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.
CoreLogic’s weekly market update suggests that lockdowns are tightening the nation’s residential property market. Specifically, total listings have collapsed, down 18.2% year-on-year: At the same time, mortgage demand remains very strong. As shown below, it was the strongest August for “mortgage activity events” in at least four years: Strong buyer demand amid reduced market supply
The CEO of AUSTRAC – the Australian Government agency responsible for detecting, deterring and disrupting criminal abuse of the financial system – has again warned that Australian property is being used to launder illicit funds: Austrac has warned that laundering the proceeds of crime through property purchases can drive up prices and keep legitimate buyers
The Australian property market continues to rebound hard out of the COVID-19 pandemic. Following a 2.6% decline in dwelling values across the five major capital city markets between 15 March (the unofficial start of the pandemic) and 13 October 2020 (the bottom), values have since risen by 18.0% across the combined five major capital city
The nation’s auction clearance rate rebounded following a huge reduction in the number of auctions held across Melbourne, which lowered the withdrawal rate. CoreLogic recorded a preliminary national clearance rate of 44.5%, up from the prior weekend’s 55.4%. Sydney’s preliminary clearance rate remained rock solid at 84.0% versus 82.7% the prior weekend, whereas Melbourne’s rebounded
Last week, the Australian Bureau of Statistics (ABS) released housing finance commitments data for July, which rebounded 0.2% after June’s first decline in 9 months: As regular readers know, the growth in new mortgage commitments has historically been correlated very strongly with dwelling value growth. The reason is straightforward: the overwhelming majority of buyers borrow
With nearly four months to go this calendar year, Sydney’s dwelling prices today hit 20% growth for 2021: Even with Sydney’ dwelling value growth slowing (see next chart), it is easy to envisage that Sydney property values will grow by more than 25% over the full calendar year: We have not seen a property price
The nation’s auction market tanked last weekend on the back of a huge fall in Melbourne’s clearance rate. CoreLogic recorded a final national clearance rate of 58.0%, down from the prior weekend’s 64.3%. Sydney’s final clearance rate remained strong at 80.2% versus 78.5% the prior weekend, whereas Melbourne’s collapsed further to just 35.9% from 49.1%
CoreLogic’s head of research, Eliza Owen, has released data showing that property transaction activity is holding up well despite hard lockdowns across Sydney and Melbourne: Initial stage 2 restrictions in 2020 coincided with a drop in sales volumes nationally through April of -33.9%. This included a fall in Sydney sales of -36.7%, and -40.3% across
In the week ended 2 September, the CoreLogic daily dwelling values index increased another 0.33%: All major markets recorded rising values. Note, Perth’s daily index has been suspended while CoreLogic investigates anomalies: Quarterly price growth remains turbo-charged at 5.09% across the five major capitals. Sydney (6.47%) continues to lead the way, followed by Brisbane (6.21%),
Today’s lending indicators data for July from the ABS shows that construction mortgages have collapsed following the ending of the HomeBuilder subsidy in March: Construction mortgages have fallen 48% from February’s peak. That said, tradies should be kept busy by the home renovation boom, as evidenced by loans for alterations & additions surging to new
CoreLogic’s August Housing Chart Pack showed that the total value of Australia’s housing stock had risen to a whopping $8.8 trillion dollars: This dwarfs other asset classes, with real estate valued at more than Australia’s total superannuation wealth ($3.1 trillion), listed stocks ($2.8 trillion) and commercial real estate ($978 billion) combined. New CoreLogic data reveals
The Australian mortgage market rose in July despite lockdowns, according to new data released today by the Australian Bureau of Statistics (ABS). The total value of new mortgage commitments rose by a seasonally adjusted 0.2% in July 2021 to be up 68.2% year-on-year: As shown above, owner-occupiers have driven mortgage demand this cycle, whereas investor
From CoreLogic: The pace of rental growth has softened over recent months, but the trend in rising rents remains strong. Nationally, rents have lifted by 8.2% over the 12 months ending August, the largest rise in rents since 2008. There remains a stark difference between the pace of growth in house rents, where nationally the
Following SQM Research’s data showing property listings hitting their lowest level on record in August, CoreLogic has released similar data showing listings running 29.4% below average: At the same time, property sales are running around 30% above average: Accordingly, CoreLogic believes the lack of stock will support property values during lockdowns: “Although there has recently
SQM Research’s August stock on market report reveals that for sale listings hit a fresh all-time low, plummeting by 9.6% to 215,911 from 238,834 in July 2021: This represents the lowest count of listings recorded by SQM Research since it begun its series in January 2010. The largest monthly falls in property listings in August
New data from the Australian Bureau of Statistics (ABS) shows that dwelling approvals tanked by 8.6% in July but were still up 21.5% year-on-year. The falls were broad-based with detached house approvals down 5.8% and unit approvals down 12.3%. Houses led approvals over the year, lifting 28.0% versus a 12.4% rise across the unit market.
The Reserve Bank of Australia (RBA) has released its private sector credit aggregates data for the month of July. Quarterly mortgage credit growth continued to firm, rising for the 12th consecutive month to 1.9% – the highest rate of growth since 2015: Owner-occupiers continue to drive mortgage growth, rising by 2.5% over the quarter versus
CoreLogic has released its daily dwelling values index for 31 August, which showed that property values across the major Australian capital city markets surged another 1.5% over the month: The rise in values was strong across all major capital city markets. Note, Perth’s index has been temporarily suspended due to anomalies: Over the August quarter,
The National Housing Finance & Investment Corporation (NHFIC) has released a research paper which shows that local governments’ fees on property developers are increasing the cost of new homes. The report notes that developers’ contributions to the cost of financing local infrastructure can add up to $85,000 to the price of a home in New
As we know, the Morrison Government has launched another housing affordability inquiry – this time examining ‘supply-side impediments’. Independent economist Saul Eslake has lodged a submission to the inquiry shredding the “crocodile tears” displayed by politicians pretending to care about housing affordability [my emphasis]: As a multiple of average household disposable income per person aged
New data released by the NSW Titles Office shows that the number of people taking out and discharging mortgages across NSW has hit an all-time high: In July, more than 27,000 residential mortgages were discharged from NSW Titles, up 37.1 per cent on July 2020… It comes at the same time residential mortgages registered on
The Housing Industry Association’s (HIA) Affordability Index is calculated for each of the eight Australian capital cities and regional areas on a quarterly basis and takes into account the latest dwelling prices, mortgage interest rates and wage developments. The latest report to June 2021 shows that affordability across Australia’s regional property markets has deteriorated at
Fifteen years ago, the Australian Government agreed to implement the Tranche 2 global AML rules for lawyers, accountants and real estate agents in a bid to prevent laundering of illicit funds, especially into Australian property. However, these reforms have been continually postponed amid fierce lobbying by shadowy “vested interests” negatively impacted by the reforms. This
The nation’s auction market collapsed into a deeper hole over the weekend on the back of another massive fall in Melbourne’s clearance rate. CoreLogic recorded a preliminary national clearance rate of 55.4%, down from the prior weekend’s 63.3%. Sydney’s preliminary clearance rate remained rock solid at 82.7% versus 81.7% the prior weekend, whereas Melbourne’s collapsed
The nation’s auction market dived over the weekend on the back of a huge fall in Melbourne’s clearance rate. CoreLogic recorded a final national clearance rate of 64.3%, down from the prior weekend’s 70.0%. Sydney’s final clearance rate remained strong at 78.5% versus 81.3% the prior weekend, whereas Melbourne’s collapsed to just 49.1% from 59.9%
Below is an article written by me published this week at News.com.au: The usually buoyant Aussie property market is facing its biggest test yet. Can the house price boom survive another lockdown? With more than half the nation likely to remain in lockdown for the foreseeable future, there is a big question mark over whether
In the week ended 26 August, the CoreLogic daily dwelling values index increased another 0.29% – the equal slowest growth since early February: All major markets recorded rising values. Note, Perth’s daily index has been suspended while CoreLogic investigates anomalies: So far in August, values have risen by 1.27%, with all major capitals recording rises:
ANZ has revised its Australian property price forecasts and now expects dwelling values to rise by more than 20% in 2021 followed by 7% growth in 2022: Property prices are expected to rise 24 per cent in Canberra by year’s end and 23 per cent in Sydney and Hobart… Gains of 21 per cent and
Price growth across Australia’s two biggest and most expensive property markets is slowing much more quickly than its smaller capital city peers, according to CoreLogic’s daily dwelling values index: As shown above: Sydney’s quarterly price growth peaked at 9.6% in mid-May but has slowed to 6.9% as at 25 August. Melbourne’s quarterly price growth peaked
Tim Toohey of Yarra Capital says the take-up rate of the federal government’s HomeBuilder scheme was more than four times higher than expected. He says that together with state-based incentives, this will result in an oversupply of new housing by 2023. The government received more than 99,000 applications to build a new home via the scheme,
