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.

16

Melbourne listings rocket after real estate restrictions ease

From Eliza Owen, Head of Research Australia at CoreLogic: One of the lessons learned about the property market through COVID-19 is that listings numbers have been extremely responsive to changes in social distancing policies. Despite an extended lockdown, Melbourne is no exception. Since onsite, private inspections resumed on the 28th of September, new listings volumes

2

Sydney’s auction market continues to strengthen

CoreLogic has released its final auction clearance results for last weekend, which reveals that the final national clearance rate retraced to 66.2% from 66.4% the prior week: Sydney’s auction clearance strengthened to 69.1% from 67.2% the prior week, whereas Melbourne’s rose to 60.2% from 58.6%. As noted by CoreLogic: There were 1,131 capital city homes

22

AUSTRAC demands property money laundering laws

The CEO of AUSTRAC – the Australian Government agency responsible for detecting, deterring and disrupting criminal abuse of the financial system – has warned that lawyers, accountants and real estate agents are being used to launder illicit, necessitating then need for the industry participants to be brought into the anti-money laundering (AML) regulatory net: Austrac

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Why Australia needs more housing stimulus

A group of university academics have called on the Morrison Government to significantly increase housing stimulus in order to help drive Australia’s economic recovery: In response to the COVID-19 recession, federal, state and territory governments quickly provided support to the housing industry for two reasons. First, to safeguard jobs and, second, because investment in the

3

Stockland demands HomeBuilder extension

The CEO of Australia’s largest listed residential property developer, Mark Steinert, has urged the Morrison Government to extend its $25,000 HomeBuilder subsidy beyond six months: Mr Steinert said the economic boost from state and federal government stimulus programs could be widened just by allowing more time for qualifying projects to begin construction… “We do know

16

Mortgage stress near record lows?

According to Roy Morgan Research, Australia’s mortgage stress is running near record lows due to around 400,000 mortgage holders on repayment holidays: New research from Roy Morgan shows an estimated 751,000 mortgage holders (20.2%) were at risk of ‘mortgage stress’ in the three months to August 2020 as Australia navigated its way through the COVID

6

NSW stamp duty receipts lift on property rebound

According to the NSW Office of State Revenue, stamp duty receipts have shrugged off COVID-19, returning to growth. Annual stamp duty receipts rose for five consecutive months to September and have now risen 1.6% above the previous April peak: It’s a similar story for property transfers, which have also risen for five consecutive months and

11

No spring launch for Aussie property listings

Earlier this month, SQM Research released its stock on market report for September, which revealed that for sale listings nationally declined by 1.2% over the month and by 7.4% year-on-year: CoreLogic’s latest Housing Market Update supports SQM’s data, showing all regions except Perth recorded falling new and total listings in the year to September: The next

4

HomeBuilder subsidy misses Victoria

Real estate developers sold 1,154 housing lots across Melbourne and Geelong in August, according to residential land sales specialist Red23. This compares with more than 1,600 sales per month in June and July. However, median lot prices rose by 0.3 per cent to $321,000 in August. The fall in sales was attributed to buyers not

29

Foreign investors abandon Aussie property market

Investment in Australian residential property by foreign investors fell by 11% between the 2018 and 2019 financial years, according to figures from the Foreign Investment Review Board. The 11% fall occurred before the COVID-19 pandemic hit. The FIRB’s figures reflect a trend towards buying brand new properties over existing ones, along with a growing interest

13

Property developers and politicians the ultimate Game of Mates

In the wake of NSW’s latest ICAC hearings and the $30 million the federal government paid for land worth $3 million near Sydney’s new airport, the New Daily’s Michael Pascoe has called for a 75% betterment tax to ensure the Australian public, not property barons, receive the lion’s share of benefits from property rezoning decisions:

5

Auction market gathers more steam

CoreLogic’s preliminary auction clearance rate firmed, with 72.4% of reported auctions cleared versus 71.5% last weekend: Sydney’s preliminary clearance rate rose was strong with 75.9% of reported auctions cleared versus 73.1% last weekend. Melbourne’s preliminary auction clearance rate also firmed to 65.0% versus 59.6% last weekend. According to CoreLogic: There were 1,134 homes taken to

2

Sydney’s auction market gathers steam

CoreLogic has released its final auction clearance results for last weekend, which reveals that the final national clearance rate rose to 66.4% from 64.4% the prior week: Sydney’s auction clearance rate rose to 67.2% from 65.8% the prior week, whereas Melbourne’s fell to 58.6% from 60.8%. As noted by CoreLogic: In Melbourne, 59 homes were

5

Sydney apartment rents collapse to 6-year low

Domain has released its latest rental report, which reveals that rents across Sydney and Melbourne fell by nearly 5% in the year to September: According to Domain, Sydney’s apartment rents have fallen to a six-year low: Unit rents across inner Sydney are at their cheapest in years with prices falling to a six-year low… The

21

Investors pull pin on Aussie property

CoreLogic’s Eliza Owen has released research examining the falling share of investors in Australia’s property market since 2016, which fell to a fresh low in August: Owen notes the following factors as drivers of the decline in investor mortgage share: temporary policies implemented between 2014 and 2019, which limited lending products favoured by investors; mortgage

8

Property industry sentiment clubbed like baby seal

The latest ANZ/Property Council of Australia survey has been released, which reveals that sentiment towards the property market remains in a deep hole: The ANZ-Property Council Survey for the December quarter showed a modest improvement across Australia’s property sectors, although sentiment remains deeply negative… Sentiment remains negative in the residential sector, although there is a

13

Australia’s property glut worsens

With the release this week of the ABS’ dwelling commencement and completions data for the June quarter, it is an opportune time to plot Australia’s latest quarterly dwelling construction data against actual and projected population growth, as outlined in last week’s federal budget. First, below is the national picture, with annual population growth forecast to

11

CoreLogic weekly house price update: small falls

In the week ended 15 October 2020, the CoreLogic 5-city daily dwelling price index, which covers the five major capital city markets, fell only 0.01%: It was the 23nd consecutive weekly decline. Melbourne and Sydney recorded falls whereas the smaller major capitals recorded rises: So far in October, Dwelling values have fallen only 0.05% at

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Harry Triguboff demands migrants to plug property price bleeding

Multi-billionaire apartment developer, “Highrise” Harry Triguboff, is unhappy about the projected decline in immigration because of the COVID-19 pandemic. He has demanded the federal government open Australia’s international border and reboot mass immigration in order to “drive” apartment sales: Apartment titan Harry Triguboff is calling on the federal government to allow the return of immigrants,

12

Mortgage repayment cliff still hangs over property market

The Australian Bankers Association (ABA) has released new data revealing that the number of Australians that have deferred repayments on bank mortgages has fallen to 270,000 from a peak of around 500,000 in June: In late June the number of loans which had been deferred by Australian homeowners and businesses peaked, with around 500,000 mortgages,

6

Reading Bill Evans’ mind

Find Bill Evans below delivering his ringing endorsement of what was clearly an outlier result for Westpac consumer sentiment yesterday: Look at the Westpac versus ANZ result: Both are post-budget. I’m not arguing that the ANZ result is more right. But I’d suggest taking the average of the two is a more sensible approach than

12

Stimulus drives new home sales

From the Housing Industry Association: “The full impact of HomeBuilder is now evident in the HIA’s New Home Sales Report with sales now 11.8 per cent higher in the seven months since restrictions came into effect than at the same time last year,” commented HIA Chief Economist, Tim Reardon. The HIA New Home Sales report