Brexit wobbles negotiated, precariously

Brexit wobbles?

UK consumer confidence rebounded close to pre-Brexit levels in September, while Q2 GDP growth was revised up marginally from +0.6 per cent to +0.7 per cent as further investment and services data became available.

It seems that the fears of the economy instantaneously crapping itself were somewhat overblown, although things may change in time.

House price growth was pretty much flat in the month of September, with the average price checking in at £206,015 according to the Nationwide index. 

Annual price growth nationally has eased to +5.3 per cent. 

Nationwide noted although construction has picked up a little housing supply has only picked up gradually, and is still nowhere near the levels needed to meet population growth and demand. 

Meanwhile the number of homes on the market remained close to all-time lows.

Here's the national average house price chart, with a (my) trend line drilled through it.

While prime central London is being clobbered by punitive stamp duty changes (see: record low stock on market), the fastest annual average house price growth was seen in Outer Metropolitan London at +9.6 per cent.

Capital growth over the year to September was also very strong in the areas surrounding London, including the South East (+8.0 per cent), and East Anglia (+7.3 per cent).

In aggregate the London average price rose by +7.1 per cent over the year to September.

The below chart indexes average house prices to Q1 1993 for England's regions.

The capital city London and nearby University and tech hub Cambridge have seen house prices explode higher, with daylight next. 

London house prices are now a thunderous +56.3 per cent above even their 2007 peaks.

In the north of England, however, prices have declined over the past year and remain at the levels seen more than a decade ago. 

Indeed, average house prices in the North, North West, and Humberside regions remain below their 2007 peaks. 

Annual house price growth has been soft in Wales, Scotland, Northern Ireland, Yorkshire, and the North West of England. 

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Slowing credit growth masks inner suburb boom

Investor credit slows

The latest Financial Aggregates figures from the Reserve Bank of Australia (RBA) for August showed the growth in investor credit slowing to +4.6 per cent, the lowest annual result in the nearly seven years since November 2009.

The considerably larger owner-occupier sector has by and large plugged the gap, with credit growth for homebuyers rising at a rate of +7.6 per cent over the year to August. 

Overall credit growth was up by +5.8 per cent over the year, a bit behind broad money growth of +6.3 per cent. 

Disappointingly, business credit growth was soft in the month of August, taking annual growth back to +5.7 per cent.

Housing sectors blurred

Over the past year some $44 billion has been conveniently reclassified by loan purpose from investor to owner-occupier, although the net value of switching has been adjusted for in the rates of credit growth.

Whatever the true story is in terms of the split of investors versus homebuyers, the bigger picture is that total housing credit outstanding increased at a rate of +6.5 per cent, up to $1.58 trillion in August. 

And throwing in the business sector, this takes the total credit sloshing around the joint up to $2.6 trillion. 

The composition of credit remains remarkably skewed to housing, hitting a record 61.1 per cent of the pie. 

The wrap

Housing credit growth is slowing in aggregate, but it's slowing from a very high base. In fact, there's now nearly $1.6 trillion of housing credit in total. 

Despite the  apparent 'slowdown' in the rate of growth, a number of different data sources have shown that the big capital city inner suburban housing markets are booming. 

The reasons behind the inner suburban housing market boom are arguable. 

Personally, I've long believed it's mainly a lifestyle thing as the city population grows and travel times increase - as well as that international students and foreign money tend to gravitate towards the inner cities (all the more so as the dollar declines). 

I mean, it literally took me 45 minutes to get out of Kingsford Smith the other day.

And as for Parramatta Road...well, it's an absolute Barry Crocker. 

In short, like many people I'd rather live in an overpriced apartment on the harbourside or at Bondi beach than in an overpriced house out west. And that's pretty much it! 

US jobless claims at 43-year lows

Thanks Obama...

US initial jobless claims, seen to be a proxy for lay-offs, were up a notch from 251,000 to 254,000, but have now been chugging along under 300,000 for 82 consecutive weeks according to the latest Department of Labor figures. 

That's the longest such streak since 1970.

The 4-week moving average of 254,000 is the lowest level in my lifetime (since November 1973, in fact, when a reading of 233,000 was recorded).

Bonza.

Net worth increases to $8.9 trillion

Record wealth

Land and dwellings drove the gains in household wealth this quarter, increasing by $112 billion, more than erasing declines in the preceding quarter of $58.5 billion. 

Financial assets also increased in the June quarter, up by $90.8 billion, largely driven by improving superannuation and pension fund balances. 

Australian household net worth increased by 2.7 per cent over the quarter and 5 per cent over the financial year to $8.89 trillion.

Cash and deposits increased to $997 billion or 22.4 per cent of financial assets, suggesting some reticence to spend and invest.

Of superannuation and pension assets, cash holdings are well above their long term averages.

After accounting for household liabilities of more than $2 trillion, this takes the average net worth per capita close to ~$369,000. Incredible by anyone's measures.

Australians have never been wealthier. Almost nobody in the world has for that matter.

Residential assets

Not all residential property assets are owned by households, of course, but around $5.74 trillion worth are. 

Thanks to interest rate cuts in May and August, the interest payable to income ratio declined to 10.3 per cent, and will decline again in the next quarter too. This index is now a third below the June 2008 peak of 16.4 per cent.

Finally, the ratio of mortgage debt to residential property assets declined to 28.6 per cent. 

However, with fewer first homebuyers buying for cash and more incumbent owners drawing equity, this ratio is certain to rise over the next decade. 

The ratio of total debt to total assets declined to 20.1 per cent.

The wrap

You can easily see the disruptive impact the macro-prudential controls had on the housing market towards the end of 2015 and in early 2016. 

By June 2016, dwelling prices were rising again, and this has continued into the September quarter.