The latest edition of our finance and property news digest with a distinctively Australian flavour. In today’s show we look at the latest from the US markets, consider the view that our housing market is pandemic proof, consider New Zealand’s LVR policy tightening consultation and why the banks are taking a political stance on the virus.
Go to the Walk The World Universe at https://walktheworld.com.au/
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I caught up with Author and Economist Harry Dent. We picked apart the recent trends, and considered whether Central Banks will succeed in propping up the everything bubble, or whether the markets will finally see through their efforts, and crash, thus laying the foundations for a real boom later.
Please share this post to help to spread the word about the state of things….
Caveat Emptor! Note: this is NOT financial or property advice!!
The latest in our series of Friday afternoon chats in which Journalist Tarric Brooker @AvidCommentator on Twitter and I discuss the latest economic data.
What is really going on, and will it support a recovery ahead?
I catch up with Author and Businessman Robert Kiyosaki ahead of the final live show in the current series that Harry Dent, Robert and I will be participating in this coming Sunday 30th August 2020, details at www.summitlivestream.com.
Note DFA has no commercial relationship with Harry, Robert or the organisers of this event, and we do not endorse the content or speakers. However, we will be presenting material on our latest research during the session.
DFA has released our latest results from our rolling 52,000 household surveys. As a result of the economic slowdown (which was already underway before COVID) and exacerbated by the COVID restrictions, more households are falling into financial stress.
We define stress in cash flow terms – money in and money out – for both rental and mortgage stress, with those in negative cash flow flagged as stressed. Investor stress is assessed by different means, including negative cash flow, extended vacancy rates, intention to sell and other factors. In the round while the various Government support schemes, and repayment holidays, plus rental freezes are assisting, the downward trajectory in finances is clear, and explains the rising stress.
Mortgage stress rose to its highest level ever at 40.2 of households. We expect this to climb higher as support is moderated, and banks have hard conversations about recommencing repayments. Morgan Stanley commissioned a survey of mortgagors as part of some research on the impact of the coronavirus, and found that 55 per cent of them have received some form of income support. Household debt ratios continue to rise (thanks also to the capitalised interest and repayment holidays).
Two states saw a slight decline in the month, TAS and NT, as restrictions were somewhat eased,though both states have the highest stress percentages. But households in VIC rose by more than 15,000 from last month and NSW by more than 12,000. Overall more than 1.5 million households are impacted, up from 1.45 million last month.
Across the segments, Young Growing Families are most exposed – this includes recent cohorts of first time buyers. Affluent households continue to be impacted, as unemployment is becoming structural. The RBA recently flagged an official rate of ~10% later in the year. The true rate is significantly higher.
Looking in more detail at the post codes with the largest counts, many are fringe areas where there are many new estates, large houses on small lots driven by the construction boom. However a number of regional centres are also impacted. VIC is particularly exposed.
Turning to rental stress, we see a rise of tenants struggling with repayments. There is confusion for some as to whether their rents are on hold, or simply accruing. We are seeing more households planning to move back with family and friends. Stress is highest in NSW and VIC, with a significant spike in the largest states.
Across the segments, Young Affluent and Multicultural Groups are most exposed, linked with both students suddenly without part-time work, and the shrinking of the gig economy. However in terms of numbers of stressed renters more mainstream families are caught.
The post code distribution is illuminating, with Melbourne 3000 the standout high risk post code. Then comes both areas of Western Sydney and the Central Coast.
Finally turning to our latest analysis of Stressed Property Investors (based on their place of residence not where their properties are located), we see that 25% of investors are stressed, and overall 12% are actively considering selling. The highest rates of stress are in the NSW and ACT.
By segment, Young Affluent and Exclusive Professional Property Investors are the most stressed, not least because of the higher proportion of multiple investment property held. Many Young Affluents have multiple (cheaper) high-rise investments which are losing value.
Melbourne 3000 holds the unenviable record for the highest count of stressed Investors (which may well correlate to the high rental stress). Mandurah, in WA, where prices have dropped 38% from peak appears near the top as many Investors have been in difficulty for years, and are unable to sell due to negative equity. Watch and learn….
We expect the banks to be tougher on property holders in these high risk areas, compared to others as the discussions about payment restarts after September.
To make the point, here is the full data for 3000 and 4000. The pinch points here are clearly related to investment property.
We can provide post code level data for most locations across the country, or you can subscribe via Patreon to receive a full monthly update.
Finally, we discussed this analysis at length on our recent live stream:
This was my contribution to today’s live event which included Harry Dent and Robert Kiyosaki. I discuss my latest survey results and property and finance scenarios.
A quick reminder of a special event on Sunday. We are in unprecedented times and business as usual won’t wash. So get to hear where things stand, but also what you can do. It’s not too late to sign-up.
Note: DFA has no commercial relationship with the organisers or other participants.
You can watch my recent shows with Harry and Robert.
