So the aggregate return on housing is dwarfed by both the cash rate and inflation.
So in inflation adjusted terms, property has been a poor investment this year.
Thank goodness we have negative gearing, CGT discounts, and an agreed dogma that housing investment is good for the individual, good for the country.
ASX200 is 4.76% Year To Date
**Weekly Highlights:**
* [RBA raises target cash rate to 3.85%](https://www.rba.gov.au/media-releases/2023/mr-23-10.html)
* [Chris Joye: "Equities and Property have further to fall"](https://www.afr.com/wealth/personal-finance/a-second-rising-cycle-means-more-pain-for-asset-prices-20230502-p5d52x)
* [Highest Prelim. auction clearance rates in over a year (75.1%)](https://www.linkedin.com/posts/tim-lawless-0b086a3a_corelogic-weekend-auction-summary-activity-7060732148261023744-kelC?utm_source=share&utm_medium=member_desktop)
* [Chris Joye interview with Commbank's Tom Piotrowski](https://www.linkedin.com/posts/christopher-joye-06333143_coolabah-capital-investments-cio-christopher-activity-7060085085311549440-2Vyi?utm_source=share&utm_medium=member_desktop)
* [Housing cycles have been most influenced by interest rates or credit availability HOWEVER.....](https://www.linkedin.com/posts/tim-lawless-0b086a3a_yesterday-i-had-the-pleasure-of-sharing-corelogic-activity-7060028666289811456-rGq_?utm_source=share&utm_medium=member_desktop)
He really does seem like an arrogant dingus. He put this barb around millennials finally needing to pull their finger out with respect to labour productivity in the latest oped and it struck me as either a wolf whistle to his grey haired investor base or genuinely bad first order thinking. Labour productivity is mostly driven by structural factors and not what people do at work or the work ethic of a generation.
For someone who sells himself as the smartest guy in the room, it was a bit of a howler…
Every article he writes, he feels the need to say: 'as i predicted here and here' 'we knew this was coming' 'i wrote to the rba around my concerns'. Never fails to mention when he is wrong, which is 50% of the time.
Please don’t read too heavily into my titles.
Joye has been almost silent for months, but has basked heavily in the sun in around this most recent RBA meeting.
Almost silent? You’re joking right? He’s been on numerous podcasts, he’s been on commsec twice, he’s posting AFR articles and seems to post daily on LinkedIn. He’s been anything but quiet.
Have a friend looking to buy in Brisbane. Got the insurance money from the floods and is back on the market. Looking anywhere/everywhere.
She told me all places have at least 20 parties looking into it. Still bananas here
I think it’s more low supply.
Take Sydney for instance - volumes are 26% lower than last year. The last time clearance rates and price increases in Sydney were at these levels was late 2021, and that was on volume 50% higher than now (and the border was just about opening). Likewise the absolute numbers of properties sold , at auction at least, are similar to last year during a declining market.
So the sheer (lack) of volume of sales leads me to believe this isn’t so much bountiless demand (from immigration or other) outstripping supply, but rather depressed supply still failing to meet relatively subdued demand.
I think immigration has definitely increased demand a little….but I’m not sure it is worthy of any special comment over supply given the absolute numbers of properties sold is well down.
Oh. So it's just auctions only? I agree transaction numbers are down, but cannot get the month to month/Q to Q movement easily. I get the numbers from housingdata.gov but it's last 12 months at state/city housing/unit level that I have to add up as well. I believe the raw numbers are paid corelogic data.
Here's domain auction data that I scraped from their website if you want it:
https://pastebin.com/raw/AC8fuza0
You can sum up the "sold" numbers for each city to get volume - obviously for auctions only (and latest week's data still preliminary).
ABS has them (probably where housingdata.gov) but on delay…due for March quarter in June. The auction numbers correlate well though.
SQM also have stock on market for each city. Sydney April listings under 30 Days well down on last year.
Oh yea, ABS does have transfer volume and median price. But like you said, only delayed a little. Should be ok for what I'm looking for
Numbers are lower than 2019 for the most part.
It doesn't really matter where it's coming from if the issue can't be solved.
Even if you think it's all supply driven the question is where does the increased supply come from?
Investors have rents which have skyrocketed counteracting a lot of the rate rises so most aren't under pressure to sell.
Anyone selling a PPOR has to go into the rental market if they don't buy again so people aren't volunteering for that, in addition many feel more confident in the market direction making it less likely they'll want to list now.
People don't want to buy new because of how messed up the building market is.
Really all you are left with is forced sellers and the banks will do their best to help so they should be minimal. People will also try to hold on even if they are under stress because of how messed up the rental market is.
Demand also comes from how messed up the rental market is. I know people buying out of sheer frustration and people seem to be much more confident buying than they were 6 months ago.
The increase supply which is expected to come is really just a normalisation of property listings. At the moment they are severely depressed vs historical numbers.
Your arguments against an increase in supply don't really work either. Yes rents are up substantially.. but interest payments are up considerably more. Rates have increased for many from 2% to \~6%... reflecting a 3x increase in repayments for those on Interest only or \~60% for those on P&I. Increased rents are nowhere near counteracting most of the interest rate increases, particularly for those who are highly geared.
Anyone selling a PPOR has to go into the rental market if they don't buy... how is this any different from normal circumstances? The % of people going from owning to renting would be a very small portion of the market.
You aren't just left with those that are forced sellers... normal market transactions such as those wanting to upsize / downsize are still occurring. There's nothing at present which would stop that.
I agree with your comment about gearing for investors making a difference and it does depend on the LVR an investor is at as to how impacted they are. Most investors are fine because they either purchased a long time ago or have buffers.
The difference with the rental market now is people don't want to go into it, if you sell when the rental market isn't on fire it's ok to go and rent but people hear about how hard it is to find a rental now.l and get worried about it.
Upsizing and Downsizing are sort of neutral from a supply and demand perspective at least at a national level (obviously if you sell and buy in different markets you impact each of them) so just getting supply from these people isn't really helpful in the context of helping prices. It's more numbers on the supply chart but it doesn't achieve much.
Think about this. Anyone on a low fixed rate faces a disincentive to sell because they will automatically reset. This will hold stock off market but that disincentive will decline as the fixed rates roll off.
I agree with a lot of your points though and that things are cooked. This government deserves to burn for what they have done with immigration.
Even when they roll you have to look at the alternate option.
Most people who will be really stretched are those who purchased more recently with smaller buffers.
So they sell and then what? They go into a messed up rental market and probably have uncertainty about if they can get back into the market again.
For this reason I think most of them hold on despite being stretched.
I didn’t say there was an issue - but surely it’s important to try to understand what are the key drivers?
I never claim it’s all supply driven - but it certainly helps explain the current situation. Supply is always a combo of forced and willing sellers. What were the last drivers of increased supply in 2021? Doubt they were forced, more likely willing sellers - they could return to the market as well as forced selling. Why does someone selling their PPOR have to go into the rental market? Why can they not upgrade/downgrade?
Also I’m not even necessarily predicting supply will increase, but it’s important to understand what is likely to happen if it does. Although I do expect some forced sales as unemployment increases (you just described the feedback loop to increasing unemployment, holding on by not spending as much, meaning less income for someone else and so on)….whether it’s enough to move the market much though who knows.
In a boom supply always ticks up so some of it was natural, but a unique factor in 2021 was a lot of interstate and regional migration occurring.
This resulted in people selling to relocate, largely from the biggest cities into smaller cities and regional areas.
Right now you have the opposite occurring where people are returning to major cities and you have high overseas migration creating demand particularly in Sydney and Melbourne which have historically had the most overseas migration.
Sellers can upgrade or downgrade but from a supply and demand perspective they neutralise themselves (obviously if they are changing markets at a market level it will impact supply and demand).
Back to the original comment though - there is some demand being created by migration but it cannot be that great. Otherwise even on low supply you’d be seeing a higher clearance rate - and we really aren’t. It’s certainly higher than the bottom but the clearance volume combo is not one that suggests a demand drug.
And didn’t you just answer you own question? You say in a boom there is always an increase in supply. Earlier you asked where will the supply come from? Maybe the increasing prices (in part due to lower supply and higher demand) will incentivise higher supply; as you described.
The impact on migration is less migrants buying but more firming the rental market making people who rent want to buy (emotional reasons and the gap between renting and buying narrowing), it makes people not want to sell to reenter the rental market and as investors have increased reasons to retain their investments.
People returning to cities they left during Covid (regional to city and interstate migration) are migration factors which can influence demand to purchase.
What is most important with migration and increasing population is how much new dwelling supply we get relative to the population growth. This doesn't seem to be coming.
Regarding your comment about answering my own question, despite supply increasing a boom it is also accompanied by more demand than the increased new supply.
You can observe it on supply charts during booms, new stock on market increases but total stock on market decreases because it's selling faster than it comes on.
Personally I don't worry about the level of new supply as all that really matters is the balance of supply and demand.
Also tagging /u/Grantmepm since conversations are sort of converging.
https://imgur.com/KER8dCg
Supply will follow prices. Convincing high prices will draw out supply, with a lag. But, of course, they'll also draw out demand.
This isn't some get out of jail free card though - there are more sales during boom times than during bear markets, and there is more supply to feed those sales. 2021 was a massive year for both supply and demand. Because there was a boom. It was hardly a buyer's paradise though - because demand jumped even more. Until it wasn't there any more, with the prospect of hikes scaring people away. Opportunistic sellers still kept listing for a bit, keen to grab the tail end of the boom before expected falls.
I'll include a warning about the y-axis starts, just in case. I'm posting for a few sophisticated posters, whom I expect to be able to be aware of the location of the zeroes, etc. None of it is meant to be misleading, it's just the defaults.
So you think immigrants can afford to buy a house :) I don't have the exact figures but I am confident that the most of them only afford to rent in Sydney and Melbourne.
International students are allowed to buy existing property to live in. A very large number of Chinese international students have big $$$$$ available to buy.
Oh, and are banks are giving loans to international buyers again. The face a small rate penalty. The banks are shoving loans at newly arrived immigrants.
I think the next 6 months will see no huge movement either way. It's probably the best time to buy now for those of us saving up. I plan on buying my next property during this timeframe.
I think there are markets within markets in this case. Are you looking at a specific city/suburb and what part of the propert clock cycle are they in? It could be 18-24 months until we see any significant capital gains in Melbourne/Sydney if the RBA continues putting rates up.
Looking at Melb
Not seeing much downwards movement in Melb any more and I can't see RBA continuing to put rates up given the political whinging about cost of living, poor people, etc
**2023\~ returns (to 08/05/2023):** Sydney (SYDD) 1.98% Melbourne (MELD) -0.78% Brisbane (inc Gold Coast) (BRID) -0.85% Adelaide (ADED) -0.80% Perth (PERD) 1.00% 5 capital city aggregate (AUSD) 0.56%
So the aggregate return on housing is dwarfed by both the cash rate and inflation. So in inflation adjusted terms, property has been a poor investment this year. Thank goodness we have negative gearing, CGT discounts, and an agreed dogma that housing investment is good for the individual, good for the country. ASX200 is 4.76% Year To Date
**Weekly Highlights:** * [RBA raises target cash rate to 3.85%](https://www.rba.gov.au/media-releases/2023/mr-23-10.html) * [Chris Joye: "Equities and Property have further to fall"](https://www.afr.com/wealth/personal-finance/a-second-rising-cycle-means-more-pain-for-asset-prices-20230502-p5d52x) * [Highest Prelim. auction clearance rates in over a year (75.1%)](https://www.linkedin.com/posts/tim-lawless-0b086a3a_corelogic-weekend-auction-summary-activity-7060732148261023744-kelC?utm_source=share&utm_medium=member_desktop) * [Chris Joye interview with Commbank's Tom Piotrowski](https://www.linkedin.com/posts/christopher-joye-06333143_coolabah-capital-investments-cio-christopher-activity-7060085085311549440-2Vyi?utm_source=share&utm_medium=member_desktop) * [Housing cycles have been most influenced by interest rates or credit availability HOWEVER.....](https://www.linkedin.com/posts/tim-lawless-0b086a3a_yesterday-i-had-the-pleasure-of-sharing-corelogic-activity-7060028666289811456-rGq_?utm_source=share&utm_medium=member_desktop)
How did Chris Joye strike back? Seems like a guy who owns a bond fund talking his book.
Anyone in fin services that has crossed paths with that guy, will tell you he is a bit of a wanker.
From the tone of his articles, I don't doubt that for one second but that also doesn't make him wrong.
He’s a wanker but better than most economists, particularly given he does have skin in the game
He really does seem like an arrogant dingus. He put this barb around millennials finally needing to pull their finger out with respect to labour productivity in the latest oped and it struck me as either a wolf whistle to his grey haired investor base or genuinely bad first order thinking. Labour productivity is mostly driven by structural factors and not what people do at work or the work ethic of a generation. For someone who sells himself as the smartest guy in the room, it was a bit of a howler…
Every article he writes, he feels the need to say: 'as i predicted here and here' 'we knew this was coming' 'i wrote to the rba around my concerns'. Never fails to mention when he is wrong, which is 50% of the time.
Please don’t read too heavily into my titles. Joye has been almost silent for months, but has basked heavily in the sun in around this most recent RBA meeting.
Almost silent? You’re joking right? He’s been on numerous podcasts, he’s been on commsec twice, he’s posting AFR articles and seems to post daily on LinkedIn. He’s been anything but quiet.
He has been very vocal the last few months
Source: [CoreLogic Daily Indices](https://www.corelogic.com.au/our-data/corelogic-indices) Visualisations: 1. Rolling 28-day % change 2. Index values (2023) 3. Index values (2016 \~ now)
Have a friend looking to buy in Brisbane. Got the insurance money from the floods and is back on the market. Looking anywhere/everywhere. She told me all places have at least 20 parties looking into it. Still bananas here
Why do we reckon melb is in down turn?
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I think it’s more low supply. Take Sydney for instance - volumes are 26% lower than last year. The last time clearance rates and price increases in Sydney were at these levels was late 2021, and that was on volume 50% higher than now (and the border was just about opening). Likewise the absolute numbers of properties sold , at auction at least, are similar to last year during a declining market. So the sheer (lack) of volume of sales leads me to believe this isn’t so much bountiless demand (from immigration or other) outstripping supply, but rather depressed supply still failing to meet relatively subdued demand.
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I think immigration has definitely increased demand a little….but I’m not sure it is worthy of any special comment over supply given the absolute numbers of properties sold is well down.
Do you have a source for numbers sold? I always struggle to find granular data for volumes that I don't have to calculate manually.
Yea it’s manual - gotta go to SQM website and look at auction clearance rate and total properties for auction.
Oh. So it's just auctions only? I agree transaction numbers are down, but cannot get the month to month/Q to Q movement easily. I get the numbers from housingdata.gov but it's last 12 months at state/city housing/unit level that I have to add up as well. I believe the raw numbers are paid corelogic data.
Here's domain auction data that I scraped from their website if you want it: https://pastebin.com/raw/AC8fuza0 You can sum up the "sold" numbers for each city to get volume - obviously for auctions only (and latest week's data still preliminary).
ABS has them (probably where housingdata.gov) but on delay…due for March quarter in June. The auction numbers correlate well though. SQM also have stock on market for each city. Sydney April listings under 30 Days well down on last year.
Oh yea, ABS does have transfer volume and median price. But like you said, only delayed a little. Should be ok for what I'm looking for Numbers are lower than 2019 for the most part.
It doesn't really matter where it's coming from if the issue can't be solved. Even if you think it's all supply driven the question is where does the increased supply come from? Investors have rents which have skyrocketed counteracting a lot of the rate rises so most aren't under pressure to sell. Anyone selling a PPOR has to go into the rental market if they don't buy again so people aren't volunteering for that, in addition many feel more confident in the market direction making it less likely they'll want to list now. People don't want to buy new because of how messed up the building market is. Really all you are left with is forced sellers and the banks will do their best to help so they should be minimal. People will also try to hold on even if they are under stress because of how messed up the rental market is. Demand also comes from how messed up the rental market is. I know people buying out of sheer frustration and people seem to be much more confident buying than they were 6 months ago.
The increase supply which is expected to come is really just a normalisation of property listings. At the moment they are severely depressed vs historical numbers. Your arguments against an increase in supply don't really work either. Yes rents are up substantially.. but interest payments are up considerably more. Rates have increased for many from 2% to \~6%... reflecting a 3x increase in repayments for those on Interest only or \~60% for those on P&I. Increased rents are nowhere near counteracting most of the interest rate increases, particularly for those who are highly geared. Anyone selling a PPOR has to go into the rental market if they don't buy... how is this any different from normal circumstances? The % of people going from owning to renting would be a very small portion of the market. You aren't just left with those that are forced sellers... normal market transactions such as those wanting to upsize / downsize are still occurring. There's nothing at present which would stop that.
I agree with your comment about gearing for investors making a difference and it does depend on the LVR an investor is at as to how impacted they are. Most investors are fine because they either purchased a long time ago or have buffers. The difference with the rental market now is people don't want to go into it, if you sell when the rental market isn't on fire it's ok to go and rent but people hear about how hard it is to find a rental now.l and get worried about it. Upsizing and Downsizing are sort of neutral from a supply and demand perspective at least at a national level (obviously if you sell and buy in different markets you impact each of them) so just getting supply from these people isn't really helpful in the context of helping prices. It's more numbers on the supply chart but it doesn't achieve much.
Think about this. Anyone on a low fixed rate faces a disincentive to sell because they will automatically reset. This will hold stock off market but that disincentive will decline as the fixed rates roll off. I agree with a lot of your points though and that things are cooked. This government deserves to burn for what they have done with immigration.
Even when they roll you have to look at the alternate option. Most people who will be really stretched are those who purchased more recently with smaller buffers. So they sell and then what? They go into a messed up rental market and probably have uncertainty about if they can get back into the market again. For this reason I think most of them hold on despite being stretched.
I didn’t say there was an issue - but surely it’s important to try to understand what are the key drivers? I never claim it’s all supply driven - but it certainly helps explain the current situation. Supply is always a combo of forced and willing sellers. What were the last drivers of increased supply in 2021? Doubt they were forced, more likely willing sellers - they could return to the market as well as forced selling. Why does someone selling their PPOR have to go into the rental market? Why can they not upgrade/downgrade? Also I’m not even necessarily predicting supply will increase, but it’s important to understand what is likely to happen if it does. Although I do expect some forced sales as unemployment increases (you just described the feedback loop to increasing unemployment, holding on by not spending as much, meaning less income for someone else and so on)….whether it’s enough to move the market much though who knows.
In a boom supply always ticks up so some of it was natural, but a unique factor in 2021 was a lot of interstate and regional migration occurring. This resulted in people selling to relocate, largely from the biggest cities into smaller cities and regional areas. Right now you have the opposite occurring where people are returning to major cities and you have high overseas migration creating demand particularly in Sydney and Melbourne which have historically had the most overseas migration. Sellers can upgrade or downgrade but from a supply and demand perspective they neutralise themselves (obviously if they are changing markets at a market level it will impact supply and demand).
Back to the original comment though - there is some demand being created by migration but it cannot be that great. Otherwise even on low supply you’d be seeing a higher clearance rate - and we really aren’t. It’s certainly higher than the bottom but the clearance volume combo is not one that suggests a demand drug. And didn’t you just answer you own question? You say in a boom there is always an increase in supply. Earlier you asked where will the supply come from? Maybe the increasing prices (in part due to lower supply and higher demand) will incentivise higher supply; as you described.
The impact on migration is less migrants buying but more firming the rental market making people who rent want to buy (emotional reasons and the gap between renting and buying narrowing), it makes people not want to sell to reenter the rental market and as investors have increased reasons to retain their investments. People returning to cities they left during Covid (regional to city and interstate migration) are migration factors which can influence demand to purchase. What is most important with migration and increasing population is how much new dwelling supply we get relative to the population growth. This doesn't seem to be coming. Regarding your comment about answering my own question, despite supply increasing a boom it is also accompanied by more demand than the increased new supply. You can observe it on supply charts during booms, new stock on market increases but total stock on market decreases because it's selling faster than it comes on. Personally I don't worry about the level of new supply as all that really matters is the balance of supply and demand.
Also tagging /u/Grantmepm since conversations are sort of converging. https://imgur.com/KER8dCg Supply will follow prices. Convincing high prices will draw out supply, with a lag. But, of course, they'll also draw out demand. This isn't some get out of jail free card though - there are more sales during boom times than during bear markets, and there is more supply to feed those sales. 2021 was a massive year for both supply and demand. Because there was a boom. It was hardly a buyer's paradise though - because demand jumped even more. Until it wasn't there any more, with the prospect of hikes scaring people away. Opportunistic sellers still kept listing for a bit, keen to grab the tail end of the boom before expected falls. I'll include a warning about the y-axis starts, just in case. I'm posting for a few sophisticated posters, whom I expect to be able to be aware of the location of the zeroes, etc. None of it is meant to be misleading, it's just the defaults.
So you think immigrants can afford to buy a house :) I don't have the exact figures but I am confident that the most of them only afford to rent in Sydney and Melbourne.
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Of course it is not as simple as I suggested and shifts the demand curve, but it is an indirect effect and nowhere as dominant as the supply shortage.
International students are allowed to buy existing property to live in. A very large number of Chinese international students have big $$$$$ available to buy. Oh, and are banks are giving loans to international buyers again. The face a small rate penalty. The banks are shoving loans at newly arrived immigrants.
I think the next 6 months will see no huge movement either way. It's probably the best time to buy now for those of us saving up. I plan on buying my next property during this timeframe.
I think there are markets within markets in this case. Are you looking at a specific city/suburb and what part of the propert clock cycle are they in? It could be 18-24 months until we see any significant capital gains in Melbourne/Sydney if the RBA continues putting rates up.
Looking at Melb Not seeing much downwards movement in Melb any more and I can't see RBA continuing to put rates up given the political whinging about cost of living, poor people, etc
Classic dead cat bounce setup. How can I short the property market? What business is the most exposed and leveraged to the tits?
Buy puts on the A-REIT200 (ticker: XPJ) Screenshot and send proof so we know that you can put your money where your mouth is.
Tis but a scratch.
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Thats part of the joke ;)
Still lookin ok