Everything you need to know about inflation & property in 40 minutes

Inflation and property

Everything you ever wanted to now about inflation (and probably some stuff you didn't).

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

RBA with a hawkish hold

Sentiment sharply lower

Amidst all the usual central bank excitement, I must admit that I missed most of it as I'm on European timezone and have been mostly following the Paris Olympics rather than interest rate announcements!

Anyway, ANZ-Indeed reported that job advertisements fell for a 6th month on the bounce, to be -29 per cent lower than their November 2022 highs, with this series following a similar downwards trend to other measures of job advertisements.

This evidently points to a cooling labour market ahead for Australia.

In markets news, copper prices have dropped to below $4 per pound, which tends to a bearish indicator for the global economy and demand (h/t @Alonzo_CTHG). 

Crude oil prices, meanwhile, have also slumped to a 7-month low, partly reflecting recession fears.

RBA on hold

Going into today's central bank announcement, then, there was plenty of discussion about whether the Reserve Bank of Australia would deliver any change of rhetoric or language, especially given that quarterly inflation this quarter is expected to be much more muted. 

Energy subsidies are due to kick in this quarter, which will quickly hack headline inflation lower, it not the underlying trend.

Market pricing for interest rates had also shifted dramatically from a week ago.

In the event, though, the announcement and media conference remained understandably relatively hawkish, since the last thing policymakers want is for sentiment to kick up just as inflation as the annual rate of inflation moves close to the target range.

There's more than enough other RBA commentary on the interwebs to keep you entertained these days, but I'll just note here for those interested in property markets news, the following passage from the SoMP (as highlighted by Michael Pascoe on social media):

Source: Reserve Bank of Australia

The Reserve Bank of Autsralia now expects dwelling investment and new housing construction to decline further this year, and increase by only 1 per cent next year, meaning that the shortage of housing is unlikely to be tackled over the next couple of years.

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P.S. Whenever you’re ready…here are 5 ways I can help you manage your own money and go next level wealth:

1. Boom or Bust – 20 minute online workshop for investors

Register for my next free online training - Boom or Bust? How to change your investment plan - book in here

You also download a free copy of my e-book The Only 6 Ways to Become Wealthy here.

    2. Download our property buying guide

Download our free property buying guide here. 

You can also check out a few of our recent property investment purchases here. 

Get in contact with us today if strategic property investment is your thing. 

    3. Subscribe to our Top 10 Podcasts for Investors

Listen in to our podcasts

The Australian Property Podcast is rapidly becoming one of Australia's biggest business podcasts, now with well over 50,000 audio downloads per month, and growing fast.

And our popular Low Rates High Returns Show also remains available on Spotify.

    4. Subscribe for my free daily blog

Subscribe for my free daily blog with some 3.7 million hits here. 

You can also catch up with me daily on Twitter here, where I'm active daily and have over 14,400 followers. 

By the way, I'm a 7-times published author on finance and investing, so you can check out some of my books here.

My new book, co-authored with Cate Bakos is available to buy here or on Amazon here - follow our book release and forthcoming release on Facebook here and at our Buy Right podcast series here. 

5. Work with me privately

For a limited time you can book in a free diagnosis call with me here, so book in a call today.

Markets alert, not yet alarmed

Markets alert, and a little alarmed

They say a week is a long time in politics, but how about in financial markets?!

Last week all the media chat in Australia was about whether interest rates would head to above 5 per cent/

And yet within a few trades we see the 3-year bond yield suddenly trading below 3.4 per cent, which should lead to a swift decline in funding costs for Aussie banks.

The triggering of the Sahm rule recession indicator in the US and Warren Buffett offloading 56 per cent of his Apple stock holding were said to be among some of the warning signals, while Japanese currency moves following the recent lift in interest rates have sent a ripple of fear across markets. 

Before you know it, Japan's Nikkei 225 index suffered its worst crash since 1987 in falling 12.4 per cent in a single day.

US tech stocks have dropped back as investors begin to worry about a US recession, with the NASDAQ 100 down from 20,675 at the July highs to around 17,500 early in today's trade, while the S&P 500 is also down around 10 per cent from its highs.

Australia's ASX 200 has pulled back from around 8,100 to 7,650, but in fairness that only takes the market index back to where it was in May.

Markets reset

I've found a good motto in adult life to be that things are rarely as good as bad as they seem.

And although there is clearly a risk of a US recession, the Federal Reserve has a lot of firepower at its disposal, beginning with at least 50 basis points of rate cuts next month, and plenty more to come before the year is out if required.

In fact, even before I finished writing this blog post the ISM gauge for employment came in far stronger than expected.

Although Australia is not as far along on this journey due to being locked down for longer, the Melbourne Institute inflation gauge today dropped back from 3.2 per cent to 2.8 per cent over the year to July, for the lowest annual result since 2021.

An interest rate cut as soon as November for Australia shouldn't be ruled out, given the parlous state of the consumption economy.

There hasn't been much volatility in markets of late, and stock markets have been absolutely ripping here, so most likely we were just due for a bit of a recalibration. 

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In other Aussie economy news, New South Wales Premier Minns ordered government workers to be back in the office from Monday, calling to an end the working from home trend that's been prevalent for the past few years.

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At InvestSmart today, Cate and I discussed auction bidding tactics here (or click on the image below):

You can buy a copy of our book here.

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P.S. Whenever you’re ready…here are 5 ways I can help you manage your own money and go next level wealth:

1. Boom or Bust – 20 minute online workshop for investors

Register for my next free online training - Boom or Bust? How to change your investment plan - book in here

You also download a free copy of my e-book The Only 6 Ways to Become Wealthy here.

    2. Download our property buying guide

Download our free property buying guide here. 

You can also check out a few of our recent property investment purchases here. 

Get in contact with us today if strategic property investment is your thing. 

    3. Subscribe to our Top 10 Podcasts for Investors

Listen in to our podcasts

The Australian Property Podcast is rapidly becoming one of Australia's biggest business podcasts, now with well over 50,000 audio downloads per month, and growing fast.

And our popular Low Rates High Returns Show also remains available on Spotify.

    4. Subscribe for my free daily blog

Subscribe for my free daily blog with some 3.7 million hits here. 

You can also catch up with me daily on Twitter here, where I'm active daily and have over 14,400 followers. 

By the way, I'm a 7-times published author on finance and investing, so you can check out some of my books here.

My new book, co-authored with Cate Bakos is available to buy here or on Amazon here - follow our book release and forthcoming release on Facebook here and at our Buy Right podcast series here. 

5. Work with me privately

For a limited time you can book in a free diagnosis call with me here, so book in a call today.

Weak economy leads to rate cuts ahead (Aird, CBA)

Dovish tilt

Gareth Aird of CBA has delivered some outstanding analysis over the past year, and updated his views in a note last week.

The weaker than expected inflation figures point to a more dovish path ahead for interest rates, with the cash rate target expected to head towards 3½ per cent over the next 18 months.

If core inflation comes in at 0.8 per cent or lower for the September quarter as expected, then this would open the door to a first interest rate cut by November 2024.

As with many other countries, the path towards the inflation target has not been smooth, so there is a good chance that the first easing doesn't happen until early 2025.

Australia has been in a per capita recession over the past 18 months, and inflation generally lags the cycle.

Great analysis and graphs.

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P.S. Whenever you’re ready…here are 5 ways I can help you manage your own money and go next level wealth:

1. Boom or Bust – 20 minute online workshop for investors

Register for my next free online training - Boom or Bust? How to change your investment plan - book in here

You also download a free copy of my e-book The Only 6 Ways to Become Wealthy here.

    2. Download our property buying guide

Download our free property buying guide here. 

You can also check out a few of our recent property investment purchases here. 

Get in contact with us today if strategic property investment is your thing. 

    3. Subscribe to our Top 10 Podcasts for Investors

Listen in to our podcasts

The Australian Property Podcast is rapidly becoming one of Australia's biggest business podcasts, now with well over 50,000 audio downloads per month, and growing fast.

And our popular Low Rates High Returns Show also remains available on Spotify.

    4. Subscribe for my free daily blog

Subscribe for my free daily blog with some 3.7 million hits here. 

You can also catch up with me daily on Twitter here, where I'm active daily and have over 14,300 followers. 

By the way, I'm a 7-times published author on finance and investing, so you can check out some of my books here.

My new book, co-authored with Cate Bakos is available to buy here or on Amazon here - follow our book release and forthcoming release on Facebook here and at our Buy Right podcast series here. 

5. Work with me privately

For a limited time you can book in a free diagnosis call with me here, so book in a call today.

2-Sense: Little joy for first homebuyers

2-Sense

Join Batesy and I as we discuss the unchanged lending settings in the housing market, demographics, and much more.

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

You can also watch the video version on YouTube here:

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P.S. Whenever you’re ready…here are 5 ways I can help you manage your own money and go next level wealth:

1. Boom or Bust – 20 minute online workshop for investors

Register for my next free online training - Boom or Bust? How to change your investment plan - book in here

You also download a free copy of my e-book The Only 6 Ways to Become Wealthy here.

    2. Download our property buying guide

Download our free property buying guide here. 

You can also check out a few of our recent property investment purchases here. 

Get in contact with us today if strategic property investment is your thing. 

    3. Subscribe to our Top 10 Podcasts for Investors

Listen in to our podcasts

The Australian Property Podcast is rapidly becoming one of Australia's biggest business podcasts, now with well over 50,000 audio downloads per month, and growing fast.

And our popular Low Rates High Returns Show also remains available on Spotify.

    4. Subscribe for my free daily blog

Subscribe for my free daily blog with some 3.7 million hits here. 

You can also catch up with me daily on Twitter here, where I'm active daily and have over 14,300 followers. 

By the way, I'm a 7-times published author on finance and investing, so you can check out some of my books here.

My new book, co-authored with Cate Bakos is available to buy here or on Amazon here - follow our book release and forthcoming release on Facebook here and at our Buy Right podcast series here. 

5. Work with me privately

For a limited time you can book in a free diagnosis call with me here, so book in a call today.

It's about to rain rate cuts...

Breaking point

Yesterday saw the release of Australia's lending indicators figures, with new home loans up by a solid +1.3 per cent over the month of June.

The increase was largely due to an increase in activity from investors.

The average loan size for owner-occupiers increased to a new high of $636,000.

APRA's ADIs data showed there to be little high debt-to-income lending and little high LVR lending (as well as almost no low-doc lending), suggesting that at least part of the higher 'average' home loan is due to lower income earning prospective owner-occupiers being locked out of the market by the lending assessment buffer. 

CommSec with the chart:

Of course James Foster ran through all the key data here. 

Meanwhile in the US it looks like the labour market has finally cracked.

Payrolls figures missed badly to the downside, and the unemployment rate jumped to 4.3 per cent, which was the highest since 2021, and now up significantly from the cycle lows. 

Average hourly earnings increased by only +0.2 per cent, to be +3.6 per cent higher over the year.

With oil prices tumbling there was an interest rate cut coming anyway, but it now looks likely that the Federal Reserve will go with a 50 basis points cut next month as the data continues to deteriorate. 

The US 10-year Treasury yield has plunged to under 3.8 per cent, while US mortgage rates fell to their lowest level of 2024.

The Federal Reserve believes that the funds rate is around 275 basis points above a 'neutral' setting, so expect to see a lot of easing over the next 18 months.

Home values fall in 3 capital cities

Two-speed property market

CoreLogic's latest figures revealed a two-speed property market, with prices declining over the past quarter in Melbourne, Hobart, and Darwin.

Source: CoreLogic

CoreLogic reported that supply is tight overall, with the number of homes for sale in Brisbane, Adelaide, and Perth 30 per cent below normal levels.

The lowest price quartile of the market is driving prices, with prices up +3.3 per cent over the quarter, versus +0.8 per cent for the upper price quartile.

As a result, units recorded a faster pace of growth than houses, almost across the board. 

It looks like the rapid pace of growth in rents has now slowed down, which is good news for inflation, with more investors now coming into the market.

You can read the full CoreLogic report here. 

Credit impulse defiantly strong

Credit growth solid

Housing credit growth came in at +0.4 per cent in June, to pick back up to +4.7 per cent over the year.

This was enough to see home values rising by +0.5 per cent in July, for an 18th consecutive rise.

The credit impulse has continued to pick up, and given the significant shift in bond yields over recent weeks, it will probably continue to do so over the year ahead.

Investor credit growth was still very low given that prices and populations have increased, rising +3.6 per cent over the year, but the cycle nadir was passed well back in September 2023.

Business credit was solid, resulting in total credit growth of +0.6 per cent over the month, and +5.6 per cent over the year.

Australia's 3-year bond yield was trading below 3.7 per cent this morning, a drop of some 50 basis points since June 27.

Home values rose for an 18th consecutive month in July according to CoreLogic, but Melbourne, Hobart, and Darwin all recorded quarterly declines.

Source: CoreLogic

Looking ahead, the headlines are looking for a pick-up in housing market sentiment as the interest rate hiking cycle ends. 

---

P.S. Whenever you’re ready…here are 5 ways I can help you manage your own money and go next level wealth:

1. Boom or Bust – 20 minute online workshop for investors

Register for my next free online training - Boom or Bust? How to change your investment plan - book in here

You also download a free copy of my e-book The Only 6 Ways to Become Wealthy here.

    2. Download our property buying guide

Download our free property buying guide here. 

You can also check out a few of our recent property investment purchases here. 

Get in contact with us today if strategic property investment is your thing. 

    3. Subscribe to our Top 10 Podcasts for Investors

Listen in to our podcasts

The Australian Property Podcast is rapidly becoming one of Australia's biggest business podcasts, now with well over 50,000 audio downloads per month, and growing fast.

And our popular Low Rates High Returns Show also remains available on Spotify.

    4. Subscribe for my free daily blog

Subscribe for my free daily blog with some 3.7 million hits here. 

You can also catch up with me daily on Twitter here, where I'm active daily and have over 14,300 followers. 

By the way, I'm a 7-times published author on finance and investing, so you can check out some of my books here.

My new book, co-authored with Cate Bakos is available to buy here or on Amazon here - follow our book release and forthcoming release on Facebook here and at our Buy Right podcast series here. 

5. Work with me privately

For a limited time you can book in a free diagnosis call with me here, so book in a call today.