House prices in every single capital city increased by between 1 per cent and 2.4 per cent in August despite Sydney and Melbourne being locked down for the whole month.
The median house value in Australia now sits at $826,583 which is $140,000 higher than the same time last year. That works out to be a growth rate of nearly $12,000 per month. Most people couldn’t save that amount of money in a year let alone a month!
What’s more, rents are continuing to increase which is not normally the case in a low inflation environment. Capital city rents on houses were up between 8 per cent and 10 per cent in Sydney, Brisbane, Adelaide and Canberra, and an amazing 15.8 per cent in Perth for the year.
Inflation was at 3.8 per cent for the year to 30 June, however that was before lockdowns commenced in NSW and Victoria. It’s forecast to come in at 2 per cent when the figures come out later this month meaning rents are increasing at four to five times the rate of inflation (and therefore wages).
Why? We think it is a combination of a shortage of new housing construction, sale listings and the ‘tree change’ pattern that’s taking people away from inner city apartments and into the suburbs on house and land.
Also contributing is the shortage of home listings. At the end of August, the number of active home listings were 30 per cent below the five-year average.
Like house prices, Australian exports are going nuts.
We experienced a record $12.1 billion trade surplus in July. Our exports to China hit a new peak in the 12 months to July. Leading the way were commodities, that is, mining and agriculture – up by 10 per cent for the year.
Again, despite lots of people doing it tough right now (tourism in particular), there are other parts of our economy that are flying.
Harvey Norman is a good example.
With nowhere to travel to, a lot of Aussies have been spending big chunks on their home and the contents in it. Harvey Norman has been a big recipient of that, nearly doubling its profit between 2020 and 2021.
In fact, since the beginning of COVID, its revenue has increased nearly 30 per cent!
It’s worth noting that a big chunk of their profit came from property revaluations. Harvey Norman owns $3.37 billion worth of property, and that property increased in value by 11.8 per cent in the year.
At more than 40 per cent of total profit, Harvey Norman is like another version of McDonalds – a property company in disguise!
Finally, Australia’s biggest bank made a cheeky move during the week.
CBA cut savings rates for the sixth time since November last year, despite no cuts to the overall cash rate… its customers are now receiving nearly half as much interest as they received 11 months ago.
Unfortunately, younger Aussies got stitched up the most. If you deposit more than you draw out, you’re now getting 0.3 per cent on your money.
For perspective, the total balance of all savings accounts with CBA increased by 9 per cent last financial year, with customers putting $64bn into the bank’s accounts. By halving their savings rates over the last 11 months, CBA would have saved themselves $192 million in interest. Wow!
It pays to shop around by the way; we had a Custodian client let us know they were getting more than 3 per cent per annum on a term deposit the other day – 10 times the rate a typical CBA customer is getting right now.
Interested in knowing more? Check out the weekly podcast we do at The Double Shot Podcast.
James and Alex
