Pete Wargent blogspot
Tuesday 28 February 2023
Mortgage credit impulse approaches GFC lows
Big Picture podcast
Sydney unit supply to shrink 84pc
The cost of this will be a continuation of the rental crisis in some parts of the country.
Friday 24 February 2023
The pendulum swings...
Net migration +400,000 in 2022 (more to come)
Money Cafe podcast: The super trap
Thursday 23 February 2023
Wage pressures moderating
Wednesday 22 February 2023
Wages miss big, slowing to 0.78pc; record fall in inflation expectations
Western Australia and Tasmania led the way with 3.6 per cent wage price growth.
Construction work done also fell in Q4, also missing market expectations for modest growth.
Rate hikes slowing spending
Tuesday 21 February 2023
House building set for worst year in a decade (HIA)
Home starts crunch
The Housing Industry Association's Tim Reardon notes in the latest forecasts that housing starts this year are set to fall to the lowest level since 2021.
Source: HIA
Reported the HIA:
Source: HIA
As such, record high population growth combined with tight lending standards continue to point to a shortage of housing, particularly rentals.
Sunday 19 February 2023
Melbourne rental market tightening at an alarming pace
Zooming out from the shock
Open home queues
There have been some examples of surprisingly strong property sales in recent weeks, confounding the expert observers, and Sydney actually recorded a preliminary auction clearance rate of above 75 per cent yesterday.
Source: Domain
CoreLogic put the preliminary clearance rate for the week in Sydney at 78 per cent, the highest in a year.
Stock levels are very low, and buyers are getting out and about.
You can argue about the underlying reasons for these dynamics.
'System one' thinking, as described by Daniel Kahneman, is that interest rates have been rising, so asset prices must decline equivalently.
But with full employment and stamp duty exemptions reinvigorating the housing market in New South Wales, some homebuyers appear to be looking further ahead with a 'System two' mindset at projections for record high population growth, soaring rents, declining dwelling starts, and a possible imminent peak in interest rates.
Zooming out
Moreover, the trendline for interest rates over the past four decades has only been one-way travel...towards zero.
Although the global lockdown measures implemented due to the pandemic and the Ukraine war have caused massive - and perhaps unprecedented - supply shocks and supply chain disruption, today Australia's 10-year bond yield is still only trading at a bit under 3.8 per cent.
Arguably not too much has changed from a structural perspective since the low inflation world of 2019 and before, while accelerating technology developments - such as in the AI and ChatGPT space, for example - could prove to be a significant deflationary shock.
Historically, monetary tightening cycles always break something sooner or later, and perhaps we could be back on the way towards near-zero interest rates earlier than we think?