clearance rates

Monday Smackdown: Auction Clearances still stratospheric… Plus much, much more!

May 25, 2015 by Jon Giaan

Everything worth knowing in less than a minute!

Consumer Sentiment Surges

Both the ANZ and Westpac measures of consumer confidence surged in the week, poking their noses up above the long-run average for the first time in a while.

Why? Seems it was all about the budget, which was seen to be much friendlier and cuddlier than the last one.

To me, this tells us two things.
1. The government’s ‘warm and fuzzy’ spin strategy worked.
2. People are idiots.

Auction Clearances still stratospheric

The national auction clearance rate moved even higher this week to 78.4%.

Either we’re looking at one of the strongest booms in recent memories, or there’s something going on with the way Aussies relate to auctions. I think it could be a bit of both.

Foreigners love (new) property

Braclay’s has broken down the Foreign Buying data from FIRB. We knew that foreign property purchases had doubled in the past year. Now it seems that doubling is all about new (vs existing) properties. Though existing also posted decent growth.

Big Business getting Bigger

All this talk about young and nimble tech companies “disrupting” the business world – and someone forgot to tell big business.

In America, the overall revenues of Fortune 500 companies have risen from 58 percent of nominal GDP in 1994 to 73 percent in 2013.

So much for the new economy.

Have a great week!

The Giaan Investor Review Report

May 5, 2015 by Jon Giaan

Each week, I jot down interesting bits and pieces as I come across them, like a scrapbook I guess, and I use it to build a picture of what I think is going on.

In recent months I’ve started forwarding it around to friends and mentoring students. Friends started forwarding it to friends, and I’m getting more requests to join the distribution list, even though I haven’t officially set one up.

So anyway, I thought, why not just share it with everyone. It doesn’t cost me anything since I’m doing it anyway. And the more knowledge we have, the better off we all are, right?

So welcome to The Giaan Investor Review Report. This is just a hodge-podge of whatever data and news I find interesting. Sometimes I’ll give a little commentary on what I think it means. Sometimes I won’t.

Give it three mins. Read the stuff that interests you, and you’ll be as well-informed as any analyst out there.

Enjoy
JG

Auction Clearances still pumping

Holding around record levels. 87% in Sydney. 83% in Melbourne. Tubthumping. The market has never seen anything like it.

(I’m starting to wonder if there’s been a cultural shift towards auctions… Is the market really this strong?)

House prices strong, but increasingly Sydney-centric

Latest RP Data shows Ozzie houses growing at 8.1% y/y. But Sydney is the main story, growing at 14.4%. Melbourne gets silver at 7%. Bris gets bronze on a barely also-ran 2.5%. Perth was flat. Darwin fell.

City narratives are dominating national stories.

May rate-cut is on

The odds are shortening for a rate-cut in May, with renowned bank-watcher (and some say the RBA’s leak distribution channel of choice) Peter Martin writing in the SMH:

Concern about a deteriorating economic outlook and a resurgent Australian dollar will force the Reserve Bank to cut interest rates on Tuesday…

Among the concerns driving the bank is a realisation that unless it cuts its cash rate on Tuesday, financial markets will stop believing that it is prepared to cut and push the dollar even higher.

Of most concern to the bank is new data on business investment plans, which shows that not only is mining investment set to fall sharply in 2015-16 but that non-mining investment is expected to fall as well, despite the talk about new economic drivers emerging to take the place of mining.

Although the Bank is concerned about the effect of another cut on Sydney house prices, it is prepared to rely on its sister regulator, the Australian Prudential Regulation Authority to ensure banks do not cut their lending standards…

The RBA is acutely aware that the upcoming federal budget will do little to boost the economy…

The RBA is playing chicken with the markets. If they don’t move, the dollar pumps higher, and no one believes anything they say. At the same time, Canberra is in Austerity mode, so no help there.

(Martin has picked the last two cuts.)

Prices give them lots of room to cut if they want to:

The ABS says the cost of living is up a piffling 0.9%. Inflation and rumours of inflation seem banished from the earth. At the same time, wages are up 1.3%, so Aussies are (technically at least) better off.

Iron Ore Prices Jump… a little.

Iron ore prices ended the week up 20% on their recent trough. It’s enough to put some high-cost miners (like Atlas and FMG) back in the black, but in the scheme of things isn’t much to write home about.

Here’s a sobering thought: Deloitte Access Economics reckon that falls in the iron ore price in the past 6 months (which feeds into profits and therefore taxation revenue) have left such a gaping hole in the budget, that even if you extended the GST to all fresh food, it wouldn’t cover the shortfall. Ouch.

Negative Gearing Aussies approach critical mass

According to the ATO, there are now 1,967,260 negative gearing property investors across Australia.

Whatever you think about neg gearing, 2 million voters is a political force to be reckoned with.

Govt get serious about foreign purchases

Abbott has announced plans for legislation to crack down on illegal foreign buying, including the potential of jail time. Not a moment too soon. Should be before parliament by June, and taking effect from December. I’ll cover the details later this week.

White-sex sells property

Here’s something cute. What do you do when you’re having trouble moving apartments in China? Get foreigners to stand around in their underpants for no good reason. Looks like it works.

There you go. What do you think? Is that useful to you?

Have a great week
JG

Bad news for all investors!

August 3, 2010 by Jon

I bet you're confused about what's happening in the economy right now.

I certainly am.

Reading all the headlines, you'd think we're on the cusp of a property crash and diving into another global crisis via a double-dip recession. Run for the hills!!

Add an election to the mix and you've got a recipe for massive procrastination.

So what can we make of it all?

Let's see if I can help…

I think the Reserve Bank of Australia went way over the top with its interest rate hikes. We went from a 3% cash rate to 4.5% in just 6 months.

This was a massive 50% increase and the most aggressive in the western world.

So why did Glen go so hard?

He had eyes only for the property market and the only way he could stop it was by using interest rates as his evil weapon against his perceived property boom.

He's thinking was… Slow down the property boom and we've got a chance at improving the housing affordability of everyday Australians.

Since his crusade 6 months ago, he succeeded in putting a pause on property prices, but only after 6 months of solid real estate gains in most markets.

…and this week, we receive evidence that is he has also killed affordability with the following headline, “New Home-Starts Fall a Further 5.2% in June”

Some uneducated investors see those type of headlines and think we've got a serious problem.

Here's what I think…

The down-turn in new home sales is by and large the product of the end of the government stimulus for first home buyers and the increase of interest rates, which has led to the following problems…

The lack of available land… Chronic lack of development finance leading to a lack of development activity… Council planning regulations taking far too long to release projects… Infrastructure delays in new development areas.

All of this will mean one thing.

That the housing shortage will continue to increase and prices will continue to push upwards… and the people most disadvantaged from this are the ones that the RBA boss, Glen Stevens is trying to help… those who are trying to buy their first home.

So all the shenanigans going on right now will push the expanding population into the rental market.

What does that mean?

Rents will significantly go up in the next 12-24 months.

Great if you're a property investor, not much good if you're a tenant.

So what I'm saying here is that there will be no property crash – full stop.

What we'll see over the next several years is single-digit growth across many markets and if you're smart and savvy within certain markets, you'll be able to achieve much better than that.

You see, when most of the stats are quoted, they're typically an average of all markets. So if we see 6% growth on average, it would not be unusual to have certain areas within property that have grown by 25%…

On the flip-side, some areas may fall by 10%.

That's why I think you need to stay on top of your game, stay invested in areas that are likely to grow faster than others.

…research, research, research…

On another subject, and that is clearance rates, I often have a lot of fun with this sort of data… But here's something you probably don't know.

The clearance rates that the average investor seems to hang off every Monday morning reports only 20% of property transaction nationally.

That's right, just 20%.

So does it really mean anything?

N.O.

Here's something else that you need to know – all it really shows is people selling and buying.

12 months ago, we might have had a clearance rate of 55% with 400 properties on the market. In the current climate, we've got clearance rates of 67% with 900 properties on the market.

All this stuff is just noise to fill up newspapers and get your attention.

The macro picture (long term) is still so strong for property in this country that you'll kick yourself if you sit on the fence again.

Interestingly, I was listening to professor Keen the other day and he is still ranting and raving about the 40% drop in real estate. The guy doesn't give up.

He said that his initial prediction of a 40% drop was over a 10-15 year period… Not 2 years after the GFC hit. He was misquoted.

He also said that the fall would be from peak to trough.

What that means is, let's say real estate has gone up 30% in the last 3 years since his prediction and it falls down by 30%, then Mr. Keen is right… Because real estate has fallen overall by 30% and it's created a new peak and trough. (Economists are never wrong – they'll find a way).

Confused, aren't you?

It's just more shenanigans by economists who are perhaps too close to the data for their own good.

My last point for today… What about a double-dip recession?

Here's all I have to say about that…

It seems to me that everybody has almost guaranteed themselves that this is going to happen. From my experience, when the mainstream press and the man in the street are talking about a double-dip recession, then it's likely not to happen and in fact go the other way.

Now of course in Australia, we never went into recession. And considering that I don't think the global economies are going to go into a double-dip recession – I think it puts us in a good position going forward.

Just think contrarian (always go the opposite direction of the herd – most people are generally wrong).

They're my thoughts.

Probably needs to be said, I failed high school, never did economics, wasn't very good with maths, have absolutely no financial planning background – so everything I say here is basically my opinion based on my results (8-figure real estate portfolio, 7-figure stock market portfolio, 8-figure business).

…so please, before investing see a certified financial planner or follow the smart money.

That's all for today.

Signed with Success,

Jon Giaan
Knowledge Source

P.S. So what do you think? Jump on your soapbox and let the rest of the Knowledge Source people hear your views below.