Podcast Episode #18 preview: Is property a good investment?

Podcast Episiode #18 Preview

This week on the Low Rates High Returns podcast we'll discuss whether or not property is a good investment.

Here's a sneak preview:

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Weekend reads and more

Must see articles

This weekend at Property Update a look at the rebound in housing lending - see here, or click on the image below:

You can subscribe for the free Yardney podcast here - now of the top property, business, and wealth mindset podcasts. 

Record fall in insolvencies

Nobody goes broke

This has been a most unusual recession.

With record low mortgage rates and all of the various stimulus measures in place, personal insolvencies dropped by a record -35.1 per cent year-on-year to just 4,239 in the June quarter.

Per head of the population the rate of insolvency has improved everywhere. 

Bankruptices fell -16 per cent over the year to the lowest level in 24½ years.

Strange times, but presumably there will be eventually more insolvencies as eviction bans and mortgage holidays end. 

Mortgages and sales activity is lifting

Activity lifts further

Short and sweet post today.

Real-time insights from Tim Lawless of CoreLogic show that mortgage and sales activity are rising as record low mortgage rates begin to bite:

Sales volumes have lifted through May, June, and now July:

Source: CoreLogic

Obviously the shutdown in Victoria will impact the August figures for that state.

Homebuyers returning, but not in Victoria

Housing finance rebounds, but...

There was a resurgence in homebuyer finance in June, but not in Victoria, where finance commitments dropped sharply. 

Unfortunately for Melbourne, this trend will only continue through July and August...and into September.

First homebuyer commitments zipped higher, but there was another sharp 9 per cent drop in Victoria, following on from a similar decline in the month of May.

Overall, stripping out refinancing housing finance jumped +6.2 per cent, despite Victoria's woes. 

The average mortgage size has been a bit all over the place of late, possibly due to there being more first homebuyers in the market. 

AFG's quarterly numbers showed a record high mortgage size in Q2, albeit only just.

Basically flat would be another way to describe the figures (and the same for the ABS data).  

There was enormous strength in the average mortgage size in New South Wales, which hit a record high, but not so in Victoria. 

Overall, a decent rebound ex-Melbourne.

Note that this bounce was also before the HomeBuilder boom kicks in.

New South Wales will also see a surge in activity up to $1 million resulting from the stamp duty discounts announced on July 27. 

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Victoria recorded some 725 cases of COVID-19 over the past 24 hours, ensuring that the Stage 4 lockdown will almost certainly run for weeks to come. 

Switch back to Airbnb as domestic tourism booms

Home tourism boom

Another massive $8.2 billion preliminary trade surplus was recorded for the month of June 2020. 

Goods imports have generally been rebounding, but inbound tourism trade remained stuck at zero in June, since the borders were effectively shut, and this has held back the recovery. 

Exports saw a decent rebound in June, up 3½ per cent to $36.2 billion, with iron ore and gold strength compensating for the declining value of coal exports. 

Exports were still down over the June quarter, however, by about 8 per cent. 

The iron ore powerhouse will continue into August and beyond, with the spot price soaring to above US$116/tonne.

Domestic tourism boom

While inbound tourism is non-existent, the most interesting part of today's trade figures showed that domestically Aussies are really embracing holidaying at home. 

Tourism trade credits increased for a second consecutive month to $3.6 billion, sending the services trade surplus ballooning to unprecedented heights (due to the absence of inbound tourism trade). 

Although festivals have been cancelled, coastal housing markets are genuinely thriving, with sales prices in Lennox Head, Ocean Shores, and Byron LGA already back to pre-COVID levels, while there is a lengthening waiting list of buyers looking for vacant land thanks to the government stimulus. 

Hinterland property is absolutely flying thanks to a raft of seachangers, with prices now higher than ever. 

Rental vacancies have dropped close to zero in a range of suburbs from Byron to Bangalow to Brunswick Heads.

Having floundered for a time, Airbnb landlords are returning to the sector with a mission, especially to the popular coastal domestic tourism locations, and rental discounts up on the coast have evaporated. 

More folks have been working from home this year, and many industries have experimented with allowing more flexible working - especially in banking and financial services - but there's also seemingly limit to how far this trend can be taken.

As a result, many are buying or renting coastal properties to spend some of their time on the coast while retaining a metropolitan presence. 

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As always, you can get the lowdown on the detailed trade figures from James Foster here.

To find out more about our buyer's agency services in New South Wales and Queensland, see here. 

Yields continue to plunge

Multi-century lows

Some wild goings on with yields around the world.

After bouncing at the back end of last week, the US 5-year Treasury yield resumed its downward trend today, to drop an all-time low of 0.2 per cent:

Source: Bloomberg, ForexLive

US 10-year government yields are threatening to plumb multi-century lows:

Source: Jeroen Blokland, The Twitter

With real yields sinking deep into negative territory:

Source: Bloomberg, FT

Over in the UK the 10-year gilt fell to a fresh all-time record low of 0.067 per cent. 

You can make your own assessment of what this means about the state of the global recovery, but I'd hazard it's not good! 

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US house prices have been very buoyant, up +4.9 per cent over the year to June according to CoreLogic's latest update, with low mortgage rates allowing more homebuyers to climb aboard the property ladder. 

Home ownership rates appeared to soar in the latest US Census Bureau figures, but most likely there are data collection challenges, so those particular numbers should be taken with a healthy degree of scepticism. 

Melbourne stock listings begin to pile up

Melbourne listings rise

Nationally the housing market has suffered from a dearth of quality stock this year.

But Melbourne's listings are beginning to pile up now, hitting 41,819 in July 2020, according to SQM Research's latest figures. 

Most recently this has been partly driven by apartments for sale in Melbourne City.

Overall, total stock is still relatively low, and lower than a year ago in six capital cities. 

But at least Sydney and Melbourne now have more stock listings, as restrictions were eased through May and June. 

Anecdotally stock levels and rental vacancies are very tight in coastal regions, with demand having increased due to COVID-19 and the related restrictions. 

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Retail sales jumped again in June as consumers enjoyed spending their stimulus cash, while hundreds of thousands of superannuation dippers have accessed their pension funds.