Unconventional Economist


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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,


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


China’s Empty Cities

In an interview last week on CNBC, Jim Chanos said the following about China: “Construction is 60-plus percent of GDP, compared to exports of 5 percent… The problem is that consumption as a percentage of Chinese economy has declined in the last 10 years, from 40 to 35 percent. It’s all real estate…When construction is 60 percent


More warnings about China’s bubble economy

Following on from Yesterday’s post on Jim Chanos’ crusade against China, another two reports have come to light sounding the alarm bell on China’s bubble economy. The first article from Bloomberg quotes Richard Duncan from Blackhorse Asset Management, who claims that China’s economy is the biggest bubble in history that may be headed for collapse. A more than 50% surge in


Chanos again warns on China’s bubble economy

  Jim Chanos, founder and president of New York investment company Kynikos Associates, is an unapologetic China bear. Earlier in the year, Chanos famously described China’s fixed asset malinvestment and manufactured growth as “a treadmill to hell“. He then recently followed up with a cracking interview/article in Fortune, describing in detail some of the key


Beware the Unintended Consequences of Increased Bank Competition

The Federal Treasurer, Wayne Swan, is due to announce the Australian Government’s reforms to increase competition in the banking sector on Sunday 12 December. In anticipation of this announcement, I want to take readers through some of the key proposals put forward in submissions to the Senate Inquiry into Competition in the Banking Sector, which is


Now I Understand

One of my long-time readers, S.I.M., posted the above video on You Tube explaining why Australia is different and does not have a housing bubble, despite overwhelming evidence to the contrary. The video nicely captures the average Aussie’s view on the housing market. Check it out.


China Bubble: More Bears Come out of the Wood Work

Following on from my earlier post, China: the Bear Case, a number of other commentators have come out publicly and warned that China is a bubble economy that risks imploding. Last Monday, The Telegraph ran an article on how Corriente Advisors, a Texas-based hedge fund manager that made millions predicting the crises in US sub-prime market and European debt, has


Unluck of the Irish

Earlier this week, Alan Kohler wrote an article in Business Spectator on the misery created by the Irish housing bubble/bust and its lessons for Australia: After 2002, when Ireland joined European Monetary Union and adopted the euro, the two things combined to create a massive property boom and, in essence, the government was able to