CoreLogic has just reported that national dwelling prices rose by 2.3 per cent in May. That's an annualised rate of more than 28 per cent. And with lenders continuing to provide cheap and easy access to credit, and investors showing lots of interest, I don't see the property market cooling off any time soon.

Here at Montgomery, we've always kept a close eye on the property market. By now you should know we believe access to credit ultimately determines short and medium-term property prices. On that front lending data has been strong for some time and housing credit has accelerated. Unsurprisingly, as we have previously predicted, house prices have risen.

Other factors can have a 'micro-economic' effect on prices through the behaviour of buyers and sellers each weekend, but ultimately the meaningful changes in property prices are driven by credit, and immigration in the longer-term.

The Commonwealth Bank of Australia (ASX:CBA) has just published property lending data, which helps paint a picture of the state of the current property market.

According to the CBA economics team, new housing-related lending rose by 3.7 per cent in April to a new record high (excluding re-financing), while lending to owner-occupiers surged by 4.3 per cent and lending to investors was up by 2.1 per cent. Thank ultra-low rates for that.

Interestingly, lending to first home buyers has fallen for three consecutive months and the CBA believes this reflects declining affordability.

Clearly, the Australian property market is booming and the latest lending data suggests there are ample people looking for property with cheque books approved. That will continue to keep property prices supported.

The CBA notes the lending mix, is shifting. First home buyers are declining while investor buying is strong and lending to owner-occupiers excluding first homebuyers rose by 7.0 per cent.

According to the CBA, housing finance data is a strong leading indicator for dwelling prices.  Mind you, the relationship weakened during COVID when the CBA forecast significant house price declines that never eventuated.

Now prices are rising to record levels, houses are selling faster than ever and the proportion of homes exceeding asking prices is also at a record. It's all thanks to cheap, abundant and easy access to credit. The rate of price increases is quite spectacular. CoreLogic has just reported national dwelling prices rose by 2.3 per cent in May. That's an annualised rate of more than 28 per cent.

Despite the surging property prices, or perhaps because prices are rising so fast, owners are reluctant to sell, resulting in listings remaining stubbornly low. According to CoreLogic again, in the three months to May there were approximately 164,000 dwelling transactions Australia-wide. During the same period however only 136,000 new properties were put up for sale. It seems potential sellers fear missing out on further price rises or being locked out altogether. Consequently, the lack of stock, itself a function of rising prices, is fuelling further price rises.

For what it's worth, the termination of the RBA's Term Funding Facility at the end of June should mean bank borrowing costs for three and four year fixed rate mortgages will rise, and so will rates on those loans. That could dampen demand for loans and if it does could slow the rate of price increases for properties, particularly for owner occupiers.

If investor loans and properties continue to accelerate at the expense of first home buyers, it might be possible some macro-prudential measures by APRA could be implemented. This would serve only to slow the pace of property price rises because interest rates remain ultra-low relative to history and employment, wages and economic data continues to improve. While aggregate wages might not be rising, you only need a bunch of IT or digital recruits to switch jobs for a reported 10-15 per cent wage increase to impact what happens at this weekend's auctions and ultimately impact property prices for everyone else.

In 2019, which seems like 100 years ago, the cruise industry was booming with bookings and pricing both at record levels. 2020 was set up to be a phenomenal year. What could go wrong?

With the onset of Covid the world changed drastically, and the travel sector in particular continues to experience significant difficulties. The cruise lines found themselves right in the eye of the storm with the Ruby Princess in Sydney and the Diamond Princess in Japan making headlines for all the wrong reasons. For approximately 15 months now and counting, ships have been sitting idle and the operators burning through cash. In order to stay afloat literally and figuratively they have been forced to raise significant amounts of capital - both equity and debt.

Moving forward to today, global travel is slowly resuming and more specifically we are seeing an enormous amount of pent up demand for leisure travel. Consumers want to go on holidays and they love to cruise. Using Norwegian Cruise Lines as an example, their booked position for 1H 2022 is meaningfully ahead of 2019 which was a record year and at higher prices. Recently launched new ship Norwegian Prima, with voyages scheduled to begin in August 2022, set a company record for the single best booking day and best initial booking week. It warrants emphasising that this is all being achieved with almost no spending on marketing, further demonstrating the strong demand for cruise travel.

The revenue economics for the major cruise lines are quite straightforward. Prior to covid all ships sail at close to 110% occupancy. The only variable is price as the opportunity cost of an empty cabin is significant. The business model is to get the passengers on board then upsell them with things like shore excursions, dining upgrades, internet, casino, drink packages, etc. Revenue is split roughly 2/3rd ticket price, 1/3rd on-board spending. For this reason, Norwegian is strongly advocating for cruises to be fully vaccinated so that they can firstly fill the ship and secondly the onboard experience will be as close to 'normal' as possible.

In the very short term, the US Centre for Disease controls (CDC), which has been making life hard for the cruise industry by imposing excessively onerous conditions to the extent where Norwegian CEO Frank Del Rio accused them of being and I quote "un-American". His source of frustration is the different rules for every other transportation, entertainment and hospitality venue which are all open to varying degrees. However, in the last few weeks, the CDC has started to ease, providing cruise operators with greater confidence that they will be able to meet their return to sailing timelines.

As any army general will tell you, it is easy to start a war but difficult to end it. This is very similar to the cruise ships and Covid where we have been through lock down and now the path out remains a little foggy. While we don't expect smooth sailing from day 1, for investors that are prepared to take a more medium-term view, we know that cruising will resume in full force and we know that demand is there in abundance.

Keep Calm and Cruise On.