If you want to have a good laugh, check-out the above CNBC video featuring Mortgage Choice CEO John Flavell who tries to argue with a straight face that Australian housing is under-leveraged:
Interviewer: “So John, here’s the thing: Everything you told us sounds fantastic. And it sounds as though it’s onwards and upwards for prices with the exception of the fact that the Australian consumer is leveraged already literally to the eye-balls. Where do we go from here then?”
Flavell: “It’s interesting that you would say that because the estimated worth of Australian housing as at last June was about $6.3 trillion and the total borrowings and mortgages was something about $1.6 trillion. So we are actually leveraged at 25%. Compare that to the US and they are leveraged at 44%. Compare Australia to a lot of Western Nations and you will find that we are not actually significantly leveraged at all. In fact, we are under-leveraged”.
John, mate, it’s the debt-to-income that’s the key metric, since it is income that sustains the debt. And on this metric Australia’s all-time high household debt dwarfs most other nations.
Just last Friday, Fitch Ratings warned that with a debt-to-income ratio of a record 186%, Australia now has the world’s most indebted households.
And just yesterday, Morgan Stanley labelled Australia’s property market “hugely leveraged”.
In the video, Flavell also spruiks the whole “undersupply” myth, which now runs counter to the data given the huge construction boom amid lower population growth:
The self-assured Flavell also seems to have conveniently changed his tune since February when he described the housing market as a “a very finely balanced and actually pressured system at the moment” when lobbying against changes to property tax concessions:
The housing market is “a very finely balanced and actually pressured system at the moment”, [Flavell] said and warned both sides of politics not to make changes to the tax incentives provided to property investors. “Any changes you are going to make could have some very deep and significant impacts, and I would be surprised if anybody would be bold enough to do anything”…
A good rent-seeker always changes their tune depending on their audience.
