Latest RBA stats show that the property market is in good shape

Saving

Household saving ratios have been high since the financial crisis, but data out yesterday from the Australian Bureau of Statistics showed that at last people may be gradually opening their wallets again.

Retail sales data will provide us with more evidence.

There is a bit of a lag in the Reserve Bank's Chart Pack figures, but let's see what we can deduce.

Household Saving Ratio graph

Sill elevated, as compared to the levels seen over the last two decades, but low interest rates should see Aussies starting to loose the purse strings a bit.

Building approvals

By the time next month's charts are in the total residential building approvals data will show approvals at their highest level in a decade.

A good thing or a bad thing?

A great thing for the economy.

And for housing prices? Well, we'll get an oversupply in pockets, of course.

But nationally?

The Digital Finance Analytics blog attempts  here to  explain the shortfall in our construction and concludes we need to more than double dwelling construction to meet demand.

I'm not sure about the exact nature of the conclusion, since different cities and regions have different demands and requirements.

But with the population growing at 400,000 per annum and household sizes far lower than they used to be then, yes we desperately need to get more building supply, and quickly.

Private Residential Building Approvals graph

Household finances

The third chart below on household finance shows the first signs that household debt levels as a percentage of disposable income - which have been flat or falling slightly for the last nine ears - may again be turning up, just a slight notch.

Household Finances graph

Housing loan approvals

Housing loan approvals are by aggregate dollar value are heading to the moon, blasting through the $20 billion barrier and heading well beyond.

It's property market boomtime.

Housing Loan Approvals graph

Dwelling prices

Prices are heading sharply upwards in all major capital cities except for Adelaide.

The red line indicates that some regional markets must have picked up also, although this is best judged on a region by region basis.

Sydney property market commentary over the years has morphed from crash, to bust, to a bull trap and then to a slow melt. But finally there seems to be an acceptance of what we forecast here long ago: we're into a sharp property upturn, with very little stock on the market.

In our estimation the cost of production was too high for this to be otherwise and only now are we at last seeing any meaningful supply response.

In the future I'll look at whether SQM's prediction of 15-20% Sydney price growth in 2014 will play out.

In any case, sweeping city-wide commentary adds very little value to anyone who can read a chart.

I'll have a look in a bit more detail at which sectors of the Sydney market are now risky (plenty of those) and which we consider to be significantly less so.

Housing Prices graph

Household wealth, household debt

With share markets driving up to a six year high yesterday, Aussies' net worth is now in a pleasing uptrend, while household debt levels have been flat for around a decade, which is good news for Aussie households.

Household Wealth and Liabilities graph

Pete Wargent is the co-founder of AllenWargent property buyers (London, Sydney) and a best-selling author and blogger.

His new book 'Four Green Houses and a Red Hotel' was released on 1 September 2013.

                                  

Pete Wargent

Pete Wargent

Pete Wargent is the co-founder of BuyersBuyers.com.au, offering affordable homebuying assistance to all Australians, and a best-selling author and blogger.

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