First homebuyers replaced by investors

Investors return

First homebuyer numbers have begun to decline, especially in Victoria and WA.

However, investor loans are now finally on the rise, and total housing finance (ex-refinancing) hit a record high in April. 

Western Australia's extraordinary housing stimulus pulled forward some demand, and there was a decline of 8 per cent in home lending in April, though the Perth market is clearly still firing.

In New South Wales and Victoria (pre-lockdown) lending was very strong to homebuyers in April. 

The average loan size for the purchase of existing dwellings jumped, reflecting what we have already seen from banks' internal data. 

Overall, strong numbers, with investors now returning to the housing market. 

Vacancy rates at record lows

Vacancies plunge

Vacancy rates fell everywhere in the month, and are now approaching record lows.

Melbourne's inner city has by far the highest number of rental vacancies, as well as the highest vacancy rate at 8.6 per cent. 

The city of Melbourne has now endured more than 140 days of lockdown, and the latest lockdown has been extended for another week, although there may soon be light at the end of the tunnel. 

In Sydney the highest vacancy rates were found at Parramatta (4.4 per cent) and Auburn. 

Vacancy rates are extremely tight in Adelaide, Hobart, and Darwin, where there are reports of bidding wars for rental properties in some cases.

The latest report from Domain can be found here.

SMSF release valve

Lending to self-managed super funds almost totally dried up a few years ago, with most lenders leaving the market. 

As a result, many borrowers have been stuck paying mortgage rates ranging from 5 per cent to 7 per cent or more, which is ridiculous given what most are paying on standard mortgage terms these days.

Fortunately a release valve is now finally being made available, as a few lenders have recently returned to the space. 

If you're still stuck paying over 5 per cent drop me a line and I can point you in the right direction.

pete.wargent@buyersbuyers.com.au 

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The ASX reset a record high today, with the ASX 200 up 0.6 per cent to 7,260. 

U.S. valuations have become stretched (depending on how you choose to measure valuations).

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Today was the biggest to date for vaccine doses administered in Australia at more than 141,000.

Aussie economy rebounds in full!

Boomtime!

Another strong quarter for GDP growth, with another 1.8 per cent growth in Q1, following on from the strong rebounding growth seen in Q4 of last year. 

Real GDP was up 1.1 per cent on the year, but other income measures have been much stronger, up powerfully by 5-6 per cent from a year earlier.

Nominal GDP has been phenomenally strong, now up 4 per cent from a year ago.

Next quarter growth will probably in the 12-13 per cent range due to the base effect!

An easier way to look at this is to look at the GDP in current prices terms by the quarter, with nominal GDP comfortably now sitting at all-time highs.

The terms of trade figures were very, very bullish.

Meanwhile interest payable on dwellings fell all the way back to where things were at 15 years ago, which is remarkable given the huge growth in the population and the the dwelling stock over that time period.

No wonder dwelling prices are set to rise given the massive improvement in serviceability. 

Separately the RBA's Chart Pack showed the household debt to income ratio continuing to decline, now down to below 1.8x as more households have taken the opportunity to deleverage or pay down debt.

On top of the stimulus, then, we have now have real strength in nominal GDP which can flow through to household incomes. 

Hallelujah! 

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It looks like the Reserve Bank might be getting set to make a change by not rolling over yield curve control to the November 2024 bond, potentially extending QE by a further $100 billion.

The RBA Governor is scheduled to give a presser after the July Board Meeting.

The last time this happened in November 2020 the OCR was cut to 0.10 per cent.

(h/t @MrMacroMarkets and @KitLowe)

House approvals at record levels as HomeBuilder ends

Approvals easing

Building approvals were expected to taper as the HomeBuilder ended, and residential approvals did decline by 9 per cent in April to 21,482.

However, detached house approvals still continued higher, to a record seasonally adjusted monthly total of 15,063.

Total dwelling approvals for the year to April were thus very solid at above 205,000. 

House approvals have been rising everywhere, but have been extremely strong in Perth.

Unit approvals tanked by 29 per cent in April, however. 

There will ultimately be an apartment undersupply after the international borders reopen, simply because there aren't the non-resident (i.e. Chinese mainland) investors or super fund buyers around these days to get enough new developments away. 

Melbourne in particular saw exceptionally low numbers for unit approvals in April. 

House prices have outperformed, logically, through the pandemic.

A unit undersupply and affordability challenges will probably see unit prices on the march in Sydney now, especially in the tightest markets such as the Northern Beaches etc. 

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Mining profits bonanza

Huge gross operating profits were recorded for the mining industry in Q1 at a record high $46.7 billion as the iron ore price soared into the stratosphere. 

There's even more to come in Q2 as well!

The stimulus really kicked in from the June 2020 quarter and was reflected in a marked lift in profits almost right across the board, and especially so in construction where profits suddenly leapt massively higher. 

Much of this may not be sustainable - presumably the iron ore price will revert lower, and construction will slow down sooner or later - but clearly the worst of the economic downturn was very well averted.

Australia's current account surplus absolutely screamed to a huge record high according to the Q1 indicators, equivalent to about 3 per cent of GDP. 

With strong growth in net exports and support from consumption expect GDP growth for the first quarter to back up last quarter's 3.1 per cent growth with another thumping result, quite possibly even above the top end of the market forecast range at 1.8 per cent.

Nominal GDP growth looks set to do about 5 per cent over the year to March. 

More later. 

Jab for victory

Vaccine efficacy

It's become clear that the countries leading the virus vaccination charge (Israel, Wales, Gibraltar etc.) have experienced tremendous results in crushing the spread of the coronavirus we're all so sick of hearing about.

Israel has seen its positivity rate plummet to just 0.02 per cent, and Wales is only recording a smattering of positive cases (while consistently reporting zero deaths). 

With more than 65 million doses administered, the UK in its entirety is the next cab off the rank.

¾ of adults in the UK have had at least one vaccine dose, and about half have had both of their doses. 

It's been a strange 2021 calendar year to date for Britain, with an eye-popping 1½ million arrivals reportedly roaming into the country across the third lockdown period from January to April, while at the same time onerous restrictions have been maintained on the populace. 

But the good news is that the vaccines are working.

Yesterday only one death was reported within 28 days of a positive COVID test.

And today was the first 'zero' day since the pandemic began, way back in March 2020 (when you think about how 'deaths' are recorded, this a remarkable feat). 

Hospital and ventilator cases are no longer reportedly daily, but have collapsed from very high levels in January. 

A bit like happened previously with Brexit, the media has become stuck reporting endlessly on this one issue, interviewing by the hour everyone from nutritionists to University mathematics professors, yet routinely all but ignoring economic, mental health, or other health issues, such as delayed diagnoses and a terrible cancer crisis. 

The public, in the main, however, seem to be moving on and getting with their lives, which is fair enough given that the virus now poses a serious risk to a tiny proportion of the population. 

The median age of death with COVID has been 83, and total deaths have run so far below their 5-year average over the past couple of months that mortality rates are now at all-time lows. 

Australian delays

Australia was a very late starter on the vaccine rollout, and has now experienced a good deal of vaccine hesitancy too.

As Victoria went into yet another lockdown this has been the highest week so far for vaccine doses, with weekly doses administered climbing to above 670,000 for the first time. 

Of the 4.36 million doses administered to date, nearly 3.9 million have been first doses, and just under ½ million have been second doses. 

With manufacture ramping up, there are now about 2.2 million further doses available, so theoretically doses administered should soon accelerate towards 1 million per week quite quickly from here. 

Source: Department of Health

Election policies

The bookies have the Coalition well in front as the likely winner of the next Federal Election, and according to surveys it seems likely that "tough on the virus" will be a very popular angle to be pursued.

When might attitudes towards the virus change?

Logically, probably not until most of the electorate - more than half of Australia's 20 million adults - has had a vaccine and perceives the risk to themselves to be considerably lower.  

Only 4 million adults have been vaccinated to date, so even when we do hit 1 million doses per week, we're still six weeks away from 10 million! 

Hopefully more international movements become possible as soon as vaccines have been made available to all Aussies who want to take one.

Old property listings crunched lower

Listings decline

Property listings plunged by another 6 per cent in May, to be 19 per cent lower over the year.

New listings did increase year-on-year, but demand remained much stronger and comfortably outstripped supply, with old listings plunging 44 per cent lower over the year.

Listings were lower over the year across most of the capital cities, and most of the significant regional markets too. 

There were significant monthly declines in May for Hobart, Canberra, Adelaide, and Melbourne.

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Commodity prices also surged in May, on a monthly average basis. 

Over the year, prices boomed 40 per cent higher in SDR terms, driven by higher iron ore prices.

Using spot prices for the bulk commodities, prices were up by a massive 52 per cent over the year, delivering a tremendous windfall. 

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The RBA left interest rates on hold in this month, as expected.

The RBA will continue to monitor lending trends in housing borrowing.

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Housing prices rise in May

CoreLogic monthly update

Sydney led the housing price index gains in May, with a 3 per cent increase, with Hobart also recording a 3.2 per cent increase (again). 

Brisbane also recorded a 2 per cent price increase in the month, to be 10.6 per cent higher over the year. 

There have also been some interesting regional trends, with regional prices up 2 per cent. 

The full CoreLogic report can be found here. 

Stock levels fell sharply in May, with a decline of 16,664 properties according to SQM Research's latest figures, with marked tightening in evidence in Hobart and Adelaide. 

Source: SQM Research

CoreLogic also sees listings miles below their 5-year average.

Election looming

All cities have seen a price increase since PM Morrison pulled off his "miracle" election win of May 2019, with Sydney a notably strong performer since that time. 

This time around there may prove to be less housing market disruption from the election campaign for a few reasons.

Firstly, Labor seems unlikely to run with its previously proposed reforms for capital gains tax, and negative gearing.

Secondly, the ALP's likely housing market proposals are focussed supply-side measures, with 30,000 affordable social dwellings to be built over 5 years at a cost of $10 billion (a drop in the ocean given the 200,000 households registered on waiting lists).

And thirdly, because according to the latest Betfair odds Labor will most likely lose anyway, with the incumbent Coalition likely to run hard with a 'tough on the virus' message.