Show notes – Market update Oct 2022 – Regions fall faster than capitals, more pain for renters as yields catch up & construction finance drops off a cliff, YOLO hampers RBA inflation tactics & more! (Ep.179)

In this week’s episode, Dave, Cate and Pete take you through:

1. Positive signs as home value index results show rate of decline slows

Dwelling values’ rate of decline is slowing in all cities except Brisbane, although Dave hints that the pain and fallout from the proposed stamp duty changes is likely to dissipate somewhat. Regions are also now losing value at a slightly higher pace than the combined capitals, although the differential is merely incremental at this stage. Property values have only just hit negative territory over the last twelve months nationally, in fact less than one per cent, and the trio marvel that this is not quite what the media is portraying. Cate makes the point that median is something that listeners all need to understand. Some factors can influence certain price-points to sell more than others and recognising that median represents a mid-point is essential when distilling the data.  Is there an elastic change to follow for the COVID-fuelled locations? Time will tell, but the trio acknowledge that the work-from-home phenomenon during COVID has shaped the way many of us now work. Will these work related, structural changes remain though? Only time will tell.

2. Spring listings still slow, bucking typical seasonal trends

Cate leads listeners through the listing figures and points out that all listings and new listings are very low, and the spring market expectations for the typical wave of new listings have not been met. The classic “chicken and egg” issue applies as vendors who may have considered selling are looking at their buying options and holding back in fear of not finding a replacement home. To the point raised earlier about construction levels, (and costs) being impacted negatively, the disparity between listed renovated houses and renovation projects is now problematic. Much of the current and new listings aren’t necessarily what most buyers want. Will the combination of low stock levels and a healthy amount of buyer interest lead to some price growth in the short term? And if so, could this bring more vendors back to the market? The trio ponder what early 2023 could look like for stock levels.

3. What’s the correlation between dwelling sales and consumer confidence?

Pete sheds light on the relationship between the number of dwelling sales and consumer confidence with the aid of a great chart from Tim Lawless, and notes that for 2022, our sales numbers are well below the five year average.

4. How job security is impacting consumer sentiment

Looking over the Westpac sentiment index, Dave takes listeners through some of the interesting changes, and some of the items that are flatlining somewhat. Job security is a noteworthy point, illustrating that the discomfort around rising interest rates and the cost of living is offset somewhat by our perception of a reasonably positive employment outlook.

5. How savings and YOLO factor into inflation

Dave’s insights into our capacity to save during lockdown, contrasted with our zest now for YOLO (you only live once) hints at part of the problem we’re now facing in relation to the inflationary pressures.

6. RBA revises inflation cap

With the recent RBA revision of the inflation cap, the trio ponder what the impact could be, however they all acknowledge the difficulties we currently face with higher fuel and food costs and the ongoing supply chain woes we face globally. Housing inflation is leading the pack, yet these essential elements are not optional when it comes to spending.

7. New lending continues downward trend, however personal loans on the rise

While lending figures are pointing towards a decrease in new finance commitments, Cate points out that personal debt and unsecured finance is increasing, signalling some potential pain points.

8. What does the bond yield say about where interest rates will end up?

Dave covers where bond yields are currently headed and gives us some optimism that the yields are not moving quite as much as previous months. The three year bond yield currently sits at circa 3.5%, and the ten year bond yield at circa 3.85% support the slowing rate of increase and Dave feels that peak inflation is not too far away. Based on a cash rate of 2.85% currently, it’s likely that an equilibrium rate of somewhere between 3.5% and 4% is on the cards. Cate considers the plight of the Christmas traders if an increase is applied by the RBA in December, and wonders whether it could be the rate increase that really bites. One to watch…