The property markets will finish the year better than many expected.
It’s the time of the year when many of us start winding down and thinking about the vacations ahead, rather than the economy and our property markets.
But the markets keep moving on, regardless of what we are doing in our lives.
Looking back at the beginning of the year I don’t think anyone would have thought that inflation and interest rates would be the big news items that they have turned out to be in 2022, and no economist forecast the shock and awe barrage of interest rate hikes the RBA threw at us.
And despite all those rate increases unemployment is at historically low levels, our economy keeps bounding along, inflation remains high, and Aussies keep spending, even though that seems to be slowing a little.
However, of course, consumer confidence is finishing the year at very low levels, no doubt affected by the barrage of bad news the media keeps dishing up.
But for those interested in property, even though our housing markets have experienced a difficult year, there is definitely a light at the end of the tunnel as our markets look like they’re finding a floor with steady asking prices and rising rents.
And there’s been a lot of data that will affect our markets this week.
How useful are the monthly CPI figures?
On 26 October this year, the Australian Bureau of Statistics commenced publishing a monthly CPI indicator as well as their standard quarterly CPI figures in order to provide a more timely indication of inflation.
Last week the second of these new monthly inflation indicators were released and showed our CPI rose 6.9% over the last year, which was much lower than many economists forecast.
The major drivers included a steep fall in volatile fruit and vegetable prices (-6.3% month on month) and travel and accommodation (-6.4% month on month).
Please watch this week’s Property Insiders chat with Dr Andrew Wilson as we explain that the data for October only reflects up-to-date price information for 62% of the goods in the quarterly CPI basket, so there are still some uncertainties surrounding the new monthly series and this figure shouldn’t be read as a sign that inflation has already peaked.
Annual building approvals at a 21-month low
House approvals are now falling away in most cities, with the HomeBuilder grant boost no longer available and having worked its way through the system.
However, approvals are still 12% higher than the 176,000 seen in 2019 before the pandemic.
Dwelling approvals fell -6.0% month on month in October, following last month’s sharp -8.1% fall.
Declines were seen in both detached houses (-2.2% month on month) and apartments (-11.3% month on month).
Over the past year, detached houses are down -11.3% year on year and apartments are actually up 5.5% year on year.
Housing loan commitments continue to fall, and more declines still likely to come
Housing loan commitments are falling and are likely to continue to turn lower as deteriorating housing market sentiment and higher rates bite borrowing capacity and housing demand.
Housing finance approvals continued to move lower in October, with the total value of new loans being down 2.7% over the month.
While loan approvals are currently 22.3% below their January peak, they are still well above their pre-COVID levels and previous peaks in 2017.
As expected, the detail shows that the decline in owner-occupier loans outstripped that of investors, the former posting a 2.9% decline, whereas the latter fell 2.2%.
September’s figures were also revised significantly, from what was initially estimated to be a sizeable 8.2% decline in total approvals (-9.3% owner-occupier; -6.0% investor) to a milder, but still significant weakening of -4.4% (-4.8% owner-occupier; -3.5% investor).
Investor activity is still holding to relatively more subdued moves over this current cycle, the cumulative declines so far meaning investor finance approvals are now 4.2% below their 2017 peak.
Whereas for owner-occupiers, the value of loan approvals is still 18.6% above their 2017 peak.
Steady, solid auction results this weekend
The summer weekend auction market commenced with reasonably settled results and no clear sign yet of the usual end-of-year market wind-down.
National auction numbers were again higher at the weekend with 1905 listings compared to last weekend’s 1857– but still well below the same weekend last year’s 3165 auctions.
Adelaide was the strongest-performing auction market reporting a 69.1% clearance rate with Brisbane at 49.6%.
Are you wondering how you should invest in this interesting phase of the property cycle?
If you're like many property investors, you're probably wondering what's the right thing to do at present.
Should you buy, should you sell, or should you just wait?
You can trust the team at Metropole to provide you with direction, guidance, and results.
Whether you’re a beginner or an experienced investor, at times like we are currently experiencing you need an advisor who takes a holistic approach to your wealth creation and that’s exactly what you get from GM Homes.