The BIP Show: talking resi & commercial real estate, gold, elections, inflation, Spurs, & more

BIP Show

Great to be back on the BIP Show talking office assets, residential property news, and more.

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

Builders going bust all over the place

Credit growth stalls

Credit growth is still reasonable over the year, but slowed to an anemic 0.3 per cent in February, even before the latest interest rate hikes took hold in full.

Over the past 3 months, credit growth has slowed to an annualised pace of just 4.3 per cent, the lowest in 2 years...and there's further slowing to come yet. 

Housing credit growth for the month was again slow at just 0.34 per cent, a very modest uptick from similarly sluggish figures in December and January. 

Notably with the lending constraints in place investor credit growth was again negligible, at just 0.2 per cent for the 3rd month in a row, with the rental crisis gathering a serious head of steam now. 

The housing credit impulse did at least turn a corner, and overall capital city housing prices rose in March, led by an increase of around +1.5 per cent in Sydney. 

Unfortunately, tighter lending policies are sending more and more developers to the wall now.

This morning Victoria's 4th largest homebuilder - the award-winning Porter Davis Homes - folded into liquidation, leaving 1,700 homes unfinished and 470 employees (as well as subcontractors) potentially in the lurch.

A further 779 homes have had contracts signed, but work has yet to commence. 

All work across the group has ceased, effective immediately. 

Within an hour or two, the developers Lloyd Group also collapsed, leaving 60 projects unfinished. 

There's a lot of infrastructure and public works underway at the moment, but this is in turn only hampering the capacity of the residential sector to deliver housing, and as such the capital city housing shortages will be exacerbated. 

Not a great day for the construction industry - and unfortunately the beatings will apparently continue until morale improves. 

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Catch up with the latest from the Australian Property Podcast here. 

Sydney the king of jobs

Sydney creates jobs

Job vacancies had declined for a 3rd consecutive quarter, from their May 2022 peak of 480,300 to 438,500 by February.

Many of these job vacancies are lower paying positions, accounting for the huge ramp up in immigration.

But still, it's equivalent to 3 per cent of the labour force, which is historically high number, albeit now declining. 

The figures suggest that the cycle lows for the unemployment rate are now passing. 

Tell you where has a LOT of jobs available: Sydney. 

Record high immigration, just a 3 per cent state unemployment rate for New South Wales, and jobs vacancies tracking at around record highs of nearly 150,000 too. 

No wonder everyone's pouring into Sydney...boom times!

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Markets have priced out any movement in interest rates in April, and the major banks CBA and Westpac are calling for a pause, with NAB also downgrading their cycle peak forecast for the cash rate target to 3.85 per cent. 

Inflation drops sharply

Inflation plunger

The ABS released its monthly inflation gauge, and it showed inflation dropping sharply from 7.4 per cent to 6.8 per cent in February.

This was way under market estimates, and confirms inflation as well down from 8.4 per cent last year. 

After an implied -0.4 per cent last month, the monthly inflation figure was only about 0.2 per cent.

Source: ABS

Much of the drop was driven by a -15 per cent decline in travel prices.

Of course, this was one of the major drivers of inflation in the first place due to Australia's extremely extended lockdowns and the massive disruption to aviation.

If you strip travel out of the figures, annual inflation was actually slower again at 6.6 per cent.

As for the wages 'spiral', well, that didn't happen either...and immigration is now set to record highs, so you can forget about further increases in the rate of wage inflation. 

The RBA is set to pause interest rates in April now.

And of course with 1- and 3-year bond yields far below the current cash rate target, the 300 basis points lending assessment buffer should be canned as well to help ease the chronic dwelling supply shortage. 

Australian Property Podcast - Episode 1

Episode 1

Tune in to the Australian Property Podcast on Apple podcasts, Spotify, or at the main website.

Or, you can simply watch on YouTube here:

Consumption weakening

Retail softening

Very soft retail figures today in a broader context.

Retail turnover increased +0.2 per cent to a seasonally adjusted $35.1 billion in February, despite rampant population growth.

Turnover is actually still lower now than it was in October and November last year. 

After factoring in price inflation, retail volumes are clearly falling, and the March indicators are for another softer result, especially for household goods. 

Overall, domestic demand is softening, and in per capita terms is dropping away. 

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I've read a few hot takes about retail turnover still being above pre-COVID levels.

Well, yes, that's generally how a spike in inflation and population growth would work. 

In terms of retail volumes, though, we'll be back on trend by March 2023, and then falling...

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James Foster did more of a deep-dive review of the numbers here. 

Big Picture podcast

The Big Picture

I joined Michael Yardney on The Big Picture podcast here (or click on the image below):

Not selling...

Low listings continue through selling season

With very few forced sellers around, new property listings continue to track miles below average as we move into the cooler autumnal months. 

CoreLogic reports: 

Source: CoreLogic

The low level of listings is mainly being experienced as a capital city phenomenon, with listings way down in Sydney, Melbourne, and Brisbane.

On the other hand, some regional areas and smaller capital cities have bucked the trend.

Source: CoreLogic

In a similar vein, rents are now easing in Canberra, Hobart, Darwin, and a number of regional areas.

In the big cities, however, asking rents are rocketing.

SQM's latest figures show asking rents in Sydney for units up by +30 per cent from a year earlier, and accelerating (Melbourne isn't far behind). 

Source: SQM Research