Scott Morrison: Mortgage collapse no cause for alarm

In yesterday’s press conference at Parliament House, Prime Minister Scott Morrison dismissed concerns around the crash in mortgage commitments, driven by investors:

Below is the transcript, with my emphasis added in italics:

Journalist: Home lending figures came out today. Huge plunge, double-digit plunge. This is a time with record low interest rates as well. We’ve also seen a couple of months of sliding house prices. Do you have any concerns about the housing market? And what can the Government do to avoid a house price collapse?

Prime Minister: Well, the thing about the Australian housing market is that demand has always outstripped supply, particularly in those markets which have been most heated and we’re talking largely about the eastern seaboard markets there. I mean, the situation in Perth and Adelaide has been a bit different. But even down in Hobart more recently, we’ve seen an undersupply of housing and oversupply of demand. And that has always been what’s driven the housing market. It hasn’t been driven by speculative investor bubbles or speculative credit, things like that, which we’ve seen occur in other countries. And I think one of the problems about the commentary about the housing market is too often the analysis has appropriated the conditions of other places and applied them to Australia and that application has been completely misguided. Of course you’re going to see a resistance, a concern amongst consumers during the times we’re experiencing right now. It would be surprising if we did not see that. But I think, fundamentally, the structural position of the housing markets in Australia would tell a far more stronger tale in terms of their resilience. That’s why I welcomed particularly yesterday the decisions by the banks to be able to continue to roll over and defer payments in relation to debts. That’s important. That’s one of the many changes that have been important to date and will be important later in the year and we’re working through very similar issues. So, I think it would be presumptive, or a little premature is probably the better word, to be making medium or even short-term forecasts about the Australian property market at the moment.

The below chart plots investor mortgage growth against dwelling price growth:

As you can see, the correlation is incredibly strong, with investor mortgages typically leading prices.

This data directly challenges the Prime Minister’s claim that the Australian housing market “hasn’t been driven by speculative investor bubbles or speculative credit”.

Leith van Onselen

Comments

  1. Even the PM reckons Australia is different. House prices will always go up coz demand always outstrips supply. How good is “non-speculative” housing “investment” for everyone who wants to have a go?!

    • GunnamattaMEMBER

      Prime Minister: Well, the thing about the Australian housing market is that demand has always outstripped supply, particularly in those markets which have been most heated and we’re talking largely about the eastern seaboard markets there. I mean, the situation in Perth and Adelaide has been a bit different. But even down in Hobart more recently, we’ve seen an undersupply of housing and oversupply of demand. And that has always been what’s driven the housing market.

      Now this is a man worshipping at the altar of the Population Ponzi

      • Here Comes Reaper

        The real loss is threw time 400,000 imos a year were only adding 20,000 a year to 1,00000 house in Syd or Mel so prices will seem to hold but father time says you lose 30 perc
        ent over 4 years twas the greedy natives dat did it lolol

      • TailorTrashMEMBER

        Of course demand will outstrip supply when your model is based on providing 1.5 billion Chinese with the opportunity to own a home in Australia before your own children . Sad that the prime minister appears so stupid or corrupted by the property brain rot that has consumed a once great country

      • kannigetMEMBER

        just shows how great economic managers they are, demand always outstripped supply yet they pushed incentives into the market to increase demand….

        HMB while I put this fire out with a bucket of petrol….. FFS

    • Jumping jack flash

      Debt-bubble demand is a wonderous thing.
      It never gets satisfied until the debt stops growing.

  2. @LVO could you please stop pointing at the fact that he’s a total tool and that the reality is different? We *want* this turd-soufflé to blow up in heir faces. Stop helping them! 😝

    • reusachtigeMEMBER

      This blog has played a significant role in keeping your so called Ponzi going by screaming alerts every time there’s a whiff of failure. It’s a great supporter of the status quo! LOLOLOL

      • Reusa….a quick question…
        Do you have your own Turd Soufflé and are you currently searching through it for explosives?

      • Exactly. On camera he will say what he needs to say to lighten the mood and keep the average joe comforted. After the interview he will phone his bureaucrats and flag another problem that needs to be dealt with.

      • SoMPLSBoyMEMBER

        SFM is no more than carved wood, paint and strings as a marionette for global capital that has found a mother lode in AUS with greedy and willing debt applicants who’ll condone anything as long as their house prices rise.
        We deserve the punishment that is upon us; perhaps we’ll learn from it.

  3. “It hasn’t been driven by speculative investor bubbles or speculative credit, things like that, which we’ve seen occur in other countries”

    HOW GOOD IS STRAYA!

      • Treasury and RBA cabal, sprinkled with corruption on behalf of bank/CFMEU/China/construction companies.

        Magic pudding of GDP and inflation targeting. No recession eva! Looking more like a cow pat now with rates so low.

        • Jumping jack flash

          Government debt, 0.5 trillion. The people’s debt, 2.4 trillion.
          It is easy to see what went on.

          The boogeyman of government debt invented in the late 80s by Howard because he had nothing else, and this is the result.

    • Jumping jack flash

      I guess that 2.4 trillion dollar pile of outstanding mortgages would have happened anyway without the housing mania.

    • Ukraine fnMEMBER

      Then what was the royal commission into banking for then?? SFM makes me sick to see how captured to the ponzi he is.

  4. Personally I would have highlighted the word ‘resistance’ very odd choice of word unless you know the only game in town is debt servitude to the Australian politico-banking-housing complex. “Stop resisting you damn youngsters, I say! We made your bed now gosh dang lie in it!”

    • DominicMEMBER

      Seeing as every ponzi sits atop a base of buyers at the bottom of the pyramid, it would gladden the soul if the youngsters of today got ‘woke’ to the role they’re playing by aspiring to get on the ladder. Stand back and let it collapse – half price housing awaits.

  5. There’s another year of mortgage holidays and jobkeepers up their sleeve. Get with the programme

  6. ZevombatMEMBER

    Reminds me of a video someone posted on here a while ago of Irish headlines leading up to their property crash. Could be like crash denial bingo

  7. Movie Naked Gun, Police Squad Frank Drebin stands up and says “Nothing to see here, move on” despite all manner of excitement behind him. That said, I remember 1990-92 in Victoria. A regional depression with a building society failure, much worse than observed elsewhere. Although Premier Clouseau is making things worse for Melbourne, and we will see more business failures that will make it harder, we are a long way short of the days that were so bad that the previously rejected Kennett was elected in a landslide.

  8. He’s right. It’s not a speculative bubble. It’s just simply that demand has been amplified. It’s been driven by a foreign investors, money laundering and absurd levels of immigration. Simple as that.

    Low interest rates help but are useless alone without the above.

    • The90kwbeastMEMBER

      “It’s not a speculative bubble. It’s just simply that demand has been amplified”

      Err, yes it is a speculative bubble. This has been covered dozens of times on this blog, and many other outlets. The very fact that negative gearing was in such common use is entirely supporting of the bubble being speculative in nature, it is the literal definition of it.

      Immigration, foreign buying etc just helped add to marginal demand and threw more fuel on the fire.

      https://images.app.goo.gl/zD9KeKzwoBDpPCjB7

  9. SoCalSurfCreeperMEMBER

    Who will be Australia’s David Lereah?

    This shill for US National Association of Realtors became a massive joke as the GFC bubble imploded. People we onto him years prior, however, and he had a blog dedicated to compiling his lies starting in 2005.
    http://davidlereahwatch.blogspot.com/
    He was later named to Time magazine’s 25 people to blame for the financial crisis http://content.time.com/time/specials/packages/article/0,28804,1877351_1877350_1877336,00.html
    Legend!
    Nerida Conisbee has to be up there.

  10. “It hasn’t been driven by speculative investor bubbles or speculative credit, things like that, which we’ve seen occur in other countries.”

    Does he honestly believe what he’s saying?

    If he does then we don’t need foreign speculators (investors), for a start.

    And massive record mortgage debt don’t matter either.

    Or falling rents.

    Or rising unemployment.

    No immigration for now.

    No problem.

    Yeah right Scotty.

    • happy valleyMEMBER

      Of course, he honestly believes what he is saying, because it’s all made up happy-clappy style.

  11. So it mirrors the GFC drop but without the ability to knock further points off interest rates, and a pump of migration to return the market to growth.

    Still, medicine does not always taste sweet does it.
    We’re better off owning a poor country, than being serfs to foreigners in a rich one (and reality is lower prices would long-term make us more competitive.. hence rich again anyway).

  12. Mining BoganMEMBER

    He’s correct though. It’s not a source of alarm. It’s something to be cheered on!

  13. “and we’re talking largely about the eastern seaboard markets there. I mean, the situation in Perth and Adelaide has been a bit different. But even down in Hobart more recently, we’ve seen an undersupply of housing ”

    So strange that a PM talks so precisely and intricately about the housing market. It’s as if he’s been following it very closely. Nevermind the things that a PM is responsible for, such as national security, defence, health, social services, environmental issues, indigenous issues etc. just keep a close eye on the property market in each state and territory and watch the sharkies in the NRL.

    Real Estate Concerned Prime Minister. RECPM.

    • Knuckles McGintyMEMBER

      He could get a side gig working for Corelogic or REA at this rate – move over Cameron Kusher…

  14. he is letting housing down the sink while trying to save construction mates

    he is not that dumb to believe that years of the greatest housing construction boom in history we still have shortage issue
    over the last few years we were building twice as many more homes per every new resident than Arizona or Florida during early 2000s, 50% more per every new resident than Ireland or Spain at the peak of their construction bubbles

    • Yes. But was was the per capita immigration rate of Arizona and Florida compared to Australia? Or Ireland and Spain? And how many mainland Chinese buyers as a % of property transactions? Australia wins gold in all.

      • population of Arizona increased 22%, Florida 16%, Ireland 12%, Spain 9.3% during 5 years of construction boom prior to a bust

        Australian population increased 8% in 5 years up to the end of 2019 (we’ll ignore this year), VIC population increased by 10.9% and NSW by 7%

        Maybe they had less Chinese buyers but they had more rich buyers from other US states (California, NY, …)
        So not so golden after all

        • Pfh007.MEMBER

          doctorX,

          You have been running your “there is no shortage” of housing arguments for years.

          The number of houses are meaningless unless they are available in the market. Until recently the residential vacancies levels in most Australian cities were barely above 2% and mostly less.

          One only needs to look at Western Australia where they had super cheap credit and residential vacancies above 5% for years to see the difference that a real over supply in residential vacancies has on both prices and rents. They fall but even then it was slow and took years…due to the cheap credit, a credit crunch would have accelerated the process.

          If you find a way of forcing all those spare bedrooms and under-used houses on to the market such that residential vacancies in all Australian cities rise then we will see prices and rents soften across Australia. But good luck watching those water meters, peeking through windows and demanding that owners downsize as nothing much has happened on that front beyond lots of hot air.

          Until COVID-19 shut the borders there was NO sign of that happening anywhere in Australia outside of Perth and Darwin. Canberra just keep cranking the people ponzi lever to soak up the available housing supply and keep vacancies tight.

          Which is kind of ironic considering how opposed you are to Australia shutting its borders to keep out COVID-19.

          • what you call vacancy rate in Australia is a joke
            SQM counts number of homes listed on two websites for longer than 3 weeks divided by total number of rental properties (second number he gets from census I think based on previously occupied homes by tenants not including unoccupied during census)

            vacancy exploded recently (in some places doubled or tripled) not because there are now twice as many vacant homes but because time to let them out increased so many of those previously vacant but under 3 weeks now appeared in the stats

            Also, there is under estimate because companies like Meriton advertise 1 unit while having dozens of units empty in buildings with hundreds of units
            https://www.domain.com.au/811-south-dowling-st-waterloo-nsw-2017-9095290

            Simply you are just blind to the fact …
            In Arizona between 2000 and 2005 480k building permits have been issued while population increased by 1.1 million (assume all permits have been used)
            In Australia between 2014 and 2019 1.225m homes have been built while population increased by 2.11 million

            you do the math

          • Pfh007.MEMBER

            More stats that don’t suit your narrative.

            Must be hard to be you.

            The problem you have is that the residential vacancy stats are measured the same way across Australia and in Perth they showed vacancies above 5% for years and about 2% in Sydney and Melbourne.

            And guess what Perth rents and prices went down and Sydney and Melbourne’s went up.

            Just as we might expect.

            The only interesting thing is that Perth disproves the “its only cheap credit” that matters true believers.

            Facts matter doctorX.

          • kannigetMEMBER

            While I dont agree with DoctorX on many of his Covid related rants he is correct on the supply issue.

            Over the last decade, We have built as much new accommodation as the UK with almost the same per capita population increase. the UK has twice the population. so effectivley we have increased accommodation stock by twice the amount as the UK for a decade and still have a “shortage”.

            Yes, if a house is not made available to the market its not counted as vacant, but that doesnt mean its not there. Meriton and almost all the other apartment builders have been gaming the figures for years by only advertising 1 out the hundreds of apartments available in a complex. They even rent them out on Air BNB to get a return on them, while they dont appear in the pool of properties…

            Another factor is the crush into the metropolitan area creates an artificial demand, State governments spend the majority of infrastructure money in the metro areas, leaving the regions to fund their own, pushing jobs into the metro area when they should be moving outward. properties in regional areas outside the commute zone sit on the market for years and dont appear in the stats because a lot get pulled or a rented / sold privately. Private sales on the mid north coast are a lot more common than in the city. Lots of sea changers just approach people and make offers in places like Coffs harbour. Those properties dont appear on the market at all…

            The fact is the rental vacancy rates are as dodgy as the auction clearance rates, lots of games played to manipulate the data o convince people to pay more..

          • your problem is that you don’t understand statistics …
            problem with statistics with discontinuities/cut offs like this 3 week non-counting period is that a small increase of vacancy rates (e.g. 10%) can result in doubling of the measure used.

            So what’s very likely is that Perth has just slightly higher vacancy that looks like double in SQM official statistics, just like in case of Sydney where actual vacancy changed slightly in a month of April (maybe by 5%) but the SQM measure of the vacancy increased by 30%.

            Stat like that that is worse than no stats.

            BTW. house prices in Perth didn’t drop because rental vacancy increased but because income dropped after the period of mining boom exuberance. Income crash caused both rent crash and house price fall as well as higher rental vacancy (crowding). That reduction in income reduced credit available to people and that’s why prices fell

            It’s all about credit and not supply

          • PaperRooDogMEMBER

            You are both right! Its not just cheap credit, though that is the main driver for Australia, availale properties also matter. There is no shortage, else there would be families living on the street after decades of shortages, rather it’s a restricted flow meaning there is only a small pool of properties on market this applies stress to buyers and chooses them to use extra credit they would not have to in a market with more available homes.

      • Do you agree that NOM + foreign property transactions to new dwellings constructed is much greater in Australia to those places you mentioned? I think you understand ratios.

        • it’s not greater …
          it doesn’t matter who buys a house, house is still here and rented (90% of Chinese buyers buy with a mortgage and rent place out but often directly to Chinese students without ever being advertised on any Australian website)

        • Comments that add to the discussion are marked as spam continuously. Unfortunately. I certainly wouldn’t pay for a subscription for that.

          • PaperRooDogMEMBER

            Seems my reply to your deleted comment about Chinese mortgages got posted below, it’s true most Chinese have an Aussie bank mortgage

    • Jumping jack flash

      Debt-bubble demand is an amazing thing, yes.
      There will always be a shortage while people are still eligible for the enormous piles of debt required to buy a house, and the banks are happy to magick it up and hand it out.

    • The number of adult homeowners, especially those mortgaged is much greater than those directly in construction and much greater than those ‘mates’.

      Also, again, you assume all dwellings are of equal quality. You need to account for the inner city apartment booms because many of these are unsuitable for many citizens, especially families. The dwelling construction boom has been in apartments, housing construction has remained remarkably stable for decades. I don’t know whether there is an under- or over-supply of these dwellings (traditional housing). Do you?

      • rise in % of small households (1 to 2 people households) in Australia is faster than the rise on small dwelling types (1-2 bdr)


  15. That’s one of the many changes that have been important to date and will be important later in the year and we’re working through very similar issues. So, I think it would be presumptive, or a little premature is probably the better word, to be making medium or even short-term forecasts about the Australian property market at the moment.

    What insane policies are they cooking up?

  16. Pfh007.MEMBER

    “..But even down in Hobart more recently, we’ve seen an undersupply of housing and oversupply of demand. And that has always been what’s driven the housing market. It hasn’t been driven by speculative investor bubbles or speculative credit, things like that, which we’ve seen occur in other countries. ..”

    Like so many commentators, Morrison adopts the binary theory that prices must reflect SUPPLY or CREDIT when it is obvious that both are important.

    Perth had lots of residential vacancies and cheap credit and prices sagged over an extended period.

    Those cities with tight residential vacancies and cheap credit saw prices rise.

    But all of this means very little while we persist with a privatised model of public money where over 95% of the money supply is created by private banks through their lending decisions and those decisions are heavily tilted towards residential property due to prudential requirements that allow banks to crank up residential lending with little control as to whether the lending is secured by existing property or new construction.

    While adjusting the regulations to reduce the attractions of lending secured by existing property makes sense they are NOT going to happen because changing the regulations will create a trail of bread crumbs, when the property market softens, back to the government.

    Any changes that are likely to reduce the amount of bank credit sprayed at the existing property market must be subtle and deniable by the government.

    About the only politically palatable change is to regulate so that lending where the security for the loan is existing property is treated less favourably than lending where the security is a new property. And by less favourably I mean either reduce the supply of credit (by imposing quotas) or by increasing the price (by adjusting the weights that apply to loans secured by existing property in the prudential framework.

    The public generally do accept that more support is warranted when the subject matter of the bank lending is new construction. This is consistent with the constant talk about shortages of supply (which are correct in many Australian cities as the residential vacancies demonstrate)

    But again who thinks that Scott Morrison has any interest in a healthy residential property market when he can just open the borders to foreign buyers and loads of immigrants eager to take on a cheap 30 year contract of debt servitude to his backers in the private banks.

  17. Leith, given your conclusion, would ScoMo (and similar) just argue that ‘investor’ doesn’t necessitate ‘speculative’?

    They are wrong, since the very venture of most ‘investors’ is speculative in nature (requires capital gains to be viable), but I think the Word-Spinners will try an wriggle out this way.

  18. Lord Winchester EntwhistleMEMBER

    Very useful to contemplate the various markets ex Mel Syd and even then the markets within markets in Mel/Syd.

    Local observation = lack of listings, anything listed is still selling strongly. Especially rural/regional acreage.

  19. The90kwbeastMEMBER

    ” It hasn’t been driven by speculative investor bubbles or speculative credit, things like that, which we’ve seen occur in other countries.”

    I read this comment as having strong political meaning, instead of absolute meaning. It’s a way of Scomo not throwing the banks & APRA under the bus and avoiding raising accusations that they have been lending irresponsibly (which they obviously have been).

    Someone should bookmark this comment when the bubble eventually does burst, because his comment is an entire misdirection of blame from the banks & APRA to… no-one. He has offered no other reason which is telling.

    “Move along, nothing to see here! Please disperse!”

    • Jumping jack flash

      Bingo.
      The banks’ banks would be very interested if the banks had been fuelling a speculative bubble that was as risky as the proverbial…

      Funding costs through the roof… credit crunch.. interest rates spike… all the good stuff would quickly follow.

      Mum’s the word, indeed.

  20. Jumping jack flash

    Its a chicken and egg argument. What came first, the houses or the debt to buy them with?

  21. two plus twoMEMBER

    Slomo: “But even down in Hobart more recently, we’ve seen an undersupply of housing and oversupply of demand.”

    Oversupply of demand?? Nice Freudian slip there. He even sees ‘demand’ as a function of ‘supply’ (referring to Ponzi Population Policy [PPP] of course).

  22. Rikki StocksMEMBER

    I’m anticipating some kind of “Cabin in the Woods” type scenario where once the YOY goes negative for Sydney & Melbourne, some massive Cthonic type entity erupts from its underground slumber to lay waste to Australia.
    SFM and his mates are the guys in the control room performing their rituals hoping to keep the lid on the box. We just need some plucky stoner to unravel the house of cards for a new beginning.
    Or maybe SFM sees himself as a Neo-Buffy character atop of the hell-mouth, slaying the deflationary onslaught. The good guys always win, right??

  23. PaperRooDogMEMBER

    It’s been published on this site before, can’t find stats right now, but here is a taste

    “He said PingAn would typically lend Chinese investors the 30 per cent required for the down payment and the remainder would be financed by an Australian bank.

    “The down payment will typically be secured against an apartment in China,” he said.

    Mr Yuen said there would be no requirement to disclose the PingAn loan to an Australian bank, which would hold the primary mortgage over the property.

    Simon Moreira, a sales manager with R Corp, which is developing the West Brunswick apartments known as “The York”, was unaware buyers were being offered zero-deposit loans. “I have got no idea about that,” he said by phone from Melbourne.

    Mr Moreira said around 80 properties in the 315-apartment development remained unsold and he would be in China shortly to continue the sales push.

    PingAn is also offering the zero-down scheme for investors buying into the Ramada serviced apartments at Hope Island on the Gold Coast.”
    https://www.afr.com/policy/economy/zero-deposit-loans-for-chinese-investors-to-spur-australian-property-market-20151025-gkhujs
    (paywalled)

    • Thanks.

      But I find it very difficult to believe that Australian banks are lending to Chinese citizens to buy CBD apartments or brick sh houses in Strathfield or chatswoo.

      An Australian citizen wouldn’t even get finance to buy a high-rise Harry CBD special.

      An Australian bank wouldn’t even lend a dollar for anything unless you have Australian PAYG income for starters.

      The purchases are in cash.

      • I’m pretty sure this was before the market top in 17, so things have changed a bit since then

  24. PaperRooDogMEMBER

    I had thought our leaders just spewed specufester propaganda but did really understand the market, then when they talk #### like ScoMo you realise they are dumb.