….).
Bullock was clear, we need more data, there are risks to the upside from sticky inflation, but employment is also an important factor, given their dual mandate.
Just remember folks, the RBA at 4.35% is significantly below several other Central Banks, including the Bank of England, which held rates on Thursday at 5.25%, despite inflation falling to 2% last month, Bank of Canada which cut rates by 0.25% to 4.75% and New Zealand’s Reserve Bank holding rates at 5.5%, despite driving the economy there into recession.
Which begs the question, has the RBA done enough on rates to squeeze inflation out of the economy in Australia, despite being lower the peers, mainly because in Australia a greater proportion of mortgages are linked to variable rates than other countries. Economists are divided, with Leith still holding the next cut will be down, as unemployment rises.
But writing on Monday, before the RBA decided to hold rates on Tuesday, Economist Warren Hogan, at the more bullish end of commentators on RBA rates, wrote in the AFR that the flow of data since the last meeting in early May made it a very close call to hold off on further tightening.
The narrow path is still attainable, but it increasingly looks like we will need to get rates up closer to 5 per cent to stay on it.
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Struggling homeowners are increasingly hitting the pricey reset button on their loans in the hope of dragging down their monthly repayments. It’s adding years to the length of their loans and potentially hundreds of thousands of dollars in interest costs.
A recent Finder.com.au survey revealed one in eight mortgage holders polled revealed they had extended their home loan to lower their repayments over the last year.
In a trend described as “borrowers stuck in mortgage quicksand”, about half of those who had extended their loans had added more than five years to the life of the debt.
This would result in much higher interest costs over the lifetime of the loan, despite cheaper monthly repayment bills in the short-term, Finder revealed.
“Even a small increase in the length of a loan term can add up to big differences in interest over the life of a home loan.”
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Today’s post is brought to you by Ribbon Property Consultants.
Digital Finance Analytics (DFA) Blog
One In Eight Mortgage Borrowers “Extend And Pretend”!
Last week, yet another building and construction firm hit the wall, collapsing into liquidation owing $5.7m straddling two different states and territories, leading to a “domino effect” impacting 130 projects and 80 staff members.
This is part of the continuing litany of failure, as data from the Australian Securities & Investments Commission (ASIC) shows that a total of 1,245 companies were declared insolvent in May alone.
This is 44% higher than the same period in 2023 and 122% higher than in May 2022. It is also the highest number of insolvencies in a single month since ASIC started reporting this data in 1999. The surge in insolvencies was driven by the construction sector, which recorded 313 insolvencies in May – a record for this cycle.
This is an object lesson for anyone considering contracting with the building and construction firm of any size; do your own due diligence! It also presents another barrier to the Albanese government’s target of building 1.2 million homes in five years—a level of construction that Australia has never achieved before, despite record activity compared with other countries and over 5% of people working in the sector.
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Today’s post is brought to you by Ribbon Property Consultants.
Digital Finance Analytics (DFA) Blog
Construction Firms Failures Hit A New Peak: There Will Be Consequences…
This is an edited version of a live discussion, with Leith van Onselen, Chief Economist at Nucleus Wealth, and co-founder of MacroBusiness.
In this show we discussed the recent developments in the housing market, and how economics is playing into the current broken system. Governments are not being transparent about their motives, or their continued intervention into the market.
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Digital Finance Analytics (DFA) Blog
DFA Live Q&A HD Replay: The Housing Poker Game: With Leith van Onselen
I caught up with accountant, Allan Mason, who was Kerry Packer’s accountant and is the best-selling author of “Tax Secrets of The Rich”. As the tax year looms, its important to take charge of your tax affairs, and we discuss some of the main issues to consider.
In this weeks show Edwin and I look at the latest in political interventions to “help” the property market, consider the impact of more Chinese money coming into Australian property, and the impact of the Bank Of Mum and Dad. Plus, our normal updates on listings, and Edwin’s latest Tip Of The Week.
