The great rotation
For the first time in a decade, investors can get paid for being patient.
I took a brief look at what that means for the outlook here (or click on the image below):
Thursday, 5 January 2023
The new rotation
I took a brief look at what that means for the outlook here (or click on the image below):
Property listings plummet in December
Listings plunge
Although there is some old stock on the market not selling, total property listings dropped from 241,701 to 228,415 in December, reflecting few forced sales and a decline in distressed listings.
It's not unusual to see a decline in December, but overall stock levels are much tighter than they have been in many recent years (in 2011 the total was over 370,000, for example).
The drop was mainly driven by a -15.3 per cent decline in Sydney inventory, with all capital cities except for Hobart recording a monthly decline.
At the sub-regional level, stock levels are generally tighter in Sydney's eastern suburbs, inner west, and lower north shore, but are now increasing in the Blue Mountains and Wollongong, following a period of chronic tightness through the pandemic.
Stock levels in Hobart have rebounded to a total of 2,293 listings, but do bear in mind this year-on-year surge is coming from extremely low levels over recent years (so in that context, not much of a surprise).
Over the month SQM recorded an increase of +2.8 per cent in asking prices, going somewhat against the prevailing narrative of a plunging market.
Indeed, capital city asking prices are as high as they have ever been, suggesting that while there are pockets of significant weakness, some markets are faring much better than others.
Source: SQM Research
How far the downturn cycle runs for largely depends on monetary policy and the regulatory approach to lending standards from here.
SQM's media release can be found here.
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All of the manufacturing ISM components point to a US slowdown...and take a look at prices paid!
Source: Bloomberg
Inflation looks set to go into freefall in 2023.
The ISM gauge appears to be pointing to year-on-year inflation going negative this year, in fact.
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It was 15 degrees in London yesterday, with a another fortnight of the same forecast.
In Europe electricity and gas prices have plunged all the way back down to pre-invasion levels, while gas futures are at the lowest level since 2021 on the milder weather.
Crude oil also fell 5 per cent overnight.
Tuesday, 3 January 2023
Spring comes early
Energy price signals
I can attests that thankfully there's been some milder weather in Europe, and gas prices have been in freefall, following their alarming spike after the Ukraine invasion.
Households and businesses have also cut back on energy consumption, and it's being reflected in dramatic declines in gas and electricity prices across Europe.
Anecdotally some businesses are not heating premises, and others have opted to close until spring.
The good news is that this is quite quickly being reflected in falling inflation figures, in Germany and elsewhere in the EU.
There's plenty of optimism around to suggest that the war on inflation may be deemed won over the coming months...
10 most expensive suburbs
Most expensive suburbs
I joined Owen and Kate for a New Year's markets and property yarn here (or click on the image below):
Rents surging in inner-cities
City rents rising
An interesting little anecdote from PropertyChat, with a Melbourne CBD unit seeing a rental increase of 58.3 per cent.
The rent in this case had declined from $650/week to $600/week due to the extended lockdowns in Melbourne.
But now it's leased at $950/week, reflecting a gradual reversal of demand from lifestyle regions and a return to the capital cities.
Melbourne now has the lowest number of advertised rental listings since the weekly records began in January 2011.
Similarly had a rental unit in our portfolio come up for lease recently in Sydney, and although we only increased the asking rental by a more modest amount, there were six applications within a few hours...three of which were above the asking price.
Record low rental vacancies
On the current trajectory, the capital city rental supply is on track to collapse in 2023.
Firstly, because demand is set to increase significantly.
The Centre for Population will release a statement on Friday this week, highlighting Australia's rising dependency ratio and the need to ramp up immigration and grow the skilled labour force.
Treasurer Jim Chalmers has already noted that the report will underscore the desire to build a bigger and better-trained workforce, including expanding opportunities for women.
And secondly, because the supply of rentals is drying up.
Interest rates have been increased very quickly since May, and the fixed rate cliff has yet to hit home for many investors.
Meanwhile, refinancing rules have also been tightened dramatically, with the introduction of a 300 basis points lending assessment buffer.
The inability to refinance will lead to many landlords to selling up, and will keep too many prospective new investors out of the market, while the balance of power in rental markets legislation has also tilted significantly in favour of tenants over recent years.
Australia's population will be projected in the population statement to increase from 26 million to 39.2 million by 2060, although historically forecasts have tended to undershoot the reality significantly.
Monday, 2 January 2023
Free book download
Total Money Management
Free book download for the new year.
Get your copy here (or click on the image below):
Canada freezes out foreign buyers
Canada ban introduced
As previously flagged by PM Trudeau, Canada has now - with some exceptions - banned foreign purchases of residential property.
From ABC News here (or click on the image below):
Canada had been the 3rd most popular global market for Chinese investors.
We should expect to see Chinese investment in Australia begin to increase again, albeit from much lower levels than we saw 6 years ago.
Foreign investment in Australian real estate fell dramatically after the introduction of stamp duty tax surcharges on non-resident purchases, while the relationship between Australia and China also cooled significantly during the previous government.
However, in the first quarter of the 2023 financial year, Chinese investment had perhaps already just begun to rebound a little, up to $1 billion for the first 3 month period reported.
Source: FIRB
Hong Kong will also drop off the radar this year as a destination for international capital flows.
Property group Juwai predicts that China's reopening will result in a surge of demand for Australian property.
This was also reported in this paywalled article in The Australian.
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