Weekend reads – Must read articles from the last week

There are more interesting articles, commentaries and analyst reports on the Web every week than anyone could read in a month.

Each Saturday morning I like to share some of the ones I’ve read during the week.

The weekend will be over before you know it, so enjoy some weekend reading.

National property index smashes 16-year record with fifth monthly increase

Things continue to look up for Australia’s property market.

This article from news.com.au looks at the latest property index results.

The property downturn is history with new figures showing the dramatic and record-breaking rise in property prices across the country.

The national property index has tipped into positive territory in the final month of the year after recording its fifth consecutive monthly increase and its largest monthly jump in more than 16 years.

Values in Sydney and Melbourne continue to lead the surge, where prices rose in November by 2.7 and 2.2 per cent respectively, shaking off the downturn that weighed on property prices up until the May federal election.

Hobart jumped 2.3 per cent, followed by Canberra’s 1.6 per cent lift, while Brisbane, Adelaide and Perth gained between 0.8 and 0.4 per cent over the month.

Darwin was the only capital to lose ground, slipping 1.2 per cent.

The national index’s rise of 1.7 per cent over the month was enough to lift its annual figures to a gain of 0.1 per cent, with Corelogic head of research Tim Lawless attributing the turnaround to several positive market factors.

“The synergy of a 75 basis points rate cut from the Reserve Bank, a loosening in loan serviceability policy from APRA, and the removal of uncertainty around taxation reform following the federal election outcome are central to this recovery,” he said.

“Additionally, we’re seeing advertised stock levels persistently low, creating a sense of urgency in the market as buyer demand picks up.

“There’s also the prospect that interest rates are likely to fall further over the coming months and an improvement in housing affordability following the recent downturn are other factors supporting a lift in values.”

The rise in values was extending across the country but the surge was concentrated to premium markets, Mr Lawless said.

Sydney and Melbourne’s top quartiles were up 7.4 and 8.1 per cent respectively over the three months, about twice that of each city’s lower quartiles.

“The stronger performance across the higher value end of the market can likely be attributed to a combination of values falling more in this sector during the downturn as well as recent adjustments to serviceability rules which have boosted borrowing capacity,” Mr Lawless said.

The recovery is expected to spread from the higher end of town, however.

“As housing values become less affordable in these high-end markets, demand is likely to ripple outwards to the more affordable areas,” Mr Lawless said.

Realestate.com.au chief economist Nerida Conisbee said the rise in premium suburbs was typical of an early cycle.

“We generally see people flocking to the best suburbs first,” she told news.com.au.

“We’ve seen it show up in search for quite some time.

When we look at suburbs people have been looking at, they have tended to be very expensive suburbs, which is quite different to when the market was really strong.”

Annualising the recent Corelogic figures would suggest the national index is in line for a yearly jump of more than 15 per cent, while Sydney and Melbourne are tracking towards mid-20 per cent surges.

But Mr Lawless said he doubted the high pace of gains could be sustained.

“Considering wages and household income growth remains low, economic conditions are losing momentum, and housing affordability is once again worsening (from an already high base in the largest cities), there are likely to be some headwinds in maintaining such a fast recovery,” he said.

“Additionally, the market is yet to be tested on higher supply levels.

“Advertised listing numbers have remained seasonally low throughout spring due to low new listing numbers and an increased rate of absorption as buyer demand lifts.

“With selling conditions looking very strong, there is a high probability that listing numbers will show a material lift through the first quarter of 2020, which will test the depth of the market and likely ease some of the urgency that is contributing to higher prices.”

BIS Oxford Economics executive chairman Robert Mellor said Australians should be cautious when analysing the strong recent data from the leading property research firm.

“We would stress that all the indicators highlight that sales volumes are still down significantly on the levels of a year ago and we expect quarterly price growth to slow significantly over the second half of this financial year to June 2020 as listings increase,” he said.

“However, by June 2020 median detached house prices in Sydney are expected to be up nearly 14 per cent on June quarter 2019 and be only less than 4 per cent below the peak level achieved in June quarter 2017.

“While in Melbourne detached median house prices are expected to be up 12 per cent over the year to June 2020 and be only 2 per cent of the March quarter 2018 peak.”

Read the full article here

Stock listings still tight

The recently released stock listing show some improvement.

This Blog by Pete Wargen explains at the statistics.

There was a fair seasonal lift in property stock listings in November.

But it wasn’t enough to offset more demand over the second half of the year, according to SQM Research’s latest figures.

Sydney listings increased to 32,101, but the total was still well down from 39,772 a year earlier as demand outstrips supply.

Melbourne has just over 40,000 listings, but a year earlier had 43,727.

Year-on-year listings were -6.3 lower nationally, driven mainly by the significant -19.3 per cent decline in Sydney.

Read the full article here

The Reserve Bank of Australia has kept the interest rate steady at 0.75%, but economists still expect another cut in 2020

This week saw the Reserve Bank keep interest rates on hold.

An article from Business Insider reports what economists believe is in-store for 2020.

The Reserve Bank of Australia (RBA) has decided to keep the interest rate steady at its November meeting.

The cash rate will remain unchanged at 0.75%, a record low achieved with a cut in October.

That rate cut followed cuts in June and July.

Economists widely assumed the RBA would keep the rate steady at its November meeting, though the possibility of a further cut to 0.5% in 2020 has been discussed.

In a statement announcing the decision, RBA governor Philip Lowe was cautiously optimistic about the state of the Australian economy.

“After a soft patch in the second half of last year, the Australian economy appears to have reached a gentle turning point,” Lowe said.

“The central scenario is for growth to pick up gradually to around 3 per cent in 2021.

The low level of interest rates, recent tax cuts, ongoing spending on infrastructure, the upswing in housing prices and a brighter outlook for the resources sector should all support growth.

“The main domestic uncertainty continues to be the outlook for consumption, with the sustained period of only modest increases in household disposable income continuing to weigh on consumer spending.

Other sources of uncertainty include the effects of the drought and the evolution of the housing construction cycle.”

In November, Lowe addressed growing speculation the RBA would turn to unconventional policy such as negative interest rates and quantitative easing.

He pointed to a narrow set of circumstances in which Australia would enter a program of quantitative easing, and suggested negative interest rates – which have been seen in Europe and Asia – were “extremely unlikely”.

Nonetheless, there is still wide speculation interest rates could go lower.

“There is increasing speculation in the market that the RBA could lower the cash rate as low as 0.25% and adopt a quantitative easing program but Governor Lowe stressed recently that the threshold for undertaking QE in Australia is far off,” Mortgage Choice CEO Susan Mitchell said in a note provided to Business Insider Australia.

“While we cannot be certain of what policy makers have in store for the future, what we do know is that we can expect to see a sustained period of low interest rates for the foreseeable future.”

Read the full article here

How FIFOs are changing regional property markets

What is the fly-in, fly-out system changing regional markets?

In this article for Switzer, John McGrath explains how the system works, and what it mean for property markets.

For much of the noughties, Australian airports on Monday mornings were filled with blue collar workers in boots and high-vis vests.

After a weekend in their city homes, they were flying back to well-paying jobs at the mines.

Now, a new fly-in, fly-out (FIFO) worker is emerging that will have a significant impact on regional property markets – the white collar FIFO.

As discussed in our McGrath Report 2020, professional FIFO families are relocating from expensive capital cities to affordable regional and coastal lifestyle areas serviced by airports, where they are pushing up demand for property.

Come Monday, they are hopping on a plane to work in the city, staying in crash pads, boltholes and even hotels. Some Airbnb their city pads when they fly back home to defray costs.

The search for lower cost of living, housing affordability and a better lifestyle are major drivers for white collar FIFOs.

As East Coast capital city house prices have surged, particularly in Sydney and Melbourne, affordable regional areas have become more appealing.

Professional FIFOs can sell up in the city and buy a larger ‘forever’ home in a regional area with a small mortgage or even no debt at all.

Small townsfolk are more likely to own their homes outright (35% compared to 28% in major cities); and they also have lower loan repayments at a median $1,414 per month compared to $1,483 in medium sized towns and $1,943 in major cities, according to the Bureau of Statistics.

These savings offset the expense of flying and lodging in the city, although some professional FIFOs have their commuting costs covered by their employers.

This is more common in banking,  consultancy and IT industries.

Many big companies are allowing more of their employees to work remotely, at least part of the time, as a way of retaining and attracting the best talent.

Amongst Australia’s one million independent contractors, many can work flexibly using technology.

Professional FIFOs are also seeking lower stress and healthier lifestyles.

On weekends, they can be surrounded by rolling green hills and farmland, surfing little-known breaks or roaming through untouched rainforest in remote national parks.

Everything they need is within a 10 minute traffic-free drive – their children’s schools, playing fields for Saturday sports, shops and cafes.

Increasing air travel options are allowing these modern day commuters to extend the range of where they can live.

There are 155 airports in Australia and 2,000 smaller airfields.

About 75% of airports are in regional and remote areas, most with regular flights to Sydney, Melbourne and Brisbane.

To cope with growing demand from expanding residential populations, many regional airports are increasing flights and boosting infrastructure.

In Victoria, Bendigo Airport is undergoing a major redevelopment.

Since March 2019, the airport has had flights to Sydney six days per week.

Victoria’s busiest regional airport, Mildura Airport has a three-hour service to Sydney and one hour to Melbourne and Adelaide.

It has tripled passengers from 60,000 in FY94 to 214,000 in FY16; and this is expected to rise to 400,000 by 2032.

The median house price in Mildura increased 11.3% to $295,000 in the 12 months to June 30, 2019 – still well below Melbourne’s $730,000 median house price.

Albury Airport services North East Victoria and has flights to Sydney and Melbourne.

Albury-Wodonga’s population is forecast to grow by 35% to 124,472 by 2036.

North East Victoria includes the increasingly popular lifestyle towns of Beechworth, Bright and Mansfield, which have access to lakes, national parks and ski areas.

In NSW, popular white collar FIFO areas include Orange, Byron Bay and Port Macquarie.

Ballina Byron Gateway Airport, which offers a one-hour flight to Sydney, is now the third busiest airport in NSW after Sydney and Newcastle.

It recorded a 5.6% rise in annual passenger movements over CY18 to 538,200.

Port Macquarie, also a one-hour flight to Sydney, is the fifth largest regional airport in NSW with 230,000 passenger movements per year.

Council has completed a $21 million upgrade, providing the capability for 180-seat B737/A320 aircraft for the first time in the airport’s 60-year history.

Orange Regional Airport had the strongest growth amongst the top 50 regional airports in CY18, with passenger movements up 19.9%.

It has 25 return flights to Sydney per week.

The median house price has increased 5.8% to $415,000 in the 12 months to June 30, 2019 – less than half Sydney’s median.

Queensland is also a hot spot for white collar FIFO families.

Toowoomba’s Wellcamp Airport has more than 80 flights per week to destinations including Melbourne and Sydney.

The Gold Coast, which has attracted high interstate migration in recent years, has flights to every capital city and 6.6 million passengers per year, which is set to double by 2037.

On the Sunshine Coast, many executives and business owners are setting up home in Noosa and commuting directly by air to Sydney, Melbourne and Adelaide.

Sunshine Coast Airport is opening a new runway in 2020 to allow long haul flights within Australia and to Asia.

Passenger numbers are expected to soar from 1.2 million today to 3 million by 2040. This will help facilitate a surge in the local population from 350,000 to 500,000.

Read the full article here

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