Markets
Local:
The ASX200 index had a solid gain over March rising by 3.27%.
Global:
The S&P 500 continued to record historic gains rising 3.2% in March 2024, taking the Q1 2024 return to 10.6%.
The Dow Jones Industrial Average rose again in March 2024 to finish the month up by 2.2%.
Gold:
From the beginning of the year to March 22, 2024, the price of gold rose from $2,066.32 per troy ounce to $2,174.65, representing a 5.24% increase.
Iron Ore:
Iron ore prices have taken a nosedive, plummeting nearly 5% and inching towards the $US110/Mt threshold, as China’s demand disappoints, leaving the market grappling with hefty inventories.
Oil:
In March of 2024, price of Brent crude oil was $85.41 USD/bbl, while the price was $83.48 USD/bbl in February of 2024. Over the last twelve months the price has risen 8.9%.
Property
Housing:
CoreLogic’s national Home Value Index (HVI) rose 0.6% in March on par with February’s increase, taking the current upswing in housing values through its 14th straight month of growth.
Since declining -7.5% between April 2022 and January 2023, the national HVI has increased 10.2%, or, in dollar terms, by approximately $71,832, rising to new record highs each month since November last year.
Every capital city except Darwin (-0.2%) recorded a rise in dwelling values over the month, although CoreLogic’s research director, Tim Lawless, notes the monthly gains continue to be punctuated by diversity.
“At one end of the scale we have Perth’s housing market where values were up 1.9% over the month, followed by Adelaide and Brisbane with 1.4% and 1.1% growth. The remaining capitals are showing much lower rates of change, although Melbourne is the only capital city to record a negative quarterly movement, down -0.2% over the first three months of the year.”
Economy
Interest Rates:
The Reserve Bank (RBA) has decided to leave the cash rate unchanged at its most recent board meeting, held on 19th March 2024, holding the cash rate at 4.35%.
Retail Sales:
Australian retail turnover rose 0.3% (seasonally adjusted) in February 2024. This followed a rise of 1.1% in January 2024 and a fall of 2.1% in December 2023. Ben Dorber, ABS head of retail statistics, said: “Seven sold-out Taylor Swift concerts in Sydney and Melbourne boosted retail spending this month, with over 600,000 Swifties flocking to these events.
Bond Yields:
Australia’s 10-year government bond yield remained steady over the month of March to finish at 4.06%.
The yield on the US 10-year government bond dipped slightly from its February result to finish the month at 4.20% down from its 4.25% reading the month prior.
Bitcoin:
The crypto market experienced significant volatility in the past month, with BTC surging to a record-breaking high of nearly $74K, followed by a rapid downturn to a low of $60K within days.
Exchange Rate:
The Aussie dollar remained level over March against the American dollar, at $0.653, and against the Euro at $0.604.
Inflation:
Australia: The monthly CPI indicator rose 3.4% in the 12 months to February, following a 3.4% rise in the 12 months to January. The annual movement for the monthly CPI indicator excluding volatile items and holiday travel was 3.9% in February, down from the rise of 4.1% in January.
USA: The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.4% in February on a seasonally adjusted basis, after rising 0.3% in January. Over the last 12 months, the all items index increased 3.2% before seasonal adjustment.
EU: The euro area annual inflation rate was 2.6% in February 2024, down from 2.8% in January. A year earlier, the rate was 8.5%. European Union annual inflation was 2.8% in February 2024, down from 3.1% in January. A year earlier, the rate was 9.9%.
Consumer Confidence:
The Westpac Melbourne Institute Consumer Sentiment Index declined 1.8% to 84.4 in March, from 86 in February. Last month we saw some promising signs that the consumer gloom that has dominated over the last two years might finally be starting to lift. The March survey update shows that progress continues to be slow at best. Consumers are still deeply pessimistic and becoming more concerned about the economy’s near-term outlook.
Employment:
Australia: The seasonally adjusted unemployment rate fell to 3.7% in February (although, in trend terms, it has remained at 3.8% for 6 consecutive months), while the participation rate increased by 0.1 percentage points over the month, to 66.7% (down from its record high of 67.0% in November 2023).
USA: Total nonfarm payroll employment rose by 303,000 in March, and the unemployment rate changed a little at 3.8%, Job gains occurred in health care, government, and construction.
Purchasing Managers Index:
The headline seasonally adjusted Judo Bank Australia Manufacturing Purchasing Manager’s Index™ (PMI) posted 47.3 in March, down from 47.8 in February. This signaled a second successive monthly deterioration in manufacturing sector conditions. Although moderate, the rate of contraction was the most pronounced since May 2020.
US Services PMI:
The S&P Global US Services PMI fell to a three-month low of 51.7 in March 2024 from 52.3 in February, slightly below forecasts of 52, and reflecting a loss of momentum in the service sector, according to preliminary estimates. New business growth softened and new business from abroad declined while employment increased.
US Global Manufacturing PMI:
The seasonally adjusted S&P Global US Manufacturing Purchasing Managers’ Index™ (PMI®) was above the 50.0 no-change mark for the third successive month in March, thereby signaling a further monthly strengthening in the health of the sector. That said, at 51.9 the index was down from 52.2 in February, pointing to a slightly less pronounced improvement at the end of the opening quarter of the year.
Adviser Numbers:
The current number of advisers is sitting at 15,620 with a net change of +4 for calendar 2024 YTD.
Sources: ABS, AFR, AWE, BLS, CoreLogic, Macquarie MWM Research, RBA, TradingEconomics, UBS, Wealth Data.
Comments
How Bad Can The Housing Crisis Get?
The supply of new homes will crash to the lowest level in over a decade by 2026, worsening housing and rental affordability, and leaving the federal government far short of its goal to build 1.2 million homes by mid-2029.
Across capital cities, 79,000 new homes will be finished in 2026, a drop of 26% compared with last year due to planning bottlenecks, labour shortages and soaring material costs.
Based on its forecasts, the industry will need to double its capacity and build an “eye-watering” 300,000 homes between 2026 and 2029 to meet the 1.2 million target.
Westpac chief economist Luci Ellis said the weakness in building construction had nothing to do with zoning and building approvals but was due to a “large backlog of properties that have been approved that are yet to be completed”. “There are a range of issues in the production and cost of production of housing at the moment, including the demand from other parts of the construction sector,” Dr Ellis said.
Barrenjoey chief economist Jo Masters said the 1.2 million target was “aspirational. We’ve never been able to build that many homes, and clearly at the moment, we’ve still got blockages in some parts of the construction process, whether that’s cost of input materials, or labour, or the right skills, or just being able to get the job done.”
Achieving a target of 1.2 million homes would require high rates of apartment construction, Ms Masters said. “And we know that apartments have a longer construction and lead time, so the timeframe to build in that segment of the market is longer.”
Federal Housing Minister Julie Collins said the government was working with states and territories to help meet the “ambitious national target” of building 1.2 million homes by July 2029. She cited a $3 billion new homes bonus, $500 million housing support program, $10 billion Housing Australia Future Fund, and new incentives to boost the supply of rental housing.
In NSW, the state government plans to increase density and height limits by up to 30% for developments where 15% of the floor area is set aside for affordable housing. It is also pushing to boost supply in the inner city with more terraces, semis and walk-up flats.
This fall in new home completions comes after a record 737,000 migrants arrived over 2022-23, contributing to a record net gain of 518,000 people – heaping more pressure on the housing system. Rents hit a fresh high of $614 a week in February 2024 as the national residential vacancy rate fell to 1%, according to SQM Research.
“This report is the clear evidence that the government needs to focus more on boosting development-ready land supply if it is to have any hope of achieving its ambition to permanently ease housing affordability and improve dwelling delivery,” UDIA national president Col Dutton said.
Jarden chief economist Carlos Cacho estimated the government would fall about 230,000 dwellings short of the 1.2 million homes target. “Labour has now become the biggest issue. That’s partly because there’s so much public and non-public non-residential spending.”
Over calendar year 2023, greenfield lot releases fell in every major market except for Perth, which is experiencing a resurgence after a decade of stagnation.
In Greater Melbourne, which accounts for 35% of the national land market, new lot releases fell 50% to just under 9000, while Sydney slumped 35% to just under 6000 and south-east Queensland fell 15% to just over 8600.
However, despite national lot sales falling 28% to 30,444, capital city lot prices rose by an average of 4.8% nationally. A 400sq m Sydney lot now costs $641,000, while a Melbourne lot costs $394,000.
Richard Temlett, head of research at Charter Keck Cramer, said it would take a lot more than interest rate cuts to facilitate the build-to-sell and build-to-rent markets. “Interest rates need to be cut by at least the middle of the year and several incentives need to be introduced immediately to stimulate the BTS and BTR apartment markets,” and “The federal migration program needs to be changed and tailored to attract key skilled workers into the Australian construction sector.”