This could light a whole other fire under property.

There’s a factor out brewing in left-field that could have a huge impact on our property markets in 2022.

The mining boom 2.0.

I don’t know if you were in the markets for the last one – around 2014. In that mining boom, huge commodity demand out of China created a massive pay-day for our miners. All this money in turn flooded government coffers and coursed through the veins of the Australian economy.

In the end, as it always does, that money found its way into real estate, and housing prices boomed.

And it looks like we’re about to repeat the whole story.

Because right now the world is in the grip of an epic ‘energy crisis’. That’s what they’re calling it and they’re not wrong.

Energy prices – from oil to gas to coal – are soaring. LNG prices are up something like 500%.

But for a little commodity exporter like Australia, that’s actually fantastic news. And for our miners, it’s an incredible stroke of luck.

Woodside and Santos, for example, have just reported their quarterly earnings, and they’re through the roof. Revenue is up a massive 80% on a year ago.

Woodside Petroleum and Santos raked in almost $3.6 billion in sales in the September quarter, up 80 per cent from the same time last year as the oil and gas producers cashed in on the international energy price crisis.

… “It’s unprecedented and wonderful, obviously,” Woodside chief financial officer Sherry Duhe told The Australian Financial Review of the prices that drove a 19 per cent jump in the company’s quarterly sales to $US1.53 billion.

“But equally, if not more exciting, is what we’re expecting in Q4 … It will be a strong quarter, based on what we’re seeing to date.”

And it’s not so much about volumes. It’s all about prices, as prices remain stuck to the ceiling.

In fact, the AFR reported that a tanker of LNG cost $10m a year ago. Today it cost $281m!

Soaring international gas prices have triggered a near 30-fold spike in the value of a single spot cargo ship of LNG to more than $US205 million ($281.8 million) in a price surge that delivers a windfall to gas producers but threatens to derail the global economic recovery.

The 40 per cent surge in Asian benchmark LNG prices to more than $US56 per million British thermal units, while shortlived, has sent shockwaves through the global gas market, given the cold Northern Hemisphere winter has yet to kick in.

So it’s a good time to be Australia. Our terms of trade are already soaring, and the trade balance was booming, even before we take account of the strong second half of the year we’re looking at.

So good times. Flush times.

The only trouble is that sometimes you can have too much of a good thing.

All this good fortune can make you lazy.

It’s like the good looking kids at school who never invest in themselves, and just figure than can live on their good looks forever.

(Totally not bitter.)

But our fortune may be our curse.

The Harvard Kennedy School’s Center for International Development last year released its Atlas of Economic Complexity. It reckons Australia has one of the least complex economies in the world, behind tech-powerhouses Senegal and Uganda.  

And look, when you’re exporting literal dirt for a living, it’s hard to make a claim to complexity.

But that’s tomorrow’s problem.

Today, we’re raking in the money hand over fist.

The little battler gets lucky again.

JG.

Melbourne continues to suffer. At least we know the economy will be fine.

Look, I’ll be honest. When Sydney’s outbreak launched, there was the tiniest bit of schadenfreude.

Melbourne had been doing it tough and there was Sydney, just cruising along with no cases and all that sunshine.

And so when the Sydney outbreak happened, and I’m not proud to admit it, but it did make me feel like we weren’t so alone over here in Melbourne.

Misery loves company.

But wouldn’t you know it, and maybe it’s karmic justice, but right now, Sydney seems to be winding down out of it’s outbreak, while things are only picking up in Melbourne.

On Sunday, NSW has recorded only 319 locally acquired cases and 10 deaths, numbers that are well down on recent highs.

Victoria on the other hand posted a whopping 1838 locally acquired COVID cases and seven deaths over the past 24 hours:

And those numbers are going from bad to worse.

And when you lay the Sydney outbreak with the recent Melbourne outbreak side by side, you can see that the Victorian outbreak is set to leave the NSW outbreak for dead.

There is no justice in this miserable world.

At least we’ve just decided to bit the bullet and face whatever Covid is going to give us. It was a nice dream that we could eliminate it, but it’s clear it was only ever a dream now.

And so I’m sending prayers for the people on the medical frontlines, and hoping that reopening doesn’t stretch the hospital system too much.

But while the health outcomes remain to be seen, I’m pretty confident the economy will be fine, no matter what happens.

And that’s because there’s still a lot of government support flowing into the system.

Deloitte has crunched the numbers, and the numbers look good.

While the mishmash of state/federal supports is certainly less encompassing than earlier JobKeeper supports, there are still a lot of dollars attached to them. And that sets the scene for a promising recovery as restrictions ease.

Last year, restrictions on movement and a collapse in confidence saw households rein in discretionary purchases. Added to that, generous government supports such as JobKeeper and the doubling of JobSeeker saw the incomes of some families rise. Combined, these factors lifted the household saving rate to a record high of 22% in June 2020.

Savings are again surging in this current lockdown… Government supports are also up. The COVID Disaster Payment has already injected $9.1b into the economy, and new state payments have also added at least $12b.

… Just as they did through 2020, we can expect households to draw down some of these excess savings when cafés, bars, clubs and restaurants throw open their doors in the very near future.

Yup. It’s one of the odd things to come out of Covid – a massive boost in household savings.

When we reopen fully, that should come bouncing back quickly.

That will eat up some of the savings.

But after that?

Who knows.

There’s a lot of money in the system.

And a lot of money to be made if you can stay ahead of it.

JG.

Another scorching weekend of auctions. Where are we going?!?

Everyone’s talking about how hot the property market is right now.

They’ve got no idea.

This is only the beginning.

Because NSW and Victoria are only making the first tentative steps towards reopening, and already the auction market is white hot.

The national clearance rate – the proportion of auctions that ended with a successful sale – popped to 81%, which is pretty much as good as it has ever gotten.

Sydney is absolutely blistering at 85%, while Victoria is very solid given the circumstances at 79%.

But what’s really interesting for me is what’s happening with the smaller capitals.

I mean look at Perth! 86%!

And Brisbane at 78% is twice as good as it usually is. I’ve never really understood why, but auctions just never do all that well in Brisbane. But not these days. Oh no. They’re going off.

And it’s the same story in Adelaide.

And it is true that the volumes in the smaller capitals are nothing like what they are in Sydney and Melbourne, but that’s always the way.

And it does make you wonder. Covid has just changed the way we’ve done so many things. It makes me wonder if Brisbanites will look at these auction results, and come around to auctions more in general.

Maybe.

The other key thing to note is here is that volumes are up strongly across the board.

According to CoreLogic, “there were 2,920 homes taken to auction across the combined capital cities this week, the busiest auction week since late June when 2,960 capital city homes were taken to auction, and the fourth busiest auction week so far this year.”

So it’s on like Donkey Kong.

And properties are selling like literal hot cakes (in a paper bag, with sugar on them).

Sales volumes so far this year are well above their five year average.

And home lending has gone vertical, and people load up on the credit:

And all that is happening with the two largest states in lockdown.

What happens when we put all that behind us?

What happens when we go back to normal? What happens when people can actually get around to open inspections?

If things are this hot now, what happens when we come back from the Christmas break, with stockings full of cash and a world returning to normal?

It’s hard to imagine, with property prices already growing at 20% a year across the country.

But remember, in New Zealand they got to 30% before the pace of growth started to ease a little.

It sems like a big stretch from here to there, but I wouldn’t be discounting it.

All the factors are there.

The powder keg is ready to blow.

JG.