Professional economist at ANZ, full time property market observer and amateur footballer. All views are my own.
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Articles by Daniel Gradwell
Property market strong but supply demand imbalance continues: ANZ's Daniel Gradwell
Daniel Gradwell | 24 February 2020 EXPERT OBSERVER I think there were 2 pronounced developments during Q4 2019i, the first being there was a broad acceptance that an improvement in the market is here to stay in terms of price growth. In terms of economic indicators, we’ve seen an improvement in the labour market over the past month or 2 which is a real positive compared to mid2019 when unemployment was trending higher.
Interest rates yield to property
The structural decline in rates has been occurring for many years, incorporating key events such as the early 1990s recession and the global financial crisis of 2007/08. While the cash rate initially increased post-GFC, it has since fallen from a peak of 4.75 per cent in mid-2011 to today’s 1 per cent. This most recent kick downwards in rates reflects a significant turnaround in expectations.
Property lessons from abroad
Associate Director - Property, ANZ The downturn in Australian property prices has been an unusual state of affairs for the many accustomed to property prices only heading in one direction: up. But the Australian property market is in many respects unique, something particularly evident in comparison with a market like China.
Down, down, sentiment is down
On the residential side, the outlook for construction and prices has worsened and firms expect a double whammy of tighter credit conditions and higher interest rates over the next year. At the same time, demand from foreign buyers is still falling. ANZ Research’s recent Housing Update noted many indicators are around the worst levels in years. Overall housing credit is growing at the slowest rate since 2013, investor credit is growing at the slowest rate on record.
Prices likely to remain subdued into 2020: ANZ Research
The housing market remains weak, and many key indicators are around the worst levels in a number of years. However, the downturn is still tracking in line with our previous forecasts, and our outlook is relatively unchanged. We still anticipate prices will keep falling through 2018 and 2019, and we have extended our forecast into 2020, where prices are likely to remain subdued. Nationwide, we continue to expect prices to fall around 4% in 2018 and 2% in 2019.
PODCAST: as good as it gets for SMEs?
“It does vary a little bit across the economy,” he told an A’n’Z of Economics podcast. “If you're exposed to infrastructure it's happy days, especially in Victoria and New South Wales.
The other side of the infrastructure boom
New Zealand’s construction sector has been struggling to keep up with demand in the face of capacity constraints. While there is plenty of work taking place, profitability has been getting squeezed as a result of cost pressures and delays. A BDO survey found many construction firms and sub-contractors are operating on unsustainable margins. As a result of these pressures a growing number of companies have been forced into receivership or posted material losses.
The 25 million person housing problem
ANZ Research normally thinks about drivers of growth such as commodities, services exports and construction, but population growth has been particularly strong for a number of years and is a driver of growth not bound to a particular industry. However, we haven't turned this into a relationship where strong population growth and strong employment growth and strong economic growth are all occurring together. A stark outcome of this population growth is the backlog which has emerged in housing.
The 25 million person housing problem
In Victoria, 2016 was actually the strongest year for population growth for Victoria since the Gold Rush. " “Younger people are now finding it more and more difficult to get into the housing market.” But with the population accelerating so rapidly, is Australia’s housing market keeping up?
Is the Australian housing market over the hill?
The recent ANZ-Property Council survey shows overall confidence in the property market is still up - but this is led by commercial property. Confidence in the housing sector is weakening. "The outlook for capital values has materially worsened.” Tighter credit availability is driving the current downturn in the housing sector - any further tightening of credit will put more pressure on the industry.
Australian housing finance up in April, unlikely to be sustained: Daniel Gradwell
The value of Australian housing finance commitments rose slightly in May, but not by enough to offset recent weakness. The value of monthly approvals is more than five per cent lower than a year ago. Investors are the main driver of this weakness, edging down another 0.1% m/m, while the owner-occupier segment is performing better (+0.8% m/m). The fall in investor demand is clearly related to APRA’s macroprudential policies.
Australian housing: markets within markets
Similar discrepancies can be seen in New South Wales with Sydney prices down 4.5 per cent year-on-year compared with the rest of the state actually being 3.3 per cent higher year-on-year. This could be attributed to a recent focus on credit tightening which is having a greater impact on the more highly leveraged Sydney and Melbourne markets compared with the more affordable regional areas. Western Australia is slowly looking better.
New housing approvals past peak with further weakness likely: ANZ
The May building approvals data support ANZ's view that the peak in new housing approvals has past. Weak housing finance results and the ongoing tightening of credit availability are likely to see approvals continue to ease. From an investment point of view, the backlog of work will keep activity elevated over the near term, but construction is expected to fall through the end of this year and 2019.
What the FIRB data really means: ANZ Research
Debate around offshore investment in housing rose in May after data from the Foreign Investment Review Board (FIRB) showed an apparent collapse in investment. Despite this, ANZ Research believes foreign buyers still have a sizeable presence in the Australian property sector. Here’s why. According to the FIRB, the number of approvals granted for foreign purchasers to buy residential property in Australia fell by 67% in 2016-17. But this has largely been driven by the introduction of application fees.
Tighter times in property
The good news is Australia’s economic growth is back around its long-term trend, and the outlook is broadly positive. In particular, ongoing employment growth, (gradually) improving wages growth, and population growth running at well above average levels should support house prices in the medium term. Elsewhere, the housing construction cycle continues to evolve broadly in line with our expectations.
What the FIRB data really means
Other data suggest a much smaller decline in foreign buying than the FIRB data. The ANZ-Property Council Survey shows a sustained but gradual fall in the presence of foreign buyers since the peak about two years ago. Nationwide, just 11,000 approvals were granted by FIRB in 2016-17, down from 40,000 the previous year. The scale of decline was similar across each of the states, with approvals in New South Wales, Victoria and Queensland all falling 65 per cent to 70 per cent year on year.
March fall in housing finance unsurprising: ANZ
The fall in housing finance in March is not surprising, given that we already knew that March was a weak month for the housing market. We will continue to watch developments in the availability of credit very closely. Any further tightening in credit conditions could imply further weakness in the housing market, and would challenge our current view of mild house price growth by the end of the year.
Foreign buyers not to blame for house prices
The research shows foreign investors purchased between 35,000 and 60,000 dwellings in Australia in 2015-16, with foreign buyers making up only a small share of total housing turnover for the year, between 7 per cent and 13 per cent. " The estimated ownership is significant… but not large enough to raise concerns about a foreign exodus from the Australian housing market." The impact is more significant as a share of newly-constructed dwellings at between 15 per cent and 25 per cent.
Nine charts that tell the story of the housing market
Housing affordability is still a significant issue. That’s especially true for first home buyers, although rental affordability is much more manageable The effects of worsening affordability have been most keenly felt by first-home buyers. The time taken to save a deposit for an average priced house in Sydney, for someone earning an average income, has sharply increased to over ten years. And that assumes that prices rise no faster than income in that time.
Australian budget preview | ANZ BlueNotes
May’s Australian federal budget is being cast as one which will boost infrastructure spending and address ‘fairness’ including through housing affordability and university fee arrangements. The Commonwealth Government is likely to use additional revenue from higher-than-expected commodity prices - plus new savings measures - as an offset to higher-capital spending and the removal of ‘zombie’ policy measures.
How do we fill the rural healthcare gap? | ANZ BlueNotes
As chronic disease grows and Australians continue to age, access to quality healthcare and the services provided by GPs - including specialists - becomes increasingly critical. This is of particular importance to regional Australia where an ageing population is more pronounced and we continue to tackle a medical workforce supply gap, despite an almost 80 per cent increase in the number of GPs in regional Australia since 2000.
The changing business of healthcare | ANZ BlueNotes
Australia's health sector is grappling with a variety of challenges including an ageing population and growing burden of chronic disease. General Practitioners (GPs) are playing an increasingly crucial role on the front lines of primary care, which accounts for more than 35 per cent of the health sector’s total $A162 billion annual expenditure.
India, Aus trade can improve | ANZ BlueNotes
In the Australia-India trading partnership much that glitters is fool’s gold. While Prime Minister Malcolm Turnbull did his best on his recent visit to the subcontinent to burnish economic ties, the reality is Australia’s business relationship with India is disappointing. This is notwithstanding current focus on proposals for the giant Adani coal mine in Queensland’s Galilee Basin as a yardstick by which to measure the development of a business partnership.
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