Tough times for first homebuyers

Rebalancing

A pretty solid result for housing finance in May with seasonally adjusted total finance rising by 1.3 per cent to just over $33 billion. 

Looking at the smoother trend figures, total housing finance has been fairly flat now for about two years, since macroprudential measures first kicked into gear. 

The value of investors loans continues to moderate - with home loans by and large picking up the slack - and this rebalancing has manifested itself recently in rising rents in Sydney and Melbourne. 

First homebuyers accounted for 14 per cent of commitments in May, a slight rise. 

But the difference between the average loan size for first homebuyers at $318,000 and non first-homebuyers, which has surged again to $390,100, has blown out to its widest ever margin.

Even smoothing the figures for the last year shows the dichotomy, and it's making life challenging for first homebuyers. 

Homebuyer commitments are trending higher in the two most populous states, largely offsetting corresponding declines in investor loans.

New dwelling sales surge

The number of new dwellings purchase by owner-occupiers has risen strongly to sit at close to the highest ever monthly level, matched only on one occasion during the days of financial crisis stimulus. 

It seems that developers in Queensland have successfully convinced more homebuyers to buy new.

Lending for the construction of new dwellings was also strong, at its best level since early 2015.

The wrap

Overall, a solid if unspectacular result, with the average loan size for non-first homebuyers blazing higher again to sit just a fraction below the 2015 record level of $390,700.

Investor loans continued to moderate as expected, and there will be a further slowing to come in the following months. 

I'll look at the investor loans by state on Thursday. 

Squeeze

Incomes squeeze

Australian household disposable incomes growth has been a bit slow in recent years, following trends in bulk commodity prices. 

That said, household wealth is at record highs, with total net worth now approaching $10 trillion, and Aussies sitting on a tremendous pile of cash. 

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The housing finance figures for May 2017 are due out today.

Owner-occupier loans are expected to bounce back moderately in the month. 

But given that APRA announced its tightening measures for interest-only loans at the end of March, all eyes will be watching investor loans to see whether this sector has slowed accordingly.

With both new and existing loans being switched towards owner-occupier products, the key figures to watch will include not only the value of investor loans, but also the total value of all lending in the month. 

There have been further tightening measures in June, so even if the first salvo was not totally effective, investor loans will still slow as we move well into the second half of 2017. 

Mortgage rates for investors have been hiked independently of the official cash rate. 

More details to follow after 11.30am.

Bears beware?

Truthers beware

A quick one for the unemployment 'truthers' out there!

Quite a plethora of pundits have opined over recent years that the official ABS employment figures are "fake", while the "real" numbers are published by Roy Morgan Research, mainly because Roy Morgan uses a different methodology and typically records a higher unemployment rate.

These good folks will no doubt be conspicuous by their absence this month, though!

Roy Morgan reported total employment searing +576,000 higher over the year to a record high of 12,330,000.

Notably full-time employment increased by +308,000 to a record 8,100,000.

That's annual employment growth of +5 per cent.

Holy moly...

If the ABS survey follows suit then expect to see employment growth picking up the pace as 2017 continues, which would also mirror business surveys and job vacancies indicators. 

Concentrated

The 2016 Census will reveal some startling figures on the sheer concentration of recent migrants in the capital cities, and particularly the number of Chinese-born migrants residing in Sydney and Melbourne. 

It's not exactly a shock to readers here - I've discussed this unfolding trend here many times before - but the determined manner in which migrants have shunned regional Australia will raise some eyebrows as the media reports are rolled out.

Partly for this reason, expect to see the unfolding jobs growth concentrated in Sydney and Melbourne.

Indeed, the jobs vacancies figures suggest to me that Sydney's unemployment rate could be headed to under 4 per cent.

Cowabunga.

Last rites

Brisbane apartment boom

Greater Brisbane's apartment construction boom totters on its last legs, with annual unit approvals crashing by 42 per cent (so far), and developers struggling to sell out live projects. 

There are still quite a number of significant projects under construction. 

Below is Coorparoo Junction this morning, on the site of the tired old Coorparoo Mall.

When finished, the project will comprise 360 apartments across the three residential towers. 

On Old Cleveland Street, the old retail eyesore has gone, to be replaced with 7,000 square metres of new retail space, including cafés, restaurants, and a 10-theatre cinema precinct.

The final stage of the apartments has reportedly yet to sell out, despite being approved in 2014 and being located in a relatively prime location. 

Over the medium term this will doubtless be a very popular location, but the appetite for new apartments has been sated for this cycle.

US jobs power back

Jobs growth solid 

US payroll employment increased by a very solid +222,000 in June, while the results for the preceding two months were also revised up. 

Over the past three months the economy has created an average of +195,000 jobs per month. 

81 consecutive months of employment growth is now by far the longest such streak in US history, although the pace of gains has often been steady rather than sharp. 

Over the first half of 2017 employment gains averaged +178,000 per month.

The economy appears to be bringing more people back into the workforce. The unemployment rate was reported at 4.4 per cent in June. 

Despite the strong headline jobs numbers, average hourly earnings increased by only 4 cents, meaning that the annual growth in earnings missed forecasts in rising by +2.5 per cent. 

Low rate environment

Some interesting food for thought here for Australia - where the unemployment rate has improved, but still remains at 5.5 per cent, with a high level of underemployment - and where the trimmed mean and weighted median measures of inflation have been tracking below the target 2 to 3 per cent range.

The Reserve Bank of Australia clearly isn't keen to see the cash rate fall any lower, yet wages growth has been very weak in historical terms.

With pacy wages growth not appearing likely any time in the immediate future, the possible sources of stronger inflation may include higher energy costs, and more lately a return to rental price inflation in Sydney and Melbourne.

Weekend reads: must see articles of the week

There are more articles in a week than you could shake a stick at.

Linked here are the must read articles, summarised for you at Property Update (or click image below). 

Subscribe for the free Property Update newsletter here.

Port Hedland ships half a billion tonnes of iron ore

Record throughput

Truly, an extraordinary story.

Pilbara Ports reported record annual throughput of 668.5 million tonnes (Mt) in the 2017 financial year, for another substantial increase of 6 per cent.

Iron ore exports from Port Hedland were 43Mt in the month of June to rack up an astounding 494.6Mt for the financial year, an annual increase of 9 per cent. 

In short, half a billion tonnes of ore was shipped from the port. 

More than 85 per cent of the iron ore cargo shipped was bound for China, Taiwan, and Hong Kong.

Indeed a look at yesterday's international trade figures underscores this incredible change in Australia's economy in just a decade-and-a-half. 

There's not much else to say but...thank you, China!

LNG exports hit record

Surplus rebounds

Australia's international trade balance surged back to a seasonally adjusted surplus of $2.47 billion in May, having recorded a revised surplus of only $90 million in Cyclone-impacted April. 

While the iron ore price was well down in May, there was a significant rebound in coal exports as the weather improved, and as expected the value of LNG exports surged to a new record high. 

Annual merchandise exports from Western Australia hit a 27-month high, while Gladstone LNG has also helped to drive the value of Queensland exports to record levels. 

Exports to China have bolted towards a record high, so Australia is beginning to post some reasonably impressive export numbers after a shaky few years.

And this dynamic is mirrored in wider trade surpluses in the resources states. 

Finally, tourism is also thriving in the lower dollar environment, which is another net positive for Queensland.

Overall, it was good to see a strong rebound for export values, which was reflected in a larger trader surplus.

However, export volumes will struggle across the second quarter as a whole, due to the disruptive impact of Cyclone Debbie.