Sydney vacancy rates remain tight

Sydney market in the spotlight
A great deal of talk in the media about housing affordability this week and what should be done about it, including a ream of band aid solutions, mainly targeted at Sydney.

In most locations around Australia, mortgage serviceability is not remotely stretched with mortgage rates available from around 4 per cent – and the ability to fix interest rates at around 4.5 per cent for five years.

Of course, it is true on the other hand that the Sydney housing market is becoming more expensive almost by the week.

But then really, what did people expect with policies which promote such rampaging population growth? That Sydney house prices would fall?

Sydney to 5 million

As expected with net interstate migration from New South Wales declining to the lowest level on record Greater Sydney’s population surged by a record 84,230 to 4.84 million in FY2014, and the population of Greater Sydney will surpass 5 million within the next year.
Thus despite what some bloggers have interpreted to be a risk of looming “oversupply” of properties, I’m presently of the view that this construction market cycle will likely pass with only a few pockets of significant overbuilding in Sydney (such as unit developments around the airport, and a few transport hubs).

Vacancy rates

SQM Research released its latest vacancy rates figures for the month of May 2015 today, which showed Sydney vacancies remaining tight at 1.8 per cent.

I’ve run a little analysis here previously on where the vacancy rates in inner ring Sydney are creeping up, and where they are not.
Only Hobart of the capital cities now has a tighter rental market with a vacancy rate of 1.5 per cent.

In the month of May vacancy rates crept up in Adelaide to 1.9 per cent, in Melbourne to 2.3 per cent, and in Brisbane to 2.4 per cent.

Vacancy rates in Canberra have held steady at 1.9 per cent.

The highest capital vacancy rate remains in fragile Darwin at 3.5 per cent, but Perth is now running the Top End capital close with its vacancy rate jumping from 3.0 to 3.4 per cent in May.
While rents in Sydney continue to rise at around 3 per cent per annum – another indicator that oversupply is not a pressing issue – asking rents have been declining in Darwin, Perth and Canberra.
Asking prices skyrocket in Sydney
SQM Research has also recorded a huge surge in asking prices in Sydney.
Over the three years, asking prices for all Sydney houses are up by 30 per cent and units by 26 per cent.
In particular, 2 bedroom units have seen asking prices booming, up by 32 per cent in only 36 months.
Despite the Sydney property boom, the latest round of Reserve Bank Board Minutes for June 2015 confirmed that property markets would present no barrier to interest rates being cut once again if required. Asserted the Minutes:

Conditions in the housing market in Sydney and parts of Melbourne had remained very strong, though trends were more mixed in other cities.”
And, indeed, the Reserve Bank shed more light on its thoughts relating to housing:

Noting that housing price growth in other cities and regional areas had declined over recent months, members discussed the strength and composition of underlying supply and demand conditions in different parts of the housing market. 

They also observed that there was a relatively low stock of dwellings for sale in Sydney and Melbourne and that dwellings took only a short time to sell.”

The Board Minutes also noted that, just as we looked at in the Housing Finance data here, New South Wales mortgage approvals are now rising sharply for both owner-occupiers and investors.

For Sydney, it seems that all bets are on.

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Financial Orbit wrap 19/06/15

Five sentences or graphics which sum up the Financial Orbit output over the last 24 hours across the website, twitter account and anything else thought about…

An early wrap as I hope to publish a new Financial Orbit Speaks before the end of the day.  By the way did you notice the new Financial Orbit Speaks tab on the website?

1. I write up the Smith & Wesson numbers/conference call and conclude there is a clear level to buy…and sell.

2. Greece – break up of talks late yesterday, to reconvene next Monday.  Best comment post the meeting? IMF Lagarde commenting on state of negotiations says not enough dialogue between “adults” in the room.  Here is the best graphic representation of those talks via @RANsquawk: 
To me a ‘haircut’/bond restructuring is eminently sensible.  Meanwhile in the Ukraine I note here the first explicit talk of a haircut I have seen…and at 40% I would rate this as a sensible sort of proportional level.  
3. I write about Poundland (and loom bands) in my latest ShareProphets column (link here)…
4. …meanwhile over at Yahoo Finance Contributors (link here) I talk about China, Hershey’s, earnings warnings and…chocolate teapots! 
5. Finally – inspired by my Hershey’s analysis above – I have a look at what price I would buy the stock. 
And finally…have a good weekend! 

FOMC thoughts – low(er) growth and a lower dollar

Ah, Federal Reserve policy and press conference day.  Always an excitable moment but – as is often the case – the more excited you are about something the less exciting the reality is.  Today’s FOMC statement (link here) had that feel to it.  The key comment to me in the formal text was this one: 
‘The Committee anticipates that it will be appropriate to raise the target range for the federal funds rate when it has seen further improvement in the labor market and is reasonably confident that inflation will move back to its 2 percent objective over the medium term’

Ah…the old ‘reasonably confident’ line.  Janet Yellen expanded on this in the press conference with a clear adherence to a data dependent decision-making methodology.  I am sure it was always this way but in this world of analysis and emphasis placed on even the merest hint about something maybe it had to be plainly reiterated in (ahem) Janet and John style.  
Two aspects particularly struck me.  First ‘the dots’ which usefully in this Financial Times graphic shows the median position of interest rates over time.  A near 3% interest rate level by the end of 2017?  That feels unlikely to me.  
My instinct would remain that the surprise may be the more elongated low/no interest rate rise period.  Consensus would have it that a rate rise is relatively imminent (see below for some betting industry extrapolated proportions) but all this can hardly be described as anything approaching a normal cycle, can it?
Odds of Fed rate hikes by meeting date:

Jul 2015 0%

Sep 22%

Oct 43%

Dec 62%

Jan 2016 76%

Mar 85%

Apr 92%

Jun 96%

The lack of normalcy is best captured by the Fed’s own forward forecast even ignoring the downward revision in 2015 real GDP hopes (1.8-2%) compared to the March projection of 2.3-2.7%.  For me the longer run metric of 2-2.3% is simply not that exciting…but yet market valuations are high helped by that wonderful distorter of DCF models in the form of ultra low interest rates.  

So how about the market impact.  No surprise that the US bourses closed up – as shown below this is very much the norm.

No, the most striking aspect was the weakness of the US dollar.  Good news for corporate America and the (as noted regularly on this page) shabby shorter-term earnings growth profile of the S&P 500.  Less good news for Europe of course and unsurprisingly a higher euro (the heady heights of 1.13+ against the dollar even with the Greek crisis brewing) pushed the DAX future into negative territory.  So a bit of volatility (like Draghi the other week Yellen made no apology for enhanced volatility) but ultimately no radical regime shift.  
From here I don’t expect big FX shifts (euro is 8-10% below a fair PPP value but that’s reasonable given the Greek issues and general limited structural reform) and hence US earnings are still unlikely to romp on the back of FX weakness.  No, the key future insight is centred on the lack of sharp GDP improvement and how this blends into equity valuations over time.  It may look good on the DCF BUT the reality is going to get more specific. 
We got lower growth and a lower dollar but all the FOMC chat says to me is that we are moving deeper into the midst of a stock picking market.  On your investments you have got to get active.  

A few macro and related thoughts/charts today

Greece – ‘to accept that Greece will spend the next 42 years paying back an average of €10bn a year to its creditors. That cannot be right…It follows that Greece’s debts will be written down, the only question being whether this is done in an orderly or chaotic way…it seems absurd to suggest that a country accounting for just 2 per cent of eurozone GDP could wreck the entire enterprise. If it could, then that enterprise is not very robust’.  Good link here.  More on Greece later with the ELA rollover and the latest IMF comments…

Tension – Markit iTraxx Financial Index, a closely watched gauge of sentiment in credit markets, has surged to a 15 month high today as the intensifying Greek debt crisis unnerves investors. The index, which tracks credit default swaps on the senior debt of 30 European banks and insurers, rose three and a half basis points to 87.522 yesterday, its highest level since March 2014.
The volatility fears…interesting to read what I noted yesterday on the Bank of America-Merrill Lynch Global Fund Managers Report (link here). 
Europe citizens – front page of the FT has a graphic which shows that ‘only 45% of Greeks felt like they were citizens of the EU when last surveyed, the lowest share of any member country.  Britons and Italians follow closely behind’ 

Ukraine – big bondholders write a letter to the FT saying that a ‘haircut on bonds is wrong path for Ukraine’.  Classic creditors!  In my view they need to get real…

China – slowing growth…but will still grow the equivalent of four Greece’s this year! Some great charts in this…

 …and other Bloomberg reports:

UK deaths – not the sort of chart I would have expected…

How to show a customer pre-payment on an invoice.

If you accept deposits or prepayment from your customers and wish to reflect those payments and show only the outstanding balance due on your invoices, a simple customized invoice will do the trick.  Read here to find out how you can record these prepayments.

 Once the invoice has been created you can choose the Apply Credits button at the bottom of the invoice screen.

Any available credits for this customer will appear in a pop-up.  Choose the pre-payment that you recorded for this invoice.  Select Done.  In the lower right portion of your invoice screen you will see the payment amount that has been applied and the balance due on the invoice.

Your next step will be to create a customized invoice form to show this same information on your printed or e-mailed invoice.  From the invoice screen choose Customize from the invoice menu bar.  If you have a newer version of Quickbooks a pop-up window will appear asking if you want to create your own form or customize an existing form.  Choose the Customize Data Layout option.

In the customization screen choose the Footer Tab, and click the Print box for Payments/Credits and for Balance Due.

New versions of Quickbooks will automatically adjust the layout to fit these extra fields at the bottom of the invoice.  If you have an older version of Quickbooks you will need to manually adjust the layout so that your lines and boxes do not overlap.  To make the manual adjustments click on the Layout Designer button at the bottom of the customization window.

In the Layout Designer window you can click on various boxes and drag the field indicator buttons to make the box smaller.  You can also click and drag various boxes to relocate them on the invoice.  When you click on a box there will be a message in the lower left corner of the Layout Designer screen telling you what box you have clicked on…whether it is a text box, a data box, etc.  Adjust the main body of the invoice to allow room for your new footers at the bottom of the invoice.

When you are done click OK and you will see a preview window of what your invoice will look like when printed.  You can hop right back into the Layout Designer if you need to make further adjustments.   This is what your customized invoice will look like…

 Another great feature is that once you customize this invoice you don’t have to repeat the process.  It remains stored in your Quickbooks.  You can even rename it so it’s easier to use later.  From the Additional Customization window choose the Basic Customization tab,

…then select Manage Templates,

 The invoice you are customizing will appear highlighted in the Manage Templates window.  Click on the Template name in the upper right and change the name as desired.  The next time you create an invoice you simply click the Template drop down in the upper right corner and choose the invoice you wish to use.   

Again, please post comments so that answers to your questions can be addressed on the blog.  Happy Bookkeeping!

This material is for informational purposes only and not intended and financial, legal or tax advice. Please consult your finance, legal or tax professional to confirm the accuracy of all information. Quickbooks is a registered product of Intuit.

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Financial Orbit wrap 16/06/15

Five sentences or graphics which sum up the Financial Orbit output over the last 24 hours across the website, twitter account and anything else thought about…

1. So Greek discussions rumble on…

…as the debt repayment dates gets closer. My view remains that the creditors have to get real too…

2. Yes it is that time of the month again for all fund management industry watchers as the BoA-Merrill Lynch Fund Manager survey hits town.  It is fair enough that putting your hands on a copy is harder than ever but with all due reference to the content providers here are a few of the graphics that I have managed to get hold of…plus a few thoughts of my own surrounding them.
Well when Mr Draghi in the most recent ECB interest rate decision press conference tells you to anticipate volatility…that is what you logically do.  Funny how yesterday I sold my long EU volatility positions at a pleasant profit…  Quite amazing to see how little H2 2008 volatility protection there was…
3. I listen to the Factset quarterly numbers and conclude that the financial information provider is interesting but (link here)…
I think you can wait for a bad day etc. for one if not more of these levels but in short was I impressed: yes.

4. In European economic news the German ZEW was hardly sparkling…
5. The FOMC kicked off today (with the disclosures tomorrow at 2pm ET).  Just a quick visual reminder about the ‘market versus Fed projections’ debate.  I know who I believe…

Sydney property in the news

Sydney red hot
Some of what is happening in Sydney’s property market is “crazy” said Reserve Bank Governor Glenn Stevens in his Brisbane presentation yesterday.
He’s not wrong there.
But house prices in Sydney won’t stop the Reserve Bank cutting interest rates lower still as required, he said.
Any way you look at it, Sydney’s desirable property markets are expensive…and they are going to remain so.
John McGrath highlighted a few out the reasons why last week on Switzer here.
“Sydney’s population is expected to reach 6.1 million in 2031, which means 80,000 new people will move here each year.

Based on the assumption of 1.5 people per dwelling (in recognition of the rise in apartment living), Sydney will need 53,000 new dwellings per year.

The HIA says 54,000 new dwellings will commence in NSW in 2015 – but that’s for the entire state. That’s also a record high figure, with annual new builds expected to decline to 47,000 per year over the next four years.”

I’m not quite sure where the assumption of 1.5 persons per dwellings came from, but the principal is spot on.
In the most desirable areas of Sydney demand is outstripping available supply by a factor of many as covered here previously.
SBS News lead with a short piece on the story here yesterday,
I note that Demographia’s measures of housing affordability have previously been criticised for not including all dwellings (i.e for excluding apartments and attached dwellings).
Yes, any way you look at it Sydney housing is expensive, but that said I don’t expect anything to change in that regard over the next couple of decades.
Watch the SBS News piece here.

Open Purchase Order Report Shows PO's That Are Received In Full

In Quickbooks Pro Manufacturing Edition are you seeing Purchase Orders on your Open PO report in Quickbooks that have been received in full.  Are you seeing the “Received In Full” stamp on these PO’s when you open them to try to determine the cause of the error.

Here is a little trick that I have found works well for me.  Open the purchase order that is in question (be sure to keep track of the PO number), change the date of the PO to the year 2030 and save and close it.   Use the “Find” feature with the PO number or locate it in the Customer center if you no longer see it on the report.  Re-open the PO and change the date back to the correct year and save and close it.

Give this a try and please comment on whether or not it has fixed your problem.  It has worked well for me and I am curious to find out if others have the same result.  Yes, I admit, it’s just a treatment and doesn’t really diagnose why this is happening.

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