Thursday, November 1, 2018

Perth house prices down, units down 20% since 2014

Recent figures released by CoreLogic shows that the Australian property market is the worst that it has been in the last six years. Perth continued to slide with house values dropping 0.8% in October which is a 2.9% drop in the past year to date.

For units, the news is even worse. The drop is 1% in October contributing to a year to date drop of 5.2% and a whopping 20% since 2014! The real estate market has had many things going against them in the past few years, including the recent royal commission into banks leaving them wounded and less likely to lend large sums out. There is also the crackdown on overseas investment into real estate, and the Chinese government targeting funny money being siphoned out of China.

Sydney has seen a drop of 8.4% over the last year and Melbourne has dropped 6.3% in the same time following their stellar performances over the last 10 years. With interest rates going up in the US, there could also be more slowdown here as the risk of interest rates rising here increases, affecting investors' appetite for further investment.

Friday, August 10, 2018

Return of the first home buyer?

All around Australia, the real estate market is looking for the end of the correction but there is no end in sight. One piece of good news comes from the Constant Investor which showed that the first home buyers as a proportion of all housing loans has increased to a six year high.


There are two ways this could happen, one is that the proportion of investor loans taken has decreased, or the first home buyers has increased. We think it is more likely that investors are not taking up as many loans. Banks are under enormous pressure to improve their lending practices which means lending out more carefully. Also with a bear market, investors are also hesitant to buy but first home buyers often have no choice if they need a house. So what do you think?

Wednesday, July 4, 2018

Different month - same result. RBA holds interest rates at 1.5%

At its meeting today, the Board decided to leave the cash rate unchanged at 1.50 per cent.
The global economic expansion is continuing. A number of advanced economies are growing at an above-trend rate and unemployment rates are low. The Chinese economy continues to grow solidly, with the authorities paying increased attention to the risks in the financial sector and the sustainability of growth. Globally, inflation remains low, although it has increased in some economies and further increases are expected given the tight labour markets. One uncertainty regarding the global outlook stems from the direction of international trade policy in the United States. There have also been strains in a few emerging market economies, largely for country-specific reasons.
Financial conditions remain expansionary, although they are gradually becoming less so in some countries. There has been a broad-based appreciation of the US dollar. In Australia, short-term wholesale interest rates have increased over recent months. This is partly due to developments in the United States, but there are other factors at work as well. It remains to be seen the extent to which these factors persist.
The recent data on the Australian economy continue to be consistent with the Bank's central forecast for GDP growth to average a bit above 3 per cent in 2018 and 2019. GDP grew strongly in the March quarter, with the economy expanding by 3.1 per cent over the year. Business conditions are positive and non-mining business investment is continuing to increase. Higher levels of public infrastructure investment are also supporting the economy. One continuing source of uncertainty is the outlook for household consumption. Household income has been growing slowly and debt levels are high.
Higher commodity prices have provided a boost to national income recently. Australia's terms of trade are, however, expected to decline over the next few years, but remain at a relatively high level. The Australian dollar has depreciated a little, but remains within the range that it has been in over the past two years.
The outlook for the labour market remains positive. Strong growth in employment has been accompanied by a significant rise in labour force participation. The vacancy rate is high and other forward-looking indicators continue to point to solid growth in employment. A gradual decline in the unemployment rate is expected, after being steady at around 5½ per cent for much of the past year. Wages growth remains low. This is likely to continue for a while yet, although the stronger economy should see some lift in wages growth over time. Consistent with this, the rate of wages growth appears to have troughed and there are increasing reports of skills shortages in some areas.
Inflation is low and is likely to remain so for some time, reflecting low growth in labour costs and strong competition in retailing. A gradual pick-up in inflation is, however, expected as the economy strengthens. The central forecast is for CPI inflation to be a bit above 2 per cent in 2018.
Nationwide measures of housing prices are little changed over the past six months. Conditions in the Sydney and Melbourne housing markets have eased, with prices declining in both markets. Housing credit growth has declined, with investor demand having slowed noticeably. Lending standards are tighter than they were a few years ago, with APRA's supervisory measures helping to contain the build-up of risk in household balance sheets. Some further tightening of lending standards by banks is possible, although the average mortgage interest rate on outstanding loans has been declining for some time.
The low level of interest rates is continuing to support the Australian economy. Further progress in reducing unemployment and having inflation return to target is expected, although this progress is likely to be gradual. Taking account of the available information, the Board judged that holding the stance of monetary policy unchanged at this meeting would be consistent with sustainable growth in the economy and achieving the inflation target over time.

Tuesday, June 19, 2018

Two more years of falling house prices in Perth - ANZ

The Perth property market doesn't look like it will turn around this year according to the ANZ who has predicted that the house prices will fall in 2018 as well as 2019. Perth is on a six year slide in property prices and in spite of a mining resurgence, it doesn't seem like there is sufficient hope for that to stop. ANZ also predicts that Adelaide and Canberra will improve in 2018 but Sydney and Melbourne will also fall.

Tuesday, May 1, 2018

28 year low for Perth house sales

2017 for the Perth real estate market was a very quiet year. Only 26,223 homes or units changed hands which is lower than the record set in 1990 when only 27,601 transactions were recorded in Perth. The median house price is now $515,000 and the average price of units has dropped from the 2014 figure of $450,000 to $410,000.

Longest period between change of Interest Rates

The RBA has today broken the record for the longest period that the interest rates have remained unchanged, deciding to keep the cash rate at 1.5%. Here is their statement about the decision below.

At its meeting today, the Board decided to leave the cash rate unchanged at 1.50 per cent.
The global economy has strengthened over the past year. A number of advanced economies are growing at an above-trend rate and unemployment rates are low. The Chinese economy continues to grow solidly, with the authorities paying increased attention to the risks in the financial sector and the sustainability of growth. Globally, inflation remains low, although it has increased in some economies and further increases are expected given the tight labour markets. As conditions have improved in the global economy, a number of central banks have withdrawn some monetary stimulus and further steps in this direction are expected.
Long-term bond yields have risen over the past six months, but are still low. Equity market volatility has increased from the very low levels of last year, partly because of concerns about the direction of international trade policy in the United States. Credit spreads have also widened a little, but remain low. Financial conditions generally remain expansionary. Conditions in US dollar short-term money markets have, however, tightened over the past few months, with US dollar short-term interest rates having increased for reasons other than the increase in the federal funds rate. This has flowed through to higher short-term interest rates in a few other countries, including Australia.
The price of oil has increased recently, as have the prices of some base metals. Australia's terms of trade are expected to decline over the next few years, but remain at a relatively high level.
The Bank's central forecast for the Australian economy remains for growth to pick up, to average a bit above 3 per cent in 2018 and 2019. This should see some reduction in spare capacity in the economy. Business conditions are positive and non-mining business investment is increasing. Higher levels of public infrastructure investment are also supporting the economy. Stronger growth in exports is expected. One continuing source of uncertainty is the outlook for household consumption, although consumption growth picked up in late 2017. Household income has been growing slowly and debt levels are high.
Employment has grown strongly over the past year, although growth has slowed over recent months. The strong growth in employment has been accompanied by a significant rise in labour force participation, particularly by women and older Australians. The unemployment rate has declined over the past year, but has been steady at around 5½ per cent for some months. The various forward-looking indicators continue to point to solid growth in employment in the period ahead, with a further gradual reduction in the unemployment rate expected. Notwithstanding the improving labour market, wages growth remains low. This is likely to continue for a while yet, although the stronger economy should see some lift in wages growth over time. Consistent with this, the rate of wages growth appears to have troughed and there are reports that some employers are finding it more difficult to hire workers with the necessary skills.
Inflation remains low. The recent inflation data were in line with the Bank's expectations, with both CPI and underlying inflation running marginally below 2 per cent. Inflation is likely to remain low for some time, reflecting low growth in labour costs and strong competition in retailing. A gradual pick-up in inflation is, however, expected as the economy strengthens. The central forecast is for CPI inflation to be a bit above 2 per cent in 2018.
The Australian dollar has depreciated a little recently, but on a trade-weighted basis remains within the range that it has been in over the past two years. An appreciating exchange rate would be expected to result in a slower pick-up in economic activity and inflation than currently forecast.
The housing markets in Sydney and Melbourne have slowed. Nationwide measures of housing prices are little changed over the past six months, with prices having recorded falls in some areas. In the eastern capital cities, a considerable additional supply of apartments is scheduled to come on stream over the next couple of years. APRA's supervisory measures and tighter credit standards have been helpful in containing the build-up of risk in household balance sheets, although the level of household debt remains high.
The low level of interest rates is continuing to support the Australian economy. Further progress in reducing unemployment and having inflation return to target is expected, although this progress is likely to be gradual. Taking account of the available information, the Board judged that holding the stance of monetary policy unchanged at this meeting would be consistent with sustainable growth in the economy and achieving the inflation target over time.

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