Unconventional Economist

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Can offshore buyers save Melbourne property?

Last week’s Melbourne Housing Valuation Report provided extensive evidence of the housing construction boom currently taking place in Melbourne which, in the face of falling population growth, risks tipping the city into oversupply, putting additional downward pressure on both prices and rents. The area that is experiencing the greatest construction boom is inner-city apartments, which

32

Reverse spruiking

  Please find below the latest email reports from the Ray White real estate agent with a particularly pessimistic outlook on the housing market (previous reports are available here, here and here). As always, these reports make interesting reading – both for their summary of domestic and global property-related news flow as well as their

2

Fix imbalances or suffer

Yesterday, the Bank of England Governor, Mervyn King, delivered an important speech on the challenges facing the global economy (h/t Macca). The speech covers a range of inter-related topics, including: the global imbalances that facilitated the unsustainable build-up of debt across Western nations; the conundrum facing the world’s governments whereby the short-run need to stimulate

34

Rents continue to flat-line

Back in August I noted how the property boosters have shifted from talking-up the prospect of rising house prices to forecasting sharply rising rents: …price stagnation… has created a headache for the property industry. With prices now expected to flat line and rental yields well below both mortgage interest rates and term deposit rates, there is reduced

16

China still building empty apartments

Yesterday, Zarathustra’s posted another interesting China report, which contained the below chart showing the continued strong growth (25% YoY) of fixed asset investment: Below find a PBS Newshour video report (h/t Hugh Pavletich) from Beijing-based economist, Yoram Bauman, who explores the possibility of a Beijing housing bubble. In the video, Bauman takes viewers on a

31

More realtor gloom

Over the past few months, I have published email reports from a Ray White real estate agent with a particularly pessimistic outlook on the housing market (here and here). Below are the latest Ray White reports which, as always, make interesting reading. The first email report is from Thursday 22 September 2011. Note the reference

28

RBNZ warns on banks and China

A few weeks ago, I posted an article on the Reserve Bank of New Zealand’s (RBNZ) quarterly statement on monetary policy, which contained a blunt warning on Australian bank funding costs. Yesterday, the RBNZ Governor, Alan Bollard, delivered an interview on Radio New Zealand cautioning that the impending European debt crisis could adversely affect Australian

34

UK housing interests have a conniption

The battle for more affordable housing is heating-up in the UK. Since last week’s detailed article on the proposed reforms to the UK planning system – the centre piece of which involves implementing a “presumption in favour of sustainable development” in order to make home building in greenfield areas easier – opposition from existing homeowners

45

Auckland embraces unaffordable housing

Here’s one of the dumbest proposals that I have read in a while. The Auckland Council has released a Draft Plan proposing to change the existing urban growth boundary (called the “Metropolitan Urban Limit” or MUL) into an even tighter “Rural Urban Boundary” that would effectively ban development outside of the rural-urban line and limit

13

Can China save us again?

The 2008 Global Financial Crisis (GFC) brought about an extraordinary fiscal and monetary response from the world’s governments. Nowhere was this response as grand as in China, which rolled out an enormous stimulus package worth some four trillion yuan ($US570 billion), mostly in the form of fixed asset investment, including the construction of roads, railways,

64

Abolishing stamp duty

Last week, Treasury Secretary, Dr Martin Parkinson made a convincing case for why state stamp duties should be abolished: Treasury boss Martin Parkinson has backed a move to wind back or abolish real estate stamp duties saying they make it hard for workers to move west and north to take advantage of the mining boom.

30

High savings are the new normal

RBA Assistant Governor, Phil Lowe, yesterday gave an interesting speech on the changing patterns in Australian household saving and spending. In particular, the speech describes some of the possible reasons underpinning the recent rise in Australia’s household savings rate and ponders whether this shift is a temporary phenomenon or likely to be long-lasting. First of all,

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Real estate agent hysteria

A few weeks back, I published a post highlighting how real estate agents seem to have turned from ‘talking-up’ the housing market to ‘talking it down’ in order to boost sales. I provided some recent email reports from a Ray White real estate agent that set a new benchmark for bearishness. Well, today I want

130

Look to Texas to solve Australian housing supply

Following on from my recent articles on land-use regulations and housing affordability, I want to take readers through Texas’ deregulated and innovative 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 and easy access to

4

London house prices surge on chaos

From Bloomberg yesterday came the below report stating that house prices in London surged in September after falling the previous month: London home sellers raised asking prices by the most in seven months in September as a lack of properties for sale and investors looking for safer assets amid financial-market turmoil bolstered values, Rightmove Plc

30

UK moves to reform planning disaster

I have written previously on how the United Kingdom (UK) housing system is arguably the worst in the world because of a myriad of policies that work to severely restrict supply, pump demand, and make renting a highly undesirable substitute for home ownership. These policies have led to the UK housing market experiencing: 1) a

17

RBNZ throws cold water on RBA

I have noted before the penchant of New Zealand’s regulatory authorities to act as a kind of trans-Tasman conscience for Australian banking authorities. After all, they share the same banking system but are less constrained by any perception of the need to sustain confidence. And yesterday, the Reserve Bank of New Zealand’s (RBNZ) quarterly statement

75

Harry leaves a dent on Australia

Harry S Dent is a well known author and founder of HS Dent Investment Management, an investment firm based in Tampa, Florida. Dent writes a regular economic newsletter and has written seven books analysing demographic trends and their affect on the economy and asset markets. I first stumbled across Dent’s work early last year at my

129

Australian Housing Valuation Report

Australian housing is overvalued. Nobody denies it. Debate remains, however, about how overvalued. Surveys by The Economist and Demographia claim Australian housing is the most expensive in the world. On the other hand, the Reserve Bank of Australia and local data providers like Rismark acknowledge the overvaluation but see it as less extreme and sustainable. The

17

Demography is destiny

Late last week, the World Economic Forum (WEF) published a fascinating article on the UN Population Division’s latest projections for global population growth (h/t Bernard Hickey). Below are some extracts from WEF’s article: “Demography is destiny” is an old phrase and may seem an exaggeration. However, there is no doubt that two major demographic trends–an

47

Do variable mortgages prevent crashes?

Last month, the Federal Reserve Bank of Richmond published a report, Foreign Housing Finance, which highlights a number of problems with the US mortgage financing system and proposes a number of reforms based largely on the financing systems employed in other developed nations. While the entire report is interesting, the below chart, in particular, grabbed my

13

Retail pain here to stay

Yesterday’s announcement by the Reserve Bank of Australia (RBA) that the official cash rate would remain on hold provoked a stinging response from the Australian Retailers Association (ARA): The Australian Retailers Association (ARA) says the Reserve Bank of Australia’s (RBA) decision to hold interest rates has left retailers struggling to hold on. The ARA had

56

Insiders turn bearish on housing

You know the housing market has taken a turn for the worse when industry groups renowned for ‘taking-up’ the housing market change track and start conditioning sellers to lower their price expectations in order to promote sales. A reader, last week sent me the below email report from Ray White, which I think you will

22

Australia’s MIA politicians

Don Brash, leader of the New Zealand ACT Party and former governor of the Reserve Bank of New Zealand (1988 to 2002), has delivered some stirring speeches recently lamenting the declining level of housing affordability in New Zealand.  On 25 August, Dr Brash gave a speech in which he noted the role played by regulatory

56

How Las Vegas gambled and lost

In yesterday’s article on the release of the latest US house price indices by Case-Shiller and the FHFA, one market stood out more than any other for the dramatic way in which home prices have collapsed: Las Vegas, Nevada. According to the Case-Shiller index, house prices in ‘Sin City’ have fallen by a whopping 59%

11

Preventing housing bubbles

Over the past week, the two main US house price data providers – Case-Shiller and the FHFA – released their second quarter indices. And once again, they provide a sobering insight into the carnage caused when housing bubbles burst violently. The national series are shown below, both in nominal and real terms. According to the

108

How the RBA undervalued housing

Remember this chart? It is taken from page 15 of the RBA Research Discussion Paper: Asset Prices, Credit Growth, Monetary and Other Policies: An Australian Case Study, released in September 2010. As you can see, the RBA chart shows a nationwide dwelling price-to-income ratio of around 4.5. Senior RBA officials have quoted this ratio in

25

More on getting poorer

Above is a time series chart from today’s ABS Household Income, Income Distribution release. The blue line is gross average household income. The red line is eqivalised disposable  income, which the ABS describes as: Disposable household income adjusted using an equivalence scale. For a lone person household it is equal to disposable household income. For a

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The average household is getting poorer

Those who support Australia’s exorbitant house prices and new economic model of Quarry Australia usually rationalise that support with figures showing that household income growth is strong and widespread. Well, no longer. The ABS has just released its biannual Household Income and Income Distribution report and the results are a shock. From the report, the 2007/08