Whistlestop review of recent events –
With all the moving parts within and around our economy here are some major items that are worth the read . . .
- Land Values – NSW Valuer-General David Parker has warned that “falling market prices will leave homeowners with overstated land values when their next assessment notices come out early next year”, advising people to start collecting data of local sale prices now to challenge valuations within the allowed window. Notices mailed out between January and April next year for some 2.1-million residential properties will form the basis for land tax payments next year as well as local rates for the next three years and owners will only have a 60-day window to challenge their valuation. The assessments will reflect values recorded on 1 July this year – after CoreLogic figures show Sydney homes had already shed 2.8 per cent in value since March – but values were still likely to come in 20-30 per cent higher than their last valuations, Mr Parker said.
- Cash Rate – Now at its highest level since December 2014 and poised to increase further as the central bank seeks to tame soaring inflation.
- Residential Listings – Fell 3.5 per cent to 228,295 and new listings – of homes on the market for fewer than 30 days – slipped 1.9 per cent, unusually for August, which typically marked the start of the spring selling season with an increase, SQM Research managing director Louis Christopher said.
- National Vacancy Rate – Held at 0.9 per cent last month, down from 1.7 per cent the previous August, Domain data shows and the proportion of empty rentals in Sydney, Melbourne and Brisbane more than halved year-on-year. Sydney’s rental vacancy rate fell to 1.2 per cent, the lowest on record for the time series, which began in 2017.
- Withdrawal Rate – Sydney has been consistently above 20 per cent since the first week of May, coinciding with the first interest rate rise,” Mr Lawless, Core Logic said. “Historically, we’ve seen Sydney’s withdrawal rate around about the 10 per cent to l5 per cent mark; so to see consistently above 20 per cent highlights that many vendors are losing confidence in their chances of selling the property under the hammer.”
- Construction Insolvencies are creeping up. The latest figures from corporate regulator ASIC show building-industry companies going into administration rose to 164 in June, up from 153 in May and 40 per cent above the June 2021 total of 97.
- Sydney Property Values are tumbling at their fastest rate in almost 40 years as the Reserve Bank’s aggressive tightening of interest rates starts to bite
- Consumer Slowdown – High inflation and rising interest rates will cause households to tighten their belts. Research by the Commonwealth Bank suggests the consumer slowdown may have already started, with evidence households were starting to cut back on non-essential spending. So far, household spending has proved resilient despite the cost of living pressures with retail consumption volumes 5.5 per cent higher over the year, the Australian Bureau of Statistics said.
- Possible Mortgage Delinquency – Up to $250 billion of mortgages taken out in the last few years could be at risk of delinquency if the RBA increases the cash interest rate to 3 per cent as expected, according to veteran banking analyst Jon Mott of Barrenjoey. And not even borrowers with full-time jobs will be immune. While rising interest rates will boost banks’ net interest margins in the next few years, Mott argues that the speed at which interest rates have risen since May will create much more meaningful issues for bank profitability in the 2023 and 2024 financial years.
- Investors – Residential property investors are ignoring soaring mortgage costs to snap up rental apartments and houses. The latest borrowing data from the Australian Finance Group, an ASX-listed mortgage aggregator, shows that investor lending increased in July to 28 per cent and is around the highest since late 2019 when property markets were recovering strongly after the Coalition’s federal election victory.
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Sandra Higgins
Principal