Weekend reads

Must-see articles

The must-see articles of the week from Property Update, this weekend including a look at the return of international students, and mean dwelling prices rising to a record high in Q1 2020.

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Melbourne home values slide

Housing market re-opens

CoreLogic has resuscitated its Daily Home Value Index.

In Melbourne home values slipped -1.8 per cent lower over the quarter.

Sydney was flat through the shutdown period, and Brisbane saw a modest increase of +0.5 per cent, albeit on volumes thinner than a Tally-Ho paper.

Source: CoreLogic

You could always place a small layoff wager on the betting exchanges.

Retail balloons again in May

Retail surges again

It's been a strange few months for retail trade.

Food retail experienced unprecedented demand in March as Aussies hoarded food and liquor.

Then there was a massive pullback in April as the economy was essentially shut down. 

And then in May there was another preliminary +16.3 per cent spike, which was the biggest monthly seasonally adjusted spike across 38 years of available ABS data. 

Total industry turnover was actually a thunderous +5.3 per cent higher than a year earlier.

Consumer discretionary spend has picked up, but has still been weaker year-on-year (though there's still a fair argument to say that the massive government stimulus has put a lot of cash in pockets).

Food and liquor retail has been exceptionally strong with so many bars and restaurants shut, leading Aussies to consume and stash more supermarket and bottle shop goods.

The monthly retail trade figures should begin to stabilise from next month, which should begin to give us a clearer picture of consumer confidence, and the willingness and ability to spend. 

The woeful jobs market of May

Activity stops

Predictably woeful jobs figures were released by the ABS today.

The unemployment rate rose to 7.09 per cent in May, for the highest level in 19 years, and this was alongside a 3.2pp drop in Australia's participation rate since January to 62.9 per cent, which is the lowest level since 2000.

On the plus side it looks as though the headline unemployment rate will peak at a much lower level than previously feared. 

State unemployment rates saw New South Wales at 6.4 per cent, Victoria at 6.9 per cent, Queensland and South Australia at 7.9 per cent, and Western Australia at 8.1 per cent. 

The number of unemployed persons increased by 85,700 to 927,600, with many holding on to their positions thanks to the government's counteracting measures, including JobSeeker and JobKeeper. 

Remember, though, that some 570,000 Aussies have also effectively dropped out of the labour force.

Despite this, total employment fell by a monstrous 835,000 persons or 6.4 per cent over the two months to May 2020. 

New South Wales bore the brunt of the fallout, with employment in the state down 269,000 over the past two months.

The job losses have been heavily concentrated among women, the young, and lower paid workers.

Hours worked have dropped by about 10.2 per cent over two months, which will quite likely be reflected in a similar drop in GDP for the first half of 2020. 

The underutilisation rate hit a record high of 20.2 per cent in May. 

Priming the pump

Forward-looking measures for employment have improved and employment should now begin to rebound accordingly, but the legacy of COVID-19 will be felt by Australia for some years to come. 

Australia has exceeded even the wildest of expectations when it comes to the containment of the Coronavirus: nobody has died for ages, and only two cases remain in hospitals, in the state of Victoria. 

Every other state and territory has effectively eradicated the virus, which is truly an amazingly positive outcome. 

But the shutdown and ongoing restrictions have inevitably crippled activity in the economy.

if Australia is to target GDP of 1 per cent above trend for the next few years then there's going to be significant ongoing stimulus required, and there's no way the government can switch off support in September if that's the goal. 

The shutdown has been successful from a health perspective, but restrictions now need to be eased and the economy demands massive ongoing fiscal and monetary support.

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More on the detail from data king James Foster here. 

Mortgage demand booms to 11-year high

Mortgage boom

Housing is well known to be very much an interest rate sensitive asset class.

And US housing markets have overall been remarkably resilient this year.

The MBA mortgage applications index jumped another +8 per cent this week, following on from a +9.3 per cent jump previously.

Total mortgage demand is up by a massive +21 per cent from a year earlier, as the lockdown has driven a tremendous desire to nest. 

The index has zipped to the highest level since the financial crisis, now pushing up to an 11-year high. 

Source: Bloomberg

The average 30-year mortgage rate in the US has fallen to a record low of just 3.30 per cent.

First fixed and now variable mortgage rates have also plunged to record lows in Australia since May 1.

Stand by for Australia to follow suit...

Wake us up when September ends

Going for broke?

Personal insolvencies hit their lowest level since 1990 in the December 2019 quarter, and were again some -16.5 per cent lower year-on-year in the March 2020 quarter. 

This is all the more remarkable when you consider the stats on a per capita rolling annual basis, where they appeared to be racing towards zero in the March quarter.

Part IV and XI bankruptices were also some 16 per cent lower year-on-year.

ASIC's insolvency figures all showed a sharp drop in insolvencies in April, presumably partly related to the government's stimulus measures. 

Construction insolvencies also fell to a series low in the March 2020 quarter, thanks to low interest rates perhaps. 

Let's see what September brings, and whether or not there is a financial 'cliff' (not if the government is smart about things). 

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350 international students are set to return to Canberra next month under a pilot scheme designed to accelerate their return. 

This is how to align your financial goals

Aligning goals

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Mean dwelling price hits record high

Dwelling prices +7.4 per cent

All capital cities recorded a rise in residential prices in the March 2020 quarter, led by Sydney (+1.9 per cent) and Melbourne (+2.1 per cent). 

The two largest cities both recorded gains of more than +10 per cent over the year, taking the weighted average capital city price +7.4 per cent higher over the year to March.

Most of the COVID restrictions were rolled out in March, so there was little impact on the price charts by capital city. 

Sydney houses and attached dwellings both recorded quarterly gains.

The mean dwelling price rose to a record high at an estimated $690,200.

The number of dwellings was an estimated 10,485,700.

The value of Australia's dwelling stock hit a record high, with a preliminary estimate of $7.23 trillion.

The ratio of dwelling stock to GDP increased to 3.79x, but was still just below 2017 levels.

This is a high figure in global terms, but plenty lower than, say, Hong Kong.