Melbourne market is an interesting one. Oversupply of apartments which is punishing investors with consistent price drops. Undersupply of free standing and still a strong net immigration number, and in most areas still strong employment which is holding up house prices. Will be interesting to see what the new year brings though as many inner city suburbs have appeared to have topped out and have been very flat over the last quarter...
If you look at wage growth it's at the lowest level on record (since 1997). Average wages growth is even worse as the rolling over of high paying jobs into lower paying jobs, and as part time work increases at the expense of full time jobs.
Underemployment was also at a record high 1.1 million people (8.5%) as at November 2016.
The total value of Australia’s dwelling stock was an all-time high 7.2 times incomes as at September 2016, up from 7.0 times incomes the year prior.
The mortgage debt supporting Australian housing hit an all-time high 96% of GDP as at September 2016, up from 92% of GDP a year earlier.
Once the construction cycle turns, it will weigh heavily on employment. There are currently nearly 1.1 million Australians (9% of the workforce) employed directly in the construction sector, which has increased from around 700,000 at the beginning of the mining boom.
To date, the the dwelling construction boom has offset the decline in mining investment. However, by the end of 2017, we are likely to see employment activity in the housing construction industry finally begin to unwind, dragging on jobs growth in unison with the cratering of mining investment.
The annual state accounts showed that New South Wales and Victoria were the key drivers of Australian GDP in the year to June 2016, growing by 3.5% and 3.3% respectively; driven to a significant extent by strong population growth.
Their impacts on employment growth was greater again. In the year to November 2016, employment in New South Wales and Victoria grew by 127,200 combined, more than offsetting a 34,100 contraction in employment across the rest of Australia.
The RBA might be able to drop interest rates by another 1%, depending on how foreign lenders react to the loss of the Govt AAA rating, banks will prob keep 0.5% of and drop in rates to cover their increased costs. Combine that with the Govt still increasing the budget deficit this year, even though the ToT had an amazing turn around in the second half of the year, and there is limited budget the support the Govt can provide the economy.
My feeling is when things turn down, it will gather pace quite rapidly due to the over reliance on house price growth to prop up consumption, and employment in construction. The car industry closure this year is a lot of high paying jobs lost in VIC and SA, then 2018 will see prob 200,000 jobs lost in the construction industry, with more in 2019 as pop growth continues to slow and the level of approvals continues to fall.
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