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Why The Australian Property Market Is Worse Than It Looks | Nucleus Investment Insights

Agitated about gas prices, worried about inflation and is the cost of living getting to you? Let us, here at Nucleus Wealth, take one off of your plate as we analyze the Australian Property Market situation to give you a heads-up.
Join us in this investment podcast as Nucleus Wealth Chief Investment Officer, Damien Klassen, and Senior Financial Adviser, Samuel Kerr, give their expert take on this topic.

Agenda:
● Delayed direct impact of rate rises. Typically rate rises take 3 months before affecting cash flow for a borrower. i.e. only 0.25% of the soon-to-be 2.35% increase has actually been felt by borrowers.
● Delayed effect due to greater than usual concentration of fixed-rate mortgages. Over the past few years, fixed mortgages went from 10-15% of lending to over 40%.
● Delayed indirect impact of rate rises. From the 3 months, for borrowers to actually notice, it takes another 3-6 months for the reduction in spending to affect business that rely on consumer demand
● Delayed 2nd order and above. The economic multiplier compounds the effect for months going forward. Typical estimates suggest 1-2 years for changes in monetary policy to have its full effect.

View the presentation slides here:
https://nucleuswealth.com/wp-content/uploads/2022/09/Why-The-Australian-Property-Market-Is-Worse-Than-It-Looks-_-Nucleus-Investment-Insights.pdf

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Nucleus Wealth is an Australian Investment & Superannuation fund that can help you reach your financial goals through transparent, low-cost, ethically tailored portfolios. To find out more head to https://nucleuswealth.com/

The information on this podcast contains general information and does not take into account your personal objectives, financial situation or needs. Past performance is not an indication of future performance. Damien Klassen is an authorised representative of Nucleus Wealth Management. Nucleus Wealth is a business name of Nucleus Wealth Management Pty Ltd (ABN 54 614 386 266 ) and is a Corporate Authorised Representative of Nucleus Advice Pty Ltd – AFSL 515796

#NucleusWealth #Propertymarket

Chapters
00:00 – Intro
00:44 – Agenda
02:29 – Housing drivers – short-term (ASX 30 Day Interbank Cash Rate Futures Implied Yield Curve)
03:51 – Housing drivers – short-term (Change in Mortgage Payment over 1 year)
05:06 – Housing drivers – short-term (Flowchart 1)
06:45 – Housing drivers – short-term (Australia: fixed versus variable home lending)
15:31 – How the economic machine works
16:30 – Housing drivers – short-term (Effect on Sydney / Melbourne House Prices)
19:45 – Housing market valuation – long term
22:17 – Housing market – stock vs flow
25:46 – Latest Stats (Property Valuation Ratios)
29:53 – Latest Stats (3-month Change in Valuation Ratios)
30:45 – Latest Stats (Current vs Historical Values)
33:27 – Macro background (Mortgage Rate)
33:58 – Macro background (Wage Growth)
36:12 – Specific Markets (Sydney House: Affordability Measures)
42:44 – Specific Markets (Brisbane House: Affordability Measures)
44:23 – Specific Markets (Adelaide House: Affordability Measures)
45:08 – Effect of Rising Interest Rates (Property Calculator)
https://nucleuswealth.com/property-calculator
59:32 – Will rising interest rates pop house prices, or just slowly deflate them?
59:53 – Investment Implications
01:03:11 – Property Report
https://nucleuswealth.com/articles/australian-property-market-update/

Written by Nucleus Wealth

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  1. The RBA has to almost raise rates in lockstep with other central banks, because if they don't, AUD will depreciate relative to other currencies. This will result in imports being more expensive, which will be passed onto consumers as price increases. Presto inflation!

  2. Good to see that Sam's not forgotten the wealth of starting a family ! 🙂 Family centred companies are few and far between , they will always be my first choice.

  3. Your property bubble is similar to ours here in Canada. People have been using homes as a means of financing debt. Cheap money. I have said this many times to people up here but I really don't think most of them get it. You cannot build an entire economy on cheap credit for the past fifteen years and then change everything and expect it to function. Quite simply it won't. I think the Fed is going to find out that inflation is going to persist for a long time. This is going to make it even harder for people to pay their bills on time and live. As you say everything is a delayed effect. You won't start to see the heavy pain until six months from now. They are going to see that inflation is going to remain stubbornly high so they will be caught in a rate trap. Neither being able to lower or raise rates. They might understand economics to a degree but they certainly don't understand addictions. People have been lulled to sleep for the past twenty years by ultra-low interest rates. The total economy is hooked on cheap money. Might as well be heroin or as you say alcohol. I worked in addictions for a while. I know the types of unpredictable behavior that result from the junkie who doesn't get his fix. This is not really the present administration's fault because this is a forty-year binge but I wish them good luck with this. You use it at first for pleasure, then you use it to avoid pain. This is going to get very ugly in a year or so. They sort of view this like the 70s in how inflation manifested and the fix they used to eliminate it. Times were very different back then. Debt was almost nonexistent and the boomers hadn't embarked on their spending spree quite yet. This is VERY different. Most people live paycheck to paycheck. They are in debt up to their yin-yang. Any little crisis is going to push them over the top let alone a major one. Good video.

  4. If they reduced the Land Tax & free'd up Land for development at cheap enough prices that high earning renters can contract a building company to develop / build houses… still it would be 1.5yrs to 2 yrs in the making to fix/build. ALSO Aus Government could increase wages for Federal Workers who then could keep up with buying/mortgage repayments, and then start passing on minimum wage increases & state workers wage increase & so inflate wages to reflect Housing market affordability.

  5. People think they can get a million dollar mortgage,service the loan for two years,then walk away with a large profit…..sorry those days are over…..people just service the loan instead of paying it off…..back in the day,you pay the mortgage off……Australia has a large debt problem which will come to roost !

  6. Thanks for the interesting presentation. Quite depressing given that one of my son’s and his partner bought at the peak of the market in late 2021 and now face decades of debt slavery to their bank, while opportunities for wealth creation are now hugely reduced thanks to the duration and magnitude of debt servicing ahead.
    Personally I would like to see a future presentation re the macro outlook for the coming decade. Many analysts and wealth funds are talking about a ‘sideways’ decade of choppy markets that can no longer be managed with traditional portfolios and in particular passive investing is a thing of the past. They talk about the importance of nimble, active management rather that set and forget portfolios that have worked in the deflationary decades that are now behind us.
    I would like to see your views on structuring portfolios for this decade and in particular what alternative assets could be used to hedge stocks and fixed income. I’m thinking of precious metals, bitcoin, commodities etc

  7. The stock market has been a really tough one this past months, but I watched an interview on CNBC where the anchor ‘Jim Cramer’ kept mentioning "…KARINA MATTIS…". This prompted me to get in touch with her, and from October 2021 till now we have been working together, and I can now boast of $540k in my trading portfolio.

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