Credit growth hits pandemic high

Credit growth stronger

Credit growth in the Aussie economy picked up strongly to 6.6 per cent for the year to November, as business credit growth surged to 7.3 per cent year-on-year following a strong economic rebound on the reopening. 

Total credit growth in the month of November was 0.94 per cent, which is as strong as we have seen since all the way back in 2007.

Annual housing credit growth increased from 6.7 per cent to 7.1 per cent in the month, but the pace of acceleration is now less steep. 

Investor credit growth increased a little, but only to 3 per cent, so expect to see some chronically tight rental markets in 2022. 

The impulse of housing credit growth continues to suggest that housing price growth will cool imminently; in fact we should already be seeing this in the December numbers. 

It's partciularly pleasant to see business credit growth picking up, to the highest level in half a decade. 

Skilled vacancies strong; hiring blitz ahead

Vacancies highest since 2008

The Department of Employment released its latest job vacancies figures up to November, and they were still running at high levels, with advertisements increasing to a seasonally adjusted 252,300, to be more than 50 per cent higher than pre-COVID levels.

New South Wales saw vacancies drop 4.5 per cent in November, but there were increases everywhere else. 

Source: LMIP

This poses the question as to what happened in New South Wales in the month.

One possibility is that many roles were filled in a reopening hiring surge. 

Just as likely, the numbers were just normalising from extreme and unprecedented highs in NSW. 

In any case, over 250,000 vacancies is a strong figure indeed, and the highest since 2008.

This suggests that if Australia can hold its nerve and successfully manage a sensible reopening we should be in for a hiring blitz in 2022.

New podcast: How to invest for your future (Michael Pascoe)

New podcast

This week on the podcast I spoke to the legendary Michael Pascoe, on the subject of how to invest for your future, and much more.

Tune in here (or click on the image below):

You can also tune in at Spotify, or Apple, or even YouTube...

Enjoy!

Household wealth pushing $14tn...but wages still slow

Wealth effect

The Aussie stock market looks set to finish the second half of 2021 broadly speaking at the same level as it was at around 30 June, after a strong first half to the calendar year.  

Property prices have had a strong run, up 22 per cent in the capital cities over the year to September, and superannuation balances have continued to grow. 

Net of all liabilities, total household wealth increased sharply in the September quarter from $13.3 trillion to $13.9 trillion.

Which when spread across approximately 10.7 million households equates to a mean or average wealth per household of just shy of $1.3 million.

There was only a modest increase in debt and liabilities over the year to $2½ trillion, so the ratios people used to watch with interest like debt to assets and debt to equity are now very low (albeit almost never reported). 

The average net worth per capita also increased by around 20 per cent over the year to September from $450,000 to to $540,000.

This was roughly equivalent to the annual change in dwelling prices, and the fastest pace of increase in the dozen years since the rapid rebound from the global financial crisis panic. 

Excess savings pile up

Household currency and deposit balances had ballooned to a massive $1.4 trillion by September, with something like $240 billion in excess savings piled up through the pandemic shutdowns, according to CBA economist estimates. 

This suggests that, if Australia can manage to successfully remain open, the combination of the wealth effect plus record balances sitting in liquid accounts should drive a powerful rebound in the consumption economy. 

Unfortunately wages growth - on average - remains slow, so the wealth effect has only been seen for those with substantial superannuation balances, stock positions, and homes, rather than spread across all Australians. 

This will be a point of focus in 2022 and beyond: can wages growth ever get back to 3½ per cent, or higher?

Employment soars 366,000 in November

Jobs bounceback

Total employment jumped +366,000 in November, all the way back to around where it was in May and June. 

A huge number of part-time jobs were recovered as the most populated states reopened for business. 

This was largely a story of employment recovering in November in New South Wales (+180,000) and Victoria (+141,000) as the restrictions were eased. 

The unemployment rate dived back down to 4.61 per cent - a sharp improvement, though a little higher than the August lows. 

Overall, very encouraging numbers, though the Twitterati are already taking about reintroducing COVID restrictions, so we're likely a long way yet from back to normal. 

Also, participation may still have some way to rise from here. 

Still, a positive result!

More detail from the data king James Foster here.

Aussies beating a path to SEQ

SEQ surge

In FY2021, interstate migration to south-east Queensland surged to the highest levels since the post-Olympics exodus from Sydney 16 years ago. 

On a net basis interstate migration to Queensland soared to +30,939 in the 2021 financial year, the highest since 2005.

This time around the surge came at the expense of locked down Victoria (-18,300 over the financial year). 

Victoria also lost more than 56,000 to net overseas migration, as the 260 long days of lockdown led to an exodus. 

The natural growth in the Australian population - births minus deaths - was still +134,800 over the year, but this was partly offset by the huge number of departures from Victoria. 

Victoria has followed New South Wales in releasing restrictions since the end of the financial year, and so its popularity is certain to rebound from here. 

Overall, Queensland had the highest population growth in FY2021 of +45,900, and Victoria had the lowest at -44,700.

The Big Picture podcast

Big Picture trends

We talked through all the latest trends on The Big Picture podcast here (or click on the image below):

Top areas to invest (paywall)

Top picks

I discussed our top location picks in the AFR today (you may be paywalled)...

In any case, you can download our full Property Investor Report for 2022 here. 

---

As inflation pressures refuse to ease the US Federal Reserve is now in taper mode, with three rate hikes priced in for 2022.

The Bank of England is also expected to hike sooner rather than later, with inflation now above 5 per cent to be at the highest level in a decade. 

It will be interesting to see what the RBA has to say of interest on the subject over the weeks ahead, if anything. 

Expect to see a bonanza jobs print today, with the economy likely to add 200,000 to 300,000 back on to total employment.

The unemployment rate might not improve much - or even at all - however, as the labour force swells and participation surges back. 

More on this later...

Australia is full: rental vacancies tighten again

Vacancies tighten

Vacancy rates continued to declined in November, down to just 1.5 per cent, well below the 2.1 per cent seen a year earlier. 

Brisbane tightened to 1.3 per cent, and for the first time we now have five capital cities with vacancy rates under 1 per cent.

Hobart had fewer than 100 rental vacancies, for a vacancy rate of just 0.3 per cent. 

The longer term trend shows that Sydney and Melbourne still have relatively higher vacancy rates, driven by the CBDs, which recorded vacancy rates of 6.9 per cent and 7.2 per cent respectively.

Many holiday locations are expected to have the 'zero vacancies' signs out over the Christmas period, according to SQM Research. 

With more Aussies than ever before likely to opt for 'stay-cations' this year, there could well be a chronic shortage of properties available for rent over the next few months.

The incremental shift in favour of tenancy laws in favour of tenants over landlords, and changes to financing requirements for property investors, have also added to the tightening market. 

Asking rents for houses surged 14.1 per cent nationally over the year, and for units rents were up 9.1 per cent, according to SQM, so investors will likey be more active in 2022. 

2021 saw a booming demand for larger properties, however, SQM's Louis Christopher anticipates a shift towards units next year, as affordability bites. 

Peak narrative

Pyramid selling

I'm increasingly convinced - or at least concerned - that many youngsters will lose most of their net worth, or worse, in the coming months or years, as the stimulus is wound back and the tightening cycle begins. 

Anyone who is old enough to have been around in the tech bubble years will immediately get the point. 

Too much leverage, too much wild speculation for instant gains, too many narratives about why such and such is different. 

This week's latest theme appears to be that pyramid schemes and Ponzi schemes could actually be a good thing, as long as you get in early... 

etc etc. 

Investment principles

Clearly there's a lot of new technology breaking new ground right now, and that will in any case continue for decades to come.

But what a lot of younger investors may not yet appreciate is that many of the same investment principles still apply today, as they do in all asset classes.

For example, employ at least some level of diversification (i.e. don't have all your eggs in one basket), have a base of sound investments, and then potentially then add some higher risk investments and allocations, and so on.

A decade from now one would to have to assume there will probably be a few huge, game-changing winners, but then also thousands of coins, NFTs, and crypto ventures that will inevitably be worth zero. 

Compound your wealth

Of course, you can get exposure to the space, if that's what you want to do - it's just probably not smart to stake all of your net worth on one outcome, particularly in some of the borderline insane meme tokens and stocks. 

Most of the people reading my blog would know this stuff already, as it's a somewhat self-selecting readership, and you're most likely interested in finance and investing. 

We were all young once, and unfortunately the only way to learn a lot of these lessons is the hard way, and perhaps many youngsters will need to do so. 

The good news is that when you're young you usually have less to lose in financial terms, and you do have the time in your side to bounce back. 

Anyway, here are a couple of stocking-filler ideas for your friends and family who may not be so financially well-versed, to get them financially educated:

Mortgage brokers taking record market share

Brokers dominating

Next stop 70 per cent of the market, and with good reason!

We discussed the latest mortgage broking trends here (or click on the image below):

Property Pod: Stephen Koukoulas

2022 outlook

We were delighted to have The Kouk back on the pod this week to roll out his 2022 predictions.

Tune in here (or click on the image below):

You can also tune in at Apple podcasts, or Spotify, and elsewhere. 

You can even tune in on YouTube if you want.

Has the market peaked?

Property market coalface

To find out what's going on, in my experience the best people to ask are often (i) mortgage brokers, and (ii) buyer's agents.

Cate Bakos Sunday blog (click on the link or image below):

China's Lehman moment...again...

Default confirmed

China's second largest property developer Evergrande has finally defaulted on its debt mountain, and financial markets were a little spooked overnight, not for the first time. 

Of course, one never knows what might happen when it comes to debt defaults and contagion, although there is likely to be a good deal of government intervention to restructure the debt. 

Indeed given recent actions it wouldn't be surprising to see Chinese credit and real estate loan growth start to rebound from these lows.

In fact, if you look at a 6-month impulse things have arguably already been rebounding.

As for whether there will be direct fallout for Australian sentiment and the local real estate market, probably not (after all, the actual bankruptcy of Lehman didn't crash the Aussie market in 2008, following the various policy responses). 

We discussed the latest related news here (or click on the image below):

Record wealth for Aussies; mortgage rates to rise

Australian wealth soars

Australian household wealth has risen sharply over the past two years, as stock markets rebounded and housing prices and superannuation balances increased. 

Fixed mortgage rates are well off their lows now, with Westpac announcing more increases yesterday.

It's not so for variable mortgage rates...at least, not yet.

And with all the refinancing going on, across all outstanding housing loans savings are still being made. 

There were plenty of other interesting trends besides in the Reserve Bank's December chart pack.

Omicron strain won't impact property trends

Taking the strain

A few thoughts on the latest virus variant, and property trends...check it out here (or click on the image below):

Big city movement at 7-month high, but...

Cities on the move

Movement in Sydney and Melbourne is approaching 50 per cent of pre-pandemic levels, for the first time since April 2021, according to the latest analysis from Roy Morgan Research.

Other cities are much further advanced in their recovery in movement data. 

Adelaide is already at 87 per cent of pre-pandemic levels, Perth is at 81 per cent, and Brisbane 75 per cent. 

Source: Roy Morgan

It's good to see things happening again, but it's clearly going to be quite some time before things get back to normal, especially for Sydney and Melbourne. 

You can get the full research and article from Roy Morgan here.

2021: The year in review

Stocks up strong in 2021

We took a look back at the past year, particularly in the stock market.

Tune in here (or click on the image below):

---

You can listen to the whole podcast back-series on Apple here.

You can also tune in to the full podcast series at Soundcloud, Stitcher, or Spotify.

You can download our new e-book here.

Don't forget to leave us a friendly review, as it helps us to get the word out.

Yardney interview

Yardney interview

I recently interviewed property supremo Michael Yardney on his 50 years in property.

You can now catch the YouTube version below:

Listings fell in November, but not here...

Listings tighten a bit

After the surge of listings from October, we might have expected to see total listings higher by the end of November.

But it was not to be so.

Listings declined from 239,866 to 233,716, according to SQM Research, as older listings were mopped up by buyers. 

Two cities did see a modest increase in listings, though: Sydney (again), and Canberra. 

Brisbane now only has 19,305 listings, way down from over 29,000 a year earlier. 

Over the year, only Darwin saw an increase in listings, up 18 per cent. 

Everywhere else, stock is tighter ago a year ago.

Lots of auctions again this week, helping to becalm the market, with more than 6,300 scheduled.

Normally the Christmas period is quiet for property market transactions, but not this year.