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.
Sydney and Melbourne house prices could return to peak levels sooner rather than later
Are Sydney and Melbourne housing prices heading for a return to peak levels?
According to an article on Domain.com.au things could be looking up in the next 3 years.
Melbourne and Sydney house prices could return to peak levels over the next three years, economists are predicting.
With a quicker-than-expected turnaround since the market slump between 2017 and 2019 in both capitals, pressure is now increasing on those looking to get into the market.
Before signs of recovery started in June, Melbourne house prices fell 10 per cent peak-to-trough, while Sydney prices dropped by 14 per cent.
But the pace of the rebound in Sydney and Melbourne had seen forecasts changed as buyers returned to the market after recent interest rate cuts, Domain economist Trent Wiltshire said.
“The property markets have rebounded more strongly than we forecast back in June,” Mr Wiltshire said.
“Based on recent indicators, it looks like price growth over the next 12 months could be above 5 per cent, maybe even around 10 per cent.”
He said prices could be close to their peak levels by the end of next year, although it would take longer for them to fully recover.
“The Brisbane market is also picking up, but the turnaround has been more muted than in Sydney and Melbourne,” Mr Wiltshire said.
David Plank, head of Australian Economics with ANZ, said it could take a few years for prices to return to their 2017 peak levels, particularly in Sydney.
ANZ was also revising its recovery predictions of a 3 to 4 per cent improvement in house prices over the next 12 months given how quickly prices had turned around in recent months.
Along with interest rate cuts, changes to lending criteria and the federal election outcome ensuring negative gearing tax incentives would remain in place had also seen a faster recovery since May.
However, he believed the pace of recovery would slow as mortgages were still harder to access than they had been when house prices boomed.
“I would be surprised if they continue to rise at this rate,” Mr Plank said.
“Eventually at some point in the next few years they will come back to what they were at the peak,” he added. “The question then is, what’s happening to incomes?”
The recent drop in building approval numbers for houses and apartments would also add pressure to prices, with fewer new homes being built.
This would only be a short-term issue with approvals expected to rise “relatively soon” as lending criteria had changed, he said.
“We’ve never had an excess supply problem,” Mr Plank said.
Independent economist Saul Eslake said he hoped prices would not return to their peak too quickly, given Australian properties were some of the most expensive in the world.
“They’re still very high by our own historical standards and international standards,” Mr Eslake said.
In May, global investment bank Morgan Stanley reported Sydney and Melbourne’s property prices were 60 per cent less affordable than those of New York or Seattle.
“People who buy and sell to make a profit, it’s great for them – but the greater general good would not be served by a general rise in property prices,” he said.
He said first-home buyers could be locked out of the market, unable to afford the rise in prices as they had been as prices boomed.
While Sydney and Melbourne’s markets were doing well, Mr Eslake said in other major capitals including Darwin and Perth prices were still flat or declining.
Read the full article here
Housing supply to dwindle
When it comes to the future of dwelling, things look like they are just going to get more complicated.
Dwelling starts tumble in FY2019
Building activity is one of those complex data series with many moving parts, and it probably deserves more than one blog post.
That’s not going to happen, though, so let’s take a brief look at the death of the construction boom in two short parts.
Part 1 – Housing starts fall 24pc
New dwelling starts seemed to stabilise at a more sustainable but lower level in the June 2019 quarter, down 24 per cent from a year earlier on a trend basis (and down by some 36 per cent for attached dwellings).
That’s potentially a lot of construction employment that will need to replaced across the coming couple of years, suggesting that full employment is likely to remain elusive.
Since steep foreign buyer surcharges were introduced, it’s been a similar story across the board over the past two financial years, with far fewer apartment projects attracting a green tick (although of course there have been other factors too).
Read the full article here
Perfect storm for growth brewing
Is there a perfect storm brewing in the property markets?
In this article for Switzer, John McGrath looks at what’s going on.
Latest figures from CoreLogic showed another dramatic month of price growth in Australia’s two biggest cities, with median home values up 1.7% in both over September.
It might not sound like much but if we had that sort of price rise every month for a year, values would be up 20%-plus and that’s boom time growth in anyone’s language.
Interest rates are a key driver of buyer confidence so last week’s 0.25% reduction in rates will be well received by the market, even though many lenders didn’t pass on the full cut.
Long term low rates make the Australian dream of home ownership more achievable.
They also open up attractive investment opportunities, particularly given the RBA has told us to expect “an extended period of low interest rates” and that they could go even lower.
The crucial question is, how will you leverage these record low rates to grow your own wealth?
Since June, the median home price has gone up by 3.6% in Sydney and 3.5% in Melbourne.
One of the reasons for this is a lack of stock for sale.
SQM Research shows a 4% dip in homes for sale nationally over September, which is highly abnormal for the first month of Spring and puts the supply/demand dynamic firmly in favour of sellers.
Melbourne stock for sale was down -5.8% and Sydney -5.7%.
Over the year, Sydney was down -20.4%.
That’s why we’re seeing auction clearance rates back in the 70% range compared to mid-40% and 50% last Spring.
SQM Research Managing Director, Louis Christopher said lower listings, rising asking prices and rising clearance rates suggested Sydney “has indeed entered into a new housing boom”.
“Melbourne is not that far behind the mark as well,” Christopher says.
“I think we can expect to record rapid rises in dwelling prices for our two largest cities at least in the December quarter and likely beyond.”
In the Australian Financial Review, CoreLogic’s Head of Research, Tim Lawless, said Sydney and Melbourne were “back to boom-time conditions”.
“I’d like to see more than just two months of that trend before I’d be calling that the marketplace is back into significant growth phase, but the indicators are showing what’s where it’s heading,” Lawless said.
We’re seeing lots of stories about homes selling well above reserve in many real estate markets but remember, today’s reserves are much lower than they were a couple of years ago.
It’s unlikely that any buyer is paying above the peak prices of 2017 when the median was 15-20% higher.
To me, this Spring is unique as it provides a rare ‘everyone wins’ scenario.
Buyers are purchasing for prices well below the peak, but many sellers are achieving better than expected results.
Plus, both sides are benefitting from historically low interest rates and easier finance.
The RBA has made it clear that we’re in for a long period of low interest rates, so I’d love to see more investors taking advantage of this, not just home buyers.
‘Early adopters’ of new market conditions could pick up very good capital gains over the medium to long term with a purchase this Spring.
This is especially the case in Queensland, where rental yields are very impressive and the market is not recovering as fast (Brisbane median values up 0.5% since July compared to 3.5% in Sydney and 3.3% in Melbourne and Regional Queensland values up 0.5% in September alone.)
Brisbane houses are selling for a median $540,000 with a gross rental yield of 4.4%. Gold Coast houses are selling for a median $630,000 also with a 4.4% yield. Sunshine Coast houses have a median of $600,000 and a rental yield of 4.3%. Apartments in all three areas are yielding 5-5.5%.
Read the full article here
The RBA has just revealed what it needs to unleash quantitative easing and negative interest rates in Australia for the first time
What will it take to unleash quantitative easing and negative interest rates in Australia?
This article from Business Insider reveals a report from the RBA.
Things look destined to get weird in Australia as the Reserve Bank (RBA) begins anxiously considering the unorthodox tools it has at its disposal.
In his strongest indication yet that he will do whatever it takes to get Australia’s economy growing again, RBA governor Philip Lowe published a report on Tuesday outlining the effects of the unconventional such as negative interest rates – just days after he slashed the cash rate for the third time this year.
“The Great Financial Crisis and its aftermath presented central banks with unprecedented challenges. Policymakers’ response included the introduction of new tools. Central banks implemented different combinations of what have been labelled unconventional monetary policy tools (UMPTs),” Lowe wrote in the report, prepared by the BIS Committee on the Global Financial System, of which Lowe is chair.
Those tools include negative interest rates and quantitative easing (QE) – so unconventional that neither of which has ever been tried in Australia.
Despite that, the report concluded that both tools have had net positive effects overseas.
“I hope that this important report can serve as a resource for policymakers looking to learn from the experience of the past years as they consider ways to maintain and enhance the efficacy of monetary policy in the future,” Lowe wrote.
However, while Tuesday’s report indicates he is wholly considering their use, he did suggest one substantial requirement.
“One key lesson is that the tools are most effective when used together with a broader set of policies, like fiscal and prudential measures,” Lowe said.
In other words, Lowe would want the government to splash some cash around, as well as the support of regulators in doing so.
It’s not the first time he’s called on the Federal Government, urging them to spend more at a Parliamentary Committee.
While he’s struggled to get them to budge, further deterioration in the economy and an RBA keen to move could be enough to force its hand.
While Lowe has previously raised the possibility of both being implemented here, he’s been keeping his cards close to his chest.
“We are prepared to do unconventional things if the circumstances warranted it,” he told the Australian government in August.
“I hope we can avoid that.”
It looks increasingly unlikely however that he will have a choice.
The official cash rate looks destined to be cut again to 0.5% by early next year, and short of a miraculous rebound in economic activity, the RBA will desperately need to consider its options.
Read the full article here
Seven morning rituals that set you up for success
What is the secret to success?
An article from Executivestyle.com.au reveals the 7 morning routines that will set you up for success.
A ritual, however, is done with deliberate intention and focus.
When we choose a set of rituals to kick-start our day, we set up a process of purposeful actions designed to set the day up for success.
Research shows the early bird really does get the worm, as morning people are generally more proactive.
Proactive behavior is when a person takes action to change a situation for the better.
It’s a trait that is related to career success, job performance, salary and self-efficacy.
Leading by example
Benjamin Franklin, founding father of the United States, had a three-hour morning routine that started at 5am.
Upon waking he would wash, address ‘powerful goodness’ (some say this might be religious), and ask himself ‘what good shall I do this day?’ before having breakfast.
In his famous 2005 Stanford address, Steve Jobs revealed the biggest piece of advice that he used to start every day.
“For the past 33 years I have looked in the mirror every morning and asked myself: ‘If today were the last day of my life, would I want to do what I am about to do?’
And whenever the answer has been no for too many days in a row, I know I need to change something”.
Glenn McGrath, Australia’s best ever fast bowler, was another classic example.
On tour with the Aussie cricket team I got to know McGrath’s pre-match routine of 90, 60, 30.
This meant that 90 minutes before the bus left the hotel for the oval, he would be in the pool warning his muscles and stretching his body.
60 minutes before departure he would have breakfast. 30 minutes before the bus left he would be downstairs ready to go.
McGrath believed this process helped him to focus on playing cricket at the highest level, and less time stressing over what he calls ‘the little things’.
Arianna Huffington, co-founder of The Huffington Post, has transformed her mornings from tornado to tranquil.
Upon waking, she breathes deeply, practices gratitude and also sets an intention for the day.
She then does a morning meditation followed by cardio on her spin bike, and stretching before hitting work.
Seven morning suggestions
Over the years I’ve developed a set of rituals that energise me keeping me healthy and productive. When I’m feeling tired and fatigued, following this process kick starts my body and brain into gear and before long I’m back feeling fresh again.
1. Wake up early and exercise
Most days I rise between 4.45am and 5.30am and I find the stillness before the day starts is the best time to think. I exercise most mornings as this wakes up my body and brain and sets me up for the day ahead.
Moving and getting outside in nature is a proven way to release endorphins and get blood and oxygen pumping to the brain. In an average week I aim to cycle three times (150km in total), do two weight training sessions, one outdoor bodyweight circuit, one yoga class, and in the warmer months I throw in one swim a week too.
2. Make your bed
I borrowed this one from Tim Ferriss, author of The 4-Hour Work Week and the idea is to have the discipline of making your bed each day before you leave the house (try cleaning up the kitchen as well) so when you come home you have order and structure.
3. Connect with loved ones
I travel quite a lot and am a single dad, my children stay with me half the time. I find the ritual of checking in with my little ones every morning when they are not staying with me (and again later that day), and talking about our day ahead and telling them that I love them, reduces the anxiety I sometimes feel.
I must admit I don’t find this one easy first thing (I find meditation easier at night) but I know lots of people who swear that including five to 10 mins of meditation each morning of helps them focus the mind. Great Apps to try include HeadSpace and Calm.
5. Eat breakfast
Starting the day with a nutritious breakfast that combines protein, performance carbs and good fats is the perfect way to fuel your body and brain for the day ahead.
Every morning, part of my warm up ritual is ingesting a quality coffee. There’s nothing like the aroma of freshly brewed coffee, the sound of grinding beans, and the steamer kicking into gear to jolt my brain into ‘let’s get into work’ mode.
7. Warm up
Just like an athlete warming up before a competition, you can’t be expected to press a button and expect your brain to dive into focused work. And if you have been on email, social media and news feeds that morning, you need to put a hard stop in your diary and sit down for five to 10 minutes with a mindful approach to the day ahead.
Ask questions like:
What is the best use of my time today?
Read the full article here
Subscribe & don’t miss a single episode of Michael Yardney’s podcast
Hear Michael & a select panel of guest experts discuss property investment, success & money related topics. Subscribe now, whether you're on an Apple or Android handset.
Need help listening to Michael Yardney’s podcast from your phone or tablet?
We have created easy to follow instructions for you whether you're on iPhone / iPad or an Android device.
Prefer to subscribe via email?
Join Michael Yardney's inner circle of daily subscribers and get into the head of Australia's best property investment advisor and a wide team of leading property researchers and commentators.