Property prices continued to dominate commentators’ thoughts this week – with The Australian this morning carrying a warning from developer Mirvac about the danger of defaults.
In the words of Peter Switzer’s Super Report today: “If you predict a market crash long enough, you’ll get it right eventually.”
One thing to bear in mind as you read the dire warnings: As The Australian pointed out, there are two markets in Australia. The “house” market is doing just fine. It’s city apartments that are causing all the furrowed brows.
There were some sobering numbers in Treasurer Scott Morrison’s speech last Monday.
Increased prices have “the potential to undermine retirement incomes, with superannuation cashed in on retirement to clear the mortgage or having mortgage costs eating into retirement.”
The proportion of home loans provided to first-home buyers was 13.4 per cent in August, the lowest mark since February 2004 and well below the long-term average of 19.4 per cent.
A 20 per cent deposit on the nationwide median home loan is more than 100 per cent of annual household disposable income – well above the 60 per cent levels that were the norm prior to 2000
Between June 2010 and June 2015, the time taken for a dual income couple to save for a 20 per cent deposit in Sydney increased from 5.8 years to 7.9 years.
Meanwhile, the The Weekend Financial Review maintained the National Australia Bank has a list of 600 towns and suburbs where lending for home loans is being capped because it’s concerned about borrower’s ability to repay. The 120 postcodes will still get loans – but could be asked, according to the Fin, to pay up to 30 per cent as a deposit.
The paper also claims other banks like Westpac are expected to announce tightening of lending – particularly for areas like new and off the plan apartments in Sydney and Melbourne.
Lenders are looking to owner-occupied refinancing to keep their loan books full.
But out at the weekend auctions, no-one was listening. The national auction clearance rage was 80.2%, up four points over last weekend. Significantly, there was more than a third less property on the market than the same period 2016.
The MoneyTalk view: there have been too many warnings to ignore on apartments. If you’re an investor buying off the plan in central Sydney or Melbourne hoping to flip it on completion in a couple of years, you are betting against the market. Good luck!
No surprises brokers are talking up the share market as a better bet. Citigroup global head of equity strategy Robert Buckland says the sharemarket is “the last honest market”.
Why? Because, according to the Weekend Fin, companies are dolling out dividends instead of re-investing.
The NAB will be giving its results later this week with all eyes on the dividend. Many predict it will be reduced, paving the way for other banks to reduce theirs.
Macquarie provides its half yearly profit numbers on Friday. The following week includes annual earnings releases from ANZ and Westpac, as well as a quarterly trading update from CBA.
Among expert share tips, The Sunday Telegraph’s Michael Heffernan of Phillip Capital suggests Telstra – “a mouth-watering six per cent fully franked dividend” – and ARB Corporation, while Sam Fimis of Patersons suggests Platinum Asset Management and MVP Medical Developments as a buy.
Paul Rickard on Switzer is talking up Challenger, though he cautions: “I agree with the Brokers that it may have run a little hard. At $10.37, the brokers have it trading on a multiple of 15.9 times FY17 earnings and 14.6 times FY18 earnings. It is forecast to pay a dividend of 34.5c in FY17, placing it on a yield of 3.3%. These numbers are not stratospheric, but they do place Challenger towards the top of range for diversified financials sector. Buy in weakness.”