This cycle is breaking all records, but just who is driving it?

So Corelogic reckons that if property prices keep growing on their current trajectory, this will be the fastest recovery on record!

(Pew, pew. Ticker-tape everywhere.)

That is, on their current trajectory, property prices will overtake their previous all-time-high, which was achieved 27 months ago, and they’ll do that by April this year:

A remarkable recovery

Since national dwelling values bottomed out 8.4% below their peak at June 2019, the Australian dwelling market has quickly recovered 6.7%.

If growth rates continue at the January trajectory (of 0.9% value growth per month), Australia’s dwelling market would make a full nominal recovery by April, marking a 10 month recovery period since values found a floor last June. This is compared to an average recovery time of 11.7 months in previous cycles.

I don’t know if you were watching this chart in real time like I was, but I remember when that dark blue line of the current cycle overtook the light-green line of 2008-09 downturn. At the time I remember thinking, oh boy, we might have a doozy on our hands here.

And it kept grinding lower. It steadily became both the deepest downturn in terms of price falls, and the most protracted downturn, in terms of months.

But then, things turned around very, very quickly.

As Corelogic note:

This recovery is remarkable when considering the relatively long time it took for the market to bottom-out. The table below shows the number of months taken to get from peak to trough, and then from trough to recovery throughout past cycles.

Most recovery periods match the length of time it takes to go from peak to trough. However in 2020, the market recovery could be half the length of the downswing.

The other thing that’s interesting about this market, as I’ve noted before, is that this recovery is not being driven by investors. Investors are normally behind most bull runs.

But this time, the market is being driven by owner occupiers.

The owner-occupier upswing

Housing finance data from the ABS shows much more activity from first home buyers, upgraders, and down-sizers in this recovery. During the previous upswing that took place from 2012-2017, the portion of new housing finance to owner occupiers (excluding refinancing), averaged 59.4% based on the value of commitments.

Over the past 7 months, this has risen to 71.4%. It is worth noting that data on the latter is covering a relatively short period of time, and investor participation may increase over 2020.

I don’t expect this will last. An going and accelerating housing shortage thanks to the construction downturn should see rents start to rise in the near future.

This, alongside rising prices, will lure investors back to the market, especially as the APRA restrictions fade into the rear-view mirror.

Then, it will be on like Donkey Kong.

JG

The property market in Tasmania looks eerily familiar…

I wanted to have a look at what’s going on across the Tasman today. It’s current property boom and emerging housing crisis is a microcosm of the factors that are driving property markets across the country.

First, according to CoreLogic, Tassie has experienced by far the sharpest rental growth over the past year:

Compare rental growth in Hobart to the national average, and Hobart is tearing away:

As usual, higher rents are being driven by low vacancy rates and a tight rental market. Vacancy rates are hovering around 0.5% – which is about as tight as it gets.

And of course when rents rise, house prices go up, since rents are the return on the property asset, and asset returns and prices are always linked.

Over the past twelve months, prices in Hobart grew 3.9%. Only Sydney and Melbourne did better, but they were bouncing back from a consolidation and that was always to be expected.

But, it looks like the Tassie boom is only getting started. Experts predict population growth will continue to outstrip supply. This dynamic – call it a housing shortage if you like – is the most consistent and predictable driver of property prices across the country, and now it’s Tasmania’s turn.

Property prices are set to keep rising in Hobart, experts say, offering no relief from the affordability crisis facing Australia’s southernmost capital city, after rapid rises in recent years.

Locals report a continued influx of mainlanders moving to the Tasmanian capital…

The city’s median house price, at $482,960 last quarter, jumped 35 per cent over the three years to September, Domain data shows. Meanwhile, unit prices increased more than 50 per cent to $395,715.

Hobart became the fourth most expensive apartment market in 2019… This is a stark contrast to two years ago when it was the most affordable…

[Independent economist Saul Eslake] noted upward price movements had been driven by a significant turnaround in population growth — with more people migrating south and fewer locals leaving — increasing demand for homes…

Rob Henry of Harcourts Hobart has seen an influx of mainland buyers in recent times as east coast housing prices have jumped…

The undersupply of housing has put a squeeze on Hobart’s rental market, the most rapidly rising of all the capital cities – with rents increasing 9.8 per cent for houses and 12.9 per cent for units over the year to September.

Hobart also has the lowest vacancy rate, sitting at 0.6 per cent in December compared to the national rate of 2.4 per cent.

“Vacancy rates are very, very low, you don’t get one or two people applying for a rental, you get 10 to 15 people wanting to put in rental applications,” Mr Henry said.

Of course, where there’s a boom in prices, and demand outstrips supply, you have a housing crisis, as there just isn’t enough houses to go around.

Thousands of Tasmanians have been left languishing on the state’s growing housing waiting list, new figures reveal, with the list now higher than at any point in the past year…

New figures released by the Department of Communities reveal that… thousands of Tasmanians remain on a housing waiting list that is getting longer.

The number of Tasmanians waiting for public housing rose in the September quarter to 3,444 — higher than at any point in the previous 12 months…

Labor’s housing spokeswoman Alison Standen said the waiting list was evidence of a deepening housing crisis in Tasmania.

“People in Tasmania tonight are concerned about where they’re going to get a roof over their heads. This means that very many vulnerable Tasmanians are struggling to find a home,” she said.

“Clearly this is a crisis in housing that is getting worse and worse.”

I expect this is right. A vacancy rate of 0.6% is pretty much ridiculous. That’s a full-blown housing shortage.

And with prices still well-below the main-land capitals, you’d have to think there’s still plenty of upside.

And the drivers are there – the same drivers that have delivered massive price gains across Australia for years.

People just don’t seem to get it. If there are more people than houses, then prices go up.

Tasmania is proof of the pudding.

JG

Kobe Bryan’t death is a tragedy, but he has left us with a powerful lesson in how to achieve god-like focus.

I’m sure you’ve seen the news by now – Basketball legend Kobe Bryant and his daughter were killed in a helicopter crash.

Now, at this point, I’m sure some keyboard hero is getting ready to pull me up and say, “Hey Jon, what about those other seven people who died in the crash. Where are your thoughts and prayers for them, you heartless prick?”

And to that I say, “Seriously, get stuffed.”

I don’t care about those people. Not really. I didn’t know them. It’d be pretentious to say that I did.

That’s not how fame works. I didn’t know Kobe Bryant personally either, but the man and the life he lived have meaning for me. His death, at just 41, with everything a man or woman could ever hope for, is, for me, profound.

And really, if you’re crying internet tears over seven people you didn’t know, and you don’t even know the name of, you’re a wanker. What about the ten-thousand or so people who also died on that day, in various tragedies around the world? Where are your internet tears for them?

No, you’re not crying internet tears for them because you’re a hypocrite. It’s just shallow virtue-signalling, to say that your compassion is greater than everyone else’s because you care about the other victims in the crash.

Take it somewhere else.

And now somebody else wants to take me to task for celebrating a sporting hero. What about the dead doctors, brain surgeons and human rights activists?

Again, unless you’ve posted on facebook about the death of at least one brain surgeon this year, you’re a hypocrite.

And we’re talking about Kobe Bryant here. This isn’t someone who just tossed a few balls around in his spare time. This is someone who climbed to the pinnacle of his profession, and stayed there for 20 years.

That’s not about talent, though he had that in spades. That’s about a phenomenal amount of commitment and hard work.

I wonder if people who haven’t played sport can really get that.

And sure, maybe there’s more worthwhile mountains to climb – charity, poetry, civil service etc.

But that misses the point. Kobe Bryant was a human who took himself on an incredible journey. The inspiration was in who he was and what he became, not in what he did per se.

But let me cut swiftly to what I really wanted to talk about: Kobe’s Black Mamba Mantra.

And what that teaches us.

After he learnt about the black mamba snake in the film, Kill Bill, Kobe decided to take the name on as his alter ego.

From that point on, when he was on the court, he was ‘The Black Mamba”.

But this wasn’t about puffing himself up. This was about survival. As he said:

“I had to separate myself. It felt like there were so many things coming at once. It was just becoming very, very confusing. I had to organize things. So I created the ‘Black Mamba.'”

I love this. The Black Mamba allowed him to leave everything behind as soon as he stepped onto the court. He didn’t have to worry about the bills, or how the kids were going at school, or any of the million things we all have to worry about.

(Note: The mind will find a million things to worry about, even if you’re as successful as Bryant.)

The Black Mamba was a work of mental discipline. It was an act of focus and concentration.

And I think a lot of what Bryant achieved in his incredible career can be put down to this superhero-level focus, and the mantra that made it possible.

And so I think there’s something in that for us. Are we focused enough? Are we committed enough? If not, do we maybe have to don the costume and become our own superhero?

So thanks Kobe Bryant. Thanks for the lessons.

And thanks for the reminder that no matter what you have or how much have you achieved, it can all be taken away from you in an instant.

His legacy is wide, but it includes this lesson too.

JG

I wouldn’t be pinning my hopes on a tourism-led recovery, and I wouldn’t be ruling out helicopter money.

I’ve got two things for you today.

First: Last week I was talking about the possible impacts the fire would have on the economy.

The obvious big-hit is going to be to tourism, especially in the short-run. Images of the fire have gone global. I’ve got aunties calling me up from Greece to make sure I’m alright.

“Yes, we’ve been quite lucky here in inner-city Ivanhoe, thanks Aunty.”

Some people think the entirety of Australia is closed for business, and that’s a shame.

But, tourism was actually struggling before the fires hit.

The ABS have just released their latest tourism numbers. This is only up to November (counting people takes ages ok?), but it paints a picture of a tourism sector that was already topping out.

This is the chart for tourism numbers by region:

The orange line shows the big boom in tourism from NE Asia, which is pretty much a China story. This chart is China only.

You can see here the phenomenal surge in Chinese tourist numbers following the GFC.

But you can also see that it has topped out already, and if anything, seems to be retracing slightly.

Given the first part of the year is the big tourism season for China, and given the fires have cast such a pall of smoke over that, I’d be thinking Chinese numbers are going to come off a substantial amount.

But putting aside the fires, you can see that the tourism industries that were gearing up for a China-forever boom, are already running out of puff.

And the property markets attached to them are probably going to slump too. Last time I tuned in with Cairns I think they were still hitching their wagon to a huge ongoing surge in Chinese interest. They might be doing a bit of a rethink now.

Anyway, Chinese tourism numbers are going to come off, but the problem is bigger than the fires.

So if tourism is not going to save us, what might?

How about money-printing?

This is an idea that more and more economists are coming around to: that the RBA is going to be forced into some sort of money-printing regime.

In fact, even the most hawkish are coming around to the idea. Last week it was Paul Bloxam at HSBC:

In June 2019, the RBA published its new estimates of unemployment. Whereas previously the central bank had thought that unemployment was around 5 per cent it was now estimating it to be around 4.5 per cent.

…In making this reassessment the RBA gave up on a previous pretence that Australia might be different. For many years, Australia had higher interest rates than elsewhere, but no longer…As a result, earlier narratives that the RBA had used to raise concerns about cutting further, including that rate cuts would not do anything useful, that rates were not the constraint on businesses and that further cuts could pump prime already high household debt, were largely cast aside.

… The economy is in the doldrums and with little room to cut its cash rate further, the RBA may be forced to take emergency action, like a bond-buying program.

This is significant for two reasons: 1. Bloxham is ex-RBA, so he’s got some insight into their inner workings. 2. For a long while he’s been saying that the next move for the RBA was up.

So if even he’s coming around to the money-printing party, it makes me think you can pretty much lock it in.

So maybe it’s not tourism, but helicopter money that’s going to save us?

Watch this space.

JG

I think society has sucked us in with this myth…

I know kids these days outstay their welcome, but this is ridiculous.  

A 35 year old married father of one has FINALLY decided it’s time to move out of his grandmother’s house.  

And he’s giving up his allowance too.  

About time I say.  

Now, I’m talking about Prince Harry (or is that former Prince Harry, I’m not too sure).  

But we all know that kids are staying at home longer and longer these days.  

Plenty are still there into their 20s. Some even stay into their 30s.  

I remember when you used to turn 18 and you couldn’t wait to get out of there! 

I digress. 

Part of the problem of course is it’s getting more expensive to live on your own.  

And we’re simply not building enough houses for everyone.  

However while most people see this as a problem, I see this as an opportunity.  

If demand – and prices – are shooting up and supply can’t keep up then there’s money’s to be made.  

And the best way to take advantage of it is with the high growth, high cashflow strategies of Dymphna Boholt.  

Dymphna and her top coach are touring right around Australia shortly showing people how to manufacture growth and cashflow from property. 

[Free event] Click here for your ticket 

By the way, this is a full day event.  

You can teach people how to buy a house and hold it for 20 years in a couple of hours.  

But you and I know that’s not where the money is.  

The money is in manufacturing equity and cashflow almost out of thin air.  

This is what I call the fast-lane to wealth.  

Click here and claim your ticket – discover how to manufacture wealth and cashflow 

So in this full day’s training you’ll discover how people are creating $40,000 … $60,000 … even over $100,000 in equity in a matter of months, sometimes weeks. And are taking negatively geared properties and turning them into cash-cows.  

If you want a faster way to create wealth then make sure you get your spot early.  

I think society has sucked us in with this myth…

WANTED: Zookeeper. Must be passionate about animals.

You’ve all seen a job-ad like this right?

I’m sure if you crunched the data on the key-words used in job ads, “passionate” would have to come out as number one.

And it’s a total con.

In fact, it’s such a pervasive con that even the people perpetrating it have no idea what they’re doing.

Let alone the poor bums who buy into it.

Think about it. Why would the zoo want a “passionate” zookeeper. Or why would an accounting firm want a passionate accountant?

The answer is fairly obvious. A passionate zookeeper is a zookeeper who is going to pour themselves into the job. They are deeply and personally motivated to do an excellent job entertaining the animals (or whatever it is that zookeepers do).

That is, the zoo is saying they want someone who is motivated above and beyond the motivation that the pay scale can provide.

They want your personal motivation to pick up the slack – to do some of the heavy lifting that the salary alone can not.

In fact, the more passionate and motivated you already are, the less they have to pay you.

And this is the heart of it. It’s why every employer wants a ‘passionate’ employee. The more passionate they are, the less they have to be paid to do the work.

It’s a con.

What’s worse, we buy into it.

If we’re unhappy in our jobs, we think we need to find a career that we are more “passionate” about.

But what that’s really saying is, “I’d be happy with this un-motivating pay-rate if I was at least in a job that excited me a little.”

“This sh!t-sandwhich would taste better with a little passion-sauce on top of it.”

This is not the way to create a better life for yourself. We have been told that it is (probably because it serves the interests of the people who want to keep us in our day-jobs), but it’s not. It’s a con.

Don’t buy into it.

Now this might sound little funny coming from me. You might have seen that I was hiring again at the start of the year. Knowledge Source, I’m proud and grateful to say, just goes from strength to strength.

It’s an honour to serve at the helm.

And I don’t remember how we drafted up the job ads, but there’s a good chance “passionate” was in there somewhere.

But I mean something quite specific by that. If I say I want a “passionate accountant”, I’m not looking for someone who is passionate about numbers and accounting systems per sè.

(That actually be kinda weird.)

What I’m looking for is someone who is excited about the opportunities that working with us will give them. I’m looking for someone who is excited about working with a growth organisation like Knowledge Source, because they are excited and committed to their own growth, and they have their own vision about where they want to be in 5 or 10 years.

This is the kind of passion that I’m looking for.

And it’s the kind of passion that you should be cultivating too.

If you feel like your work-life lacks passion, don’t look for a new job that you feel passionate about. Look for a vision of your life as a whole that you can get passionate about, and then find a job that fits within that vision.

This is how we should be talking about passion.

But until we do, we are slaves to other people’s dreams.

JG

I think society has sucked us in with this myth…

WANTED: Zookeeper. Must be passionate about animals.

You’ve all seen a job-ad like this right?

I’m sure if you crunched the data on the key-words used in job ads, “passionate” would have to come out as number one.

And it’s a total con.

In fact, it’s such a pervasive con that even the people perpetrating it have no idea what they’re doing.

Let alone the poor bums who buy into it.

Think about it. Why would the zoo want a “passionate” zookeeper. Or why would an accounting firm want a passionate accountant?

The answer is fairly obvious. A passionate zookeeper is a zookeeper who is going to pour themselves into the job. They are deeply and personally motivated to do an excellent job entertaining the animals (or whatever it is that zookeepers do).

That is, the zoo is saying they want someone who is motivated above and beyond the motivation that the pay scale can provide.

They want your personal motivation to pick up the slack – to do some of the heavy lifting that the salary alone can not.

In fact, the more passionate and motivated you already are, the less they have to pay you.

And this is the heart of it. It’s why every employer wants a ‘passionate’ employee. The more passionate they are, the less they have to be paid to do the work.

It’s a con.

What’s worse, we buy into it.

If we’re unhappy in our jobs, we think we need to find a career that we are more “passionate” about.

But what that’s really saying is, “I’d be happy with this un-motivating pay-rate if I was at least in a job that excited me a little.”

“This sh!t-sandwhich would taste better with a little passion-sauce on top of it.”

This is not the way to create a better life for yourself. We have been told that it is (probably because it serves the interests of the people who want to keep us in our day-jobs), but it’s not. It’s a con.

Don’t buy into it.

Now this might sound little funny coming from me. You might have seen that I was hiring again at the start of the year. Knowledge Source, I’m proud and grateful to say, just goes from strength to strength.

It’s an honour to serve at the helm.

And I don’t remember how we drafted up the job ads, but there’s a good chance “passionate” was in there somewhere.

But I mean something quite specific by that. If I say I want a “passionate accountant”, I’m not looking for someone who is passionate about numbers and accounting systems per sè.

(That actually be kinda weird.)

What I’m looking for is someone who is excited about the opportunities that working with us will give them. I’m looking for someone who is excited about working with a growth organisation like Knowledge Source, because they are excited and committed to their own growth, and they have their own vision about where they want to be in 5 or 10 years.

This is the kind of passion that I’m looking for.

And it’s the kind of passion that you should be cultivating too.

If you feel like your work-life lacks passion, don’t look for a new job that you feel passionate about. Look for a vision of your life as a whole that you can get passionate about, and then find a job that fits within that vision.

This is how we should be talking about passion.

But until we do, we are slaves to other people’s dreams.

JG

It’s hard to estimate the impact these fires will have on the economy. But some economists are tyring.

It’s one of the odd things about the economy, disasters are often good news.

Well, it’s kind of a question about what the economy measures and what it doesn’t.

If someone comes along and keys my Merc, for example, the money I spend on repairs is a positive contribution to GDP. The nights I spend crying into my pillow… they don’t get counted at all.

For a long time, this has been one of the big criticisms of the economics discipline, and the capitalist system it supports. An oil spill is bad news for wildlife. It’s a free-kick to the economy.

But while I might be open to the idea that we need to do a better job measuring happiness and misery, and making them policy objectives, the fact is that once the money starts flowing, it keeps flowing.

I pay the panel-beater. He takes the money and buys bread. The baker takes the money and buys groceries. Woolies takes the money and lobbies politicians to stop them opening up competition in the grocery market. The politicians take the money and pay junior-staffers to dig up dirt on their opponents.

And this is how our wonderful economy works.

And so in the context of this horrendous summer of fires (and let me be serious for a moment – these fires have been full-on. For the people personally and directly affected, I can see it’s been incredibly traumatic.) but in the context of these fires, the economic implications are not clear cut.

Obviously, in the first instance, it’s been a big disruption to economic activity. The economy has taken a hit.

But as we go on, and we begin the slow and painful processes of rebuilding – well, this is where we get our perverse result that disasters can be good for economic activity. 

And where we end up at the end of the day, well, that’s something the economists are trying to nut out now.

Economists like Shane Oliver at AMP:

The damage to property and wealth flowing from the bushfires will likely run into many billions. For example, the Victorian Black Saturday bushfires are estimated to have cost $4.4bn, whereas the current fires have covered an area 15 times bigger. So there will be a very big rebuilding boost to economic activity to come once the fires are brought under control…

Activity related to farming, manufacturing, transport, tourism and business generally in the affected areas will be disrupted – this will involve around 2-3% of the population and will be concentrated around the March quarter. It will also be partly offset as affected people have to undertake spending that they otherwise wouldn’t have had to.

A bigger impact on economic activity is likely to come via a hit to consumer spending as the constant news of the fires and the smoke haze in several capital cities weighs on confidence…

Inbound tourism is also likely to be impacted by the heavy coverage of the bushfires globally – with ridiculous maps showing much of Australia on fire (including where I am right now) – likely to adversely affect perceptions of Australia…

Taken together we expect a detraction from GDP due to the bushfires of around 0.4% starting in the December quarter but mainly impacting the March quarter before a rebuilding boost kicks in from the June quarter. Given the uncertainty, the range around this negative impact is -0.25% up to a worse case of -1% of GDP should the fires continue on a widespread basis through the rest of summer. The rebuilding boost should reverse much of this drag later in the year, but there is considerable uncertainty around this as the impact on tourism and consumer spending may linger longer.

The short-term hit Oliver is pointing to is substantial. But as he says, it will likely reverse, and output in the second half of the year is stronger than it otherwise would have been.

That could see a government enjoying some stronger economic numbers in the second half of the year. With the memory of the fires (and how they’ve been handled) behind them, punters may view these stronger numbers favourably.

Obviously I’m not saying they planned it that way, but they won’t be looking that gift horse in the mouth either.

Anyway, whatever the case, people talking up the economic devastation that these fires have created, (again, leaving aside the very real personal devastation that many people have felt) are missing the point to a degree.

From a strictly economic perspective, some disasters are good news in the long run.

JG