UK house price growth hits 5-year high

UK mortgage surge

UK house price growth is to +5.8 per cent per Nationwide, the highest rate since January 2015.

The recent mini-boom has been spurred along by stamp duty exemptions for transactions under £500,000.

The average house price rose +0.8 per cent over the past month to hit a record high of £227,826 in October 2020. 

UK mortgage approvals increased to 91,500 in September, the highest level since 2007.

Housing credit bounce in September

Business investment slumps

Broad money growth hit a decade high of 12 per cent in September, according to the RBA's Financial Aggregates.

However, with businesses unwilling or unable to invest credit growth declined to 2 per cent, the lowest level since May 2008.

This isn't too much of a surprise, since it's been tough to make investment commitments due to the restrictions in place in some states. 

Housing credit is at least biting, with monthly credit growth hitting a 25-month high in September.

With personal credit growth at record lows and unemployment effectively running at around double digit levels, it's time for further action. 

The Reserve Bank is widely expected to announce a suite of measures to lower borrowing costs next week, possibly including a form of QE. 

The market awaits the details.

With the RBA's mandate requiring full employment the measures may include some reference to satisfactory progress being made towards that goal.

The RBA's mandate also requires targeting inflation of 2 to 3 per cent, on average, but the target has been missed on the low side since 2015.

APRA updates loan deferral data

Deferrals easing

Mortgage payment deferrals have declined from 11 per cent ($195 billion) in June to 7.4 per cent ($133 billion) in September 20290, according to APRA's figures. 

There was a notable monthly swing towards deferrals expiring in September. 

Source: APRA

Presumably banks and regulators would feel a whole lot happier with the world if non-performing loans were in a 2 to 3 per cent range before some kind of normality resumes.

The trend has been consistently positive over the past four months.

The good news is that more timely data from the Reserve Bank and ANZ suggests that the major improvement began to take hold through October, so we might expect to see a more substantial reduction reported next month. 

Source: APRA

Victoria has the highest share of housing loans deferred by state, at well above 8 per cent, but all states and territories reported a marked reduction in September.

New South Wales and Queensland look set to see deferrals fall below 5 per cent in October.

The lowest impact has been seen in Canberra, Tasmania, and South Australia. 

Job ads at 90pc of pre-COVID levels

Jobs are resurgent

After an interesting week for SEEK, it's surely a relief to get back to the statistics, and job ads are now back up to 90 per cent of their solid pre-COVID levels. 

In many respects, this a remarkable result. 

Indeed, in Western Australia, Queensland, the NT, and the two southern states, job ads are now higher year-on-year as the stimulus and China's rebound has boosted the resources sector.

Pulling in the other direction, on the hand, the woes for Victoria have continued through October, suggesting that at least a quarter of a million jobs have been lost in the state, and with fewer opportunities for re-employment.

Until this year Victoria had been the state pulling in migrants from interstate, but this is no longer likely to be the case, with Sydney now emerging as Australia's tech capital and south-east Queensland comfortably winning the lifestyle drawcard.

If Western Australia's mini-boom continues it may not be long before Aussies are crossing the Nullabor again in a westerly direction.

Here are the stats broken down by state, showing the rebounding trend over the past four weeks:

Source: SEEK

Good to see. 

Borrowers begin to exit deferrals (ANZ full-year update)

Bank profits slashed

ANZ reported in its full year update that 51,000 Australian home loan accounts were still active deferrals as at 15 October 2020, from a portfolio of 1.08 million accounts. 

Average loan sizes for deferrals were significantly higher than system, meaning that active home loan balance deferrals by value accounted for a larger share of the overall pie at $19 billion.

Source: ANZ

Active loan deferrals have come down sharply from 86,000 in August.

Source: ANZ

Notably early October seems to have been a marked turning point for borrowers beginning to exit home loan deferrals, with repayments now beginning.

Source: ANZ

There is still plenty of work to be done here, though, as the composition of deferrals data has consistently implied. 

Source: ANZ

Dividend cut

Overall, there's been lots of progress over the past three months as the economy has reopened.

And with some friendly regulatory assistance, home loan arrears can get down to a more comfortable 2 to 3 per cent range in the first quarter of next year. 

There's no total escaping of the pain for the banks, though, as cash profit crashed 42 per cent lower.

The final dividend of 35 cents per share is a big drop from last year.

Low inflation continues to miss target

Inflation modest bounce

Headline inflation was expected to rebound in the September quarter as the childcare subsidies rolled off and the sharp drop in fuel prices was not to be repeated. 

The headline inflation rate did bounce for the third quarter, up by 1.6 per cent, but this came off the back of the historic 1.9 per cent plunge in the June quarter. 

Over the year to September the trimmed mean measure increased by just 1.19 per cent, and the weighted median increased by just 1.27 per cent.

There was essentially no tradables inflation over the year to September 2020.

Overall there's still relatively little prospect of underlying inflation getting back to target over the next few years, meaning that the target will have been missed continuously for about 8 years...assuming we get back to target eventually, 

Ongoing undershoot

Although it's not how the Reserve Bank would choose to measure its own performance, the Grattan Institute has previously highlighted how cumulatively inflation has shot significantly below the target since the end of 2015.

This impacts credibility and feeds into consumer and business expectations, and also means that we came into the recession with a stuttering economy rather than in a dynamic or flourishing environment. 

That's all in the past now - the Reserve Bank is expected to set aside its long-standing focus on financial stability to ease its policy stance and announce further measures to support the economy next week.

More detailed analysis from data king James Foster here. 

Mortgage lending up 30pc from a year earlier

Lending continues in September

Via CBA, new housing lending is up 30 per cent from a year earlier. 

This suggests that the strong figures reported a couple of weeks ago for August have in all likelihood continued through September and October.

Source: CBA internal data

A fair chunk of the surge has been for households refinancing to lower mortgage rates, but equally new lending to homebuyers is up sharply ex-refi.

With further easing to come, this is overall bullish for housing.

The RBA's Michelle Bullock concluded in a speech this morning that the Australian economy has coped well to date with the test of the COVID-19 downturn, but business failures will likely rise over the year ahead as insolvency relief is wound back.  

Pandemic downturn 'continues to confound'

Confidence at 8-month high

According to CommSec, reporting the latest ANZ-Roy Morgran Consumer Confidence figures, the downturn continues to confound, with confidence rebounding quickly.

Confidence is still below its long-run average, but lifted to the highest level in 8 months this week:

Source: Commsec

The economy is expected to be weak over the coming year, but the stimulus has done its job and families feel considerably more secure in their finances than they were a year ago.

Inflation expectations hit a fresh record low, with another weak result expected in tomorrow's CPI (inflation) release for the September 2020 quarter.

Melbourne reopening on hold for a bit longer (analysis paralysis)

Further delays for Melbourne

Good news for most of Australia this weekend, with zero domestic virus cases reported again yesterday, zero cases in ICUs nationally, and zero ventilator cases.

That's a marked contrast from Europe, where winter has seen case numbers (if not hospital admissions) explode.

A broad range of countries saw record high case numbers this week. 

France recorded 52,010 cases on Sunday alone, coming off the back of 45,422 cases on Saturday, as the virus goes endemic. 

Thankfully excess deaths have generally been low this time around, unlike in March or April.

In Australia, the state of Victoria saw 7 cases reported for the 24-hour period, and the state government was due to report an easing of the dramatic lockdown restrictions on Sunday.

The 14-day rolling average for case numbers have fallen to remarkably low levels following an extraordinary 16 weeks of lockdown.

However, no further easing was announced on Sunday, leading angry critics have accused the state government of 'analysis paralysis'.

Jobs losses across the state have averaged 36,500 per month since March.

While most states saw things begin to rebound in May, Victoria has endured four months of lockdown and total jobs losses had reached 220,000 by September.

With another month of lockdown now endured total job losses may have exceeded a quarter of a million.

Edit: perhaps the widespread backlash had some effect, with some easing measures to take effect from Wednesday, it was announced today. 

Some restrictions will remain in place for now, including visits to regional Victoria, but the worst now appears to be over. 

Auctions strengthen

There were 1,456 auctions held this week according to CoreLogic's figures, the highest volume since April, and the preliminary clearance rate in Sydney rose to above 80 per cent from 551 results. 

In Sydney the Eastern Suburbs, Ryde, and Northern Beaches all posted exceptionally high clearance rates on CoreLogic's numbers.  

Other cities such as Adelaide and Canberra reported strong results, perhaps even gaining some demand from capital flight away from Victoria. 

Source: CoreLogic

In saying that, Melbourne itself posted solid preliminary figures this weekend...even on Grand Final weekend, as homebuyers become desperate to get moving again. 

Further monetary easing from the Reserve Bank in November is now all but locked in, which should cement the property market rebound. 

See here for more from data wizard James Foster. 

How to make millions with the Star Principle

Something for the weekend

I haven't done a personal blog post for a while, being busy on other things.

But here's one for the weekend, on how to build or find a star business (or click on the image below):

US housing affordability hits 45-year high, and...

US housing blow-off

A few interesting charts from the Twitterati.

US housing market affordability is now at the highest level in nearly half a century.

Mortgage rates continue to fall to record lows. 

And we have blast-off...existing home sales ripped to the highest level since May 2006.

The UK housing market is exhibiting some similar signs, in part thanks to stamp duty holidays.

Australia is the next cab off the rank, as so many vendors have effectively gone on strike this year, which is leading towards a stock shortage, and with a further round of monetary easing imminent.

Property prices now rising (CoreLogic)

Prices on the up

Tim Lawless of CoreLogic reported that only Melbourne now has a rolling 28-day average property price in negative territory.

Melbourne prices are 6.1 per cent below their April peak, but the trend is improving in the Victorian capital too.

Prices across the smaller capitals have been rising since early September, according to CoreLogic.

And here's the chart showing the same:

Commsec highlighted that Australia's 90-day bank bill swap rate fell to the lowest level ever, at 6 basis points. 

Australia's most affordable suburbs

Affordable choices

We discussed at Yahoo Finance - click here or on the image below:

The suburbs were picked from those with a median house price at around 70 per cent of the median for the city in question.

Victoria vacancies down 36pc

Job vacancies recovering

Job vacancies increased further in September, but Victoria remained in the doldrums with quarter of a million jobs now gone and job vacancies down 36 per cent from a year earlier.

The Premier has called for a 'ceasefire' for the remainder of the week as businesses agitate to be able to reopen.

The state's closure to business is risking a loss of investment and capital flight, with even Queensland having more skilled vacancies than Victoria now. 

Total vacancies increased by +8,700 or +6.4 per cent in September at the national level.

The recovery thus continues, but total vacancies are still down by -19,900 from a year earlier, driven by Victoria (-16,300).

Vacancies have more than doubled since their April lows of 71,470, to 144,000 in September, and there have been solid gains in recruitment activity for technicians and trades over the past month. 

While vacancies are down -36 per cent year-on-year in Victoria, states such as Western Australia and South Australia have benefited a good deal from the various stimulus packages, and vacancies are higher than at the same time last year. 

Western Australia has seen the fastest recovery of all this year, powering ahead of the demand for iron ore. 

Overall, a solid monthly figure, and to some extent Victoria's loss has been others' gain.

Property in focus (ausbiz TV)

Property in focus

I discussed the week's big property news with Nadine Blayney at ausbiz TV.

Check out the segment here (or click on the image below):

AFG sees surge in first homebuyers

Homebuyer boom

There was a surge of mortgage lending to a record high for Australia's largest mortgage aggregator.

And AFG showed that the driver was not refinancing or investors, but a surge in first homebuyers, and to a lesser degree upgraders.

Only 21 per cent of loans by volume for investors, and just 14 per cent of commitments were interest-only (a series low).

Here are some of the key numbers:

Source: AFG

AFG reported $18.25 billion of mortgage lodgements for the quarter, up sharply from $15.7 billion a year earlier.

Volumes were up by 16 per cent from a year earlier to a record high, with some 35,461 loans lodged (prior year: 29,141). 

Lending was very strong in New South Wales and Queensland.

Mortgage wars loom

Stand by for mortgage wars, as the major lenders saw their market share flagging again, down to just 59 per cent of the pie in the September quarter. 

In 2013 major lenders accounted for a thumping 78 per cent market share, and the noose has tightened considerably since that time. 

But now responsible lending obligations are set to be wound back, so expect to see increasingly furious competition in the home lending space and more mortgage rates available from around 2 per cent.

Biden remains strong favourite in polls

Coup de grâce?

Opinion polls have been unequivocal in implying that President Trump is dead and buried, and media reporting has generally followed in sympathy along similar lines.

Betting markets also have Biden has hot favourite.

The end could finally be night for the 45th President. 

One thing that's worth keeping a watchful eye on for investors and traders, though, is the recent trend for betting odds, which has seen a sharp swing away from Biden over the past few days.

Biden has drifted from $1.48 to $1.64 on Betfair exchanges since October 15.

Put another way, an 8 per cent increase in matched bets has seen Biden's winning odds slump by a third over just the past four days. 

To be clear, all bookies continue to see Biden as strong favourite to win.

And this move is also completely at odds with virtually all mainstream polling, which sees Trump as five or six points behind Biden. 

Timestamp

The only takeaway here is that the end result could prove to be much closer than expected, given that the election date is still 15 days and 11 hours away at the time of blogging. 

Two horse races can always throw up surprises, so brace for some volatility in financial markets over the next fortnight. 

Sydney auctions strengthen

Auctions rise

There were 1,134 auctions this week, as volumes continue to rise.

Volumes are still well down on a year ago, as Melbourne continues to hold relatively few auctions.

Auction clearance rates continued to strengthen, with Sydney's preliminary clearance rate rising to 76 per cent from 560 reported results so far. 

Canberra remains very strong, consistently reporting even higher results. 

Summary results via Tim Lawless of CoreLogic:

Source: CoreLogic

Clearance rates were above 80 per cent on Sydney's Lower North Shore, Northern Beaches, and Central Coast, according to MyHousingMarket's Chief economist Dr. Andrew Wilson. 

Melbourne restrictions ease

Australia's virus spread has all but ceased as the country heads into summer, with no ICU or ventilator cases reported yesterday nationwide, and a total of only five positive tests were reported for Victoria across the past three days. 

The tug of war continues with furious businesses demanding an immediate reopening but the state government conceding only modest restrictions and an effective lockdown continuing for a large proportion of residents. 

ABS figures reported this week showed that up until September nearly a quarter of a million Victorians have been put out of work since January as the state's economy has seized up. 

Melbourne restaurants will be allowed to open from November 1 - still a fortnight away - but will only be allowed to seat a maximum of twenty indoors. 

With only seven weeks between that time and Christmas this is surely going to further cripple the local hospitality industry.