Property Masterclass (Sydney)

Property Masterclass

Chris Bates and I are running a property masterclass event on Friday next week.

Details are below, shoot me an email if you want to attend (free to blog readers):

I'll be sticking around for a few drinks afterwards.

Rental market driving homelessness

International arrivals rebound

The ABS reported that the value of Australia's dwelling stock increased by $325 billion in the June quarter to be back above $10 trillion, recovering the decline during the pandemic. 

Source: ABS

The increase was mainly driven by increases in the mean dwelling prices in NSW (+$32,000) and Queensland (+$26,000). 

Source: ABS

In a separate release the ABS reported that the number of international arrivals increased to an estimated 1.74 million in July, the highest figure since January 2020. 

Source: ABS

Despite this, short-term arrivals remain way below previous highs, with Chinese visitors tracking at just a fraction of their pre-pandemic levels. 

Source: ABS

Thus there is plenty of scope for further increases in the total number of international arrivals. 

In other news, SQM Research reported declines in rental vacancy rates in August, to 1.2 per cent.

There were monthly declines in rental vacancy rates in Sydney, Brisbane, Perth, Adelaide, and Canberra.  

Source: SQM Research

There was a modest monthly increase in asking rents, with asking rents over the year up 17 per cent for units, and 15 per cent for houses. 

Louis Christopher mirrored what was reported by the Council for Homeless Persons over the past week, that the chronic shortage of affordable rentals is likely to drive a very large increase in homelessness.

Source: SQM Research

This is set to continue as paternalistic lending settings make it very hard for landlords to add rentals to the market on a net basis at a time when many are selling, while prospective first homebuyers are also becoming stuck in the rental pool. 

The CHP also reported that the state of Victoria would need 60,000 affordable and community housing dwellings to be built over the course of the next decade. 

SQM's media release is here.

Rental vacancies fall to record lows (PropTrack)

Rolling crisis

It's been noticeable of late that the rental market frenzy has subsided, as the market adjusts to the new conditions and higher rents.

That having been said, it doesn't seem as though the rental crisis going away.

Instead with population growth running at record highs - but prospective landlords also unable to borrow due to the record lending assessment buffer in place - we now seem to be embroiled in a rolling crisis.

PropTrack reported rental vacancies falling from 1.24 per cent in July to a record low of just 1.10 per cent in August.

Rental vacancy rates fell in 7 of the 8 capital cities over the month, with Sydney recording the sharpest monthly decline to 1.26 per cent.

Vacancy rates are lower still in Melbourne, while Brisbane, Adelaide, and Perth all have rental vacancy rates running at well under 1 per cent. 

Source: PropTrack

The share of available properties for rent has fallen by more than half since the onset of the pandemic, said PropTrack, with no signs of the rental crisis easing. 

The rental crisis has been driven by high immigration, fewer investors, and tight lending settings meaning first homebuyers unable to borrow becoming stuck in the rental pool. 

2-Sense podcast (and free diagnosis call)

2-Sense

Flying long haul this week with the kids, so wish me luck.

If you're in Sydney on Friday September 2022 from 2pm in the afternoon, we have a few spare tickets for a property masterclass to be held by myself and Chris Bates at Circular Quay (a nice freebie for blog readers - send me an email if you're interested pete@allenwargent.com). 

I'm sure a fair few of us will be hanging around for a drink afterwards as well. 

Being back on the Aussie timezone I'll also have capacity to run a few more free diagnosis calls over the next month so drop me a line if you're interested.

This week on the 2-Sense property podcast Batesy and I discussed the pattern book housing proposal in New South Wales, buyer fear of missing out (FOMO), and the latest trends highlighted in the 2023 Intergenerational Report. 

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

You can also watch the video version on YouTube here:

Temporary visas recover to hit new record

Visa records broken

The total number of temporary visa holders in Australia accelerated to a record high 2.55 million in July, according to Home Affairs. 

The total number has now rebounded by +914,000 from the lows. 

International student numbers have soared to a record 655,000, but visitor numbers still have a way to go. 

Hikes crushing consumers...

Rates bite hard

Australia's national accounts could be well summed up in just two charts.

Firstly, the interest payable on dwellings has increased by more than 80 per cent since the pre-COVID days as interest rates have increased. 

Second, the household saving ratio has plunged from the spike to 24 per cent to just 3 per cent, and will soon turn negative as more fixed rate loans reset to variable rates (after superannuation contributions we're already there for many households). 

Consumer demand will almost certainly drop away accordingly, at least until such time as interest rates can fall again in 2024. 

Everything else looks peaky

Australia has avoided a technical recession so far, but in per capita terms the economy contracted -0.3 per cent in the March quarter and -0.3 per cent in the June quarter. 

Why is per capita GDP negative? 

That's because - according to the population estimates at least - the population increased by 626,500 or +2.4 per cent over the 2023 financial year. 

Cameron Kusher from REA Group with the graph:

The boom in Australia's nominal GDP as commodity prices spiked is now finally unwinding, and is set to pull down income growth over time. 

And there will plenty more to come here as the terms of trade normalise.

The wrap

Overall, it's been an amazing reopening and rebound for the Aussie economy, but the honeymoon period is now over and growth in the economy has now stalled or is falling on basically every measure. 

The yield curve for cash rate futures are now seen to be peaking over the next few months, and then falling in 2024.

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James Foster dials in with the detailed analysis here. 

How to build your property brief with Amy and Owen

Podcast

Tune in to this week's latest with Amy and Owen here (or click on the image below):

You can watch the video version here:

Buyer FOMO to explode

Listings surge

SQM Research reported an increase in capital city property listings in August.

Sydney recorded its biggest monthly increase in new listings (+10.5 per cent) since SQM's records began in 2009. 

Melbourne also a sharp increase in listings, but in Brisbane there was another modest decline.

Canberra saw by far the largest rise in total listings in August. 

Despite this listings overall remain low, and lower than a year ago.

Listings are especially lower than a year ago in Sydney, Melbourne, Brisbane, Perth, and Adelaide.

Asking prices increased again in August to be 7.2 per cent higher than a year earlier, with Sydney asking prices rising 1.1 per cent in August, with houses in the New South Wales capital now up 10 per cent from a year ago. 

The strongest increase in asking prices was seen for units in Brisbane, up 13.7 per cent over the year, with more rises recorded in August. 

Economy slows

The GDP figures for the June quarter should just about be rescued by a stronger than expected contribution from net exports, which will contribute approximately 0.8 percentage points to economic growth in the June quarter.

Falling commodity prices did begin to reduce Australia's surprisingly large current account surplus in the June quarter. 

James Foster ran through the nitty gritty here.

Interest rates on hold again

Despite this, the household consumption figures look diabolical as higher mortgage rates bite, and the Reserve Bank kept interest rates on hold again as expected today, for a 3rd consecutive month. 

Louis Christopher of SQM Research anticipates that property buyer FOMO (fear of missing out) will now explode as homebuyers and investors see the next move in interest rates as being down in 2024. 

A strong start to 2024 is now expected for property prices.