We’re a third of the way through the year now and Australian house prices continued to surge strongly in April, albeit at a slower rate than the blistering pace seen in March.
And while auction clearance rates have dropped a little, they’re still at boomtime levels.
But what’s happening to our rental market? We know they’ve been lagging behind house price growth.
To answer that question we will look at Dr. Andrew Wilson’s latest National Home Rental Market report in today’s Property Insiders chat.
Dr. Wilson will also give you his forecasts for our housing markets for the balance of the year as well as what’s likely to happen to inflation and interest rates.
On the economic front, every level of government and the Reserve Bank have been doing all that they can to support our economy.
With our Federal budget coming out next week there’s lots of speculation about what’s ahead, but no one is really expecting any major announcements that will affect our property markets.
However, the latest finance figures suggest our Budget deficit will be $30Billion smaller than expected, so that should make it easier for Treasurer Josh Frydenberg who has confirmed that he will retain the focus on supporting our economy, getting more people into jobs, and promoting higher wages and will only address our high debt levels later.
This makes sense considering that government borrowing costs and interest repayments are so cheap at present.
Watch this week’s Property Insiders chat as I speak with Dr. Andrew Wilson, chief economist of My Housing Market.
Auction clearance rates
Once again the media, probably looking for something to say, likes to remind us that auction clearance rates are lower than they were at the beginning of the year.
But any other time these types of auction clearance rates would be considered boomtime results.
Dr. Andrew Wilson reported a MayDay auction clearance rate of 84.6% in Sydney last weekend.
Although Saturday’s result was the second consecutive weekend of marginally lower clearance rates for Sydney, it was achieved despite a 39% increase in the number of homes offered for sale.
Dr. Andrew Wilson also reported a month-high weekend clearance rate of 80.1%, a little higher than last weekend (79%) despite 1084 homes being listed for auction on Saturday.
The clearance rate for houses was 79.7%, with units higher at 81.7%
Watch this week’s video is Dr. Wilson unpacks the auction results and explains how we’ve moved from a white-hot property market to a red-hot property market, and he gives his thoughts on what will happen to prices in our major housing markets this year.
He expects there could even be a further 10% growth in Sydney and Melbourne.
Melbourne and Sydney Unit Vacancies Now Falling as Rental Markets Tighten
Home rental markets have continued to tighten over April with clear trends now emerging of a sustained reduction in the record-high vacancies of Sydney and Melbourne inner-suburban and CBD apartments reported over the past year.
Unit rental vacancy rates however continue to track higher than the rates for houses reflecting recent rising demand from tenants for larger, outer-suburban homes.
Tight and falling house vacancy rates were reported in all capitals over April with the exception of Melbourne that recorded the highest result and a rising trend – likely impacted by an ongoing exodus of interstate coronavirus migrants.
Most capitals are now recording vacancy rates at or below 1.0% for houses reflecting emerging chronic housing shortages.
Although vacancy rates for units remain higher than houses generally, the trend continues to decline in all capitals with the exception of Darwin – that nonetheless again reported the lowest capital city rate.
Although unit rents in Melbourne and Sydney have fallen sharply over the past year, vacancy rates have declined markedly over the past month.
This reduction is likely impacted by sharply increased demand for inner-city holiday and business accommodation as interstate border restrictions have eased and short-term rentals have transferred out of the permanent market that it flooded over the past year.
Shortages in rental accommodation have translated into sharp increases in rents over the past year for both houses and units in all capitals with the exception of Melbourne and Sydney.
Canberra remains clearly the most expensive capital for house and unit rents with Brisbane, Adelaide, and Perth all recording strong annual rental increases for both houses and units.
Already undersupplied rental markets are likely to continue to tighten with upward pressure on rents continuing as first home buyer activity is set to ease from current strong levels adding to demand tenancies.
Ongoing chronically low levels of investors will also continue to constrain rental markets on the supply-side exacerbated by the underbuilding of recent years.
The Budget deficit could be $30 Billion smaller than forecast
With the Budget coming up next week Australasia’s labour market’s strong rebound means the federal government now expects the final cost of the JobKeeper scheme to be about $88.8bn.
The October 2020 Budget had forecast that the wage subsidy would cost $101.3bn in total.
Government figures show that more than 90,000 people have come off welfare benefits since JobKeeper ended in late March.
Treasurer Josh Frydenberg says that ending the scheme was the right decision for the economy, the labour market, and the Budget.
Inflation weaker than many expected
What this week’s video as Dr. Andrew Wilson explains how inflation was weak this quarter and the implications this will have for the RBA and interest rates.
You’ll hear Dr. Wilson explain that he believes inflation will rise gently moving forward but interest-rate won’t increase in the foreseeable future.
Personal credit growth was extremely low over the year to March 2021, as consumers took advantage of stimulus payments and record low interest rates to clear debts.
Credit growth across the economy slumped to an extremely low level at just 1 per cent year-on-year.
Annual credit growth has only been lower than that once since the early 1990s recession, during the financial crisis in November 2009.
But it seems that now Aussie consumers and businesses are once again interested in taking on some debt.
Private sector credit (effectively and standing loans) rose by 0.4% in March, the biggest increase in 13 months but credit was up only 1% year on year over the year – the weakest annual growth rate in 11 years.
Housing led the gains, up a 0.5% and even non-housing personal credit record of the biggest increase in six years, up 0.2%.
Business credit rose 0.3% in the month but was still down to 0.6% during the year.
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