5 things I learned this week that you should also know

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A lot can happen in one week in our property markets, can’t it?

So here’s a look back at some of the things I read or learned this week, that I believe you should also know.

1. The RBA will hike rates in November according to NAB

NAB now sees the first RBA rate hike occurring in November, with follow up hikes in December 2022 and February 2023.
NAB sees an initial move of 0.15% followed by 0.25% hikes at each of the next two meetings which will take the target cash rate to 0.75% by February 2023.
NAB says:
  • The economy has continued to surprise to the upside, with the labour market now 6-12 months ahead of our prior forecasts – and significantly ahead of the RBA’s – alongside two consecutive inflation surprises.
  • From here we see underlying inflation tracking at least in the upper half of the target band with the possibility it will be above the band in Q1 and Q2. As a result, there is the risk the RBA hikes earlier and we think every meeting should be considered ‘live’ from August 2022.
  • For the RBA’s timing, a pickup wage growth will remain an important factor. While it will be difficult to have assessed the breadth and passthrough of wage growth completely by November, the RBA will have two additional reads on the WPI

Rba

 

2. Property markets break new records 

It looks like Australian house and unit prices have continued to beat records as seen in the last Domain Quarterly House Price Report.
The report shows that in the December quarter, Australian house prices experienced a rate of growth at 6.5 per cent, with median house prices outstripping $1 million nationally to set a new record high.
House prices have risen three times faster than units over the past year as the report also shows that national medium unit prices also reached a record high with quarterly price growth at 1.9 percent.
Unit Prices

House Prices

3.  We bought more expensive homes last year.

realestate.com.au looked at the share of total sales by price point in 2020 compared to 2021 and noticed a shift away from lower priced properties to more expensive ones.
Of course, this is a product of both lower interest rates encouraging people to spend more on housing and the subsequent increase in prices reducing the supply of cheaper housing stock.
The share of sales for properties priced below $250,000, from $250,000 to $500,000 and from $500,000 to $750,000 have reduced year-on-year.
At the same time, higher price points have each seen an increase in their share of total sales over the year.
The share of sales for properties priced below $250,000, from $250,000 to $500,000 and from $500,000 to $750,000 have reduced year-on-year.
At the same time, higher price points have each seen an increase in their share of total sales over the year.

May be an image of text that says "2020 2021 Share of total preliminary sales by price point, Nationally $0-$250K 11.6% $250K-$500K 8.1% $500K-$750K $750K-$1M 29% $1M-$1.5M 12.6% 33.6% 26.5% 26.2% 15.2% 8.5% $1.5M-$2M 11% 3.6% 4.9% $2M-$2.5M 1.4% 2.1% $2.5M-$3M 0.8% 1.3% $3M+ 1.4% 2.2% 0% 5% 10% Source: realestate.com.au 15% 20% 25% 30% 35%"

 

4. The property side effects of Covid

As the accompanying charts clearly show, over the last couple of years:
  1. We are spending more time at home and less time in the office
  2. 40% of us now work from home regularly.
  3. We are spending records of money on home renovations – which makes sense if we’re spending more time there.

 

5. Record number of new homes under construction.

Australian Bureau of Statistics data shows residential construction activity continued to boom from July to September last year, even though Sydney, Melbourne and Canberra spent most of that quarter in lockdown.

Commencements of new detached houses remained extremely high in the September quarter.

Many of these projects will be supported by the Federal Government’s HomeBuilder program.

This scheme, rolled out as part of COVID-19 economic assistance, began in June 2020 and provided a grant of $25,000 to build a new home.

HomeBuilder ended in April 2021. Under the original design of the scheme, projects had to commence within six months – i.e. by the September quarter.

That deadline has since been extended, and projects now have until mid-2022 to get underway.
May be an image of text that says "The number of new houses has been extremely high since HomeBuilder began OOOs of dwellings, quarterly, seasonally adjusted Apartments & semi-detached 45 Houses 40 35 30 HomeBuilder begins 25 20 15 10 5 o Jan11 Jan Jan13 Jan14 Source: ABS Building Activity Jan Jan16 Jan Jan Jan19 Jan20 Jan 21 Jan22 PropTrack"

 

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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


'5 things I learned this week that you should also know' have 10 comments

    Avatar for Michael Yardney

    December 26, 2021 Anton Ady

    I look back to the first half of the 1990’s when property markets came off up to 18% then recovering from around 1997. Since then our property markets have risen almost exponentially with intermittent “minor” pull backs yet there have always been doomsayers along the way without a return to the early 1990’s. A lot has happened since then with multiple wars, high immigration until Covid, the introduction of GST, the wage to house price multiple increasing, and so on but the same could be said in the lead up to the early 90’s house price collapse with the introduction of a flexible exchange rate, inflation, “a recession we had to have”, a stock market collpase and so on. I believe in “never say never”, so the question from this background is what could precipitate such a similar decline to the 1990’s?

    Reply

      December 26, 2021 Michael Yardney

      Anton – we had a major recession in the 90s, I remember it well, and if the same happens again it is very likely our property markets will suffer badly again

      Reply

    Avatar for Michael Yardney

    December 7, 2021 Sunsal

    Hi Michael
    What is your suggestion in investing in Boxhill North, Vic? (median – 1.3 to 1.4Mil)
    I have checked Boxhill South, Boxhill North, Blackburn South, Blackburn North etc but my thinking is Boxhill North is better. Please advice

    Reply

      December 7, 2021 Michael Yardney

      I really can’t answer this without knowing a lot more about you because what makes a great investment for one person is not the right property for someone with a different set of needs becuase they are at a different stage of their investment journey – start with a plan a strategy – not a location

      Reply

    Avatar for Michael Yardney

    October 31, 2021 Ansari

    Hi Michael , Do you see any price growth in Mount Druitt, Sydney for both houses and townhouses close to station with approval of a $1.49 billion revamp of the Mt Druitt CBD ?

    Reply

      October 31, 2021 Michael Yardney

      There is still substantial price growth likely in most Sydney suburbs, but moving forward it is likely that areas like Mount Druitt will lag behind the more affluent areas.
      Those living in the Mount Druitt region are people who are not experiencing higher wages growth at the time when property values are increasing. This suburb is not on my radar

      Reply

    Avatar for Michael Yardney

    July 26, 2021 Eleanor Joan

    Hi Michael,
    Point number 3- how does this take into account foreign property owners in Australia?

    Reply

      July 26, 2021 Michael Yardney

      That’s a great point Eleanor. Over the last couple of years foreign investors have become a smaller part of our property market, as banks both locally and overseas have been reluctant to lend to them, meaning more overseas investors are buying their properties with cash. However these statistics do not take into account overseas loans held against local properties

      Reply

    Avatar for Michael Yardney

    June 12, 2021 Rasanjali

    Will the middle ring suburbs like Rowville, Vic increase in price as well ?

    Reply

      June 12, 2021 Michael Yardney

      Rowville is not a middle ring suburb- it’s an outer suburb being around 31 km form the CBD, but it will keep growing in value, but not a s strongly as the more affluent “older money” suburbs

      Reply


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