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.
It’s raining “announcables” at the moment, with interesting developments this past week on the housing and finance front as city, state and federal Governments continue to poke at the broken system. Schemes include, government buying off the plan to give construction firms a leg up, cheap housing for essential workers, changes to lending rules, higher council rates for investors, and further crackdowns on airB&B.
While these may sound attractive from a media positioning perspective, they will hardly move the dial on the broken housing system in Australia. It’s a case of fiddling while Rome burns.
In fact, for more on the broken system, join me on my live show next Tuesday evening at 8pm Sydney, when I will be joined by Leith Van Onselen, Chief Economist at Nucleus Wealth as we discuss “The Great Housing Poker Game”.
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Today’s post is brought to you by Ribbon Property Consultants.
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Hello, I’m From The Government, And I’m Here To Help You! (Honest!!?)
In this show we will look at some of the recent data relating to the New Zealand economy, which is sitting in a high interest rate, recessionary condition, as the Reserve Bank of New Zealand wrangles inflation towards its targets. We saw a significant rise in people leaving the country, with New Zealand Citizens voting with their feet!
So, we will look at the latest on property prices, retail spending and the latest inflation and migration updates. Overall, things remain very tough, though inflation while remaining sticky, is easing slowly.
So, standing back, clearly the New Zealand economy is not out of the woods yet, but the Reserve Bank of New Zealand’s approach of lifting rates higher than Australia does appear to be pushing inflation in the right direction. The uptick in exits from New Zealand suggests perhaps that some are deciding to jump ship, because households are clearly feeing the pressures. And recent policy changes will likely continue to reduce net overseas migration, with potentially significant impacts on the jobs market, and demand for property.
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The seasonally adjusted unemployment rate fell by 0.1 percentage point to 4.0 per cent in May, according to data released today by the Australian Bureau of Statistics (ABS).
With employment rising by around 40,000 people and the number of unemployed falling by 9,000 people, the unemployment rate fell to 4.0 per cent.
In April we saw more unemployed people than usual waiting to start work. Some of the fall in unemployment and rise in employment in May reflects these people starting or returning to their jobs.
While the total number of unemployed people fell by 9,000 in May, this followed a 33,000 increase in April. Unemployment was around 24,000 people more than in March, an average increase of around 12,000 people each month.
“There are now almost 600,000 unemployed people, however, that is still nearly 110,000 fewer people than in March 2020, just before the pandemic.
As a result of the increase in employment and the fall in unemployment, the seasonally adjusted employment-to-population ratio remained at 64.1 per cent and the participation rate remained at 66.8 per cent.
The latest net overseas migration figures showed that Australia’s NOM was 178,500 in Q3 and 129,400 in Q4, totalling 307,900 for the half. This leaves only 87,100 worth of NOM over the first half of this year to meet the federal budget’s 395,000 NOM target for 2023-24.
Given that net permanent and long-term arrivals have remained hot so far in 2024, NOM is once again going to blow way past the budget’s forecast.
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After a week away, we’re back with another episode as we look at the stupidity in the property sector, as some are piling into the investor sector, while others are trapped due to the higher interest rates, and nowhere to go.
Data from my surveys, as discussed this past week, along with other market data shows we have a very divided housing market, with on one side of the ledger many households under significant pressure and begin forced to sell up, while watching their property values slide, while on the other side property investors are still piling in competing with owner occupied buyers, especially at the lower end of the market and bidding prices higher. Actually of course there are many micro markets across the country, and so any headline “data” on rises or falls mask important differences. Housing isn’t just the great Australian barbecue-stopper. It’s our greatest pain point, too. All this only days after Australia’s GDP figures grew at the lowest rate in three decades, excluding the COVID-19 pandemic, and as traders push out rate cut expectations well into next year.
So today I will be looking at the latest signals from the data relating to mortgage prisoners, forced sales, credit growth and investor activity, to provide context for the misleading headlines we see on the property portals.
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Today’s post is brought to you by Ribbon Property Consultants.
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The Housing Market Sheep And Goats (Which Are You?)
Yesterday the ABS released the latest data on dwellings approved and they fell 0.3 per cent in April, after a 2.7 per cent rise in March, according to the seasonally adjusted data after just 13,078 new homes were signed off for construction.
Looing at the mix, Approvals for private houses fell 1.6 per cent. While approvals for private sector dwellings excluding houses also fell 1.1 per cent in April in seasonally adjusted terms.
In the year to April, just 163,493 new dwelling permits were issued, a level which has been broadly consistent since December as surging home building costs and elevated interest rates batter construction activity. The annual result was vastly outpaced by population growth over the same period, which soared by 626,871 mostly due to surging net migration levels. From July 1, Labor is targeting the construction of 1.2 million well-located homes over five years, requiring a 12 month rolling average of 240,000 new homes.
Aprils figure is well short of the 20,000 homes that need to be constructed each month if the country is to hit the federal government’s target of building 1.2 million new homes in the space of five years, starting in July.
So the chronic housing supply issue will remain a problem and put upward pressure on home prices and rents, leading to higher inflation, and so higher interest rates for longer.
So unless things change, the gap between the supply of dwellings and meeting demand will continue to grow, driving home prices and rents higher, and pushing inflation higher which leads to higher interest rates and mortgage costs.
Step one should be to trim migration meaningfully back to bring the supply and demand back into better balance, remembering that on capita we are still currently building MORE dwellings than other western countries, as I discussed with Tarric Brooker recently. There is a strategic path to tackle the issues we face, but it seems to be politically impossible so more people will struggle to find a place to live – something which should be a basic human right, and a priority for Government.
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Today’s post is brought to you by Ribbon Property Consultants.
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No Homes For You: The Structural Desolation Of Dwelling Approval Falls!
Australia is paying way too much for its home-grown gas, as the over-exporting of gas has driven East Coast gas prices 400% higher than historical average prices leading to higher inflation and a stalled energy transition. This is a huge impost on living standards via direct bill shocks and spills over to energy-intensive manufacturing, which includes building materials, making the housing crisis even worse.
Yet there’s more as The Australia Institute, an independent public policy think tank based in Canberra, just published a report titled Australia’s great gas giveaway – How Australia gives gas to multinational corporations for free.
In addition to exposing Australians to the full international price of gas (yes gas produced in Australia and shipped off shore by huge international companies) due to stupid Government policy, the Institute says that Australian governments charge no royalties on 56% of the gas that is exported from Australia. Over the last four years, multinational companies made $149 billion exporting gas they got for free.
If royalties had been charged on this gas, at least $13.3 billion in revenue could have been raised.
Australia exports LNG from 10 installations. Six of these projects—four of the five in Western Australia and both in the Northern Territory—pay no state or federal royalties. Australia exports 56% of its gas through these facilities.
Sure, the industry is subject to taxes – which are distinct from royalties – including income tax and the petroleum resource rent tax levied on profits. But Institute said the oil and gas companies should be paying royalties as well as taxes on profits and a failure to do so consistently meant Australians were missing out on a fair return on their resources.
ACT Senator David Pocock said the gas industry was taking part in “state-sanctioned daylight robbery”. “We are seeing a betrayal of Australians and our future by the major parties. We are seeing state capture by the gas industry,” he said. “They are absolute leeches on this country and this has to end.”
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Gaslighting By The Gas Producers Exposed As Australians Pay!
