Which are the key factors for property?

Drivers and demand

It's not all that long ago that the Reserve Bank said that interest rates weren't the sole driver of asset prices.

You've got to look at population growth and supply, they said, citing Perth as an example. 

Now the tune has changed a bit, and there's caution about further easing because of the potential impact on asset prices.

Which factors have the biggest influence on property?

I take a look in the short post below at Property Buyer:

Investors set to return

Mortgage offers

So far the property rebound has been all about first homebuyers, upgraders, and downsizers.

But if we see more deals like this Westpac offer it won't be long before investors begin to return.

Via Redom Syed at Confidence Finance:

Source: Confidence Finance

Auctions trend is strong across the capital cities, with more listings finally coming online, but these being met with more motivated buyers.

Source: Corelogic

The 4Fs: finances

4Fs framework

A look at the next part of our 4Fs model: finances.

See here or click on the image below:

Weekend reads and more

Must see articles

This weekend a look at the eroding of vendor discounts in Sydney and Melbourne property, as well as the latest news on auctions and vacancy rates.

See here or click on the image below:

You can also subscribe for the free Yardney podcast here.

Have a great weekend!

Some trend pointers for property investors

Average earnings increase

Plenty of people bemoaned the record low nominal growth in Australia's wage price index in calendar year 2019, myself included.

Through a prolonged period of high levels of immigration the workforce has clearly become more casualised, and there's been widespread underutilisation as well as wage theft. 

On the other hand, the latest average weekly earnings figures show that there are still plenty of dollars sloshing around some parts of the economy. 

Over the year to November 2019 there was +3.3 per cent growth in average weekly earnings, driven by solid +3.4 per cent growth for full-time employees in the private sector.

That's well ahead of the rate of inflation of about +1.8 per cent. 

Full-time ordinary time earnings for males increased by +3.2 per cent, which is plenty better than some of the numbers we've seen for men in recent years (while the equivalent figure for females was robust at +3.5 per cent):

For average total male earnings there was very solid growth in Victoria (+5.5 per cent) in particular, as well as in New South Wales (+3.8 per cent). 

In the mining boom glory years male workers drew in extremely strong rates of pay in the Top End - I even lived in Darwin myself for a short time - but those days have long gone, and many workers are leaving the Northern Territory as gravity and mean reversion take hold. 

You can click on the below chart to see how male full-time total earnings have progressed over time by state and territory, with the impact of the end of the mining construction boom in evidence for the resources state figures:

Sector trends

Overall, average weekly earnings increased by +3.2 per cent over the year to November 2019 to a new high of $1,659, which was a stronger result than the +2.5 per cent seen a year earlier.  

Thus while growth in the wage price index has been benign, it's clear that some earners and sectors have been faring reasonably well. 

Higher income earners may include healthcare specialists, construction workers and project managers, engineers, and some of those in tech roles...especially employees based in Melbourne and Sydney. 

Indeed, construction topped the industry sectors for adult ordinary time earnings in 2019, with major infrastructure projects seeing some big pay packets being offered, including in inner-city Brisbane. 

Fixed rates fall further

More cuts

ANZ is the next to go, following on from CBA, with fixed mortgage rates cut further.

The 2-year fixed rate home loan is now down to 2.68 per cent:

There have also been substantial cuts for investor and interest-only loans.

As ever, always consult with a mortgage professional before locking in a fixed rate, as these products may not allow unlimited additional repayments!

MOAR capacity

Spare capacity

Challenging times for policymakers.

I don't know of a single obsever who believes that the unemployment rate is going to fall to below 5 per cent this year, let alone towards full employment, however low that might prove to be.

There was another soft result from SEEK's job ads series, down by 7 per cent over the year to January, and the labour force update for January was also distinctly underwhelming. 

Employment increased by +13,500, as the annual growth in employment to decelerated further to +1.94 per cent.

Part-time employment growth (+2.8 per cent) has continued to outstrip the growth in full-time positions (+1.7 per cent). 

Employment growth remained solid in Victoria, to be up +91,000 over the year, with Queensland next up at +67,000, but New South Wales (+43,000) has clearly come off the boil, and there's all but nothing meaningful to speak of elsewhere. 

With the participation rate ticking back up a notch, the unemployment rate jumped from 5.09 per cent back up to 5.28 per cent in January, which was disappointing, if unsurprising. 

The disruption to the economy in January saw the unemployment rate in Victoria saw spike quickly to 5.4 per cent in seasonally adjusted terms, suggesting that far too much slack remains. 

The smoother trend figures plotted below show only New South Wales (4½ per cent) as remotely sitting in the right postcode. 

Finally, the trend result for monthly hours worked was just +1.3 per cent higher year-on-year, which is also a lacklustre read and well below the rate of employment growth.

Overall, it wasn't a terrible report, but the widely predicted increase in spare capacity does appear to be playing out, with more of the same likely to be in the post as the Chinese travel ban persists throughout February and beyond. 

Labour market no longer tightening

Labour market chartfest

Bit of a labour market chartfest today.

Skilled vacancies fell from 171,000 to 168,000 on a seasonally adjusted basis in January, to be 11 per cent lower than a year earlier.

Somewhat disingenuously, you could try to spin this as a monthly increase in 'trend' terms, I guess...

In New South Wales skilled vacancies were 14 per cent lower than a year earlier, and in Victoria ads were down by 9 per cent over the same time period. 

The headline figures aren't nearly strong enough to point towards a tighter labour market, or an improvement in wages growth, although at least Western Australia saw a 5 per cent increase in advertisements. 

Wages growth slows

Private sector wages growth slowed to just 2.16 per cent in the December quarter, according to the ABS, while public sector wages growth also slowed to just 2.25 per cent. 

Victoria had been the shining light for potential income growth, but even here private sector wages growth is now slowing again as labour market slack persists. 

Despite this setback, wages growth was still 'fastest' in Victoria at 2.7 per cent over 2019, with Western Australia steadily improving but bringing up the rear at 1.7 per cent.  

Overall, wages growth was already slowing to just 2.2 per cent late last year...and that's before the Chinese virus kicked in.

There hasn't been a worse annual result for a calendar year since the data series began in 1997.

There was some wage price growth in healthcare (3.1 per cent) driven by NDIS funding, but otherwise it's a bit of a quagmire.

A period of slow wages growth was inevitable after the mining boom peaked, but that was 7 years ago now - more recently the economy has been running well below potential needlessly.