Unconventional Economist

26

Roubini calls time on China (part 2)

Earlier this month, Houses and Holes posted a report from Professor Nouriel Roubini warning that the Chinese economy is overheating and risks a sharp slowdown sometime after 2013. Now Professor Roubini has followed up with an article on Project Syndicate fleshing-out his views in greater detail. Professor Roubini  more or less supports earlier warnings from Michael Pettis and prominent China

41

Hooked on property

In January this year, I published the below HIA chart and accused Australia’s governments of being ponzi merchants for attempting to keep the Great Australian Housing Bubble alive by pumping demand and restricting supply in order to preserve government finances. Now RP Data has confirmed my suspicions with a fantastic piece of research entitled Property

18

Moody’s downgrades China’s property sector

Just in, credit rating agency, Moody’s Investor Services, has downgraded China’s property sector to negative from stable, citing both falling property sales and prices [my emphasis]: Hong Kong, April 14, 2011 — In a new report, Moody’s Investors Service changes its outlook for the China property sector to negative from stable. The change reflects the

13

Andy Xie on China

Andy Xie, an independent economist based in Shanghai and the former Morgan Stanley chief Asia-Pacific economist, yesterday published an excellent article in Caixin warning that an inefficient public sector and negative real interest rates are pushing China towards stagflation, instability and a possible financial crisis (h/t interest.co.nz). Xie’s article more or less supports earlier warnings

34

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

15

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,

36

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

89

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

38

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

54

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,

35

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,

18

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

114

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

26

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

20

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

108

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

31

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

29

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

30

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

50

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

37

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

50

Productivity Commission on Planning/Zoning

Regular readers of this blog will know that I am critical of Australia’s urban planning structure and land-use regulations.  Through growth control policies such as exclusionary zoning and urban growth boundaries, Australia’s governments have effectively told the market where development can and cannot occur. In turn, they have restricted the level of contestability and competition in the land market and helped raise

11

Puru Saxena on China, Commodities and Australia

Financial Sense Interview with Puru Saxena (click to listen)  A reader, ‘Sceptic’, today posted the above link to an interview on Financial Sense with Puru Saxena. Mr Saxena runs Puru Saxena Wealth Management, an established money management firm based in Hong Kong. Mr Saxena produces the monthly Money Matters report, which follows economic, historical and geo-political trends,

18

The Economist on Australian Housing

Some readers might have seen it already, but the Economist has just released an article questioning the sustainability of Australia’s house price boom. Here are some key extracts (article available here): This week in The Economist we will publish our quarterly index of house prices around the world. Australia’s homes are the most overvalued in the index. The ratio of prices to

44

The Baby Boomer Bust?

The 21st century will be the century of old age, where declining birth rates meet longer life expectancies. This ageing of the population will affect many areas of the international economy, from consumption and growth to asset valuations.  The impacts from ageing will likely be most acute in Western Nations, although some developing countries, most notably