Governments must work together to solve housing supply

ScreenHunter_18 Jul. 05 10.22 Cross-posted from The Conversation: Is there a national housing supply problem? No, but there is a problem of access to affordable housing in certain regions. Last month, Reserve Bank Governor, Glenn Stevens commented on the need for “animal spirits” to respond to the exceptionally accommodative monetary policy setting and boost the supply of housing. More than 12 months have passed since the RBA last adjusted the cash rate to the current record low of 2.5%. This has stimulated investor demand, particularly in metropolitan Sydney and (to a lesser extent) Melbourne. Yesterday’s Reserve...
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Australia’s “low” mortgage growth is still a big problem

ScreenHunter_86 Oct. 01 12.52 By Leith van Onselen Business Spectator's Alan Kohler has continued his schizophrenic take on Australia's housing market, today arguing that concerns about excessive speculative activity in the housing market are not warranted because credit growth is so low: There’s talk of macroprudential policies to limit investment lending, but no one is rushing into this, and for good reason: there isn’t really a problem. There were three booms in property investment during the 1990s, when investor housing credit grew at between 25 and 30 per cent per annum. The current growth rate is anaemic by...
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Engineering construction hits mining cliff

ScreenHunter_08 Nov. 07 08.52 By Leith van Onselen The ABS has released engineering construction data for the June quarter of 2014, which revealed a 2.0% seasonally adjusted fall in the value of work done over the quarter, and a reduction in the construction pipeline. According to the ABS, the total value of engineering construction in real seasonally-adjusted terms fell by 2.0% in the June quarter and was down by 3.8% over the year, with both the private (-1.6%) and public (-3.5%) sectors falling over the quarter (see below chart). You can see the big uplift in activity from 2003 as the commodity price boom...
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Retail sales disappoint in August

ScreenHunter_02 May. 25 22.30 By Leith van Onselen The Australian Bureau of Statistics (ABS) has just released retail sales figures for the month of August, which registered a 0.1% seasonally-adjusted rise in sales over the month, well below economist’s expectations of a 0.4% increase. Annual sales growth clocked in at a solid 5.1%: The below chart maps out seasonally-adjusted sales growth by state on a monthly and annual basis: At the state and territory level, positive monthly retail sales growth was recorded in Victoria (+0.7%), Western Australia (+0.1%), and the Northern Territory (+1.7%), whereas sales...
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Chief scientist strikes appropriate balance on CSG

ScreenHunter_76 Oct. 01 10.14 By Leith van Onselen The New South Wales Chief Scientist, Mary O'Kane, last night delivered her Final Report of the Independent Review of Coal Seam Gas Activities in NSW, which apears to have struck an appropriate balance between the economic opportunities of CSG and health and environment concerns. The report, which is based on 19 months of investigation, found that most risks to health and the environment from CSG can be managed, although "unintended consequences" are also inevitable, due either to natural disasters, human error, or accidents, which necessarily requires that CSG activities...
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Manufacturing recession deepens

ScreenHunter_10 Mar. 29 12.46 By Leith van Onselen The Australian Industry Group (AIG) has released its Performance of Manufacturing Index (PMI) for September, which revealed an accelerating contraction in manufacturing activity, with the index declining by 0.8 to 46.5 (a score below 50 means that activity is contracting): - Respondents to the Australian PMI® indicated that despite a welcome depreciation in the Australian dollar since early September, it remains high and continues to support intense import competition and weigh heavily on exports. The winding down of Australian automotive assembly and the ongoing...
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Is the RBA to blame for housing speculation?

ScreenHunter_12 Sep. 23 12.54 By Leith van Onselen Former RBA board member, Professor Warwick McKibbin, has delivered the RBA a serve, blaming the central bank's ultra low interest rate settings for fuelling unprecedented investor housing speculation, and blowing a potential housing bubble. From The Australian: Professor McKibbin said the bank had made the wrong call to cut interest rates so low and was facing the consequences. “A surge in investor borrowing for assets in relatively fixed supply such as housing was inevitable; yet cutting rates was never going to do much to boost business loans or weaken the currency...
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The Coalition’s Budget aspirations look doomed

ScreenHunter_73 Oct. 01 07.35 By Leith van Onselen The Abbott Government has reportedly all but conceded defeat on around $30 billion of Budget measures, choosing instead to devise an alternative path to savings, which will be revealed in the mid-year economic and fiscal outlook (MYEFO) in December. As reported in The AFR today, the Government's planned higher education reforms appear doomed, with the Palmer United Party (PUP) insisting that it would block the deregulation of university fees, raising the loan repayment interest rate, of the 20% funding cut from the Government. PUP will also oppose the GP co-payment, as...
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Australia’s empty homes

ScreenHunter_71 Sep. 30 17.30 By Catherine Cashmore, a market analyst, journalist, and policy thinker, with extensive industry experience in all aspects relating to property. Follow Catherine on Twitter or via her Blog. “The home, built in 1857, had been unoccupied for years” said the report of a dilapidated Victorian-era mansion in Sydney’s Balmain East. Situated in an exclusive residential pocket next door to Balmain East ferry wharf, and sporting bayside views of Sydney’s Harbour Bridge, the 457 square metre block of land attracted 200 people to the auction, 18 registrations to bid, and sold $830,000 above the...
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Links 1 October 2014

ScreenHunter_01 Apr. 02 06.19 Global Macro / Markets / Investing: We are experiencing the flipside of 1970s-style inflation - FT Alphaville Commodities Are Crashing Amid Stock-Bond Disconnect Deja Vu - Zero Hedge Surging US dollar threatens emerging markets’ carry trades - Financial Times Not all bonds ar created equal - Pragmatic Capitalism How much money investors have pulled from formerly Gross-managed Pimco funds - Bloomberg Bill Gross, Calpers and the End of the Investment Guru - New York Times North America: Could Lehman Brothers have been bailed out? - Dealbook US home prices are rising at an...
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It’s Raine-ing elderly property investors

200236712-001 By David Collyer, cross-posted from Prosper Australia: Angus Raine of RE agents Raine & Horne burst into song about property taxes in a letter on page 55 of the Australian Financial Review today- and what a nice cartoon, Clement! Angus wants Stamp Duty tax breaks for empty nesters – people trapped in inappropriate housing by bad taxes. He wants capital gains concessions for real estate investors over the age of 60, saying, “tax constraints are making it very difficult for them to access the capital tied up in these assets.” The Raine & Horne agents will be walking tall today,...
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Cormann rules-out housing super fix

ScreenHunter_282 Nov. 14 14.15 By Leith van Onselen Finance Minister, Mathias Cormann, has ruled-out allowing first-time home buyers to access their superannuation to pay a house deposit, arguing that such a move would merely inflate house prices further. From The Australian: Senator Cormann said the idea would probably put pressure on house prices at a time when people were concerned about housing affordability... Senator Cormann countered the idea by suggesting it would only increase further. “The purpose of superannuation is to provide an income stream in retirement,” he told ABC News24. “There is a sole...
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Investors still hog wild for mortgages

ScreenHunter_05 Apr. 15 22.08 By Leith van Onselen The Reserve Bank of Australia (RBA) today released its private sector credit aggregates data for the month of August: A chart showing the long-run breakdown in the components is provided below: Personal credit growth (0.2% MoM; 1.1% QoQ; 1.1% YoY) and business credit growth (0.0% MoM; 1.2% QoQ; 3.2% YoY) continue to grow at a modest pace in annual terms, whereas housing credit growth (0.6% MoM; 1.7% QoQ; 6.7% YoY) is stronger, but remains at fairly subdued levels relative to its long-run average growth rate; although it is still growing more than twice as...
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ANZ-RM consumer confidence rises above average

ScreenHunter_15 Mar. 18 16.24 By Leith van Onselen The ANZ-Roy Morgan Research (RMR) consumer confidence index rose in the week ended 28 September, up 0.8 points (0.7%) to 113.7, taking it just above its long-run average reading of 113.2 (see next chart). As usual, ANZ chief economist, Warren Hogan, talked-up the result, saying that the ANZ still believed “household spending will grow moderately this year", seemingly summoning the confidence fairy and wealth effect from rising housing prices, even though wages are falling in real (inflation-adjusted) terms. The below chart plots the most recent Westpac-Melbourne...
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MB Members’ Report: Sydney housing loses its safe haven status

ScreenHunter_01 Oct. 04 00.04 For several years now, I have argued that Sydney housing offers relatively good value from an investment perspective. This was based upon the view that Sydney housing was relatively undervalued following an extended period of under-performance over the second half of the 2000s, as well as tighter supply and generally stronger fundamentals than the other major capitals. The situation has changed materially over the past 18 months, however, following the 22% surge in Sydney house prices over that period, driven by unprecedented demand from property investors. This has seen Sydney's price premium...
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RP Data: Home prices up marginally in September

ScreenHunter_07 Mar. 20 20.55 By Leith van Onselen RP Data's price results are in for September, with the daily index recording a 0.10% rise over the month at the 5-city level, with values rising in Sydney, Brisbane and Adelaide, but falling in Melbourne and Perth (see next chart). It was the fourth consecutive monthly increase in values, with values also up by 2.83% over the quarter (see next chart). Home values have now increased by 6.31% since the start of the year at the 5-city level and by 9.4% over the past 12 months, driven by strong growth in Sydney and Melbourne (see below charts). however,...
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Kelly O’Dwyer talks foreign investment, negative gearing

ScreenHunter_06 May. 06 09.27 By Leith van Onselen Liberal MP, Kelly O'Dwyer, appeared on ABC Lateline last night to discuss foreign investment in Australian real estate, as well as negative gearing (amongst other things). The full transcript can be viewed here, On foreign investment, O'Dwyer once again slammed the Foreign Investment Review Board's (FIRB) monitoring and enforcement of foreign ownership rules, in particular the requirement that non-residents cannot purchase pre-existing dwellings and the requirement that temporary residents sell their pre-existing homes within three months of departing Australia: KELLY...
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Kohler flip-flops on Australian housing

ScreenHunter_4409 Sep. 30 07.48 By Leith van Onselen Watching Business Spectator's Alan Kohler take contradictory positions on Australian housing over the past two weeks has been a sight to behold. On 17 September, Kohler declared that Australia's high house prices are not a problem and are the result of a well-functioning market: The point is that it’s not entirely clear that expensive housing is a bad thing, although I am talking my book, of course, as a home-owning, empty-nest baby boomer (with frustrated, renting children). It is true that a bubble followed by a crash would be undesirable, to say the least, but is...
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Why Chris Pyne is wrong on youth unemployment

ScreenHunter_29 Aug. 22 11.42 By Leith van Onselen Education Minister, Christopher Pyne, appeared on the ABC's Q&A program last night and showed why he is out-of-touch on the issue of youth unemployment, declaring that there is "no crisis". From The Age: Q&A host Tony Jones asked whether the Coalition should place youth unemployment on a "crisis agenda to try and fix this?" "There isn't a crisis. There certainly is an emphasis from the Coalition on young people either learning or earning so when they leave school – and happily more people are finishing year 12 which gives them a better chance of getting a job...
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RM inflation expectation lowest in 2014

ScreenHunter_05 Mar. 12 11.39 By Leith van Onselen Roy Morgan Research (RMR) has released its inflation expectations survey for August, which revealed that consumers' inflation expectations over the next two years fell by 0.2% to 4.8% per year in August - 0.2% down from a year ago and the lowest result recorded so far in 2014: According to the media release: Analysis by State shows inflation expectations were driven lower by falls in five out of the six Australian States: New South Wales (5.0%, down 0.3%), Queensland (4.9%, down 0.1%), Western Australia (5.3%, down 0.4%), South Australia (4.3%, down 0.7%) and...
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Links 30 September 2014

ScreenHunter_01 Apr. 02 06.19 Global Macro / Markets / Investing: PIMCO MacroPerspectives (PDF) - PIMCO The Geneva Report on global deleveraging - VOX Geneva Report warns record debt and slow growth point to crisis - Financial Times Why investment advice is often so confusing - A Wealth of Common Sense Two-year Treasury yields are at multi-year highs - Business Insider Why hedge funds love tech stocks - Alpha Attribution Where Bill Gross went wrong - Pragmatic Capitalism North America: The US manufacturing renaissance is real - Dr. Ed’s Blog The Fed and the case of regulatory capture - Justin...
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Falling incomes the ultimate barrier for FHBs

ScreenHunter_01 Jan. 27 23.41 By Martin North, cross-posted from the Digital Finance Analytics Blog In the current discussions about macroprudential, stimulated by the RBA comments last week and likely to be stoked further as the RBA appears before the Senate Banking Committee on Thursday, many are claiming that household balance sheets and incomes are supporting the growth in house prices, and so no intervention is needed. The chair of the Banking Committee Sam Dastyari is “concerned about the unanticipated consequences of the Reserve Banks’s view-change on the sustainability of the housing boom and whether it needed to...
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RBA: Low dollar no saviour for manufacturing

ScreenHunter_20 Feb. 20 10.06 By Leith van Onselen More arse covering from the RBA today, this time arguing that a lower dollar could not have saved Australian manufacturing. From The Canberra Times: A lower exchange rate would not have helped manufacturing during the mining boom, according to modelling conducted by the Reserve Bank... But the Reserve Bank paper, Exchange Rate Movements and the Australian Economy, suggests that fixing the dollar at 2003 levels - around 60 US cents – would have made little difference. "Even a constant nominal exchange rate would not have prevented the ongoing decline in the relative...
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Australian mortgage debt hits all-time high

ScreenHunter_31 Sep. 02 16.36 By Leith van Onselen The RBA released its quarterly household balance sheet statistics on Friday, which revealed that Australian mortgage debt hit the highest level on record in the June quarter when measured against household disposable income. According to the RBA, the ratio of housing debt hit a whopping 137.1% in June, up from 136.1% in March and 5% above the pre-GFC peak of 132.1% (see next chart). Total household debt rose to 151.1% in June, up from 150.2% in March, but remains 1.8% below the 152.9% all-time high reached in September 2006 (see next chart). When compared...
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Property slump hits Melbourne CBD

ScreenHunter_07 Feb. 10 11.46 By Leith van Onselen The Age has a series of feature articles today on the budding oversupply of apartments in and around Melbourne's CBD, which is dampening both prices and rents. According to an analysis of recent sales by the newspaper, many recent buyers of high rise apartments are incurring big losses on resale, as new supply continues to run well ahead of demand: Owners are selling apartments in some Melbourne skyscrapers at substantial losses as the state government approves thousands more units... Central Melbourne will get 10,200 new apartments this year, a similar number next...
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