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.
In the week ended 21 November 2019, the CoreLogic 5-city daily dwelling price index, which covers the five major capital city markets, surged another 0.48%: The rise in values was broad-based, but again driven by Sydney followed by Melbourne: Quarterly dwelling values continue to rise strongly, driven by Sydney and Melbourne, where prices are rocketing:
Last weekend, CoreLogic released its preliminary auction clearance rates, which revealed the following results: Today, CoreLogic has released its final auction results, which reported a 4.0% decline in the final national auction clearance rate to 70.1% – well above the same weekend last year (42.0%) and above last week’s 72.0%: As you can see, Sydney’s
Martin North and John Adams have challenged the notion that Australian dwelling values are rising strongly, claiming that dwelling values across three quarters of suburbs fell in value over July to October, according to Realestate.com.au data: This, they claim, challenges the narrative of a strong property rebound and represents a “pattern of unusual and fishy
The latest scheduled review of Australia’s anti-money laundering (AML) laws by the global Financial Action Taskforce (FATF) has been cancelled, with Australia given free rein to continue laundering money through property. Via Michael West: Most of the major international money laundering schemes that have been uncovered rely on lawyers, accountants or real estate agents. After
SQM Research’s latest newsletter provides commentary on Australia’s pending dwelling construction bust, which SQM believes will run into 2021 and could cause a significant increase in unemployment: Today we have run with three charts – Australian dwelling completions, commencements and approvals. The point of this exercise is to illustrate that the current rate cuts are
Late last month, the Australian Bureau of Statistics (ABS) released its 2018-19 Australian System of National Accounts (ASNA) release, which provided a detailed presentation of annual national accounts data. Locked away on Table 61 was my favourite section of the release: data on aggregate land values at the state and national levels. This year’s release
It’s amazing watching the sense of entitlement on display from Australia’s property sector. Rather than being grateful to the Morrison Government and Australia’s policy agencies for throwing the kitchen sink at the housing market, Zippy Financial director and principal broker, Louisa Sanghera, has instead attacked the Government’s first home buyer (FHB) deposit scheme for not
Via CBA’s dubious household spending interntions series: Home Buying Spending Intentions The sharp uptrend in home buying intentions continues Home buying intentions rose further in October and are now close to the record highs seen in H1 2017 Current HSI readings are consistent with an ongoing pick up in dwelling prices Retail Spending Intentions Retail spending intentions
Via CoreLogic, the leading index for weekly mortgages is up modestly year on year: But the real story is the serious weakness in listings: A balance still leading to house price gains. Full report.
Earlier this month, a cabal of Big Australia shills claimed that Aussies no longer want to live in a detached house with a backyard, and are instead choosing high density living and renting: Danni Hunter, Victorian chief executive of the Urban Development Institute of Australia… said density would “grow stronger … and that’s really good
Tony Walker, columnist at Fairfax, has done a good job dissecting the resentment towards the baby boomer generation, which has ridden Australia’s long housing boom at the expense of their children and grandchildren: A lucky generation in a lucky country in danger of scorching its dumb luck has had bestowed on itself the sort of
With Australia’s East Coast littered with flammable and faulty towers, Meriton Apartments founder, “high-rise” Harry Triguboff, has demanded banks rescue the sector: “If the cladding is a problem the banks will suffer a lot because of the value of the apartments dropping,” Mr Triguboff told The Australian. “For a few thousand dollars each they can
But it is seasonal, via S&P: That said, there’s a year on year break lower in regional banks so the worst is probably past for now. Full report.
Auction clearance rates lifted slightly over the weekend, with the preliminary rate nationally coming in at 74.1%, up from 72.0% last weekend: Auction clearances were also way above the 42.0% recorded in the same weekend last year: Sydney’s preliminary clearance rate was 77.2%, down from 81.0% last weekend, but way above the 42.8% recorded in
Via the excellent Garth Aird at CBA: Overview Australian capital city dwelling prices, led by Sydney and Melbourne, have risen sharply since mid-2019. RBA rate cuts, coupled with extra borrowing capacity from the APRA induced changes to loan serviceabilityassessment anda surprise election outcome that removed some taxation risksaround housing causedhome buyer interest return in force.
In the week ended 14 November 2019, the CoreLogic 5-city daily dwelling price index, which covers the five major capital city markets, surged another 0.34%: The rise in values was broad-based, but driven by Sydney followed by Melbourne: Quarterly dwelling values continue to rise strongly, driven by Sydney and Melbourne, where prices are rocketing: The
CoreLogic’s head of research, Tim Lawless, has released interesting research on the boom in new mortgage commitments since the May Federal Election: Since moving through a trough in May, the value of new owner occupier home loan commitments has increased by 17.3% through to the end of September and the value of investor loan commitments
Earlier this week, we learned that construction insolvencies are booming, according to ASIC: Insolvencies in the $150bn residential and non-residential construction industry remain at a high level… insolvencies in the three months to September jumped 78 per cent in Victoria, 41 per cent in Queensland and 7 per cent in NSW. This was a significant
Last weekend, CoreLogic released its preliminary auction clearance rates, which revealed the following results: Today, CoreLogic has released its final auction results, which reported a 1.4% decline in the final national auction clearance rate to 72.0% – well above the same weekend last year (43.3%) and above last week’s 68.0%: As you can see, Sydney’s
SQM Research MD Louis Christopher expects growth in housing prices in Australia’s capital cities to average 11% in 2020. The latest edition of Christopher’s Housing Boom and Bust Report forecasts that dwelling prices in Melbourne will rise by up to 15%, while Sydney’s housing market will record growth of 10%-14%. However, Christopher says the housing
CoreLogic has released housing affordability data, which shows that affordability peaked in the June quarter of 2019: However, that was as good as it will get given the recent surge in values, especially across Sydney and Melbourne: According to CoreLogic: CoreLogic’s head of research, Tim Lawless, said the return of the “fear of missing out”
Australian Housing and Urban Research Institute (AHURI) has released new research claiming that older empty-nesters are clinging to their larger family-friendly homes. The AHURI also recommends a wide range of tax reforms to encourage seniors to downsize: “They like to stay where they’re familiar,” said lead researcher Associate Professor Stephen Whelan from the University of
NSW Planning Minister has attacked so-called NIMBY baby boomers for opposing high-rise development across Sydney: Baby Boomers are primarily responsible for hostility toward housing growth and density, Planning Minister Rob Stokes says, accusing the generation of being the drivers of so-called NIMBYism… Speaking to developers, planning bureaucrats and community leaders, Mr Stokes said growth had
‘Big Australia’ mass immigration shills claim that Australians no longer want to live in a detached house with a backyard, and are instead choosing high density living and renting: Danni Hunter, Victorian chief executive of the Urban Development Institute of Australia… said density would “grow stronger … and that’s really good for the diversity of
SQM Research has released its rental vacancy data for October, which revealed that vacancies nationally were flat over the month but rose 0.1% over the year: Meanwhile, asking rents remain two-speed, with sharp annual falls across Sydney offsetting rises elsewhere, and driving down the capital city average: As shown in the next chart, a huge
Various property insiders agree that the Morrison Government’s first home buyer (FHB) deposit subsidy is likely to raise property values when it is introduced in January, thereby eroding housing affordability: SQM Research real estate analyst Louis Christopher said the Morrison government’s free LMI for 10,000 first-time annual buyers would “marginally” increase prices from January… “Past
It’s a question that you need to ask because if present trends are allowed to develop then Australia will be the next Hong Kong within twenty years or more. Will you like it when Carry Lam is running the joint for Xi Jinping? Via Domain: Hong Kong chief executive Carrie Lam has labelled protesters the
Yesterday, the CEO of property listings portal, REA Group, claimed the crash in property sales is “about as bad as it can get [and] it’s the worst market we’ve ever seen”. Today, the boss of rival Domain Group has warned of an “extraordinary” shortage of properties for sale in Sydney and Melbourne: Mr Pellegrino likened
Via Damien Boey at Credit Suisse: We have just published an article on the drivers of the Sydney housing market recovery. Key points are as follows: Sydney house prices are rising at a 22% quarter-annualized pace – but the speed of the recovery cannot be explained by local demand and supply factors. Our model of house prices based on
So much for the slowdown: I have seen this before in this index. It can fade then, presumably, get revised. Anyways, it is now signalling conditions roughly similar to last year. Not strong by any means but better than it was. Meanwhile, supply reamins chronically short: More price gains ahead. Full report.
