Residential property prices fell 2.4 per cent in the December quarter 2018, according to figures released today by the Australian Bureau of Statistics (ABS). The total value of Australia’s 10.3 million residential dwellings fell by $133.1 billion to $6.7 trillion. The mean price of dwellings in Australia is now $651,100, and falling.
Plus the number of home transfers complete are trending down as sales volumes decline, and stock rises.
Chief Economist for the ABS, Bruce Hockman said: “Australia’s two largest cities continue to lead the fall in property prices. These falls follow a period of solid growth, where prices in Sydney rose 68 per cent and Melbourne rose 54 per cent, over the five years to December quarter 2017.”
Sydney property prices fell 3.7 per cent in the December quarter 2018 and have continued to fall since September quarter 2017, while Melbourne property prices recorded the fourth consecutive quarter of falls (-2.4 per cent).
Here are the annual trends. Hobart and Canberra are still in poisitve territory (but falling).
Mr. Hockman said: “While property prices are falling in most capital cities, a tightening in credit supply and reduced demand from investors and owner occupiers have had a more pronounced effect on the larger property markets of Sydney and Melbourne.”
Through the year growth in residential property prices fell 5.1 per cent in the December quarter 2018. Falls were recorded in Sydney (-7.8 per cent), Melbourne (-6.4 per cent), Darwin (-3.5 per cent), Perth (-2.5 per cent) and Brisbane (-0.3 per cent).
We also see continuing falls in the number of home transfers (the end result of sales). The last quarter of 2018 is still preliminary, but the trends are pretty clear now. Falls in Melbourne appear the most significant.
But Sydney is not far behind.
Other states also appear weaker (even Hobart, Adelaide and Canberra). Expect more home price falls ahead.
The ABS released the latest trade data to end January 2019. The surplus jumped to $4.5bn which is the second highest on record. The largest was $4.7bn surplus in December 2016.
Westpac highlighted that the January outcome was a $0.8bn improvement on December and exceeded expectations (market median $2.75bn and Westpac $3.1bn).
Imports did rebound in the month, +3.3%, following a 5.5% fall last month (vs a forecast +4%).
Exports were much stronger than anticipated, increasing by 5.0%, up $1.9bn (vs a forecast +2.2%).
Export strength was largely centred on a sharp rebound in gold off a low base, up 174% (Westpac expected a 75% rebound).
In dollar terms, gold accounted for $1.4bn of the $1.9bn increase in total exports in the month.
Coal exports rose 6%, following a couple of softer months, and metal ores increased by 3.4%, boosted by the higher iron ore price. But rural exports have been more resilient over the past couple of months – however the drought in NSW and surrounds remains a considerable headwind.
Metal ores and coal both advanced in January, up a combined $0.6bn.
The trade surplus widened in 2018 and in to 2019 on higher export earnings, boosted by rising commodity prices.
Notably, commodity prices have surprised to the high side in part due to supply disruptions having an amplified impact in a market where supply and demand are in relatively tight balance.
The $4.5bn surplus for January compares with a Q4 monthly average of $2.8bn.
The surplus for Q1 as a whole is expected to be a material improvement on that in Q4, with export volumes forecast to rise (following a disappointing second half of 2018) and on a likely further increase in the terms of trade.
The Australian economy grew 0.2 per cent in seasonally adjusted chain volume terms in the December quarter 2018, according to figures released by the Australian Bureau of Statistics (ABS) today. But the heavy lifting was done by Government, leading to a 2.3% annual result. In seasonally adjusted terms we had two quarter falls in GDP per capita, so we are technically in recession on a per capital basis.
Actually the December data provided no major surprises as both the headline GDP and behaviour of consumers were broadly as anticipated. This is also true on housing, investment and public demand.
The trend data shows a fall in GDP, GDP per capital and in the savings ratio. Expect significant fiscal stimulus in the budget, and more after the election. This is an economy running of just a few cylinders.
New home building activity fell by 3.6 per cent during the final quarter of 2018 while home renovation activity declined by 3.1 per cent. Despite the softening at the end of 2018, activity was still higher than in the same quarter a year earlier.
Here is the ABS summary:
AUSTRALIAN ECONOMY GREW BY 0.2%
Australia’s gross domestic product (GDP) grew by 0.2% in the December quarter 2018, following a 0.3% rise in the September quarter. The Australian economy grew 2.3% through the year.
Government final consumption expenditure rose 1.8% in the December quarter 2018 and remains strong through the year at 5.6%. National non-defence (4.2%) was the main contributor to growth in the quarter, due to increases in social benefits to households from continued government spending on disability, health and aged care services. State and local government expenditure increased 1.1% driven by rises in non-employee expenses.
GOVERNMENT FINAL CONSUMPTION EXPENDITURE, Volume measures: Seasonally adjusted
SUSTAINED GROWTH IN INVESTMENT BY GENERAL GOVERNMENT
General government gross fixed capital formation increased 2.7% this quarter. The rise was driven by state and local general government (6.3%), with continued strength due to public infrastructure investment. This was offset by national general government, which fell 5.7% following defence purchases in the September quarter. Through the year general government gross fixed capital formation has risen 9.0%, again reflecting the high number of public infrastructure projects occurring across the country.
GENERAL GOVERNMENT GROSS FIXED CAPITAL FORMATION, Volume measures: Seasonally adjusted
BUILD UP IN INVENTORIES
Inventories held by business increased $685m in the December quarter 2018.
CHANGE IN INVENTORIES – Selected industries, Volume measures: Seasonally adjusted
GROWTH IN HOUSEHOLD CONSUMPTION SLOWS
Household final consumption expenditure increased 0.4% in the December quarter 2018, with through the year growth moderating to 2.0%. The growth in household consumption was driven by spending on health, clothing and footwear, and hotels, cafes and restaurants. There were falls in household spending for electricity, gas and other fuel, purchases of vehicles and furnishings and household equipment.
HOUSEHOLD FINAL CONSUMPTION EXPENDITURE, Volume measures: Seasonally adjusted
BROAD BASED GROWTH IN COMPENSATION OF EMPLOYEES
Compensation of Employee (COE) increased 0.9% in December quarter 2018 due to strength from both the private and public sector. Through the year COE increased 4.3% and with growth above its five year December average of 3.4% growth.
COMPENSATION OF EMPLOYEES, Current prices: Seasonally adjusted
HOUSEHOLD SAVING RATIO INCREASED MARGINALLY
The household saving ratio rose to 2.5% in the December quarter 2018. This slight pick up was due to modest growth in household disposable income alongside lower growth in household spending. The growth in gross disposable income was due to continued growth in compensation of employees as well as an increase in insurance claims received by households.
HOUSEHOLD SAVING RATIO, Current prices: Seasonally adjusted
Chief Economist for the ABS, Bruce Hockman, said: “Growth in the economy was subdued, reflecting soft household spending and a decline in dwelling investment. The approvals for dwelling construction indicate that the decline in dwelling investment will continue.”
Household spending grew by 0.4 per cent, reflecting a continuation of modest spending in recent quarters. Investment in dwellings fell 3.4 per cent.
Falls in private investment dampened growth in the quarter. This was consistent with the decline in construction industry value added, falling 1.9 per cent. Services industries supporting construction activity detracted from growth with professional scientific and technical services industry value added declining for the first time in three years. Mining investment fell in the quarter as significant projects transitioned from the construction to the production phase. This is reflected in oil and gas production, which grew 7.7 per cent.
Public demand sustained growth in the quarter. Public investment remained at high levels with State and Local government growth of 6.3 per cent reflecting continued work on a number of large infrastructure projects. Government final consumption expenditure grew 1.8 per cent, with ongoing expenditure in health, aged care and disability services. This investment translates to ongoing strength from the healthcare industry, which remains the largest contributor to economic growth.
Mr Hockman said “As the economy transitions out of the mining boom, investment has remained strong with major public works driving growth around Australia.”
Australia’s current account deficit in seasonally adjusted terms decreased $3,582 million in the December quarter 2018 to $7,203 million driven mainly by increased goods and services exports, according to latest figures from the Australian Bureau of Statistics (ABS).
Australia’s net foreign debt liability position increased $35.4 billion to $1,082.9 billion., up 3%.
More downward pressure on the GDP? It looks like the economy has lost considerable momentum over the second half of 2018, thanks to whats happening in housing and weak consumer spending.
The balance on goods and services surplus in the December quarter 2018 was $8,425 million, a rise of $2,661 million. Exports of goods and services rose $3,676 million (3 per cent) and imports of goods and services rose $1,015 million (1 per cent). The net primary income deficit narrowed by $848 million to $15,318 million in the December quarter 2018.
In volume terms, falling exports and rising imports resulted in an expectation for international trade to detract 0.2 percentage points from growth in the December quarter 2018 Gross Domestic Product. In seasonally adjusted chain volume terms, the balance on goods and services surplus decreased $781 million, narrowing the surplus to $1,241 million.
Australia’s net international investment position was a liability of $975.7 billion at 31 December 2018, an increase of $36.5 billion on the revised 30 September 2018 position of $939.1 billion.
Australia’s net foreign debt liability position increased $35.4
billion to $1,082.9 billion. Australia’s net foreign equity asset
position decreased $1.1 billion to $107.2 billion at 31 December 2018
The number of dwellings approved in Australia fell by 3.2 per cent in January 2019, in trend terms, according to data released by the Australian Bureau of Statistics (ABS) today.
“The trend for the total dwelling approvals series has steadily declined over the past year,” said Justin Lokhorst, Director of Construction Statistics at the ABS. “The series is now at its lowest level since May 2013.”
The decrease in January was driven by private sector dwellings excluding houses (e.g. townhouses and apartments), which fell 8.1 per cent in trend terms.
Private sector houses also declined, by 0.4 per cent.
Among the states and territories, total dwelling approvals fell in January in the Australian Capital Territory (19.8 per cent), the Northern Territory (8.0 per cent), Victoria (4.5 per cent), Queensland (3.9 per cent), New South Wales (2.3 per cent) and South Australia (0.8 per cent) in trend terms. Western Australia (2.2 per cent) and Tasmania (1.4 per cent) recorded increases.
Approvals for private sector houses fell 0.4 per cent in January in trend terms. Queensland (1.4 per cent), New South Wales (0.6 per cent) and Victoria (0.3 per cent) declined, while increases were recorded in South Australia (2.3 per cent) and Western Australia (0.2 per cent).
In seasonally adjusted terms, total dwellings rose by 2.5 per cent in January, driven by rises in Western Australia (28.8 per cent), Tasmania (15.4 per cent) and New South Wales (12.0 per cent). Private dwellings excluding houses rose 2.7 per cent, while private houses also increased (by 2.1 per cent).
But as Westpac put it ” As a rule, January housing data should be taken with a large grain of salt – the low flows through the holiday period mean any month to month noise is amplified by seasonal adjustment”.
The value of total building approved fell 1.5 per cent in January, in trend terms, and has fallen for 14 months. The value of residential building fell 2.7 per cent, while non-residential building rose 0.4 per cent.
Australia’s trend unemployment rate remained steady in January 2019 at 5.1 per cent, from a revised December 2018 figure, according to the latest information released by the Australian Bureau of Statistics (ABS).
ABS Chief Economist Bruce Hockman said: “The unemployment rate has remained at 5.1 per cent for a second month, supported by strong participation in the labour force, at 65.7 per cent.” Employment and hours
In January 2019, trend monthly employment increased by 24,900 persons. Full-time employment increased by 16,800 persons and part-time employment increased by 8,100 persons.
Over the past year, trend employment increased by 295,500 persons (2.4 per cent) which was above the average annual growth over the past 20 years (2.0 per cent).
The trend employment to population ratio, which shows how employed the population is, rose to a 10 year high of 62.4 per cent.
“The 15-64 year old employment to population ratio reached a historical high of 74.1 per cent, with almost three of every four ‘working age’ Australians now employed”, Mr Hockman said.
The trend monthly hours worked increased by 0.1 per cent in January 2019 and by 1.6 per cent over the past year. This was slightly below the 20 year average year-on-year growth of 1.7 per cent.
The trend monthly underemployment rate remained steady at 8.3 per cent and decreased by 0.3 percentage points over the year. The trend underutilisation rate also remained steady at 13.3 per cent, and decreased by 0.7 percentage points over the past year.
States and territories
The trend unemployment rate increased in South Australia, Western Australia and Tasmania, decreased in New South Wales and Queensland, and remained steady in all other states and territories.
In January 2019, increases in trend employment were observed in most states and territories except Western Australia (down 1,700 persons),Tasmania (down 300 persons) and South Australia (down 200 persons). The largest increases were in New South Wales (up 11,200 persons), followed by Victoria (up 10,300 persons) and Queensland (up 3,500 persons).
Over the past year, increases in employment were observed in all states except Tasmania (down 1,400 persons). Both territories recorded falls in employment (the Northern Territory down 2,500 persons and the Australian Capital Territory down 2,300 persons). The largest increases were in New South Wales (up 133,900 persons), Victoria (up 118,800 persons) and Queensland (up 27,800 persons). The highest annual employment growth rates were in Victoria at 3.7%, followed by New South Wales at 3.4% and Queensland at 1.1%. New South Wales and Victoria were the only states to have a year-on-year growth rate in trend employment above their 20 year average. The monthly trend unemployment rate increased by 0.1 pts in Western Australia (6.6%) and Tasmania (6.2%). It increased by less than 0.1 pts in South Australia (6.0%) and the Northern Territory (5.0%). It remained unchanged in Victoria (4.5%) and the Australian Capital Territory (3.5%). It decreased by 0.1 pts in New South Wales (4.1%) and less than 0.1 pts in Queensland (6.1%).
The monthly trend underemployment rate increased in the Northern Territory (up 0.3 pts to 5.0%) and Victoria (up 0.1 pts to 8.2%). Decreases were seen in Tasmania (down 0.2 pts to 9.6%), Western Australia (down 0.1 pts to 9.2%) and the Australian Capital Territory (down 0.1 pts to 6.3%).
Increases to the trend participation rate were observed in the Northern Territory (up by 0.2 pts to 74.8%), South Australia (up by less than 0.1 pts to 62.8%), New South Wales (up by less than 0.1 pts to 65.1%) and Victoria (up by less than 0.1 pts to 65.9%). Decreases were observed in Tasmania (down 0.1 pts to 60.1%) and the Australian Capital Territory (down 0.1 pts to 69.6%). The monthly trend participation rate remained unchanged in Queensland (65.6%) and Western Australia (68.5%).
The trend Wage Price Index (WPI) rose 0.5 per cent in December quarter 2018 and 2.3 per cent through the year, according to figures released today by the Australian Bureau of Statistics (ABS). Growth remains anemic.
The trend quarterly rise of 0.5 per cent continues an extended period of moderate hourly wage growth. Annually, private sector wages rose 2.3 per cent and public sector wages grew 2.5 per cent.
ABS Chief Economist Bruce Hockman said that the annual rates of growth in the private sector have been lower than those recorded for the public sector over the last four years.
Remember that from last July the Fair Work Commission lifted the minimum wage by 3.5%. This factor impacted more than 2 million workers and has been responsible for lifting the overall results. But many households have seen no uplift at all.
In original terms, annual growth to the December quarter 2018 ranged from 1.6 per cent for the Information Media and telecommunication services industry to 2.8 per cent for the Electricity, gas, water and waste services and Health care and social assistance industries.
Western Australia once again recorded the lowest through the year wage growth of 1.6 per cent while Victoria recorded the highest of 2.7 per cent.
So if wages growth is stirring, its at the margin, and hardly noticeable.
“This report finds that trends in wages growth across the various measures considered have been fairly similar over the last 20 years. However, growth across these measures has been below the long-term average over the last five or so years,” it said, noting a relatively steady fall in growth rates since the global financial crisis (GFC).
Among the various reasons investigated by the report as potential contributors to low wage growth were the rates of unemployment and inflation, productivity, as well as “structural factors” such as changes across different industries, technology — particularly automation and the gig economy — and changes in employee bargaining power”.
The ABS has released the first in its new combined series of household and business finance – “ 5601.0 – Lending to households and businesses, Australia, Dec 2018″.
The new data required a rebuild of our analytics, but it is very clear that the rate of growth of new credit continues to ease across the board. The focus of the release is credit flows, the rate of new loans being written. The RBA of course reports the stock at the economy level, and APRA the Bank (ADI) stock. Today we look at the flow data.
Owner Occupied lending flows fell by 1.59% from November to December, down $310 million dollars. Investment lending fell 1.6%, down $125 million dollars and personal credit fell 1.17%, down $68 million dollars. Total credit flows to households fell 1.52% down $506 million dollars. Business credit flows fell 2.55%, down $866 million dollars and total credit flows dropped 2.03% by $1.38 billion dollars, to $66.5 billion dollars.
The share of investment loan flows for residential property was 28.5% of housing flows, and lending for business fell to 50.6% of all credit flows.
The credit impulse (the rate of change of credit growth) continues to ease, which signals a weaker economy, and lower home prices ahead. Significantly, owner occupied lending is slowing faster than investor lending now.
Within the housing categories the rolling 12 month growth rates in credit flows shows that owner occupied construction are down 16.7%, finance for new builds is down 14,2%, finance for established property is down 14.3% and refinanced loans is down 10.9% over 12 months. New investment loan flows fell 3.4% and refinanced investor loans was down 21.3%, which is a significant drop. These are the factors which feed into my overall home price models, and this downward momentum of the credit impulse is highly significant, and why I am looking for more home price falls ahead. Note again, its the owner occupied sector on the slide, not just property investors!
We can look at credit flows for investor purposes across the states. NSW is down more than 25%, VIC down 21.5%, SA down 14%, WA down 12% TAS down 24%, NT down 4.7% and ACT down a massive 37%; all over the past 12 months.
First time buyers continue at a lower rate as our tracker shows, with 17.7% of new loans for first time buyers, down from 18.3% last month, a drop of 1,976 transactions compared with last month, to 8,517.
In addition the number of first time property investor buyers dropped again.
The average loan size for a first time buyer fell to $337,260, indicating tighter lending standards, while other loans were bigger at $397,404.
Finally, personal credit flows were down again, with new revolving loans especially hard hit.
The Credit Tide Is Receding
In conclusion, there is nothing in this data to suggest increased momentum in credit, but then this is in December, and before the APRA statement that lending standards will remain tight (7% hurdle rate applies) and the Royal Commission left responsible lending rules where they were.
My conclusion is that the credit impulse will continue to slow. This will have a flow on effect to home prices and household consumption. The decade of credit driven expansion looks to be over for now. The problem is of course this will lead to weaker economic out-turns ahead, and falling home prices.
That said, credit is still growing unsustainably faster than income or inflation with housing credit at 4.9% growth over 12 month. But the rate of growth, as we showed here is easing back.
And I do not think the credit tap will be opened up “to 11” again anytime soon. Welcome to a new, but uncomfortable normal. One in which those with loans they should never have had in the first place continue to struggle with them, and new borrowers, should they chose to borrow, will need to jump through a whole series of higher hoops.
20-30% peak to trough falls in home prices anyone?
Australian retail turnover fell 0.4 per cent in December 2018, seasonally adjusted, according to the latest Australian Bureau of Statistics (ABS) Retail Trade figures.
This confirms the earlier data, which shows households just do not have the money to spend, (and spent in November to get the discounts).
This follows a 0.5 per cent rise in November 2018.
“Household goods (-2.8 per cent) and Clothing and footwear (-2.4 per cent) led the falls after strong rises in November from Black Friday promotions,” said Ben James, Director of Quarterly Economy Wide Surveys. “There were also falls in Department stores (-1.1 per cent) and Other retailing (-0.1 per cent).”
The falls were partially offset by rises in Food retailing (0.5 per cent) and Cafes, restaurants and takeaway food services (1.1 per cent).
In seasonally adjusted terms, there were falls in New South Wales (-0.6 per cent), Victoria (-0.5 per cent), the Australian Capital Territory (-1.8 per cent), Queensland (-0.1 per cent), South Australia (-0.3 per cent), the Northern Territory (-0.3 per cent), and Tasmania (-0.2 per cent.). The only state to have a rise in December 2018 was Western Australia (0.1 per cent).
Online retail turnover contributed 5.6 per cent to total retail turnover in original terms in December 2018, down from 6.6 per cent in November 2018, highlighting the increasing importance of the November month for online sales. In December 2017 online retail turnover contributed 4.8 per cent to total retail.
The trend estimate for Australian retail turnover rose 0.2 per cent in December 2018, following a rise of 0.2 per cent in November 2018. Compared to December 2017, the trend estimate rose 3.2 per cent.
For the December quarter 2018, there was a 0.1 per cent rise in seasonally adjusted volume terms. This follows a rise of 0.2 per cent in the September quarter 2018. The quarterly rise in volumes was led by Clothing and footwear (2.7 per cent), and Department stores (0.7 per cent). Food retailing (-0.2 per cent), Other retailing (-0.5 per cent), Cafes, restaurants and takeaway food services (-0.5 per cent), and Household goods (-0.3 per cent) fell in seasonally adjusted volume terms.
The number of dwellings approved in Australia fell by 4.1 per cent in December 2018, in trend terms, according to data released by the Australian Bureau of Statistics (ABS) today.
“The trend for the total dwelling approvals series has continued to decline over the past year,” said Daniel Rossi, Director of Construction Statistics at the ABS. “The series is now at its lowest level since June 2013.”
The decrease in December was driven by private sector dwellings excluding houses (e.g. townhouses and apartments), which fell 8.5 per cent. Private sector houses also declined, by 1.1 per cent.
Among the states and territories, dwelling approvals fell in December in the Australian Capital Territory (21.3 per cent), Queensland (6.5 per cent), New South Wales (5.0 per cent), Western Australia (3.8 per cent), South Australia (1.5 per cent) and Victoria (1.4 per cent) in trend terms. The Northern Territory (1.7 per cent) and Tasmania (1.1 per cent) recorded increases.
Approvals for private sector houses fell 1.1 per cent in December in trend terms. Queensland (3.6 per cent), New South Wales (1.6 per cent) and Western Australia (0.6 per cent) declined, while increases were recorded in South Australia (0.6 per cent) and Victoria (0.2 per cent).
In seasonally adjusted terms, total dwellings fell by 8.4 per cent in December, driven by a 18.8 per cent decrease in private dwellings excluding houses. Private houses also fell 2.2 per cent.
The value of total building approved fell 1.5 per cent in December, in trend terms, and has fallen for the past 13 months. The value of residential building fell 2.6 per cent, while non-residential building rose 0.2 per cent.
