While it looked like we were coming out of a deep but short recession rather quickly, we were then hit by an unexpected a second wave of Covid-19 which locked down Victoria.
Obviously this is not good for the health of our nation but also for the health of Australia’s economy in the short term, meaning previous economic forecasts now need to be revisited.
And what will this mean for our property markets?
That’s what we discuss in this week’s Property Insiders video with Australia’s leading housing economist Dr. Andrew Wilson, who gives an update of what’s happening in our property markets and we also have a talk about:
- What’s happening with property finance which is a good leading indicator for what’s ahead for property.
- What first home buyers are up to
- Falling consumer confidence – again
- The latest employment figures
The outlook for Australia’s economy according to the RBA
While it looked like we were coming out of a deep but short recession rather quickly, we were then hit by an unexpected a second wave of Covid-19 which locked down Victoria.
Obviously this is not good for our economy in the short term – it may knock $12Billion off our economy in the September quarter, meaning previous economic forecasts now need to be revisited.
The Reserve Bank of Australia lowered its expectations in last Friday’s Statement of Monetary Policy which contains their detailed forecasts on the economy.
The SoMP emphasises the “extreme uncertainty about the course of the pandemic and its economic effects”.
Given that uncertainty the RBA has been publishing three scenarios for the economy: a baseline central view, an upside and a downside.
In their SoMP the RBA revised their growth forecasts down a little and revised their unemployment forecasts up a little to 10{c8b66c61d036f6ef577ebb4000d6f98acefd4039e69613ab9f29a3541d0a44dc}.
Slower growth in the September quarter, possibly even another quarter of contraction, will push out our economic recovery to the December quarter which is likely to put more pressure on Canberra for economic stimulus.
Payrolls flat in July as rest of Australia offsets job losses in Victoria
Weekly ABS payrolls rose 0.4{c8b66c61d036f6ef577ebb4000d6f98acefd4039e69613ab9f29a3541d0a44dc} in the last week of July.
A state breakdown shows while Victoria has seen further job losses, those losses are so far being offset by a recovery in other states.
To date, around 50{c8b66c61d036f6ef577ebb4000d6f98acefd4039e69613ab9f29a3541d0a44dc} of all payrolls jobs lost in the initial months of the pandemic have been recovered, though this still leaves jobs down 4.5{c8b66c61d036f6ef577ebb4000d6f98acefd4039e69613ab9f29a3541d0a44dc} from pre-COVID levels and importantly this data incorporates those on the JobKeeper wage subsidy which currently has some 3.5m people receiving the subsidy.
Looking ahead Victorian payroll numbers are likely to deteriorate further given Melbourne’s more stringent level 4 lockdown from August 2, but other states are continuing their recovery but also recording some flow-on effects from Melbourne’s lockdown.
For Thursday’s employment report, the revised data suggests a positive jobs number should be expected where there is currently a very wide range in the consensus of between -120k to +150k!. A quick mapping based on percentages on the relevant reference week suggests +50k jobs for July.
Consumer confidence slips again this week – lowest level for 3 months
ANZ-Roy Morgan Consumer Confidence dropped 2.1pts to 86.5 this week – and is at its lowest for well over three months since April 25/26, 2020 (85.0).
Consumer Confidence dropped around the country and fell particularly hard in Melbourne after the city entered a restrictive Stage 4 lockdown last week, down 4.1pts to 81 – clearly the lowest of all the mainland Capital Cities.
Consumer Confidence also dropped in Sydney, down 1pt to 85.1 and sharply in Adelaide, down 8.8pts to 85.2. Perth remains the most confident city, but Consumer Confidence dropped by 5.5pts to 94.9 in the Western Australian capital. ‘
Overall Consumer Confidence is now 29pts lower than a year ago on the comparable weekend of August 10/11, 2019 (115.5) and 7.6pts below the 2020 weekly average of 94.1.
Driving the fall this week were declines in confidence about the Australian economy over the next year and that now is a good time to buy major household items.
Victorians aren’t spending
Boy is this lockdown starting to affect our economy!
ANZ Bank observed that growth in spending in Victoria has gone backwards due to stage four COVID-19 restrictions, but spending elsewhere has kept rising compared with the year-earlier period, albeit at a slowing rate.
Not surprisingly Victoria hit a second-wave low (−12{c8b66c61d036f6ef577ebb4000d6f98acefd4039e69613ab9f29a3541d0a44dc} y/y for the week to 8 August) not seen since the week ending 5 May.
New South Wales’s spending grew just 3{c8b66c61d036f6ef577ebb4000d6f98acefd4039e69613ab9f29a3541d0a44dc} y/y in the same week, while the rest of Australia’s spending grew 17{c8b66c61d036f6ef577ebb4000d6f98acefd4039e69613ab9f29a3541d0a44dc} y/y.
In Victoria:
- Dining/takeaway fell sharply to −59{c8b66c61d036f6ef577ebb4000d6f98acefd4039e69613ab9f29a3541d0a44dc} y/y for the week to 8 August, the lowest rate of change since late April.
- Fashion also fell to pre-JobKeeper lows (−60{c8b66c61d036f6ef577ebb4000d6f98acefd4039e69613ab9f29a3541d0a44dc} y/y) and travel/movement fell to −57{c8b66c61d036f6ef577ebb4000d6f98acefd4039e69613ab9f29a3541d0a44dc} y/y.
While ANZ-observed grocery spending in Victoria ticked up (+29{c8b66c61d036f6ef577ebb4000d6f98acefd4039e69613ab9f29a3541d0a44dc} y/y for the week to 8 August) in response to tighter restrictions on movement and takeaway offerings, household goods spending in Victoria (+16{c8b66c61d036f6ef577ebb4000d6f98acefd4039e69613ab9f29a3541d0a44dc} y/y) was much weaker than elsewhere in Australia (+44{c8b66c61d036f6ef577ebb4000d6f98acefd4039e69613ab9f29a3541d0a44dc} y/y for NSW and +120{c8b66c61d036f6ef577ebb4000d6f98acefd4039e69613ab9f29a3541d0a44dc} y/y for Australia excluding NSW and Vic).than elsewhere in Australia (+44{c8b66c61d036f6ef577ebb4000d6f98acefd4039e69613ab9f29a3541d0a44dc} y/y for NSW and +120{c8b66c61d036f6ef577ebb4000d6f98acefd4039e69613ab9f29a3541d0a44dc} y/y for Australia excluding NSW and Vic).
This week’s property data provided by Dr. Andrew Wilson of My Housing Market
Auction clearance rates
Auction clearance rates remain firm in Sydney last weekend.
However with Melbourne in lockdown and auctions now being held on line, many properties originally scheduled for auction have been withdrawn and these are classed as non-sales creating a much lower clearance rate than normal.
Latest finance figures:
Watch the video as Dr. Wilson unpacks the latest finance data.
Admittedly these were June figures and the market has changed significantly since then, but as you can see home lending surged, coming off a very low base, with first home buyer activity surging.
New property listings
Watch this weeks video as Dr Andrew Wilson explains how the the supply and demand ratio is being influenced by the number of properties coming onto the market for sale.
Building activity
After a significant building boom a few years ago the following charts show how the pipeline for new apartment construction has collapsed.
Victoria’s mounting Covid-19 cases will lead to slower economic recovery and a weakened outlook for the housing market, according to the RBA’s August statement on monetary policy.
“More broadly, residential building approvals for both detached and higher-density housing have declined over recent months,” the RBA said.
“Furthermore, since the Home Builder scheme requires that work commences within three months of the contract date, higher-density construction projects are less likely to qualify.
“Developers have reported that sales of off-the-plan apartments have remained very soft, and some developers are delaying commencements of planned projects.
“The pipeline of residential work to be done declined over the past year because completions outpaced new approvals.”
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