Via AIG: Where goes property goes Australia. Full report.
0
Services PMI soft on little property shock
Primary Section
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.
5
Auction clearances sink under listings flood
This weekend marked the second biggest weekend of auctions since CoreLogic began tracking the market in 2008, with a whopping 4136 homes going under the hammer. Australia’s preliminary auction clearance rate fell further to 69.9% from 71.4% last weekend – a figure that will likely fall into the mid 60s once all results are counted:
7
Auctions deluge continues to flood property market
Australia’s auction market continued to fatigue after a record week of listings: Last weekend’s final auction clearance rate was 68.5%, down from 70.3% the prior weekend off 4,251 auctions (up from 3,720 the prior weekend): As noted by CoreLogic: This week saw Canberra, Adelaide and the combined capital cities all recording their busiest auction weeks
6
Sydney’s housing market is truly bananas
Previously I have published data showing that Sydney house prices are trading at close to all-time highs relative to the other capital cities: Now Cameron Kusher has posted similar data on Twitter showing how Sydney house prices are tracking against the other major capitals. According to Kusher, “in 2007 median house prices in Sydney and
8
Where house prices will outperform in 2022
Below is an article that I wrote this week for News.com.au: This week, CoreLogic recorded another strong 1.3 per cent rise in Australian dwelling values, with values up an astonishing 22 per cent annually, led by extreme growth in Sydney (25.8 per cent), Brisbane (25.1 per cent) and Adelaide (up 21.4 per cent). This marked
11
Developers: Rezoning more land won’t lower property prices
Developers have fronted the parliamentary inquiry into housing affordability and admitted that simply rezoning land won’t lower property prices: CHAIR: Is it not your view that, if we increase the amount of supply, prices will go down? Mr Helmers: I don’t think that’s the case. Like Richard, I think what we would expect to see
49
Property lobby demands migrants NOW!
Anybody denying that Australia is the property equivalent of a Narco state only needs to read the comments from the AFR Property Summit with respect to immigration: “All property sectors for the past 50 years, [were] driven by overseas migration, whether it be the population [or] the talent that’s coming in,” [Dexus chief executive Darren
4
CoreLogic weekly house price update: Two-speed
In the week ended 2 December, the CoreLogic daily dwelling values index increased another 0.20%: All major markets except Perth recorded rising values, again led by Brisbane and Adelaide: Quarterly price growth remains strong but slowing at 3.91% across the five major capitals. Brisbane (7.43%) and Adelaide (6.53) lead the way, followed Sydney (4.31%), Melbourne
4
HomeBuilder lines land developers’ pockets
When the Morrison Government’s HomeBuilder subsidy was announced last year, I argued that land developers would be the major beneficiaries since they would be able to inflate the cost of their house-and-land packages, while also clearing their inventory. Shortly afterwards, we witnessed developers mark-up the cost of house-and-land packages by the amount of the grant,
2
Investor mortgage boom crowds out first home buyers
The Australian mortgage market fell again in October, according to new data released today by the Australian Bureau of Statistics (ABS). The total value of new mortgage commitments fell by a seasonally adjusted 2.5% in October 2021 to be up 32.2% year-on-year: As shown above, owner-occupiers had driven mortgage demand this cycle, whereas investor demand
4
Highrise Harry chokes supply to drive up profits
If you want bonafide evidence that property developers manipulate the market to ration supply and maximise their profits, look no further than ‘Highrise’ Harry Triguboff’s testimony today in The Australian: Harry Triguboff, Australia’s richest property developer, will make $400m from building and keeping apartments for investment this year… The documents showed a 15 per cent
7
Melbourne @9 million is a Bladerunner set
The Herald-Sun has published a spruik piece on how Melbourne’s suburbs will enjoy a “jobs and high-rise population boom” following the construction of the Suburban Rail Loop: The Suburban Rail Loop project linking middle-ring suburbs will spark a jobs and high-rise population boom, helping to ease Melbourne’s “unsustainable” urban sprawl. Suburbs such as Cheltenham, Glen
10
FOMO is leaving the Australian property market
This year has witnessed one of the most largest and broadest booms in the Australian property market’s history. Australian dwelling values have risen by an extraordinary 20.9% so far in 2021, with every capital and region experiencing strong growth: There are several factors behind this strong price growth. Record low mortgage rates and an acute
1
Rental growth strong again in November
CoreLogic has released rental data for November, with rental growth continuing at its strongest pace since 2008: The trend in rental growth has held reasonably firm since April, with the monthly change in national rents holding between 0.6% and 0.7%, well above the decade average monthly movement of 0.2%. Every capital city and rest-of-state region
3
CoreLogic: Regions lead Aussie property growth in November
CoreLogic has released its full dwelling value results for November, with values nationally rising 1.3% over the month and 22.2% year-on-year: Australia’s regions led the way, recording 2.2% growth in November versus 1.1% growth across the capital cities. Over the year, the regions recorded 25.2% growth versus 21.3% growth across the capital cities. Commenting on
2
Australia’s high-rise apartment market still stuck in doldrums
The Australian Bureau of Statistics (ABS) yesterday released its dwelling approvals data for October, which revealed that apartment approvals have fallen 62% below their November 2017 peak, while detached approvals are falling from their April HomeBuilder record highs: Below are a series of charts that track approvals by housing segment in rolling annual terms nationally
0
Detached house approvals rebound after HomeBuilder slump
New data from the Australian Bureau of Statistics (ABS) shows that dwelling approvals fell by 12.9% in October and were down 8.1% year-on-year. The fall was driven by unit approvals, which tanked 37.5%. This was partly offset by house approvals, which rose 4.3%. Over the year, houses approvals fell 3.7% whereas unit approvals fell 16.5%.
3
Aussie mortgage growth hits the brakes
The Reserve Bank of Australia (RBA) has released its private sector credit aggregates data for the month of October. Quarterly mortgage credit growth decelerated further to 1.8% after recently recording the highest rate of growth since 2015: Owner-occupiers continue to drive mortgage growth, rising by 2.3% over the quarter versus 0.8% growth for investors: Meanwhile,
3
Australian property prices rise 1.1% in November
CoreLogic has released its daily dwelling values index for 30 November, which shows that values across the five major markets rose by 1.1% over the month – a significant deceleration from earlier this year: Brisbane (2.8%) and Adelaide (2.5%) led growth, with Sydney (0.9%), Melbourne (0.6%) and Perth (0.2%) trailing: Quarterly growth across the five
14
APRA drops hammer on interest-only mortgages
The Australian Prudential Regulatory Authority (APRA) yesterday afternoon released its new “more risk-sensitive” bank capital framework, which incentivises banks to lend to lower-risk owner occupiers rather than higher risk investors: The framework, developed over four years of consultation, will help to ensure Australian banks continue to have the financial strength to withstand future adverse economic
3
NSW stamp duty receipts blow the roof off
The unprecedented boom in the New South Wales property market has driven stamp duty receipts to a fresh all-time high, according to data from Office of State Revenue. In the year to October 2021, stamp duty receipts surged 65% to a record high $9.4 billion: Average stamp duty has also risen to a record high
19
Fake housing affordability inquiry shifts blame to states
As expected, the Coalition’s fake housing affordability inquiry is set to shift blame the states by accusing them of restrictive planning and profiteering from rising property taxes: The inquiry chairman, northern beaches federal Liberal MP Jason Falinski, said affordability could be improved over the long-term if the states boosted supply and slashed property charges. Mr
19
2021 a death blow for Aussie housing affordability
ANZ-CoreLogic has released its 2021 housing affordability report, which shows that the barriers to buying a home in Australia has worsened materially following rapacious price growth and a sharp rise in the time taken to save a deposit: The national dwelling value to income ratio reached a record high 7.7 in the June quarter 2021.
12
Grattan calls for social housing future fund
The Grattan Institute has release a report entitled “A place to call home”, which calls for the establishment of a $20 billion social housing future fund. Below is the blog post explaining the proposal followed by my response: Australia has a housing crisis. Australians are spending more of their incomes on housing than in the
8
Auctions deluge drowns clearance rates
This weekend marked the biggest weekend of auctions since CoreLogic began tracking the market in 2008, with a whopping 4261 homes going under the hammer: Accordingly, Australia’s preliminary auction clearance rate fell to 71.4% – a figure that will likely fall into the high 60s once all results are counted: According to CoreLogic: This week
10
Record auction deluge to flood property market
Australia’s auction market continues to fatigue after weeks of high listings: Last weekend’s final auction clearance rate was 70.3%, down heavily from 73.2% the prior weekend off 3720 auctions (up from 3,539 the prior weekend): As noted by CoreLogic: Maintaining volumes in excess of 3,000 for the fifth consecutive week, last week overtook three weeks
13
Why developers ‘talk their book’ on land supply and planning
Last week, Dr Cameron Murray – author of the Book Game of Mates – gave testimony to the parliamentary inquiry into housing affordability whereby he completely demolished the Coalition’s supply-side thesis. Dr Murray was asked via a question on notice to provide evidence to the inquiry that developers manipulate the land market to ration supply
25
Australia’s housing boom one of the biggest in 140 years
Realestate.com.au has examined 140 years of data and declared that the current Australian house price boom is the third biggest on record: It wasn’t until the 1950s that prices started to increase relative to other goods. Prices rose gradually at first, and then since the late 1990s began a period of very strong growth… The
1
CoreLogic weekly house price update: Brisbane still booming
In the week ended 25 November, the CoreLogic daily dwelling values index increased another 0.25%: All major markets except Perth recorded rising values, again led by Brisbane and Adelaide: So far in November, dwelling values have risen by 0.97%, led by Brisbane (2.31%) and Adelaide (1.99%): Quarterly price growth remains turbo-charged but slowing at 4.09%