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Australian Housing - The Timebomb is Ticking
- Australia’s high level of household debt leaves it vulnerable to the next major global economic shock. It's been nearly 10-years since the Global Financial Crisis (GFC) and another significant shock is inevitable, even if it’s not of the same magnitude. The immediate impact of the accumulation in debt has been weaker-than-normal consumer spending. Wealth effects highlighted by withdrawal of housing equity have been absent.
- More specifically, the Sydney housing market is the key concern. In past cycles, net inter-state migration out of NSW has helped spread national housing risk, but in the current cycle this hasn't occurred because of the mining downturn. Indeed, more balanced housing risk and stronger growth would emerge if housing equity was to begin moving out of Sydney.
- Most of the additional purchasing power provided by the 2.1%pt decline in mortgage rates, and the fall in savings has been invested in housing leaving a limited boost to after-tax disposable income. The decision to sacrifice spending on consumer goods for investment in housing has been a headache for monetary policy as it attempts to prop-up growth without adding to economic risk.
- The listed retail sector has been faced with tough conditions over the past few years due to weak income growth and this looks set to continue. The entry of Amazon into Australia next year and sharp increases in electricity prices from 1 July 2017 add to our concerns for the sector. The technology-based retailers appear better positioned than their bricks-and-mortar counterparts, with TME probably offering better earnings quality at a reasonable value than WEB. TME also has the advantage of being exposed to the New Zealand household sector, which is less geared.
Provider
Macro Strategy Advisors Pty Ltd
About us:
- The business is a Proprietary Limited Australian company that is owned and fully operated by Shane Lee from a small office in Sydney’s CBD.
- Shane worked for 17 years in Sydney-based senior research roles (economist, equity strategist and bond strategist) in global and regional investment banks and a domestic commercial bank prior to starting Macro Strategy Advisors. These roles straddled the asset classes making him uniquely positioned to advise multi-asset investors. He worked for the Reserve Bank of Australia (RBA) for 3 years as a housing, commercial property and equity market analyst and a liquidity forecasting specialist. He worked as a structural engineer in Queensland for 10 years prior to his career at the RBA.
Aim of our business:
- To partner with our clients in their aim to maximise returns. We provide timely, independent and thought-provoking research on thematic macro issues that are impacting or could impact financial markets. We aim to produce research that prompts our clients to question their assumptions.
Services:
- A fortnightly research note.
- Regular presentations and data support delivered by understanding our clients interests and investment process.
- We also in work in confidence to investigate, analyse and report on issues at our clients direction. This work is done on a project-by-project basis.
- As an Australian based business, the main focus is analysing how domestic and global issues impact Australian investors. However, our global and domestic insights are also valued by our offshore clients.
Our Edge:
- Our low cost base relative to our competitors allows us to provide a quality product at a reasonable cost.
- We are fully independent and don’t support a banking function or any third party. We have no interests other than providing our clients with the best possible research.
- Our focus is not point forecasting, but providing rigorous analysis and insight. We don’t routinely focus on the top or bottom 10% of likely outcomes to create a headline.
- Shane’s background in engineering has provided clients with unique insights into global infrastructure and domestic housing issues.
Shane Lee
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