Builders face mounting challenges

Construction costs

Growing challenges in the construction sector, as we discussed here (or click on the image below):

Blunder Down Under

Week from hell

The Labor Party was at Winx odds of close to $1.20 going into the 2019 Federal Election, leading some of the bookies to pay out early. 

For a while it looked as though this year might play out to be a similar story, with the Leader of the Opposition keeping a low profile, while intermittently making derisory observations about the struggling Prime Minister to popular acclaim.

What a difference a week makes.

With the election date now called, the first week of the campaign was an unmitigated disaster for the pretender to the throne Albanese, with a series of unforced gaffes leading the media to smell blood. 

Shadow Treasurer Jim Chalmers continues to present very credibly, but the prevailing odds at Sportsbet, TAB, and now Betfair have all swung violently towards level pegging in the space of only the past week. 

Only one month ago the Coalition was out at $4 and now they're in to under $2 with Betfair, with the respective leaders yet to face off in their first live debate of the campaign. 

It could be a long five weeks ahead, with Morrison having delivered a near-flawless campaign last time around. 

Rental vacancies approaching zero

Tightening rentals market

Private new home sales increased moderately in March.

The Housing Industry Association (HIA) also notes the rapidly tightening rentals market, with vacancies at "close to zero". 

Sydney and Melbourne have been the two markets when rental vacancies haven't been so tight, but it seems that is now changing quite quickly too. 

Adelaide - and increasingly Brisbane - have very tight rental markets.

Source: SQM Research

As you can see in SQM's graphic above, the number of properties for rent in Brisbane has fallen by 40 per cent since January 9.

Tim Lawless from CoreLogic notes, meanwhile, that short-term fixed rates are have now moved comfortably higher than variable mortgage rates. 

Source: CoreLogic

Unemployment falls to 3.95pc

Unemployment with '3'...sort of

A solid labour force release saw full time employment increasing by 20,500, and total employment increasing by 17,900, to record high of 13,389,000.

The result was enough to push the unemployment rate down to the lowest levels since the 1970s, dropping from 4.04 per cent to 3.95 per cent.

But since the figures are rounded to one decimal places, this will be reported as a flat result at 4 per cent (nice and easy for Albo to remember!). 

The unemployment rate for women fell to 3.7 per cent, the lowest level since 1974.

The underemployment rate also fell to 6.3 per cent, and the underutilisation rate fell to 10.3 per cent - both new cycle lows and reflective of the tightest labour market since 2008 - so we should start to see some wages growth from here. 

The working age population is already beginning to pick up, so we may not see much lower unemployment figures than this in this cycle. 

Queensland has added nearly 100,000 to the state's total employed figures over the past year. 

The weakest part of the release was monthly hours worked, which declined over the month, to be lower than a year ago.

The twin reasons for this were flooding and the Omicron coronavirus variant, leading to more absences from the workplace in March. 

Overall, this was a pretty solid release, but may just be unspectacular enough to keep interest rates on hold until June, by which time we'll likely have a new government, and more information will have come to light on wage price growth and consumer price inflation. 

Housing starts in decline

Dwelling starts retrace

Dwelling commencements hit a record high 68,000 in the June 2021 quarter - as the HomeBuilder stimulus kick-started a detached house bonanza around most of inhabited Australia - but fell again in the last quarter of 2021, back down to 50,000. 

Despite this, the number of dwellings under construction remained high, at a total of around 230,000.

This included over 100,000 detached homes still under construction, spread far and wide around the country.

Some of these may not complete, given the sharp increase in materials and labour costs, but it's still quite a pipeline. 

Units under construction remained under 130,000, driven by some much-needed supply coming online in Queensland. 

There were still 31,000 dwellings approved, but not yet commenced, and I doubt this figure will decrease given the high cost of building right now. 

Overall, dwelling commencements were on the way down in Q4, and the first quarter of 2022 may well be to be lower as well due to COVID disruptions. 

Recent flooding has only added to the already high level of pressure on Australia's rental markets.

12-week program: limited access

New Level Wealth

We're reopening our 12-week money mastermind program for the next week.

You can apply to join us here (or click on the image below):

Australia enters rental crisis

Rental crisis

SQM Research reported that Australia entered a deep rental crisis, in March.

Last month the number of rental vacancies fell by another 7,000 from 43,844 to 36,868. 

There were some big drops recorded in Sydney and Melbourne as the return to the cities took hold.

Nevertheless, SQM reported that many regional centres are still running at near zero vacancies. 

Source: SQM Research

There are many reasons why this dynamic has taken hold, from record high employment to a desire for more space, with household formation increasing but the average household size decreasing. 

Many households have been using their spare room as an office, increasing demand for space. 

And foreign investors have also been forced out of the market, which hasn't helped the rental supply.

At the current rate of absorption, there will only be around 20,000 rental vacancies left by the time the new government takes office.

This would represent the lowest vacancy rate on record, so there will be some immediate policy challenges to take on.

SQM's media release is reporting some sharp increases in asking rents over the past year, especially in Brisbane and Sydney of late. 

This is how to prepare for higher rates

Rates hikes coming

This week on the Pod, Suvidh Arora from Cinch Home Loans discusses how to prepare for higher interest rates.

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

You can also tune in at Apple podcasts, Spotify, and all the rest.

Enjoy.

Oh, and I forgot there's now Youtube as well!