Unconventional Economist

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Lessons from the UK housing crash

It’s time for another trip down memory lane. It’s September 2007 and home prices in London have just started to fall, but are still holding up nationally (see below chart). UK households are growing increasingly nervous. After embarking on an almighty borrowing binge over the 2000s, as evident by household debt to disposable incomes rising

12

Tax stats unmask investors

The 2008-09 Australian Taxation Office (ATO) Taxation Statistics were released yesterday (available here), and the data on property investment was very interesting. First, the number of property investors reporting to the ATO fell by 34,000 or 2% from the previous year (see below chart). Second, after rising steadily since 1999-00, the overall value of net

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SQM Research on the housing finance data

As my fellow MacroBusiness bloggers have already pointed out, Australia’s housing finance data released today by the ABS was bad, real bad. One of Australia’s few truely independent property analysts, the Managing Director of SQM Research, Louis Christopher, offered perhaps the most damning assessment via a series of Tweets: Home loans drop on weak demand

4

Hong Kong’s housing headed for a crash?

This years Demographia International Housing Affordability Survey ranked Hong Kong as the most unaffordable housing market out of the seven countries surveyed, with median home prices a whopping 11.4 times incomes. After falling some 23% over 6 months in the wake of the global financial crisis, Hong Kong’s housing market has been on a tear,

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So much for the Californian housing shortage

Let’s take a trip down memory lane. It’s early 2006 and the median house price in Los Angeles-Orange County, California has hit $582,000. Demographia has just released its latest International Housing Affordability Survey showing that Southern California has the most expensive housing market out of the six nations surveyed. Property speculation is at fever pitched.

21

NZ moves to limit exposure to housing

New Zealand has undertaken two policy actions lately aimed indirectly at reducing the economy’s exposure to the housing market. The first measure, called the Open Bank Resolution (OBR) Policy, has been initiated by the Reserve Bank of New Zealand (RBNZ) and seeks to protect taxpayers from funding future bank bailouts. The OBR is intended to

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Fresh calls for housing stimulus

Yesterday’s Australian Financial Review published an article entitled Capital house prices slide, which provided a sobering assessment of the housing market, particularly in Brisbane, Perth and Melbourne. House prices fell in most capitals in February and analysts expect poor affordability to prevent any real recovery for at least a year… Rp Data senior research analyst

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China’s largest ghost city filled

At last, a good news story on China. Readers might remember that I posted an article in December showing alarming satellite photos of entire cities laying vacant (see China’s empty cities). In that article appeared the below photo of Zhengzhou New District, which was supposedly “China’s biggest ghost city, complete with entire blocks of totally

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Why Australians aren’t spending

Robert Gottliebsen today posted an interesting article on Business Spectator providing an insight into why Australians are cutting back on retail spending: Retailers have been looking closely at what is causing stress among Australians and among Australian consumers… Those in lower income suburbs or in areas where there are many high mortgage/low deposit new houses,

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Saul-ute to a real economist

Saul Eslake is on fire. Earlier this month, Mr Eslake wrote a wonderful article in Fairfax lambasting the first home owners’ grant and other demand-side measures employed in vain by Australia’s governments to make homes more affordable: Governments have thus been providing cash handouts to first-time home buyers for almost half a century. Yet, strikingly,

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Chinese burn

Like it or not, Australia’s economic fortunes are inextricably linked to the Chinese economy. If China can somehow miraculously sustain growth above 8% and continue its current high level of commodity-intensive fixed asset investment, then the Australian economy will likely meander along whilst the housing market stagnates or slowly deflates over an extended time period.

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Addendum: Covered bonds to the rescue?

Following on from last night’s post on covered bonds, yesterday’s Daily Reckoning contained an interesting discussion on the whole bank funding issue and the potential pitfalls of covered bonds: [Jeremy] Cooper warned about Aussie banks that still rely on wholesale funding in an article in last week’s Financial Review. “Its been fashionable for awhile in this country

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Covered bonds exposure draft released

The Exposure Draft on Covered Bonds legislation has been released. Key points to note are as follows (courtesy of CBA via email): Proposed maximum issuance cap of 8% of total Authorised Deposit Taking Institution (ADI) assets. Segregation of cover pool assets will be achieved via establishing a special purpose vehicle (SPV). The cover pool will

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That’s not a first home owner grant!

This is a first home buyer grant. From the UK Telegraph: [A] controversial new mortgage deal is being launched by five local authorities and backed by Lloyds Banking Group, one of the lenders bailed out by the taxpayer during the credit crisis. The scheme is aimed at struggling first-time buyers who are unable to afford the

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Is the first home buyer pool running dry?

Last week, I quoted an Australian Financial Review article explaining how Australia’s banks are lifting maximum loan-to-value ratios (LVRs) and are, in some cases, waving mortgage insurance payments on high LVR loans in an effort to increase mortgage lending: Major banks are pitching special mortgage deals to their customers in an effort to generate business

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Mirror image

As regular readers will know, I am a close follower of the Canadian economy and housing market. Like Australia, Canada is a commodity exporter and more or less dodged the global recession that recently shocked the developed world. As in Australia, there is also widespread debate about whether Canada is experiencing a speculative housing bubble

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Dateline questions the China growth story

SBS Dateline last night showed an investigative story entitled China’s Ghost Cities. The video takes viewers on a tour of vast new cities of apartments and shops that are being built across China and which remain almost completely empty – all in the name of achieving economic growth. One of the people interviewed in the

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Ponzi dynamics (by Leith van Onselen)

An article in Friday’s Australian Financial Review (AFR) entitled “Getting a foot in the door” neatly highlighted the ponzi-like nature of the Australian housing market and the unsustainability of current housing values. Below are some extracts from the article along with some commentary of my own. It took Lee Palmer two years of trying before

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Banks continue to lower lending standards

First, ING – Australia’s fifth largest lender – announced that it would begin issuing never-ending mortgages that have no fixed term and no requirement to repay any capital along the way, in a bid to reduce monthly home loan repayments and increase the size of housing mortgages. Then Westpac, Australia’s largest mortgage lender, announced that

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The Economist on housing supply

I was disappointed with The Economist’s recent special reports on housing. Whilst the reports captured the psychology and the demand-drivers of bubbles well (discussed in an earlier post), they failed to adequately capture the role of supply-side constraints. As far as I could see, the only reference to the supply-side of the housing market were

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NAB warns on offshore funding risks

The Australian banks’ heavy reliance on offshore funding has received limited coverage in the press lately. On Thursday, the Australian Financial Review (AFR) ran a story entitled Clyne sounds funding alarm, where NAB’s CEO warned about funding challenges facing Australia’s banks and the risks inherent to the Australian economy. Surprisingly, however, Clyne’s comments were not

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Glenn Stevens wags the dog

Today, Fairfax reported the following statements from RBA Governor Glenn Stevens at a question and answer session at the Australian Business in Europe lunch in London (my emphasis): Reserve Bank of Australia chief Glenn Stevens says he is not “terribly troubled” about the level of house prices in Australia. Mr Stevens said the ratio of

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Canadian Business on China’s bubble economy

I read an interesting article today from Canadian Business magazine on the challenges facing the Chinese economy and the risks to commodity exporters like Australia and Canada (h/t Financial Insights).  It’s a worthwhile read, particularly for readers seeking a detailed overview of the bear case on China. But a warning – at 5,400 words the

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The Economist: Bricks and Slaughter

The Economist has published an excellent article entitled Bricks and Slaughter (h/t Financial Insights for the link). It is part of a series by the Economist exploring the lessons to be learned from the global housing bubble. Below are some key extracts; although I recommend that you read the article in full for yourself. A

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Jumping the urban growth boundary

Australia’s state and local governments rely on a variety of regulatory devices to limit suburban growth. One measure that has been implemented in all of Australia’s major cities and some towns (many within the past decade) is the Urban Growth Boundary or UGB.  A UGB is a form of large-scale zoning whereby the government effectively draws a ring around a

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Guest Post: FHOG: Proudly Ripping Off Young Aussies since 2000

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. With the last week’s Mortgage Choice data indicating