James' weekly snapshot - 10Aug2021

Seems like there is a massive focus now on getting herd immunity to Coronavirus through vaccination, particularly with Sydney doing it tough during its prolonged lockdown.

Around the world we’ve seen everything from free Krispy Kreme doughnuts to $1m cash lottery tickets and Superbowl tickets being used as incentives to get people to vaccinate.  There was also a push for $300 payments from somewhere in the Australian government, but the Prime Minister has knocked that idea on the head.

At the other end of the spectrum, we’ve seen the likes of US federal government, Google and SPC mandating that their workers must be vaccinated.  Those who choose not to be vaccinated are being forced to wear masks, socially distance, and be tested a couple of times a week.

It will be interesting to see how that plays out between now and Christmas. We’re sitting at 18 per cent full vaccination and 36 per cent part vaccination in Australia.

The Reserve Bank of Australia made its monthly announcement on interest rates last week.

Perhaps unsurprisingly, it left the cash rate at its current record low of 0.1 per cent. The key takeaway for us was that it believes the recovery from COVID is moving faster than expected, despite recent outbreaks and lockdowns.

It acknowledged that house prices are increasing, but that the growth and demand was mainly driven by owner occupiers. The RBA reiterated that it wanted to make sure responsible lending was occurring, however did not have concerns about that today.

As always, the last paragraph is the one with most meaning:

The Board will not increase the cash rate until actual inflation is sustainably within the 2 per cent to 3 per cent target range. The central scenario for the economy is that this condition will not be met before 2024. Meeting this condition will require the labour market to be tight enough to generate wages growth that is materially higher than it is currently. 

In other words, it won’t increase interest rates until there is wage growth. The RBA expects that to be sometime during 2024. So, we have until then to take advantage of these low interest rates and, even then, it will only increase rates when our wages start increasing. That’s pretty much been the RBA’s position for the past 12 months.

A topic of hot debate recently has been the future of working-from-home once we (eventually) recover form COVID.  We might have received our first insight into what lies ahead through the results of an RBA survey of companies into changing work patterns.

The results?

It found 25 per cent of all companies plan to cut their office space footprint by a quarter in response to changing work patterns.

Half of the companies surveyed had no plans to change their office space footprint, with many of them thinking they’ll need their pre-COVID space to accommodate social distancing and periods of peak-traffic.

The remaining 25 per cent were undecided and still trying to figure it out… and fair enough!

This supports the theory we’ve had for some time now; the majority of companies will run with a hybrid model with some work from home days and some office contact days.

We mentioned last week that house prices were up a massive 18 per cent for the year. Three specific examples highlighted the extent of that growth over the weekend.

The first, in Adelaide, was a two-storey five-bedroom home on 768m2 in Henley Beach (about 10km west of Adelaide CBD). It was bought for $1.875m in March 2021 and sold in August for $2.12m. That works out to be a 13 per cent increase in five months!

The second, in Melbourne, was a four-bedroom terrace on 164m2 in Albert Park (about 5km south of Melbourne CBD). The house was bought for $2.97m in August 2019 and sold in August 2021 for $3.67m. While it didn’t sell within as short a period as the Henley Beach house, it still means a 23.5 per cent increase in value over two years!

The third, in Sydney, was a five-bedroom home on a 1,500m2 block of land in Vaucluse (about 8km east of Sydney CBD). The house was bought for $10.66m in July last year and sold this month for $15m - a 40% increase within 12 months!

Finally, it’s a very exciting week with the 2021 Census being conducted on Tuesday night!

For those not familiar, the Census is a survey of all Australians that has been done every five years by the Australian Bureau of Statistics for the past 60 years! There are 63 questions in total and it will give us an awesome insight into our identity as a nation. Where we live, how old we are, what we do, believe in and where we come from.

It will be particularly interesting this year to see how many Aussies work from home. That number has sat around 5 per cent for about 20 years. We’d expect that – along with a few other things – to change this time around.

Unfortunately, we won’t get the results until August next year. However, we’ll be marking that date in our 2022 diary (when we get it)!

Interested in knowing more? Check out the weekly podcast we do at  The Double Shot Podcast.

James and Alex

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About James Fitzgerald

Property & People 11 years with JLF Group of companies James holds a Bachelor’s Degree in Law and Commerce – Majoring in Accounting James is the nephew of CEO, John Fitzgerald and has at times worked in and run the Research, Acquisitions, Construction, Investloan and Sales divisions of the business.

At just 30 years of age, he has bought, sold and developed more than 2,000 properties and spent more than 20,000 hours of his time helping to build and implement strategies for Custodian clients.

James is the chairman of Toogoolawa Schools Ltd, a not for profit school for youth at risk that was started in 1991.

James starts the day with an hour of exercise; he loves Netflix TV series and has a sweet tooth. James is based at our Head Office on the Gold Coast and can be contacted via phone and email.

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