Australian property is one the widest and deepest asset bubbles in the history of capitalism. Any objective assessment of this “market” can lead to no other conclusion.
With a long history of commitment to home ownership, Australians have always been prepared to structure their finances around property. This showed up in a total dwelling stock to GDP ratio that persisted around a very high 150% from 1960 to 1990. In the late 1990s that shot up to 200% and then embarked on near ceaseless climb to 360% today.
There are many other guides to the extreme overvaluation of Australian property. The ratio of household debt (overwhelmingly mortgages) to disposable income is the highest in the world at 186%. Median price to income multiples are anything from 12x in Sydney, to 10x in Melbourne, down to still immensely unaffordable 6x in smaller capitals, up from 3-4x times in all over the long run for all. The extent of overvaluation is plain.
What makes the Australian property bubble unique is the degree to which it has warped the nation’s political economy. Once a diverse and vibrant resources and manufacturing economy, over the twenty years that the Australian housing bubble grew that shape changed completely. An huge proportion of the debt underpinning Australian property is borrowed from offshore, almost $1 trillion, mostly by its big four major banks. This perpetually inflated the local currency, as well as input costs like land prices, which dramatically diminished Australian competitiveness and drove tradable sectors like manufacturing offshore. From 14% of output in the 1970s, manufacturing hit 5% of output in 2016, the lowest in the OECD.
Moreover, the centrality of Australia property to the wealth of the national polity increasingly distorted policy and even elections. In the 2008 global financial crisis, the then Labor government bailed out the the big four banks with guarantees to their offshore loans, rewriting the entire rule book for Australia’s financial architecture in one panicked afternoon. Public subsidies poured into demand-side stimulus, as well as RMBS markets. Any notion that Australian property was a “market” evaporated. Australian property was, and remains, a kind of asset quango, a public/private partnership in support of the retirement plans of its pre-dominant Baby Boomer generation.
MacroBusiness cover all elements of Australian property daily.
These guarantees exist to this day and reached their peak distortion to the political economy in 2016 when the ruling Liberal/National Party Coalition government fought and won an election in the singular defense of “negative gearing”, the principal tax policy most responsible for investor’s favouring property over other asset classes.
Contemporary Australia does not just have a property bubble, it has morphed into Propertocracy in which the primacy of house prices determines who leads the country, what policies are chosen and which generations prosper.
August 2021 Australian property market affordability update Australian property market prices continued to climb over the last month, with the past six months seeing some of the strongest growth on record. Mortgage fixed interest rates were steady, standard variable rates fell slightly but remain significantly above fixed rates. There are some extraordinary divergences in affordability.
The nation’s final auction clearance rate rebounded last weekend following a big fall in auction listings in Melbourne. CoreLogic recorded a final national clearance rate of 73.7%, up significantly from the prior weekend’s 67.7%. Sydney’s final clearance rate remained strong at 82.8% versus 81.2% the prior weekend, whereas Melbourne’s rebounded to 55.0% from 43.8% the
CoreLogic estimates there were around 598,000 house and unit sales across Australia over the year ending August 2021, which was the highest number of annual sales since 2004 and a 42% lift on the annual number of sales over the previous 12-month period: Across the states, annual home sales are substantially higher than a year
The FT sums up the strategic importance of the new subs deal: China’s geopolitical ambitions face a formidable new challenge after the US agreed to help Australia build at least eight nuclear-powered submarines and supply it with long-range Tomahawk missiles, regional officials and analysts said. The agreement, part of a new trilateral security partnership that
In the week ended 16 September, the CoreLogic daily dwelling values index increased another 0.34%: All major markets recorded rising values. Note, Perth’s daily index has been suspended while CoreLogic investigates anomalies: Values have so far risen by 0.74% this month, with all major markets rising: Quarterly price growth remains turbo-charged but slowing at 4.82%
The PropTrack Listings Report for September has been released, which assesses listings on realestate.com.au. The latest report reveals that property listings continue to fall across both capital cities and regional areas: Right across Australia property listings have collapsed, down 23.9% nationally year-on-year. The only notable exception is Melbourne, which was in hard lockdown this time
Twice over the past two days, the Reserve Bank of Australia (RBA) has pointed the finger at the federal government for Australia’s housing affordability problems. Speaking in an address to the Anika Foundation on Tuesday, governor Phil Lowe pointed to a number of public policy issues, which are the responsibility of the Government, that need
The HIA has released new home sales data for August, which rose 5.8% over the month and continues to track at a solid level following the expiry of the HomeBuilder subsidy in March: “The strength in New Home Sales in recent months indicates that the boom in detached home building will continue to create strong
The MSM is always pretty slow on the uptake but some days you have to wonder if they’re dropping Mogadon. To wit: Australia is embarking on its most significant change of defence and strategic direction in decades, aiming to make the Navy’s next submarine fleet nuclear-powered. In a deal announced by US President Joe Biden,
NSW planning minister Rob Stokes is the latest to call out the federal government’s bogus housing affordability inquiry: Federal politicians, developers, economists and large sections of the media are quick to blame all our housing affordability woes on slow supply, slow state planning systems and stringent controls. But the idea that the planning system alone
Recall the Hayne Banking Royal Commission’s very first recommendation, which was to maintain responsible lending laws: Hayne arrived at this recommendation after observing multiple cases of predatory lending over the Royal Commission’s 12 month deliberation. Also recall that Treasurer Josh Frydenberg tried to repeal these responsible lending laws, claiming they are essential to helping the
Yesterday, the Australian Treasury’s Macroeconomic Division head Crystal Ossolinski told the parliamentary committee into housing affordability that housing supply had not kept pace with rapid population growth in the early 2000s, which caused house prices to surge: “We’ve had some periods of strong population growth in Australia, particularly in the early 2000s, where population growth
SQM Research has released its August rental report, which recorded the lowest national rental vacancy rate since March 2011 at just 1.6%: The next chart plots the time series at the national level and shows clearly the sharp reduction in the vacancy rate over the past year: The next chart plots vacancies across the five
The ABS yesterday released its property price data for the June quarter, which valued Australia’s dwelling stock owned by households at $8.5 trillion, whereas the total housing stock was valued at $8.9 trillion. As shown below, the ratio of the dwelling stock owned by households against Australian GDP hit a record 4.1 times as at
CoreLogic’s weekly market update suggests that lockdowns are tightening the nation’s residential property market. Specifically, total listings have collapsed, down 17.6% year-on-year: At the same time, mortgage demand remains strong. As shown below, it is the strongest September for “mortgage activity events” since 2017: Strong buyer demand amid reduced market supply is obviously a recipe
The Australian Bureau of Statistics (ABS) today released its property price indices for the June quarter, which registered explosive 6.7% growth across the combined capitals over the quarter and 16.8% growth year-on-year: The gains were broad-based with all capitals recording strong price growth over the quarter and year. The next table tracks price growth over
Coalition MP Jason Falinski, who will chair the parliamentary inquiry into Housing Affordability and Supply, penned an article in The AFR lamenting the destruction of housing affordability across Australia and the need to boost housing supply: The Tax and Revenue Committee’s inquiry is our last and best chance to understand why in 1985, growth in
The unprecedented rebound in the New South Wales property market has driven stamp duty receipts to an all-time high, according to data from Office of State Revenue. In the year to July 2021, stamp duty receipts surged 54% to a record high $8.4 billion: Part of the lift in stamp duty receipts is attributable to
The nation’s auction clearance rate rebounded further over the weekend, recording a preliminary national clearance rate of 72.3%, up from the prior weekend’s 63.7%. Sydney’s preliminary clearance rate remained rock solid at 83.8% versus 84.0% the prior weekend, whereas Melbourne’s rebounded to 54.4% from 44.5% the prior weekend, but remained weak: According to CoreLogic regarding
The nation’s final auction clearance rate rebounded last weekend following a big fall in auction listings in Melbourne. CoreLogic recorded a final national clearance rate of 67.7%, up significantly from the prior weekend’s 58.0%. Sydney’s final clearance rate remained strong at 81.2% versus 80.2% the prior weekend, whereas Melbourne’s rebounded to 43.8% from 35.9% the
New data shows the number of lenders mortgage insurance (LMI) policies have risen by 25% in the last year: Data from Digital Finance Analytics shows the number of LMI policies taken out in Australia rose by 25 per cent from 218,593 in 2019 to 273,473 in 2020. More than 150,000 policies were taken out in
From the excellent George Tharenou at UBS Evidence Lab: 2021 UBS EL Mortgage survey implies material deterioration in loan standards UBS Evidence Lab surveyed ~900 Australians who took a mortgage in the last year – conducted from 21 June to 5 July, at the start of lockdowns in NSW and Victoria. The 2021 vintage is
Although the cash rate hasn’t budged since October last year, Australian mortgage rates continue to push lower, according to CoreLogic: According to CoreLogic, mortgage rates were 3 basis points lower over the month for existing owner-occupier loans and 1 basis point lower for new owner-occupier loans. However, fixed rates have begun edging higher. These have
By Tim Lawless, Research Director at CoreLogic Credit standards remain prudent, but higher household debt levels or a further rise in high-debt-to-income ratio lending could be a trigger for tighter credit conditions down the track. The focus on housing credit policies is becoming more intense as property values continue to rise and mortgage debt levels
Below is MB’s submission to the House of Representatives Standing Committee on Tax and Revenue’s inquiry into Housing Affordability and Supply, which was uploaded yesterday. The House of Representatives Standing Committee on Tax and Revenue is conducting an inquiry into Housing Affordability and Supply. In launching this inquiry, committee chair Jason Falinski rallied an “urgent
In the week ended 9 September, the CoreLogic daily dwelling values index increased another 0.28%: All major markets recorded rising values. Note, Perth’s daily index has been suspended while CoreLogic investigates anomalies: Quarterly price growth remains turbo-charged but slowing at 4.94% across the five major capitals. Sydney (6.26%) continues to lead the way, followed by
NSW Property Council executive director Luke Achterstraat claims that “housing affordability is under pressure” because “low building approval rates” are “affecting the delivery of housing targets in New South Wales”: “Since the unwinding of stimulus measures and the return of lockdowns across parts of NSW and Victoria, approvals for private houses have fallen 24.4 per
Dwelling assets are being repriced globally, as expected by central banks who have sought to achieve this with their interest rate policies. There is no mystery to rising house prices. Central banks are trying to make them rise, as they repeatedly explain. That’s how we manage the macroeconomy these days. BoE:https://t.co/ia7YkkAzwj RBA:https://t.co/Xr21vQjKzB pic.twitter.com/dwTTNM4IAn — Cameron
The latest REA Insights Housing Market Indicators Report shows that buyer demand, based on the number of views per listing of properties for sale on realestate.com.au, hit an all-time high in August, ahead of a delayed spring selling season in locked-down markets: This comes at the same time as actual property listings have collapsed to
RateCity has reported that the number of variable mortgage rates on its data base offered under 2% has jumped from 28 to 46 in just two months. Moreover, there are more than three times the number of sub-2% variable rates at the start of the year: “Since COVID, the battleground for the banks has been
