Unconventional Economist

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Bizarro World

Today I promised myself that I would take a break from the housing market in order to tackle other areas of interest, such as demographics, China, population policy, and investing. But then I was handed an article by a colleague entitled Why must we make the same old policy failures in the housing market?   At

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Disparate groups slam Australia’s housing affordability

In the wake of the 2011 Demographia International Housing Affordability Survey, which identified Australia as having the most unaffordable housing in the Anglosphere, it appears that pressure is building on the Australian Government to take corrective action. Over the past two weeks, concerns have been raised by three disparate groups: the Sacred Heart Mission, the Real Estate Institute of

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US Democratic Party Shoots Itself in the Foot

The United States Democratic Party has a problem. Following the 2010 Census, which showed strong population growth in Republican held states, six House of Representative seats and Electoral College votes are to be reapportioned toward states won by John McCain (the 2008 Republican candidate) from states won by President Barrack Obama (see below map). This loss

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New Zealand Deleverages (Continued)

Following Wednesday’s post, New Zealand Deleverages: Taste of Things to Come, two important pieces of information have been released supporting my contention that the New Zealand economy is facing a prolonged period of anaemic growth as household’s deleverage following their borrowing binge in the 2000s.  First, data was released on Thursday showing a ‘shock’ rise in unemployment to 6.8% from

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Australia doesn’t need more securitisation

Regular readers of this blog will know that I am highly sceptical of measures aimed at increasing competition within the mortgage market. Back in December, I argued that Australia’s housing bubble had been caused by a combination of easy credit and unresponsive housing supply. In the early-1990s, these non-bank lenders entered the Australian mortgage market and began raising funds via securitisation

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NZ Deleverages: Taste of Things to Come

Readers that have followed this blog for a while will know that I follow events in New Zealand closely, as I believe that events there can provide important insights and lessons for Australia. In many ways, New Zealand is a microcosm of Australia (minus the resources). We share essentially the same banking system (New Zealand’s largest banks are owned by Australia’s Big

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The Australian banks’ $135 billion funding chase

The Australian Financial Review (AFR) today published an article entitled Banks in $135bn funds chase, which highlighted the significant offshore funding challenges facing Australia’s banks. Here’s an extract of what the AFR had to say: The heavy reliance of Australian banks on international financing will force the big four banks to seek about $135 billion in wholesale funding

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UK deleveraging: “standard of living to plunge at fastest rate since 1920s”

The Telegraph today published a disturbing article on the dire state of the UK economy: Households face the most dramatic squeeze in living standards since the 1920s, the Governor of the Bank of England warned, as he reacted to the shock disclosure that the economy was shrinking again. Families will see their disposable income eaten up as

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China’s Demographic Time Bomb

The 21st century will be the century of old age, where declining birth rates meet longer life expectancies. Nowhere are these demographic shifts occurring as quickly as in China, which is facing demographic challenges that threaten to slow its long-term expansion. China’s demographic headwinds stem from its ‘one child policy’, which was brought into effect in 1979 and is

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Detailed Report: The 2011 Demographia Housing Affordability Survey (By Leith van Onselen)

The 7th Annual Demographia International Housing Affordability Survey has just been released and, once again, it has delivered a stern condemnation of housing policy in Australia. This year, the Demographia survey has been expanded to 325 markets in seven countries: Australia, Canada, Hong Kong, Ireland, New Zealand, the United Kingdom, and the United States. The

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The Days of Easy Credit are Numbered

Back in December, I wrote the following: In the early-1990s, non-bank lenders entered the Australian mortgage market and began raising funds via securitisation on wholesale debt markets. The rise of these non-bank lenders caused an intensification of competition amongst mortgage lenders. With no formal regulator and no rules outside of regular trade practices and corporations law, they

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More Planning Madness

An interesting article appeared today in the Fairfax press about the extortionate cost of land on the fringe of Australia’s capital cities. The value of land sold…rose 5.2 per cent to a median lot price of $186,629 over the year to September, or 2.8 per cent in the quarter alone. “Land price appreciation is a key cause of

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Never Trust a Real Estate Economist

With the the 7th Annual Demograhia International Housing Affordability Survey due to be released on 24 January 2011, you can expect the banks and property spruikers to come out in force proclaiming that: Australia’s housing market is not overvalued; that there is no housing bubble; that house prices will continue to rise inexorably; and that somehow Australia

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Why not copy Houston: A follow-up

Tuesday’s post, Why not copy Houston, has again attracted many interesting comments and ideas. The intention of this post was to provide a case study of an alternative urban planning system – Houston – that appears to have achieved far superior outcomes to Australia’s highly prescriptive approach. In particular: high quality housing that is less than half the cost of equivalent Australian

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Guest Post: Changing the Rules: Why our Property Boom is Over (Part 1)

Sam Birmingham runs a top quality networking site for young professionals called WeBe, which provides up-to-date information on financial matters, work-related issues, lifestyle news and reviews, and current affairs and opinion pieces. WeBe also provides a platform where members can have their voices heard, express opinions and share ideas with other like-minded Young Professionals. Yesterday, Sam published the first in

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Why not copy Houston?

Following on from my recent articles on land-use regulations and housing affordability, I want to take readers through Texas’ deregulated urban planning system, and how this system has assisted in providing Texans with housing that is among the most affordable in the Western world despite very high population growth. Adam Smith would be proud: Possibly the best description

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A Developer’s Perspective

My recent articles on the supply-side of the housing market have certainly aroused interest. My last three posts have each registered over 30 comments – a feat only achieved by this blog six times in 54 posts. But that’s nothing compared to my latest article on Seeking Alpha, which is a re-print of last week’s post: The

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The Great Australian Land Racket

Another interesting day on the blog front. Yesterday’s article, Planning Gone Mad, certainly stirred up a hornets’ nest of comments and emails from readers. These ranged from highly supportive to outright opposition and claims that I have pandered to right wing interests. Nothing could be further from the truth. In all honesty, I couldn’t give

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Planning Gone Mad

My previous article, The Truth about the US Housing Market, has obviously divided opinion on the important issues of housing affordability and the causes of housing bubbles. In only 48 hours, this article has been read by over 5,000 people, making it my second most popular article of all time, behind Australian Housing: a Bubble in

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The Truth about the US Housing Market

Last week, the United States Case-Shiller 20-cities Composite house price index took an unexpected plunge, falling 1.3% in October from a month earlier. Prices have now fallen by around one-third (see below chart). Month-over-month prices fell in all metro areas covered by the index. And in six markets – Atlanta, Charlotte, Miami, Portland, Seattle and Tampa – house prices have

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China Bubble: Now the Locals are Worried

Alarm over China’s bubble economy continues to grow. First, Western commentators, led by Jim Chanos and Vitaliy Katsenelson, warned that China’s economy is over-dependent on fixed asset investment – i.e. building infrastructure, real estate and manufacturing plants. This over-investment in fixed assets, which now comprises a whopping 60% of China’s annual GDP, has caused China to build far

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Another Commodities Bubble?

Between mid-2007 and late 2008, the price of all tradeable commodities skyrocketed, headlined by oil reaching nearly $US150 per barrel in July 2008. At the time, fundamental economic forces and demand and supply were being blamed for the sharp rise in commodities prices. Take, for example, this explanation from Jeffrey Harris, chief economist of the CFTC, the US commodities futures

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Is Australia Running out of Luck?

An interesting article appeared in yesterday’s Sydney Morning Herald entitled “Slugging it out over our future direction” (hat tip to John Murray for alerting me to it). In the article, investment ‘experts’ are asked to make predictions on the Australian economy for 2011. While a number of analysts are fairly positive on China and the

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Foreign Investors Shun Australian Bank Debt

The Australian banks’ excessive borrowing from foreigners, which has been used to fund the Great Australian Housing Bubble, is something that I have warned about since starting this blog. This issue first entered my consciousness in 2009 when reading fellow blogger, David Llewellyn-Smith’s brilliant book, The Great Crash of 2008. Amazingly, this issue has received little attention from mainstream Australian

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China Bubble: More Bearish Commentary

The holiday season has not stemmed the flow of commentary questioning the strength of the Chinese economy. On Christmas Eve, Australia’s own Karen Maley of Business Spectator wrote a nice summary of the challenges currently facing the Chinese economy. Here’s an extract of what Maley wrote: As we head into 2011, the biggest cliffhanger for Australia is

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Westpac drops mortgage lending standards

Earlier this month I warned of the unintended consequences of increased bank competition. This article described how the intensification of competition for mortgage lending in Australia from the mid-1990s caused credit standards to drop and offshore borrowings to explode. The resulting increase in the availability of credit arising from this increased competition, combined with unresponsive housing supply, has caused the housing bubble that

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Son of Wallis Challenge Winner

Regular readers would be aware that I was a co-sponsor and judge of the Son of Wallis Challenge, a privately run competition to promote a comprehensive government inquiry into the Australian financial system. Today the winner was announced and I congratulate Kaon Li for her winning entry.  Thanks, too, to all of our contestants. I can honestly say that all entries were excellent and it was a closely

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New Zealand Deleverages

Following Standard and Poor’s November downgrading of New Zealand’s sovereign credit rating from AA+ stable to AA+ negative, the New Zealand Government recently warned that its budgetary situation has worsened amid deleveraging by New Zealand households. Finance Minister Bill English foreshadowed a New Year review of government spending in the wake of figures showing the budget deficit running

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China: the Bull Case

A reader has sent me the below email, which comes from the President & CEO of CapitaLand, Mr LIEW Mun Leong, and was sent to all staff in July this year. CapitaLand has apparently been the major residential developer in China for the past 15 years. The email presents a rather bullish view of China,

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China Bubble: More interesting data and analysis

Following on from my earlier post on China’s empty cities, more interesting analysis and data has come out about China’s bubble economy. These reports seem to add further weight to recent bearish arguments put forward by Jim Chanos and Vitaliy Katsenelson (amongst others). First, Dan Denning has written a cracking post in the Daily Reckoning explaining how China’s