Two lots of Chinese data and the latest Australian Bureau of Statistics housing finance numbers continue to build the central Reserve Bank forecast that the Australian economy has bottomed and should slowly but steadily pick up from here. If just the event of the change of government adds a dash of investment confidence for business, the tide should start running stronger sooner.
Today's July housing finance figures roll on from a strong June quarter. The big bet made by the RBA and the federal and state treasuries is coming off - cheap money will lift real estate activity in general and dwelling construction in particular.
Loans for the purchase of new dwellings have risen for 17 consecutive months. Loans for the purchase of new dwellings in July were up by a whopping 37 per cent on July last by number (3,093) and 33 per cent by value ($1,023 million).
Finance commitments for existing housing are an order of magnitude greater by number (43,271) and value ($12,868 million) but their strong growth rate of 13 per cent still lags behind the new stuff that carries the larger payoff in economic activity. Chris Bowen's mini-budget figures embraced by Joe Hockey last week are based on the forecast of a five per cent increase in dwelling investment this financial year. The Master Builders Association believes that forecast is conservative. The momentum picking up in the statistics is with the MBA.
The theory is that a lift in dwelling investment (new housing and renovations) provides a lift in relevant domestic manufacturing activity, as well as jobs for tradies, real estate developers and agents. People moving into a new home are more likely to buy new appliances and furniture to go with it. Some retailers (but not department stores) get a feed and the money goes round.
Meanwhile China's August inflation count came in at an annual rate of 2.6 per cent, leaving plenty of room for monetary easing should Beijing need it to stick to the 7.5 per cent economic growth target – but it looks like that won't. Sunday's trade statistics surprised on the upside with a 7.2 per cent jump in exports, signalling renewed global demand for the stuff China makes. There also was a 7 per cent fall in imports that might be seen as less helpful everywhere except in Australia as our key exports were up. Port Hedland exported 33 per cent more iron ore to China last month than it shipped a year ago.
Tomorrow will see Chinese industrial production and retail sales numbers, both of which should be up. The recent fears about a Chinese hard landing continue to recede and the country's continuing urbanisation and industrialisation continue to provide a cushion of commodities demand while our own economy transitions from the construction phase of the resources boom. Meanwhile Chinese tourism this year has been running at a growth rate of about 20 per cent above last year – all without a Barangaroo casino. China already is our second-biggest source of tourists behind the cousins across the ditch with daylight third.
Barring a further external shock, the economic outlook is one of improving growth. Business confidence has received the political shot it was looking for. Next it will seek increased consumer demand to justify investment. On cue, improving house and share prices have a capacity to create a self-reinforcing cycle of investor and consumer confidence – we begin to feel richer.
Capital city property markets continue to rebound and median prices in most centres increased over the June quarter, according to the latest Bendigo Bank/Real Estate Institute of Australia (REIA) Real Estate Market Facts report.
While the housing sector recovery is well and truly under way, REIA president Peter Bushby says the uplift isn’t across the board.
The combined median price across eight capitals grew by 3.3 per cent for houses and 2.6 per cent for units and other dwellings in the three months to June.
“The weighted average capital city median house price is now $549,898 with Sydney, Melbourne, Brisbane, Adelaide and Darwin all contributing to the increase,” Bushby says.
“However Perth and Canberra both dipped and Hobart recorded the biggest drop.”
Those few dips aside, the result shows that markets are continuing their recovery phase after most bottomed out around the middle of last year.
Compared to this time in 2012, the median house price for capital cities is up 6.1 per cent and, with the exception of Hobart, went up in all capitals.
Melbourne had the biggest jump over the past year, up by an impressive 8.4 per cent, Bushby says.
“There was mixed news for investors too over the June quarter, with median house rents for three-bedroom houses decreasing in most capital cities. Darwin had the only rise and there was no change in Perth or Hobart. However, compared to the June quarter of last year, Darwin and Perth had large increases in median rents for other dwellings, up by 18.6 per cent and 12.2 per cent respectively.”
In keeping with the media’s habit of asking dumb questions and coming up with dumber answers, the (mis)information channels are alive with speculation about what the election result means for real estate.
The short answer is that the election will have no direct impact on property markets. Indirectly, the election of a new government will tend to be positive, because an emphatic change of government usually boosts public sentiment.
The reality is, though, that real estate markets were already rising before the weekend poll and the election outcome won’t change that.
This week’s new data on housing finance helps to illustrate the point. The figures from the Australian Bureau of Statistics show that lending for residential real estate purchases rose, again, in July. No surprises there – housing finance has been climbing month by month since late last year.
The value and the number of loan commitments to buy dwellings have been steadily rising since the last trough in December 2012. The number of loans for owner-occupier housing has increased from around 44,000 last December to above 52,000 in July.
The figures show that investors now comprise about 36% of the buying market. That’s noteworthy for two reasons: one, a symptom of rising markets is greater activity from investors, who usually make up about 30% of buyers; and two, despite their rising prominence, investors continue to be a minority in the market.
The major forces in residential real estate include first-time buyers (currently around 14% of the market) and investors (about 36%). The most important component is the third force, which comprises the remaining 50%. These are the next-time buyers – i.e. home buyers other than first-home buyers.
They’re the people who drive real estate markets and cause prices to rise over time. So those who stridently claim that grants to first-home buyers cause prices to rise or that negative gearing tax benefits are to blame because they help investors, are well wide of the mark.
Markets are recovering and price growth is back because next-time buyers are active again and investors, who collectively are followers not leaders, are getting busy as well.
Consumers have been encouraged by improving affordability, thanks to higher incomes, lower interest rates and the two years of price decline that preceded the recent recovery. Housing affordability is at its best in 10 years, according to latest Housing Affordability Report from AdelaideBank and the Real Estate Institute of Australia. It says that the last time affordability was this good was in the June quarter of 2003.
All of this was happening before the federal election and occurred despite the widely-held view that an election causes stagnation. People who run bad businesses or struggle to make investment decisions have used the election as a scapegoat. They’re deluding themselves.
We’re in a growth market and have been since late last year. The election result changes little.
Now that the distraction is out of the way, let’s just get on with it. We have a growing economy, low unemployment and attractive interest rates.
Australian Property Forum is an economics and finance forum dedicated to discussion of Australian and global real estate markets and macroeconomics, including house prices, housing affordability, and the likelihood of a property crash. Is there an Australian housing bubble? Will house prices crash, boom or stagnate? Is the Australian property market a pyramid scheme or Ponzi scheme? Can house prices really rise forever? These are the questions we address on Australian Property Forum, the premier real estate site for property bears, bulls, investors, and speculators. Members may also discuss matters related to finance, modern monetary theory (MMT), debt deflation, cryptocurrencies like Bitcoin Ethereum and Ripple, property investing, landlords, tenants, debt consolidation, reverse home equity loans, the housing shortage, negative gearing, capital gains tax, land tax and macro prudential regulation.
Forum Rules:
The main forum may be used to discuss property, politics, economics and finance, precious metals, crypto currency, debt management, generational divides, climate change, sustainability, alternative energy, environmental topics, human rights or social justice issues, and other topics on a case by case basis. Topics unsuitable for the main forum may be discussed in the lounge. You agree you won't use this forum to post material that is illegal, private, defamatory, pornographic, excessively abusive or profane, threatening, or invasive of another forum member's privacy. Don't post NSFW content. Racist or ethnic slurs and homophobic comments aren't tolerated. Accusing forum members of serious crimes is not permitted. Accusations, attacks, abuse or threats, litigious or otherwise, directed against the forum or forum administrators aren't tolerated and will result in immediate suspension of your account for a number of days depending on the severity of the attack. No spamming or advertising in the main forum. Spamming includes repeating the same message over and over again within a short period of time. Don't post ALL CAPS thread titles. The Advertising and Promotion Subforum may be used to promote your Australian property related business or service. Active members of the forum who contribute regularly to main forum discussions may also include a link to their product or service in their signature block. Members are limited to one actively posting account each. A secondary account may be used solely for the purpose of maintaining a blog as long as that account no longer posts in threads. Any member who believes another member has violated these rules may report the offending post using the report button.
Australian Property Forum complies with ASIC Regulatory Guide 162 regarding Internet Discussion Sites. Australian Property Forum is not a provider of financial advice. Australian Property Forum does not in any way endorse the views and opinions of its members, nor does it vouch for for the accuracy or authenticity of their posts. It is not permitted for any Australian Property Forum member to post in the role of a licensed financial advisor or to post as the representative of a financial advisor. It is not permitted for Australian Property Forum members to ask for or offer specific buy, sell or hold recommendations on particular stocks, as a response to a request of this nature may be considered the provision of financial advice.
Views expressed on this forum are not representative of the forum owners. The forum owners are not liable or responsible for comments posted. Information posted does not constitute financial or legal advice. The forum owners accept no liability for information posted, nor for consequences of actions taken on the basis of that information. By visiting or using this forum, members and guests agree to be bound by the Zetaboards Terms of Use.
This site may contain copyright material (i.e. attributed snippets from online news reports), the use of which has not always been specifically authorized by the copyright owner. Such content is posted to advance understanding of environmental, political, human rights, economic, democratic, scientific, and social justice issues. This constitutes 'fair use' of such copyright material as provided for in section 107 of US Copyright Law. In accordance with Title 17 U.S.C. Section 107, the material on this site is distributed for research and educational purposes only. If you wish to use this material for purposes that go beyond 'fair use', you must obtain permission from the copyright owner. Such material is credited to the true owner or licensee. We will remove from the forum any such material upon the request of the owners of the copyright of said material, as we claim no credit for such material.
Privacy Policy: Australian Property Forum uses third party advertising companies to serve ads when you visit our site. These third party advertising companies may collect and use information about your visits to Australian Property Forum as well as other web sites in order to provide advertisements about goods and services of interest to you. If you would like more information about this practice and to know your choices about not having this information used by these companies, click here: Google Advertising Privacy FAQ
Australian Property Forum is hosted by Zetaboards. Please refer also to the Zetaboards Privacy Policy
