looking back 2 of 3

I began this note with big plans but narrowed it down to three key 2024 topics—I assume keeping it shorter avoids the dreaded “unsubscribe” button.

Next week I will wrap up the 2024 review this who was most active and trends in the property market as a result.

I will also share some stats from our little business that may give you insights into how our clients meet their property objectives.

Today, during 2024:

1. Our economic well-being has gone backward

2. Housing became less affordable than ever

3. The year of the rate drop didn’t arrive.

1. Our economic well-being has gone backward

We will often hear economic and political misnomers saying our economy is “growing” or “we can’t control international weakness”.

Its BS.

You can make any economic growth look good with a bit of inflation and record immigration.

The best measure is how we are doing individually, and without inflation to falsely present this as a good thing.

Look at this chart showing this measure -you won’t see this is in a press release from Canberra – compare us to “OECD countries” – a diverse group of 38 economies around the world.

There is not international weakness – most countries are doing well.

Unfortunately, the load was not spread evenly for us.

We don’t need to say how inflation hit us over the last few years.

The problem is that it hit some categories more than others, resulting in younger age groups needing to pull back a lot further.

This is also a function of interest rates (see below) where younger generations are generally “interest payers”, being mortgage holders, and oldies “interest receivers” due to cash in retirement savings.

This chart illustrates this point well. It is almost a perfect trend.

The younger age groups are cutting back on spending while the seniors have been milking it this year.

2. Housing became less affordable than ever

Whether owning or renting this year, affordability has declined to record lows.

I don’t feel a need to go through this as we have covered it a lot, but this chart from PropTrack makes the point that we don’t need to be reminded:

Of course, property prices, rents, and to some extent, incomes vary across States.

e.g. ACT and WA have the highest median incomes in the country. Miners and Public Servants, respectively. Doesn’t help the rest of you.

Here is a breakdown of how much pre-tax income is required for rent or a mortgage plus ownership costs for a median price.

3. The year the rate drop didn’t arrive.

I hope you are ready for the chart of the year for what the RBA cash interest rate did this year - I had to search long and hard for it:

Back in February, I offered up this table from a survey of 40 leading economists’ prediction of the RBA cash rate, and by derivative your mortgage rate, for 2024 and 2025.

Perhaps it’s a big ask, but as experts I think we can scrutinise at least the direction.

Of the 40, 26 predicted an interest rate decrease, 11, forecast to remain as is (good for them), and 3 thought the rate would increase.

I will now finish with this final and important point.

4. Don’t jump at shadows.

Here are two articles on the front page of the Australian Financial Review on consecutive days last week.

Lesson: there is a danger of making a decision or changing your view based on a 24-hour news cycle.. or listening to “experts”, but that is for another day…

Like to talk? Here is the link if you would like to book a time: https://bit.ly/tri-state-client-meet

Unlike many others, we are open through the festive season.

Have a Great Week!!