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Ben Kingsley Blog post by Ben Kingsley

RBA Cash Rate October 2021: Lending Standards To Change?

G’day. Ben Kingsley here with my October economic and RBA update.

There’s lots to explore with the key themes around how the pandemic is continuing to rule over sustained economic recovery for both the world economy and also our domestic economy. China’s now on an economic watch. So, we’ll talk more about that. And then finally, we’ll round this conversation out with where property prices are going from here.

So, I’ll start with obviously the COVID pandemic.

It’s still the biggest story affecting our global economic recovery. The Delta strain is effectively 10 times more infectious than the flu and 16 times more deadly than the flu based on the data from the John Hopkins University. Now, what I want to talk about here is not so much the argument of “vax or unvax” or any of that sort of stuff… What I want to talk about is the impact of the health story to the economic recovery, right? It is really important that we understand that this health story has led to authorities and our politicians and so forth, locking us down, changing the way in which we go about our living and our freedoms. So, that has an economic impact. So, that’s what I’m here to talk about in making sure we understand what that economic impact is. And we look at some of the leading economists in this conversation:

Firstly, I want to talk about the global number. So, we’ve seen over 235 million reported cases of COVID. We’ve seen over 4.8 million deaths, and we’ve seen the fatality ratio, the case to fatality ratio, of around 2% globally. Now, we’ve also seen vaccine registrations recorded over 6.3 billion and the New York Times data tracking of COVID is telling us that around 35% of the global population is now fully vaccinated. So, this is where the story gets better. Okay. In the last 28 days… So, let’s look at the rolling 28 days. We are starting to see. We still have global infections, 14.5 million people have been infected. Vaccines administered, we’ve seen over 805 million vaccine doses. And in the last 28 days, sadly, we’ve still seen 241,000 people dying from this pandemic. But the news here is, in terms of global case fertility ratio, we are now down at 1.6 and that’s because of vaccines and also improved therapeutics that have been administered for those people who have been unfortunate to catch the virus.

Now, in comparison to the Australian case fatality ratio in the last 28 days, we have that down at 0.61%. Now, if we look at our total fatality case ratio, it was sitting at 1.2 or thereabouts, basically over the course of the full pandemic. So, we’ve been able to effectively get a 50% improvement on that as we’ve been rolling out better health measures, including the vaccine and also those therapeutics.

Now, why is this important? Well, I always look to some of the leading economists in this space and what we do know is globally, all economists now need to factor in the pandemic impact and the health impact associated with that in terms of what that’s going to do for people movement. So, I looked at Bill Evans’s economic update from the Westpac Group, and it’s a clear argument that he’s looked at. He’s basically looking at saying the empirical data around vaccine reduces hospitalisations, which ultimately reduces those death rates. So, you will continue to see the assumption that politicians will continue to take the health advice. And that health advice will basically be talking about lockdowns or social distancing or other types of measures that do reduce our freedoms in the effort to save lives, and to also make sure that our health systems can sustain a potential surge as we start to move with living with COVID.

So, Bill Evans and his Westpac economic modeling team are suggesting that vaccine ratios above 90% is where we will start to see less impact in terms of economic impact.

So, what he’s arguing is if we don’t get to those higher numbers, we continually might still face risks of a health system that can’t, in the short-term, cope. And that will ultimately mean that the governments of the day will have no choices, but to continue with ongoing restrictions. And that ultimately means that we’ll see more of these stop-start measures in the economy. And that will mean our economy will be choppy and that will also impact on jobs and future economic growth. And so, that’s why the COVID story still remains the biggest story today. And you’ll see that as we look at some of the data moving through the numbers.

So, let’s take a look now at the two biggest world economies and what’s happening in those particular markets…

United States

So, GDP out of the US, we did see the third and final estimate of the second quarter. GDP showed the economy grew at an annualised 6.7% over the quarter, and that’s a growth estimate of now 6.6%. So, that’s a real pop, but you’ve also got to remember that that’s coming off a lower base like every other country from 2020, where we did see that serious impact of the pandemic in terms of economic output.

In terms of the stimulus story. So, throughout the course of the COVID pandemic, the regulators such as Jerome Powell, in terms of the Fed Chair, has introduced stimulus around buying bonds and so forth. And now they’re talking about the tapering of those stimulus options into the end of this year, and then closing the bond buying program by the middle of 2022. Now, he is cautiously optimistic about the US economic outlook stating that he was quite positive in the medium term. However, he still reiterates near term outlook is clouded by uncertainty because of the Delta strain and supply constraints. He also reinforced his expectation that the recent lift in inflation is mostly due to transitional factors. So, again, we’ve got someone with one eye on a broader economy, but also one eye in terms of the pandemic rolling forward.

In terms of the other indicators were mixed — the economic indicators out of the US, on the negative side of ledger. Consumer confidence was down for the third consecutive months to reach a seven month low. Confidence fell to 109.3 in September. This was down from 115.2 in August and below consensus expectations of 115. Again, the spread of the Delta variant and higher prices continue to weigh on confidence. On the other negative side, the PMI index disappointed with manufacturing slipping to 55.4 and services decline to 54.5 indicating the slowing of the economy. So, it’s still moving in an expansion, but it’s starting to lose momentum. And finally on the negative side, additional jobless claims rose by 362,000 for the week ending the 25th of September. And this was up from 351,000 in the prior period and above consensus expectations of 330,000. So, that’s where we are seeing it in terms of their economy is starting to hit some of these speed humps as we start to live with COVID more on an ongoing basis.

On the positive side, the unemployment rate fell to 5.2% in August. This was down from 5.4 in July and in line with consensus expectations. And this is the lowest level of unemployment since the pandemic began. So, that is a positive news story on that front. The final one there, the US home sales beat expectations, rising 8.1% in August following a 1.8% fall in July. And did reach a seven month high. So, sales were supported by attractive pricing and additional inventory and house prices continue to be affected by strong demand and the lack of supply. CoreLogic index in the US show annual growth of almost 20% in property prices in the US. So, a bit of a mixed story there.


China. This one is the developing story.

So, there’s a lot of negative news coming out of China, but we’ve got to remember that China was the first to come out of the pandemic and get their economy back on track, but they are now also starting to deal with the COVID Delta strain and those breakouts that are occurring there. And that’s resulting in manufacturing delays, high raw material costs, production bottlenecks, and more recently, some power rationing on the back of their global targets for reducing emissions.

So, right now, China is in the middle of, what they refer to as, an emerging energy crisis due to the shortage of coal and the tighter emission standards, which has triggered widespread curves on electricity usage.

Reducing output from China will add further pressure on the supply chain and put greater pressure on prices and inflation. So, we’ve got to watch that as a developing story. China’s official manufacturing, PMI index fell to 49.5 in September, which is marking the first time it has slipped below 50 since the pandemic began. A reading, obviously, below 50 indicates a decline in output while non-manufacturing PMI, which measures activity in construction and services sector rose to 53.2 in September up from 47.5 in August.

In addition, there’s a large Chinese property developer called Evergrande, and they remain under a microscope regarding their huge levels of debt and potentially defaulting on their loan obligations. Now, on the back of this, global investors are scrutinising what’s going to happen with this property development company, and how this unfolds. Will it create a cotangent in both China in terms of general property prices? And then we’ll see a construction slow down and a property slow down if price corrections start to be more spread across China, but also from an Australian point of view, What does that mean around our goods and exports such as iron and ore? So, that is a developing story coming out of China as well.

And finally, the other big news in the Chinese economy was with regards to their crackdown on cryptocurrencies. So, effectively, the authorities have announced that all crypto-related transactions will be considered illegal and that’s in addition to their bans that they already put on mining cryptocurrencies like Bitcoin. So, effectively, they’re basically saying that crypto in China is not going to be a thing except their own potential digital currency that they may want to introduce into the marketplace. So, no third-party cryptos. It’s all about potentially their own Chinese crypto. So, more to watch on that space.

So, when we do wrap up the China story, this next quarter is quite an interesting story from an economic data point of view. Second biggest world economy starting to stumble and obviously having these internal challenges around energy consumption and also of these shortages, but that also, as we said, puts real pressure on the supply chain in terms of what flows out of China, and that’s going to potentially have an inflationary and supply constraint issue to global growth. So, that’s something why this is a big news story that the whole world needs to be looking at.


And when we turn our attentions to Europe. The OECD has raised European growth forecast for 2021 and 2022 as the interim economic outlook for the original lower base. So, it was a lower base. Strong policy support and increased vaccinations will underpin a quicker rebound based on the OECD data in economic activity. However, they still note that the recovery remains very uneven, striking different economic outputs from different countries. So, it’s still a mixed bag as, again, we start to learn to live with COVID.

Equity Markets

The other big news in terms of global markets was really what happened on the equity markets around the world.

We did see global equity markets in a sea of red in September.

On the back of the main themes around COVID infections and the impact on confidence around what’s been happening there and the slowdown in raw materials and those supply constraints that we’ve also seen in terms of those particular things. So, we did see the Dow Jones Average fall by 3.5%. In September, the S&P 500 index dropped 3.9%. And the Nasdaq Composite declined 4.6%. So, it’s really a mixed bag of negative numbers coming out of the US, European stock markets. So, we look at the pan-regional STOXX 600 index ended September with losses of 3.4% after a seven month winning streak. We did see also the UK FTSE was down around 1% and our Australian ASX 200 also finished down around 3% as we continue to navigate the uncertain times in regards to the world economic outlook.


Let’s continue looking at the Australian market. And obviously we released this update in conjunction with the RBA announcement. And we did see that…

Today’s decision by Governor Lowe and the Reserve Bank was to keep the cash rate on hold at 0.1%.

That wasn’t a surprise. In fact, in September, Governor Lowe doubled down in his position on the cash rate that it wouldn’t be going anywhere until 2024 even though the markets are pricing in changes to the cash rate earlier than that. He said noting that he finds it “difficult to understand why rate rises are being priced in over next year and in early 2023”. He continued to highlight that wages growth remains weak, and it will be likely needed to be above 3% to get inflation back into the 2% to 3% target ban. So, he is doubling down.

On the economic impact of the lockdowns, he expected that the economic contraction for this September quarter is likely to be at least -2% and possibly even more significant given the continued lockdowns in New south Wales, Victoria, and the ACT. He did go on to say that the RBA expects positive growth in the December quarter alongside increasing vaccinations, easing with restrictions, sustained government support and higher household wealth boosted by a sharp increase in dwelling prices.

Continuing on our RBA storyline, and the rising house crisis story has two key factors that have come into the attention of the RBA:

  • Firstly, number one – the Governor flagged that the Council of Financial Regulators is discussing potentially regulatory steps if lending standards deteriorate, or credit growth accelerates too much. So, more to say about that in a minute. He added that what he believed…
  • Point number two – He also addressed what he believed would be combating the influence of higher land values by flagging key areas reform that is needed. And so, this is where he’s basically going after the property story instead of going after it from an interest rates or monetary policy point of view. So, the areas that need reform in his opinion; taxation, social security system, planning and zoning regulations. The types of dwellings that are being built, the nature of our transport network as other factors. So, they are the critical things that he thinks can help with effectively housing affordability in this country. So, I suspect we will see more in regards to that story as it plays itself out.

Now, expanding on the first point where we should be preparing ourselves for the introduction of two possible macroprudential regulation changes in the not-too-distant future, folks.

So, it’s really important to understand what we’re talking about here. We did see evidence of this also by the Assistant Governor, Michele Bullock, who gave a speech in September on “The Housing Market and Financial Stability”. She noted that housing credit is currently growing at an annualised rate of around 7% and the data that suggests that this growth could peak at around 11% early next year. Record low interest rates and Government stimulus measures such as the home builder program are important factors that’s driving strength in the housing market, she noted. Even Josh Frydenberg entered into the conversation late last month when he started to talk about his supportive move to making sure that there’s stability in the lending system. So, we’re starting to see these flagging indicators coming into the market where they’re preparing us, signaling to us in terms of what’s coming.

So, what are the likely tweaks that we’re going to see in lending policy? And when will they be announced by APRA?

That is the $64 million question. So, we expect the two things that they will be going after based on the media commentary that we’re seeing is the debt to income measure. Now, what they would potentially be looking at is a debt to income measure around six times household income. So, they would limit your borrowing that you couldn’t borrow the beyond that figure in terms of the debt to income ratio of around 6%. So, we’ll see what happens there.

The second measure that we think APRA will also be looking to consider is mandating a serviceability lending criteria, where they adjust the floor rate, which effectively means that they move the assessment rate up higher, which reduces households’ borrowing power. So, they are hopefully the two tweaks that we see that they will bring into the market very sensibly and not in a big rush because what we don’t want to do is panic the market. And just a comment from myself, I can’t rule out the idea that they won’t be looking at also introducing something for investors.

Now, that’s to say that investors haven’t been at the same levels that they were historically in terms of our investors historical market share of the lending, but I do suspect that we might even see some tweaks coming into potentially reduce investors in the market. It’s not an investor-led story this time around, it’s definitely an owner-occupied led story. So, we’ll have to wait and see on that one, whether they introduce that. But I suspect that would be the third cab off the rank and that would also be looking at in terms of who’s still in the market and where do they need to reduce demand for property over the course of 2022.


Alright. Let’s look at unemployment. The unemployment story was an interesting one. So, the unemployment numbers saw their first big hit from the Delta outbreak in August and where we did see 146,300 jobs – a -1.1% decline in jobs. The fall was driven by a large drop in New south Wales; 172,000 people lost their jobs. Employment in the state has now fallen by almost 220,000 over the past three months. That’s why we want to try and get out of these lockdowns to get jobs back happening again.

The unemployment rate interestingly fell by 0.1 to a record of 4.5%. Now, this is on the back of a drop in the participation rate. So, even though this is the best rating in 12.5 years, the story wasn’t really a good one. To get the true indication of the story – and we’ve talked about this before – we need to look at the hours worked to get a true picture. So, in August hours worked nationally fell by a sizeable 3.7% in the month, and is now on the back of those lockdowns in terms of why that has occurred. Hours worked in New south Wales has fallen by 13% since June, and are at the lowest level since the pandemic began. So, obviously, we’re seeing those indicators being hurt. New south Wales being hurt by those lockdowns.

Another important measure is the slack in the labor market. The unemployment rate increased sharply during August to 9.3%, its highest level since November of last year. Now, most economists are now expecting to see more job losses over the months ahead with the unemployment rate moving back into the 5% range. However, on the back of the vaccination rates and the reopening, economists will see improved job numbers in November and December job numbers. And so, we are likely to see the unemployment get back into the 4% range in 2022.

Consumer Confidence

Moving to consumer confidence. Now, this is an interesting measure considering that we have our two biggest economies in terms of New south Wales and Victoria, and also the ACT, currently in lockdown. Consumer sentiment actually improved in September off a lower base set in August amid the realisation of longer lockdowns as Australia’s vaccine rates continue to increase rapidly. And that’s given consumers hope that there’s a path out of lockdown. The Melbourne Institute’s monthly consumer sentiment index increased by 2% to a reading of 106.2 to remain above the long term range.

Importantly, consumer confidence has been resilient throughout this last round of lockdown compared to the national lockdowns that we saw in 2020 and the extended Victorian lockdown in late 2020, which I sort of understand because we’ve got a better heads up on it. We know what to expect. We’ve learned a lot in terms of how to be dealing with COVID over the last 12 to 18 months. Increasingly, the data also showed improvement in sentiment because people who have been jabbed or are planning to get vaccinated are much more confident than those who are unwilling or undecided at this stage. So, we’re definitely seeing some confidence from those people who are prepared to get out in the community because they will be allowed to as being fully vaccinated.

In terms of the studying the sentiment across the country, we saw all this. So, Queensland had strong sentiment on the back of a little lockdown that they had. They came out of that. So, they are up 8.4. New south Wales also had a rise of 5.3%. Undoubtedly, helped by the Government’s announcement of a roadmap to easing restrictions. Sentiment also was up in Tassie. Sentiment was down in other states led by falls in WA down 9.1, South Australia down 4.3. And, of course, sentiment in Victoria for its sixth lockdown was also flat at -0.1 of 1%.

So, going forward, it’s believed that the sentiment will be supported by increasing vaccination rates, lower interest rates, fiscal policy support, strong household balance sheet, and a gradual lifting of restrictions with the only detractor being around the health risk and how different states and territories react to them, and obviously the communities inside those cities also react whether they cocoon or whether they get out and about based on the opening up of our economies.

Retail Spending

Retail spending data for August. Retail spending took a huge hit in August as lockdowns continued to bite. Sales fell 1.7% in a month and were 0.7% lower over the year to August. This marks the third consecutive fall in spending with sales down 6% since May. There’s clear evidence of a two-speed economy differential between the regions that are locked down and those that aren’t locked down. So, retail spending is now around or below its pre-pandemic levels in both New south Wales, Victoria, and the ACT while the rest of the country spending remains 10% higher. So, that just gives you some indication in regards that.

Taking a look around: Spending fell another 3.5% in New south Wales in August hitting its lowest level since April of 2020. Retail sales in Victoria declined 3% after the state’s lockdown. Spending fell 19.9% in the ACT, the largest decline on record, and after the territory was also hit with those restrictions. In August, spending fell in August in Queensland down 0.9, Tasmania -1.1, and the Northern territory, -6. Meanwhile, sales rose across South Australia, 6.6, following a reopening boost and in WA was also up 2.8%.

Looking at the data by categories: I think it’s important for us to do this from time to time just to reiterate where the spending patterns are challenged. So, spending patterns have largely been consistent with previous lockdown. Clothing, footwear, personal accessories, and department stores saw second consecutive months of double digit falls. Food spending, grocery stores rose in a month while there were other drops in spending in cafes, restaurants and takeaways. So, we did see that basically playing out.

Lifting our eyes beyond the current lockdowns, we now see that there is a large buildup of housing saving buffers and higher household wealth following massive dwelling price growth and this provides some solid confidence of spending as lockdowns lift.

With the only caveat being the short-term – people’s reaction again to those daily case numbers, and unfortunately the increased levels of deaths that we will experience as we reopen the economy. And we can obviously take our lead in terms of the behaviors that have been happening over in the US and the UK. So, hopefully, we will see Australia come out the other side of this with a positive mindset.

Business Confidence

Turning our attention to business confidence. When you do see these significant lockdowns, we do want to see how resilient the business confidence market is. Well, I’m pleased to report that confidence and conditions increased slightly in August following a large decline in July. The improvements did surprise some economists who thought that the lockdowns would have a bigger impact in regards to that. So, we did see the confidence index edge up from -7 to -5. Still remaining in negative below its long term average.

The condition index also edged higher from a reading of 10 to 14, which is above its long term average. The current data shows business confidence and conditions have remained much more resilient this year than the earlier stages of the pandemic. Most likely this positive set of data reflects the strong momentum in the economy leading into the recent lockdowns. And the confidence in the vaccine rollout will hopefully see an end to lockdowns.

Looking across industry: conditions were stronger in mining followed by wholesale finance business and logically real estate. That is property. Again, conditions were weak in sectors that are heavily impacted by lockdowns, particularly, transport and utilities and recreation and personal services. So, that is the story that we are seeing in regards to business confidence.


Now, let’s talk about lending. These are the numbers and we’ll get into property next, which is the big crescendo in terms of this update. So, credit extended to the private sector grew by 0.6 in August, marking another month of robust growth. In annual terms, credit grew by 4.7%. And it’s the fastest rate over the last three years on the back of cheap money. Business credit continued to expand at a solid rate increasing 0.6 in the month to be up 3.4% higher over the year. On a point-to-point note on the business credit, there were some signs of stress – this is an important point to note – around loan deferrals. We did see an increase sharply in August on the back of the lockdowns. However, to put that in context: deferrals are still much lower than the levels we did see in 2020 from which they recovered strongly. So, let’s hope these businesses will be able to reopen and start to pay their debt obligations.

When it comes to household lending and mortgage lending, we basically saw a fall in August. The value of new home loan commitments excluding refinances was down 4.3% in the month. The fall was driven by a decline of 6.6% in lending to owner occupiers. Now, this is the largest monthly fall in owner-occupied lending since May of 2020. Despite the fall, lending to owner-occupiers remains elevated and still 52.8% above the pre-COVID levels that we did see back in February of 2020. For your investment lending, we saw a rise of 1.5% over the month. It’s clear that the affordability pressures continue to weigh on lending for first home buyers. The number of loans for first home buyers fell by 3% in August. That’s also on the back of first home buyers taking advantage of last year’s home builder incentives, which basically brought that demand forward. Lockdowns appear to have less of an impact on investors.

Investor lending rose 1.5% over the month – wait for this – to be up 92.2% higher than this time in August last year.

In terms of investor lending, it’s at its highest level since April of 2015, and at the third highest level in the history of the series, which states back to 2002. You can get a read in regards to what’s happening here: Owner-occupiers are putting their buyers’ decisions on hold, primarily in the biggest cities because of lockdowns and restrictions of movement, and being able to get out and inspect properties and buy properties that they’re going to live in. However, for investors, it doesn’t really seem to be slowing down their buying appetite and their activity, which means that they may be looking at borderless investing and as such, they may be using Buyers Agents, or friends and family to help them secure properties and assets interstate. And that’s definitely showing up in terms of the increase in investor lending.

Building approvals

Residential building approvals bounced back in August from falls over the past four months. The number of total residential building approvals rose by 6.8% in a month to be 31.2% higher over the year. The growth was driven by a 13.3% rise in private medium-density dwellings, which is apartments and townhouses, and a 3.5% increase in private sector housing, which is effectively freestanding housing. Approvals, sorry, are now around 20% below their historical peak in March of 2021, but remain around 18% above their pre-COVID levels. So, we have seen this surge on the back of the building approvals.

Demand for attached housing remains more than 30% above pre-COVID levels across all states. And that’s probably got to do with people wanting to have their own backyard because of the COVID restrictions. Looking around the country, we saw approvals increased in South Australia up by 16.6. Victoria, 8.1%. New South Wales up by 7%. Yet housing approvals were down in WA, 7.3 and 5.2% in Queensland. But again, those markets are pretty robust. So, month to month data isn’t too much to read into.

So, my read on these numbers is, and it has been the first time that we’ve seen these approvals start to get back to the levels as we saw the home builder program really forward book demand. This is now starting to say that the fundamentals are there. So, what we’re going to be seeing now is this is a good pipeline of construction activity, and this should be a good sign for jobs and also for the economy as a whole. So, if we start to see those building approvals coming through.

Property Prices

Finally, we’re going to talk about property prices. This is the big story….

Even under the lockdown conditions in our two bigger cities, we did see another month of solid growth in dwelling prices in September where prices rose across the country by 1.5%.

Monthly growth remains well above the decade average of 0.4%. Over the year, dwelling prices are up 20.3%. This marks the strongest annual growth since 1989. We’ve got to remember folks, there really isn’t a typical Australian property market. Some areas have outperformed other areas and some markets are doing better than others. So, I thought in this update, let’s take a little bit of look at those numbers in terms of how houses and units has performed as we do the state by state wrap up. So, let’s get into those numbers.

So, in terms of houses, we will start with Sydney first. What we did see is the median house prices now $1.3 million. We saw the monthly result of a 2% gain. The quarterly is now sitting at 6.2% and the annual return is 25.8% for houses. That’s price growth. Add the yield in there as well, and you’ve got a total return in the vicinity of 32.2. So, very, very strong housing market in Sydney. In terms of the unit market in Sydney, you saw a 1.5% price growth for that particular market. For the month, for the quarter, 4.6 yearly, 13.1 annualized. We did see around that 11.6% total returns. You’re talking around 15.3% and a median value price of 824,000.

Turning our attentions to the second biggest market of Melbourne. For houses, a 1.1% gain, quarterly gain a 4.3, yearly gain 16.2, annual gain is… Overall return is 20.9, so we’re seeing a median house value there of $962,000. For the unit market, only a 0.2% gain for the month, 1.1 for the quarter, year to date, we are seeing total return of 12.1% when you factor in yield and you’re seeing median house price… Sorry, unit prices in Melbourne of $619,000. Brisbane, a strong month for houses, 2% price growth. For the quarter, 6.5%. Year to date, 19.2% in house prices. Overall return factoring in yields, 27.3. Median house price, $709,000 for houses. For units, 0.6 for the month, 2.8 for the quarter, annualised 8.3 for the year to date. And then you’re talking about overall return is 14.5%. Median value of units now in Brisbane, $430,000. Adelaide, we saw a 2.1% increase for the month for houses, a quarterly return in Adelaide, 6.2%. Year to date return, 16.8. In terms of total return, 26.6. Median house price now in Adelaide, $575,000.

Units market. 0.4 increase for the month. For the quarter, 1.4. Year to date, 3.8. Total return, 11.3. Median house price, $367,000. Perth, 0.4 for the month for houses. 1.3 for houses for the quarter. In terms of total return, a really strong annualised return there of 23.5 with a strong yield over in WA market. Median house price in WA is now $548,000. Still not fully recovered in some markets to their previous peaks. The unit market, flat, no growth at all for the month. For the quarter, only 0.7. In terms of the overall year to date return, 10.6. You’re seeing a very strong yield in the unit market in WA. In Perth, median unit price is $398,000. Hobart, 2.1% for the month. For the houses, 6.1. For the quarter in terms of total return, super strong, 31.5. For a median house price, get this, of 704,000. Compare that to a median house price in Perth where incomes are significantly higher, a 548. And you’re probably looking at a pretty hot Hobart market that’s probably run more than I would’ve expected it to in my retreat into the future of those higher levels. In terms of the unit market, really strong down there as well. 2.9% for the month, for the quarter, 7.8%. In terms of year to date, 29.1. Total return of 36.9 and median unit prices now down in Hobart of $542,000. Significantly higher than Adelaide, Brisbane, and Perth, and for such a small population market, a very surprising number to be honest. In terms of Darwin, house prices were actually negative, by -0.3 of 1%. For the quarter, they’re up half of 1%. Year to date, they’re up 12.9. Total return, 24.9. Median value of houses in Darwin, 563,000. So, still relatively affordable. And the grand scheme of things, both Hobart and Darwin, even though they’re capital cities for their territories and states. That really doesn’t mean much when you look at population size. In terms of unit prices for Darwin, growth of 0.8 of 1% for the month. For the quarter, 3.8%. Year to date, 15.8. Median house price value of $353,000.

Rounding out the capital territories and states is our nation’s capital, Canberra. 2% for the month for houses. For the quarter, 7.5. Year to date, 23%. In terms of total return, 32.8. And you’re talking about a median house price now in Canberra of $956,000. In terms of unit prices, 1.8% growth, 4.6 for the quarter. Year to date, 9.9. Total returns, 17.7. And median unit value of 538,000 for Canberra. All of that data, obviously, courtesy of our good friends at CoreLogic in providing that update.

So, as I close out this month’s economic update, I want to talk about the future of property prices…

 So, although we did see a 1.5% rise in property prices, which is a solid month growth, if you think about where we peaked, which was back in March, where we had a 2.8% monthly growth, it’s starting to taper off. Now, looking at our own data, we still know that buyer-demand is still incredibly high, and it’s still a competitive market where there’s definitely far more buyers than sellers. And we expect property prices will continue to rise, given limited stocks being added. And certainly this continued buying pressure. We do know the macroprudential will impact demand. There is no doubt about that. In terms of whether they decide to introduce it this side of Christmas or look to introduce it early into the New Year. It will play a role in reducing demand, but the regulators know something very important about the property market and the whole economy. They do not want to, nor can they afford to, go too hard too quickly. It will be incremental tweaks, and they will do this in terms of trying to slow property prices, but not slowing that momentum in that market because property is a very, very key driver of overall economic growth.

So, my message for those people looking: if you’re still thinking about getting into the market into the end of this year or into 2022, we believe there will be some outstanding buying opportunities.

There are always markets within markets. We think there will be some stellar results in 2022. Certainly double digit growth in some markets. Some markets have already had their run, so that’s where you’ve got to do your due diligence. So, you’ve just got to look at the sort of run that they’ve had and continue to look at the demand-supply ratio in terms of looking at the scores of the level of demand versus supply. That will help you in helping you make your considerations.

So, make sure you do your property research and continue to look at the levels of demand in the market because there are still some incredibly affordable markets around Australia, and there’s some incredibly great opportunities to get into very tightly held markets with low interest rates and also low vacancy rates, which means yields are also in pretty good shape in those markets. So, we do expect those markets to continue to offer buying opportunities into 2022 and beyond.

So, there you have it. That’s my wrap for this month. We’ll be back next month to take another look at the data, but until next month… Knowledge is empowering, but only if you act on it.

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