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 September 2019, the Australian Securities & Investments Commission (ASIC) reported that one in 10 consumers who took out a home loan via a mortgage broker were finding it hard to meet their repayments within 12 months. ASIC’s research also found that although consumers generally expect a mortgage broker to secure the most suitable home
CoreLogic’s head of residential research, Eliza Owen, has penned interesting research on Brisbane’s apartment market, which appears to be no longer oversupplied: The narrative of over-supply and under-performance in Brisbane units has dominated conversations around south-east Queensland property for almost 5 years. At January 2020, Brisbane unit values remain 11.5% below their 2010 peak to
In the week ended 20 February 2020, the CoreLogic 5-city daily dwelling price index, which covers the five major capital city markets, rose another 0.25%: The rise in values was again fairly broad-based: Quarterly dwelling values continue to rise strongly, driven by Sydney and Melbourne, where prices are still rocketing: The strong rebound across Sydney
It has to be said. Jess Irvine today: This week, three of Australia’s leading housing academics, Hal Pawson, Vivienne Milligan and Judith Yates, released a book, Housing Policy in Australia: a case for system reform, which pulls together decades of research into what they see as a systematic failure of Australian policy when it comes
Earlier this week, CoreLogic released its preliminary auction clearance rates, which revealed the following results: Today, CoreLogic has released its final auction results, which reported a 5.3% decline in the final national auction clearance rate to 73.3% – well above the same weekend last year (51.2%): As you can see, Sydney’s final auction clearance rate
Stephen Koukoulas (“the Kouk”) has once again claimed that housing affordability is no worse today than 20 or 30 years ago: About 30 years ago, 20 years ago and 10 years ago, a median income household buying a median priced house with an 80% LVR paid around 22-25% of their disposable income to pay off
The coronavirus property panic begins, predictably led by Domain: Melbourne’s rental market is feeling the effects of the coronavirus outbreak, as student apartments sit empty while their potential tenants wait in China for Australia to lift its travel restrictions. There are fears that if Chinese students don’t arrive soon, the apartments may stay empty for
The Tax Justice Network’s index, released every two years, has ranked Australia 48th in the world on how intensely our legal and financial system allows wealthy individuals and criminals to hide and launder money extracted from around the world: The Cayman Islands ranked as the world’s biggest contributor to financial secrecy, as a result of
The Reserve Bank of Australia (RBA) has released new research which attempts to explain why dwelling values respond much more to interest rate changes in some parts of the country (e.g. Sydney and Melbourne) than others: We know that housing prices vary substantially across different parts of the country. The average price of housing is
Perhaps freshly off the blower with Highrise Harry, Gottiboff explores some COVID-19 scenarios today. If it is stopped he says: …On the weekend I was yarning with a Hong Kong resident who has temporality switched his base to Australia. He tells me the coronavirus is far more destabilising than the riots and a great many
JLL has reported that the number of inner-city apartments completed during the past 12 months across capital city markets fell by 21% to be 30% below its 2017 peak, while the number of apartments under construction fell by 18%. The volume of apartments being marketed has also tumbled by 47%: JLL’s Australian head of residential
After last week blaming Australia’s busted housing system for the weak economy, Ross Gittins has penned another article arguing that Australia’s housing obsession is a “devouring” monster: The devouring monster we’ve allowed home ownership to become is now eroding what’s long been the fourth leg of retirement income policy. More people are retiring without owning
Last week’s ABS housing finance data revealed a booming mortgage market, with year-on-year new mortgage commitments (excluding refinancings) surging by 14.0%: Today, Deloitte released its 2020 Australian Mortgage Report, with lenders and brokers predicting a further 2%-3% increase in mortgage settlements in 2020: In terms of new mortgage financing, or settlements, this totalled $316 billion
The federal government announced in the 2017 Budget that it would remove a capital gains tax (CGT) exemption for around 100,000 expatriate Australians who sell their main residence while overseas. While the measure was projected to raise $581 million over the forward estimates, it was condemned by tax and legal experts as being “unjustifiably bad
In the last three years, Australian houses have gone from boom to bust and now back to boom again. I have written in the past about how crazy the property cycle is, and recently, a buying frenzy has pushed prices back toward previous highs. Many are calling the market up 10% over the next year,
More data has been released on the Morrison Government’s first home buyer (FHB) deposit subsidy scheme, which reveals that two-thirds of the allocated 10,000 slots have already been taken up, with more than half the applicants aged under 30: Just a month-and-a-half into the program, the figures showed about 6,500 loans were being processed. Some
HIA-CoreLogic has released its September quarter land sales report, which reveals a strong 46% increase in sales volumes from their record low in the March 2019 quarter: Residential lot sales across Australia have increased by 45.9 per cent from their record low in the March 2019 quarter to 10,563 sales. There are many factors that
Auction clearance rates rocketed over the weekend, with the preliminary rate nationally surging to 78.6% from 69.4% last weekend: The nation auction clearance rate was also way above the 51.2% recorded in the same weekend last year: In particular, Sydney’s preliminary clearance rate was 80.3%, up from 79.9% last weekend and way above the 54.6%
A few weeks ago we posted this Property Calculator here for you all to test; we appreciated the feedback, much of which has been implemented We’re pleased to announce the official launch of our Australian Property Calculator. Read on for a brief breakdown of some of the features Calculator features: Your property forecast Step 1:
Via Mr Joye today: According to a March 2019 paper published by two RBA economists, “a percentage point drop in the expected real mortgage rate would boost housing prices by 28 per cent in the long run”.We have had 68 of the 75 basis points of cuts passed through to borrowers thus far, which implies home
Jessica Irvine has penned another article imploring policy makers to replace property stamp duties with a broad-based land tax: Even as young Australians can’t afford the homes they want, many older Australians say they don’t want the homes they currently have. A mismatch, of sorts… This brings us to the final strand of this story
For years, the development industry and urban planners have called for Australia’s supposedly underutilised middle-ring suburbs to be bulldozed for apartments and townhouses in order to house the many millions of extra migrants projected to inundate our cities over coming decades: This transformation into a dense urban form is to be most stark in Sydney,
Eliza Owen – CoreLogic’s head or residential research – has published an interesting report on the link between the ABS’ housing finance series and dwelling value growth. As expected, there is a strong correlation between the two, with finance typically leading dwelling values by three months: This week the ABS released its housing finance data
In the week ended 13 February 2020, the CoreLogic 5-city daily dwelling price index, which covers the five major capital city markets, rose another 0.25%: The rise in values was fairly broad-based: Quarterly dwelling values continue to rise strongly, driven by Sydney and Melbourne, where prices are still rocketing: The strong rebound across Sydney and
Via the ABC: Chris Harpur understands better than most the advantages of owning property in retirement. Like many people of his generation, the 72-year-old has reaped the benefits of booming property prices. He said his terrace home in the inner-Sydney suburb of Alexandria had doubled in value since he bought it in 2008. And he
Via Martin North: The latest results from our household surveys revealed that household financial confidence recovered just a little in recent weeks, but is still in ultra-low territory and well below the neutral 100 measure, at 81.4. So far, the impact of virus concerns have not translated into households finances, whereas the bushfires, floods and
Earlier this week, CoreLogic released its preliminary auction clearance rates, which revealed the following results: Today, CoreLogic has released its final auction results, which reported a 1.3% decline in the final national auction clearance rate to 67.7% – still well above the same weekend last year (51.1%): As you can see, Sydney’s final auction clearance
A new report from Charter Keck Cramer has warned that the recent slowdown in apartment developments means that Sydney, Melbourne and Brisbane will face a housing supply shortage by the end of 2021. Dwelling approvals across Australia fell by 18.5 per cent in calendar 2018, to the lowest level since 2012; all three east coast
Via The Australian: Developers are cancelling launches of new apartment blocks and investment seminars targeting offshore buyers as they confront a potential fall in sales due to the coronavirus outbreak. The property industry had hoped the new year would be marked by a pick-up in demand. While local buyers are out in force, a predicted
In 2015, Bob Birrell and David McCloskey from the Australian Population Research Institute released an explosive report examining new household and dwelling projections for Sydney and Melbourne for the period 2012 to 2022. The report found that there would be a continuing scarcity of family-friendly housing in both cities, especially of detached housing, but an
