MB Members Report: Perth property at the precipice

wile-e-coyote In last year's members report on the Perth housing market, we noted that storm clouds were gathering on the horizon for the Western Australian economy, thanks to the unwinding of the biggest mining and commodity price boom in the state's history. This, we argued, would take up to 18 months to manifest, which would presumably see Perth housing hit the wall sometime from 2015. This report revisits the Perth housing market and finds that the canary in the mine is dead, and represents a risky proposition for both housing investors and first home buyers alike. The evolution of Perth house...
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What Grattan’s city-centric report really showed

ScreenHunter_3524 Jul. 29 16.37 By Catherine Cashmore, a market analyst, journalist, and policy thinker, with extensive industry experience in all aspects relating to property. Follow Catherine on Twitter or via her Blog. “Too many workers live too far away to fulfil our cities’ economic potential” - is the conclusion of a recently published study by the Grattan institute. The report maps the dollar value of goods and services produced by workers within a particular area of Australia’s biggest cities. Demonstrating a disproportionate 80% is created on just 0.2% of the nation’s land mass. It mirrors findings...
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West African Ebola spreads

Diseased_Ebola_2014 From The Australian: COUNTRIES infected by the deadly Ebola virus in ­Africa are resorting to increasingly desperate measures amid the worst outbreak the world has known. Liberia’s President Ellen Johnson Sirleaf closed all but four of the country’s borders while Nigeria shut and quarantined a hospital as the death toll rose to at least 674 in four countries. Mrs Sirleaf also restricted public gatherings and quarantined the most heavily affected communities in Liberia after one of the doctors who was treating patients here in the capital died of the ­disease on Saturday. Only the...
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Daily iron ore price update (property punt)

fgea Here are the iron ore charts for July 29, 2014: We're all green today with physical chasing paper markets higher. Rebar futures joined the party. The BDI cape remains becalmed. Reuters has texture: "The sentiment towards the second half for China has really improved but we still believe that the stimulus we have seen is minuscule and the property market remains tough," said Helen Lau, senior mining analyst at UOB-Kay Hian Securities in Hong Kong. Optimism over China's economy rose after HSBC's preliminary survey showed manufacturing activity there quickened to an 18-month high in July,...
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ASX at the close

ScreenHunter_31-Jun.-04-16.424-200x2001 Chris Weston, Chief Market Strategist at IG Markets Asia has been fairly subdued today, although price action on an index level still points to holding a favourable bias towards China, Hong Kong and Japan. In Australia, the ASX 200 saw good buying off the early morning low (5565), although defensive names have outperformed. The talk on the floor was around QBE and its latest downgrade, and surprisingly, it has surprised the market. Over the last few years you’d be hard pushed to find a daily chart in the local market with more gapping issues than QBE; however the sell-side continues to see...
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MPs to quiz Chinese on Aussie property purchases

ScreenHunter_06 May. 06 09.27 By Leith van Onselen From The Australian comes news that members of the Parliamentary into into foreign property investment will embark on a week long tour of China to help ascertain the degree of investment in Australian property: The delegation is being led by committee chair, Kelly O’Dwyer, who is joined by fellow Liberals Peter Hendy and Scott Buchholz and Labor’s Pat Conroy... This is not the reason for the trip but the MPs will have the chance to get China’s perspective about the sensitive foreign investment issues... And on the question of Chinese investment in housing,...
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QLD prepares for asset fire sale

ScreenHunter_2966 Jun. 24 15.17 By Leith van Onselen The AFR is reporting today that Queensland Treasury Corp has called for expressions of interest to sell $33.6 billion of ports, power generators, electricity distribution networks and water pipelines (see below graphic). Studying the for sale list makes me nervous, as most of the assets appear to be essential infrastructure, whose sale could potentially lead to deleterious outcomes for taxpayers. As argued previously, it is the degree of market competition that usually determines whether an asset sale is positive for the public. And essential infrastructure...
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Miners rise as iron ore futures gain

logo It's all green again for iron ore miners today as Dalian iron ore futures are up almost 1% and rebar futures are following, up...
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S&P outlines Australia’s doom scenario

imgres Standard and Poors has today affirmed Australia's AAA sovereign rating: The sovereign credit ratings on Australia benefit from the country's strong institutional settings, its wealthy and resilient economy, and a high degree of monetary and fiscal policy flexibility. The country's high external and household indebtedness, as well as vulnerability to weakening commodity export demand, moderate these strengths. We have affirmed the unsolicited ratings on Australia at 'AAA/A-1+', and the outlook remains stable. The stable outlook is based on our assumption that Australia's historically...
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Iron ore juniors fiddle while China burns prices

Capture The media loves it, but this one goes in the totally irrelevant category. From the AFR: Australian iron ore miners are playing with the structure and dating of contracts for the ore in a bid to lessen the impact of big discounts being forced on them by Chinese buyers. ...Instead of continuing to set prices in accordance with the previous month’s average iron ore price, BC Iron managing director Morgan Ball said his company had been offering buyers a choice of several reference periods against which to calculate the iron ore price. For example, ore delivered in April may actually be priced...
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S&P warns on increasing mortgage risks

ScreenHunter_30 Oct. 10 06.15 By Leith van Onselen Standard & Poors (S&P) has released a new report warning of increasing risks for the Australian housing market due to rising investor participation, slowing income growth and softening employment prospects, which could create mortgage repayment pressures for recent, highly leveraged, purchasers: All else being equal, falling interest rates have brought improvements to lending serviceability and, after a brief period of balance-sheet restoration, renewed lending demand, with Australian households--and investors especially--at the forefront. These easing conditions,...
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Victorian iron ore dreams eat dust

imgres This one was always in the deep hopium category. From the ABC: The company proposing a new iron ore mine at Nowa Nowa says it will have to re-evaluate the economics of the project. Eastern Iron had hoped to export the ore from Eden but the owner of the bulk wharf facility, South-East Fibre Exports (SEFE), has withdrawn its offer. SEFE exports woodchips and timber from the wharf but it announced earlier this year it will stop sourcing timber from East Gippsland. The managing director of Eastern Iron, Greg De Ross, says he is investigating a smaller naval wharf near Eden or other port options...
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GS: High dollar to force rate cut

images From the AFR: The Reserve Bank may be forced to cut the official cash rate before the end of the year to beat back of a wall of foreign money that has driven the Australian dollar higher, according to Goldman Sachs Asset Management’s bond expert Phil Moffitt. Mr Moffitt, a 30-year veteran of the bond market and one of Goldman’s most senior Australian partners was speaking at the sidelines of the $935 billion asset managers’ client conference in Sydney. He said the confluence of weak domestic growth, an expected fall in inflation as the carbon tax is discarded and the high currency was...
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New home sales have peaked (members)

zxfgfda The HIA is out with its new home sales index: New home sales took a step higher in the month and quarter of June 2014, said the Housing Industry Association, the voice of Australia’s residential building industry. The HIA New Home Sales Report, a survey of Australia’s largest volume builders, shows an increase of 1.2 per cent in the month of June 2014 and a rise of 2.0 per cent in the June quarter. Sales of multi-units drove the monthly result, surging by 15.9 per cent. Detached house sales fell by 1.0 per cent in June. “Detached house sales increased by 2.6 per cent in the June...
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Consumer confidence highest since January

ScreenHunter_15 Mar. 18 16.24 By Leith van Onselen The ANZ-Roy Morgan Research (RMR) consumer confidence index has more than recovered from its Budget-induced slump, rising another 2.7 points in the week ended 27 July to 116.2, and is now at its highest level since late-January and some 2.7% above its long-run average reading of 113.2 (see next chart). According to ANZ chief economist, Warren Hogan: While the improvement in confidence was relatively broadly based last week, households’ perceptions about ‘financial situation compared to a year ago’, a subindex most closely correlated with consumer demand, has...
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No Nick, FHBs should not be allowed to use super (members)

ScreenHunter_3508 Jul. 29 09.47 By Leith van Onselen Independent senator, Nick Xenophon, has announced that he will introduce legislative changes in the Spring session of parliament to allow first home buyers (FHBs) to access their superannuation savings to pay a house deposit: Such a scheme successfully operates in Canada, called Home Buyers’ Plan, leading to improved housing affordability... In Canada up to $25,000 can be accessed for a first home, and it’s made a dramatic difference for housing affordability there. However, Senator Xenophon will be moving for changes to Superannuation Act 1976 to allow the...
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LNG price crash persists

GLNG_chart2 From Reuters today: Asian spot liquefied natural gas (LNG) prices edged lower last week as buyers low-balled sellers amid ample supply from Papua New Guinea and Australia, while bets of a winter price pickup spurred some into floating storage plays.Spot LNG prices for September delivery slipped slightly to $10.50 per million British thermal units (mmBtu) last week, compared with $10.60 per mmBtu on the week ended July 18."I think buyers are bidding around $10 for Sept delivery, perhaps up to $11 for October. So there may still be further downside, or we could have reached the floor," one trader...
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Platinum founder warns on property “act of faith”

ScreenHunter_3505 Jul. 29 08.50 By Leith van Onselen The founder of Platinum Asset Management, billionaire investor Kerr Neilson, has released an interesting report warning about Australia's frothy house price valuations and the risks of a correction once "conditions change, [and] a lot of the assumptions are found wanting". The report highlights four "facts" about Australian housing: 1. Returns from housing investment are often exaggerated and flattered by inflation. 2. Holding costs of rates, local taxes and repairs are estimated to absorb about half of current rental yields. 3. Long-term values are determined by...
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Business warns on Work for the Dole

ScreenHunter_10 Mar. 29 12.46 By Leith van Onselen Business groups have raised concern that the Abbott Government's planned expansion to its "Work for the Dole" program (outlined yesterday) could create a deluge of sham job applications. Under the beefed-up scheme, the unemployed would be required to apply for 40 jobs a month in order to continue to receive benefits. According to The Guardian: The Australian Chamber of Commerce and Industry’s director of employment, education and training, Jenny Lambert, said she understood the government had set the job search target to encourage activity. “[But] what we don’t...
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Residex: House prices cooling (members)

ScreenHunter_07 Mar. 20 20.55 By Leith van Onselen Residex has released its home price results for June, which revealed an acceleration of growth at the national level, with national house values rising by 0.92% over the month and unit values rising by 1.66% (see below tables). In the 2013-14 financial year, dwelling values rose by 7.09% (houses) and 7.70% (units) at the national level, led by Sydney (15.37% houses; 13.30% units) and Melbourne (8.32% houses; 6.04% units). According to Residex founder, John Edwards, despite the solid increase in values in June, the Australian housing market is cooling (see Chart...
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Chinese developers pull up iron ore miners (members)

wfwq The Wall Street Journal has a story today on the sudden and steep rally in Chinese shares, especially large developers: As China's real-estate market slows, investors are turning bullish and buying up stocks of large property developers, betting they won't only ride out the storm but also grow. The MSCI China Real Estate Index, which tracks the stocks of mainland developers, has surged 16.5% from the start of July through Friday, on pace for its best month in nearly three years, as local governments have started to ease restrictions on housing purchases to boost sales. The index remained down...
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Daily iron ore price update (closed)

,jhb Singapore was closed yesterday so there is no spot or 12 month derivative prices. Dalian 6 month iron ore futures jumped 1.5% to 689 yuan: The BDI cape fell a little more to near record lows and rebar futures didn't do much. Stimulus hopes seem to be winning over fundamentals at the moment and there's not much else one can say. The often bullish Clyde Russell puts a brave face on things: One thing has become clear from the latest production reports from the big three iron ore miners: They appear intent on ensuring their dominance by boosting low-cost output...The three global iron ore...
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Mining confidence hits rock bottom

sdS The annual Newport Consulting mining outlook study is out and is sickly reading. Future outlook reaches a new five-year low. An overwhelming 93 percent of mining leaders in this year’s report were not optimistic about their growth prospects for the next 12 months – up by more than 50 percent compared to last year. Most hold low hopes of the sector resuming large-scale projects in the next 12 month, and only 7 percent believe they will see some large-scale projects return during this time. New federal government embraced, but industry wants more action. A sizeable 70 percent of mining...
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Polls swing to Tony

5707-vote-2pp From Roy Morgan: The L-NP (45.5%, up 2%) has increased its support after the Abbott Government’s strong response to the downing of Malaysian Airlines flight MH17, but still trails the ALP (54.5%, down 2%) on a two-party preferred basis according to today’s multi-mode Morgan Poll conducted over the last two weekends  –  July 19/20 & 26/27, 2014. This Morgan Poll on voting intention was conducted with an Australia-wide cross-section of 3,296 Australian electors aged 18+. Despite the L-NP gaining on a two-party preferred basis, primary support for the ALP improved to 39% (up 0.5% from...
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More thin objections to macroprudential

ScreenHunter_3268-Jul.-11-11.45 From the AFR today, Massey University’s director of the centre for financial services and markets, associate banking professor David Tripe reckons on New Zealand macroprudential that: “I think the RBA can be a little more sensitive to public opinion; in fact the RBNZ can strike you as singularly insensitive,” he said. “Every time you intervene you create some market distortions; the question is whether the distortions are worse than the problem you are trying to solve.” He also said: “If and when the restrictions are eased, there will be a surge of activity by first-time home...
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