House prices surge; Coalition’s climate crisis; Buffett’s $US382 cash pile

House prices surge; Coalition’s climate crisis; Buffett’s $US382 cash pile

News in brief

The Coalition parties are set for a stoush, again, over climate change, after the National Party adopted a policy that abandons new zero emissions by 2050, and ties policy to targets dependent on what other countries have achieved.

 

Nothing much is going right for the Coalition with the latest Newspoll showing support has crashed to 24 per cent – a record low – while Sussan Ley’s approval rating is now minus 33. Newspoll in The Australian shows One Nation is the biggest winner, with support for the once renegade party at 15 per cent. On a two-party preferred basis, Labor holds a commanding 57-43 per cent margin.

 

The Wall Street tech giants are surging following earnings announcements in recent days. Nvidia is the market leader with a market capitalisation of $US5 trillion. It is now worth eight per cent of the entire S&P500. The Magnificent 7 – Nvidia, Apple, Microsoft, Amazon, Alphabet, owner of Google, Meta and Tesla now comprise more than one-third of the S&P500.

 

Legendary investor Warren Buffet is weeks away from stepping down as chief executive of Berkshire Hathaway, and he is leaving his successor a cash pile of a record $US382 billion.

 

Two Australian hotels have made it into the world’s best 50 hotels, as judged by well-travelled experts in the hotel and travel industry. Capella Sydney, operated by high-end Singapore-based Capella Hotels and Resorts Group, was named best hotel in Oceania and 12th best in the world. Brisbane's The Calile came in at number 34.

Fear-o-meter

How high can house prices go? Since February this year – the month of the first rate cut – price rises have accelerated across the country, in cities and regions.

 

While in the short-term interest rates play the biggest role when it comes to prices, the supply-demand dynamic is more important in the medium term.

 

There is a genuine lack of supply in the market, and while that remains, it’s hard to see house prices do anything but rise.

 

What might keep a lid on price rises is the potential end to the interest rate cycle on the back of last week’s hot inflation figures.

 

And housing is expensive. The median value in Brisbane and Adelaide is now higher than Melbourne. Sydney’s median value is heading towards $1.3 million. Affordability has to put some sort of brake on price rises. It is why the biggest house price rises are coming in the middle and lower quartiles.

Fear & Greed Q+A today

Last week's shock inflation number has ruled out an interest rate cut from the RBA tomorrow. But not everybody is predicting the end of the rate cutting cycle just yet.

 

"Well, we think that there will still be a cut [next year] and the two main reasons for that is one that we expect the unemployment rate to be above forecasts... And secondly, interest rates are still at a restrictive level at 3.6%. I think the cash rate is still putting downward pressure on the economy. When you just think about all the factors that put the neutral rate together, when we did that analysis in our view, the neutral interest rate is 3% or a little bit below that.

 

So at 3.6%, I think we're still putting more downward pressure on the economy. And I think we need a little bit more support. Do we need it right now? Probably not because inflation is too high. But for example, the Fed went on an extended pause of nine months before it cut rates earlier this year. It hadn't moved for a nine month period. So this rate cutting cycle could be quite elongated and it was always likely to be the case that services inflation would be a little bit sticky."

House prices have entered a new growth cycle, with values across Australia rising at their fastest pace in over two years, on the back of lower interest rates and government support. National values were up 1.1 per cent last month, according to Cotality. The annual growth rate is now 6.1 per cent. While it is a solid rate of return, it is well below the 9 per cent return from the ASX, or 50 per cent return from Bitcoin. Of course, housing comes with less risk than cryptocurrencies. The step up in prices coincides with rate cuts, an expansion of the deposit guarantee scheme, and a national shortage of homes for sale.

Greed-o-meter

Market	Mth %	Yr %	Median $
Sydney	0.7	4.0	1,256,156
Melbourne	0.9	3.3	818,975
Brisbane	1.8	10.8	992,864
Adelaide	1.4	6.7	867,681
Perth	1.9	9.4	884,471
Hobart	0.3	2.4	686,262
Darwin	1.6	15.4	564,473
Canberra	0.6	3.2	877,937
National	1.1	6.1	872,538

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So just how much did home values rise in each market? Cotality's Home Value Index shows growth across the nation of 1.1pc last month - the fastest pace since June 2023. Here's how each market fared:

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Source: Cotality