New dwelling supply

Apartments vs. population boom

A quick look at dwelling supply, now the latest population growth estimates are in.

2019 was the biggest ever financial year for apartment completions in Sydney and New South Wales, so the rental market is likely to remain soft for quite some time as the new stock is absorbed. 

In Victoria, annual population growth was off the highs in the 2019 financial year, but at +132,800 remained so strong that a dwelling shortage looks likely by the end of 2020. 

In New South Wales, however, while new supply has tightened of late, this cycle's apartment construction boom became so large that it'll take longer for the new units to be absorbed. 

New South Wales is also losing a fair number of residents interstate, while south-east Queensland continues to attract the bulk of interstate migration.

The boom in apartment construction across Brisbane and Gold Coast was a bit unusual in that wasn't driven so much by rising prices, but rather a combination of lower interest rates and a proliferation of investors from the Chinese mainland. 

The construction downturn came about a couple of years sooner in Queensland, and as such the overbuild has by and large already washed through. 

The figures for completions and new units under construction are about 6 months lagged, but show that by June 2019 the new dwelling supply had already normalised in Queensland. 

For Sydney and Melbourne, higher population growth and denser cities these days likely mean a  greater ongoing apartment supply than was the case through earlier cycles. 

But even still, the New South Wales construction downturn had quite a way to run as at June 2019.

The construction slowdown has indeed been marked over the past six months, as well evidenced in yesterday's employment figures for NSW.

Population growth of +381,600 in FY2019

Population grows 1.5pc to 25.5m

Moves to slow permanent migration to Australia took some effect across recent quarters.

The natural increase of the population was a bit higher over the 2019 financial year at +142,600.

And net overseas migration of +238,800 was just +100 higher than it was in the prior year. 

Overall, population growth in FY 2019 was therefore only modestly higher year-on-year at +381,600 (FY 2018: +380,800).

The rampant population growth of a few years ago has therefore eased a little, although levels of growth do remain very strong. 

South-east Queensland as a destination continued to dominate the interstate moves over the financial year, while net interstate migration to Victoria has now calmed down a little.

People are less inclined to leave Western Australia now than they have been for some years. 

Piecing it together, some 86 per cent of population growth in FY 2019 was accounted for by New South Wales (+109,400), Victoria (+132,800), and Queensland (+85,700).

The estimated resident population of the Northern Territory continues to shrink, to be down by -1,200 over the year to June 2019.

Nerida Conisbee of REA Group has noted that the Darwin housing market is really struggling, with no positive indicators registered at all.

Next up we can map these figures against dwelling completions.

Unemployment rate 5.2pc as slack persists

Part-time jobs surge

Employment jumped by +39,900 in November, driven by part-time jobs, to just shy of 13 million. 

However, the October figure was revised down to -24,800, bringing the 3-month average increase in employment to a rather modest +9,500. 

This was enough to hold the annual increase in employment steady this month at +2 per cent. 

The monthly unemployment rate dipped from 5.31 per cent to 5.18 per cent, although it's still a long way from the level needed for stronger wages growth.

In New South Wales, quarterly employment fell by a nasty -39,500, with Queensland leading quarterly jobs growth, followed by Victoria.

Although New South Wales and Victoria still have unemployment rates under 5 per cent, in NSW the trend is now higher, and elsewhere unemployment rates are generally at about 6 per cent or above.

Across Queensland the unemployment rate remains far too high at 6.4 per cent. 

With employment growth driven by part-time work, the annual growth in trend monthly hours worked slumped to just +1.6 per cent. 

The wrap

Overall, while the headline figure looked great, the broader measures of slack are still high in historical terms. 

And another forward-looking indicator today from Seek showed negative year-on-year growth in job ads, and the private sector going sharply backwards. 

First homebuyer Phoenix to rise in 2020 (echo boom)

Exuberance of youth

Lots of new data out today on the labour force, population growth, and record household wealth.

But first, a look at something different: the Aussie population diced up by year of age.

Having gone nowhere for 15 years, the population aged 25 to 34 suddenly ripped higher through the resources boom from 2007 onwards.

This has partly been due to faster skilled migration in the under 30s cohort, as well as an echo-boom from the Baby Boomer generation. 

And more recently on the back of a student visa surge, this trend has continued right through until today.

In fact, the 25 to 34 cohort has increased by close to 1 million persons since 2007.

Click the chart to expand it: 

This equates to a significant pent up demand from first homebuyers and, as such, expect the first home loan deposit scheme (FHLDS) to be fully subscribed in the new year. 

The scheme will be made available to qualifying first homebuyers with at least a 5 per cent deposit. 

FIGJAM and other biases

Cognitive bias

See here for more (or click the image below):

Job ads crunched to 4-year low

4-year low for vacancies

The skilled vacancies index fell for the 11th consecutive month, and is now -10.6 per cent (or -19,400 job ads) lower than a year earlier, according to the Department of Employment. 

The trend for total vacancies declined to 162,700, with the index slumping to a 4-year low and sinking fast. 

In New South Wales, job ads are down -16.1 per cent year-on-year, while in Victoria the index is down -11.8 per cent. 

Annual declines were recorded in all jurisdictions except for Western Australia and the ACT.

The RBA's Harper was quoted in a media piece this week noting that 'you don't want to be in a place where you're over-stimulated'.

Safe to say, that particular risk has been comfortably headed off!

Tesla off to the races

Tesla roars

The most polarising of stock market stories - which I'm following only as an observer from the sidelines - sees Tesla (TSLA) soaring towards record heights.

Despite the propensity for burning cash, the latest surge sees the market cap roaring to US$69 billion on the back of a fresh 52-week high:

A positive Credit Suisse research note found that Tesla has a significant competitive advantage thanks to its work on batteries, software, and electrification. 

Even my wife is even talking about wanting to buy a Tesla now (unfortunately for me!).

Perhaps the tide has turned in favour of the bulls?

Some analysts have talked of extremely high price targets for the stock, but you still need to factor in competition as the sector matures. 

Discl: No position. 

Vacancy rates up seasonally in November

Perth turnaround

Rental demand tends to soften in November, according to SQM Research, and vacancy rates increased accordingly from 2.1 per cent to 2.2 per cent. 

Nationally, the vacancy rate of 2.2 per cent was slightly lower than the 2.3 per cent recorded a year earlier, although the total number of vacancies was broadly similar at ~76,000. 

Melbourne's vacancy rates has started to drift a little higher as apartment completions hit home, while Sydney still has the highest vacancy rate in the nation. 

The most notable change over the past year has been in Perth where the vacancy rate is now 2½ per cent, well down from 3.4 per cent a year earlier. 

Expect vacancy rates to spike over Xmas as international students return home, before retracing in the new year.

Vacancies are extremely low in Hobart, where many landlords have taken to Airbnb to maximise rental income.