How are our property markets coping with lockdown? | Property Insiders [VIDEO]

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In a time of lockdowns, thinking 40 hours ahead is sometimes a challenge.

Now try thinking 40 years ahead.

Well, that’s what the Federal Government has done when it recently released its fifth Intergenerational Report.

It has taken a 40-year view on where we’ll be in 2061 and forecasts that Australia will be older, smaller, and more in debt than previous Intergenerational reports suggested.

What does that mean for our economy and our property markets?

These are some of the questions I’m going to ask Dr. Andrew Wilson, chief economist of My Housing Market and Australia’s leading housing economist, in our Property Insiders chat today.

We’re also going to talk about how our property markets are coping with almost 12 million Australians in lockdown, the latest unemployment figures, and much more.

Watch this week’s video as we discuss what happened in our auction markets over the weekend and how the Australian property markets are coping with the lockdown.

Sydney Auction Market

The hot Sydney auction market is holding on despite the lockdown.

The Sydney weekend auction market continues its resilient performance in the face of an increasingly restrictive local Covid lockdown.

Although Sydney reported another this year to date low clearance rate on Saturday at 76.6%, it was nonetheless just below the 76.9% reported over the previous weekend and well ahead of the 64.6% recorded over the same weekend last year.

Underlying activity in the Sydney market clearly remains strong, with the lower clearance rates again impacted by another high number of lockdown-related withdrawals – 22% of reports at auctions.

Sydney Auction Trends

Melbourne Auction Market

Another good weekend for Melbourne auction sellers generally.

Melbourne’s auction clearance rate was steady at the weekend indicating more strong results for most sellers despite a surge in mid-winter listings.

Melbourne recorded a clearance rate of 76.7% which was just below the previous weekend 76.9%, but well ahead of the shutdown impact in 44.9% recorded over the same weekend last year.

A new July record of 977 homes was listed to go under the hammer on Saturday, which was ahead of last week’s previous record of 853 auctions and reflects the easing over recent weeks of the local Covid restrictions.

Melbourne Auction Trends

Latest Unemployment figures

Over the last week, the latest jobless figures came out and unemployment fell to below 5%, the lowest level in over a decade.

  • The unemployment rate fell from 5.12% to a decade low of 4.9% in June
  • There were more full-time jobs created (+51 600) and the number of part-time jobs fell available fell by -22,500
  • The number of people employed in Australia rose to a record high of 13.154 million
  • Victoria’s unemployment figure is down to 4.5% – what an amazing feat for the State hit hardest by lockdowns last year.

Unemployment

Eviction bans and support payments for Sydney renters and landlords

A 60-day moratorium on evictions has been announced by the New South Wales Treasurer for tenants if they have lost at least 25% of their income in the latest lockdown.

New South Wales workers will also be able to access Federal Government support of $375 a week if they’ve lost between 8 and 20 hours of work a week – this increases up to $600 a week if they’ve lost more than 20 hours of work.

In an effort to encourage landlords to offer impacted tenants rent relief the government will give grants of up to $1500 or land tax relief.

The Intergeneration Report

Watch as Dr. Andrew Wilson and I discuss the following elements of the 5th Intergenerational Report:

Population growth

The recently released report showed that Australia is going to be smaller, older, and more in debt than previously expected in 40 years’ time.

The previous Intergenerational Report in 2015 projected an Australian population of almost 40 million by 2054-55.

The 2021 update projects 38.8 million by 2060-61, and this means Australia’s population is projected to grow faster than most other developed countries.

Population Level

Despite the reduction of the projected population, these trends are truly monumental.

If you think about it’s taken Australia well over 200 years since European settlement to reach a population of 25.5 million people.

But in the next 40 years, our population will increase by around 13.3 million people, in other words, it will increase by over 50%.

Currently, there are 2.5 people in each household, but the IGR forecasts the average number of people in each household will shrink a little moving forward.

This will have a massive impact on how much cities look. Property Price

It will be a lot for our city planners to deal with and means that our way of living is going to change considerably as town planners struggle to cope with this growth.

Of course, this will impact property investment choices, but strategic knowledgeable investors will be well-placed to capitalise on the changing trends.

To deal with this population growth, by 2061 we are going to require one new property for every two properties that currently exist – think about that – where are we going to put them?

In other words, we are going to require about a third more real estate than we currently have.

How valuable is this going to make well-located Real Estate moving forward?

Also in this week’s video, we discussed Australia may handle migration moving forward considering that we are experiencing low wages growth.

However, with more Australians moving into retirement years, in the future, Australia will require skilled tax-paying workers to help pay for our health care system.

Currently, there are 4.5 people in the workforce supporting Australians aged over 65.

By 2061, and the current projections there will only be 2.5 workers for every Australian aged over 65.

Dependancy Ration

 

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About

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


'How are our property markets coping with lockdown? | Property Insiders [VIDEO]' have 20 comments

    Avatar for Michael Yardney

    June 2, 2021 Mike Schwarz

    Dr Andrew Wilson – Question on Interest Rates
    It is said that the banks have been receiving cheap funding from the reserve and this ends in June. They will then need to source funding on the global market which is markedly higher. This would suggest they will have no option but to raise interest rates.
    Had you factored this into your view on interest rates?

    Reply

      June 2, 2021 Michael Yardney

      Great question Mike. I know Dr Wilson has taken this into account from our private discussions. The banks will have to borrow overseas, but look what interest rates are overseas. Of course the value of the Australian dollar will be a factor.
      Remember, the RBA is keen to keep interest rates low to stimulate the economy, increase business activity and jobs growth and eventually get unemployment down. They are not not going to pull the rug out from under us

      Reply

    Avatar for Michael Yardney

    April 25, 2021 Mark

    Its interesting to watch the FOMO effect on purchasing real estate at higher prices than they are worth as real estates are elevating prices during the demand. I also recently read an account of a person at auction in Sydney saying I felt like I had won lotto just because he secured the winning bid !
    Now the prices are rising so quickly and people are borrowing way to much to purchase at historically low interest rates its not difficult to work out what happens next when interest rates rise again !
    See household debt in Australia
    https://www.finder.com.au/australias-personal-debt-reported-as-highest-in-the-world
    Another concern is the misdemeanor of good debt and bad debt lets face it all debt is bad but it portrays a certain air of its ok because its good debt .. but good debt can turn bad too ie negative equity
    We see the occurrence every decade or so the debt delinquency increases this last happened when interest rates were increased
    I have been in a position where I have not only seen this occur but almost been burnt too .. not a good feeling but you learn by your mistakes very quickly
    The oracle Buffet says be fearful when others are greedy and greedy when others are fearful
    I am standing back and waiting for this supposed pandemic mayhem to cease ….

    Reply

      April 25, 2021 Michael Yardney

      What you say is correct – some people are making poor decisions driven my FOMO – but that doesn’t mean it’s the wrong time to make a wise investment decision

      Reply

    Avatar for Michael Yardney

    April 2, 2021 Mary

    @Joseph
    Your comment about “Australia heading towards Japan” and being over 1T in debt

    Have you seen this link lately?

    https://www.usdebtclock.org/world-debt-clock.html

    Australia is doing AMAZINGLY WELL compared to the rest of the world.

    I suggest to try removing the lens of pessimism and looking at life in general with a more realistic and optimistic outlook

    People are angry when prices go down
    People are angry when prices go up

    Can’t seem to win either way eh?

    Reply

    Avatar for Michael Yardney

    March 3, 2021 Jennifer

    90% of jobs recovered? I I don t think so. The tourism and travel sectors have been decimated and the education sector is not far behind. It s a shame that 9-5ers forget that these sectors even exist. I personally have been getting by on menial casual jobs for over a year and it looks like that will continue for most of this year as borders remain closed. Some of us have had our lives turned upside down for the foreseeable future, so No, it is not back to normal. I m lucky as I had some money and a mortgage already but I can t even go to the bank to access a better rate through refinancing as I don t tick a single box right now. And I work for a very reputable company normally – stood down definitely through no fault of theirs or mine. Not all of us are back to normal!

    Reply

      March 3, 2021 Michael Yardney

      We quoted the Australian Bureau of Statistics latest figures. Of course for the many people like you who are still without a permanent job and the situation is terrible and we are not wanting to belittle that.

      Reply

    Avatar for Michael Yardney

    February 4, 2021 Raj Thakrar

    Hi Michael,
    It is too early to be generalist and say property prices will hike. There are number of factors in play here.
    1 Due to lock down some sales were on hold
    2 Government Incentive in play
    3 Relaxed lending rule
    4 Government incentive
    Cost of new build artificially inflated by builders and developers sending cost of new build to new level making house price higher. The buyers technically are not benefiting for these Government incentives they are going in to builder and developers pocket. Housing in Australia is still young growing market so bubble will burst scenario does to stack up. It is always demand and supply simple economics.

    Reply

    Avatar for Michael Yardney

    December 10, 2020 Philip Lee

    The property market didn’t collapse because the government is throwing everything at it to keep it afloat. Our property market is not a free market driven by market fundamentals. It is manipulated by the government cutting interest rates to zeo, stamp duty concessions plus first home buyer grants, and government guarantees for deposits all sucking in the financially unsophisticated into putting themselves into a life of mortgage stress. It’s just kicking the can down the road.

    Reply

      December 10, 2020 Michael Yardney

      Philip. You are correct, our property markets have never been a “free market”, they have been manipulated by the Reserve Bank and APRA. Remember a couple of years ago when investors were dominating the market pushing up prices, the RBA raised interest rates and APRA made it much harder for banks to lend to investors and this slowed down the markets.
      Currently intervention has supported our markets and that’s good. It’s the government’s job to protect its constituents – you and me and one way of doing that is providing stability to our housing market. They are too big to fail and no one will let them fail.

      Reply

    Avatar for Michael Yardney

    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

      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 for Michael Yardney

    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

      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 for Michael Yardney

    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

      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 for Michael Yardney

    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

      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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