NEWSLETTER – June 2017
BUSINESSES AT THE COLD FACE
The All Ordinaries traded fairly flat for the last 3 months which also reflected in economic data and interest rates. We still continue to see some green shoots amongst the blue chip and green chip stocks with a clear absence of growth from the mining and speculative arena. Many economists are cautiously optimistic on the direction of the All Ordinaries over the next few months despite its challenging performance in the last 6 months. However, please remember that the optimism is moderate and in comparison to the challenges of the last 3 months.
Source: ASX News & E-Trade News
Report on Title Office Lodgements & Settlements
Statistics issued by Landgate indicate that total document lodgements 2016/17 year to date (217,290) reflect a 9.35% decrease when compared to the same time 2015/16 (239,697).
Furthermore, the total number of documents lodged in March 2017 was 3% down on the same month last year.
Encouraging however, was the fact that there was a 14.25% increase in the number of documents lodged in March 2017 from the previous month.
Also, the electronic advices of sale (EAS) and searches increased for the fourth consecutive month. The EAS’s are only lodged by conveyancers when settlement transactions become unconditional.
Transfer and mortgage lodgements also increased 28 per cent and 17 per cent respectively compared with February 2017, so there is definitely slight movement in the property market.
From Thane Conveyancing’s point of view, the inflow of new contracts as well as settlements concluded over the last quarter has been erratic which appears to be the same for most other conveyancers we have spoken to.
THANE FINANCIAL PLANNING
The AUD is currently sitting at 0.75 against the USD, a point at which it started at the beginning of the quarter. However during the previous 3 months we have seen the AUD both rise and fall.
During the first month of the quarter, we saw the US Fed raise rates by 0.25%, Brexit commenced, strong gains were also felt by both the Australian and European share markets in addition to a rise in the AUD for the beginning of the month. However due to an increase in global supply for commodities we saw a decline of the AUD in the latter half of March.
The decline of the AUD continued during the month of April as commodity prices (in particular Iron Ore and Energy) declined by nearly 20% which was a result of the continued rise in global supply, tightening credit conditions within China and further expectations of US interest rates.
The final month of the quarter saw the AUD continue to fall amidst the lower commodity prices in addition to soft Australian economic data (for which we saw a cooling effect on construction and cautious retail spenders). It however gained some momentum in the last weeks of the quarter due a weaker USD.
In following from last quarters figures (in contradiction to our hopes of Perth’s property markets being “on the mend”), recent statistics have shown that Perth’s median house prices have dropped a further 0.8% from last quarter and now currently sit at $516,000 – in comparison to March 2015 where the average price was $550,000. In our last article, we noted that buyers’ confidence was increasing in the market, with tightening on investment lending, combined with low interest rates – there has been a 5% increase in sales activity following on from last quarter’s 8% increase, which is somewhat “promising”.
From a rental market perspective, we noted in our last article that the market was looking somewhat positive. From the December to February quarter, rents looked to have stabilised at $360.00 per week with no drop in the period. However, it is evident now that tenants are still benefiting from our current market with a further reduction at end of the May quarter, with the average rent per week sitting at $350.00 per week. The market is one that is extremely price competitive with the vacancy rate sitting at 6.9%. However, leasing activity in the metro area has risen once again by 32%!
In looking at the above statistics from REIWA, we still have a long road ahead from a property perspective but remain positive that with the right information and professional advice, we can make it through this tough period!
THE ECONOMY AT A GLANCE
Source: Reserve Bank of Australia. Released on 8 June 2017 (Data updated to 7 June 2017).
A NOTE FROM THE PRINCIPAL
Interest rates remained on hold which was really no surprise, as the economic data is still proving to be a little challenging despite the backdrop of housing prices on the Eastern Seaboard. There are still some real concerns around what may be a pricing bubble in Sydney and Melbourne, and careful control of interest rates will be required to ease us out of that situation. Whilst the W.A. economy is still quite challenging, some of the economic data such as the unemployment figures seem to have stabilised.
Where we are really struggling at the moment is in the areas of building approvals, real estate contracts and rental yield. This is purely due to lack of demand and lack of population growth. The good news is that those indicators seem to have stabilised and that stabilisation should be reflected over the next couple of months.
The government initiatives from the recent budget, particularly surrounding investment properties, depreciation and investment lending indicates clearly that they are looking to recover some economic factors from the investment community. Some of the legislative changes substantially lower the tax deductions available on investment properties and in turn narrow down the amounts that can be borrowed (hence closing down on the amount of negative gearing that can be claimed). Other changes to superannuation and alike are all designed around narrowing tax deductions in this area. It will be interesting to see how these measures affect the deficit in the coming years.
As far as the international economic community is concerned, we are definitely seeing positive signs throughout most Western economies with interest rates showing upward pressure. India, China and Indonesia are still showing excellent growth figures albeit China is back on the previous year.
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