Australian Property

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.


Ghost Melbourne permanent

Dictator Dan says Melbourne is now a permanent ghost city, at the AFR: In a sign that Melbourne’s CBD may never fully recover, Mr Andrews predicted workers would continue to work remotely and said many businesses had reported high productivity levels since the shift to remote work caused by the coronavirus pandemic. “We will see


Sydney, Melbourne rents pounded

Via Domain: Source: Domain Rent Report, December quarter 2020 UNITS – MEDIAN WEEKLY ASKING RENT Capital City Q4 2020 QoQ Change YoY Change Sydney $470 -5.1% -7.8% Melbourne $388 -3.0% -7.6% Brisbane $400 1.3% 3.9% Adelaide $340 0.0% 7.9% Perth $350 2.9% 12.9% Canberra $495 3.1% 3.1% Darwin $420 7.7% 7.7% Hobart $400 0.0% -2.4%


Realty locusts swarm into early election

Via REIA: Australia’s housing market recorded respectable growth over 2020 and with limited stock and strong demand, 2021 should see further price increases, REIA President Adrian Kelly said. Mr Kelly said the winding back of Jobkeeper and Jobseeker may see temporary issues for tenants in some capital cities but the trend to relocate to the


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Federal Government stimulus – most notably the HomeBuilder and First Home Loan Deposit Scheme – has done a terrific job juicing new home construction. Detached house approvals have hit a 20-year high: Whereas construction finance commitments have experienced an unprecedented rise: This has inevitably posed the question of “what happens to construction when the stimulus unwinds”?


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Sydney and Melbourne property listings surge

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It’s that time of month, even though the boffins and gearlever holders are on holidays for January they still managed to put out a glorious make benefit for MacroBusiness readers Chart Pack. First, its the measure that all economists love and politicians are slavishly devoted to – GDP: COVID-19 really put the guts into GDP


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Australia’s mortgage time bomb defused

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The dawning of a new age of suburbia

By Ross Elliott, cross-posted from The Pulse: “Mr. Covid has been the best city and regional planner Australia has ever had. The suburbs will shine and regions will grow. Maybe we should forget about big city infrastructure projects for a while and spend it on our future resilient communities where people look out for each


Sydney and Melbourne apartment rents hammered

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High-rise “slums” are symptoms of mass immigration

The SMH’s Elizabeth Farrelly – a former Sydney Councillor – has penned another article decrying the proliferation of low quality “slum” high-rise apartments across her beloved Sydney: I love cities, especially Sydney, and especially their ancient inner cores. I support density and renewal. But not like this. Even by comparison with the seventies, this new


CoreLogic: Housing demand running well ahead of supply

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Aussies still shunning debt. Unless it’s for a new home

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Fake greens pump mass property development

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Aussie mortgage growth launches

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Auction market ends 2020 on a high note

SQM Research has released its final auction report for last weekend, which reveals the market ended 2020 on a strong note: While SQM’s auction clearances are always lower than its competitors (CoreLogic and Domain), they are running around their highest level since COVID hit in March when the property markets in Sydney and Melbourne were