The Great Australian Doorstep

Seachange

I discussed the great Aussie seachange/treechange with Martin Faz at The Grauniad here (or click on the image below):

You can access the referenced Risks & Opportunities Report for free here (or by clicking on the image below). 

4 tips for upgraders as the property market lifts

Tips for upgraders

Via BuyersBuyers.com.au here:

You can check out the Affordable 10-Year Property Plan here. 

Investors begin to return to housing

Credit growth ticks up

Housing credit growth jumped in December to an 18-month high of 3.54 per cent. 

Owner-occupier credit growth increased to 5.6 per cent.

Monthly investor credit growth increased for a fifth consecutive month, albeit in annual terms investor credit growth was only flat and recovering from record lows. 

With the share of interest-only loans now at series lows, more debt is being paid down.

But even so, the housing credit impulse is pointing to higher capital city housing prices in 2021 as investors return. 

Overall, 2020 was a dismal year for credit growth at just 1.8 per cent, with broad money growth surging to 12.6 per cent driven by stimulus. 

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Loan holidays ease

In other news, deferred loans continued to decline to 1.9 per cent in December, according to APRA's latest figures. 

Source: APRA

Housing loan deferrals were generally down to around 2 per cent or lower, except in post-lockdown Victoria where deferrals were considerably higher. 

Source: APRA

Catastrophising commentators are still hanging their hats on a 31 March day of reckoning, but realistically there's very little incentive for lenders to foreclose on the few remaining deferred loans. 

Mortgage deferrals have plunged from nearly $200 billion to $42.9 billion - the riskier remaining loans deferred are probably those relating to high-rise units in CBD towers, where rental vacancies have been high.

Inflation below target for 5 years

Inflation rebounds

After the huge +1.9 per cent plunge in Q2, headline inflation rose again in Q4 by +0.9 per cent.

Trimmed mean inflation came in at just +1.19 per cent for the year - the slowest year on record - and underlying inflation increased a little to finish the year at +1.27 per cent.

The 2-3 per cent inflation target has now been missed for five long years as policy has instead favoured leaning against the wind of asset prices. 

Capital city rents fell modestly by -1.3 per cent in 2020, although mortgage repayments fell considerably more. 

What little inflation there is was largely seen in non-tradables, especially tobacco (driven by another lift in excise), with childcare prices returning to pre-COVID levels towards the end of the year. 

Tradables inflation was negative over the calendar year. 

If inflation is supposed to average 2-3 per cent over the medium term, there's some significant catching up to be done.

And that's especially so if the Reserve Bank is to focus on actual (rather than projected) inflation outcomes, suggesting that talk of tapering is premature, at least until the damage to the labour market is repaired. 

Detailed analysis, as always, here with James Foster. 

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In other news, CoreLogic will report home values rising by about ½ per cent in January. 

Source: CoreLogic

Likely to be leading the way will be Brisbane (+0.8 per cent) and Perth (+0.8 per cent), followed by Adelaide close behind.  

Over the past quarter, prices have turned the corner in all capital cities, plus Gold Coast. 

Source: CoreLogic

What to expect from property in 2021

Bullish sentiment

International borders could remain shut for quite some time yet, as vaccinations are steadily rolled out.

But low interest rates were always going to be a gamechanger for housing markets. 

I guest-blog for Rich Harvey at Propertybuyer here today on what to expect over the year or two ahead (or click on the image below):

Podcast Episode 30

Bursting bubbles

Before we move on to discuss economics, in Episode 30 we discuss the results of bursting bubbles.

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

You can also tune in at Soundcloud, Stitcher, or Spotify.

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You can also order a copy of our book here, and download a free chapter here.

Reverse engineering

Inversion technique

 A short post on how to solve deep-seated problems - see here (or click on the image below):

Unemployment rate falls to 6.6pc

Unemployment falls again

An excellent labour force result in December with another +50,000 jobs added, mainly full time, taking total employment all the way back up to 12.9 million.

Job ads have been so strong lately that total employment in Australia could conceivably hit a record high in the first quarter of 2021. 

It's clear that zero immigration in the latter part of 2021 has impacted New South Wales and Victoria most of all, while the Queensland economy is faring remarkably well (thousands of Victorians relocated to Brisbane in 2020). 

The participation rate increased yet again to 66.2 per cent for a remarkable turnaround since the middle of 2020.

Yet with total unemployed persons declining again from 942,100 to 912,000 in December the unemployment rate still dropped to 6.6 per cent. 

The peak was seen in July 2020 at a lower than expected 7.5 per cent, and the unemployment rate in the first quarter of 2021 is going to be way, way better than Treasury's forecast. 

Hours worked in December were still slightly lower than a year earlier, but overall it's been a brilliant recovery. 

With no growth in the labour force from net overseas migration the unemployment rate should continue to fall comfortably in 2021 with the right policy settings in place. 

Australia is the envy of the world right now, but with the US, UK - and now many other countries - ramping up their vaccination programmes apace, there will be some challenging policy decisions lying ahead.