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.
I have been bullish on Brisbane property for some time. The main reason is that Brisbane dwelling values are exceptional value in a relative sense when compared to its larger East-Coast counterparts, Sydney and Melbourne, as illustrated clearly below: The other reason is that net internal migration into Brisbane has remained robust throughout the pandemic: After
You know we’ve reached Bizarro World when real estate agents complain because property prices and rents are soaring too quickly. Well that’s exactly what the Real Estate Institute of Tasmania (REIT) has done via the ABC: The Real Estate Institute of Tasmania’s (REIT) latest report shows that in the past year the median cost to
Westpac with the note: We have revised our outlook for Australian dwelling prices. Back in February we boldly predicted a 20% increase over 2021 and 2022. A stronger than expected surge over the first half of 2021 is now expected to see prices up 18% in the first year alone. Lockdowns will see some loss
This may seem like a cheap shot. But optics is everything in politics. Only a day after Labor dumped the negative gearing and capital gains tax reforms taken to the past two elections, leader Anthony Albanese sold his Marrickville investment house for $2.35 million, banking a $1.2 million gross profit: From the article: [Albanese] and
The Housing Industry Association (HIA) has issued a media release cheering Labor’s decision to axe the negative gearing reforms taken to the prior two federal elections, claiming it will boost dwelling supply and affordability: “[The] announcement by the Australian Labor Party to drop plans to increase taxes on housing through changes to negative gearing and
CoreLogic has released its Quarterly Auction Market Review, which reveals that Australian auction volumes were the busiest since 2017 over the June quarter of 2021; although this drove the auction clearance rate down from the March quarter’s record high: There were 31,605 homes taken to auction across the combined capital cities over the three months
NAB’s Q2 2021 survey of residential property professionals, released yesterday, reveals that the share of Australian homes sold to foreign buyers has fallen to its lowest level since records began in 2010, at only 2.3% of new home sales and 2.0% of established home sales: All major states experienced falling foreign demand for new homes
In mid-June, RBA Governor Phil Lowe stated that the Council of Financial Regulators (CFR) – i.e. RBA, Treasury, APRA and ASIC – are actively examining macroprudential tools to curb the mortgage/property market in the event that credit accelerates, and that these tools would come into effect before the RBA considers lifting interest rates. In this
NAB has released its residential property survey for Q2, with its Residential Property Index reaching a new survey high of +71 points in the second quarter: The rebound in NAB’s index is universal, although WA, SA and TAS have begun to turn down: NAB has also ramped-up its dwelling growth forecasts for 2021 from 14.1%
Here we go again. A new federal inquiry into ‘housing supply problems’ will be launched by the Morrison Government to examine the contribution of property taxes and restrictive planning and zoning regulations [my emphasis] Treasurer Josh Frydenberg has approved a parliamentary committee inquiry into housing supply to be led by Liberal MP Jason Falinski, chairman
With both Sydney and Melbourne still in hard lockdown, the nation’s auction market continues to hold up well. CoreLogic record a preliminary national clearance rate of 74.8%, down only slightly from the prior weekend’s 76.3%. Sydney’s preliminary clearance rate softened to 74.8% from the prior weekend’s 77.1, whereas Melbourne’s also softened to 71.9% from 76.1%.
Think Tank Per Capita has released a new discussion paper entitled “Generation Stressed”, which shows that Australian households have experienced “a significant increase in the lifetime expenditure on the median mortgage” over the generations, specifically: “For a Silent Generation family buying in 1970, the average repayment cost over the course of the mortgage was 11.2%
In the week ended 22 July, the CoreLogic daily dwelling values index increased another 0.31% – the smallest weekly increase since early February: All major markets record rising values: So far in July, dwelling values have risen by 1.16%, led by Sydney and Brisbane: Quarterly price growth remains turbo-charged at 6.19% across the five major
The auction market has held firm in the face of lockdowns, with the final national clearance rate remaining steady at 73.7% off similar volumes (2,097 versus 2,104 the prior weekend). As shown in the next table, Sydney’s final clearance rate rose to 76.6% from 74.3% the prior weekend. This was off 769 auctions (versus 650
CoreLogic’s Research Director, Tim Lawless, sees upside for Brisbane property values arising from its successful bid to host the Olympics in 2032: The Olympics should work as a positive influence on Brisbane housing market conditions, however, with the Games still some eleven years away, the flow on effects are likely to be gradual and centred
News.com’s Tarric Brooker believes that soaring property prices and the locking-out of first home buyers could dent the reelection chances of the Morrison Government: In the 1970s then British Prime Minister Margaret Thatcher came to the conclusion that one of the key factors in providing citizens with a stake in society was home ownership… Many
The new national president of the Property Council of Australia (PCA), David Harrison, has called on governments to fix the chronic ‘housing shortages’ dogging the nation: The PCA is also pushing for underlying issues to be addressed with Mr Harrison saying it is trying to prosecute the case around housing supply. “When there’s a shortage
CoreLogic’s June property market report revealed that total for sale listings were tracking 25% below the five-year average: The latest REA Insights report shows similar results with active listings down around 20% year-on-year: At the same time, annual property sales hit their highest level since February 2004, with every mainland capital city and region recording
A new report from the National Housing Finance and Investment Corporation (NHFIC) claims that the states have generated $60 billion in windfall stamp duties over the past 20 years. The NHFIC has found that the effective tax rate goes up if states and territories do not adjust stamp duty rates and thresholds to account for
According to Roy Morgan, mortgage stress plunged to a near record low in the three months to May, driven by the lowest mortgage rates on record alongside the rebound in jobs: New research from Roy Morgan shows an estimated 677,000 mortgage holders (17.3%) were at risk of ‘mortgage stress’ in the three months to May
Perth’s housing market continues to behave differently from the other major capital cities. Perth property price growth has stalled recently, while the other major capitals have roared ahead: Accordingly, Perth’s quarterly value growth is running at one-third the pace of the 5-city average: Perth is also the only major capital city market yet to rise
CoreLogic’s June property price results recorded 6.6% annual rental growth, which was the strongest annual increase in rents since February 2009: Now CoreLogic has released its quarterly rental review, which shows that rental growth is booming across the entire nation, with the exception of Melbourne and Sydney: As expected, house rental rises continue to outpace
With both Sydney and Melbourne in hard lockdown this weekend, I was expecting the nation’s auction clearance rate to take a heavy hit. Not so, with CoreLogic recording a preliminary national clearance rate of 76.3%, basically the same as last weekend’s 76.4%. Sydney’s preliminary clearance rate firmed to 77.1% from the prior weekend’s 76.5%, whereas
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 interest rates edged higher as the Reserve Bank of Australia ended its Term Funding Facility. There are some extraordinary divergences in affordability. It has never been cheaper in some markets
The auction market has largely swept aside Sydney’s lockdown, with the final national clearance rate rising to 73.7% from 72.1% the prior weekend off similar volumes (2,104 versus 2,168 the prior weekend). As shown in the next table, Sydney’s final clearance rate rose to 74.3% from 70.5% the prior weekend. This was off 650 auctions
In the week ended 15 July, the CoreLogic daily dwelling values index increased another 0.35% – the smallest weekly increase since early April: All major markets except Perth record rising values: So far in July, dwelling values have risen by 0.85%, led by Sydney and Brisbane: Quarterly price growth remains turbo-charged at 6.19% across the
Yesterday, the Australian Bureau of Statistics (ABS) released dwelling construction data for the March quarter, which showed that detached house commencements hit the highest level on record over the quarter, whereas unit commencements fell to a nine-year low: By contrast, actual dwelling completions remained depressed over the quarter, suggesting the pipeline of construction is well
CoreLogic has released a new report showing that it is cheaper to service a mortgage than rent across one-third of the nation’s properties, with New South Wales and Victoria primarily responsible for warping the results: CoreLogic analysis suggests servicing a mortgage is now cheaper than paying rent on 36.2% of Australian properties, which is higher
May’s Victorian Budget implemented a new windfall gains tax for properties whose value is boosted by a council rezoning. This tax will apply to properties where the value is boosted by more than $100,000, with a 50% tax on windfalls above $500,000. The clearest indication that this windfall tax is good policy has come from
That’s the message from today’s Westpac consumer sentiment release: • The Westpac-Melbourne Institute Index of Consumer Sentiment rose by 1.5% to 108.8 in July from 107.2 in June. The survey was conducted over the week of July 5–9, during the lock-down in Sydney and restrictions in regional NSW but before the tightening of restrictions announced
