Positive Credit

Positive Credit

The Australian economy just received some more supporting news. Private sector credit rose 0.4% in July, and this increase was led by the all important Housing sector, where credit grew 0.5%.

This confirms what we have been saying all along. That as the various international false fear economic stories faded, Australian property buyers who had stood on the sidelines, would begin to return to the market. We always knew the hesitation in auction clearance rates and property prices generally would be short lived. A pause in the Australian market of just a couple of months.

This has created a large group of people wanting to buy, who have not done so as yet. Which means market prices will remain well supported and only head higher. Remember our favourite catch cry, we may well be at the top of the range in prices previously experienced, but more importantly, we are just at the “bottom of the future range”.

The overall private sector credit growth number doubled from the previous month of June’s 0.2%. Such data as we are seeing, alongside un-employment at last steadily trending lower, suggests there is no rush for the Reserve Bank to act quickly again.

The next RBA meeting will also be Glenn Stevens last one. Which will bring to a close the most over-paid, under-performing, Governor in the history of the RBA. It remains to be seen if this is however a good thing. As the incoming Governor is again an internal and bizarrely un-tested appointment. Nowhere else in the world do people just roll into central bank leadership by default. It is an absurd proposition, and yet this is what we do in Australia?

Housing permits also jumped significantly in July, up 11.3%, but this does not represent a suggestion of over-supply being in the pipeline. Single monthly figures can lead us astray.

We must always look through the individual data to the trend. This 11.3%, comes after a decline of 10.1% over just the previous two months. So for three months now, permits have been flat. This strongly suggests that any talk of general over-supply in the property market is fast evaporating.

Meanwhile foreign buying interest continues to climb exponentially.

It’s a great time to own property.

Clifford Bennett