The ABS released their data for the managed funds industry to June 2014 today. At 30 June 2014, the managed funds industry had $2,405.3b funds under management, an increase of $46.1b (2%) on the March quarter 2014 figure of $2,359.2b. The main valuation effects that occurred during the June quarter 2014 were as follows: the S&P/ASX 200 was flat; the price of foreign shares, as represented by the MSCI World Index excluding Australia, increased 4.2%; and the A$ appreciated 2.2% against the US$.
At 30 June 2014, the consolidated assets of managed funds institutions were $1,895.3b, an increase of $31.3b (2%) on the March quarter 2014 figure of $1,864.0b. The asset types that increased were units in trusts, $12.5b (6%); shares, $9.2b (2%); overseas assets, $9.0b (3%); loans and placements, $4.8b (11%); bonds, etc., $3.3b (3%); short term securities, $2.1b (3%); and derivatives, $0.2b (16%). These were partially offset by decreases in other financial assets, $5.0b (12%); deposits, $4.5b (2%); other non-financial assets, $0.3b (2%); and land, buildings and equipment, $0.1b (0%).
Tag: ABS
A Tale Of Two Cities – Demand and Supply In Action
Last week we reported on the ABS house stock data, which valued property at more than 5.2 trillion in Australia. We have been looking in more detail at this data, and cross relating it to information from our own household surveys. Today we compare the markets in NSW and WA, because there are some interesting observations to note. First, NSW and WA have the highest mean dwelling prices in Australia. NSW stands at more than $650,000 and WA $595,000, ahead of VIC and ACT. TAS has the lowest mean at just over $300,000.
In addition, when we look at the decomposition of the $5.2 trillon by state, NSW has the largest share, WA has a smaller, but significant share, behind VIC and QLD.
But, there are some interesting differences between NSW and WA. Population growth, from all sources (migration, births, and interstate movements), shows that WA is growing faster than NSW. So, from the demand perspective, we would expect prices in WA to be responding to that demand.
In fact, dwelling prices in WA have been growing at a significantly lower speed than in NSW. In fact, most recent data suggests prices in WA are going slightly backwards.
So, whats making this happen? We need to look at the supply side of the equation. WA have been building more properties, significantly more, than NSW. So demand and supply in WA are more in balance, even taking the faster population growth into account.
We also checked out the status of property purchase by SMSF’s and the like, and there are similar trends in the two states, so that element can be discounted from the analysis. We have previously highlighted the shrinking average plot size for new developments, and noted that WA has been allowing plot sub-division and new builds on sub-250 sqm plots. So it is interesting to note NSW’s recent announcement to release land in the west for smaller development plots. Supply and demand are clearly in action, and NSW house prices won’t adjust from their stratospheric levels until substantial supply side issues are addressed. The way to address Australia’s housing issues is to release more land, and build more houses.
Real Incomes Go Backwards
The ABS published their Wage Price Index to June 2014. In seasonally adjusted terms, both the Private and Public sector wage price indexes rose 0.6%. The rises in indexes at the industry level (in original terms) ranged from 0.1% for Accommodation and food services, Public administration and safety, and Arts and recreation services to 0.9% for Mining. The trend index and the seasonally adjusted index for Australia rose 2.6% through the year to the June quarter 2014. Rises in the original indexes through the year to the June quarter 2014 at the industry level ranged from 2.0% for both Wholesale trade and Professional, scientific and technical services to 3.2% for Education and training.
We see a consistent falling trend in income growth, since 2010.
Looking at the impact after adjusting for inflation, real effective incomes are now falling.
This is significant and serious. Many households have taken on the burden of large mortgages assuming that whilst they will experience short term pain, their incomes would grow, so easing spending pressures. This however is just not happening. Consider this updated data on household Loan To Income ratios (LTI). Some households have an effective LTI about 5 times. This is very high.
In our surveys, we find that some segments are particularly exposed. The worst is in our Growing segment, these are younger families, many of whom are first time buyers, or recent up graders. As a result mortgage stress is high, and growing in this group, even at current low interest rates.
These pressures help to explain why many households are not feeling very confident, and are reacting to rising energy, child care and school fees, falling real incomes, and rising mortgage stress. The most affluent households are least impacted.
House Price Momentum Slowing As Value Reaches $5.2 Trillion
The ABS released their latest data on Residential Property Prices today. The total value of residential dwellings in Australia was $5,196,355.9 m at the end of June quarter 2014, rising $112,598.5 m over the quarter. The mean price of residential dwellings rose $9,900 and the number of residential dwellings rose by 37,600 in the June quarter 2014. The price index for residential properties for the weighted average of the eight capital cities rose 1.8% in the June quarter 2014 and rose 10.1% through the year to the June quarter 2014. The capital city residential property price indexes rose in Sydney (+3.1%), Melbourne (+1.3%), Brisbane (+1.8%), Adelaide (+1.0%), Canberra (+0.8%), Darwin (+0.7%) and Hobart (+0.3%) and fell in Perth (-0.2%). Recent data suggest momentum is slowing, a little.
Annually, residential property prices rose in Sydney (+15.6%), Melbourne (+9.3%), Brisbane (+6.8%), Adelaide (+5.6%), Hobart (+4.3%), Perth (+3.6), Darwin (+3.4%), and Canberra (+2.2%).
The median price of established houses exceeds $700,000 in Sydney. Hobart and Adelaide have the lowest values. Looking at the rest of the states, beyond the capital cities, NT has the highest value, and QLD exceeds NSW and VIC. Note this data is to December 2013 only, as the ABS does not yet reprot the latest data for the past 6 months.
Looking at attached dwellings, again Sydney is highest, on average, at over $550,000, whereas away from the capital cities, prices are higher in NT and QLD.
Looking at the number of transfers, momentum is clearly in Sydney and Melbourne. Brisbane is showing signs of upward movement. Note again this data is to December 2013.
Property is too highly priced, compared with income measures, and international comparisons. The long term chronic problem of poor supply, easy loans and high demand continues to be a brake on the broader economy. Household confidence is not buttressed by rising prices. Many continue be be excluded from the market.
June Finance Data – ABS
The ABS published their June lending data today, covering commercial, housing and other lending categories. Owner occupied housing rose 1.8% in seasonally adjusted terms, Personal finance fell 1.8% and commercial lending rose by 12.1% in June after a fall of 5.9% in May.
Looking at housing lending, investment lending remains significant (though in percentage terms it fell slightly this month). This is on a seasonally adjusted basis.
Investment lending accounted for 38% of all housing including refinance, and unsecured.
Looking more narrowly, the proportion of investment loans written remains close to record, at 46.3% of loans, the all time record is 46.8% (May 2014). This is calculated by removing refinance and unsecured lending.
Australia’s Unemployment Rate Increased to 6.4 per cent in July 2014 – ABS
According to the ABS, in data released today, Australia’s seasonally adjusted unemployment rate increased by 0.3 percentage points to 6.4 per cent in July 2014. We also note that female and male unemployment rates have converged.
The seasonally adjusted labour force participation rate increased by 0.1 percentage points to 64.8 per cent in July 2014. The number of people employed decreased by 300 to 11,576,600 in July 2014 (seasonally adjusted). The decrease in employment was due to decreased part-time employment, down 14,800 people to 3,499,200. This was offset by increased full-time employment, up 14,500 people to 8,077,400. The monthly seasonally adjusted aggregate hours worked series decreased in July 2014, down 14.8 million hours (0.9%) to 1,610.7 million hours. The seasonally adjusted number of people unemployed increased by 43,700 to 789,000 in July 2014.
Looking at the state data, the average unadjusted rate unemployment rate increased 0.1 pts to 6.1%, based on unrounded estimates. ACT still has the lowest rate, whilst TAS has the highest.
Whilst there are some statistical reasons for the result (changes in the sample this time), the fall in aggregate hours worked indicates this is a concerning result. As such, we expect unemployment to be a drag on momentum, and it will curb enthusiasm for property amongst some segments. In our household survey results however, the largest changes in unemployment were amongst those who were classified as property inactive, closely followed by those who have purchased recently. Given the high loan to income ratios in this group, any unemployment impact may be magnified in this highly leveraged group.
Unemployment Up In June, Slightly.
The ABS released their Labour Force statistics for June 2014 today. Australia’s seasonally adjusted unemployment rate increased by 0.1 percentage points to 6.0 per cent in June 2014
The seasonally adjusted labour force participation rate increased by 0.1 percentage points to 64.7 per cent in June 2014. The number of people employed increased by 15,900 to 11,578,200 in June 2014 (seasonally adjusted). The increase in total employment was due to increased female employment (both full-time and part-time) and increased male part-time employment, offset by a fall in male full-time employment. Part-time employment increased by 19,700 people to 3,515,700 and full-time employment decreased by 3,800 people to 8,062,500.
The ABS monthly seasonally adjusted aggregate hours worked series increased in June 2014, up 15.1 million hours (0.9 per cent) to 1,629.1 million hours. The seasonally adjusted number of people unemployed increased by 20,300 to 741,700 in June 2014.
There are still considerable state variations, with unemployment lowest in the ACT (3.3%) and WA (4.9%), and highest in TAS (7.3%) and SA (6.8%).
As unemployment creeps higher, more households with large mortgages will be under pressure. We will be updating our mortgage stress modelling shortly.