Martin North from Digital Finance Analytics has released new mortgage stress data, which reveals that more than one quarter of Australian property investors are losing money on a cash flow basis: Digital Finance Analytics has released the results of our rolling 52,000 household surveys to the end of June, which reveals that mortgage stress rose
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.
The Morrison Government’s HomeBuilder subsidy, which gives up to $25,000 to eligible households to build or substantially renovate their homes, has ignited massive surge of buyers of house and land packages, according to agents and developers: Inquiries have tripled and land sales have gone up by more than 300 per cent since the HomeBuilder scheme
According to the latest mortgage deferral data from the Australian Bankers Association (ABA), repayments on nearly 500,000 mortgages have been deferred for six month, totaling $175.6 billion: That equates to an average mortgage size of $350,000 that has had repayments deferred by Australia’s banks. On Tuesday, comparison site Mozo warned that many mortgage holders could
Over the past decade, Australia’s mainstream media spun propaganda claiming that Australians are “choosing” high density apartment living over detached housing due to its convenience. We were also frequently told that changing lifestyles has meant that most Australians do not want a large backyard. I have always claimed that this notion of Australians “choosing” to
A month after trimming his forecast for Australian dwelling value declines to between 5% and 10%, AMP chief economist Shane Oliver has turned bearish owing to the spike in COVID-19 infections across Melbourne: Dr Oliver said the uptick in virus cases in Melbourne would further weaken the market and add downward pressure to housing prices.
CoreLogic’s preliminary auction report reported a slight rise in the preliminary clearance rate (from 64.5% to 65.1%) off solid volumes: Once final results are received later this week, we are likely to see the weighted average clearance rate fall to around 60%. If so, this would mean that auction clearances are hovering just below the
With dwelling values diving across Melbourne: Vendors are rushing to sell their properties, according to SQM Research: Most capital cities experienced decreases in property listings over the month… Melbourne and Perth were the only capital cities to record increases in listings, 2.7% and 0.4% respectively. Year-on-year listings show more significant declines for nearly all capital
Earlier this week, Roy Morgan Research reported that around one third of employed Australians have been working from home (WFH), with 36% of capital city workers WFH: As shown above, so-called ‘knowledge’ industries concentrated in Australia’s CBDs have been most impacted by WFH. The impact on CBD occupancy rates has been dramatic, according to The
CoreLogic’s head of research, Eliza Owen, has released a report examining why Melbourne is leading Australia’s property downturn: The July CoreLogic index results show the Melbourne property market is the worst capital city performer since the onset of COVID19. June marked the third consecutive month of value falls across the city. This sees values down
In the week ended 2 July 2020, the CoreLogic 5-city daily dwelling price index, which covers the five major capital city markets, fell another 0.16%: It was the eighth consecutive weekly decline. The falls were broad-based: Quarterly dwelling value growth is negative, driven by Melbourne: Annual price growth remains strong, but is fading: The next
CoreLogic has released the final auction clearance rate for last weekend, which rebounded to 60.6% versus 59.6% last week off solid volumes: According to CoreLogic: There were 1,485 capital city homes scheduled for auction last week, returning a final auction clearance rate of 60.6 per cent, the highest clearance rate seen since 31st May. In
Nasty, via the AFR: One in 10 off-the-plan apartment sales have fallen over during the past three months as lower valuations due to weaker demand and oversupply prompted banks to reject final loan approvals, forcing buyers to give up millions of dollars in deposits. Out of around 35,000 off-the-plan settlements between March and June, 3041
Housing Minister Michael Sukkar was interviewed by Sky News yesterday where he signaled that the Morrison Government would indefinitely subsidise first home buyers’ property purchases: “10,000 places [in the FHB deposit subsidy scheme] have been released today. This scheme allows people to purchase their first home with a deposit of as little as 5%. One
The Australian Bureau of Statistics (ABS) yesterday released its dwelling approvals data for April, which recorded a heavy 35% monthly fall in apartment approvals: Apartment approvals were also 69% below their November 2017 peak. Today, I want to focus on the high-rise apartment segment, which has driven the apartment bust. The next chart shows the
Unit Rental Vacancies Surge in Inner Sydney over June – Rents Falling. Nine News Reports Exclusively#housingmarkethttps://t.co/QEFHQzkJFB — Andrew Wilson (@DocAndrewWilson) July 1, 2020 There is no end in sight to the deterioration as: eviction and mortgage forbearance ends; foreign students and immigration remain stalled; AirBnB remains busted; the construction pipeline delivers still more supply; high
The insurance premium for Sydney’s Opal Tower – which was evacuated on Christmas Eve 2018 amid severe structural cracking – has been increased by $1.1 million after 12 experts found more than 500 additional defects. The find has prompted the owners’ corporation to sue the New South Wales government. Owners’ corporation chairman Shady Eskander said
The Australian Bureau of Statistics (ABS) has released dwelling approvals data for the month of May. At the national level, the number of dwelling approvals collapsed by a seasonally adjusted 16.4% to 12,736. The overall decline in approvals was driven by units & apartments, which fell by 34.9%, whereas house approvals fell by 4.4%. Over
10,000 more Australians will be able to buy their first home from today with a deposit as little as 5% thanks to our First Home Loan Deposit Scheme. We’re proud to have already helped 10,000 Australians into their first home in the first year of the new scheme. https://t.co/QjDMGJyvLJ — Scott Morrison (@ScottMorrisonMP) July 1,
SQM Research has released its weekly auction survey, which reported clearance rates for Sydney and Melbourne in the 40s: Last week, Sydney recorded a final auction clearance rate of 49.6% with Saturday auctions breaking through the 50% barrier (50.3%). While the mid-week results disappointed at 45.7%. Sydney auction volumes rose again to 621 properties. Melbourne
CoreLogic has released its full dwelling value results for May, which reveals a 0.7% decline in values nationally and a 0.8% fall across the combined capitals – the second consecutive monthly decline: As shown below, the five major capitals all recorded value falls in May, whereas the smaller capitals recorded rises: Value declines have been
The Reserve Bank of Australia (RBA) yesterday released its household debt data for the March quarter, which revealed that the ratio of household debt-t0-disposable income rose to 186.9%, whereas mortgage-debt-to-disposable income retraced slightly to 142.0%: As you can see, both are a fraction below record highs. However, due to the cratering of mortgage rates to
Via Moody’s Summary » The 30+ days delinquency rate for prime Australian residential mortgage-backed securities (RMBS) increased to 1.79% in March 2020 from 1.55% in December 2019 and 1.57% in March 2019. » Delinquencies will continue to increase in 2020 because of the economic disruptions caused by the coronavirus outbreak. Delinquencies will continue increasing over
As Leith noted yesterday, Australia is well into a specufestor mortgage credit rout: If we dig into APRA’s monthly banking stats for May today we can see who’s behind it. Basically the majors are all pulling their heads in, though ANZ flopped into the positive for one month at least: But one big eight bank
With Australia’s official cash rate crashing to just 0.25%, mortgage rates have also cratered to all-time lows: Some smaller lenders have even lowered mortgage rates below 2% for the first time ever as competition intensifies: Mortgage loan interest rates have plunged below the two per cent mark for the first time ever in Australia. Experts
Research undertaken by the Australian National University (ANU) in May showed that the COVID-19 pandemic had led to a sharp rise in housing stress. The survey found that 15% of households were not able to pay their regular housing costs during the previous three months, compared with just 7% in April. Matthew Gray from the
The Reserve Bank of Australia (RBA) has released its private sector credit aggregates data for the month of May 2020: A chart plotting the long-run time series is shown below: Overall mortgage growth was 3.1% in the year to May, a fraction above all time lows (3.0%). A breakdown of owner-occupied credit (0.5% MoM; 1.5%
CoreLogic’s dwelling value results for June are out at the 5-city level, with values falling 0.85% over the month amid universal declines: It was the second consecutive monthly decline: Over the June quarter, dwelling values fell by 0.4% across the major capitals: Melbourne has suffered the biggest quarterly falls: The next chart plots quarterly price
Unless you want to lose money. For investors, there is simply no reason to buy and plenty of reasons to sell. Even for first home buyers, there’s no reason to buy and plenty of reasons to rent. First, there is huge unemployment that is going to be very sticky with unprecedented wage pressures, via Credit
In the 1950s and 60s Australia had a policy of supporting manufacturing development in Australia, and its capacity to absorb large numbers migrants largely reflected its industry protection. Given the operation of the then Industrial Relations Commission, those industries tended to have remuneration outcomes which enabled both the migrants coming to Australia, and the pre