The latest labour data unpacked + What’s really behind rising house prices? | Property Insiders [VIDEO]

Why are house prices rising at a time when unemployment is still high and wages are not growing? Property 2

Just to make things clear…

This is not the same question as: “Why have house prices been so resilient during the coronavirus induced recession?”

House prices are never as volatile as share prices on the stock market but this time around government intervention to support jobs and the economy and the provision of mortgage deferrals from the banks for homeowners and investors meant that very few property owners fell into mortgage stress and Australia has had minimal if any distressed sales.

But the question I would like to address today is a different one – why are house prices still increasing in some locations?

That’s what I’m going to ask Dr. Andrew Wilson, Chief Economist of My Housing Market and of course, I’m looking forward to seeing his data which will show us what’s been happening in the property markets over the last week.

Last week we spoke about how many of the housing bears changed the forecasts – now another major bank, the NAB has done an about-face.

They now join Westpac, CBA, Capital Economics, UBS, ANZ and HSBC who over the last few weeks have sheepishly been forced to do a long overdue 180-degree turn, conceding that our property markets have remained resilient and they all now expect property prices to rise in 2021 and 2022.

The NAB that they have changed their view on property prices for the next year and expect rises of around 5% over 2021 and 6% over 2022.

The economics communities have not exactly covered themselves in glory when it comes to predicting the future of Australia’s biggest asset class.

Nab Forcast

Why are property prices still rising?

Swelling disposable incomes at a time of falling interest rates and therefore lower property holding costs have left borrowers better off than they would have been a year ago.

Just like the health consequences of coronavirus has not affected us all equally with some groups in the community being more vulnerable than others, similarly, the Covid 19 economic impact and the resultant recession has not affected us all equally.

Regional Prices

Unfortunately, unemployment has risen, but the job losses have disproportionately being born by lower income earners, casual workers and those who have lost their second job.

Many of these people are not typically homeowners – they are more likely to be tenants.

This meant our rental markets have suffered this year, with vacancies particularly high in the inner-city apartment markets.

On the other hand, around 90% of Australians still have a job and many of them are better off financially with more disposable income than they’ve had for a long time, even if their wages haven’t gone up.

And in the last month or so most workers will have seen their pay packet go up because of newly introduced tax cuts

According to the latest credit and charge card data released by the Reserve Bank Australians have wiped a staggering $7.31 billion off personal credit card debt this year.

And at the same time, Australians are drowning in cash, having stashed more of their cash in the banks.

Australian Household Cash

Household deposits with financial institutions it up almost 12% over the year as Aussies have rapidly amassed close to $100billion in total savings as a buffer against the COVID-19 recession.

In September alone $16.5billion flowed into bank deposit accounts and since the pandemic household deposits are up a cumulative $99.5bn (or 10.1% on Feb 2020 levels).

Australia’s labour market improves more quickly than expected?

The labour market has improved sharply over recent months with employment outside of Victoria almost back to pre-pandemic levels.

Excluding Victoria, employment is now just 0.9% below from pre-COVID March levels (or 82k lower), while the participation rate is now above pre-pandemic levels and is the equal highest since August 2019 at 66.1%.

Hours worked, admittedly, are still recording slightly weaker outcomes.

The labour market improvement has occurred even as government support is being tapered with JobSeeker (unemployment) numbers falling 8.0% since May (or 117k people) with the steepest declines being seen in WA (-15.2%), QLD (-12.7%), NSW (‑11.8%) and the ACT.

The only state to have seen an increase in JobSeeker numbers since May is Victoria (+4.3%) which was driven by Victoria’s second lockdown.

Labour MarketLabour Market 2

This week’s economic data provided by Dr. Andrew Wilson Andrew Wilson

Watch our video as Dr. Andrew Wilson gives his commentary on the following data:

Recovering Sharemarket – Our strong share market signals improved investor sentiment which should only get better as our economy recovers.

Sharemarket

The Australian Dollar – has been climbing recently, which is the opposite effect of what the Reserve Bank was hoping when it lowered interest rates, but this is likely a reflection of the low US dollar

Economy Prospect

Latest employment figures –  while unemployment rose marginally to 7% in October, this is a much better figure than most commentators expected.

In this week’s video as Dr. Andrew Wilson unpacks the employment figures and explains the rising participation rate (more Australians looking for a job or working) is great news.

Jobless

600,000 jobs have been created in the workforce over the last five months and close to 600,000 people have returned to the workforce

Labour Market

Labour Market 2

The latest property data provided by Dr. Andrew Wilson of My Housing Market

Watch our video as Dr. Andrew Wilson gives his commentary on the following data: Andrew Wilson

Sydney

Auction clearance rates remained firm in Sydney last weekend.

At these levels, when close to 80% of properties put to auction sell under the hammer, price growth tends to follow.

There are now firm signs that we’ve passed the bottom of the Sydney property market.

Sydney Weekend

And Sydney property sales remain strong, almost back to pre Covid levels reflecting pent up demand.

Real Time Sydney

Melbourne

With life in Melbourne getting back to normal, more properties are being listed for sale and auctions have returned to Melbourne, even though in low but increasing numbers, and buyers are active in the market.

Melbourne Weekend

With more Melbourne properties being listed for sale by auction, it’s likely that one of Melbourne’s favourite weekend pastimes, on-site auctions, will return with a vengeance.

Melbourne Weekend2

Melbourne property sales have continued to be strong, reflecting pent up demand.

This situation is likely to continue as Melburnians get back to a more normal life and their confidence increases

Real Time Melbourne

Brisbane

The Brisbane property market is performing very strongly with the number of sales being higher than pre the Coronavirus pandemic.

Real Time Brisbane

Newly listed homes for sale:

With consumer confidence picking up, vendors are more comfortable and many more homes have come on the market for sale over the last week, particularly in Victoria.

But now with Christmas coming on, fewer properties are being put on the market as some vendors wait till after the break to sell their properties

Watch our video as Dr. Andrew Wilson gives his commentary on the latest statistics.

Real Time Sales Data

Now is the time to take action and set yourself for the opportunities that will present themselves as the market moves on

Metropole Team

If you’re confused about the mixed messages in the media you are not alone.

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Michael is a director of Metropole Property Strategists who help their clients grow, protect and pass on their wealth through independent, unbiased property advice and advocacy. He's once again been voted Australia's leading property investment adviser and one of Australia's 50 most influential Thought Leaders. His opinions are regularly featured in the media. Visit Metropole.com.au


'The latest labour data unpacked + What’s really behind rising house prices? | Property Insiders [VIDEO]' have 8 comments

    Avatar

    October 16, 2020 Joseph Battaglia

    Michael your optimistic views irrespective of the true underlying data is disconcerting.
    The government is covering up the reality of the situation, throwing money against the wall at all costs (hoping some will stick) and falsely propping up the economy whilst kicking the can down the road. The rhetoric from parties with bias/interest in the real estate market are also contributing to the propaganda that “things are ok and sentiment is up” – whilst reality is different.
    We are not leaders on the world stage, for our real property obsession, in fact we are almost ridiculed that we are a nation that increases their wealth through selling properties to each other increasing the price at each transaction.

    Its fiscally clear, we should allow the reset button to deflate this overvalued bubble and get back to reality. I mean seriously, some of these prices are ridiculous!

    Are we going the way of Japan?
    This QE is just irresponsible on all counts.
    Over $1T in debt for such a small economy… come on, who are we kidding.

    Reply

      Michael Yardney

      October 16, 2020 Michael Yardney

      You are right Joseph, many of our industries are on life support from the government at the moment. And while the property market was being supported by loan deferrals, they seem to be cleaning themselves up nicely. What is the alternative? Do you really want to see businesses go broke and people go hungry? Our government and those around the world have learned how to handle economic downturns. And spending our way out of a downturn is a valid economic argument

      Reply

    Avatar

    October 2, 2020 Dave

    Dear Michael. Your articles are interesting
    and usually very well written . However this one is full of a lot of spelling and sentence construction mistakes that in parts make it hard
    to follow . Take a look at where it says sh-t (Let me know if you need a proof reader ) 😉

    Reply

      Michael Yardney

      October 2, 2020 Michael Yardney

      Thanks for the heads up Dave – you are right lots of errors in this one. As I can talk faster than I can type I usually use voice to text, and it is pretty accurate. But clearly I missed a couple of bad bloopers this time.

      Reply

    Avatar

    July 24, 2020 Martin

    The RBA will print money. And has printed plenty of it already to fight covid-19. It just doesn’t give the money directly to the government. It prints new money and uses it to buy government bonds on the secondary market so that institutions can take a cut as they buy the newly issued bonds from the government So that the government can pay for jobkeeper and Then these institutions onsell them to the RBA for a markup.

    Reply

      Michael Yardney

      July 25, 2020 Michael Yardney

      There has been a lot of discussion recently about Modern Monetary Theory, which suggests central banks should print more money and then give (lend) it to the government, to help pay for it debts.
      This week RBA governor Philip Lowe said that he won’t do that (print extra money) instead the banks should borrow on the open market at the prevailing low interest rates because they can afford it.
      Rather than print more money he gave the Morrison government the green light to increase debt levels and lock in a larger budget deficit to support the economy during its recovery from the virus crisis

      Reply

    Avatar

    June 26, 2020 Alex P.

    While Dr Wilson may say that more sellers entering the market is an expression of confidence, the flip side is that it may be the smart money taking the opportunity to exit while prices are still holding up. If you drill down in the data is there a way to differentiate whether these are investment properties or owner occupied properties being sold and how does that relate to historical data. Second point is that government intervention has done a good job of addressing short term liquidity over the crisis but there have been no measures on a similar scale to address solvency, and solvency is what really matters after the liquidity tap has been turned off.

    Reply

      Michael Yardney

      June 26, 2020 Michael Yardney

      Alex, you are right on both counts.

      Our experience on the ground speaking to buyers, sellers and estate agents, is that there are very few distressed properties coming on the market at present.

      Similarly we do not believe the government is going to pull the rug out from under us in September after he’s gone to such an effort to support the economy and our markets

      Reply


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