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.
Robert Gottliebsen has urged the federal government to allow first home buyers (FHBs) to raid their superannuation nest eggs for the purposes of purchasing a home: For young people, let’s revisit the idea that, on a restricted basis, some of their superannuation could be used to help them own a home. Owning a dwelling to
ABC News has provided a useful update on the rental smash taking place in Sydney and Melbourne: …the latest rental vacancy data from SQM Research shows the pandemic is taking a harsher toll here than other capital cities. The vacancy rate (the percentage of available properties not yet leased) has almost doubled in the 12
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
In the week ended 22 October 2020, the CoreLogic 5-city daily dwelling price index, which covers the five major capital city markets, jumped by 0.13%: It was the first rise in 24 weeks. All major markets recorded value rises: So far in October, Dwelling values have risen 0.09% at the 5-city level, with all capitals
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
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
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
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
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
Via The Fake Left: Under a plan to get the population excited about the event, at least 2,000 schools have been instructed to include winter sports in their curriculum by the end of the year and a giant clock in Beijing counts down the time left before the Games begin. The official slogan is: “Joyful
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
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
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
Iron ore prices for October 19, 2020: Spot firmed but will fall again today. I still see more downside than up in the very short term. That said, the restocking pulse is fine and price supportive with port inventories hitting 124.5mt last week. I expect we’ve got another 40mt to go so it is a
From Karen Maley at the AFR today: …”To the extent that an easing of monetary policy helps people gets jobs, it will help private-sector balance sheets and lessen the number of problem loans. In doing so, it can reduce financial stability risks,” Lowe argued. …Other economists point out that a further drop in home loan
The bulls are coming for Queensland property: QUEENSLAND is on the cusp of a property boom that could lead prices to skyrocket by more than 20 per cent in some areas and last for years to come. Fears of a real estate armageddon in the wake of the pandemic have been replaced with a surge
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
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:
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
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
What chance does a political party promising to radically reduce home prices to improve affordability have of getting elected? The electoral calculus is simple. There’s no chance. If they say they want to, they are lying. This reality is why the Federal Budget included policies to boost housing demand but do not expand the supply
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
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
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
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
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
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,
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,
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
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
