By Leith van Onselen Please find above the RP Data Housing Update for April, presented by Tim Lawless, which discusses the state-of-play of the Australian housing market as at end-March. This month’s video sees Lawless discussing the ongoing improvement in market conditions following the 2.8% quarterly increase in dwelling values, which was the strongest result
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.
By Leith van Onselen The Master Builders Association (MBA) has released its Builder Sentiment Survey for the March quarter of 2013, which revealed an improvement in sentiment over the medium-term, but ongoing subdued levels of activity in the short-term: Pick up in builders’ expectations for industry The index measuring expectations for building industry activity picked
By Leith van Onselen This blog has spent a lot of time highlighting the looming oversupply of apartments facing Melbourne. Well, it appears that the office market is facing similar conditions, with Morgan Stanley today releasing research pointing to a big ramp-up in office construction and office vacancy rates over the next couple of years:
By Leith van Onselen The auction clearance rate in Australia’s biggest auction market – Melbourne – recorded a reasonable result over the weekend, with 65% of the 443 auctions reported to the REIV selling, with only 10 auctions listed as “no result” (see below table). The result compares to the 68% provisional clearance rate rate
By Leith van Onselen SQM Research has released Stock on Market data for the month of March, which revealed a 3.8% increase in listings nationally over the month but a -2.1% decrease over the year (see below table). From the media release: Sydney recorded the largest rise in listings; rising by 7.6% or 1,966 properties.
By Leith van Onselen In February, the Australian Bureau of Statistics (ABS) released construction materials volumes data for the December quarter of 2012, which showed continued weakness in the production of concrete blocks, clay bricks and roof tiles – materials typically used in housing construction – but ongoing strength in the consumption of cement and
By Leith van Onselen For those who are interested, I last night appeared on The Business (ABC TV) to discuss the role played by planning constraints in driving-up house prices and making housing markets more susceptible to price volatility (boom/bust price cycles). The video segment is shown above. Note that in the interview, which went
By Leith van Onselen In what will decried by the industry, Sydney and Melbourne have ranked amongst the ten most expensive housing markets in the world according to the Global Property Guide: Recently, a list of the world’s 10 most expensive cities for travelers and employees has been released by The Economist’s Intelligence Unit (via
By Leith van Onselen The latest dwelling approvals data, released yesterday by the Australian Bureau of Statistics (ABS), confirmed that apartment living is growing ever more popular across Australia, but particularly in Australia’s larger and more expensive capitals. While house approvals are at recessionary levels, unit & apartment approvals are running near their all-time high
By Leith van Onselen As noted previously, Melbourne has, since the onset of the Global Financial Crisis, led the nation in housing construction. The recent boom in housing construction is easily recognisable by the below charts, which track the total number of dwelling approvals in the five major capitals since the late-1980s, as well as
By Leith van Onselen The Australian Bureau of Statistics (ABS) has just released dwelling approvals data for the month of February. At the national level, the number of dwelling approvals rose by a seasonally adjusted 3.1% to 13,371, with both detached house (+4.2%) and apartment (+1.6%) approvals rising. Consensus was for a total rise of
By Leith van Onselen Australian Finance Group (AFG) yesterday released its housing finance data for the month of March, which registered the Group’s strongest March mortgage sales on record, with 7,893 finance commitments (valued at $3,181 million) over the month, an improvement of 8.6% on March 2012 and 0.9% above the previous best March in
By Leith van Onselen As summarised by Houses & Holes, the Housing Industry Association (HIA) yesterday released new home sales data for the month of February, which registered an overall -5.3% fall in new home sales over the month, with detached house sales falling by -4.0% and unit sales falling by -11.0%. It was a
A fly has incommodiously landed in the recovery ointment this morning with the release of HIA new home sales, which fell heavily in February down 5.3%: From the HIA: New home sales stumbled in February, following four consecutive months of growth, said the Housing Industry Association, the voice of Australia’s home building industry. The HIA New Home
By Leith van Onselen SQM Research yesterday released its Vendor Sentiment index results for the March quarter, which registered a 1.3% increase over the quarter driven by big increases in Sydney and Darwin (see below table). According to SQM Research: …the rises were not even across all the capital cities. Indeed, only two cities recorded
By Leith van Onselen Hot on the heels of UK and Korean policies aimed at stimulating mortgage borrowing, news has broken that no deposit mortgages could soon be making a comeback in Australia. From Australian Broker Online: Non-bank lender Homeloans Ltd’s launching of a new product aimed at borrowers without genuine savings as a deposit
From Moody’s: Moody’s Investors Service says that Australian prime mortgage arrears worsened in January compared to the previous month. As published in Moody’s just-released Global Structured Finance Collateral Performance Review, Moody’s says arrears in excess of 30 days in the Australian prime residential mortgage market were 1.52% in January, up from 1.44% in December but
By Leith van Onselen Following on from this morning’s post on the 5-city home values results for March, please find below RP Data’s official March Media Release, which also includes results for the other capital cities (i.e. Hobart, Darwin. and Canberra) and ‘rest-of-state’, as well as a breakdown of results for both houses and units.
By Leith van Onselen In the month of March 2013, the RP Data-Rismark 5-city daily dwelling values index, which covers the five major capital city markets, recorded a 1.30% increase, with all major capitals except Adelaide recording rises in values (see next chart). It was the third consecutive monthly rise in values and follows increases
By Leith van Onselen Finally, a politician has the balls to speak-out about what is required to achieve affordable housing in Australia’s mining towns: freeing-up land supply. From the Sunshine Coast Daily: UNDER a radical new scheme, Federal Member for Kennedy, Bob Katter, claims he can reduce the cost of house blocks in mining towns to
By Leith van Onselen In the week ended 28 March 2013, the RP Data-Rismark 5-city daily dwelling price index, which covers the five major capital city markets, recorded a 0.31% increase, which followed last week’s 0.04% increase. It was the seventh straight weekly rise (see next chart). Value gains were broad-based, with all major capitals
By Leith van Onselen RP Data has today released data on vendor discounting across Australia’s property markets, which continues to improve. According to the Media Release: …the average discount on a typical home was -7.5 per cent from its initial list price; across the combined capital cities the figure was lower at -6.4 per cent.
By Leith van Onselen The Reserve Bank of Australia (RBA) Financial Stability Review (FSR), released earlier today, contains the below gem on the Melbourne housing market, which aligns with my overall view: Although housing loan arrears rates are currently low across most parts of Victoria, the outlook for the Melbourne property market appears to be
Regular readers will know that I view foreign investment in residential property and more generally as a positive. However, that does not mean that promised screens and protections of said property purchases should not be thorough and effective. Instead, according to reader Gunnamatta, they are neither. Indeed Gunnamatta has, in the past few days, tested
By Leith van Onselen Please find below Residex’s latest housing market update, which includes house and unit price results as at end-February 2013, whereby house prices rose at the national level (+0.96%) and unit prices fell (-0.15%). In this month’s report, Residex’s founder, John Edwards, sees continued improvement in the housing market. There is one