Unconventional Economist

5

The Ice Age rolls on

Societe Generale’s Albert Edwards has provided an insightful, but bearish, view of the state of the global economy. Here are some key extracts (full report below): As we see a short-lived economic recovery failing only two years into the cycle and a plunge back into recession, we remind investors that this was exactly the Ice

14

China’s morbid dependency

In the lead up to Standard and Poors’ (S&P) downgrade of US Government debt, the largest holder of US Treasuries – China – had stepped-up its warnings and condemnation of the US Government’s fiscal mis-management and its deteriorating debt repayment capability. In November 2010, China’s Dagong Global Credit Rating Co. reduced its credit rating for

15

Will aged care exacerbate the baby boomer bust?

Yesterday, Fairfax published an interesting article, Sell the family home: PM’s aged care shake-up, which highlights one of the key longer-term challenges facing the Australian housing market: the impending retirement of the baby boomers. JULIA GILLARD will prepare the ground today for the biggest shake-up of aged care in decades with a speech calling for

68

More rent hysteria

It’s been interesting watching the change in perceptions regarding the housing market. Around this time last year, several well-known housing commentators were predicting strong gains in home values, including: BIS Shrapnel, which in July 2010 forecast a 30% rise in home prices over 3 years; and Australian Property Monitors (APM), which in March 2011 forecast

37

APRA imposes the new normal

In recent months, the credit ratings agencies – Standard & Poors, Moody’s and Fitch – have warned against the re-emergence of the Australian banks’ pre-GFC business model of borrowing heavily from offshore to pump the Australian housing market. However, with housing credit growth now at 35 -year lows: Other categories of lending even more subdued:

8

China’s shadow banking explosion

Fitch recently released an eye opening report on the staggering growth of leverage in the Chinese economy (h/t Bernard Hickey). As many readers will be aware, the Chinese Government has been implementing policies aimed at curbing bank lending in order to slow inflation. However, as is often the case with regulation, these policies have shifted

41

The long kiss goodnight

The Australian housing bubble debate appears to have hit a stalemate, where the dominant view is that home prices will stagnate for an extended period as incomes catch-up (i.e. declining in real terms). It’s a reasonable view with precedent. For example, after the late-1980s house price boom and the strong run-up in house prices between

51

Melbourne’s Miami connection

A few months back I had dinner with an American hedge fund manager. The fund had made good returns shorting the United States and Irish housing markets, and was undertaking reconnaissance of Australia’s capital city housing markets to determine whether similar shorting opportunities were available. In the days prior to the meeting, the fund manager

7

More rent hawkishness

RP Data a few days back released its June Quarter Rental Review. The report provides a detailed summary of the nation’s rental markets, both at the capital city and regional levels. Consistent with the June Quarter APM Rental Report, released last week, RP Data confirms that rental growth has stalled after a solid run-up between

34

BIS chief pushes the housing envelope

Earlier this month, the Chief of BIS Shrapnel, Dr Frank Gelber, gave an interesting interview on Switzer on the outlook for the housing market (click to watch video). The key discussion on the housing market starts from 5.15, where Dr Gelber says the following (paraphrased): The doomsdayers are “discredited”. “That was crazy stuff… they have

8

China’s believe it or not

After last week’s China update, which focussed on the massive malinvestment taking place within the Chinese economy, I received a number of articles from readers for inclusion in this week’s round-up. Thanks for everyone that sent articles in. If you find any articles that you wish to be included in next week’s summary, feel free

16

Rents going nowhere fast

Last week, in The boys who cried rents, I showed how the private sector housing data providers’ perennial bullish predictions of strong rental growth across Australia’s capital city housing markets is at odds with recent data, which has shown sluggish rental growth nationally since early 2009 (see below RP Data chart). Chief amongst the forecasters

4

Hilarious Euro Crisis Song

Here’s my winner for this year’s Eurovision Song Contest. Fellow MacroBusiness blogger, Delusional Economics, has done a great job of keeping us abreast of the potential crisis unfolding in the Eurozone. But in case you are still struggling to understand how Europe got into this position, the below video by the UK’s Guardian may be

73

The boys who cried rents

Economic forecasting – whether in relation to housing, currency, interest rates, or other markets – is tough. The world of economics and finance is very complex and predictions within a reasonable degree of confidence and accuracy 12 months hence are hard. Yet, the media continually publishes predictions by the nation’s economists and data analysts as

32

Chinese malinvestment grows

Almost daily now, I come across interesting articles on the Chinese economy. Rather than share each article individually, I will from now on provide a weekly round-up of articles from around the web. If readers have come across any noteworthy articles that I have missed, feel free to add these to the comments section below.

24

Rental complex

Following on from my recent post, The case against home ownership, Canadian Business last week published a great article. entitled Rental complex, asking why more Canadians don’t rent – a question equally applicable to Australians. At over 2,800 words, it’s a long article (but well worth reading). Below are some of the key extracts. Note

17

Buyer beware

Watch the full episode. See more PBS NewsHour. A few weeks back, in Aussie investors flock to US housing fund, I noted the relative undervaluation of US real estate compared with Australia, and how the newly launched US Masters Residential Property Fund, which is targeted at properties in the New Jersey area, was over-subscribed from

83

The case against home ownership

“The business of the United States used to be business. But somehow with all these Government programs, we turned the business of America into housing”… The above is just one of the great quotes from yesterday’s debate on Canada’s The Agenda (video below). The debate subject was The case against home ownership, and the panel

42

Not in my backyard

In 2002, the Victorian Labor Government launched Melbourne 2030 – a strategic planning policy framework for greater Melbourne aimed at reducing urban sprawl and car dependence by shifting new housing development away from Melbourne’s fringe (“greenfield development”) towards pre-existing urban areas (‘brownfield development’), where public transport is already established. Central to Melbourne 2030 was: the

45

Melbourne leads supply glut

Following on from today’s post, Avoid Melbourne housing, SQM Research has just released its latest weekly newsletter  again showing Melbourne as the epicentre of the nation’s housing supply glut. According to SQM, Melbourne’s stock on market has increased a whopping 47% since June 2010 (see below table). The only ‘good’ news coming out of the newsletter is

24

RMBS mortgage arrears rise 25%

Just in, arrears on Australian prime residential mortgage-backed securities (RMBS) rose by 25% in the March quarter and are approaching their historical high reached in January 2009. From The Adviser (via aushousingcrash): Loans underlying Australian prime residential mortgage-backed securities that are greater-than-30 days in arrears jumped to 1.81 per cent in March 2011, from 1.44

69

Rethinking urban planning

This blog has dedicated significant effort questioning the axioms underpinning Australia’s urban planning system. This system has grown increasingly restrictive as urban growth boundaries (UGBs), minimum targets for ‘brownfield’ development (urban consolidation), up-front infrastructure charges, amongst other measures, have been implemented across jurisdictions since the late 1990s/early 2000s. These urban planning tools, affectionately known amongst

57

Are services economies sustainable?

Sam Burmingham, founder and editor of the WeMoney Newsletter, has written a thought provoking article on his blog questioning the sustainability of service-based economies. Sam’s article is provided below for your reading pleasure. As always, comments are welcome. A couple of week ago Ross Gittins wrote: If ever there was a time when it’s obviously stupid

24

When to buy & sell housing

Fellow econblogger, Cameron Murray, has written another fascinating post on his Blog about the best time to buy and sell real estate. Cameron’s post is re-produced below for your reading pleasure. As always, comments are welcome. I came across the Commonwealth Bank – RP Data Home Buyers Index recently. It is designed to estimate the

71

Vitaliy Katsenelson: Why China will crash

In November 2010, I published a fascinating interview with Vitaliy Katsenelson – author of the Little Book of Sideways Markets (highly recommended), and teacher and Director of Research / Portfolio Manager at Investment Management Associates Inc, a money management firm based in Denver, Colorado. In this interview, Vitaliy provided possibly the best discussion of the

45

Local bulls vs foreign bears

On Friday, Bloomberg published an article entitled Australia’s home price plunge pits local bank bulls against foreign bears. The article nicely summarises the conflicting views about the Australian residential property market, with foreigner’s pessimism largely tempered by the local bank economist’s rose coloured outlook: Australian home prices in 2011 have fallen the most in three

35

Moody’s identifies another $540b of Chinese problem loans

Following on from today’s post on Gary Shilling’s warning that China is headed for a hard landing, credit ratings agency, Moody’s Investor Services, today released a report claiming that it has identified an additional 3.5 trillion yuan ($US540 billion) of potential problem loans that the Chinese National Audit Office (NAO) did not disclose in their

59

UK moves to reflate housing market

I have talked previously about how the United Kingdom (UK) operates the worst kind of housing policy – one that pumps demand while placing a tight straight jacket on land/housing supply – the outcome of which is both unaffordable housing and a propensity for boom/bust property cycles (see below chart). Now the UK Government is