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.
The ABS yesterday released its property price data for the September quarter, which valued Australia’s dwelling stock owned by households at $6.56 trillion, whereas the total housing stock was valued at $6.87 trillion. As shown below, the total value of Australia’s dwelling stock owned by households was 7.10 times employee incomes as at September, up
The ABS has released its property price index – incorporating both detached houses and units – which registered a 2.4% rise in home values nationally over the September, driven by big gains (3.6% respectively) in Sydney and Melbourne: The other capitals were a mixed bag, with Brisbane (+0.7%) and Hobart (+1.3%) recording rises and Adelaide
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,
Auction clearance rates retraced over the weekend, with the preliminary rate nationally falling to 74.5% from 78.9% last weekend: However, auction clearances were still way above the 41.0% recorded in the same weekend last year: Sydney’s preliminary clearance rate was 78.1%, down from 84.7% last weekend, but way above the 41.3% recorded in the same
Last weekend, 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 73.6% – well above the same weekend last year (41.3%) and well above last week’s 68.5%: As you can see,
In the week ended 5 December 2019, the CoreLogic 5-city daily dwelling price index, which covers the five major capital city markets, surged another 0.41%: The rise in values was broad-based, but again driven by Sydney and Melbourne: Quarterly dwelling values continue to rise strongly, driven by Sydney and Melbourne, where prices are rocketing: The
Australia’s flammable cladding fiasco has just mushroomed with “biowood” also being declared unsafe, and apartment owners now facing millions of dollars in costs to have the cladding replaced: Thousands of apartment owners across Australia who thought they were safe from potentially deadly cladding fires now face millions of dollars in bills to remove and replace
Via the AFR: The Federal Court has set a date for the appeal against the “Wagyu and shiraz” judgment, however the regulator will be meeting a different adversary than the one it faced off against in the first half of 2019. The Australian Securities and Investments Commission will front up to a full bench of Federal
SQM Research has released its Stock on Market figures for November, which revealed a big 6.3% jump in for sale listings over the month, although listings were still 6.3% lower than the same month last year: As you can see, the rise in listings in November was broad-based, with everywhere rising except for Darwin. Likewise,
A cabal of property industry parasites has demanded developers be given free rein to transform Sydney’s suburbs into high-rise: The percentage of apartments and houses approved for construction within an 800-metre walk from train stations has been trending down for the past three years, according to research from Urbis. Urbis group director Clinton Ostwald said
Via Martin North: DFA has released our mortgage stress survey results to the end of November. And after a couple of months going sideways, thanks to some rate cuts and tax refunds, the trajectory has gone sharply higher again this month. One factor which is now biting is the switch from interest only loan to
Via the Climate Council today: A long-term warming trend from the burning of coal, oil and gas is supercharging extreme weather events, putting Australian lives, our economy and our environment at risk. The Climate Council’s new report, ‘Dangerous Summer: Escalating Bushfire, Heat and Drought Risk‘, has found this summer is shaping up as a terrible trifecta
The Australian Greens have threatened to introduce a private members bill to enact the Tranche 2 anti-money laundering (AML) laws for real estate gate keepers (e.g. real estate agents, accountants and lawyers): Greens senator and former investment banker Peter Whish-Wilson drew a link between the accusations against Westpac and the government’s refusal to progress the
By Gareth Aird, senior economist at CBA: Key Points RBA cuts to the cash rate have generated both a lift in new housing‑related lending and an acceleration in debt repayment. We expect national dwelling prices will continue to grow faster than household income in 2020 but any increase in household leverage is likely to be
November’s dwelling price results from CoreLogic revealed booming rises in dwelling values, driven by Sydney and Melbourne: However, while dwelling values are inflating at an annual pace of nearly 20% across the major capitals, rents continue to languish, with Sydney’s continuing to fall: Rental markets are continuing to show a sluggish performance, with rents unchanged
It is logical that the last thing to fall in modern Australia will be house prices! We’ve stopped buying anything else. From CBA’s buying intentions. No food or clothes: Nor cars: Nor travel: Nor health: But houses, yummmmm! As debt repayment becomes the only game in town: Some are yet to get the memo: The
Friday’s mortgage credit data from the RBA revealed that the stock of mortgage debt outstanding grew by only 3.0% in the year to October 2019 – the lowest growth on record: At the same time, yesterday’s dwelling value results for November, released by CoreLogic, continued to rebound, registering 0.4% annual growth: Logically, the stock of
Yesterday, the Australian Bureau of Statistics (ABS) released its dwelling approvals data for November, which revealed that dwelling approvals nationally have crashed by 35% in trend terms from the March 2015 peak, driven by a mammoth 52% decline in unit and apartment approvals: Today, I want to focus on the high-rise apartment segment, which is
Earlier this year, developer Ralan collapsed owing creditors at least half a billion dollars. Included among those impacted were hundreds of buyers who bought apartments off-the-plan and who are now facing deposit losses of up to $70,000 or more. Many of these buyers were Chinese were targeted in an elaborate ponzi scheme and faced millions
The Australian Bureau of Statistics (ABS) has released dwelling approvals data for the month of October. At the national level, the number of dwelling approvals tanked by a seasonally adjusted 8.1% to 13,049. The overall fall in approvals was broad-based, with both units & apartments (-11.3%) and houses (-7.0%) diving. In the year to October
Following on from this morning’s MB report covering the five major capitals, CoreLogic has released its full dwelling value results for November, which also captures the smaller markets and regional areas: As shown above, the smaller capitals and regions also had a mostly positive month in November, with Hobart (+2.3%), Canberra (+1.6%) and the combined
CoreLogic’s dwelling price results have been released for November, which reveals a booming 2.0% increase in values over the month at the 5-city level, driven by surging values across Sydney (2.7%) and Melbourne (2.3%): It was the fifth consecutive monthly acceleration in home values at the 5-city level: Over the November quarter, dwelling values rose
Auction clearance rates surged over the weekend, with the preliminary rate nationally rising to 78.9% from 72.9% last weekend: Auction clearances were also way above the 41.3% recorded in the same weekend last year: Sydney’s preliminary clearance rate was 84.7%, up from 82.3% last weekend, and way above the 41.6% recorded in the same weekend
The federal government’s legislation to remove the capital gains tax (CGT) exemption for expatriates who sell their main residence while living overseas has been passed by the House of Representatives after Labor agreed to back the bill. The bill is now likely to be put to the Senate before parliament rises for the year. The
The Reserve Bank of Australia (RBA) has released its private sector credit aggregates data for the month of October 2019: A chart showing the long-run breakdown in the components is provided below showing broad-based weakness: A long-run breakdown of owner-occupied credit (0.44% MoM; 1.26% QoQ; 4.79% YoY) and investor credit (-0.02% MoM; -0.19% QoQ; -0.18%
APRA is out with October bank data and if the major banks are lending to specufestors then they are returning the dough even faster: ANZ CBA MQG NAB WBC BOQ BEN SUN Oct-19 86401 155833 18164 111974 182267 11960 13735 12336 Sep-19 86652 155691 17269 112687 184042 11985 13683 12354 Aug-19 87140 155562 17300 113519
Via FtAlphaville: There’s a popular joke in finance that venture capital is just one giant ploy to subsidise millennial lifestyles. While there’s an element of truth to this with ride-sharing, food delivery or ready-made meal kits, the service provided has always been in-kind — an underpriced meal, or a cheaper-than-cost taxi ride. That is, until
During the peak of the last housing cycle in 2017, MB coined the phrase “shrinkflation” to describe the peculiar situation whereby housing prices rise strongly alongside crashing sales volumes. Australia’s housing market is experiencing another round of shrinkflation with dwelling values surging at the same time as turnover remains anaemic. A new report from CoreLogic
In the week ended 28 November 2019, the CoreLogic 5-city daily dwelling price index, which covers the five major capital city markets, surged another 0.43%: The rise in values was broad-based, but again driven by Sydney and Melbourne: Quarterly dwelling values continue to rise strongly, driven by Sydney and Melbourne, where prices are rocketing: The
The NSW Office of State Revenue has released stamp duty data to October, which reveals a massive $1.47 billion (23%) decline over the past year and a $2.55 billion (34%) decline since stamp duty receipts peaked in September 2017: The slump in stamp duty receipts follows a sharp 20% decline in property transfers in the
