Investors squashed further

Investors squashed

APRA's latest monthly banking statistics reported negative growth in investment loan exposures in July.

Commonwealth Bank, ANZ Bank, Westpac Banking Corp, and Suncorp all recorded an outright decline in outstanding housing investment loans, while NAB's investment loan book was broadly flat. 

Year-on-year growth is either negative or slowing for each of the major banks. 

The Reserve Bank of Australia (RBA) also reported that year-on-year investor credit growth hit its lowest level on record in July 2018.

With annual personal credit growth contracting even further to -1.4 per cent and business credit growth slower than a year earlier at just 3.4 per cent, the growth in total credit is now at the lowest level since the first quarter of 2014.

Lending to homebuyers remains solid, but broad money growth is tracking at quarter-century lows. 

The housing investor market share fell further to 33.2 per cent, now having fallen back in line with the average level for this millennium to date (there have evidently been a few misclassifications along the way). 

Equal & opposite reaction

Housing markets can be a finely balanced affair, with the strong level of rental supply of recent years now set to reverse.

Given that we've been through a period of strong immigration/population growth alongside falling home ownership rates, from a macro perspective presumably this must be leading to rental shortages in some parts of the country (not so much in the big capital cities yet, due to the high level of off the plan apartment purchases through this cycle and the related lag effect). 

I don't have much time to look at it today, but a quick glance at the stats shows rental vacancy rates plunging towards zero in Orange, from certain parts of Adelaide to Ballarat and Canberra, and from Geelong West to Hobart and Moranbah.

If the investor squeeze persists Melbourne may be next of the largest metropolises. 

Still plenty of apartment supply to be absorbed in the big cities, but this will be one trend to watch with interest.

NSW business investment roars to record high

Capex slows

A somewhat disappointing CapEx result for the second quarter of calendar year 2018, with total new investment declining by 2.5 per cent in seasonally adjusted terms to $29.1 billion. 

The services sector is really firing in some parts of the country, though - it's mainly a capital cities phenomenon - driven by a tremendous 12 per cent year-on-year lift in New South Wales in trend terms to a record quarterly high for the state of $8 billion. 

There were also very positive results reported for the ACT, South Australia, and Tasmania.

Unfortunately in Q2 this was more than offset by the ongoing decline of investment in the resources jurisdictions of Western Australia and the Northern Territory.

Trend quarterly investment in Western Australia now sits some 62 per cent below its peak of 6 years ago, albeit now being close to bottoming out. 

It's interesting to consider that while mining investment continues to retrace, investment in the services sector is at the highest level on record, with the annual rate of growth surging to a 6½ year high. 

The road ahead

While the headline result was a bit disappointing, the CapEx plans suggested that the outlook isn't too bad.

Mining investment is bottoming out - at long, long last - while manufacturing and services investment is expected to continue rising (strongly so in the case of the services sector).

The third estimate for total capital expenditure in 2018/19 came in at about $102 billion, up by 16 per cent from the second estimate as plans firmed. 

On these figures Greater Sydney could see its unemployment rate falling to below 4 per cent soon enough, surely the kind of numbers to create some upwards wages pressure. 

Mining investment is still expected to fall lower in the next financial year, but not by much. 

Hobart building boom

Building approvals fade

Total building approvals over the year to July remained elevated at more than 230,000 (up from about 220,000 a year ago), but the financial year kicked off in a more subdued manner with a 5.2 per cent seasonally adjusted decline.

Sydney unit approvals are recording punchier declines now, with July approvals down by some 35 per cent from a year earlier.

I've discussed previously how Hobart is only a comparatively small city and therefore a potentially larger and faster percentage increase in the dwelling stock is a dynamic worth watching.

Detached house approvals in July were up by more than 250 per cent from a year earlier in the Tasmanian capital, taking total annual approvals to a 99-month high.

We're talking comparatively small numbers in absolute terms, of course, but the trajectory is worth watching carefully for those interested in Hobart's housing market.

Since these are mainly detached houses approved - and these tend to be built quickly - there is less of a lag effect compared to the big apartment projects of Sydney and Melbourne. 

The monthly downturn in residential building approved was more than offset by a huge month-on-month leap in non-residential building work.

This was mainly a New South Wales story, thrusting non-resi work approved in July back above $10 billion.

Cambridge rows upstream

Let it run

Remarkably a decade has now passed since the financial crisis. 

Hometrack's latest UK cities index took an interesting retrospective over the past decade.

The top performers since the time of around the preceding market peaks were Cambridge (+70 per cent) and London (+60 per cent). 

Source: Hometrack

At the other end of the spectrum if you bought at the peak of the Belfast bubble you'd still be under water a decade later (-28 per cent). 

Buying high

Boomtime rats

Panic stations as the institutional rats desert the rapidly sinking Isentia ship.

Fundies dumped more stock aplenty over the past week. 

Another full blown crash to the share price was triggered today, with more than 18 per cent wiped off the market cap.

From nearly $5.00 the stock is now trading at 34 cents.

Source: ASX

Source: ASX

Abandon ship!

The Elephant in the Room (podcast)

Property podcast

With Veronica Morgan and Chris Bates, at one of the fastest growing podcasts out there.

Tune in here (or click the image below)!

Warning: contains swearing.

'Arguably Australia's best property blogger...' - heh :-)

Weekend reads - must see articles of the week

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Gig night in Brisbane - The Charlatans live at The Triffid.

Rental crisis looms

Rental shortages

Some months ago I wrote about the prospect of a 'rental crisis' being the next big housing market story (even leading some readers to question my mental health - isn't social media the best?).

Of course, these trends play out over a period of years rather than in tune with today's 24-hours news cycle.

And just as I was lambasted for flagging overbuilding of units in some pockets in 2013 I don't expect much support this time around either.

Despite record dwelling construction through this cycle, rental vacancies have actually fallen over the past year, with only Sydney holding the numbers up as record supply comes online (a huge number of investors bought off the plan in this cycle).

In some markets such as Hobart and a number of regional towns rental vacancies have sunk as close to zero as you'll ever see (there'll always be some frictional vacancies) - and Canberra is heading in that direction - but these episodes may be explained by local factors.

The acid test will be what plays out in Victoria.

And the signs aren't looking good for renters, with the latest REIV figures showing the state's vacancy rate plunging to the lowest level on record. 

Source: ABC News/REIV

As Melbourne accelerates towards full employment on the back of a record construction boom, the state is attracting migrants from all over Australia as well as overseas.

The city added more than 125,000 residents over the past year, and will exceed 5 million later today.

This year the city will likely add at least as many residents again.

In the normal course of events the rental market would respond accordingly.

But in this instance Labor is proposing making prospective investment unattractive altogether by quashing negative gearing, which will greatly diminish the availability of affordable rental housing. 

Insane.

Isentia speculators packing

Isentia broke

Isentia Group (ASX: ISD) has built up a hard-earned reputation for underwhelming the market.

And this reporting season it certainly didn't disappoint as management monstered another 45 per cent of shareholder value during today's trade. 

It's interesting to reflect upon how this stock was regularly being touted as the 'highest quality business on the ASX' (even after a massive 60 per cent drawdown). 

If memory serves there was talk of substantial shareholders doubling down, too. 

As it turned out Mr. Market was right all along, with another desperate results announcement and Annual Report released in today's episode of confession season. 

Unfortunately this marks the latest in a long line of disastrous market conniptions for ISD, with the share price nudging just 44 cents this afternoon, down from above $4.60 in 2015. 

Speculators exposed as tide goes out

The Isentia story is a worthwile case study in how the lines between speculation and investment are so easily blurred with deliberately opaque semantic debate. 

Of course it's easy for stock promoters to push the 'quality investment' angle if a business reports a small profit or net cash inflow for any given financial year. 

But if a group with a small market cap is sitting on a truckload of debt and the promised future revenues can collapse so dramatically, does taking a position that profitable business represent investment or speculation?

With the share price down by more than 90 per cent since the cheerleaders were out in force and the final dividend scrapped to zero, the answer pretty much writes itself. 

Labour market is tightening, gradually

Gradual tightening

The labour market is tightening, gradually.

Something I've been prattling on about for a while is the prospect of full employment for Melbourne, forged on the back of a mammoth construction boom.

And the Victorian capital took another huge leap closer to that dynamic in July as its unemployment rate fell to just 4.9 per cent in the month. 

A year earlier the unemployment rate across Greater Melbourne was above 6 per cent as the rate of population growth surged to the highest level since the gold rush.

This takes the annual average unemployment rate for Melbourne down to 5.6 per cent, from 6.1 per cent a year earlier. 

If it feels as though the recovery has been slower than those we've experienced in the past, then there would be an element of truth in that.

That said, the population is growth at a quicker pace these days, so the decline in the total number of unemployed persons may be expected to be more gradual.

Whatever, it's happening. 

Sydney's annual average unemployment rate continues to decline to fresh multi-year lows, now at well under 4½ per cent, while Adelaide has really turned a corner since 2016 (in a good way). 

Perth is still drifting. 

The median duration of job search is also improving, ticking down to 17 weeks from 19 weeks a year earlier.

The tightening was driven by a tremendous improvement in Brisbane (surprisingly) and Hobart (less surprisingly). 

Getting there.

6 of the best (Jonathan Giles)

Aussie money habits

In this mini-series I ask some well known Aussies some personal stuff about their money habits. 

This week, I give 6 of the best to AFL ruckman Jonathan Giles, who's football career over the past decade and more has taken in its fair share of interstate and coast-to-coast travel, from Port Adelaide to Essendon, and from GWS Giants in Sydney to the West Coast Eagles. 

'Joffa' has built a property portfolio in Australia on his travels, and, as we'll discover, some crypto!

Enjoy!

6 of the best: Jonathan Giles

1. What did you learn about money during your formative years (positive or negative)?

I didn't learn a great deal about money growing up.

My parents were careful savers and probably taught me to save money and not waste it.

To value it.  

2. What career and/or money advice would you give to your younger self?

Education!

I would've told myself to get educated about finance and investing from a younger age.

The younger you learn and the earlier you have that knowledge, the more time you have on your side for good decisions to set you up for the future.

3. What have been your best and worst investments?

My best investment would have to be the time I invested in getting educated and learning from others - and I mean both in life and investing experience.

My worst investment - no doubts, the highly speculative cryptocurrencies (that I still hold!).

4. In terms of business/investment how would you describe yourself in one sentence?

In a sentence: I invest for the long term, and take some calculated risks.

5. Do you have any formal or informal financial mentors?

I like to learn from a variety of people, through blogs, books, magazines, and podcasts.

So I consider these people to be my informal mentors. 

I invest in property and [PIPA Chairman and property author/educator] Peter Koulizos has always someone I've been able to talk to, and to learn so much from. 

6. What are your ambitions or goals for the future?

I want to get more involved in developments and learn from people that have done it all before me.

I'd also possibly like to start my own building and development company one day.

Thanks Joff, best of luck!

If you want blood...you got it

Shoot to spill

Troubling suspicions of a looming crisis in Australian leadership were sadly confirmed today as yet another wannabe Prime Minister elect failed to name an AC/DC song.

The challenger Dutton may be best known for his thinly-disguised appeals to Australian nativism, yet when put to the razor's edge with the now-traditional interview gotcha the potato brother couldn't name a single Acca Dacca track.

Who knows what these guys get briefed on, but could anything else make them sound so out of touch too much?

Hells bells, this is a thousand times more un-Australian than a politician being caught with their pants down, becoming embroiled in a dual citizenship saga, or yet another rort of the hotel motel expenses. 

Au nom de la liberté...someone send for the ute-lovin' ScoMo!

Victoria's everything boom

Victoria construction surges

Brisbane's once-rampant apartment construction has now righted itself, and indeed median unit prices were up a fraction over the past year in the Queensland capital. 

Victoria's apartment construction on the other hand has exploded to a record high (as expected from leading indicators), with the value of work done an astronomical 416 per cent higher than a decade earlier in chain volume measures terms. 

Sydney doesn't build so many houses, so a lot of activity is expected, but for Melbourne this is a boom-and-a-half!

Or in a picture...AWOOGA!

It's an everything boom for Victorian construction, as flagged here previously, with public and engineering works also going on a tear. 

Queensland engineering construction is also finally on the rise again after the state's multi-year downturn. 

Adding in detached housing construction, Victoria's construction super-boom over 16 consecutive quarters and counting helped to increase total work done nationally in the second quarter by 1.6 per cent in seasonally adjusted terms. 

Eight consecutive quarterly increases in South Australia have also helped to offset the resources and housing construction weakness in Western Australia.

Construction work in New South Wales is set to top out now as apartment starts decline. 

Job ads stalling

In other news skilled job vacancies were up by 4.7 per cent from a year earlier to be 30.5 per cent above the October 2013 nadir in July 2018, according to the latest Department of Employment figures. 

The seasonally adjusted monthly result was up just a notch following three consecutive declines. 

Unsurprisingly Victoria scored well here too, with falling unemployment looking like a shoo-in for Melbourne. 

In Western Australia vacancies were up 16.3 per cent over the past year, pointing to brighter days ahead across the Nullarbor.

Nationally, though, the growth in job ads seems to have stalled, with an election to follow - and that rarely inspires confidence in employers.

On thwarting the Peter Principle

Here's how!

Kiwis migrating to Oz again

Choice

After a 3-year hiatus, it seems that more Kiwis are heading to West Island again (as opposed to the other way around). 

Australia is winning in the permanent and long term migration Bledisloe Cup, at least.

It's interesting to note that the unemployment rate has been lower in New Zealand than in Australia for quite some time.

And there were some one-off factors, such as the post-earthquake Christchurch rebuild. 

But maybe the tide is turning just a little now back in favour of Australia. 

Special visa class for rugby players, anyone?

Now renting

Starting to see just a bit more of this in Brisbane now.

Source: Harcourts

The coming infrastructure boost will help.

Wheels coming off out west

One wheel off/axle broken

Sharper dwelling value falls now happening in a Western Sydney near you.

Chart art brought you via Cameron Kusher of CoreLogic.

Source: CoreLogic

Follow @cmkusher for top draw analysis.

I discussed the risks of Blacktown, Parramatta, the Hills District, and some Western Sydney suburbs in a bit more detail in this February 2017 podcast special with Business Insider. 

Prices are now down by more than 10 per cent in the Hills District SA4.

Median prices are also down by 8 per cent in Blacktown, and 7 per cent in Parramatta. 

More to follow...

More bums on seats in FY2018

Australia is very popular

Permanent and long term arrivals increased 4½ per cent in FY2018 to 808,480, up from 773,400 a year earlier.

That's a record high.

Tourism boom now slowing

2018 was also a record financial year for tourism and short-term visitors.

There was another solid 5.6 per cent in visitors to New South Wales, to 3.44 million.

Queensland also saw an apparently strong 6.2 per cent increase to 1.97 million.

Being up at Noosa today - and sharing luncheon with Queensland-born Mr. Michael Pascoe, no less - I'm duty bound to say that this is because the Sunshine State is beautiful one day and perfect the next.

In truth, though, this should be seen as a somewhat disappointing result for Queensland given that Gold Coast played host to Commonwealth Games XXI in 2018.

Report card: could do better. 

Wall of China

There's been some debate as to whether the multi-decade boom in Chinese visitors to Australia is slowing or not. 

It's impossible to say from looking at month to month numbers - there have been apparent slowdowns many times before over the years - but there was a 12 per cent increase over the financial year, from 1.28 million to 1.44 million. 

Indian visitors increased by a much faster 20 per cent over the financial year, albeit from a much lower base. 

Viewed in that context, it's less surprising that over the financial year by far the greatest percentage annual increases in visitors were seen in Tasmania (36 per cent) and the Australian Capital Territory (27 per cent). 

Tasmania was ahead of the curve in recognising the Asian Century opportunity and playing its tourism card accordingly, something that Queensland and other states should learn from. 

Small wonder, too, that Hobart and Canberra have been among the strongest housing markets.

South Australia also saw an impressive 14 per cent increase in visitors. 

On the other side of the ledger, there was a sharp 14 per cent drop in visitors to the Northern Territory.