The RBA meets Tuesday, with economists and markets predicting no change to rates. Indeed, not til later next year will rates likely come down, barring some external shock. Governor Michele Bullock said last month that inflation remains too high to consider a cut in the near term.
At the heart of the problem is the Governments spending a greater share of the economy, and stoking jobs in the public and related sector, like healthcare. States are also spending like drunken sailors, and the federal government is throwing more money at households via the electricity subsides. This is all inflationary.
On the other hand, the RBA did not take the cash rate as high as many other central banks did. As a result we have a shallower path, dodging a recession by the rate water torture will continue for longer. The upshot has been a cautious central bank that has kept the cash rate at 4.35% for the past year. By comparison, the Federal Reserve may cut for a third straight meeting this month.
So we will muddle through into 2025, and possibly face an election with rates at 4.35%. This could well become a cat fight with the RBA caught in the muddle, sorry middle.
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Digital Finance Analytics (DFA) Blog
The RBA Faces Mixed Signals, But Will Likely Stand Firm On Rates…
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Digital Finance Analytics (DFA) Blog
Its Edwin's Monday (Wednesday) Evening Property Rant!
More households are feeling the pinch in the run up to Christmas according to our latest research and as demonstrated in the results to the end of November 2024, which we look at today.
We start with an overview of “financial stress”, defined in cash flow terms, then look at mortgage, rental, investor and overall stress across the country, as we dive into the top postcodes and consider the future scenarios for interest rates.
If you want a deep dive into a specific post code, drop it into the comments below, and I will make a subsequent show including the granular data I hold.
The full detailed set of data is available via our Patreon programme: https://www.patreon.com/DigitalFinanceAnalytics
Details of our one to one service are here: https://digitalfinanceanalytics.com/blog/dfa-one-to-one/
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The latest auction clearance rates data confirms what we already knew, the traditionally busy spring selling season is ending with a whimper as it falls to the lowest this year amid weak buyer demand. Of course, clearance rates are a poor proxy for property market health, but the low quality of many listed properties, combined with over aggressive pricing are part of the story.
Add in expectations of higher for longer interest rates with ANZ pushing out a rate cut to May 2025, “We are shifting our view on the start of the RBA’s easing cycle from February 2025 to May 2025. We now also only expect two 25 basis point rate cuts in total [down from three],” said ANZ Bank’s Adam Boyton on Friday.
In addition expected falls of say 5 per cent in house prices in Sydney and Melbourne next year are reinforcing the trend. Borrowing capacity is also continuing to be crimped.
Also, costs of living pressures are hitting home, with an article over the weekend covering a Red Bridge survey which said that more than one third of Australians have delayed medical treatment because of the costs of living crisis, while almost half have put off buying a home, car or other purchase. 28 per cent of those polled say economic conditions have caused them to put off having children, while 20 per cent say they have delayed their decision to get married.
As the AFR says, this week was a big test of demand, with more than 1000 auctions scheduled in Sydney and Melbourne, and over 2600 scheduled nationally. However, just 63.4 per cent of homes sold under the hammer, based on preliminary auction numbers tallied by CoreLogic, down from 65.3 per cent last week. This matched the result of the first week of November, which was the lowest early clearance rate of the year. Once all the results are collected, it is expected that the final clearance rate will be below 60 per cent for the seventh consecutive week. “The auction market ended the spring selling season with a whimper,” said CoreLogic research director Tim Lawless.
Domain preliminary results also mirror the decline in clearances, mirroring price falls in some markets especially in Melbourne and Sydney, and on Monday, CoreLogic will release its monthly Home Values Index, which will show further declines in house prices in both Cities.
The two leading indicators for housing prices – auction clearance rates and the amount of stock on market – suggested price drops in those cities would persist, SQM’s Louis Christopher said.
Bottom line is the property market is taking an early holiday, and 2025 looks pretty shaky especially in the major markets.
Renegade Seminar: you can join the The World Economic Renegade Summit where Leading economist Harry Dent, Tom Panos and myself will explore what is really going on, and how you can take control of your financial future. This event starts next Wednesday Sydney time at 7pm
You won’t regret taking the time, and by the way there is $5,000 worth of Gold for one lucky attendee. You can secure your place via the link here: mesiti.com/north
Note Edwin’s RANT will be on Wednesday this week.
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Today’s post is brought to you by Ribbon Property Consultants.
Digital Finance Analytics (DFA) Blog
Property Market Takes An Early Break, As Prices Ease…
Speculation about Japanese rate hikes drove a rebound for the yen, which ended with the biggest weekly gain vs the USD since July. The dollar fell 1.18% on the day to 149.76 yen, under pressure after Japan’s government finalised a stimulus budget and inflation in Tokyo came in hotter than economists forecast.
ASX property stocks were the worst performing, sliding 0,7 per cent. Goodman Group shares dropped 0.8 per cent to $37.91 and Westfield parent Scentre was down 1.1 per cent to $3.68.
The falls come as economists from three Australian banks – ANZ, AMP and Bank of Queensland – push out their forecast for a first cut from the Reserve Bank of Australia to May, from February previously.
In cryptocurrencies, Bitcoin briefly traded above $US98,600 btu was last at $96,534. Regardless of the current price level, some predict significant growth is possible with growth through the remaining days of 2024 to hit a high of $200,000. This is of course the point, markets can hope, but Bitcoin and the markets more widely continue to be driven on hopium. Just don’t look down.
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Digital Finance Analytics (DFA) Blog
Vertigo: Markets Still Grinding Higher (Just Don’t Look Down!)
Part two of the government’s stalled housing legislation finally passed federal parliament on Thursday. The Build to Rent tax reform bill aims to boost investment in apartment blocks designed and constructed for rental occupancy and retained in single ownership.
Other than as purpose-built student accommodation, this form of development remains rare in Australia.
At the same time, Build to Rent does not inherently contribute to affordable housing.
At least in its initial form in Australia, it is typically a “premium product”, mainly in well-connected locations and targeted at moderate to high income earners.
And it might suck construction activity away from other projects too!
Oh, for some joined up thinking!
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Digital Finance Analytics (DFA) Blog
The Build To Rent Solution Won’t Solve The Real Problem!
Part two of the government’s stalled housing legislation finally passed federal parliament on Thursday. The Build to Rent tax reform bill aims to boost investment in apartment blocks designed and constructed for rental occupancy and retained in single ownership.
Other than as purpose-built student accommodation, this form of development remains rare in Australia.
At the same time, Build to Rent does not inherently contribute to affordable housing.
At least in its initial form in Australia, it is typically a “premium product”, mainly in well-connected locations and targeted at moderate to high income earners.
And it might suck construction activity away from other projects too!
Oh, for some joined up thinking!
http://www.martinnorth.com/
Go to the Walk The World Universe at https://walktheworld.com.au/
The New Zealand Reserve Bank’s Monetary Policy Committee lowered the Official Cash Rate to 4.25% from 4.75%.
The bank’s updated projections are consistent with another 50-point reduction at its next decision on Feb. 19, Governor Adrian Orr told reporters at a press conference. “But it’s also conditional on economic projections panning out,” he said.
“Economic growth is expected to recover during 2025, as lower interest rates encourage investment and other spending,” the bank said. “Employment growth is expected to remain weak until mid-2025 and, for some, financial stress will take time to ease.”
This is a very different path compared with the RBA’s 4.35% well into 2025.
Sometimes a short sharp shock is better!
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Digital Finance Analytics (DFA) Blog
Kiwis See Another Rate Cut As The RBNZ Takes A Different Path!
The latest monthly CPI data from the ABS showed headline inflation going sideways and underlying inflation rising, despite the massive Government support to households across electricity and rents.
Nothing here to signal rate cuts in the short term, and the RBA will continue to look through to the underlying rate of 3.5% which is up from last month and higher than their target.
Of course, politically speaking we will hear loads about Government support, and bearing down on inflation, despite the fact that many of the actions of Government are driving inflation higher.
Its another classic case of numberwanging, because the real costs for people are so much higher.
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