FT: Aussie house prices highest risk of crash in G10

Via the FT today:

Free iPads, rental guarantees and an eye-watering A$100,000 ($72,000) off the price of an apartment are some of the sweeteners on offer from property developers amid the worst housing downturn in Australia for 35 years.

… according to Morgan Stanley, which warned this week the slump could torpedo Australia’s run of 27 years without a recession — a modern global record.

“We think the steep downturn in house prices exposes Australia to the risk of recession, particularly in the context of an exogenous shock such as slowdown in Chinese growth,” said Daniel Blake, lead author of the Morgan Stanley report.

“Our models show that Australian households are most exposed of any G10 country to a housing slump and face a period of deleveraging, leaving growth heavily reliant on public spending on health, education and infrastructure.”

…even the promise of discounts worth up to A$100,000 each on 10 luxury apartments offered for sale in Melbourne at A$1m-A$1.5m last month by Caydon Property Group failed to attract a buyer last month, highlighting the challenging conditions.

Nothing new but worth noting given the word is spreading to the world’s largest financial publications. Not normals:

With the consumer now trailing in its wake:

Of course, as we know, there’s a boom coming.

Comments

  1. there is no government spending that can offset property bonanza end

    those 300 plus cranes with all the spending related to cranes (building material, furniture, finance, consulting, sales, .. and all the middleman in between) employ well over half a million people

    • Well over half a million.
      Construction employment alone is close to 10% of the workforce (the highest % in 100 years).
      In Nov 2018 there were 12 million employed persons. 10% = 1.2 million.
      If you include all the finance/real estate/homeware sales employees it could be double that.
      So maybe 2 million + jobs are at risk.

      • though I think Opal Towers used to have vertical gardens (still got the gardens, just no longer vertical). Opportunity for spiderman gardeners.

      • @ truthisfashionable

        well met, great comeback, Jim’s can do any sh!tty job the rest of us hate! Man, give me, (oops, let me pay for) one of those jobs!

      • actually, better idea, just chuck all that hazmat on the lawn and I’ll pick it up with the mower, there, two in one.

      • HadronCollision

        Click their NSW link

        Business fail

        I am right now after some AC and compressed AC flooring removal quotes ;or safely do it myself)

        Jimsfail

      • Vertical gardening is definitely a thing, and an issue. The Central Park development in Broadway (Sydney) employs 2 gardeners year-round, and 4 others come in casually in the spring/summer. This all adds to the strata fees, and the energy consumed by all this activity outweighs any putative environmental “benefits”. (Note: I am very much in favor of roof gardens; just not vertical gardens; the only purpose they serve is for architects to show off)

  2. BoomToBustMEMBER

    a single word in there is extremely dangerous “deleveraging” 99.9% of people in this country have no idea it even exists, and of those .1% who know about it you would be lucky if 10% understood its true meaning and the trouble associated.

  3. DB Bank Analyst making sense again today – Just Follow Law… from the note

    Was it the Financialisation of the Household or the Remuneration Model?
    The mortgage product and the family “home” has evolved from a means to afford an abode to a high return financial credit product which fabricated both a source and store of chimerical wealth. Maybe the remuneration models are rational, and the extent of financialisation was the true error? Will Hayne be courageous enough to tackle the deeper philosophical root cause of banking mis-conduct?

  4. DefinitelyNotTheHorribleScottMorrisonPM

    Nah. We’ll just keep ramming people in, lower rates, and start QE. Jobs and growth. The FT knows nothing about proper bubble management.

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